-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uw8haPro/GZ6JsHQuCkxI1AOON3sM2rqq+Pc72GHIr7tMI1e3XQCNjpZ5f0u0tMD JY1pMp8uKadSU16CXRTQ5w== 0000732718-98-000011.txt : 19980518 0000732718-98-000011.hdr.sgml : 19980518 ACCESSION NUMBER: 0000732718-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US WEST INC CENTRAL INDEX KEY: 0000732718 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840926774 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08611 FILM NUMBER: 98623575 BUSINESS ADDRESS: STREET 1: 7800 E ORCHARD RD STREET 2: STE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3037936500 MAIL ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 1-8611 U S WEST, Inc. A Delaware Corporation IRS Employer No. 84-0926774 7800 East Orchard Road, Englewood, Colorado 80111-2526 Telephone Number 303-793-6500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X_ No __ The number of shares of each class of U S WEST, Inc.'s common stock outstanding (net of shares held in treasury), at April 30, 1998, was: U S WEST Communications Group Common Stock - 484,953,012 shares; U S WEST Media Group Common Stock - 608,893,048 shares U S WEST, Inc. Form 10-Q TABLE OF CONTENTS
Item Page PART I - FINANCIAL INFORMATION 1. U S WEST, Inc. Financial Information Consolidated Statements of Operations - Three Months Ended March 31, 1998 and 1997 3 Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 5 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 7 Notes to Consolidated Financial Statements 8 2. U S WEST, Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 3. U S WEST, Inc. Quantitative and Qualitative Disclosures About Market Risk 44 PART II - OTHER INFORMATION 1. Legal Proceedings 45 6. Exhibits and Reports on Form 8-K 45
Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF OPERATIONS U S WEST, Inc. (Unaudited) - ---------------------------------------------------------------------------------- --------------------------- Three Months Ended March 31, Dollars in millions 1998 1997 - ---------------------------------------------------------------------------- ------------------ -------------- Sales and other revenues $3,967 $3,766 Operating expenses: Employee-related expenses 1,247 1,148 Other operating expenses 914 842 Taxes other than income taxes 111 124 Depreciation and amortization 880 830 ------------------ -------------- Total operating expenses 3,152 2,944 ------------------ -------------- Operating income 815 822 Interest expense (247) (278) Equity losses in unconsolidated ventures (136) (165) Gain on asset sales: Investments 17 51 Rural telephone exchanges - 18 Guaranteed minority interest expense (22) (22) Other expense - net (62) (26) ------------------ -------------- Income before income taxes 365 400 Provision for income taxes (153) (170) ------------------ -------------- NET INCOME $ 212 $ 230 ================== ============== Dividends on preferred stock (13) (13) ------------------ -------------- EARNINGS AVAILABLE FOR COMMON STOCK $ 199 $ 217 ================== ==============
See Notes to Consolidated Financial Statements. Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF OPERATIONS U S WEST, Inc. (Unaudited), continued - ---------------------------------------------------------------------------------- --------------------------- Three Months Ended March 31, In thousands (except per share amounts) 1998 1997 - ---------------------------------------------------------------------------- ------------------ -------------- COMMUNICATIONS GROUP: Basic earnings per common share $0.72 $0.70 ================== ============== Basic average common shares outstanding 484,964 481,341 ================== ============== Diluted earnings per common share $0.71 $0.70 ================== ============== Diluted average common shares outstanding 489,113 492,394 ================== ============== Dividends per common share $0.535 $0.535 ================== ============== MEDIA GROUP: Basic and diluted loss per common share $(0.24) $(0.20) ================== ============== Basic and diluted average common shares outstanding 608,295 606,527 ================== ==============
See Notes to Consolidated Financial Statements. Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS U S WEST, Inc. (Unaudited) - ------------------------------------------------------------------------ ---------------- -------------------- March 31, December 31, Dollars in millions 1998 1997 - ------------------------------------------------------------------------ ---------------- -------------------- ASSETS Current assets: Cash and cash equivalents $ 521 $ 211 Accounts and notes receivable - net 2,053 2,249 Inventories and supplies 202 179 Deferred directory costs 263 257 Deferred tax asset 330 373 Prepaid and other 148 130 ---------------- -------------------- Total current assets 3,517 3,399 Gross property, plant and equipment 39,791 39,223 Accumulated depreciation 21,135 20,643 ---------------- -------------------- Property, plant and equipment - net 18,656 18,580 Investment in Time Warner Entertainment 2,487 2,486 Net investment in international ventures 456 475 Intangible assets - net 12,537 12,674 Net investment in assets held for sale 441 419 Other assets 1,786 1,707 ---------------- -------------------- Total assets $ 39,880 $ 39,740 ================ ====================
See Notes to Consolidated Financial Statements. Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS U S WEST, Inc. (Unaudited), continued - -------------------------------------------------------------------- ------------------- --------------------- March 31, December 31, Dollars in millions 1998 1997 - -------------------------------------------------------------------- ------------------- --------------------- LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ 1,882 $ 1,430 Accounts payable 1,446 1,751 Employee compensation 402 521 Dividends payable 269 268 Deferred revenues and customer deposits 466 444 Other 1,982 1,901 ------------------- --------------------- Total current liabilities 6,447 6,315 Long-term debt 13,178 13,248 Postretirement and other postemployment benefit obligations 2,562 2,570 Deferred income taxes 4,086 4,068 Deferred credits and other 1,075 1,035 Contingencies Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Company-guaranteed debentures 1,080 1,080 Preferred stock subject to mandatory redemption 100 100 Shareowners' equity: Preferred stock 923 923 Common shares 10,871 10,876 Retained deficit (417) (369) LESOP guarantee (46) (46) Accumulated other comprehensive income (loss) 21 (60) ------------------- --------------------- Total shareowners' equity 11,352 11,324 ------------------- --------------------- Total liabilities and shareowners' equity $ 39,880 $ 39,740 =================== =====================
See Notes to Consolidated Financial Statements. Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF CASH FLOWS U S WEST, Inc. (Unaudited) - ----------------------------------------------------------------------------------- -------------------------- Three Months Ended March 31, 1998 1997 - ------------------------------------------------------------------------------------ ------------ ------------ Dollars in millions OPERATING ACTIVITIES Net income $212 $230 Adjustments to net income: Depreciation and amortization 880 830 Equity losses in unconsolidated ventures 136 165 Gain on sales of investments (17) (51) Gain on sale of rural telephone exchanges - (18) Deferred income taxes and amortization of investment tax credits 33 (27) Changes in operating assets and liabilities: Postretirement medical and life costs, net of cash fundings (19) (6) Accounts and notes receivable 168 108 Inventories, supplies and other current assets (49) (51) Accounts payable and accrued liabilities (104) 161 Other - net 19 5 ----------- ------------ Cash provided by operating activities 1,259 1,346 ----------- ------------ INVESTING ACTIVITIES Expenditures for property, plant and equipment (918) (764) Payment to Continental Cablevision shareowners - (1,150) Investment in international ventures (45) (48) Investment in domestic ventures (117) (55) Proceeds from sales of investments 71 176 Cash from net investment in assets held for sale 13 29 Other - net 21 4 ----------- ------------ Cash used for investing activities (975) (1,808) ----------- ------------ FINANCING ACTIVITIES Net proceeds from (repayments of) short-term debt 326 (3,339) Proceeds from issuance of long-term debt - 4,090 Repayments of long-term debt (23) (55) Dividends paid on common and preferred stock (272) (248) Proceeds from issuance of common stock 30 30 Purchases of treasury stock (35) (53) ----------- ------------ Cash provided by financing activities 26 425 ----------- ------------ CASH AND CASH EQUIVALENTS Increase (decrease) 310 (37) Beginning balance 211 201 =========== ============ Ending balance $521 $164 =========== ============
See Notes to Consolidated Financial Statements. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended March 31, 1998 (Dollars in millions) (Unaudited) A. Summary of Significant Accounting Policies Basis of Presentation. U S WEST, Inc. ("U S WEST" or the "Company") has two classes of common stock that are intended to reflect separately the performance of its communications and multimedia businesses. One class of stock, Communications Stock, reflects the communications businesses of U S WEST known as U S WEST Communications Group ("Communications Group") and the other class of stock, Media Stock, reflects the multimedia businesses of U S WEST known as U S WEST Media Group ("Media Group"). The Consolidated Financial Statements have been prepared by U S WEST pursuant to the interim reporting rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally accompanying financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of U S WEST's management, the Consolidated Financial Statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the financial information set forth therein. It is suggested that these Consolidated Financial Statements be read in conjunction with the 1997 U S WEST Consolidated Financial Statements and notes thereto filed on Form 10-K, as amended by Form 10-K/A filed April 13, 1998, and included in U S WEST's proxy statement mailed to all shareowners on April 20, 1998. Certain reclassifications within the Consolidated Financial Statements have been made to conform to the current year presentation. New Accounting Standards. Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities," was issued in April 1998. SOP 98-5 requires, among other things, that the costs related to start-up activities of a new entity, facility, product or service be expensed. Adoption of SOP 98-5 is required as of January 1, 1999, but earlier adoption is allowed. The effect of adopting SOP 98-5 is under evaluation. B. U S WEST Separation On October 25, 1997, the Board of Directors of U S WEST adopted a proposal to separate U S WEST into two independent companies (the "Separation"). As a result of the Separation, the Communications Group will become an independent public company and will be renamed "U S WEST, Inc." ("New U S WEST"). In addition, Media Group's directory business known as Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) U S WEST Dex, Inc. ("Dex") will be aligned with New U S WEST (the "Dex Alignment"). Following the Separation, U S WEST will continue as an independent public company comprised of the current businesses of Media Group other than Dex and will be renamed "MediaOne Group, Inc." ("MediaOne"). The Separation will be implemented pursuant to the terms of a separation agreement between U S WEST and New U S WEST (the "Separation Agreement"). In connection with the Dex Alignment, (i) U S WEST will distribute, as a dividend, an aggregate of $850 in value of New U S WEST common stock to holders of Media Stock and (ii) $3.9 billion of U S WEST debt, currently allocated to Media Group, will be refinanced by New U S WEST (the "Dex Indebtedness"). MediaOne will account for the Separation as a discontinuance of the businesses comprising New U S WEST. The measurement date for discontinued operations accounting purposes will be the date upon which U S WEST stockholder approval is obtained. 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 and MediaOne will recognize a gain on the distribution of New U S WEST. Based on the number of shares of Communications Stock outstanding and market price as of May 1, 1998, the gain (net of Separation costs) is estimated at approximately $25.6 billion. The Company will incur Separation costs during 1998 of approximately $175, which includes cash payments under severance agreements of $45 and financial advisory, legal, registration fee, printing and mailing costs. Separation costs also include a one-time payment to terminate the sale of the Media Group cable system in Minnesota. Further information about the Separation is contained in U S WEST's proxy statement mailed to all shareowners on April 20, 1998. U S WEST shareowners have been asked to consider and approve the Separation at its annual meeting to be held on June 4, 1998. Subject to shareowner approval, the transaction is expected to be completed by mid-June 1998. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) C. Comprehensive Income During first-quarter 1998, U S WEST adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires, among other things, that the components and total amount of comprehensive income be displayed in the financial statements for interim and annual periods beginning in 1998. Comprehensive income includes net income and all changes in equity during a period that arise from nonowner sources, such as foreign currency items and unrealized gains and losses on certain investments in debt and equity securities. Total comprehensive income and the components of comprehensive income follow:
- ----------------------------------------------------------------------- --------------------------------------- Three Months Ended March 31, 1998 1997 - ----------------------------------------------------------------------- -------------------- ------------------ Net income $ 212 $ 230 Other comprehensive income, before tax: Foreign currency translation adjustments 16 12 Unrealized gains (losses) on debt and equity securities 118 (63) Reclassification for losses realized in net income - (3) Income tax (expense) benefit related to items of other comprehensive income (53) 22 -------------------- ----------------- Total comprehensive income $ 293 $ 198 ======================================================================= ==================== ==================
D. Minnesota System In May 1997, pursuant to a Federal Communications Commission ("FCC") order, U S WEST entered into an agreement to sell its cable systems (the "Minnesota System") in Minnesota for proceeds of $600. Under the terms of the agreement, Media Group had the right to terminate the agreement at any time upon payment of a $30 termination fee. As a result of the Separation, Media Group 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 Media Group to retain the Minnesota System so long as the Separation is consummated by July 31, 1998. Media Group has terminated the agreement to sell the Minnesota System and otherwise settled all claims related thereto. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) (Unaudited)
E. Earnings Per Share The following reflects the computation of diluted earnings (loss) per share for Communications Stock and Media Stock: - ---------------------------------------------------------------------------------- --------------------------- Three Months Ended March 31, 1998 1997 - ------------------------------------------------------------------------------- ---------------- ------------- (Shares in thousands) Communications Group Income used for basic earnings per share $347 $339 Interest on convertible zero coupon subordinated notes, net of tax - 3 ---------------- ------------- Income used for diluted earnings per share $347 $342 ================ ============= Weighted average number of shares used for basic earnings per share 484,964 481,341 Effect of dilutive securities: Stock options 4,149 1,667 Convertible zero coupon subordinated notes - 9,386 ---------------- ------------- Weighted average number of shares used for diluted earnings per share 489,113 492,394 ================ ============= Communications Group basic earnings per share $0.72 $0.70 Communications Group diluted earnings per share 0.71 0.70 - ------------------------------------------------------------------------------- ---------------- -------------
The Communications Group dilutive securities represent the incremental weighted average shares from the assumed exercise of Communications Group stock options and the assumed conversion of the zero coupon subordinated notes which were redeemed in August 1997. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) (Unaudited)
- ---------------------------------------------------------------------------------- --------------------------- Three Months Ended March 31, 1998 1997 - ------------------------------------------------------------------------------- ---------------- ------------- (Shares in thousands) Media Group Loss $(135) $(109) Dividends on preferred stock (13) (13) ---------------- ------------- Loss available to common shareowners used for basic and diluted loss per share $(148) $(122) ================ ============= Weighted average number of shares used for basic and diluted loss per share 608,295 606,527 ================ ============= Media Group basic and diluted loss per share $(0.24) $(0.20) - --------------------------------------------------------------------------------------------------------------
Media Group diluted loss per share does not include potential share issuances associated with Media Group stock options, convertible zero coupon subordinated notes and the convertible Series D Preferred Stock due to their antidilutive effects. The zero coupon subordinated notes were redeemed in August 1997. F. Contingencies At U S WEST Communications, Inc. ("U S WEST Communications") there are pending regulatory actions in local regulatory jurisdictions that call for price decreases, refunds or both. Oregon. On May 1, 1996, the Oregon Public Utilities Commission ("OPUC") approved a stipulation terminating prematurely U S WEST Communications' alternative form of regulation ("AFOR") plan, and it then undertook a review of U S WEST Communications' earnings. In May 1997, the OPUC ordered U S WEST Communications to reduce its annual revenues by $97, effective May 1, 1997, and to issue a one-time refund, including interest, of approximately $102 to reflect the revenue reduction for the period May 1, 1996 through April 30, 1997. The one-time refund is for interim rates which became subject to refund when U S WEST Communications' AFOR plan was terminated on May 1, 1996. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) U S WEST Communications filed an appeal of the order and asked for an immediate stay of the refund with the Oregon Circuit Court which granted U S WEST Communications' request for a stay, pending a full review of the OPUC's order. On February 19, 1998, the Oregon Circuit Court entered a judgment in U S WEST Communications' favor on most of the appealed issues. The OPUC appealed on March 19, 1998. The potential exposure, including interest, at March 31, 1998, is not expected to exceed $210. Utah. In another proceeding, the Utah Supreme Court has remanded a Utah Public Service Commission ("UPSC") order to the UPSC for hearing, thereby establishing two exceptions to the rule against retroactive ratemaking: 1) unforeseen and extraordinary events, and 2) misconduct. The UPSC's initial order denied a refund request from interexchange carriers and other parties related to the Tax Reform Act of 1986. The potential exposure, including interest, at March 31, 1998, is not expected to exceed $160. State Regulatory Accruals. U S WEST Communications has accrued $148 at March 31, 1998, which represents its estimated liability for all state regulatory proceedings, predominately the items discussed above. It is possible that the ultimate liability could exceed the recorded liability by an amount up to approximately $220. U S WEST Communications will continue to monitor and evaluate the risks associated with its local regulatory jurisdictions, and will adjust estimates as new information becomes available. In addition to its estimated liability for state regulatory proceedings, U S WEST Communications has an accrued liability of approximately $230 at March 31, 1998 related to refunds in the state of Washington. The Company expects that the majority of these refunds will be issued to ratepayers, interexchange carriers ("IXCs") and independent local exchange carriers ("LECs") during the second- and third-quarters of 1998. G. Subsequent Events PrimeStar. Prior to April 1, 1998, Media Group held a 10.4 percent interest in PrimeStar Partners, L.P. ("Old PrimeStar"). In addition, Media Group distributed PrimeStar direct broadcast satellite ("DBS") services to subscribers in its service areas and, as a result, reflected consolidated operating results with respect to such subscribers. On April 1, 1998, Media Group contributed its interest in Old PrimeStar, as well as its PrimeStar subscribers and certain related assets, to PrimeStar, Inc. ("PrimeStar"), a newly formed entity, in exchange for an approximate 10 percent interest in PrimeStar and approximately $80 in cash (the "PrimeStar Contribution"). Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) AirTouch Transaction. On April 6, 1998, Media Group sold its domestic wireless businesses to AirTouch Communications, Inc. ("AirTouch") in a tax-efficient transaction (the "AirTouch Transaction"). The AirTouch Transaction was consummated pursuant to an agreement and plan of merger (the "AirTouch Merger Agreement") dated as of January 29, 1998. The domestic wireless businesses included cellular communication services provided to 2.6 million customers in 12 western and midwestern states and a 25 percent interest in PrimeCo Personal Communications, L.P. ("PrimeCo"). Pursuant to the AirTouch Merger Agreement, AirTouch acquired these cellular and personal communications services ("PCS") interests. Consideration under the AirTouch Transaction consisted of (i) debt reduction of $1.35 billion, (ii) the issuance to U S WEST of $1.65 billion in liquidation preference of dividend bearing AirTouch preferred stock (fair value of approximately $1.5 billion), and (iii) the issuance to U S WEST of 59.5 million shares of AirTouch common stock. This transaction resulted in the disposition of Media Group's domestic wireless businesses. Applying the terms of the AirTouch Merger Agreement, this transaction resulted in a gain of approximately $2.2 billion, net of deferred taxes of $1.7 billion. In connection with this transaction, U S WEST and AirTouch have entered into an investment agreement, pursuant to which AirTouch has agreed to provide to U S WEST registration rights with respect to the shares of AirTouch preferred stock and AirTouch common stock which U S WEST received in the AirTouch Transaction and to assist U S WEST in the monetization of such shares. In order to minimize U S WEST's exposure to fluctuations in the market value of its investment in AirTouch preferred stock, U S WEST entered into an interest rate swap transaction on April 6, 1998 in the notional amount of $1.5 billion terminating on September 30, 1998. Such transaction requires that U S WEST (MediaOne after the Separation) either pay or receive the difference between the fixed interest rate of 5.865 percent and a floating rate which is indexed to the 30-year U. S. Treasury Bond rate. The contract qualifies for hedge accounting and is carried at market value with gains or losses recorded in equity until sale of the investment. Debt and Preferred Securities Refinancing. In connection with the Separation, New U S WEST and MediaOne are seeking to refinance substantially all of the indebtedness issued or guaranteed by U S WEST (the "U S WEST Indebtedness") through a combination of tender offers, prepayments, defeasance, consent solicitations and/or exchange offers (the "Refinancing"). Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) At 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 $8.1 billion of U S WEST Indebtedness, $5.5 billion of U S WEST Communications indebtedness, $2.7 billion of MediaOne of Delaware, Inc.("MediaOne Delaware") indebtedness and $200 million of indebtedness of U S WEST Financial Services, Inc. ("Financial Services"), a member of the capital assets segment. The approximate $8.1 billion of U S WEST Indebtedness includes $5.4 billion of medium and long-term debt securities, $1.1 billion of commercial paper, $500 million of other indebtedness and $1.08 billion of Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Company-guaranteed debentures ("Preferred Securities"). As part of the Refinancing, the Company is offering the holders of Preferred Securities the right to exchange their Preferred Securities for an equal amount of new preferred securities guaranteed by MediaOne or cash (the "Exchange Offer"). Also as part of the Refinancing, the Company is making offers to purchase for cash (the "Cash Tender Offer") $5.2 billion of medium and long-term debt securities. Any securities not tendered pursuant to the Cash Tender Offer will be assumed by MediaOne, although U S WEST may determine to defease certain of such securities in lieu of assumption. In addition, U S WEST will prepay certain other U S WEST Indebtedness pursuant to the Refinancing. Consummation of the Exchange Offer and the Cash Tender Offer is subject to certain conditions, including the approval of the Separation by U S WEST's shareowners. After the Separation and related Refinancing, New U S WEST will have approximately $9.9 billion of debt, which will include $5.5 billion of U S WEST Communications indebtedness and $4.4 billion of U S WEST Indebtedness which includes the effects of the Refinancing (which includes the Dex Indebtedness) and the funding of certain costs of the Separation. New U S WEST, through its financing subsidiary U S WEST Capital Funding, Inc. ("Capital Funding), will initially finance the repurchase or repayment of U S WEST Indebtedness with commercial paper. Following consummation of the Separation, New U S WEST will issue medium and long-term securities to refinance a portion of the commercial paper. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) After the Separation and related Refinancing and after giving effect to the AirTouch Transaction, MediaOne will have approximately $5.4 billion of debt and preferred securities, which will include $2.7 billion of MediaOne Delaware indebtedness and $2.7 billion of debt and preferred securities issued or guaranteed by MediaOne, which includes new debt incurred by MediaOne Group Funding, Inc. ("MediaOne Funding"), a newly formed financing subsidiary of MediaOne, to refinance a portion of the U S WEST Indebtedness. It is anticipated that such new debt will be a combination of commercial paper and commercial bank debt. In addition, the capital assets segment, which will remain with MediaOne, will have approximately $400 million of indebtedness. MediaOne Funding's bank debt will include certain additional terms and covenants which are generally included in the bank indebtedness of cable companies. In addition, any senior indebtedness issued by MediaOne Funding after the Separation will be guaranteed by MediaOne Delaware and, as a result, will rank pari passu with MediaOne Delaware's senior indebtedness. To the extent the Preferred Securities are tendered for cash pursuant to the Exchange Offers, it is anticipated that MediaOne will issue additional preferred securities following the Separation so that it will have approximately $1 billion of preferred securities outstanding. Following the Separation, MediaOne intends to monetize the AirTouch securities it received in the AirTouch Transaction and use a portion of the proceeds to reduce its commercial paper and commercial bank debt. In May 1998, New U S WEST and MediaOne entered into revolving bank credit facilities to support their commercial paper programs and, in the case of MediaOne, to provide financing in conjunction with the Refinancing. New U S WEST's credit facility totals $4.5 billion; $3.5 billion matures in one year and $1.0 billion matures in five years. MediaOne's credit facility totals $4.0 billion; $2.0 billion matures in one year and $2.0 billion matures in five years. H. Net Investment in Assets Held for Sale The capital assets segment is being accounted for in accordance with Staff Accounting Bulletin No. 93, issued by the SEC, which requires discontinued operations not disposed of within one year of the measurement date to be accounted for prospectively in continuing operations as "net investment in assets held for sale." The net realizable value of the assets is evaluated on an ongoing basis with adjustments to the existing reserve, if any, being charged to continuing operations. No such adjustment has been required. Prior to January 1, 1995, the entire capital assets segment was accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30. Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
The components of net investment in assets held for sale follow: - ------------------------------------------------------------------------ ----------------------- ------------------- March 31, December 31, 1998 1997 - ------------------------------------------------------------------------ ----------------------- ------------------- ASSETS Cash and cash equivalents $ 65 $ 54 Finance receivables - net 774 777 Investment in real estate - net of valuation allowance 107 156 Bonds, at market value 118 119 Investment in FSA 397 365 Other assets 206 197 ----------------------- ------------------- Total assets 1,667 1,668 ----------------------- ------------------- LIABILITIES Debt 364 372 Deferred income taxes 683 669 Accounts payable, accrued liabilities and other 168 197 Minority interests 11 11 ----------------------- ------------------- Total liabilities 1,226 1,249 ----------------------- ------------------- Net investment in assets held for sale $ 441 $ 419 ====================================================================================================================
Building sales and operating revenues of the capital assets segment were $63 and $57 for the three months ended March 31, 1998 and 1997, respectively. Revenues of Financial Services were $5 for the three months ended March 31, 1998 and 1997. Selected financial data for Financial Services follows:
- -------------------------------------------------------------------------------------------------------------------- March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------------- Net finance receivables $ 822 $ 824 Total assets 1,174 1,208 Total debt 353 363 Total liabilities 1,082 1,121 Equity 92 87 - --------------------------------------------------------------------------------------------------------------------
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
I. Supplemental Communications Group and Media Group Combined Statements U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF INCOME - -------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- Operating revenues: Local service $1,350 $1,231 Interstate access service 698 687 Intrastate access service 206 200 Long-distance network services 201 250 Other services 255 219 ---------------- ------------- Total operating revenues 2,710 2,587 Operating expenses: Employee-related expenses 938 864 Other operating expenses 481 445 Taxes other than income taxes 97 107 Depreciation and amortization 524 527 ---------------- ------------- Total operating expenses 2,040 1,943 ---------------- ------------- Operating income 670 644 Interest expense (97) (103) Gain on sale of rural telephone exchanges - 18 Other expense - net (25) (22) ---------------- ------------- Income before income taxes 548 537 Provision for income taxes (201) (198) ---------------- ------------- NET INCOME $347 $339 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST COMMUNICATIONS GROUP COMBINED BALANCE SHEETS - -------------------------------------------------------------------------------------------------------------- March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 373 $ 27 Accounts and notes receivable - net 1,586 1,681 Inventories and supplies 179 150 Deferred tax asset 217 247 Prepaid and other 78 77 ---------------- -------------------- Total current assets 2,433 2,182 Gross property, plant and equipment 33,681 33,408 Accumulated depreciation 19,503 19,176 ---------------- -------------------- Property, plant and equipment - net 14,178 14,232 Other assets 825 832 ---------------- -------------------- Total assets $17,436 $17,246 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST COMMUNICATIONS GROUP COMBINED BALANCE SHEETS (continued) - -------------------------------------------------------------------------------------------------------------- March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 898 $ 626 Accounts payable 1,113 1,325 Employee compensation 287 375 Dividends payable 260 259 Advanced billings and customer deposits 306 292 Payable to Media Group 92 90 Other 1,202 1,033 ------------------ --------------------- Total current liabilities 4,158 4,000 Long-term debt 4,931 5,020 Postretirement and other postemployment benefit obligations 2,456 2,468 Deferred income taxes 839 805 Deferred credits and other 771 754 Contingencies Communications Group equity 4,281 4,199 ------------------ --------------------- Total liabilities and equity $17,436 $17,246 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $347 $ 339 Adjustments to net income: Depreciation and amortization 524 527 Gain on sale of rural telephone exchanges - (18) Deferred income taxes and amortization of investment tax credits 61 18 Changes in operating assets and liabilities: Postretirement medical and life costs, net of cash fundings (22) (10) Accounts receivable 95 82 Inventories, supplies and other current assets (36) (34) Accounts payable and accrued liabilities 98 193 Other - net 2 - ----------- ------------ Cash provided by operating activities 1,069 1,097 ----------- ------------ INVESTING ACTIVITIES Expenditures for property, plant and equipment (557) (400) Proceeds from sale of rural telephone exchanges - 7 Proceeds from (payments on) disposals of property, plant and equipment 19 (7) Purchase of PCS licenses (18) - ----------- ------------ Cash used for investing activities (556) (400) ----------- ------------ FINANCING ACTIVITIES Net proceeds from (repayments of) short-term debt 119 (429) Repayments of long-term debt (23) (54) Dividends paid on common stock (259) (237) Proceeds from issuance of common stock 17 24 Purchases of treasury stock (21) - ----------- ------------ Cash used for financing activities (167) (696) ----------- ------------ CASH AND CASH EQUIVALENTS Increase 346 1 Beginning balance 27 80 =========== ============ Ending balance $373 $ 81 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST MEDIA GROUP COMBINED STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ------------------------------ 1998 1997 - -------------------------------------------------------------------------------------------------------------- Sales and other revenues: Cable and broadband $ 624 $ 556 Wireless communications 341 335 Directory and information services 307 309 Other 7 7 --------------- -------------- Total sales and other revenues 1,279 1,207 Operating expenses: Cost of sales and other revenues 424 406 Selling, general and administrative expenses 354 320 Depreciation and amortization 356 303 --------------- -------------- Total operating expenses 1,134 1,029 --------------- -------------- Operating income 145 178 Interest expense (150) (175) Equity losses in unconsolidated ventures (136) (165) Gains on sales of investments 17 51 Guaranteed minority interest expense (22) (22) Other expense - net (37) (4) --------------- -------------- Loss before income taxes (183) (137) Income tax benefit 48 28 --------------- -------------- NET LOSS $(135) $(109) =============== ============== Dividends on preferred stock (13) (13) --------------- -------------- LOSS AVAILABLE FOR COMMON STOCK $(148) $(122) ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST MEDIA GROUP COMBINED BALANCE SHEETS - -------------------------------------------------------------------------------------------------------------- March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $148 $184 Accounts and notes receivable - net 478 589 Deferred directory costs 263 257 Receivable from Communications Group 92 90 Deferred tax asset 113 126 Other 93 82 ----------------- ------------------- Total current assets 1,187 1,328 Property, plant and equipment - net 4,478 4,348 Investment in Time Warner Entertainment 2,487 2,486 Net investment in international ventures 456 475 Intangible assets - net 12,443 12,597 Net investment in assets held for sale 441 419 Other assets 1,064 961 ----------------- ------------------- Total assets $22,556 $22,614 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST MEDIA GROUP COMBINED BALANCE SHEETS (continued) - -------------------------------------------------------------------------------------------------------------- March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 984 $ 804 Accounts payable 338 432 Deferred revenue and customer deposits 160 152 Other 910 1,038 -------------------- ------------------- Total current liabilities 2,392 2,426 Long-term debt 8,247 8,228 Deferred income taxes 3,247 3,262 Deferred credits and other 419 393 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Company-guaranteed debentures 1,080 1,080 Preferred stock subject to mandatory redemption 100 100 Media Group equity 7,071 7,125 -------------------- ------------------- Total liabilities and equity $22,556 $22,614 ==============================================================================================================
Form 10-Q - Part I U S WEST, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited)
U S WEST MEDIA GROUP COMBINED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 1997 - -------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss $(135) $(109) Adjustments to net loss: Depreciation and amortization 356 303 Equity losses in unconsolidated ventures 136 165 Distributions from unconsolidated ventures 3 3 Gains on sales of investments (17) (51) Deferred income taxes (27) (45) Provision for uncollectibles 28 25 Changes in operating assets and liabilities: Accounts and notes receivable 81 8 Deferred directory costs, prepaid and other (17) (17) Accounts payable and accrued liabilities (209) (36) Other - net (9) 3 ----------- ------------ Cash provided by operating activities 190 249 ----------- ------------ INVESTING ACTIVITIES Expenditures for property, plant and equipment (361) (364) Payment to Continental Cablevision shareowners - (1,150) Investment in international ventures (45) (48) Investment in domestic ventures (99) (55) Proceeds from sales of investments 71 176 Cash from net investment in assets held for sale 13 29 Other - net 2 4 ----------- ------------ Cash used for investing activities (419) (1,408) ----------- ------------ FINANCING ACTIVITIES Net proceeds from (repayments of) short-term debt 207 (2,910) Proceeds from issuance of long-term debt - 4,090 Repayments of long-term debt - (1) Proceeds from issuance of common stock 13 6 Dividends paid on preferred stock (13) (11) Purchases of treasury stock (14) (53) ----------- ------------ Cash provided by financing activities 193 1,121 ----------- ------------ CASH AND CASH EQUIVALENTS Decrease (36) (38) Beginning balance 184 121 =========== ============ Ending balance $ 148 $ 83 ==============================================================================================================
Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share amounts) Some of the information presented in or in connection with this report constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include: (i) greater than anticipated competition from new entrants into the local exchange, intraLATA toll, cable, wireless, data and directories markets, (ii) changes in demand for the Company's products and services, including optional custom calling features, (iii) higher than anticipated employee levels, capital expenditures, and operating expenses (such as costs associated with year 2000 remediation), (iv) the loss of significant customers, (v) pending regulatory actions in state jurisdictions, (vi) regulatory changes affecting the cable and telecommunications industries, including changes that could have an impact on the competitive environment in the local exchange market, (vii) a change in economic conditions in the various markets served by the Company's operations, including international markets, that could adversely affect the level of demand for cable, telephone, wireless, directories or other services offered by the Company, (viii) greater than anticipated competitive activity requiring new pricing for services, (ix) higher than anticipated start-up costs associated with new business opportunities, (x) increases in fraudulent activity with respect to broadband and wireless services, (xi) delays in the Company's ability to begin offering interLATA long-distance services, (xii) consumer acceptance of broadband services, including telephony, data, and wireless services, or (xiii) delays in the development of anticipated technologies, or the failure of such technologies to perform according to expectations. Results of Operations - First Quarter 1998 Compared with First Quarter 1997
Net Income (Loss) - -------------------------------- ----------------------------------------- -- --------------------------------------- Net Income (Loss) Diluted Earnings (Loss) Per Share ----------------------------------------- --------------------------------------- Increase Increase (Decrease) (Decrease) -------- ----------- -------- ---------- Three Months Ended March 31, 1998 1997 $ % 1998 1997 $ % - --------------------------------- -------- ---------- -------- ----------- --------- --------- -------- ---------- Communications Group $ 347 $ 339 $ 8 2.4 $ 0.71 $ 0.70 $ 0.01 1.4 Media Group (135) (109) (26) 23.9 (0.24) (0.20) (0.04) 20.0 ========= ========== ======== =========== Total net income $ 212 $ 230 $(18) (7.8) ================================ ========= ========== ======== ===========
Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share amounts), continued
Communications Group Net Income - ---- --- -- --------------------------- ------------------------------------ -- ------------------------------------- Net Income Diluted Earnings Per Share ------------------- ---------------- -------------------- ---------------- Increase Increase ---------------- ---------------- Three Months Ended March 31, 1998 1997 % 1998 1997(1) $ % $ - --------------------------------------- -------- --------- ------- --------- --------- --------- --------- ------ Reported net income $347 $339 $8 2.4 $0.71 $0.70 $0.01 1.4 Adjustment to reported net income: Gain on sale of rural telephone exchanges (2) - (11) 11 - - (0.02) 0.02 - -------- --------- ------- --------- ---------- ---------- ------- ------ Normalized income $347 $328 $19 5.8 $0.71 $0.67 $0.04 6.0 ======================================= ======== ========= ======= ========= == ========== ========== ======= ======
(1) Column does not add due to rounding of individual components. (2) In first-quarter 1997, the Communications Group sold certain rural telephone exchanges in Nebraska for a pretax gain of $18 and an after-tax gain of $11. During 1998, the Communications Group's normalized income increased $19, or 5.8 percent, to $347 Normalized diluted earnings per share was $0.71 per Communications share, an increase of $0.04, or 6.0 percent. The increase in normalized income is primarily due to higher demand for services partially offset by interstate access rate reductions, higher expenses related to interconnection and start-up costs associated with growth initiatives, including wireless PCS.
Media Group Net Loss - ---- --- -- ---------------------- ------------------------------------- -- ----------------------------------------- Net Loss Diluted Loss Per Share ------------------- ------------------ -------------------- ------------------- Increase Increase (Decrease) (Decrease) ------- ---------- -------- ----------- Three Months Ended March 31, 1998 1997 $ % 1998 1997 $ % - ---------------------------------- --------- --------- ------- ---------- ---------- --------- -------- ----------- Reported net loss $(135) $(109) $(26) 23.9 $(0.24) $(0.20) $(0.04) 20.0 Adjustments to reported net loss: Gains on sales of investments (10) (31) 21 (67.7) (0.02) (0.05) 0.03 (60.0) Other - Separation costs 35 - 35 - 0.06 - 0.06 - ========= ========= ======= ========== ========== ========= ======== =========== Normalized loss $(110) $(140) $30 (21.4) $(0.20) $(0.25) $0.05 (20.0) ================================== ========= ========= ======= ========== == ========== ========= ======== ===========
During 1998, Media Group's normalized net loss decreased $30, or 21.4 percent, to $110. Normalized diluted loss per share was $0.20, a decrease of $0.05, or 20.0 percent. The normalized net loss decrease was primarily a result of lower interest expense and reductions in losses generated by unconsolidated international ventures. During first-quarter 1998, Media Group recorded a gain on the sale of an investment of $10, net of tax expense of $7, and U S WEST incurred costs related to the proposed Separation of $35, net of tax benefits of $14. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Upon consummation of the Separation, certain Separation costs will be netted against the gain realized upon distribution of the New U S WEST common stock to U S WEST's shareowners. The estimated $25.6 billion gain on the distribution represents the difference between the fair value of New U S WEST and the historical investment in New U S WEST.
Sales and Other Revenues - --------------------------------------------------------------- -------------------------- ------------------------- Three Months Ended Increase March 31, (Decrease) -------------------------- ------------------------- 1998 1997 $ % - --------------------------------------------------------------- ------------ ------------- ------------- ----------- Communications Group $2,710 $2,587 $123 4.8 Media Group 1,279 1,207 72 6.0 Intergroup eliminations (22) (28) 6 (21.4) ============ ============= ============= =========== Total $3,967 $3,766 $201 5.3 =============================================================== ============ ============= ============= =========== Communications Group Operating Revenues - --------------------------------------------------------------- -------------------------- --- --------------------- Three Months Ended Increase March 31, (Decrease) -------------------------- --------------------- ------------- 1998 1997 $ % - --------------------------------------------------------------- ------------ ------------- ------------- ----------- Local service $1,350 $1,231 $119 9.7 Interstate access service 698 687 11 1.6 Intrastate access service 206 200 6 3.0 Long-distance network services 201 250 (49) (19.6) Other services 255 219 36 16.4 ============ ============= ============= =========== Total $2,710 $2,587 $123 4.8 =============================================================== ============ ============= ============= ===========
Local Service Revenues. During 1998, local service revenues increased $119, or 9.7 percent, to $1,350, primarily as a result of access line growth and increased demand for new product and service offerings, and existing central office features. Total reported access lines increased 568,000, or 3.6 percent, during the past 12 months, of which 284,000 was attributable to second lines. Second line installations increased 25.2 percent. Access lines grew 634,000, or 4.1 percent, when adjusted for sales of approximately 66,000 rural telephone access lines during the past twelve months. Also contributing to the increase in revenues were rate increases of $17 in various states, and interim compensation revenues from IXCs as a result of the FCC payphone orders which took effect in April 1997. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Interstate Access Service Revenues. Interstate access service revenues increased $11, or 1.6 percent, to $698 during 1998, primarily due to a change in the classification of universal service fundings which increased revenues by $19. In 1997 these fundings were offset against interstate access service revenues through a contra-revenue account. Beginning in 1998 these fundings are recorded as access expense within other operating expense. Excluding the effects of the reclassification, interstate access revenues declined $8, or 1.2 percent, primarily due to the effects of lower prices under the FCC's current price cap plan and the effects of 1997 true-ups to sharing-related accruals. Partially offsetting these decreases were the effects of a 6.1 percent increase in billed interstate access minutes of use and increased demand for private line services. Intrastate Access Service Revenues. Intrastate access service revenues increased $6 in 1998, or 3.0 percent, to $206, primarily due to a 7.1 percent increase in billed intrastate minutes of use and higher demand for private line services. Partially offsetting the increase were net rate reductions of $5 in local jurisdictions, the majority of which were in the state of Washington. Long Distance Network Services Revenues. Long-distance network services revenues decreased $49, or 19.6 percent, to $201, primarily due to the effects of competition and rate reductions of $14 in local jurisdictions. Also contributing to the decline were the implementation of multiple toll carrier plans ("MTCPs") in various jurisdictions in 1997. The MTCPs essentially allow independent telephone companies to act as toll carriers and are net income neutral with the reduction in toll revenues largely offset by increased intrastate access service revenues and lower access expense. Other Services Revenues. Revenues from other services increased $36, or 16.4 percent, to $255, primarily as a result of greater sales of inside wire maintenance and continued market penetration in voice messaging services. Increased sales of wireless communication services and other unregulated products and services also contributed to the increase. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued
Media Group Sales and Other Revenues - ----------------------------------------------------------- ---------------------------- --------------------------- Three Months Ended Increase March 31, (Decrease) ---------------------------- --------------------------- 1998 1997 $ % - ----------------------------------------------------------- -------------- ------------- ------------- ------------- Cable and broadband: Domestic $619 $552 $67 12.1 International 5 4 1 25.0 -------------- ------------- ------------- ------------- 624 556 68 12.2 Wireless communications: Cellular service 318 303 15 5.0 Cellular equipment 23 32 (9) (28.1) -------------- ------------- ------------- ------------- 341 335 6 1.8 Directory and information services: Domestic 307 287 20 7.0 International - 22 (22) - -------------- ------------- ------------- ------------- 307 309 (2) (0.6) Other 7 7 - - ============== ============= ============= ============= Total $1,279 $1,207 $72 6.0 =========================================================== ============== ============= ============= =============
Media Group sales and other revenues increased $72, or 6.0 percent, to $1,279 in 1998, primarily as a result of growth in domestic cable and broadband services. Cable and Broadband. Domestic cable and broadband revenues increased $67, or 12.1 percent, to $619, primarily as a result of higher core cable revenue per subscriber and continued growth in PrimeStar DBS service revenues. Excluding the one-time effects of cable system acquisitions and dispositions and a change in classification of late fee revenues, revenues increased $69, or 12.5 percent. Basic cable programming services revenue increased $46, or 12.5 percent, due primarily to a 10 percent increase in revenue per average cable subscriber and a 1.5 percent increase in basic subscribers. The increase in revenue per subscriber is primarily a result of expanded channel offerings and rate increases resulting from higher programming fees. PrimeStar DBS service revenues contributed $11 to the revenue increase, due primarily to a 27 percent increase in PrimeStar DBS subscribers since the end of first quarter 1997. Advertising and equipment and installation revenues also contributed $11 to the increase in domestic cable and broadband revenues. Core cable revenue per average cable subscriber increased 7.4 percent to $39.17 in 1998, compared with $36.47 in the first quarter of 1997. Excluding the one-time effects of cable system acquisitions and dispositions and a change in classification of late fee revenues, core cable revenue per average cable subscriber increased 8.3 percent. Form 10-Q - Part I Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Prior to April 1, 1998, Media Group distributed PrimeStar DBS services to subscribers in its service areas, and as a result, reflected consolidated operating results with respect to such subscribers. Subsequent to April 1, 1998, in conjunction with the Prime Star Contribution, Media Group will no longer reflect consolidated operating results for PrimeStar DBS services. Wireless Communications. Cellular service revenues increased $15, or 5.0 percent, to $318 in 1998 due to a 22 percent increase in subscribers, partially offset by a 15 percent decrease in average revenue per subscriber to $40.46 per month. On April 6, 1998, U S WEST sold its domestic wireless businesses to AirTouch in a tax-efficient transaction. Directory and Information Services. Revenues related to Yellow Pages directory advertising represent 99 percent of domestic directory and information services revenues. Yellow Pages directory advertising revenues increased $20, or 7.0 percent, to $304. The increase is driven by a 5.8 percent increase in revenue per local advertiser primarily resulting from price increases of 4.7 percent and an increase in volume and complexity of advertisements sold. In conjunction with the proposed Separation, the domestic directory business will be aligned with New U S WEST. During 1997, Media Group sold its wholly owned international directory and information services operations. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued
Operating Income - --------------------------------------------------------------- -------------------------- --- --------------------- Three Months Ended Increase March 31, (Decrease) -------------------------- --------------------- 1998 1997 $ % - --------------------------------------------------------------- ------------ ------------- ------------- ----------- Communications Group $670 $644 $26 4.0 Media Group 145 178 (33) (18.5) ============ ============= ============= =========== Total $815 $822 $(7) (0.9) =============================================================== ============ ============= ============= =========== Communications Group Operating Income -------------------------------------------------------------------------------------------------------------------- hree Months Ended Increase March 31, (Decrease) ------------------------------------------------- 1998 1997 $ % ------------------------------------------------------------------------------------------------------------------------------ Operating revenues $2,710 $2,587 $123 4.8 Operating expenses: Employee-related expenses 938 864 74 8.6 Other operating expenses 481 445 36 8.1 Taxes other than income taxes 97 107 (10) (9.3) Depreciation and amortization 524 527 (3) (0.6) ------------------------------------------------ Total operating expenses 2,040 1,943 97 5.0 ------------------------------------------------ Operating income $670 $644 $26 4.0 ===================================================================================================================
During 1998, the Communications Group's operating income increased $26, or 4.0 percent, to $670. Revenue growth of $123, or 4.8 percent, was partially offset by an increase of $97, or 5.0 percent, in operating costs, including approximately $50 of expenses related to interconnection. Total operating expense growth was primarily due to increases in employee-related costs and other operating expenses. Total employee-related expenses increased $74, or 8.6 percent, to $938 during 1998 primarily due to higher contract labor costs and increased salaries and wages. The higher contract labor costs were predominately a result of systems development work (which includes expenses related to interconnection and year 2000 costs) and marketing and sales efforts. Higher salaries and wages were a result of workforce increases and wage increases. Other operating expenses increased $36, or 8.1 percent, to $481 during 1998. The increase is primarily due to interconnection expenses of approximately $30 and costs associated with growth initiatives (primarily PCS). Other operating expenses also increased $19 due to the change Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued in the classification of the universal service funding expenses. Partially offsetting the increases were reduced access expense (primarily due to dial-around competition and the MTCPs) and a 1997 reserve adjustment associated with billing and collection activities performed for IXCs. Taxes other than income taxes decreased $10, or 9.3 percent, primarily as a result of adjustments related to the 1997 property tax accrual.
Media Group Operating Income - -------------------------------------------------------- ------------------------------- --------------------------- Three Months Ended Increase March 31, (Decrease) ------------------------------- --------------------------- 1998 1997 $ % - -------------------------------------------------------- --------------- --------------- ------------- ------------- Cable and broadband: Domestic $(48) $(17) $(31) - International (2) (4) 2 (50.0) --------------- --------------- ------------- ------------- (50) (21) (29) - Wireless communications: Domestic 87 95 (8) (8.4) International (3) (3) - - --------------- --------------- ------------- ------------- 84 92 (8) (8.7) Directory and information services: Domestic 143 130 13 10.0 International - (7) 7 - --------------- --------------- ------------- ------------- 143 123 20 16.3 Other (1) (32) (16) (16) - --------------- --------------- ------------- ------------- Total operating income $145 $178 $(33) (18.5) ======================================================== =============== =============== ============= =============
(1) Primarily includes headquarters expenses for shared services and divisional expenses associated with equity investments. During 1998, Media Group's operating income decreased $33, or 18.5 percent, to $145. The decrease in operating income is primarily a result of an increase in domestic cable and broadband operating losses. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Cable and Broadband. Domestic cable and broadband operating losses increased $31, to $48, as compared with 1997. Revenue increases of $67, or 12.1 percent, to $619, were more than offset by increased programming costs of $22, or 17.3 percent, to $149, increases in operating, marketing and advertising, and general and administrative costs of $30 or 15.0 percent, to $230, and increased depreciation and amortization charges of $46, or 19.0 percent, to $288. Programming cost increases were primarily a result of expanded channel offerings and increased programming costs per subscriber as a result of rate increases. Programming costs increased 13.4 percent excluding programming costs related to PrimeStar services. Increases in operating, marketing and advertising, and general and administrative costs are primarily a function of an increase in employee costs primarily associated with customer service initiatives, as well as costs associated with deployment of new services such as high-speed data, and advertising costs. The termination of the Minnesota System sale resulted in a one-time increase to depreciation and amortization expense of $28 during 1998. Depreciation and amortization expense was suspended on this property while it was held for sale in 1997. The domestic cable and broadband business will continue to generate operating losses for the foreseeable future due to the amortization of intangible assets associated with the acquisition of Media Group's cable properties and depreciation associated with network upgrades. Wireless Communications. Domestic cellular operating income decreased $8, or 8.4 percent, to $87 during 1998. The decrease in operating income is primarily a result of accelerated depreciation associated with the replacement of certain infrastructure equipment. On a per subscriber basis, revenue decreased 15.3 percent and the costs incurred to acquire and support customers decreased 12.8 percent. Directory and Information Services. Domestic Yellow Pages directory advertising operating income increased $12, or 8.8 percent, to $149. Revenue increases of $20, or 7.0 percent, were partially offset by increases in the costs associated with selling more premium advertising, primarily graphic arts design, and higher general operating costs, including printing and paper costs. Operating losses associated with on-going product development activities reduced domestic directory and information services operating income by $6 in 1998, compared with a reduction of $7 in 1997. During 1997, Media Group sold its wholly owned international directory and information services operations. Other. Other operating losses increased primarily as a result of increased corporate costs, including costs associated with international activities. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued
Interest Expense and Other - ------------------------------------------------------------------------------------------------------------------- Three Months Ended Increase March 31, (Decrease) ------------------------------------------------------ 1998 1997 $ % - ------------------------------------------------------------------------------------------------------------------ Interest expense $(247) $(278) $(31) (11.2) Equity losses in unconsolidated ventures (136) (165) (29) (17.6) Gains on sales of investments 17 51 (34) (66.7) Gain on sale of rural telephone exchanges - 18 (18) - Guaranteed minority interest expense (22) (22) - - Other expense - net (62) (26) 36 - - ------------------------------------------------------------------------------------------------------------------
Interest Expense. Interest expense decreased $31, or 11.2 percent, due primarily to lower debt levels at the Media Group during 1998 as compared with 1997. Equity Losses in Unconsolidated Ventures. Equity losses decreased $29 in 1998. This decrease is comprised of a $41 decrease in international losses offset by a $12 increase in domestic losses. The decrease in international losses relates to foreign exchange rate improvements at Telewest Communications, plc ("Telewest"); rapid subscriber growth experienced by the central European wireless ventures located in Hungary, the Czech and Slovak Republics, and Poland; and the absence of losses related to ventures in Malaysia and Indonesia in the first quarter of 1998. In 1998, equity method accounting was suspended on the Company's investments in Malaysia and Indonesia in conjunction with a 1997 adjustment to write down the carrying value of the investment in Malaysia to its fair value of zero and to recognize probable funding commitments in connection with a shareholder support agreement related to the investment in Indonesia. The Company continues to monitor its investments in Malaysia and Indonesia. During the first quarter of 1998, the Indonesian currency declined 55 percent as compared with the U. S. dollar; whereas, the Malaysian currency recovered slightly. The Company funded an additional $6 pursuant to the terms of the Indonesian venture shareholder support agreement. After such funding the Company's contractual funding commitment is reduced to $13 and its partners' commitments remain at $36. Domestically, the increase in losses is attributed to Media Group's interests in PrimeCo, Time Warner Entertainment and Old PrimeStar. U S WEST's interest in PrimeCo was transferred to AirTouch on April 6, 1998 pursuant to the AirTouch Transaction, and U S WEST's interest in Old PrimeStar was exchanged for an approximate 10 percent interest in PrimeStar on April 1, 1998. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Gains on Sales of Investments. During 1998, Media Group sold a cable programming investment resulting in a pretax gain of $17. During 1997, Media Group sold its 5 percent interest in a wireless venture in France resulting in a pretax gain of $51 and Communications Group sold certain rural telephone exchanges in Nebraska resulting in a pretax gain of $18. Other Expense - Net. Other expense increased primarily due to costs incurred by U S WEST related to the proposed Separation totaling $49. Such costs include the Minnesota System termination fee and settlement of related claims, and certain filing and consulting fees as of March 31, 1998, to effect the Separation. U S WEST will incur total Separation costs during 1998 of approximately $175. Upon consummation of the Separation, certain Separation costs will be netted against the gain realized upon distribution of the New U S WEST common stock to U S WEST's shareowners. The Separation costs were partially offset by decreased foreign exchange transaction losses associated with loans to international ventures during the quarter. Liquidity and Capital Resources
Operating Activities - ------------------------------------------------------------ -------------------------------------- ---------------- Three Months Ended March 31, Decrease -------------------------------------- --------------- 1998 1997 $ - ------------------------------------------------------------ --------------------- ---------------- ---------------- Communications Group (1) $1,069 $1,097 $(28) Media Group (1) 190 249 (59) ===================== ================ ================ Total cash provided by operating activities $1,259 $1,346 $(87) ============================================================ ===================== ================ ================
(1) Individual group cash flow statements are provided in Note I - Supplemental Communications Group and Media Group Combined Statements - to the Consolidated Financial Statements. The decrease in Communications Group's operating cash flow during 1998, as compared with 1997, reflects a reduction in accounts payable largely offset by business growth and lower tax payments and restructuring expenditures. Operating cash flow at Media Group decreased primarily due to the timing of interest payments as compared with 1997, a one-time payment for the termination of the Minnesota System sale and increased tax payments. Such decreases were partially offset by an increase in cash generated by operations. The Communications Group's operating cash flow during the second- and third-quarters of 1998 will be affected by the payment of approximately $205 of rate refunds and $25 of interest in the state of Washington. The rate refunds are for revenues that were collected subject to refund (with interest) from May 1, 1996 through January 31, 1998. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued
Investing Activities - --------------------------------------------------------------------------------- ------------------------------ Three Months Ended March 31, ------------------------------ 1998 1997 - --------------------------------------------------------------------------------- --------------- -------------- Communications Group (1) $ 556 $ 400 Media Group (1) 419 1,408 (2) =============== ============== Total cash used for investing activities $ 975 $1,808 ================================================================================= =============== ==============
(1) Individual group cash flow statements are provided in Note I - Supplemental Communications Group and Media Group Combined Statements - to the Consolidated Financial Statements. (2) 1997 Media Group investing activities include the cash portion of the Continental Cablevision, Inc. ("Continental") acquisition of $1,150 paid by Media Group during 1997 to the Continental shareowners. Total capital expenditures, on a cash basis, were $918 during first-quarter 1998. On a cash basis, Communications Group capital expenditures were $557 and Media Group capital expenditures were $361 during 1998. The majority of the Communications Group's capital expenditures related to access line growth and continued improvement of the telecommunications network. Expenditures associated with entering wireless communications markets and meeting the Telecommunications Act requirements including interconnection and local number portability also impacted capital expenditures. The majority of Media Group capital expenditures in 1998 were devoted to upgrading the domestic cable network and preparing for the provision of new and enhanced services. Media Group anticipates capital expenditures will accelerate during the remainder of 1998. Investing activities include Media Group's investments in international ventures of $45, primarily capital contributions to a cable investment in Belgium, and the Company's investments in domestic ventures of $117. The investments in domestic ventures include Media Group's capital contributions to PrimeCo of $64 and the purchase of various cable investments totaling $35, and Communications Group's purchase of PCS licenses in connection with its launch of PCS service in various markets of $18. Media Group also sold various cable investments during 1998, resulting in proceeds of $71. On March 29, 1998, Telewest announced that merger discussions were underway for Telewest to acquire General Cable plc ("General Cable"). On April 15, 1998, the boards of Telewest and General Cable announced agreement on the proposed merger terms for Telewest to acquire General Cable for Telewest shares and cash ("Merger Offer"). General Cable shareholders will receive 1.243 new Telewest shares and 65 pence in cash for each General Cable share (or an aggregate of approximately L409 million in Telewest shares and L240 million in cash). Telewest intends to raise the cash portion of the purchase price through a rights offering to Telewest's existing shareholders ("Pre-emptive Issue"), including Media Group. Media Group and certain Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued of Telewest's other principal shareholders have agreed to purchase any Telewest shares not purchased by Telewest's other shareholders in the rights offering. The Merger Offer and Pre-emptive Issue are conditional on the approval of Telewest's shareholders. A 40 percent shareholder of General Cable has agreed to irrevocably accept the Merger Offer. There can be no assurance that any transaction involving the acquisition of General Cable will be consummated.
Financing Activities - --------------------------------------------- -------------------------------- ------------------------------------- Three Months Ended March 31, ------------------------------------- 1998 1997 - ------------------------------------------------------------------------------ ------------------- ----------------- Communications Group (1) $(167) $ (696) Media Group (1) 193 1,121 =================== ================= Total cash provided by financing activities $ 26 $ 425 ============================================================================== =================== =================
(1) Individual group cash flow statements are provided in Note I - Supplemental Communications Group and Media Group Combined Statements - to the Consolidated Financial Statements. Dividends U S WEST paid dividends on the Communications Stock totaling $259 and $237 during the three months ended March 31, 1998 and 1997, respectively. Debt Activity Total debt at March 31, 1998 was $15,060, an increase of $382 compared with December 31, 1997. Including debt associated with the capital assets segment of $364 and Preferred Securities of $1,080, total indebtedness at March 31, 1998 was $16,504. Excluding debt associated with the capital assets segment, the Company's percentage of debt to total capital at March 31, 1998, was 54.6 percent compared with 54.0 percent at December 31, 1997. Including debt associated with the capital assets segment, Preferred Securities and mandatorily redeemable preferred stock, the Company's percentage of debt to total capital at March 31, 1998, was 59.4 percent compared with 58.9 percent at December 31, 1997. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued U S WEST Communications and New U S WEST Credit Ratings During the first quarter of 1998, Moody's downgraded U S WEST Communications' senior unsecured debt from Aa3 to A2 due to recent regulatory rulings and financial challenges associated with the Separation. See "Contingencies." U S WEST Communications' debt remains under review by Moody's for possible downgrade pending clarification of New U S WEST's corporate structure and future strategic initiatives. On May 7, 1998, Duff & Phelps reaffirmed U S WEST Communications' senior unsecured debt and commercial paper ratings of AA- and D-1+, respectively. In addition, Duff & Phelps announced that the credit ratings to be assigned to the senior unsecured debt and commercial paper of Capital Funding following the consummation of the Separation will be A and D-1, respectively. MediaOne Credit Ratings On May 7, 1998, Duff & Phelps announced MediaOne Funding's senior unsecured indebtedness will be rated BBB, its commercial paper will be rated D-2, and MediaOne's Preferred Securities will be rated BBB-. In addition, MediaOne Delaware's senior indebtedness will be assigned a rating of BBB. Other U S WEST from time to time engages in preliminary discussions regarding restructurings, dispositions and other similar transactions. Any such transaction may include, among other things, the transfer of certain assets, businesses or interests, or the incurrence or assumption of indebtedness, and could be material to the financial condition and results of operations of U S WEST. There is no assurance that any such discussions will result in the consummation of any such transaction. Risk Management In conjunction with the AirTouch Transaction, Media Group received $1.65 billion in liquidation preference of dividend bearing AirTouch preferred stock and 59.5 million shares of AirTouch common stock. As of April 30, 1998, the market value of the AirTouch common stock was approximately $3.2 billion and the market value of the preferred stock was approximately $1.5 billion. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued Equity-Price Risk Management. Media Group is exposed to market risks associated with fluctuations in the price of the AirTouch common securities. A hypothetical 10 percent increase in the price of AirTouch common stock would increase the market value of Media Group's investment in AirTouch common stock by approximately $320. Interest Rate Risk Management. The market value of the AirTouch preferred stock is exposed to market risks associated with fluctuations in interest rates. U S WEST has reduced its exposure to fluctuations in the market value of the AirTouch preferred stock by entering into an interest rate swap which locks in the treasury rate component of the market value of the AirTouch preferred stock. As a result, a hypothetical 25 basis point change in interest rates would not have a material effect on the combined market value of the AirTouch preferred stock and the interest rate swap. Effects of the Separation, the Refinancing and the AirTouch Transaction In connection with the Separation, New U S WEST and MediaOne are seeking to refinance substantially all of the U S WEST Indebtedness through a combination of tender offers, prepayments, defeasance, consent solicitations and/or exchange offers. At 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 $8.1 billion of U S WEST Indebtedness, $5.5 billion of U S WEST Communications indebtedness, $2.7 billion of MediaOne Delaware indebtedness and $200 million of Financial Services indebtedness. The approximate $8.1 billion of U S WEST Indebtedness includes $5.4 billion of medium and long-term debt securities, $1.1 billion of commercial paper, $500 million of other indebtedness and $1.08 billion of Preferred Securities. As part of the Refinancing, the Company is offering the holders of Preferred Securities the right to exchange their Preferred Securities for an equal amount of new preferred securities guaranteed by MediaOne or cash. Also as part of the Refinancing, the Company is making offers to purchase for cash $5.2 billion of medium and long-term debt securities. Any securities not tendered pursuant to the Cash Tender Offer will be assumed by MediaOne, although U S WEST may determine to defease certain of such securities in lieu of assumption. In addition, U S WEST will prepay certain other U S WEST Indebtedness pursuant to the Refinancing. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued As of April 30, 1998, the estimated cost of the Refinancing is $339 (net of income tax benefits of $226) which includes approximately $278 (net of income tax benefits of $186) of debt extinguishment costs. In addition to refinancing costs, such costs include the difference between the market and fair value of the U S WEST Indebtedness and a charge for unamortized debt issuance costs. Refinancing costs also include $48 (net of income tax benefits of $32) related to the Exchange Offer. Such costs will reduce MediaOne equity and earnings available for common stock. Consummation of the Exchange Offer and the Cash Tender Offer is subject to certain conditions, including the approval of the Separation by U S WEST's shareowners. After the Separation and related Refinancing, New U S WEST will have approximately $9.9 billion of debt, which will include $5.5 billion of U S WEST Communications indebtedness and $4.4 billion of U S WEST Indebtedness which includes the effects of the Refinancing (which includes the Dex Indebtedness) and the funding of certain costs of the Separation. During the second-quarter of 1998, New U S WEST's operating cash flow will be affected by the payment of its allocated share of Separation costs, estimated at $45 (after-tax). In addition, New U S WEST will pay to MediaOne approximately $122 for its allocated, after-tax share of Refinancing costs. New U S WEST, through its financing subsidiary Capital Funding, will initially finance the repurchase or repayment of U S WEST Indebtedness with commercial paper. Following consummation of the Separation, New U S WEST will issue medium and long-term securities to refinance a portion of the commercial paper. After the Separation and related Refinancing and after giving effect to the AirTouch Transaction, MediaOne will have approximately $5.4 billion of debt and preferred securities, which will include $2.7 billion of MediaOne Delaware indebtedness and $2.7 billion of debt and preferred securities issued or guaranteed by MediaOne, which includes new debt incurred by MediaOne Funding to refinance a portion of the U S WEST Indebtedness. It is anticipated that such new debt will be a combination of commercial paper and commercial bank debt. In addition, the capital assets segment, which will remain with MediaOne, will have approximately $400 million of indebtedness. MediaOne Funding's bank debt will include certain additional terms and covenants which are generally included in the bank indebtedness of cable companies. In addition, any senior indebtedness issued by MediaOne Funding after the Separation will be guaranteed by MediaOne Delaware and, as a result, will rank pari passu with MediaOne Delaware's senior indebtedness. To the extent the Preferred Securities are tendered for cash pursuant to the Exchange Offers, it is anticipated that MediaOne will issue additional preferred securities following the Separation so that it will have approximately $1 billion of preferred securities outstanding. Following the Separation, MediaOne intends to monetize the AirTouch securities it received in the AirTouch Transaction and use a portion of the proceeds to reduce its commercial paper and commercial bank debt. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued 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. In May 1998, New U S WEST and MediaOne entered into revolving bank credit facilities to support their commercial paper programs and, in the case of MediaOne, to provide financing in conjunction with the Refinancing. New U S WEST's credit facility totals $4.5 billion; $3.5 billion matures in one year and $1.0 billion matures in five years. MediaOne's credit facility totals $4.0 billion; $2.0 billion matures in one year and $2.0 billion matures in five years. Contingencies Communications Group Contingencies At U S WEST Communications there are pending regulatory actions in local regulatory jurisdictions that call for price decreases, refunds or both. Oregon. On May 1, 1996, the OPUC approved a stipulation terminating prematurely U S WEST Communications' AFOR plan, and it then undertook a review of U S WEST Communications' earnings. In May 1997, the OPUC ordered U S WEST Communications to reduce its annual revenues by $97, effective May 1, 1997, and to issue a one-time refund, including interest, of approximately $102 to reflect the revenue reduction for the period May 1, 1996 through April 30, 1997. The one-time refund is for interim rates which became subject to refund when U S WEST Communications' AFOR plan was terminated on May 1, 1996. U S WEST Communications filed an appeal of the order and asked for an immediate stay of the refund with the Oregon Circuit Court which granted U S WEST Communications' request for a stay, pending a full review of the OPUC's order. On February 19, 1998, the Oregon Circuit Court entered a judgment in U S WEST Communications' favor on most of the appealed issues. The OPUC appealed on March 19, 1998. The potential exposure, including interest, at March 31, 1998, is not expected to exceed $210. Utah. In another proceeding, the Utah Supreme Court has remanded a UPSC order to the UPSC for hearing, thereby establishing two exceptions to the rule against retroactive ratemaking: 1) unforeseen and extraordinary events, and 2) misconduct. The UPSC's initial order denied a refund request from interexchange carriers and other parties related to the Tax Reform Act of 1986. The potential exposure, including interest, at March 31, 1998, is not expected to exceed $160. Form 10-Q - Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions), continued State Regulatory Accruals. U S WEST Communications has accrued $148 at March 31, 1998, which represents its estimated liability for all state regulatory proceedings, predominately the items discussed above. It is possible that the ultimate liability could exceed the recorded liability by an amount up to approximately $220. U S WEST Communications will continue to monitor and evaluate the risks associated with its local regulatory jurisdictions, and will adjust estimates as new information becomes available. In addition to its estimated liability for state regulatory proceedings, U S WEST Communications has an accrued liability of approximately $230 at March 31, 1998 related to refunds in the state of Washington. The Company expects that the majority of these refunds will be issued to rate payers, IXCs and independent LECs during the second- and third-quarters of 1998. New Accounting Standards SOP 98-5, "Reporting on the Costs of Start-Up Activities," was issued in April 1998. SOP 98-5 requires, among other things, that the costs related to start-up activities of a new entity, facility, product or service be expensed. Adoption of SOP 98-5 is required as of January 1, 1999, but earlier adoption is allowed. The effect of adopting SOP 98-5 is under evaluation. Item 3. Quantitative and Qualitative Disclosures About Market Risk Reference is made to the information set forth on pages 39 and 40. Form 10-Q - Part II PART II - OTHER INFORMATION Item 1. Legal Proceedings U S WEST and its subsidiaries are subject to claims and proceedings arising in the ordinary course of business. While complete assurance cannot be given as to the outcome of any contingent liabilities, in the opinion of U S WEST, any financial impact to which U S WEST and its subsidiaries are subject is not expected to be material in amount to U S WEST's operating results or its financial position. Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Exhibit Number 10a. 364-Day Credit Agreement dated May 8, 1998, among MediaOne Group Funding, Inc., U S WEST, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. 10b. Five-Year Credit Agreement dated May 8, 1998, among MediaOne Group Funding, Inc., U S WEST, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. 10c. 364-Day Credit Agreement dated May 8, 1998, among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. 10d. Five-Year Credit Agreement dated May 8, 1998, among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. 12. Statement regarding computation of earnings to fixed charges ratio of U S WEST, Inc. and U S WEST Financial Services, Inc. 27. Financial Data Schedule.
(b) Reports on Form 8-K filed during the First Quarter of 1998 (i) Form 8-K report dated January 29, 1998, regarding a press release with respect to a merger agreement between AirTouch and U S WEST Media Group. (ii) Form 8-K report dated February 6, 1998, concerning the release of earnings for the year ended December 31, 1997, and (iii) Form 8-K report dated March 25, 1998, concerning Unaudited Pro Forma Condensed Combined Financial Statements of U S WEST, Inc.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 15, 1998 U S WEST, INC. /s/ Michael P. Glinksy --------------------------- Michael P. Glinsky Executive Vice President and Chief Financial Officer EX-10 2 EXHIBIT 10A. EXHIBIT 10a. $2,000,000,000 364-DAY CREDIT AGREEMENT dated as of May 8, 1998 among MediaOne Group Funding, Inc. U S WEST, Inc. (to be renamed MediaOne Group, Inc.) The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Administrative Agent J.P. Morgan Securities Inc. Lead Arranger The Bank of New York, Citicorp Securities, Inc. and NationsBank, N.A., Co-Syndication Agents TABLE OF CONTENTS ---------------------- ARTICLE 1 DEFINITIONS
SECTION 1.01. The Definitions..................................................................1 SECTION 1.02. Accounting Terms and Determinations.............................................13 SECTION 1.03. Types of Borrowings.............................................................13
ARTICLE 2 THE CREDITS
SECTION 2.01. Commitments to Lend.............................................................14 SECTION 2.02. Notice of Committed Borrowing...................................................16 SECTION 2.03. Money Market Borrowings.........................................................16 SECTION 2.04. Notice to Banks; Funding of Loans...............................................20 SECTION 2.05. Notes...........................................................................21 SECTION 2.06. Maturity of Loans...............................................................22 SECTION 2.07. Interest Rates..................................................................22 SECTION 2.08. Facility Fees...................................................................24 SECTION 2.09. Termination or Reduction of Commitments.........................................25 SECTION 2.10. Method of Electing Interest Rates...............................................25 SECTION 2.11. Prepayments....................................................................27 SECTION 2.12. General Provisions as to Payments...............................................27 SECTION 2.13. Funding Losses..................................................................28 SECTION 2.14. Computation of Interest and Fees................................................28
ARTICLE 3 CONDITIONS
SECTION 3.01. Closing.........................................................................29 SECTION 3.02. All Borrowings..................................................................30 SECTION 3.03. Loans after Separation..........................................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power...................................................31 SECTION 4.02. Corporate and Governmental Authorization; No Contravention.........................................................................31
SECTION 4.03. Binding Effect..................................................................31 SECTION 4.04. Financial Information...........................................................31 SECTION 4.05. Litigation......................................................................32 SECTION 4.06. Compliance with ERISA...........................................................32 SECTION 4.07. Environmental Matters...........................................................32 SECTION 4.08. Taxes...........................................................................33 SECTION 4.09. Subsidiaries....................................................................33 SECTION 4.10. Not an Investment Company.......................................................34 SECTION 4.11. Full Disclosure.................................................................34
ARTICLE 5 COVENANTS
SECTION 5.01. Information.....................................................................34 SECTION 5.02. Maintenance of Property; Insurance..............................................36 SECTION 5.03. Maintenance of Existence........................................................36 SECTION 5.04. Compliance with Laws............................................................37 SECTION 5.05. Inspection of Property, Books and Records.......................................37 SECTION 5.06. Subsidiary Debt; Fixed Charge Coverage..........................................37 SECTION 5.07. Debt Coverage; Minimum EBITDA...................................................38 SECTION 5.08. Negative Pledge.................................................................38 SECTION 5.09. Consolidations, Mergers and Sales of Assets.....................................40 SECTION 5.10. Use of Proceeds.................................................................41 SECTION 5.11. Year 2000 Compatibility.........................................................41
ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default...............................................................41 SECTION 6.02. Notice of Default...............................................................44
ARTICLE 7 THE AGENT
SECTION 7.01. Appointment and Authorization...................................................44 SECTION 7.02. Agent and Affiliates............................................................44 SECTION 7.03. Action by Agent.................................................................45 SECTION 7.04. Consultation with Experts.......................................................45 SECTION 7.05. Liability of Agent..............................................................45 SECTION 7.06. Indemnification.................................................................45 SECTION 7.07. Credit Decision.................................................................46
SECTION 7.08. Successor Agent.................................................................46 SECTION 7.09. Agent's Fee.....................................................................46
ARTICLE 8 CHANGES IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................46 SECTION 8.02. Illegality......................................................................47 SECTION 8.03. Increased Cost and Reduced Return...............................................48 SECTION 8.04. Taxes...........................................................................49 SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans.................................................................................51 SECTION 8.06. Substitution of Bank............................................................51
ARTICLE 9 GUARANTY
SECTION 9.01. The Guaranty....................................................................52 SECTION 9.02. Guaranty Unconditional..........................................................52 SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances.................................................................53 SECTION 9.04. Waiver by the Company...........................................................53 SECTION 9.05. Subrogation.....................................................................53 SECTION 9.06. Stay of Acceleration............................................................53
ARTICLE 10 MISCELLANEOUS
SECTION 10.01. Notices........................................................................54 SECTION 10.02. No Waivers.....................................................................54 SECTION 10.03. Expenses; Indemnification......................................................54 SECTION 10.04. Sharing of Set-offs............................................................55 SECTION 10.05. Amendments and Waivers.........................................................56 SECTION 10.06. Successors and Assigns........................................................56 SECTION 10.07. Termination of Existing Credit Agreements......................................58 SECTION 10.08. Governing Law; Submission to Jurisdiction......................................58 SECTION 10.09. Counterparts; Integration; Effectiveness.......................................58 SECTION 10.10. WAIVER OF JURY TRIAL...........................................................59 SECTION 10.11. Confidentiality................................................................59
Pricing Schedule Schedule 4.07 - Environmental Matters Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Company, MediaOne of Delaware, Inc. and the Borrower Exhibit F - Opinion of Special Counsel for the Administrative Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Extension Agreement Exhibit I - Form of MediaOne Delaware Guaranty CREDIT AGREEMENT AGREEMENT dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. The Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assignee" has the meaning set forth in Section 10.06(c). "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means MediaOne Group Funding, Inc., a Colorado corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. A "Change of Control" shall occur if any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. The Separation shall not constitute a Change of Control. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.11. "Committed Loan" means a loan to be made by a Bank pursuant to Section 2.01(a); provided that if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Company" means U S WEST, Inc., a Delaware corporation (to be renamed MediaOne Group, Inc. after the Separation), and its successors. "Company's 1997 Form 10-K" means U S WEST, Inc.'s annual report on Form 10-K for 1997, as amended by Form 10-K/A filed April 13, 1998, in each case as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated EBITDA" means, for any period, the net income of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (x) equity gains or losses in unconsolidated Persons, (y) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss or (z) any gain or loss on the disposition of investments), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense and (iii) depreciation, amortization and other similar non-cash charges and minus, to the extent included in determining such adjusted net income, the aggregate amount of (i) interest income and (ii) income tax benefit. "Consolidated Fixed Charges" means, for any period, the sum, determined without duplication, of (i) interest expense of the Company and its Consolidated Subsidiaries (reduced by the amount of cash dividends on preferred stock of AirTouch Communications, Inc. (or its successors) received by the Company and its Consolidated Subsidiaries, to the extent such interest expense is incurred in respect of Debt, payments on which may be contingent upon receipt of such dividends or which is secured in whole or in part by such preferred stock) and (ii) dividends paid on preferred stock issued by the Company and its Consolidated Subsidiaries, all determined on a consolidated basis for such period. "Consolidated Net Worth" means at any date the consolidated shareowners' equity of the Company and its Consolidated Subsidiaries determined as of such date. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. Notwithstanding the foregoing, for purposes of Sections 5.06 and 5.07 Debt shall in no event include the following: (w) Debt (i) (A) of a Minor Subsidiary, or (B) which is secured by a Lien on the assets or capital stock of a Minor Subsidiary or the equity interests in a Person which is not a Consolidated Subsidiary, which Debt or Lien is incurred in connection with the international operations of the Company and its Subsidiaries, and (ii) for the payment of which no other recourse may be had to the Company or any of its Subsidiaries which is not a Minor Subsidiary; (x) Debt of the Company or the Borrower issued in connection with the issuance of Trust Originated Preferred Securities or substantially similar securities, so long as such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans; (y) Debt of the Company or the Borrower consisting of Mandatorily Exchangeable Debt Securities or substantially similar securities, so long as (i) such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans, and (ii) upon maturity or exchange prior to maturity the obligations of the Company or the Borrower, as the case may be, will be satisfied solely by the delivery of capital stock of the Company, AirTouch Communications, Inc., Financial Security Assurance Holdings Ltd., or Enhance Financial Services Group Inc. (or their respective successors); and (z) Debt incurred (i) in connection with discontinued operations outstanding on the date of this Agreement in an aggregate principal amount not exceeding $200,000,000 and (ii) for the payment of which no recourse may be had to continuing operations of the Company and its Subsidiaries. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "Domestic Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Domestic Loan immediately before it became overdue. "Effective Date" means the date this Agreement becomes effective in accordance with Section 10.09. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.07. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07 on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Bank of New York, Citibank, N.A., and Morgan Guaranty Trust Company of New York, and "Euro-Dollar Reference Bank" means any one of the foregoing. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the Amended and Restated Credit Agreements dated as of October 31, 1997, among the Borrower, the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as administrative agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Domestic Loans at such time or (ii) all Committed Loans which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Domestic Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 10.03(b). "Indentures" means the agreements or instruments evidencing the following Debt of Continental Cablevision, Inc., and its successors: (i) the 11% Senior Subordinated Debentures Due June 1, 2007; (ii) the 8 5/8% Senior Notes Due August 15, 2003; (iii) the 9% Senior Debentures Due September 1, 2008; (iv) the 8 7/8% Senior Debentures Due September 15, 2002; (v) the 9 1/2% Senior Debentures Due August 1, 2013; (vi) the 8 1/2% Senior Notes Due September 15, 2001; (vii) the 8.3% Senior Notes Due May 15, 2006; and (viii) any other Debt containing terms and conditions as or more favorable to the holders thereof than the terms and conditions of any of the foregoing Debt. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date, and any Interest Period beginning on or after a Termination Date which would otherwise end after the first anniversary of such Termination Date shall end on the first anniversary of such Termination Date. (2) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date. (3) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $75,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $75,000,000. "MediaOne Delaware Guaranty" shall mean a Guaranty of MediaOne of Delaware, Inc., substantially in the form of Exhibit I hereto. "Minor Subsidiary" means, for purposes of the last sentence of the definition of Debt and of Section 5.08(f) (the "Relevant Provisions"), (i) each of U S WEST International Holdings, Inc. (to be renamed MediaOne International Holdings, Inc.) and its Subsidiaries, but only if such Person is engaged only in operations outside the United States, and (ii) any other Subsidiary which, at the time of the issuance of a Guaranty or grant of a Lien referred to in the Relevant Provisions, had assets which, when taken together with all assets of Subsidiaries at any earlier time when such Subsidiaries were deemed to be Minor Subsidiaries pursuant to this clause (ii), did not exceed $250,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Schedule attached hereto and identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Proxy Statement" means the definitive Proxy Statement for 1998 Annual Meeting of Stockholders of U S WEST, Inc., dated and filed with the Securities and Exchange Commission on April 20, 1998. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to but excluding the Termination Date. "Separation" has the meaning set forth in the Proxy Statement. "Significant Subsidiary" means any Subsidiary which would meet the definition of "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company. "Super-Majority Banks" means at any time Banks having at least 85% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 85% of the aggregate unpaid principal amount of the Loans. "Termination Date" means, with respect to each Bank, May 7, 1999, or such later date to which the Termination Date for such Bank shall have been extended pursuant to Section 2.01(b), or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article 5 to eliminate the effect of any change in such generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article 5 for such purpose), then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect in the United States immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Domestic Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01(a) in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) The Commitments. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection (a) from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to the Borrower shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments shall terminate at the close of business on the Termination Date. (b) Extension of Commitments. The Commitments may be extended in the manner and amount set forth in this subsection (b), for a period of 364 days measured from the Termination Date then in effect. If the Company wishes to request an extension of each Bank's Commitment, it shall give notice to that effect to the Agent not less than 45 days and not more than 60 days prior to the Termination Date then in effect, whereupon the Agent shall promptly notify each of the Banks of such request. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Agent. If any Bank shall not have responded affirmatively within such 30-day period, such Bank shall be deemed to have rejected the Company's proposal to extend its Commitment, and only the Commitments of those Banks which have responded affirmatively shall be extended, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit H hereto duly completed and signed by the Borrower, the Company, the Agent and all of the Banks which have responded affirmatively. The Agent shall provide to the Company, no later than 10 days prior to the Termination Date then in effect, a list of the Banks which have responded affirmatively. The Extension Agreement shall be executed and delivered no later than five days prior to the Termination Date then in effect, and no extension of the Commitments pursuant to this subsection (b) shall be legally binding on any party hereto unless and until such Extension Agreement is so executed and delivered. The Company and the Borrower may decline to execute and deliver such Extension Agreement if any Bank has rejected the Company's proposal to extend its Commitment or has failed to execute and deliver such Extension Agreement, and will promptly notify the Agent and the Banks if it so declines. (c) Additional Commitments. At any time during the Revolving Credit Period (unless the Commitments shall have been reduced pursuant to Section 2.09(b)), if no Default shall have occurred and be continuing at such time, the Company may, if it so elects, increase the aggregate amount of the Commitments, either by designating a Person not theretofore a Bank and acceptable to the Agent to become a Bank or by agreeing with an existing Bank that such Bank's Commitment shall be increased. Upon execution and delivery by the Company, the Borrower and such Bank or other Person of an instrument of assumption in form and amount satisfactory to the Administrative Agent, such existing Bank shall have a Commitment as therein set forth or such other Person shall become a Bank with a Commitment as therein set forth and all the rights and obligations of a Bank with such a Commitment hereunder; provided that (i) the Company shall provide prompt notice of such increase to the Agent, which shall promptly notify the other Banks, (ii) the aggregate amount of each such increase which is effective on any day shall be at least $50,000,000 and (iii) the aggregate amount of the Commitments shall at no time exceed $2,250,000,000. Upon any increase in the aggregate amount of the Commitments pursuant to this subsection (c), within five Domestic Business Days in the case of each Group of Domestic Loans outstanding, and at the end of the then current Interest Period with respect thereto in the case of each Group of Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety, and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. (d) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on the Termination Date in amounts such that the aggregate principal amount of such Bank's outstanding Loans to the Borrower at the close of business on the Termination Date shall not exceed its Commitment. Each Borrowing under this subsection (d) shall be made from the several Banks ratably in proportion to their respective Commitments. Amounts prepaid pursuant to Section 2.11 shall not be reborrowed. If less than all the Banks shall have agreed to extend the Termination Date pursuant to subsection (b) above, but the Termination Date for those Banks which have not so agreed has not yet occurred (the "Earlier Date"), and the Borrower has requested a Borrowing pursuant to this subsection (d), then such Borrowing shall be made on the Earlier Date. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Domestic Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing bear interest initially at the Base Rate or at a Euro-Dollar Rate, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01(a), the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 9:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day prior to the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 10.01 not later than (x) 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B)contains qualifying, conditional or similar language; (C)proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly (and in any event no later than 11:00 A.M. (New York time) on (i) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (ii) the proposed date of Borrowing, in the case of an Absolute Rate Auction) notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:15 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless any applicable condition specified in Article 3 has not been satisfied, as determined by the Agent in accordance with Article 3, the Agent will make the funds so received from the Banks immediately available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to Noon (New York City time) on the date of such Borrowing) that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. If the Borrower shall have repaid such corresponding amount of such Bank, such Bank shall reimburse the Borrower for any loss on account thereof incurred by the Borrower. SECTION 2.05. Notes. (a) The Loans of each Bank to the Borrower shall be evidenced by a single Note of the Borrower payable to the order of such Bank for the account of its Applicable Lending Office, unless such Bank requests otherwise, in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Borrower. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type to the Borrower be evidenced by a separate Note of the Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01, the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it to the Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of the Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to the Borrower then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan by a Bank included in any Borrowing made pursuant to Section 2.01(a) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date for such Bank. Each Loan included in any Borrowing made pursuant to Section 2.01(d) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the first anniversary of the Termination Date on which such Borrowing is made. Each Loan included in any Borrowing made pursuant to Section 2.03 shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable thereto. SECTION 2.07. Interest Rates. (a) Each Domestic Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on the last day of each calendar quarter and, with respect to the principal amount of any Domestic Loan converted to a Euro-Dollar Loan, on each date a Domestic Loan is so converted. Any overdue principal of or interest on any Domestic Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Domestic Loans for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Domestic Loans for such day) and (ii) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (d) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07 as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Facility Fees. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or earlier date of termination of the Commitments in their entirety) to but excluding the date the Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of the Loans. Accrued facility fees shall be payable quarterly in arrears on the last day of each calendar quarter and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). "Facility Fee Rate" means a rate per annum determined in accordance with the Pricing Schedule. SECTION 2.09. Termination or Reduction of Commitments. (a) During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. (b) If the Separation has not been consummated on or before November 8, 1998, the Commitments shall be ratably reduced by 50% on the next succeeding Domestic Business Day. (c) On each date of incurrence by the Company or any of its Subsidiaries of any Debt or other obligations secured by Liens on capital stock of AirTouch Communications, Inc., the Commitments shall be ratably reduced by the 364-Day Percentage of 75% of the Net Cash Proceeds of such Debt or other obligations, but only until the Aggregate Commitments equal $2,000,000,000. For purposes of this subsection (c), "Net Cash Proceeds" means, in each case as set forth in reasonable detail in a statement delivered to the Agent, the gross cash proceeds received less all discounts, commissions and legal and other customary third-party expenses incurred in connection with the transaction giving rise to such proceeds; "364-Day Percentage" means the percentage equivalent of a fraction, the numerator of which is the Commitments and the denominator of which is the sum of the Commitments and the commitments (the "Five-Year Commitments") under the Five-Year Credit Agreement dated as of the date hereof among the Borrower and the other parties named therein (as the same may be amended from time to time); and "Aggregate Commitments" means the sum of the Commitments and the Five-Year Commitments. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8), as follows: (i) if such Loans are Domestic Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Domestic Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by such Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Domestic Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.11. Prepayments. (a) Subject in the case of any Euro-Dollar Loans to Section 2.13, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)), or, upon three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (b) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Each such prepayment shall be applied to prepay ratably the Loans of the several Banks included in the relevant Group or Borrowing. (d) On the date of any reduction of Commitments pursuant to Section 2.09(b) or (c), the Borrower shall repay such principal amount (together with accrued interest thereon) of outstanding Loans, if any, as may be necessary so that after such repayment (i) the aggregate outstanding principal amount of each Bank's Committed Loans does not exceed the amount of such Bank's Commitment as then reduced, and (ii) the aggregate unpaid principal amount of all outstanding Loans does not exceed the aggregate amount of the Commitments as then reduced. Any such prepayment shall be made in accordance with all applicable provisions of this Agreement (including without limitation subsections (a) (other than as to amount), (b) and (c) of this Section 2.11). SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without off set or counterclaim, to the Agent at its address referred to in Section 10.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Domestic Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to borrow, convert, continue or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.11(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE 3 CONDITIONS SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following (in the case of any document, dated the Closing Date unless otherwise indicated): (a) a duly executed Note of the Borrower for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of Stephen E. Brilz, Esq., counsel for the Company and the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to the Agent that the commitments under the Existing Credit Agreements have been terminated and that the principal and interest on all loans and accrued fees outstanding thereunder have been paid in full; (e) a duly executed MediaOne Delaware Guaranty; (f) evidence satisfactory to the Agent of the payment of all fees and other amounts payable to the Agent for the account of the Banks or the Agent on or prior to the Closing Date, including, to the extent invoiced, reimbursement of all out-of-pocket expenses (including, without limitation, legal fees and expenses) required to be reimbursed or paid by the Borrower or the Company hereunder; and (g) all documents the Agent may reasonably request relating to the existence of the Company, the Borrower and MediaOne of Delaware, Inc., the corporate authority for and the validity of this Agreement, the Notes and the MediaOne Delaware Guaranty, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to May 30, 1998; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) the fact that, immediately before and after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties contained in this Agreement shall be true on and as of the date of such Borrowing (except, in the case of the representations and warranties contained in Section 4.04(b), but only if neither Level V Status nor Level VI Status (as defined in the Pricing Schedule) exists on the date of such Borrowing, as disclosed by the Borrower to the Banks in writing in the Notice of Borrowing relating to such Borrowing). Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. SECTION 3.03. Loans after Separation. The obligation of any Bank to make or maintain a Loan after the Separation is subject to receipt by the Agent of evidence satisfactory to it that the Separation has been consummated substantially on the terms described in the Proxy Statement. The Agent shall promptly notify the Company and the Banks of the satisfaction of the foregoing condition. ARTICLE 4 REPRESENTATIONS AND WARRANTIES Each of the Company and the Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. Each of the Company and the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company and the Borrower of this Agreement, by the Borrower of the Notes and by MediaOne of Delaware, Inc. of the MediaOne Delaware Guaranty are within such Person's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Person or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person or any Significant Subsidiary or result in the creation or imposition of any Lien on any material asset of such Person or any Significant Subsidiary. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and the Borrower, the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, and the MediaOne Delaware Guaranty constitutes a valid and binding agreement of MediaOne of Delaware, Inc., in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1997 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Arthur Andersen L.L.P. and set forth in the Company's 1997 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 1997 there has been no material adverse change in the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole (it being understood that the consummation of the Separation shall not be considered such a change). SECTION 4.05. Litigation. Except as disclosed in the Company's 1997 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement, the MediaOne Delaware Guaranty or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where failure to comply would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Environmental Matters. (a) The operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws except such non-compliance which would not (if enforced in accordance with applicable law) reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. (b) Except as specifically identified in Schedule 4.07, the Company and each of its Subsidiaries have obtained all material licenses, permits, authorizations and registrations required under any Environmental Laws ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Company and each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits. (c) Except as specifically identified in Schedule 4.07, (i) none of the Company, any of its Subsidiaries or any of their present property or operations are subject to any outstanding written order from or settlement or consent agreement with any governmental authority or other Person, nor is any of the foregoing subject to any judicial or docketed administrative proceedings, respecting any Environmental Laws or Hazardous Substances with a potential liability in excess of $1,000,000 and (ii) there are no other conditions or circumstances known to the Company which may give rise to any claims respecting any Environmental Laws arising from the operations of the Company or its Subsidiaries (including, without limitation, off-site liabilities), or any additional costs of compliance with Environmental Laws, that would reasonably be expected to have a material adverse effect on the financial position or results of operations of the Company and its Subsidiaries, considered as a whole. SECTION 4.08. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. SECTION 4.09. Subsidiaries. Each of the Company's corporate Significant Subsidiaries (including, but not limited to, the Borrower and MediaOne of Delaware, Inc.) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. SECTION 4.10. Not an Investment Company. None of the Company, the Borrower or MediaOne of Delaware, Inc. is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.11. Full Disclosure. All written information heretofore furnished by the Company or the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company or the Borrower to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. ARTICLE 5 COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 95 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Arthur Andersen L.L.P. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer (or such officer's designee, designated in writing by such officer) or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) within five Domestic Business Days after any officer of the Company or the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company or the Borrower setting forth the details thereof and the action which the Company or the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other than any amendment on Form 8-K the sole purpose of which is to file exhibits relating to existing Debt meeting the requirements of clause (ii) of the definition of Debt) which the Company shall have filed with the Securities and Exchange Commission; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (h) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries and the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Maintenance of Property; Insurance. (a) The Company will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will maintain, and will cause each Significant Subsidiary to maintain (either in the name of the Borrower or in such Significant Subsidiary's own name), with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried; provided that, in lieu of any such insurance, the Company and any Significant Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Company or such Significant Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles and practice. SECTION 5.03. Maintenance of Existence. The Company will, and will cause each Significant Subsidiary to, preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.03 shall prohibit or interfere with the Company's publicly announced strategy to discontinue or dispose of in one or more transactions the financial services businesses of it or of any of its Subsidiaries. SECTION 5.04. Compliance with Laws. The Company will comply, and will cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and for which adequate reserves in conformity with generally accepted accounting principles have been established. SECTION 5.05. Inspection of Property, Books and Records. The Company will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. SECTION 5.06. Subsidiary Debt; Fixed Charge Coverage. (a) Prior to the Separation, total debt of all Consolidated Subsidiaries (excluding Debt of a Consolidated Subsidiary to the Company or to a Wholly-Owned Consolidated Subsidiary) will at no time exceed 250% of Consolidated Net Worth. For purposes of this subsection (a), any preferred stock of a Consolidated Subsidiary other than the Borrower which is held by a Person other than the Company or a Wholly-Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in the Debt of such Consolidated Subsidiary. (b) After the Separation, Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on the last day of any fiscal quarter of the Company during any period set forth below will equal or exceed the percentage of Consolidated Fixed Charges set forth below opposite such period; provided that, for purposes of the foregoing calculation, in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, (x) Consolidated EBITDA and Consolidated Fixed Charges for such period shall equal Consolidated EBITDA and Consolidated Fixed Charges, respectively, for each fiscal quarter (a "Relevant Quarter") ending after the Separation and on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters, and (y) Consolidated EBITDA and Consolidated Fixed Charges shall be calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items which are not attributable to operations which are continuing after the Separation.
Period Percentage Prior to December 31, 1998 145% On or after December 31, 1998 150%
SECTION 5.07. Debt Coverage; Minimum EBITDA. (a) Prior to the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries will at all times be less than 70% of the sum of consolidated Debt of the Company and its Consolidated Subsidiaries and consolidated shareowners' equity of the Company and its Consolidated Subsidiaries. (b) If the Separation has occurred, Consolidated EBITDA (calculated on a pro forma basis for the quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) shall equal or exceed $175,000,000 for the fiscal quarter ending on June 30, 1998, $360,000,000 for the two consecutive fiscal quarters ending on September 30, 1998, and $550,000,000 for the three consecutive fiscal quarters ending on December 31, 1998. (c) After the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries as of the last day of any fiscal quarter of the Company ending on or after March 31, 1999 will not exceed 500% of Consolidated EBITDA (calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) for the four consecutive fiscal quarters of the Company ending on such date. SECTION 5.08. Negative Pledge. Neither the Company nor the Borrower will, and the Company will not permit any Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $265,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof. (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e)any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien on assets or capital stock of Minor Subsidiaries which secures Debt of Persons in which the Company or any of its Subsidiaries has made investments, but for the payment of which Debt no other recourse may be had to the Company or any Subsidiaries which are not Minor Subsidiaries ("Limited Recourse Debt"), or any Lien on equity interests in a Person which is not a Consolidated Subsidiary (a "Joint Venture") securing Limited Recourse Debt of such Joint Venture; (g) Liens on capital stock of AirTouch Communications, Inc., Financial Security Assurance Holdings Ltd. or Enhance Financial Services Group Inc. (or their respective successors) which secure Debt for borrowed money; (h) any Lien arising out of the refinancing, replacement, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (i) Liens arising in the ordinary course of business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (j) Liens not otherwise permitted by and in addition to the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed 20% of Consolidated EBITDA for the four consecutive fiscal quarters most recently ended; provided that in the case of any four fiscal quarter period ending after the Separation but prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA (calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) for each fiscal quarter (a "Relevant Quarter") ending after the Separation and on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters. SECTION 5.09. Consolidations, Mergers and Sales of Assets. (a) The Company will not (i) consolidate with or merge into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or any substantial part of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person. It is understood that this covenant shall not prohibit: (w) a swap of cable systems or cable system assets by the Company or any of its Subsidiaries with any other Person to the extent such swap involves a like-kind exchange (with receipt or payment of any other consideration being subject to any other applicable provisions of this Agreement, including, without limitation, the first sentence of this Section 5.09(a)), (x) a disposition of cable systems or cable system assets by the Company or any of its Subsidiaries for cash or other consideration, to the extent such cash proceeds have been committed to be reinvested within six months of such disposition, and have actually been reinvested within twelve months of such disposition, in other cable systems or cable system assets (with receipt or payment of any other consideration being subject to any other applicable provisions of this Agreement, including, without limitation, the first sentence of this Section 5.09(a)), (y) a disposition of a Minor Subsidiary, if, after giving effect thereto, the Company shall be in compliance with Sections 5.06 and 5.07 on a pro forma basis until the end of the twelve-month period immediately following the last day of the month in which such disposition is proposed to be consummated, and the Company shall have delivered to each of the Banks at least 15 days prior to the consummation of such disposition a certificate to such effect and an accompanying report establishing the basis for such certification, in a form, and providing detail and justification for the information contained therein, satisfactory to the Agent, or (z) a disposition of assets constituting discontinued operations on the date of this Agreement. (b) Prior to the Separation, the Company will retain ownership, directly or indirectly, of at least 80% of the capital stock, and at least 80% of the voting power, of U S WEST Communications, Inc. ("Communications"), and will cause Communications to continue to own substantially all of the telecommunications assets it owns on the date of this Agreement. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds will include any use for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. SECTION 5.11. Year 2000 Compatibility. The Company shall take all reasonable action necessary to ensure that the computer based systems of the Company and its Subsidiaries are able to operate and effectively process data including dates on or after January 1, 2000, except that such action shall not be required to the extent that the failure to take such action would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. At the request of the Agent, the Company shall provide assurance reasonably acceptable to the Agent of the year 2000 compatibility of the Company and its Subsidiaries. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof; (b) the Company or the Borrower shall fail to observe or perform any covenant contained in Sections 5.06 to 5.10, inclusive; (c) the Company or the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 10 days (or, in the case of Section 5.11, 30 days) after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment or payments, in the aggregate in excess of $75,000,000, in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or obligor with respect to any commitment to provide such Debt or any Person acting on such holder's or obligor's behalf to accelerate the maturity thereof or, because such event or condition constitutes a default or event of default or similar event, however defined, under the instrument governing such commitment, to terminate such commitment; (g) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize or otherwise acquiesce in any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $75,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $75,000,000; (j) a judgment or order for the payment of money in excess of $75,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days; (k) the Company shall repudiate in writing any of its obligations under Article 9 or MediaOne Delaware shall repudiate in writing any of its obligations under the MediaOne Delaware Guaranty or any such obligation shall be unenforceable against the Company or MediaOne Delaware, as the case may be, in accordance with its terms, or the Company or MediaOne Delaware shall so assert in writing; (l) one or more events or conditions shall occur which result in a default under any agreement or agreements in respect of any Material Debt that is subject to the Indentures and as a consequence of such default or defaults the Company or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Debt and such payment, consideration or benefit is determined by the Required Banks, after taking into account any payment, consideration or benefit made, given or agreed to be given by such holders to the Company or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Debt; (m) the Separation shall have occurred on terms and conditions which are not substantially the same as those set forth in the Proxy Statement; or (n) a Change of Control shall have occurred; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and/or (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company or the Borrower, without any notice to the Company or the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company, the Borrower or any Subsidiary or affiliate of the Company or the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company or the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent (with the consent of the Company, such consent not to be unreasonably withheld), which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $400,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE 8 CHANGES IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the market for such Interest Period, or (b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Euro-Dollar Loans advise the Agent that the Adjusted London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Domestic Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Domestic Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Domestic Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) Any and all payments by the Company or the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company or the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Person shall make such deductions, (iii) such Person shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Person shall furnish to the Agent, at its address referred to in Section 10.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a) imposed by the United States. (e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Company or the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to the Borrower which would otherwise be made by such Bank as (or continued as or converted into) Euro-Dollar Loans shall instead be Domestic Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Borrower has been repaid (or converted to a Domestic Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Domestic Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Domestic Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or (iii) any Bank has not signed an amendment or waiver which must be signed by all the Banks to become effective, and such amendment or waiver has been signed by the Super-Majority Banks, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank. ARTICLE 9 GUARANTY SECTION 9.01. The Guaranty. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by the Borrower under this Agreement. Upon failure by the Borrower to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. SECTION 9.02. Guaranty Unconditional. The obligations of the Company hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and the Borrower under this Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. SECTION 9.04. Waiver by the Company. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. SECTION 9.05. Subrogation. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. SECTION 9.06. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. ARTICLE 10 MISCELLANEOUS SECTION 10.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company, the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified pursuant to this Section 10.01 and telephonic confirmation of receipt thereof is received, or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received. SECTION 10.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 10.03. Expenses; Indemnification. (a) The Company shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that (i) no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction and (ii) the Company shall not be liable for any settlement entered into by an Indemnitee without its consent (which shall not be unreasonably withheld). (c) Each Indemnitee agrees to give the Company prompt written notice after it receives any notice of the commencement of any action, suit or proceeding for which such Indemnitee may wish to claim indemnification pursuant to subsection (b). The Company shall have the right, exercisable by giving written notice within fifteen Domestic Business Days after the receipt of notice from such Indemnitee of such commencement, to assume, at the Company's expense, the defense of any such action, suit or proceeding; provided, that such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at such Indemnitee's expense unless (1) the Company shall have agreed to pay such fees and expenses; (2) the Company shall have failed to assume the defense of such action, suit or proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnitee in any such action, suit or proceeding; or (3) such Indemnitee shall have been advised by independent counsel in writing (with a copy to the Company) that there may be one or more defenses available to such Indemnitee which are in conflict with those available to the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the Company's expense, the Company shall be obligated to assume the expense, it being understood, however, that the Company shall not be liable for the fees or expenses of more than one separate firm of attorneys, which firm shall be designated in writing by such Indemnitee). SECTION 10.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 10.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company, the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, except as provided below, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) amend or waive the provisions of Article 9 or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 10.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans, with (and subject to) the written consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that if a Participant is an affiliate of such grantor Bank or is another Bank, no such consent shall be required. In the event of any such grant by a Bank of a participating interest to a Participant, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company, the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below but which is consented to in accordance with this subsection (b) shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that (i) if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent shall be required; (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and (iii) any assignment shall not be less than $15,000,000, or if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes except for any rights retained in accordance with clause (ii) of this proviso. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 10.07. Termination of Existing Credit Agreements. The Company and each of the Banks that is also a "Bank" party to the Existing Credit Agreements agrees that the "Commitments" as defined in the Existing Credit Agreements shall be terminated in their entirety on the Effective Date. Each of such Banks waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreements and (b) any claim to any facility fees or other fees under the Existing Credit Agreements for any day on or after the Effective Date. Each of the Company and the Borrower (i) represents and warrants that (x) after giving effect to the preceding sentences of this Section 10.07, the commitments under the Existing Credit Agreements will be terminated effective not later than the Effective Date, (y) no loans are, as of the date hereof, or will be, as of the Effective Date, outstanding under the Existing Credit Agreements and (ii) covenants that all accrued and unpaid facility fees and any other amounts due and payable under the Existing Credit Agreements shall have been paid on or prior to the Effective Date. SECTION 10.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the Company and the Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 10.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of counterparts hereof signed by each of the Company, the Borrower, the Banks and the Agent (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 10.11. Confidentiality. Each of the Agent and the Banks agrees to use its reasonable best efforts to keep confidential any information delivered or made available by the Company or the Borrower to it which is clearly stated by the Company or the Borrower to be confidential; provided that nothing herein shall prevent the Agent or any Bank from disclosing such information (i) to the Agent or any other Bank in connection with the transactions contemplated hereby, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Company and its Subsidiaries, provided that such Person is not (x) known to it to be bound by a confidentiality agreement with the Company or its Subsidiaries or (y) known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy hereunder or under the Notes or (viii) to any actual or proposed participant or assignee of all or any of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MEDIAONE GROUP FUNDING, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter U S WEST, INC. (TO BE RENAMED MEDIAONE GROUP, INC.) By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter Commitments $95,500,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By Name: Title: $95,000,000 THE BANK OF NEW YORK By Name: Title: $95,000,0000 CITIBANK, N.A. By Name: Title: $95,000,000 NATIONSBANK, N.A. By Name: Title: $87,500,000 ABN AMRO BANK N.V. By Name: Title: By Name: Title: $87,500,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By Name: Title: $87,500,000 BARCLAYS BANK PLC By Name: Title: $87,500,000 THE CHASE MANHATTAN BANK By Name: Title: $87,500,000 FLEET NATIONAL BANK By Name: Title: $87,500,000 MELLON BANK, N.A. By Name: Title: $87,500,000 TORONTO DOMINION (TEXAS), INC. By Name: Title: $75,000,000 BANQUE NATIONALE DE PARIS By Name: Title: By Title: $75,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By Name: Title: $75,000,000 SOCIETE GENERALE SOUTHWEST AGENCY By Name: Title: $58,000,000 DRESDNER BANK A.G., NEW YORK AND GRAND CAYMAN BRANCHES By Name: Title: By Name: Title: $58,000,000 ROYAL BANK OF CANADA By Name: Title: $58,000,000 THE ROYAL BANK OF SCOTLAND PLC By Name: Title: $58,000,000 WESTDEUTCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By Name: Title: By Name: Title: $37,500,000 BANK ONE, COLORADO, N.A. By Name: Title: $37,500,000 BANKERS TRUST COMPANY By Name: Title: $37,500,000 BANQUE PARIBAS By Name: Title: By Name: Title: $37,500,000 BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH By Name: Title: By Name: Title: $37,500,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By Name: Title: By Name: Title: $37,500,000 THE DAI-ICHI KANGYO BANK, LIMITED By Name: Title: $37,500,000 FIRST UNION NATIONAL BANK By Name: Title: $37,500,000 THE FUJI BANK, LIMITED LOS ANGELES AGENCY By Name: Title: $37,500,000 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT By Name: Title: $37,500,000 KREDIETBANK N.V. By Name: Title: By Name: Title: $37,500,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. LOS ANGELES AGENCY By Name: Title: $37,500,000 NORWEST BANK COLORADO, NATIONAL ASSOCIATION By Name: Title: $37,500,000 THE SAKURA BANK LIMITED, LOS ANGELES AGENCY By Name: Title: $37,500,000 THE SUMITOMO BANK, LIMITED By Name: Title: $25,000,000 CRESTAR BANK By Name: Title: Total Commitments $2,000,000,000 =========== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title: 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Mark Connor Facsimile number: 302-634-1092 Telephone number: 302-634-4218 PRICING SCHEDULE The "Euro-Dollar Margin" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
Level Level Level Level Level Level Status I II III IV V VI Euro-Dollar Margin: Usage less than or equal to 331/3% .170% .250% .315% .355% .4375% .750% Usage more than 331/3% and less than or equal to 662/3% .245% .325% .390% .430% .5125% .750% Usage more than 662/3% .295% .375% .440% .480% .5625% .750% Facility Fee .080% .100% .110% .120% .1875% .250% Rate ===================== ============ ============= ============= ============ ============= ============
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date after the Separation if, at such date, the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB+ or higher by S&P and Baa1 or higher by Moody's. "Level II Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists (x) at any date prior to the Separation, and (y) at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB or higher by S&P and Baa3 or higher by Moody's, (ii) the Borrower's outstanding commercial paper is rated A2 or higher by S&P and P3 or higher by Moody's or A3 or higher by S&P and P2 or higher by Moody's and (iii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB- or higher by S&P and Baa3 or higher by Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BB+ or higher by S&P and Ba1 or higher by Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date after the Separation if, at such date, none of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "S&P" means Standard & Poor's Ratings Group, a New York corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Usage" means at any date the percentage equivalent of a fraction (i) the numerator of which is the sum of the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date, and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the Usage for each date on or after the date of such termination shall be deemed to be greater than 662/3%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower guaranteed by the Company and MediaOne of Delaware, Inc., and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. SCHEDULE 4.07 Environmental Matters NONE. EXHIBIT A NOTE New York, New York ________, 19__ For value received, MEDIAONE GROUP FUNDING, INC., a Colorado corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date therefor specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the inaccuracy of, or the failure of the Bank to make, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. U S WEST, Inc. (to be renamed MediaOne Group, Inc.), has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this Note. MEDIAONE GROUP FUNDING, INC. By Title: LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------------------------------ Date Amount of Type of Loan Amount of Maturity Date Notation Made Loan Principal By Repaid - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: MediaOne Group Funding, Inc. Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks listed on the signature pages thereof, the other agents named therein and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. - -------- 1Amount must be $25,000,000 or a larger multiple of $5,000,000. 2Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. Terms used herein have the meanings assigned to them in the Credit Agreement. MEDIAONE GROUP FUNDING, INC. By________________________ Title: EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to MediaOne Group Funding, Inc. (the "Borrower") Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks parties thereto, the other agents named therein and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [10:30 A.M.] [9:15 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By______________________________ Authorized Officer EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent") Re: Money Market Quote to MediaOne Group Funding, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** - ---------- * As specified in the related Invitation. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the 364-Day Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks listed on the signature pages thereof, the other agents named therein and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - ---------- ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY, MEDIAONE OF DELAWARE, INC., AND THE BORROWER To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Gentlemen and Ladies: I have acted as counsel for U S WEST, Inc., MediaOne of Delaware, Inc. ("MediaOne Delaware") and MediaOne Group Funding, Inc., in connection with the 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998, among them, the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the instruction of the client pursuant to Section 3.01(b) of the Credit Agreement. I am familiar with the proceedings taken by the Company, MediaOne Delaware and the Borrower in connection with the authorization, execution and delivery of the Credit Agreement, the MediaOne Delaware Guaranty and the Notes, and I have examined such documents, certificates, and such other matters of fact and questions of law as I have deemed relevant under the circumstances to express an informed opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. 2. The execution, delivery and performance by the Company and the Borrower of the Credit Agreement, by the Borrower of the Notes and by MediaOne Delaware of the MediaOne Delaware Guaranty are within such Person's corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental body, agency or official. 3. The execution, delivery and performance by the Company and the Borrower of the Credit Agreement, by the Borrower of the Notes and by MediaOne Delaware of the MediaOne Delaware Guaranty will not (i) result in a breach or violation of, conflict with, or constitute a default under, the articles of incorporation or bylaws of such Person or any material law or regulation or any material order, judgment, agreement or instrument to which such Person is a party or by which such Person is bound, or (ii) result in the creation or imposition of any Lien on any asset of such Person. 4. The Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower, the Notes constitute valid and binding obligations of the Borrower and the MediaOne Delaware Guaranty constitutes a valid and binding agreement of MediaOne Delaware, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 5. To my knowledge, and except as disclosed in the Company's 1997 Form 10-K (as amended by Form 10-K/A) as filed with the Securities and Exchange Commission, there is no action, suit or proceeding pending against, or, to the best of my knowledge, threatened against or affecting the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement, the MediaOne Delaware Guaranty or the Notes. 6. The Borrower, MediaOne Delaware and each of the Company's other corporate Significant Subsidiaries are corporations validly existing and in good standing under the laws of their jurisdictions of incorporation, and have all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. For purposes of my opinion set forth in numbered paragraph 4 above, I have assumed that the laws of the State of New York, which are stated to govern the Credit Agreement, the MediaOne Delaware Guaranty and the Notes, are the same as the laws of the State of Colorado. In rendering the opinions set forth herein, I have assumed that the Credit Agreement, the MediaOne Delaware Guaranty and the Notes will conform to the specimens thereof examined by me, that the signatures on all documents examined by me were genuine, and the authenticity of all documents submitted to me as originals or as copies of originals, assumptions which I have not independently verified. This opinion is furnished by me as counsel for the Company, MediaOne Delaware and the Borrower and is solely for your benefit and the benefit of any Assignee under the Credit Agreement. Without my prior written consent, this opinion may not be relied upon by you or any Assignee in any other context or by any other person. This opinion may not be quoted, in whole or in part, or copies thereof furnished, to any other person without my prior written consent, except that you may furnish copies hereof (a) to your auditors and attorneys, (b) to any state or federal authority having regulatory jurisdiction over you or the Company or the Borrower, (c) pursuant to order or legal process of any court or governmental agency, (d) in connection with any legal action to which you are a party arising out of the transactions contemplated by the Credit Agreement, and (e) to any Participant or proposed Participant in the Commitment of any Bank. This opinion is limited to the present laws of the State of Colorado and the General Corporation Law of the State of Delaware, to present judicial interpretations thereof, and to the facts as they presently exist, and I assume no responsibility as to the applicability or effect of the laws of any other jurisdiction. In rendering this opinion, I assume no obligation to revise or supplement this opinion should the present laws of the State of Colorado or the General Corporation Law of the State of Delaware be changed by legislative action, judicial decision, or otherwise. Very truly yours, Stephen E. Brilz EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereof (the "Banks"), the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that, assuming that the execution, delivery and performance by the Company and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers and have been duly authorized by all necessary corporate action, the Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower and the Notes constitute valid and binding obligations of the Borrower. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, __ 199_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), U S WEST, Inc. (to be renamed MEDIAONE GROUP, INC.) (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of May 8, 1998 among the Company, the Borrower named therein, the Assignor and the other Banks party thereto, as Banks, the other agents named therein and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.3 It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees to that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Company and the Agent. This Agreement is conditioned upon the consent of the Company and the Agent pursuant to Section 10.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 10.06(c) the Company agrees to cause the Borrower to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company or the Borrower, or the validity and enforceability of the obligations of the Company - -------- 3 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. or the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By Title: [ASSIGNEE] By Title: [U S WEST, INC.] [MEDIAONE GROUP, INC.] By Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title:] EXHIBIT H EXTENSION AGREEMENT MediaOne Group Funding, Inc. [U S WEST, Inc.] [MediaOne Group, Inc.] 7800 East Orchard Road Englewood, Colorado 80111 Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 60 Wall Street New York, NY 10260 Gentlemen: The undersigned hereby agree to extend the Revolving Credit Period under the 364-Day Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., [U S WEST, Inc.] [MediaOne Group, Inc.], the Banks listed therein, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Credit Agreement") for 364 days to ____________ __, ____. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. It may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK]1 By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. [NAME OF BANK]1 By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. Agreed and accepted: MEDIAONE GROUP FUNDING, INC. By Title [U S WEST, INC.] [MEDIAONE GROUP, INC.] By Title MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title EXHIBIT I GUARANTY GUARANTY dated as of May __, 1998 by MediaOne of Delaware, Inc., a Delaware corporation (the "Guarantor"), for the benefit of the Banks and the Agent referred to below. WHEREAS, U S WEST, Inc. (to be renamed MediaOne Group, Inc.) (the "Company") and MediaOne Group Funding, Inc. (the "Borrower"), have entered into a Credit Agreement dated as of May 8, 1998 with the banks listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"); and WHEREAS, said Credit Agreement, as amended from time to time, is herein referred to as the "Credit Agreement" and the terms defined therein and not otherwise defined herein have, as used herein, their respective meanings set forth in Section 1.01 of the Credit Agreement; and WHEREAS, the obligations of the Banks to make loans under the Credit Agreement are conditioned on, among other things the execution and delivery to the Agent of a Guaranty in the form hereof by the Guarantor, which is a wholly-owned subsidiary of the Company; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: SECTION 1. Guaranty. 1.1. The Guaranty. The Guarantor hereby unconditionally guarantees the full and punctual payment when due (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to the Credit Agreement, and the full and punctual payment of all other amounts payable by the Borrower under the Credit Agreement. Upon failure by the Borrower to pay punctually any such amount in full, the Guarantor shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Credit Agreement. 1.2 Guaranty Unconditional. The obligations of the Guarantor hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under the Credit Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to the Credit Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under the Credit Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in the Credit Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith, with the Credit Agreement or with any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of the Credit Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder. 1.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts under the Credit Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. 1.4. Waiver by the Guarantor. The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. 1.5. Subrogation. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. 1.6. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under the Credit Agreement or its Notes is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Agent made at the request of the Required Banks. 1.7. Limit of Liability. The obligations of the Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. SECTION 2. Miscellaneous. 2.1. Successors and Assigns. This Guaranty shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the Banks and the Agent and their respective successors and assigns. 2.2. Amendments. Neither this Guaranty nor any provision hereof may be amended, modified, waived, discharged or terminated orally, but only by a statement in writing signed by the Agent with the prior written consent of each of the Banks or pursuant to Section 1.3 above. 2.3. Governing Law; Submission to Jurisdiction. This Guaranty shall be construed in accordance with and governed by the laws of the State of New York. The Guarantor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. MEDIAONE OF DELAWARE, INC. By _____________________________ Name: Title: 7800 East Orchard Road Englewood, Colorado 70111 Facsimile number: 303-793-0307 Telephone number: 303-793-6250 Attention: Rahn Porter EX-10 3 EXHIBIT 10B. EXHIBIT 10b. $2,000,000,000 FIVE-YEAR CREDIT AGREEMENT dated as of May 8, 1998 among MediaOne Group Funding, Inc. U S WEST, Inc. (to be renamed MediaOne Group, Inc.) The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Administrative Agent J.P. Morgan Securities Inc. Lead Arranger The Bank of New York, Citicorp Securities, Inc. and NationsBank, N.A., Co-Syndication Agents
TABLE OF CONTENTS ---------------------- ARTICLE 1 Definitions Section 1.01. The Definitions..................................................................1 Section 1.02. Accounting Terms and Determinations.............................................13 Section 1.03. Types of Borrowings.............................................................13
ARTICLE 2 The Credits
Section 2.01. Commitments to Lend.............................................................14 Section 2.02. Notice of Committed Borrowing...................................................15 Section 2.03. Money Market Borrowings.........................................................16 Section 2.04. Notice to Banks; Funding of Loans...............................................20 Section 2.05. Notes...........................................................................21 Section 2.06. Maturity of Loans...............................................................22 Section 2.07. Interest Rates..................................................................22 Section 2.08. Facility Fees...................................................................24 Section 2.09. Termination or Reduction of Commitments.........................................24 Section 2.10. Method of Electing Interest Rates...............................................25 Section 2.11. Prepayments....................................................................26 Section 2.12. General Provisions as to Payments...............................................27 Section 2.13. Funding Losses..................................................................28 Section 2.14. Computation of Interest and Fees................................................28 Section 2.15. Swingline Facility..............................................................28
ARTICLE 3 Conditions Section 3.01. Closing.........................................................................30 Section 3.02. All Borrowings..................................................................31 Section 3.03. Loans after Separation..........................................................32
ARTICLE 4 Representations and Warranties
Section 4.01. Corporate Existence and Power...................................................32 Section 4.02. Corporate and Governmental Authorization; No Contravention.........................................................................32
Page Section 4.03. Binding Effect..................................................................32 Section 4.04. Financial Information...........................................................33 Section 4.05. Litigation......................................................................33 Section 4.06. Compliance with ERISA...........................................................33 Section 4.07. Environmental Matters...........................................................34 Section 4.08. Taxes...........................................................................34 Section 4.09. Subsidiaries....................................................................35 Section 4.10. Not an Investment Company.......................................................35 Section 4.11. Full Disclosure.................................................................35
ARTICLE 5 Covenants
Section 5.01. Information.....................................................................35 Section 5.02. Maintenance of Property; Insurance..............................................37 Section 5.03. Maintenance of Existence........................................................38 Section 5.04. Compliance with Laws............................................................38 Section 5.05. Inspection of Property, Books and Records.......................................38 Section 5.06. Subsidiary Debt; Fixed Charge Coverage..........................................38 Section 5.07. Debt Coverage; Minimum EBITDA .....................................................................................39 Section 5.08. Negative Pledge.................................................................40 Section 5.09. Consolidations, Mergers and Sales of Assets.....................................41 Section 5.10. Use of Proceeds.................................................................42 Section 5.11. Year 2000 Compatibility.........................................................42
ARTICLE 6 Defaults
Section 6.01. Events of Default...............................................................43 Section 6.02. Notice of Default...............................................................45
ARTICLE 7 The Agent
Section 7.01. Appointment and Authorization...................................................46 Section 7.02. Agent and Affiliates............................................................46 Section 7.03. Action by Agent.................................................................46 Section 7.04. Consultation with Experts.......................................................46 Section 7.05. Liability of Agent..............................................................46 Section 7.06. Indemnification.................................................................47
Section 7.07. Credit Decision.................................................................47 Section 7.08. Successor Agent.................................................................47 Section 7.09. Agent's Fee.....................................................................47
ARTICLE 8 Changes in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................48 Section 8.02. Illegality......................................................................48 Section 8.03. Increased Cost and Reduced Return...............................................49 Section 8.04. Taxes...........................................................................50 Section 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans.................................................................................52 Section 8.06. Substitution of Bank............................................................52
ARTICLE 9 Guaranty
Section 9.01. The Guaranty....................................................................53 Section 9.02. Guaranty Unconditional..........................................................53 Section 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances.................................................................54 Section 9.04. Waiver by the Company...........................................................54 Section 9.05. Subrogation.....................................................................54 Section 9.06. Stay of Acceleration............................................................55
ARTICLE 10 Miscellaneous
Section 10.01. Notices........................................................................55 Section 10.02. No Waivers.....................................................................55 Section 10.03. Expenses; Indemnification......................................................55 Section 10.04. Sharing of Set-offs............................................................57 Section 10.05. Amendments and Waivers.........................................................57 Section 10.06. Successors and Assigns........................................................57 Section 10.07. Termination of Existing Credit Agreements......................................59 Section 10.08. Governing Law; Submission to Jurisdiction......................................60 Section 10.09. Counterparts; Integration; Effectiveness.......................................60 Section 10.10. WAIVER OF JURY TRIAL...........................................................60 Section 10.11. Confidentiality................................................................60
Pricing Schedule Schedule 4.07 - Environmental Matters Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Company, MediaOne of Delaware, Inc. and the Borrower Exhibit F - Opinion of Special Counsel for the Administrative Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Extension Agreement Exhibit I - Form of MediaOne Delaware Guaranty CREDIT AGREEMENT AGREEMENT dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 Definitions Section 1.01. The Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assignee" has the meaning set forth in Section 10.06(c). "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means MediaOne Group Funding, Inc., a Colorado corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. A "Change of Control" shall occur if any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. The Separation shall not constitute a Change of Control. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.11. "Committed Loan" means a loan to be made by a Bank pursuant to Section 2.01(a); provided that if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Company" means U S WEST, Inc., a Delaware corporation (to be renamed MediaOne Group, Inc. after the Separation), and its successors. "Company's 1997 Form 10-K" means U S WEST, Inc.'s annual report on Form 10-K for 1997, as amended by Form 10-K/A filed April 13, 1998, in each case as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated EBITDA" means, for any period, the net income of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (x) equity gains or losses in unconsolidated Persons, (y) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss or (z) any gain or loss on the disposition of investments), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense and (iii) depreciation, amortization and other similar non-cash charges and minus, to the extent included in determining such adjusted net income, the aggregate amount of (i) interest income and (ii) income tax benefit. "Consolidated Fixed Charges" means, for any period, the sum, determined without duplication, of (i) interest expense of the Company and its Consolidated Subsidiaries (reduced by the amount of cash dividends on preferred stock of AirTouch Communications, Inc. (or its successors) received by the Company and its Consolidated Subsidiaries, to the extent such interest expense is incurred in respect of Debt, payments on which may be contingent upon receipt of such dividends or which is secured in whole or in part by such preferred stock) and (ii) dividends paid on preferred stock issued by the Company and its Consolidated Subsidiaries, all determined on a consolidated basis for such period. "Consolidated Net Worth" means at any date the consolidated shareowners' equity of the Company and its Consolidated Subsidiaries determined as of such date. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. Notwithstanding the foregoing, for purposes of Sections 5.06 and 5.07 Debt shall in no event include the following: (w) Debt (i) (A) of a Minor Subsidiary or (B) which is secured by a Lien on the assets or capital stock of a Minor Subsidiary or the equity interests in a Person which is not a Consolidated Subsidiary, which Debt or Lien is incurred in connection with the international operations of the Company and its Subsidiaries, and (ii) for the payment of which no other recourse may be had to the Company or any of its Subsidiaries which is not a Minor Subsidiary; (x) Debt of the Company or the Borrower issued in connection with the issuance of Trust Originated Preferred Securities or substantially similar securities, so long as such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans; (y) Debt of the Company or the Borrower consisting of Mandatorily Exchangeable Debt Securities or substantially similar securities, so long as (i) such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans, and (ii) upon maturity or exchange prior to maturity the obligations of the Company or the Borrower, as the case may be, will be satisfied solely by the delivery of capital stock of the Company, AirTouch Communications, Inc., Financial Security Assurance Holdings Ltd., or Enhance Financial Services Group Inc. (or their respective successors); and (z) Debt incurred (i) in connection with discontinued operations outstanding on the date of this Agreement in an aggregate principal amount not exceeding $200,000,000 and (ii) for the payment of which no recourse may be had to continuing operations of the Company and its Subsidiaries. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "Domestic Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8, (ii) a Swing Loan or (iii) an overdue amount which was a Domestic Loan immediately before it became overdue. "Effective Date" means the date this Agreement becomes effective in accordance with Section 10.09. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.07. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07 on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Bank of New York, Citibank, N.A., and Morgan Guaranty Trust Company of New York, and "Euro-Dollar Reference Bank" means any one of the foregoing. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the Amended and Restated Credit Agreements dated as of October 31, 1997, among the Borrower, the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as administrative agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Domestic Loans at such time or (ii) all Committed Loans which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Domestic Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 10.03(b). "Indentures" means the agreements or instruments evidencing the following Debt of Continental Cablevision, Inc., and its successors: (i) the 11% Senior Subordinated Debentures Due June 1, 2007; (ii) the 8 5/8% Senior Notes Due August 15, 2003; (iii) the 9% Senior Debentures Due September 1, 2008; (iv) the 8 7/8% Senior Debentures Due September 15, 2002; (v) the 9 1/2% Senior Debentures Due August 1, 2013; (vi) the 8 1/2% Senior Notes Due September 15, 2001; (vii) the 8.3% Senior Notes Due May 15, 2006; and (viii) any other Debt containing terms and conditions as or more favorable to the holders thereof than the terms and conditions of any of the foregoing Debt. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. (2) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. (3) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $75,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $75,000,000. "MediaOne Delaware Guaranty" shall mean a Guaranty of MediaOne of Delaware, Inc., substantially in the form of Exhibit I hereto. "Minor Subsidiary" means, for purposes of the last sentence of the definition of Debt and of Section 5.08(f) (the "Relevant Provisions"), (i) each of U S WEST International Holdings, Inc. (to be renamed MediaOne International Holdings, Inc.) and its Subsidiaries, but only if such Person is engaged only in operations outside the United States, and (ii) any other Subsidiary which, at the time of the issuance of a Guaranty or grant of a Lien referred to in the Relevant Provisions, had assets which, when taken together with all assets of Subsidiaries at any earlier time when such Subsidiaries were deemed to be Minor Subsidiaries pursuant to this clause (ii), did not exceed $250,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Schedule attached hereto and identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Proxy Statement" means the definitive Proxy Statement for 1998 Annual Meeting of Stockholders of U S WEST, Inc., dated and filed with the Securities and Exchange Commission on April 20, 1998. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to but excluding the Termination Date. "Separation" has the meaning set forth in the Proxy Statement. "Significant Subsidiary" means any Subsidiary which would meet the definition of "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company. "Super-Majority Banks" means at any time Banks having at least 85% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 85% of the aggregate unpaid principal amount of the Loans. "Swing Lenders" means Morgan Guaranty Trust Company of New York and Bank of America National Trust and Savings Association, in their capacity as lenders under the swingline facility described in Section 2.15, and their respective successors in such capacity, and "Swing Lender" means any of such Swing Lenders. "Swing Loan" means a Loan made by a Swing Lender pursuant to Section 2.17. "Termination Date" means, with respect to each Bank, May 8, 2003, or such later date to which the Termination Date for such Bank shall have been extended pursuant to Section 2.01(b), or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. Section 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article 5 to eliminate the effect of any change in such generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article 5 for such purpose), then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect in the United States immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. Section 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Domestic Loans, have the same Interest Period or initial Interest Period (or a Swing Loan made by a Swing Lender). Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01(a) in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith and a "Swing Borrowing" is a Borrowing under Section 2.17 made by a Swing Lender). ARTICLE 2 The Credits Section 2.01. Commitments to Lend. (a) The Commitments. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection (a) from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to the Borrower shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments shall terminate at the close of business on the Termination Date. (b) Extension of Commitments. The Commitments may be extended in the manner and amount set forth in this subsection (b), for a period of 364 days measured from the Termination Date then in effect. If the Company wishes to request an extension of each Bank's Commitment, it shall give notice to that effect to the Agent not less than 45 days and not more than 60 days prior to the Termination Date then in effect, whereupon the Agent shall promptly notify each of the Banks of such request. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Agent. If any Bank shall not have responded affirmatively within such 30-day period, such Bank shall be deemed to have rejected the Company's proposal to extend its Commitment, and only the Commitments of those Banks which have responded affirmatively shall be extended, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit H hereto duly completed and signed by the Borrower, the Company, the Agent and all of the Banks which have responded affirmatively. The Agent shall provide to the Company, no later than 10 days prior to the Termination Date then in effect, a list of the Banks which have responded affirmatively. The Extension Agreement shall be executed and delivered no later than five days prior to the Termination Date then in effect, and no extension of the Commitments pursuant to this subsection (b) shall be legally binding on any party hereto unless and until such Extension Agreement is so executed and delivered. The Company and the Borrower may decline to execute and deliver such Extension Agreement if any Bank has rejected the Company's proposal to extend its Commitment or has failed to execute and deliver such Extension Agreement, and will promptly notify the Agent and the Banks if it so declines. (c) Additional Commitments. At any time during the Revolving Credit Period (unless the Commitments shall have been reduced pursuant to Section 2.09(b)), if no Default shall have occurred and be continuing at such time, the Company may, if it so elects, increase the aggregate amount of the Commitments, either by designating a Person not theretofore a Bank and acceptable to the Agent to become a Bank or by agreeing with an existing Bank that such Bank's Commitment shall be increased. Upon execution and delivery by the Company, the Borrower and such Bank or other Person of an instrument of assumption in form and amount satisfactory to the Administrative Agent, such existing Bank shall have a Commitment as therein set forth or such other Person shall become a Bank with a Commitment as therein set forth and all the rights and obligations of a Bank with such a Commitment hereunder; provided that (i) the Company shall provide prompt notice of such increase to the Agent, which shall promptly notify the other Banks, (ii) the aggregate amount of each such increase which is effective on any day shall be at least $50,000,000 and (iii) the aggregate amount of the Commitments shall at no time exceed $2,250,000,000. Upon any increase in the aggregate amount of the Commitments pursuant to this subsection (c), within five Domestic Business Days in the case of each Group of Domestic Loans outstanding, and at the end of the then current Interest Period with respect thereto in the case of each Group of Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety, and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. Section 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Domestic Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing bear interest initially at the Base Rate or at a Euro-Dollar Rate, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. Section 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01(a), the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 9:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day prior to the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 10.01 not later than (x) 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly (and in any event no later than 11:00 A.M. (New York time) on (i) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (ii) the proposed date of Borrowing, in the case of an Absolute Rate Auction) notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:15 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. Section 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless any applicable condition specified in Article 3 has not been satisfied, as determined by the Agent in accordance with Article 3, the Agent will make the funds so received from the Banks immediately available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to Noon (New York City time) on the date of such Borrowing) that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. If the Borrower shall have repaid such corresponding amount of such Bank, such Bank shall reimburse the Borrower for any loss on account thereof incurred by the Borrower. Section 2.05. Notes. (a) The Loans of each Bank to the Borrower shall be evidenced by a single Note of the Borrower payable to the order of such Bank for the account of its Applicable Lending Office, unless such Bank requests otherwise, in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Borrower. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type to the Borrower be evidenced by a separate Note of the Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01, the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it to the Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of the Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to the Borrower then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. Section 2.06. Maturity of Loans. Each Loan by a Bank included in any Borrowing made pursuant to Section 2.01(a) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date for such Bank. Each Loan included in any Borrowing made pursuant to Section 2.03 shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable thereto. Section 2.07. Interest Rates. (a) Each Domestic Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on the last day of each calendar quarter and, with respect to the principal amount of any Domestic Loan converted to a Euro-Dollar Loan, on each date a Domestic Loan is so converted. Any overdue principal of or interest on any Domestic Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Domestic Loans for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Domestic Loans for such day) and (ii) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (d) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07 as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. Section 2.08. Facility Fees. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or earlier date of termination of the Commitments in their entirety) to but excluding the date the Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of the Loans. Accrued facility fees shall be payable quarterly in arrears on the last day of each calendar quarter and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). "Facility Fee Rate" means a rate per annum determined in accordance with the Pricing Schedule. Section 2.09. Termination or Reduction of Commitments. (a) During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. (b) If the Separation has not been consummated on or before November 8, 1998, the Commitments shall be ratably reduced by 50% on the next succeeding Domestic Business Day. (c) On each date of incurrence by the Company or any of its Subsidiaries of any Debt or other obligations secured by Liens on capital stock of AirTouch Communications, Inc., the Commitments shall be ratably reduced by the Five-Year Percentage of 75% of the Net Cash Proceeds of such Debt or other obligations, but only until the Aggregate Commitments equal $2,000,000,000. For purposes of this subsection (c), "Net Cash Proceeds" means, in each case as set forth in reasonable detail in a statement delivered to the Agent, the gross cash proceeds received less all discounts, commissions and legal and other customary third-party expenses incurred in connection with the transaction giving rise to such proceeds; "Five-Year Percentage" means the percentage equivalent of a fraction, the numerator of which is the Commitments and the denominator of which is the sum of the Commitments and the commitments (the "364-Day Commitments") under the 364-Day Credit Agreement dated as of the date hereof among the Borrower and the other parties named therein (as the same may be amended from time to time); and "Aggregate Commitments" means the sum of the Commitments and the 364-Day Commitments. Section 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8), as follows: (i) if such Loans are Domestic Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Domestic Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by such Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Domestic Loans on the last day of the then current Interest Period applicable thereto. Section 2.11. Prepayments. (a) Subject in the case of any Euro-Dollar Loans to Section 2.13, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)), or, upon three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (b) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Each such prepayment shall be applied to prepay ratably the Loans of the several Banks included in the relevant Group or Borrowing. (d) On the date of any reduction of Commitments pursuant to Section 2.09(b) or (c), the Borrower shall repay such principal amount (together with accrued interest thereon) of outstanding Loans, if any, as may be necessary so that after such repayment (i) the aggregate outstanding principal amount of each Bank's Committed Loans does not exceed the amount of such Bank's Commitment as then reduced, and (ii) the aggregate unpaid principal amount of all outstanding Loans does not exceed the aggregate amount of the Commitments as then reduced. Any such prepayment shall be made in accordance with all applicable provisions of this Agreement (including without limitation subsections (a) (other than as to amount), (b) and (c) of this Section 2.11). Section 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without off set or counterclaim, to the Agent at its address referred to in Section 10.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. Section 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Domestic Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to borrow, convert, continue or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.11(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. Section 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Section 2.15. Swingline Facility. (a) Swing Loans. Each Swing Lender may, in its sole discretion, make loans to the Borrower pursuant to this Section 2.15(a) from time to time during the Revolving Credit Period; provided that immediately after giving effect thereto (i) the aggregate outstanding principal amount of all loans made pursuant to this Section 2.15(a) shall not at any time exceed $50,000,000 and (ii) the sum of the aggregate outstanding principal amount of the Loans shall not exceed the aggregate Commitments. Each loan under this Section 2.15(a) shall be in an aggregate principal amount of at least $5,000,000 or any larger multiple of $1,000,000 and shall bear interest at the Base Rate or such other rate as is agreed to by the Borrower and such Swing Lender. (b) Request for Swing Loan. If the Borrower wishes to request a Swing Loan, the Borrower shall give a Swing Lender notice of such request (with a copy thereof sent simultaneously to the Agent) not later than 11:00 A.M. (New York time) on the requested date of borrowing, specifying (i) the requested date of such Swing Loan, which shall be a Domestic Business Day, and (ii) the requested amount of such Swing Loan. (c) Funding of Swing Loans. If a Swing Lender elects, in its sole discretion, to make any requested Swing Loan, such Swing Lender shall, unless it determines that any condition applicable to Borrowings specified in Section 3.02 or 3.03 has not been satisfied, make available the amount of such Swing Loan, in Federal or other funds immediately available in New York, to the Borrower at the Swing Lender's address referred to in Section 10.01, not later than 3:00 P.M. (New York time) on the requested date of borrowing. (d) Payment of Interest. The Borrower shall make each payment of interest on the Swing Loans not later than 12:00 Noon (New York time) on the maturity date for such Swing Loan, in Federal or other funds immediately available in New York, to the Swing Lenders at their addresses referred to in Section 10.01. (e) Maturity of Swing Loans. Each Swing Loan shall mature on the Termination Date or, if earlier, on the earlier of (x) the date when the next Committed Loan, immediately following such Swing Loan, is made and (y) the day that is seven days or less, as the Borrower may elect, after the date such Swing Loan is made, and the principal amount thereof shall be due and payable on such date together with interest accrued thereon to such date. (f) Swing Loan Participations. At any time, upon the request of a Swing Lender, each Bank other than the requesting Swing Lender shall, on the second Domestic Business Day after such request is made, purchase a participating interest in the requesting Swing Lender's Swing Loans in an amount equal to its ratable share of the aggregate principal amount of such Swing Loans. Each Bank will immediately transfer to the requesting Swing Lender, in immediately available funds, the amount of its participation. Whenever, at any time after a Swing Lender has received from any Bank such Bank's participating interest in a Swing Loan, such Swing Lender receives any payment on account thereof, such Swing Lender will distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment received by such Swing Lender is required to be returned, such Bank will return to such Swing Lender any portion thereof previously distributed by such Swing Lender to it. Each Bank's obligation to purchase such participating interests shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank or any other Person may have against the Swing Lender requesting such purchase or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments; (iii) any adverse change in the condition (financial or otherwise) or results of operations of the Borrower, the Company or any other Person; (iv) any breach of this Agreement by the Borrower, the Company or any other Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. ARTICLE 3 Conditions Section 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following (in the case of any document, dated the Closing Date unless otherwise indicated): (a) a duly executed Note of the Borrower for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of Stephen E. Brilz, Esq., counsel for the Company and the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to the Agent that the commitments under the Existing Credit Agreements have been terminated and that the principal and interest on all loans and accrued fees outstanding thereunder have been paid in full; (e) a duly executed MediaOne Delaware Guaranty; (f) evidence satisfactory to the Agent of the payment of all fees and other amounts payable to the Agent for the account of the Banks or the Agent on or prior to the Closing Date, including, to the extent invoiced, reimbursement of all out-of-pocket expenses (including, without limitation, legal fees and expenses) required to be reimbursed or paid by the Borrower or the Company hereunder; and (g) all documents the Agent may reasonably request relating to the existence of the Company, the Borrower and MediaOne of Delaware, Inc., the corporate authority for and the validity of this Agreement, the Notes and the MediaOne Delaware Guaranty, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. Section 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to May 30, 1998; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) the fact that, immediately before and after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties contained in this Agreement shall be true on and as of the date of such Borrowing (except, in the case of the representations and warranties contained in Section 4.04(b), but only if neither Level V Status nor Level VI Status (as defined in the Pricing Schedule) exists on the date of such Borrowing, as disclosed by the Borrower to the Banks in writing in the Notice of Borrowing relating to such Borrowing). Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. Section 3.03. Loans after Separation. The obligation of any Bank to make or maintain a Loan after the Separation is subject to receipt by the Agent of evidence satisfactory to it that the Separation has been consummated substantially on the terms described in the Proxy Statement. The Agent shall promptly notify the Company and the Banks of the satisfaction of the foregoing condition. ARTICLE 4 Representations and Warranties Each of the Company and the Borrower represents and warrants that: Section 4.01. Corporate Existence and Power. Each of the Company and the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. Section 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company and the Borrower of this Agreement, by the Borrower of the Notes and by MediaOne of Delaware, Inc. of the MediaOne Delaware Guaranty are within such Person's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Person or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person or any Significant Subsidiary or result in the creation or imposition of any Lien on any material asset of such Person or any Significant Subsidiary. Section 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and the Borrower, the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, and the MediaOne Delaware Guaranty constitutes a valid and binding agreement of MediaOne of Delaware, Inc., in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Section 4.04. Financial Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1997 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Arthur Andersen L.L.P. and set forth in the Company's 1997 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 1997 there has been no material adverse change in the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole (it being understood that the consummation of the Separation shall not be considered such a change). Section 4.05. Litigation. Except as disclosed in the Company's 1997 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement, the MediaOne Delaware Guaranty or the Notes. Section 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where failure to comply would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Section 4.07. Environmental Matters. (a) The operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws except such non-compliance which would not (if enforced in accordance with applicable law) reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. (b) Except as specifically identified in Schedule 4.07, the Company and each of its Subsidiaries have obtained all material licenses, permits, authorizations and registrations required under any Environmental Laws ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Company and each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits. (c) Except as specifically identified in Schedule 4.07, (i) none of the Company, any of its Subsidiaries or any of their present property or operations are subject to any outstanding written order from or settlement or consent agreement with any governmental authority or other Person, nor is any of the foregoing subject to any judicial or docketed administrative proceedings, respecting any Environmental Laws or Hazardous Substances with a potential liability in excess of $1,000,000 and (ii) there are no other conditions or circumstances known to the Company which may give rise to any claims respecting any Environmental Laws arising from the operations of the Company or its Subsidiaries (including, without limitation, off-site liabilities), or any additional costs of compliance with Environmental Laws, that would reasonably be expected to have a material adverse effect on the financial position or results of operations of the Company and its Subsidiaries, considered as a whole. Section 4.08. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. Section 4.09. Subsidiaries. Each of the Company's corporate Significant Subsidiaries (including, but not limited to, the Borrower and MediaOne of Delaware, Inc.) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. Section 4.10. Not an Investment Company. None of the Company, the Borrower or MediaOne of Delaware, Inc. is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 4.11. Full Disclosure. All written information heretofore furnished by the Company or the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company or the Borrower to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. ARTICLE 5 Covenants The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: Section 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 95 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Arthur Andersen L.L.P. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer (or such officer's designee, designated in writing by such officer) or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) within five Domestic Business Days after any officer of the Company or the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company or the Borrower setting forth the details thereof and the action which the Company or the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other than any amendment on Form 8-K the sole purpose of which is to file exhibits relating to existing Debt meeting the requirements of clause (ii) of the definition of Debt) which the Company shall have filed with the Securities and Exchange Commission; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (h) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries and the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. Section 5.02. Maintenance of Property; Insurance. (a) The Company will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will maintain, and will cause each Significant Subsidiary to maintain (either in the name of the Borrower or in such Significant Subsidiary's own name), with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried; provided that, in lieu of any such insurance, the Company and any Significant Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Company or such Significant Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles and practice. Section 5.03. Maintenance of Existence. The Company will, and will cause each Significant Subsidiary to, preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.03 shall prohibit or interfere with the Company's publicly announced strategy to discontinue or dispose of in one or more transactions the financial services businesses of it or of any of its Subsidiaries. Section 5.04. Compliance with Laws. The Company will comply, and will cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and for which adequate reserves in conformity with generally accepted accounting principles have been established. Section 5.05. Inspection of Property, Books and Records. The Company will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. Section 5.06. Subsidiary Debt; Fixed Charge Coverage. (a) Prior to the Separation, total debt of all Consolidated Subsidiaries (excluding Debt of a Consolidated Subsidiary to the Company or to a Wholly-Owned Consolidated Subsidiary) will at no time exceed 250% of Consolidated Net Worth. For purposes of this subsection (a), any preferred stock of a Consolidated Subsidiary other than the Borrower which is held by a Person other than the Company or a Wholly-Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in the Debt of such Consolidated Subsidiary. (b) After the Separation, Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on the last day of any fiscal quarter of the Company during any period set forth below will equal or exceed the percentage of Consolidated Fixed Charges set forth below opposite such period; provided that, for purposes of the foregoing calculation, in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, (x) Consolidated EBITDA and Consolidated Fixed Charges for such period shall equal Consolidated EBITDA and Consolidated Fixed Charges, respectively, for each fiscal quarter (a "Relevant Quarter") ending after the Separation and on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters, and (y) Consolidated EBITDA and Consolidated Fixed Charges shall be calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items which are not attributable to operations which are continuing after the Separation.
Period Percentage Prior to December 31, 1998 145% December 31, 1998- December 30, 2000 150% On or after December 31, 2000 200%
Section 5.07. Debt Coverage; Minimum EBITDA. (a) Prior to the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries will at all times be less than 70% of the sum of consolidated Debt of the Company and its Consolidated Subsidiaries and consolidated shareowners' equity of the Company and its Consolidated Subsidiaries. (b) If the Separation has occurred, Consolidated EBITDA (calculated on a pro forma basis for the quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) shall equal or exceed $175,000,000 for the fiscal quarter ending on June 30, 1998, $360,000,000 for the two consecutive fiscal quarters ending on September 30, 1998, and $550,000,000 for the three consecutive fiscal quarters ending on December 31, 1998. (c) After the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries as of the last day of any fiscal quarter of the Company ending during any period set forth below will not exceed the percentage of Consolidated EBITDA (calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) for the four consecutive fiscal quarters of the Company ending on such date set forth below opposite such period.
Period Percentage March 31, 1999- December 30, 1999 500% December 31, 1999- December 30, 2000 475% On or after December 31, 2000 400%
Section 5.08. Negative Pledge. Neither the Company nor the Borrower will, and the Company will not permit any Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $265,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof. (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien on assets or capital stock of Minor Subsidiaries which secures Debt of Persons in which the Company or any of its Subsidiaries has made investments, but for the payment of which Debt no other recourse may be had to the Company or any Subsidiaries which are not Minor Subsidiaries ("Limited Recourse Debt"), or any Lien on equity interests in a Person which is not a Consolidated Subsidiary (a "Joint Venture") securing Limited Recourse Debt of such Joint Venture; (g) Liens on capital stock of AirTouch Communications, Inc., Financial Security Assurance Holdings Ltd. or Enhance Financial Services Group Inc. (or their respective successors) which secure Debt for borrowed money; (h) any Lien arising out of the refinancing, replacement, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (i) Liens arising in the ordinary course of business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (j) Liens not otherwise permitted by and in addition to the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed 20% of Consolidated EBITDA for the four consecutive fiscal quarters most recently ended; provided that in the case of any four fiscal quarter period ending after the Separation but prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA (calculated on a pro forma basis for the fiscal quarter in which the Separation occurs in order to exclude items not attributable to operations which are continuing after the Separation) for each fiscal quarter (a "Relevant Quarter") ending after the Separation and on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters. Section 5.09. Consolidations, Mergers and Sales of Assets. (a) The Company will not (i) consolidate with or merge into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or any substantial part of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person. It is understood that this covenant shall not prohibit: (w) a swap of cable systems or cable system assets by the Company or any of its Subsidiaries with any other Person to the extent such swap involves a like-kind exchange (with receipt or payment of any other consideration being subject to any other applicable provisions of this Agreement, including, without limitation, the first sentence of this Section 5.09(a)), (x) a disposition of cable systems or cable system assets by the Company or any of its Subsidiaries for cash or other consideration, to the extent such cash proceeds have been committed to be reinvested within six months of such disposition, and have actually been reinvested within twelve months of such disposition, in other cable systems or cable system assets (with receipt or payment of any other consideration being subject to any other applicable provisions of this Agreement, including, without limitation, the first sentence of this Section 5.09(a)), (y) a disposition of a Minor Subsidiary, if, after giving effect thereto, the Company shall be in compliance with Sections 5.06 and 5.07 on a pro forma basis until the end of the twelve-month period immediately following the last day of the month in which such disposition is proposed to be consummated, and the Company shall have delivered to each of the Banks at least 15 days prior to the consummation of such disposition a certificate to such effect and an accompanying report establishing the basis for such certification, in a form, and providing detail and justification for the information contained therein, satisfactory to the Agent, or (z) a disposition of assets constituting discontinued operations on the date of this Agreement. (b) Prior to the Separation, the Company will retain ownership, directly or indirectly, of at least 80% of the capital stock, and at least 80% of the voting power, of U S WEST Communications, Inc. ("Communications"), and will cause Communications to continue to own substantially all of the telecommunications assets it owns on the date of this Agreement. Section 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds will include any use for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. Section 5.11. Year 2000 Compatibility. The Company shall take all reasonable action necessary to ensure that the computer based systems of the Company and its Subsidiaries are able to operate and effectively process data including dates on or after January 1, 2000, except that such action shall not be required to the extent that the failure to take such action would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. At the request of the Agent, the Company shall provide assurance reasonably acceptable to the Agent of the year 2000 compatibility of the Company and its Subsidiaries. ARTICLE 6 Defaults Section 6.01. Events of Default. If one or more of the following events shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof; (b) the Company or the Borrower shall fail to observe or perform any covenant contained in Sections 5.06 to 5.10, inclusive; (c) the Company or the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 10 days (or, in the case of Section 5.11, 30 days) after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment or payments, in the aggregate in excess of $75,000,000, in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables the holder of such Debt or obligor with respect to any commitment to provide such Debt or any Person acting on such holder's or obligor's behalf to accelerate the maturity thereof or, because such event or condition constitutes a default or event of default or similar event, however defined, under the instrument governing such commitment, to terminate such commitment; (g) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize or otherwise acquiesce in any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $75,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $75,000,000; (j) a judgment or order for the payment of money in excess of $75,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days; (k) the Company shall repudiate in writing any of its obligations under Article 9 or MediaOne Delaware shall repudiate in writing any of its obligations under the MediaOne Delaware Guaranty or any such obligation shall be unenforceable against the Company or MediaOne Delaware, as the case may be, in accordance with its terms, or the Company or MediaOne Delaware shall so assert in writing; (l) one or more events or conditions shall occur which result in a default under any agreement or agreements in respect of any Material Debt that is subject to the Indentures and as a consequence of such default or defaults the Company or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Debt and such payment, consideration or benefit is determined by the Required Banks, after taking into account any payment, consideration or benefit made, given or agreed to be given by such holders to the Company or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Debt; (m) the Separation shall have occurred on terms and conditions which are not substantially the same as those set forth in the Proxy Statement; or (n) a Change of Control shall have occurred; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and/or (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company or the Borrower, without any notice to the Company or the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower. Section 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 The Agent Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Section 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company, the Borrower or any Subsidiary or affiliate of the Company or the Borrower as if it were not the Agent hereunder. Section 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. Section 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Section 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company or the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. Section 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. Section 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent (with the consent of the Company, such consent not to be unreasonably withheld), which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $400,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. Section 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE 8 Changes in Circumstances Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the market for such Interest Period, or (b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Euro-Dollar Loans advise the Agent that the Adjusted London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Domestic Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Domestic Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. Section 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Domestic Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. Section 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Section 8.04. Taxes. (a) Any and all payments by the Company or the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company or the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Person shall make such deductions, (iii) such Person shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Person shall furnish to the Agent, at its address referred to in Section 10.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a) imposed by the United States. (e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Company or the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. Section 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to the Borrower which would otherwise be made by such Bank as (or continued as or converted into) Euro-Dollar Loans shall instead be Domestic Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Borrower has been repaid (or converted to a Domestic Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Domestic Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Domestic Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. Section 8.06. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or (iii) any Bank has not signed an amendment or waiver which must be signed by all the Banks to become effective, and such amendment or waiver has been signed by the Super-Majority Banks, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank. ARTICLE 9 Guaranty Section 9.01. The Guaranty. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by the Borrower under this Agreement. Upon failure by the Borrower to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. Section 9.02. Guaranty Unconditional. The obligations of the Company hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. Section 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and the Borrower under this Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. Section 9.04. Waiver by the Company. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. Section 9.05. Subrogation. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. Section 9.06. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. ARTICLE 10 Miscellaneous Section 10.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company, the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified pursuant to this Section 10.01 and telephonic confirmation of receipt thereof is received, or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received. Section 10.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.03. Expenses; Indemnification. (a) The Company shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that (i) no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction and (ii) the Company shall not be liable for any settlement entered into by an Indemnitee without its consent (which shall not be unreasonably withheld). (c) Each Indemnitee agrees to give the Company prompt written notice after it receives any notice of the commencement of any action, suit or proceeding for which such Indemnitee may wish to claim indemnification pursuant to subsection (b). The Company shall have the right, exercisable by giving written notice within fifteen Domestic Business Days after the receipt of notice from such Indemnitee of such commencement, to assume, at the Company's expense, the defense of any such action, suit or proceeding; provided, that such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at such Indemnitee's expense unless (1) the Company shall have agreed to pay such fees and expenses; (2) the Company shall have failed to assume the defense of such action, suit or proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnitee in any such action, suit or proceeding; or (3) such Indemnitee shall have been advised by independent counsel in writing (with a copy to the Company) that there may be one or more defenses available to such Indemnitee which are in conflict with those available to the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the Company's expense, the Company shall be obligated to assume the expense, it being understood, however, that the Company shall not be liable for the fees or expenses of more than one separate firm of attorneys, which firm shall be designated in writing by such Indemnitee). Section 10.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. Section 10.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company, the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, except as provided below, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) amend or waive the provisions of Article 9 or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement; provided further, that no such amendment or waiver shall, unless signed by all of the Swing Lenders and each other Lender affected thereby, increase the maximum aggregate principal amount of Swing Loans which may be outstanding at any time, postpone the date fixed for the maturity of any Swing Loan or otherwise affect any of their rights and obligations hereunder. Section 10.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks and all Swing Lenders. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans, with (and subject to) the written consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that if a Participant is an affiliate of such grantor Bank or is another Bank, no such consent shall be required. In the event of any such grant by a Bank of a participating interest to a Participant, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company, the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below but which is consented to in accordance with this subsection (b) shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that (i) if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent shall be required; (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and (iii) any assignment shall not be less than $15,000,000, or if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes except for any rights retained in accordance with clause (ii) of this proviso. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. Section 10.07. Termination of Existing Credit Agreements. The Company and each of the Banks that is also a "Bank" party to the Existing Credit Agreements agrees that the "Commitments" as defined in the Existing Credit Agreements shall be terminated in their entirety on the Effective Date. Each of such Banks waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreements and (b) any claim to any facility fees or other fees under the Existing Credit Agreements for any day on or after the Effective Date. Each of the Company and the Borrower (i) represents and warrants that (x) after giving effect to the preceding sentences of this Section 10.07, the commitments under the Existing Credit Agreements will be terminated effective not later than the Effective Date, (y) no loans are, as of the date hereof, or will be, as of the Effective Date, outstanding under the Existing Credit Agreements and (ii) covenants that all accrued and unpaid facility fees and any other amounts due and payable under the Existing Credit Agreements shall have been paid on or prior to the Effective Date. Section 10.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the Company and the Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 10.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of counterparts hereof signed by each of the Company, the Borrower, the Banks and the Agent (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). Section 10.10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 10.11. Confidentiality. Each of the Agent and the Banks agrees to use its reasonable best efforts to keep confidential any information delivered or made available by the Company or the Borrower to it which is clearly stated by the Company or the Borrower to be confidential; provided that nothing herein shall prevent the Agent or any Bank from disclosing such information (i) to the Agent or any other Bank in connection with the transactions contemplated hereby, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Company and its Subsidiaries, provided that such Person is not (x) known to it to be bound by a confidentiality agreement with the Company or its Subsidiaries or (y) known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy hereunder or under the Notes or (viii) to any actual or proposed participant or assignee of all or any of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MEDIAONE GROUP FUNDING, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter U S WEST, INC. (TO BE RENAMED MEDIAONE GROUP, INC.) By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter Commitments $95,500,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By Name: Title: $95,000,000 THE BANK OF NEW YORK By Name: Title: $95,000,0000 CITIBANK, N.A. By Name: Title: $95,000,000 NATIONSBANK, N.A. By Name: Title: $87,500,000 ABN AMRO BANK N.V. By Name: Title: By Name: Title: $87,500,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By Name: Title: $87,500,000 BARCLAYS BANK PLC By Name: Title: $87,500,000 THE CHASE MANHATTAN BANK By Name: Title: $87,500,000 FLEET NATIONAL BANK By Name: Title: $87,500,000 MELLON BANK, N.A. By Name: Title: $87,500,000 TORONTO DOMINION (TEXAS), INC. By Name: Title: $75,000,000 BANQUE NATIONALE DE PARIS By Name: Title: By Title: $75,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By Name: Title: $75,000,000 SOCIETE GENERALE SOUTHWEST AGENCY By Name: Title: $58,000,000 DRESDNER BANK A.G., NEW YORK AND GRAND CAYMAN BRANCHES By Name: Title: By Name: Title: $58,000,000 ROYAL BANK OF CANADA By Name: Title: $58,000,000 THE ROYAL BANK OF SCOTLAND PLC By Name: Title: $58,000,000 WESTDEUTCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By Name: Title: By Name: Title: $37,500,000 BANK ONE, COLORADO, N.A. By Name: Title: $37,500,000 BANKERS TRUST COMPANY By Name: Title: $37,500,000 BANQUE PARIBAS By Name: Title: By Name: Title: $37,500,000 BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH By Name: Title: By Name: Title: $37,500,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By Name: Title: By Name: Title: $37,500,000 THE DAI-ICHI KANGYO BANK, LIMITED By Name: Title: $37,500,000 FIRST UNION NATIONAL BANK By Name: Title: $37,500,000 THE FUJI BANK, LIMITED LOS ANGELES AGENCY By Name: Title: $37,500,000 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT By Name: Title: $37,500,000 KREDIETBANK N.V. By Name: Title: By Name: Title: $37,500,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. LOS ANGELES AGENCY By Name: Title: $37,500,000 NORWEST BANK COLORADO, NATIONAL ASSOCIATION By Name: Title: $37,500,000 THE SAKURA BANK LIMITED, LOS ANGELES AGENCY By Name: Title: $37,500,000 THE SUMITOMO BANK, LIMITED By Name: Title: $25,000,000 CRESTAR BANK By Name: Title: Total Commitments $2,000,000,000 =========== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title: 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Mark Connor Facsimile number: 302-634-1092 Telephone number: 302-634-4218 PRICING SCHEDULE The "Euro-Dollar Margin" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
Level Level Level Level Level Level Status I II III IV V VI Euro-Dollar Margin: Usage less than or equal to 331/3% .150% .225% .2875% .325% .375% .650% Usage more than 331/3% and less than or equal to62/3% .225% .300% .3625% .400% .450% .650% Usage more than 662/3% .275% .350% .4125% .450% .500% .650% Facility Fee .100% .125% .1375% .150% .250% .350% Rate ===================== ============ ============= ============= ============ ============= ============
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date after the Separation if, at such date, the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB+ or higher by S&P and Baa1 or higher by Moody's. "Level II Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists (x) at any date prior to the Separation, and (y) at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB or higher by S&P and Baa3 or higher by Moody's, (ii) the Borrower's outstanding commercial paper is rated A2 or higher by S&P and P3 or higher by Moody's or A3 or higher by S&P and P2 or higher by Moody's and (iii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BBB- or higher by S&P and Baa3 or higher by Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities guaranteed by the Company and MediaOne of Delaware, Inc. are rated BB+ or higher by S&P and Ba1 or higher by Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date after the Separation if, at such date, none of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "S&P" means Standard & Poor's Ratings Group, a New York corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Usage" means at any date the percentage equivalent of a fraction (i) the numerator of which is the sum of the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date, and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the Usage for each date on or after the date of such termination shall be deemed to be greater than 662/3%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower guaranteed by the Company and MediaOne of Delaware, Inc., and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. SCHEDULE 4.07 Environmental Matters NONE. EXHIBIT A NOTE New York, New York ________, 19__ For value received, MEDIAONE GROUP FUNDING, INC., a Colorado corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date therefor specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the inaccuracy of, or the failure of the Bank to make, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Five-Year Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. U S WEST, Inc. (to be renamed MediaOne Group, Inc.), has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this Note. MEDIAONE GROUP FUNDING, INC. By Title: LOANS AND PAYMENTS OF PRINCIPAL
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EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: MediaOne Group Funding, Inc. Re: Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks listed on the signature pages thereof, the other agents named therein and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. - -------- 1Amount must be $25,000,000 or a larger multiple of $5,000,000. 2Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. Terms used herein have the meanings assigned to them in the Credit Agreement. MEDIAONE GROUP FUNDING, INC. By________________________ Title: EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to MediaOne Group Funding, Inc. (the "Borrower") Pursuant to Section 2.03 of the Five-Year Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks parties thereto, the other agents named therein and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________
Principal Amount Interest Period $
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [10:30 A.M.] [9:15 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By______________________________ Authorized Officer EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent") Re: Money Market Quote to MediaOne Group Funding, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** - ---------- * As specified in the related Invitation. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Five-Year Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc. (to be renamed MediaOne Group, Inc.), the Banks listed on the signature pages thereof, the other agents named therein and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - ---------- ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY, MEDIAONE OF DELAWARE, INC., AND THE BORROWER To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Gentlemen and Ladies: I have acted as counsel for U S WEST, Inc., MediaOne of Delaware, Inc. ("MediaOne Delaware") and MediaOne Group Funding, Inc., in connection with the Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998, among them, the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the instruction of the client pursuant to Section 3.01(b) of the Credit Agreement. I am familiar with the proceedings taken by the Company, MediaOne Delaware and the Borrower in connection with the authorization, execution and delivery of the Credit Agreement, the MediaOne Delaware Guaranty and the Notes, and I have examined such documents, certificates, and such other matters of fact and questions of law as I have deemed relevant under the circumstances to express an informed opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. 2. The execution, delivery and performance by the Company and the Borrower of the Credit Agreement, by the Borrower of the Notes and by MediaOne Delaware of the MediaOne Delaware Guaranty are within such Person's corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental body, agency or official. 3. The execution, delivery and performance by the Company and the Borrower of the Credit Agreement, by the Borrower of the Notes and by MediaOne Delaware of the MediaOne Delaware Guaranty will not (i) result in a breach or violation of, conflict with, or constitute a default under, the articles of incorporation or bylaws of such Person or any material law or regulation or any material order, judgment, agreement or instrument to which such Person is a party or by which such Person is bound, or (ii) result in the creation or imposition of any Lien on any asset of such Person. 4. The Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower, the Notes constitute valid and binding obligations of the Borrower and the MediaOne Delaware Guaranty constitutes a valid and binding agreement of MediaOne Delaware, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 5. To my knowledge, and except as disclosed in the Company's 1997 Form 10-K (as amended by Form 10-K/A) as filed with the Securities and Exchange Commission, there is no action, suit or proceeding pending against, or, to the best of my knowledge, threatened against or affecting the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement, the MediaOne Delaware Guaranty or the Notes. 6. The Borrower, MediaOne Delaware and each of the Company's other corporate Significant Subsidiaries are corporations validly existing and in good standing under the laws of their jurisdictions of incorporation, and have all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. For purposes of my opinion set forth in numbered paragraph 4 above, I have assumed that the laws of the State of New York, which are stated to govern the Credit Agreement, the MediaOne Delaware Guaranty and the Notes, are the same as the laws of the State of Colorado. In rendering the opinions set forth herein, I have assumed that the Credit Agreement, the MediaOne Delaware Guaranty and the Notes will conform to the specimens thereof examined by me, that the signatures on all documents examined by me were genuine, and the authenticity of all documents submitted to me as originals or as copies of originals, assumptions which I have not independently verified. This opinion is furnished by me as counsel for the Company, MediaOne Delaware and the Borrower and is solely for your benefit and the benefit of any Assignee under the Credit Agreement. Without my prior written consent, this opinion may not be relied upon by you or any Assignee in any other context or by any other person. This opinion may not be quoted, in whole or in part, or copies thereof furnished, to any other person without my prior written consent, except that you may furnish copies hereof (a) to your auditors and attorneys, (b) to any state or federal authority having regulatory jurisdiction over you or the Company or the Borrower, (c) pursuant to order or legal process of any court or governmental agency, (d) in connection with any legal action to which you are a party arising out of the transactions contemplated by the Credit Agreement, and (e) to any Participant or proposed Participant in the Commitment of any Bank. This opinion is limited to the present laws of the State of Colorado and the General Corporation Law of the State of Delaware, to present judicial interpretations thereof, and to the facts as they presently exist, and I assume no responsibility as to the applicability or effect of the laws of any other jurisdiction. In rendering this opinion, I assume no obligation to revise or supplement this opinion should the present laws of the State of Colorado or the General Corporation Law of the State of Delaware be changed by legislative action, judicial decision, or otherwise. Very truly yours, Stephen E. Brilz EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among MediaOne Group Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereof (the "Banks"), the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that, assuming that the execution, delivery and performance by the Company and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers and have been duly authorized by all necessary corporate action, the Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower and the Notes constitute valid and binding obligations of the Borrower. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, __ 199_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), U S WEST, Inc. (to be renamed MEDIAONE GROUP, INC.) (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Five-Year Credit Agreement dated as of May 8, 1998 among the Company, the Borrower named therein, the Assignor and the other Banks party thereto, as Banks, the other agents named therein and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.3 It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees to that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Company and the Agent. This Agreement is conditioned upon the consent of the Company and the Agent pursuant to Section 10.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 10.06(c) the Company agrees to cause the Borrower to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company or the Borrower, or the validity and enforceability of the obligations of the Company -------- 3 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. or the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By Title: [ASSIGNEE] By Title: [U S WEST, INC.] [MEDIAONE GROUP, INC.] By Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title:] EXHIBIT H EXTENSION AGREEMENT MediaOne Group Funding, Inc. [U S WEST, Inc.] [MediaOne Group, Inc.] 7800 East Orchard Road Englewood, Colorado 80111 Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 60 Wall Street New York, NY 10260 Gentlemen: The undersigned hereby agree to extend the Revolving Credit Period under the Five-Year Credit Agreement dated as of May 8, 1998 among MediaOne Group Funding, Inc., [U S WEST, Inc.] [MediaOne Group, Inc.], the Banks listed therein, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Credit Agreement") for 364 days to ____________ __, ____. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. It may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK]1 By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. [NAME OF BANK]1 By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. Agreed and accepted: MEDIAONE GROUP FUNDING, INC. By Title [U S WEST, INC.] [MEDIAONE GROUP, INC.] By Title MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title EXHIBIT I GUARANTY GUARANTY dated as of May 8, 1998 by MediaOne of Delaware, Inc., a Delaware corporation (the "Guarantor"), for the benefit of the Banks and the Agent referred to below. WHEREAS, U S WEST, Inc. (to be renamed MediaOne Group, Inc.) (the "Company") and MediaOne Group Funding, Inc. (the "Borrower"), have entered into a Credit Agreement dated as of May 8, 1998 with the banks listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"); and WHEREAS, said Credit Agreement, as amended from time to time, is herein referred to as the "Credit Agreement" and the terms defined therein and not otherwise defined herein have, as used herein, their respective meanings set forth in Section 1.01 of the Credit Agreement; and WHEREAS, the obligations of the Banks to make loans under the Credit Agreement are conditioned on, among other things the execution and delivery to the Agent of a Guaranty in the form hereof by the Guarantor, which is a wholly-owned subsidiary of the Company; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: SECTION 1. Guaranty. 1.1. The Guaranty. The Guarantor hereby unconditionally guarantees the full and punctual payment when due (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to the Credit Agreement, and the full and punctual payment of all other amounts payable by the Borrower under the Credit Agreement. Upon failure by the Borrower to pay punctually any such amount in full, the Guarantor shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Credit Agreement. 1.2. Guaranty Unconditional. The obligations of the Guarantor hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under the Credit Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to the Credit Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under the Credit Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in the Credit Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith, with the Credit Agreement or with any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of the Credit Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder. 1.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts under the Credit Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. 1.4. Waiver by the Guarantor. The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. 1.5. Subrogation. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. 1.6. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under the Credit Agreement or its Notes is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Agent made at the request of the Required Banks. 1.7. Limit of Liability. The obligations of the Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. SECTION 2. Miscellaneous. 2.1. Successors and Assigns. This Guaranty shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the Banks and the Agent and their respective successors and assigns. 2.2. Amendments. Neither this Guaranty nor any provision hereof may be amended, modified, waived, discharged or terminated orally, but only by a statement in writing signed by the Agent with the prior written consent of each of the Banks or pursuant to Section 1.3 above. 2.3. Governing Law; Submission to Jurisdiction. This Guaranty shall be construed in accordance with and governed by the laws of the State of New York. The Guarantor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. MEDIAONE OF DELAWARE, INC. By _____________________________ Name: Title: 7800 East Orchard Road Englewood, Colorado 70111 Facsimile number: 303-793-0307 Telephone number: 303-793-6250 Attention: Rahn Porter EX-10 4 EXHIBIT 10C. EXHIBIT 10c. $3,500,000,000 364-DAY CREDIT AGREEMENT dated as of May 8, 1998 among U S WEST Capital Funding, Inc. U S WEST, Inc. USW-C, Inc. The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Administrative Agent - ------------------------------------------------------------------------------- J.P. Morgan Securities Inc. Lead Arranger Bank of America National Trust and Savings Association, Chase Securities Inc. and Mellon Bank, N.A., Co-Syndication Agents
TABLE OF CONTENTS ---------------------- Page ARTICLE 1 Definitions Page Section 1.01. The Definitions..................................................................1 Section 1.02. Accounting Terms and Determinations.............................................12 Section 1.03. Types of Borrowings.............................................................12 ARTICLE 2 The Credits Section 2.01. Commitments to Lend.............................................................13 Section 2.02. Notice of Committed Borrowing...................................................15 Section 2.03. Money Market Borrowings.........................................................15 Section 2.04. Notice to Banks; Funding of Loans...............................................19 Section 2.05. Notes...........................................................................20 Section 2.06. Maturity of Loans...............................................................21 Section 2.07. Interest Rates..................................................................21 Section 2.08. Facility Fees...................................................................23 Section 2.09. Termination or Reduction of Commitments.........................................24 Section 2.10. Method of Electing Interest Rates...............................................24 Section 2.11. Prepayments....................................................................25 Section 2.12. General Provisions as to Payments...............................................26 Section 2.13. Funding Losses..................................................................27 Section 2.14. Computation of Interest and Fees................................................27 Section 2.15. Change of Control...............................................................27 ARTICLE 3 Conditions Section 3.01. Closing.........................................................................28 Section 3.02. All Borrowings..................................................................29 Section 3.03. Loans after Separation..........................................................30 ARTICLE 4 Representations and Warranties Section 4.01. Corporate Existence and Power...................................................30 Section 4.02. Corporate and Governmental Authorization; No Contravention.........................................................................31
Page Section 4.03. Binding Effect..................................................................31 Section 4.04. Financial Information...........................................................31 Section 4.05. Litigation......................................................................31 Section 4.06. Compliance with ERISA...........................................................32 Section 4.07. Environmental Matters...........................................................32 Section 4.08. Taxes...........................................................................33 Section 4.09. Subsidiaries....................................................................33 Section 4.10. Not an Investment Company.......................................................33 Section 4.11. Full Disclosure.................................................................33 ARTICLE 5 Covenants Section 5.01. Information.....................................................................34 Section 5.02. Maintenance of Property; Insurance..............................................36 Section 5.03. Maintenance of Existence........................................................36 Section 5.04. Compliance with Laws............................................................36 Section 5.05. Inspection of Property, Books and Records.......................................37 Section 5.06. Subsidiary Debt.................................................................37 Section 5.07. Debt Coverage...................................................................37 Section 5.08. Negative Pledge.................................................................38 Section 5.09. Consolidations, Mergers and Sales of Assets.....................................39 Section 5.10. Use of Proceeds.................................................................39 Section 5.11. Year 2000 Compatibility.........................................................39 ARTICLE 6 Defaults Section 6.01. Events of Default...............................................................40 Section 6.02. Notice of Default...............................................................42 ARTICLE 7 The Agent Section 7.01. Appointment and Authorization...................................................43 Section 7.02. Agent and Affiliates............................................................43 Section 7.03. Action by Agent.................................................................43 Section 7.04. Consultation with Experts.......................................................43 Section 7.05. Liability of Agent..............................................................43 Section 7.06. Indemnification.................................................................44 Section 7.07. Credit Decision.................................................................44
Page Section 7.08. Successor Agent.................................................................44 Section 7.09. Agent's Fee.....................................................................44 ARTICLE 8 Changes in Circumstances Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................45 Section 8.02. Illegality......................................................................45 Section 8.03. Increased Cost and Reduced Return...............................................46 Section 8.04. Taxes...........................................................................47 Section 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans.......................49 Section 8.06. Substitution of Bank............................................................49 ARTICLE 9 Guaranty Section 9.01. The Guaranty....................................................................50 Section 9.02. Guaranty Unconditional..........................................................50 Section 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances.................................................................51 Section 9.04. Waiver by the Company...........................................................51 Section 9.05. Subrogation.....................................................................51 Section 9.06. Stay of Acceleration............................................................52 Section 9.07. Release upon Separation.........................................................52 ARTICLE 10 Miscellaneous Section 10.01. Notices........................................................................52 Section 10.02. No Waivers.....................................................................52 Section 10.03. Expenses; Indemnification......................................................53 Section 10.04. Sharing of Set-offs............................................................54 Section 10.05. Amendments and Waivers.........................................................54 Section 10.06. Successors and Assigns........................................................55 Section 10.07. Termination of Existing Credit Agreements......................................56 Section 10.08. Governing Law; Submission to Jurisdiction......................................57 Section 10.09. Counterparts; Integration; Effectiveness.......................................57 Section 10.10. WAIVER OF JURY TRIAL...........................................................57 Section 10.11. Confidentiality................................................................57
Pricing Schedule Schedule 4.07 - Environmental Matters Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Company and the Borrower Exhibit F - Opinion of Special Counsel for the Administrative Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Extension Agreement CREDIT AGREEMENT AGREEMENT dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 Definitions Section 1.01. The Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assignee" has the meaning set forth in Section 10.06(c). "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means U S WEST Capital Funding, Inc., a Colorado corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.11. "Committed Loan" means a loan to be made by a Bank pursuant to Section 2.01(a); provided that if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Company" means (i) prior to the Separation, U S WEST, Inc., a Delaware corporation, and its successors and (ii) after the Separation, USW-C, Inc., a Delaware corporation, which will be renamed U S WEST, Inc., and its successors. "Company's 1997 Form 10-K" means U S WEST, Inc.'s annual report on Form 10-K for 1997, as amended by Form 10-K/A filed April 13, 1998, in each case as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated EBITDA" means, for any period, the net income of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (x) equity gains or losses in unconsolidated Persons, (y) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss or (z) any gain or loss on the disposition of investments), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense and (iii) depreciation, amortization and other similar non-cash charges and minus, to the extent included in determining such adjusted net income, the aggregate amount of (i) interest income and (ii) income tax benefit. "Consolidated Net Worth" means at any date the consolidated shareowners' equity of the Company and its Consolidated Subsidiaries determined as of such date. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. Notwithstanding the foregoing, for purposes of Sections 5.06 and 5.07 Debt shall in no event include the following: (x) Debt of Persons which are not Consolidated Subsidiaries ("Joint Ventures") (i) which is secured by a Lien on the assets or capital stock of a Minor Subsidiary or the equity interests in such Joint Ventures or is Guaranteed by a Minor Subsidiary, which Lien or Guaranty is incurred in connection with the international operations of the Company and its Subsidiaries, and (ii) for the payment of which no other recourse may be had to the Company or any of its Subsidiaries; and (y) Debt of the Company or the Borrower issued in connection with the issuance of Trust Originated Preferred Securities or substantially similar securities, so long as such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "Domestic Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Domestic Loan immediately before it became overdue. "Effective Date" means the date this Agreement becomes effective in accordance with Section 10.09. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.07. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07 on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of Bank of America National Trust and Savings Association, Mellon Bank, N.A., and Morgan Guaranty Trust Company of New York, and "Euro-Dollar Reference Bank" means any one of the foregoing. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the Amended and Restated Credit Agreements dated as of October 31, 1997, among the Borrower, the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as administrative agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Domestic Loans at such time or (ii) all Committed Loans which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Domestic Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 10.03(b). "Indentures" means the agreements or instruments evidencing the following Debt of Continental Cablevision, Inc., and its successors: (i) the 11% Senior Subordinated Debentures Due June 1, 2007; (ii) the 8 5/8% Senior Notes Due August 15, 2003; (iii) the 9% Senior Debentures Due September 1, 2008; (iv) the 8 7/8% Senior Debentures Due September 15, 2002; (v) the 9 1/2% Senior Debentures Due August 1, 2013; (vi) the 8 1/2% Senior Notes Due September 15, 2001; (vii) the 8.3% Senior Notes Due May 15, 2006; and (viii) any other Debt containing terms and conditions as or more favorable to the holders thereof than the terms and conditions of any of the foregoing Debt. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date, and any Interest Period beginning on or after a Termination Date which would otherwise end after the first anniversary of such Termination Date shall end on the first anniversary of such Termination Date. (2) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date. (3) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period beginning prior to a Termination Date which would otherwise end after a Termination Date shall end on such Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $100,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $100,000,000. "Minor Subsidiary" means, for purposes of the last sentence of the definition of Debt and of Section 5.08(f) (the "Relevant Provisions"), (i) USW PCN Inc., and (ii) any other Subsidiary which, at the time of the issuance of a Guaranty or grant of a Lien referred to in the Relevant Provisions, had assets which, when taken together with all assets of Subsidiaries at any earlier time when such Subsidiaries were deemed to be Minor Subsidiaries pursuant to this clause (ii), did not exceed $250,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Schedule attached hereto and identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Proxy Statement" means the definitive Proxy Statement for 1998 Annual Meeting of Stockholders of U S WEST, Inc., dated and filed with the Securities and Exchange Commission on April 20, 1998. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to but excluding the Termination Date. "Separation" has the meaning set forth in the Proxy Statement. "Significant Subsidiary" means any Subsidiary which would meet the definition of "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company. "Super-Majority Banks" means at any time Banks having at least 85% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 85% of the aggregate unpaid principal amount of the Loans. "Termination Date" means, with respect to each Bank, May 7, 1999, or such later date to which the Termination Date for such Bank shall have been extended pursuant to Section 2.01(b), or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. Section 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article 5 to eliminate the effect of any change in such generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article 5 for such purpose), then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect in the United States immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. Section 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Domestic Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01(a) in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 The Credits Section 2.01. Commitments to Lend. (a) The Commitments. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection (a) from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to the Borrower shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments shall terminate at the close of business on the Termination Date. (b) Extension of Commitments. The Commitments may be extended in the manner and amount set forth in this subsection (b), for a period of 364 days measured from the Termination Date then in effect. If the Company wishes to request an extension of each Bank's Commitment, it shall give notice to that effect to the Agent not less than 45 days and not more than 60 days prior to the Termination Date then in effect, whereupon the Agent shall promptly notify each of the Banks of such request. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Agent. If any Bank shall not have responded affirmatively within such 30-day period, such Bank shall be deemed to have rejected the Company's proposal to extend its Commitment, and only the Commitments of those Banks which have responded affirmatively shall be extended, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit H hereto duly completed and signed by the Borrower, the Company, the Agent and all of the Banks which have responded affirmatively. The Agent shall provide to the Company, no later than 10 days prior to the Termination Date then in effect, a list of the Banks which have responded affirmatively. The Extension Agreement shall be executed and delivered no later than five days prior to the Termination Date then in effect, and no extension of the Commitments pursuant to this subsection (b) shall be legally binding on any party hereto unless and until such Extension Agreement is so executed and delivered. The Company and the Borrower may decline to execute and deliver such Extension Agreement if any Bank has rejected the Company's proposal to extend its Commitment or has failed to execute and deliver such Extension Agreement, and will promptly notify the Agent and the Banks if it so declines. (c) Additional Commitments. At any time during the Revolving Credit Period (unless the Commitments shall have been reduced pursuant to Section 2.09(b)), if no Default shall have occurred and be continuing at such time, the Company may, if it so elects, increase the aggregate amount of the Commitments, either by designating a Person not theretofore a Bank and acceptable to the Agent to become a Bank or by agreeing with an existing Bank that such Bank's Commitment shall be increased. Upon execution and delivery by the Company, the Borrower and such Bank or other Person of an instrument of assumption in form and amount satisfactory to the Administrative Agent, such existing Bank shall have a Commitment as therein set forth or such other Person shall become a Bank with a Commitment as therein set forth and all the rights and obligations of a Bank with such a Commitment hereunder; provided that (i) the Company shall provide prompt notice of such increase to the Agent, which shall promptly notify the other Banks, (ii) the aggregate amount of each such increase which is effective on any day shall be at least $50,000,000 and (iii) the aggregate amount of the Commitments shall at no time exceed $3,750,000,000. Upon any increase in the aggregate amount of the Commitments pursuant to this subsection (c), within five Domestic Business Days in the case of each Group of Domestic Loans outstanding, and at the end of the then current Interest Period with respect thereto in the case of each Group of Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety, and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. (d) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on the Termination Date in amounts such that the aggregate principal amount of such Bank's outstanding Loans to the Borrower at the close of business on the Termination Date shall not exceed its Commitment. Each Borrowing under this subsection (d) shall be made from the several Banks ratably in proportion to their respective Commitments. Amounts prepaid pursuant to Section 2.11 shall not be reborrowed. If less than all the Banks shall have agreed to extend the Termination Date pursuant to subsection (b) above, but the Termination Date for those Banks which have not so agreed has not yet occurred (the "Earlier Date"), and the Borrower has requested a Borrowing pursuant to this subsection (d), then such Borrowing shall be made on the Earlier Date. Section 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Domestic Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing bear interest initially at the Base Rate or at a Euro-Dollar Rate, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. Section 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01(a), the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 9:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day prior to the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 10.01 not later than (x) 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly (and in any event no later than 11:00 A.M. (New York time) on (i) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (ii) the proposed date of Borrowing, in the case of an Absolute Rate Auction) notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:15 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. Section 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless any applicable condition specified in Article 3 has not been satisfied, as determined by the Agent in accordance with Article 3, the Agent will make the funds so received from the Banks immediately available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to Noon (New York City time) on the date of such Borrowing) that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. If the Borrower shall have repaid such corresponding amount of such Bank, such Bank shall reimburse the Borrower for any loss on account thereof incurred by the Borrower. Section 2.05. Notes. (a) The Loans of each Bank to the Borrower shall be evidenced by a single Note of the Borrower payable to the order of such Bank for the account of its Applicable Lending Office, unless such Bank requests otherwise, in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Borrower. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type to the Borrower be evidenced by a separate Note of the Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01, the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it to the Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of the Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to the Borrower then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. Section 2.06. Maturity of Loans. Each Loan by a Bank included in any Borrowing made pursuant to Section 2.01(a) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date for such Bank. Each Loan included in any Borrowing made pursuant to Section 2.01(d) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the first anniversary of the Termination Date on which such Borrowing is made. Each Loan included in any Borrowing made pursuant to Section 2.03 shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable thereto. Section 2.07. Interest Rates. (a) Each Domestic Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on the last day of each calendar quarter and, with respect to the principal amount of any Domestic Loan converted to a Euro-Dollar Loan, on each date a Domestic Loan is so converted. Any overdue principal of or interest on any Domestic Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Domestic Loans for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Domestic Loans for such day) and (ii) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (d) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07 as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. Section 2.08. Facility Fees. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or earlier date of termination of the Commitments in their entirety) to but excluding the date the Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of the Loans. Accrued facility fees shall be payable quarterly in arrears on the last day of each calendar quarter and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). "Facility Fee Rate" means a rate per annum determined in accordance with the Pricing Schedule. Section 2.09. Termination or Reduction of Commitments. (a) During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. (b) If the Separation has not been consummated on or before November 8, 1998, the Commitments shall be ratably reduced by 50% on the next succeeding Domestic Business Day. Section 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8), as follows: (i) if such Loans are Domestic Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Domestic Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by such Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Domestic Loans on the last day of the then current Interest Period applicable thereto. Section 2.11. Prepayments. (a) Subject in the case of any Euro-Dollar Loans to Section 2.13, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)), or, upon three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (b) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Each such prepayment shall be applied to prepay ratably the Loans of the several Banks included in the relevant Group or Borrowing. (d) On the date of any reduction of Commitments pursuant to Section 2.09(b), the Borrower shall repay such principal amount (together with accrued interest thereon) of outstanding Loans, if any, as may be necessary so that after such repayment (i) the aggregate outstanding principal amount of each Bank's Committed Loans does not exceed the amount of such Bank's Commitment as then reduced, and (ii) the aggregate unpaid principal amount of all outstanding Loans does not exceed the aggregate amount of the Commitments as then reduced. Any such prepayment shall be made in accordance with all applicable provisions of this Agreement (including without limitation subsections (a) (other than as to amount), (b) and (c) of this Section 2.11). Section 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without off set or counterclaim, to the Agent at its address referred to in Section 10.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. Section 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Domestic Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to borrow, convert, continue or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.11(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. Section 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Section 2.15. Change of Control. If a Change of Control shall occur, the Company will, within ten days after the occurrence thereof, give each Bank notice thereof, which notice shall describe in reasonable details the facts and circumstances giving rise thereto and shall specify an Optional Termination Date for purposes of this Section (the "Optional Termination Date") which date shall not be less than 30 nor more than 60 days after the date of such notice. Each Bank may, by notice to the Company and the Agent given not less than three Domestic Business Days prior to the Optional Termination Date, terminate its Commitment (if any), which shall thereupon be terminated, and declare the Note held by it (together with accrued interest thereon) and any other amounts payable hereunder for its account to be, and such Note and such other amounts shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower, in each case effective on the Optional Termination Date. A "Change of Control" shall occur if any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. The Separation shall not constitute a Change of Control. ARTICLE 3 Conditions Section 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following (in the case of any document, dated the Closing Date unless otherwise indicated): (a) a duly executed Note of the Borrower for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of Thomas O. McGimpsey, Esq., counsel for the Company and the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to the Agent that the commitments under the Existing Credit Agreements have been terminated and that the principal and interest on all loans and accrued fees outstanding thereunder have been paid in full; (e) evidence satisfactory to the Agent of the payment of all fees and other amounts payable to the Agent for the account of the Banks or the Agent on or prior to the Closing Date, including, to the extent invoiced, reimbursement of all out-of-pocket expenses (including, without limitation, legal fees and expenses) required to be reimbursed or paid by the Borrower or the Company hereunder; and (f) all documents the Agent may reasonably request relating to the existence of the Company and the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. Section 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to May 30, 1998; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) the fact that, immediately before and after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties contained in this Agreement shall be true on and as of the date of such Borrowing (except, in the case of the representations and warranties contained in Section 4.04(b), as disclosed by the Borrower to the Banks in writing in the Notice of Borrowing relating to such Borrowing). Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. Section 3.03. Loans after Separation. The obligation of any Bank to make or maintain a Loan after the Separation is subject to receipt by the Agent of the following documents, each dated or effective on the date of consummation of the Separation: (a) an instrument, satisfactory in form and substance to the Agent, and duly executed and delivered by USW-C, Inc. pursuant to which USW-C, Inc. (to be renamed U S WEST, Inc.) assumes the obligations of U S WEST, Inc. (to be renamed MediaOne Group, Inc.) under this Agreement; (b) evidence satisfactory to it that the Separation has been consummated substantially on the terms described in the Proxy Statement; (c) an opinion of Thomas O. McGimpsey, Esq., counsel for USW-C, Inc., substantially in the form of Exhibit E hereto with such modifications as are acceptable to the Agent and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and (d) all documents the Agent may reasonably request relating to the existence of USW-C, Inc., the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the satisfaction of the foregoing conditions. ARTICLE 4 Representations and Warranties Each of the Company and the Borrower represents and warrants that: Section 4.01. Corporate Existence and Power. Each of the Company and the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. Section 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company and the Borrower of this Agreement and by the Borrower of the Notes are within such Person's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Person or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person or any Significant Subsidiary or result in the creation or imposition of any Lien on any material asset of such Person or any Significant Subsidiary. Section 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and the Borrower, and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Section 4.04. Financial Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1997 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Arthur Andersen L.L.P. and set forth in the Company's 1997 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 1997 there has been no material adverse change in the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole (it being understood that the consummation of the Separation shall not be considered such a change). Section 4.05. Litigation. Except as disclosed in the Company's 1997 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes. Section 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where failure to comply would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Section 4.07. Environmental Matters. (a) The operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws except such non-compliance which would not (if enforced in accordance with applicable law) reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. (b) Except as specifically identified in Schedule 4.07, the Company and each of its Subsidiaries have obtained all material licenses, permits, authorizations and registrations required under any Environmental Laws ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Company and each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits. (c) Except as specifically identified in Schedule 4.07, (i) none of the Company, any of its Subsidiaries or any of their present property or operations are subject to any outstanding written order from or settlement or consent agreement with any governmental authority or other Person, nor is any of the foregoing subject to any judicial or docketed administrative proceedings, respecting any Environmental Laws or Hazardous Substances with a potential liability in excess of $1,000,000 and (ii) there are no other conditions or circumstances known to the Company which may give rise to any claims respecting any Environmental Laws arising from the operations of the Company or its Subsidiaries (including, without limitation, off-site liabilities), or any additional costs of compliance with Environmental Laws, that would reasonably be expected to have a material adverse effect on the financial position or results of operations of the Company and its Subsidiaries, considered as a whole. Section 4.08. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. Section 4.09. Subsidiaries. Each of the Company's corporate Significant Subsidiaries (including, but not limited to, the Borrower) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. Section 4.10. Not an Investment Company. Neither the Company nor the Borrower is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 4.11. Full Disclosure. All written information heretofore furnished by the Company or the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company or the Borrower to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. ARTICLE 5 Covenants The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: Section 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 95 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Arthur Andersen L.L.P. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer (or such officer's designee, designated in writing by such officer) or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) within five Domestic Business Days after any officer of the Company or the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company or the Borrower setting forth the details thereof and the action which the Company or the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other than any amendment on Form 8-K the sole purpose of which is to file exhibits relating to existing Debt meeting the requirements of clause (ii) of the definition of Debt) which the Company shall have filed with the Securities and Exchange Commission; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (h) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries and the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. Section 5.02. Maintenance of Property; Insurance. (a) The Company will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will maintain, and will cause each Significant Subsidiary to maintain (either in the name of the Borrower or in such Significant Subsidiary's own name), with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried; provided that, in lieu of any such insurance, the Company and any Significant Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Company or such Significant Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles and practice. Section 5.03. Maintenance of Existence. The Company will, and will cause each Significant Subsidiary to, preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.03 shall prohibit or interfere with the Company's publicly announced strategy to discontinue or dispose of in one or more transactions the financial services businesses of it or of any of its Subsidiaries. Section 5.04. Compliance with Laws. The Company will comply, and will cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and for which adequate reserves in conformity with generally accepted accounting principles have been established. Section 5.05. Inspection of Property, Books and Records. The Company will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. Section 5.06. Subsidiary Debt. (a) Prior to the Separation, total debt of all Consolidated Subsidiaries (excluding Debt of a Consolidated Subsidiary to the Company or to a Wholly-Owned Consolidated Subsidiary) ("Subsidiary Debt") will at no time exceed 250% of Consolidated Net Worth. (b) After the Separation, Subsidiary Debt as of the last day of any fiscal quarter of the Company will not exceed 150% of Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on such date; provided that in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA for each fiscal quarter (a "Relevant Quarter") beginning after the Separation and ending on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters. (c) For purposes of this Section, any preferred stock of a Consolidated Subsidiary other than the Borrower which is held by a Person other than the Company or a Wholly-Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in the Debt of such Consolidated Subsidiary. Section 5.07. Debt Coverage. (a) Prior to the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries will at all times be less than 70% of the sum of consolidated Debt of the Company and its Consolidated Subsidiaries and consolidated shareowners' equity of the Company and its Consolidated Subsidiaries. (b) After the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries as of the last day of any fiscal quarter of the Company will not exceed 400% of Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on such date; provided that in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA for each fiscal quarter (a "Relevant Quarter") beginning after the Separation and ending on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters. Section 5.08. Negative Pledge. Neither the Company nor the Borrower will, and the Company will not permit any Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $265,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof. (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien on assets or capital stock of Minor Subsidiaries which secures Debt of Persons which are not Consolidated Subsidiaries in which the Company or any of its Subsidiaries has made investments ("Joint Ventures"), but for the payment of which Debt no other recourse may be had to the Company or any Subsidiaries ("Limited Recourse Debt"), or any Lien on equity interests in a Joint Venture securing Limited Recourse Debt of such Joint Venture; (g) any Lien arising out of the refinancing, replacement, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (h) Liens arising in the ordinary course of business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (i) Liens not otherwise permitted by and in addition to the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $750,000,000. Section 5.09. Consolidations, Mergers and Sales of Assets. The Company will not (i) consolidate with or merge into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person. The Company will retain ownership, directly or indirectly, of at least 80% of the capital stock, and at least 80% of the voting power, of U S WEST Communications, Inc. ("Communications"), and will cause Communications to continue to own substantially all of the telecommunications assets it owns on the date of this Agreement. Section 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds will include any use for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. Section 5.11. Year 2000 Compatibility. The Company shall take all reasonable action necessary to ensure that the computer based systems of the Company and its Subsidiaries are able to operate and effectively process data including dates on or after January 1, 2000, except that such action shall not be required to the extent that the failure to take such action would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. At the request of the Agent, the Company shall provide assurance reasonably acceptable to the Agent of the year 2000 compatibility of the Company and its Subsidiaries. ARTICLE 6 Defaults Section 6.01. Events of Default. If one or more of the following events shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof; (b) the Company or the Borrower shall fail to observe or perform any covenant contained in Sections 5.06 to 5.10, inclusive; (c) the Company or the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 10 days (or, in the case of Section 5.11, 30 days) after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment or payments, in the aggregate in excess of $100,000,000, in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt; (g) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize or otherwise acquiesce in any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $100,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $100,000,000; (j) a judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days; (k) the Company shall repudiate in writing any of its obligations under Article 9 or any such obligation shall be unenforceable against the Company in accordance with its terms, or the Company shall so assert in writing; (l) prior to the Separation, one or more events or conditions shall occur which result in a default under any agreement or agreements in respect of any Material Debt that is subject to the Indentures and as a consequence of such default or defaults the Company or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Debt and such payment, consideration or benefit is determined by the Required Banks, after taking into account any payment, consideration or benefit made, given or agreed to be given by such holders to the Company or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Debt; or (m) the Separation shall have occurred on terms and conditions which are not substantially the same as those set forth in the Proxy Statement; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and/or (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company or the Borrower, without any notice to the Company or the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower. Section 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 The Agent Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Section 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company, the Borrower or any Subsidiary or affiliate of the Company or the Borrower as if it were not the Agent hereunder. Section 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. Section 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Section 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company or the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. Section 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. Section 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent (with the consent of the Company, such consent not to be unreasonably withheld), which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $400,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. Section 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE 8 Changes in Circumstances Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the market for such Interest Period, or (b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Euro-Dollar Loans advise the Agent that the Adjusted London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Domestic Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Domestic Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. Section 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Domestic Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. Section 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Section 8.04. Taxes. (a) Any and all payments by the Company or the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company or the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Person shall make such deductions, (iii) such Person shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Person shall furnish to the Agent, at its address referred to in Section 10.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a) imposed by the United States. (e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Company or the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. Section 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to the Borrower which would otherwise be made by such Bank as (or continued as or converted into) Euro-Dollar Loans shall instead be Domestic Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Borrower has been repaid (or converted to a Domestic Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Domestic Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Domestic Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. Section 8.06. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or (iii) any Bank has not signed an amendment or waiver which must be signed by all the Banks to become effective, and such amendment or waiver has been signed by the Super-Majority Banks, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank. ARTICLE 9 Guaranty Section 9.01. The Guaranty. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by the Borrower under this Agreement. Upon failure by the Borrower to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. Section 9.02. Guaranty Unconditional. The obligations of the Company hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. Section 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and the Borrower under this Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. Section 9.04. Waiver by the Company. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. Section 9.05. Subrogation. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. Section 9.06. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. Section 9.07. Release upon Separation. So long as, immediately before and after the consummation of the Separation, no Default shall have occurred and be continuing, simultaneously with such consummation, USW-C, Inc. (to be renamed U S WEST, Inc.) shall succeed to all of the rights, duties and obligations of U S WEST, Inc. (to be renamed MediaOne Group, Inc.) ("Old U S WEST") hereunder, whereupon Old U S WEST shall have no further rights, duties and obligations hereunder, in each case automatically, without any further action on the part of any party hereto. ARTICLE 10 Miscellaneous Section 10.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company, the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified pursuant to this Section 10.01 and telephonic confirmation of receipt thereof is received, or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received. Section 10.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.03. Expenses; Indemnification. (a) The Company shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that (i) no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction and (ii) the Company shall not be liable for any settlement entered into by an Indemnitee without its consent (which shall not be unreasonably withheld). (c) Each Indemnitee agrees to give the Company prompt written notice after it receives any notice of the commencement of any action, suit or proceeding for which such Indemnitee may wish to claim indemnification pursuant to subsection (b). The Company shall have the right, exercisable by giving written notice within fifteen Domestic Business Days after the receipt of notice from such Indemnitee of such commencement, to assume, at the Company's expense, the defense of any such action, suit or proceeding; provided, that such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at such Indemnitee's expense unless (1) the Company shall have agreed to pay such fees and expenses; (2) the Company shall have failed to assume the defense of such action, suit or proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnitee in any such action, suit or proceeding; or (3) such Indemnitee shall have been advised by independent counsel in writing (with a copy to the Company) that there may be one or more defenses available to such Indemnitee which are in conflict with those available to the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the Company's expense, the Company shall be obligated to assume the expense, it being understood, however, that the Company shall not be liable for the fees or expenses of more than one separate firm of attorneys, which firm shall be designated in writing by such Indemnitee). Section 10.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. Section 10.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company, the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, except as provided below, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) amend or waive the provisions of Article 9 or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. Section 10.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans, with (and subject to) the written consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that if a Participant is an affiliate of such grantor Bank or is another Bank, no such consent shall be required. In the event of any such grant by a Bank of a participating interest to a Participant, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company, the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below but which is consented to in accordance with this subsection (b) shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that (i) if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent shall be required; (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and (iii) any assignment shall not be less than $15,000,000, or if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes except for any rights retained in accordance with clause (ii) of this proviso. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. Section 10.07. Termination of Existing Credit Agreements. The Company and each of the Banks that is also a "Bank" party to the Existing Credit Agreements agrees that the "Commitments" as defined in the Existing Credit Agreements shall be terminated in their entirety on the Effective Date. Each of such Banks waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreements and (b) any claim to any facility fees or other fees under the Existing Credit Agreements for any day on or after the Effective Date. Each of the Company and the Borrower (i) represents and warrants that (x) after giving effect to the preceding sentences of this Section 10.07, the commitments under the Existing Credit Agreements will be terminated effective not later than the Effective Date, (y) no loans are, as of the date hereof, or will be, as of the Effective Date, outstanding under the Existing Credit Agreements and (ii) covenants that all accrued and unpaid facility fees and any other amounts due and payable under the Existing Credit Agreements shall have been paid on or prior to the Effective Date. Section 10.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the Company and the Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 10.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of counterparts hereof signed by each of the Company, the Borrower, the Banks and the Agent (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). Section 10.10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 10.11. Confidentiality. Each of the Agent and the Banks agrees to use its reasonable best efforts to keep confidential any information delivered or made available by the Company or the Borrower to it which is clearly stated by the Company or the Borrower to be confidential; provided that nothing herein shall prevent the Agent or any Bank from disclosing such information (i) to the Agent or any other Bank in connection with the transactions contemplated hereby, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Company and its Subsidiaries, provided that such Person is not (x) known to it to be bound by a confidentiality agreement with the Company or its Subsidiaries or (y) known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy hereunder or under the Notes or (viii) to any actual or proposed participant or assignee of all or any of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. U S WEST CAPITAL FUNDING, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter U S WEST, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter USW-C, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Sean Foley Commitments $194,444,444 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By Name: Title: $194,444,444 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By Name: Title: $194,444,444 THE CHASE MANHATTAN BANK By Name: Title: $194,444,444 MELLON BANK, N.A. By Name: Title: $186,666,667 ABN AMRO BANK N.V. By Name: Title: By Name: Title: $186,666,667 THE BANK OF NEW YORK By Name: Title: $186,666,667 BANK ONE, COLORADO, N.A. By Name: Title: $186,666,667 CITIBANK, N.A. By Name: Title: $186,666,667 KEYBANK NATIONAL ASSOCIATION By Name: Title: $186,666,667 NATIONSBANK, N.A. By Name: Title: $155,555,556 COMMERZBANK AG LOS ANGELES BRANCH By Name: Title: By Name: Title: $155,555,556 FLEET NATIONAL BANK By Name: Title: $112,777,778 CANADIAN IMPERIAL BANK OF COMMERCE By Name: Title: $105,000,000 BANKERS TRUST COMPANY By Name: Title: $105,000,000 THE FIRST NATIONAL BANK OF CHICAGO By Name: Title: $105,000,000 KREDIETBANK N.V. By Name: Title: By Name: Title: $105,000,000 THE ROYAL BANK OF SCOTLAND PLC By Name: Title: $105,000,000 WELLS FARGO BANK, N.A. By Name: Title: $58,333,333 BANK OF HAWAII By Name: Title: $58,333,333 BARCLAYS BANK PLC By Name: Title: $58,333,333 BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH By Name: Title: By Name: Title: $58,333,333 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT By Name: Title: $58,333,333 LEHMAN COMMERCIAL PAPER INC. By Name: Title: $58,333,333 MERRILL LYNCH CAPITAL CORPORATION By Name: Title: $58,333,333 NORWEST BANK COLORADO, NATIONAL ASSOCIATION By Name: Title: $58,333,333 THE TOKAI BANK, LIMITED By Name: Title: $58,333,333 U.S. BANK NATIONAL ASSOCIATION By Name: Title: $38,888,889 BANQUE NATIONALE DE PARIS By Name: Title: By Name: Title: $38,888,889 ROYAL BANK OF CANADA By Name: Title: $38,888,889 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. By Name: Title: By Name: Title: $11,666,667 THE PROVIDENT BANK. By Name: Title: Total Commitments: $3,500,000,000 =========== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title: 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Mark Connor Facsimile number: 302-634-1092 Telephone number: 302-634-4218 PRICING SCHEDULE The "Euro-Dollar Margin" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
Level Level Level Level Level Level Status I II III IV V VI Euro-Dollar Margin: Usage less than 50% .1475% .155% .175% .215% .245% .300% Usage more than or equal to 50% .1975% .205% .225% .265% .295% .350% Facility Fee .040% .045% .050% .060% .080% .100% Rate ===================== ============ ============= ============= ============ ============= ============
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date after the Separation if, at such date, the Borrower's outstanding senior unsecured long-term debt securities are rated A+ or higher by S&P or A1 or higher by Moody's. "Level II Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated A or higher by S&P or A2 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists (x) at any date prior to the Separation, and (y) at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated A- or higher by S&P or A3 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated BBB+ or higher by S&P or Baa1 or higher by Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated BBB or higher by S&P or Baa2 or higher by Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date after the Separation if, at such date, none of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "S&P" means Standard & Poor's Ratings Group, a New York corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Usage" means at any date the percentage equivalent of a fraction (i) the numerator of which is the sum of the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date, and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the Usage for each date on or after the date of such termination shall be deemed to be greater than 50%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower guaranteed by the Company, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. SCHEDULE 4.07 Environmental Matters NONE. EXHIBIT A NOTE New York, New York ________, 19__ For value received, U S WEST CAPITAL FUNDING, INC., a Colorado corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date therefor specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the inaccuracy of, or the failure of the Bank to make, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. U S WEST, Inc., has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this Note. U S WEST CAPITAL FUNDING, INC. By Title: LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------------------------------ Date Amount of Type of Loan Amount of Maturity Date Notation Made Loan Principal By Repaid - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: U S WEST Capital Funding, Inc. Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed on the signature pages thereof, the other agents named therein and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. - -------- 1Amount must be $25,000,000 or a larger multiple of $5,000,000. 2Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. Terms used herein have the meanings assigned to them in the Credit Agreement. U S WEST CAPITAL FUNDING, INC. By________________________ Title: EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to U S WEST Capital Funding, Inc. (the "Borrower") Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks parties thereto, the other agents named therein and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [10:30 A.M.] [9:15 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By______________________________ Authorized Officer EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent") Re: Money Market Quote to U S WEST Capital Funding, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** - ---------- * As specified in the related Invitation. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the 364-Day Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed on the signature pages thereof, the other agents named therein and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - ---------- ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY AND THE BORROWER To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Gentlemen and Ladies: I have acted as counsel for U S WEST, Inc., USW-C, Inc. and U S WEST Capital Funding, Inc., in connection with the 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998, among them, the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the instruction of the client pursuant to Section 3.01(b) of the Credit Agreement. I am familiar with the proceedings taken by the Company, USW-C, Inc. and the Borrower in connection with the authorization, execution and delivery of the Credit Agreement and the Notes, and I have examined such documents, certificates, and such other matters of fact and questions of law as I have deemed relevant under the circumstances to express an informed opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Company and USW-C, Inc. are each corporations validly existing and in good standing under the laws of the State of Delaware, and each has all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. 2. The execution, delivery and performance by the Company, USW-C, Inc. and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental body, agency or official. 3. The execution, delivery and performance by the Company, USW-C, Inc. and the Borrower of the Credit Agreement and by the Borrower of the Notes will not (i) result in a breach or violation of, conflict with, or constitute a default under, the articles of incorporation or bylaws of such Person or any material law or regulation or any material order, judgment, agreement or instrument to which such Person is a party or by which such Person is bound, or (ii) result in the creation or imposition of any Lien on any asset of such Person. 4. The Credit Agreement constitutes a valid and binding agreement of the Company USW-C, Inc. and the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 5. To my knowledge, and except as disclosed in the Company's 1997 Form 10-K (as amended by Form 10-K/A) as filed with the Securities and Exchange Commission, there is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement or the Notes. 6. The Borrower and each of the Company's other corporate Significant Subsidiaries are corporations validly existing and in good standing under the laws of their jurisdictions of incorporation, and have all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. For purposes of my opinion set forth in numbered paragraph 4 above, I have assumed that the laws of the State of New York, which are stated to govern the Credit Agreement and the Notes, are the same as the laws of the State of Colorado. In rendering the opinions set forth herein, I have assumed that the Credit Agreement and the Notes will conform to the specimens thereof examined by me, that the signatures on all documents examined by me were genuine, and the authenticity of all documents submitted to me as originals or as copies of originals, assumptions which I have not independently verified. This opinion is furnished by me as counsel for the Company and the Borrower and is solely for your benefit and the benefit of any Assignee under the Credit Agreement. Without my prior written consent, this opinion may not be relied upon by you or any Assignee in any other context or by any other person. This opinion may not be quoted, in whole or in part, or copies thereof furnished, to any other person without my prior written consent, except that you may furnish copies hereof (a) to your auditors and attorneys, (b) to any state or federal authority having regulatory jurisdiction over you or the Company or the Borrower, (c) pursuant to order or legal process of any court or governmental agency, (d) in connection with any legal action to which you are a party arising out of the transactions contemplated by the Credit Agreement, and (e) to any Participant or proposed Participant in the Commitment of any Bank. This opinion is limited to the present laws of the State of Colorado and the General Corporation Law of the State of Delaware, to present judicial interpretations thereof, and to the facts as they presently exist, and I assume no responsibility as to the applicability or effect of the laws of any other jurisdiction. In rendering this opinion, I assume no obligation to revise or supplement this opinion should the present laws of the State of Colorado or the General Corporation Law of the State of Delaware be changed by legislative action, judicial decision, or otherwise. Very truly yours, Thomas O. McGimpsey EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the 364-Day Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the banks listed on the signature pages thereof (the "Banks"), the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that, assuming that the execution, delivery and performance by the Company and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers and have been duly authorized by all necessary corporate action, the Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower and the Notes constitute valid and binding obligations of the Borrower. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, __ 199_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), U S WEST, Inc. (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of May 8, 1998 among the Company, USW-C, Inc., the Borrower named therein, the Assignor and the other Banks party thereto, as Banks, the other agents named therein and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.3 It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees to that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Company and the Agent. This Agreement is conditioned upon the consent of the Company and the Agent pursuant to Section 10.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 10.06(c) the Company agrees to cause the Borrower to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility - -------- 3 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. with respect to, the solvency, financial condition, or statements of the Company or the Borrower, or the validity and enforceability of the obligations of the Company or the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By Title: [ASSIGNEE] By Title: [U S WEST, INC. By Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title:] EXHIBIT H EXTENSION AGREEMENT US WEST Capital Funding, Inc. US WEST, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 60 Wall Street New York, NY 10260 Gentlemen: The undersigned hereby agree to extend the Revolving Credit Period under the 364-Day Credit Agreement dated as of May 8, 1998 among US WEST Capital Funding, Inc., US WEST, Inc., USW-C, Inc., the Banks listed therein, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Credit Agreement") for 364 days to ____________ __, ____. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. It may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK]1 By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. [NAME OF BANK]1 By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. Agreed and accepted: US WEST CAPITAL FUNDING, INC. By Title US WEST, INC. By Title MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title EX-10 5 EXHIBIT 10D. EXHIBIT 10d. $1,000,000,000 FIVE-YEAR CREDIT AGREEMENT dated as of May 8, 1998 among U S WEST Capital Funding, Inc. U S WEST, Inc. USW-C, Inc. The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Administrative Agent - ------------------------------------------------------------------------------- J.P. Morgan Securities Inc. Lead Arranger Bank of America National Trust and Savings Association, Chase Securities Inc. and Mellon Bank, N.A., Co-Syndication Agents
PAGE TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. The Definitions..................................................................1 SECTION 1.02. Accounting Terms and Determinations.............................................12 SECTION 1.03. Types of Borrowings.............................................................12 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend.............................................................13 SECTION 2.02. Notice of Committed Borrowing...................................................14 SECTION 2.03. Money Market Borrowings.........................................................15 SECTION 2.04. Notice to Banks; Funding of Loans...............................................19 SECTION 2.05. Notes...........................................................................20 SECTION 2.06. Maturity of Loans...............................................................20 SECTION 2.07. Interest Rates..................................................................21 SECTION 2.08. Facility Fees...................................................................23 SECTION 2.09. Termination or Reduction of Commitments.........................................23 SECTION 2.10. Method of Electing Interest Rates...............................................24 SECTION 2.11. Prepayments....................................................................25 SECTION 2.12. General Provisions as to Payments...............................................26 SECTION 2.13. Funding Losses..................................................................26 SECTION 2.14. Computation of Interest and Fees................................................27 SECTION 2.15. Change of Control...............................................................27 ARTICLE 3 CONDITIONS SECTION 3.01. Closing.........................................................................28 SECTION 3.02. All Borrowings..................................................................29 SECTION 3.03. Loans after Separation..........................................................29 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power...................................................30 SECTION 4.02. Corporate and Governmental Authorization; No Contravention......................30
PAGE SECTION 4.03. Binding Effect..................................................................30 SECTION 4.04. Financial Information...........................................................31 SECTION 4.05. Litigation......................................................................31 SECTION 4.06. Compliance with ERISA...........................................................31 SECTION 4.07. Environmental Matters...........................................................32 SECTION 4.08. Taxes...........................................................................32 SECTION 4.09. Subsidiaries....................................................................33 SECTION 4.10. Not an Investment Company.......................................................33 SECTION 4.11. Full Disclosure.................................................................33 ARTICLE 5 COVENANTS SECTION 5.01. Information.....................................................................33 SECTION 5.02. Maintenance of Property; Insurance..............................................35 SECTION 5.03. Maintenance of Existence........................................................36 SECTION 5.04. Compliance with Laws............................................................36 SECTION 5.05. Inspection of Property, Books and Records.......................................36 SECTION 5.06. Subsidiary Debt.................................................................36 SECTION 5.07. Debt Coverage...................................................................37 SECTION 5.08. Negative Pledge.................................................................37 SECTION 5.09. Consolidations, Mergers and Sales of Assets.....................................38 SECTION 5.10. Use of Proceeds.................................................................39 SECTION 5.11. Year 2000 Compatibility.........................................................39 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default...............................................................39 SECTION 6.02. Notice of Default...............................................................42 ARTICLE 7 THE AGENT SECTION 7.01. Appointment and Authorization...................................................42 SECTION 7.02. Agent and Affiliates............................................................42 SECTION 7.03. Action by Agent.................................................................43 SECTION 7.04. Consultation with Experts.......................................................43 SECTION 7.05. Liability of Agent..............................................................43 SECTION 7.06. Indemnification.................................................................43 SECTION 7.07. Credit Decision.................................................................43
PAGE SECTION 7.08. Successor Agent.................................................................44 SECTION 7.09. Agent's Fee.....................................................................44 ARTICLE 8 CHANGES IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................44 SECTION 8.02. Illegality......................................................................45 SECTION 8.03. Increased Cost and Reduced Return...............................................46 SECTION 8.04. Taxes...........................................................................47 SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans.................................................................................49 SECTION 8.06. Substitution of Bank............................................................49 ARTICLE 9 GUARANTY SECTION 9.01. The Guaranty....................................................................49 SECTION 9.02. Guaranty Unconditional..........................................................50 SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances.................................................................51 SECTION 9.04. Waiver by the Company...........................................................51 SECTION 9.05. Subrogation.....................................................................51 SECTION 9.06. Stay of Acceleration............................................................51 SECTION 9.07. Release upon Separation.........................................................51 ARTICLE 10 MISCELLANEOUS SECTION 10.01. Notices........................................................................52 SECTION 10.02. No Waivers.....................................................................52 SECTION 10.03. Expenses; Indemnification......................................................52 SECTION 10.04. Sharing of Set-offs............................................................53 SECTION 10.05. Amendments and Waivers.........................................................54 SECTION 10.06. Successors and Assigns........................................................54 SECTION 10.07. Termination of Existing Credit Agreements......................................56 SECTION 10.08. Governing Law; Submission to Jurisdiction......................................56 SECTION 10.09. Counterparts; Integration; Effectiveness.......................................56 SECTION 10.10. WAIVER OF JURY TRIAL...........................................................57 SECTION 10.11. Confidentiality................................................................57
Pricing Schedule Schedule 4.07 - Environmental Matters Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Company and the Borrower Exhibit F - Opinion of Special Counsel for the Administrative Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Extension Agreement CREDIT AGREEMENT AGREEMENT dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. The Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assignee" has the meaning set forth in Section 10.06(c). "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means U S WEST Capital Funding, Inc., a Colorado corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.11. "Committed Loan" means a loan to be made by a Bank pursuant to Section 2.01(a); provided that if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Company" means (i) prior to the Separation, U S WEST, Inc., a Delaware corporation, and its successors and (ii) after the Separation, USW-C, Inc., a Delaware corporation, which will be renamed U S WEST, Inc., and its successors. "Company's 1997 Form 10-K" means U S WEST, Inc.'s annual report on Form 10-K for 1997, as amended by Form 10-K/A filed April 13, 1998, in each case as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated EBITDA" means, for any period, the net income of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (x) equity gains or losses in unconsolidated Persons, (y) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss or (z) any gain or loss on the disposition of investments), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense and (iii) depreciation, amortization and other similar non-cash charges and minus, to the extent included in determining such adjusted net income, the aggregate amount of (i) interest income and (ii) income tax benefit. "Consolidated Net Worth" means at any date the consolidated shareowners' equity of the Company and its Consolidated Subsidiaries determined as of such date. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. Notwithstanding the foregoing, for purposes of Sections 5.06 and 5.07 Debt shall in no event include the following: (x) Debt of Persons which are not Consolidated Subsidiaries ("Joint Ventures") (i) which is secured by a Lien on the assets or capital stock of a Minor Subsidiary or the equity interests in such Joint Ventures or is Guaranteed by a Minor Subsidiary, which Lien or Guaranty is incurred in connection with the international operations of the Company and its Subsidiaries, and (ii) for the payment of which no other recourse may be had to the Company or any of its Subsidiaries; and (y) Debt of the Company or the Borrower issued in connection with the issuance of Trust Originated Preferred Securities or substantially similar securities, so long as such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent. "Domestic Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Domestic Loan immediately before it became overdue. "Effective Date" means the date this Agreement becomes effective in accordance with Section 10.09. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.07. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07 on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of Bank of America National Trust and Savings Association, Mellon Bank, N.A., and Morgan Guaranty Trust Company of New York, and "Euro-Dollar Reference Bank" means any one of the foregoing. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the Amended and Restated Credit Agreements dated as of October 31, 1997, among the Borrower, the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as administrative agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Domestic Loans at such time or (ii) all Committed Loans which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Domestic Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 10.03(b). "Indentures" means the agreements or instruments evidencing the following Debt of Continental Cablevision, Inc., and its successors: (i) the 11% Senior Subordinated Debentures Due June 1, 2007; (ii) the 8 5/8% Senior Notes Due August 15, 2003; (iii) the 9% Senior Debentures Due September 1, 2008; (iv) the 8 7/8% Senior Debentures Due September 15, 2002; (v) the 9 1/2% Senior Debentures Due August 1, 2013; (vi) the 8 1/2% Senior Notes Due September 15, 2001; (vii) the 8.3% Senior Notes Due May 15, 2006; and (viii) any other Debt containing terms and conditions as or more favorable to the holders thereof than the terms and conditions of any of the foregoing Debt. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. (2) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. (3) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after a Termination Date shall end on such Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07. "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $100,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $100,000,000. "Minor Subsidiary" means, for purposes of the last sentence of the definition of Debt and of Section 5.08(f) (the "Relevant Provisions"), (i) USW PCN Inc., and (ii) any other Subsidiary which, at the time of the issuance of a Guaranty or grant of a Lien referred to in the Relevant Provisions, had assets which, when taken together with all assets of Subsidiaries at any earlier time when such Subsidiaries were deemed to be Minor Subsidiaries pursuant to this clause (ii), did not exceed $250,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Schedule attached hereto and identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Proxy Statement" means the definitive Proxy Statement for 1998 Annual Meeting of Stockholders of U S WEST, Inc., dated and filed with the Securities and Exchange Commission on April 20, 1998. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to but excluding the Termination Date. "Separation" has the meaning set forth in the Proxy Statement. "Significant Subsidiary" means any Subsidiary which would meet the definition of "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company. "Super-Majority Banks" means at any time Banks having at least 85% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 85% of the aggregate unpaid principal amount of the Loans. "Termination Date" means, with respect to each Bank, May 8, 2003, or such later date to which the Termination Date for such Bank shall have been extended pursuant to Section 2.01(b), or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Company. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article 5 to eliminate the effect of any change in such generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article 5 for such purpose), then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect in the United States immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Domestic Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01(a) in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) The Commitments. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection (a) from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to the Borrower shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments shall terminate at the close of business on the Termination Date. (b) Extension of Commitments. The Commitments may be extended in the manner and amount set forth in this subsection (b), for a period of 364 days measured from the Termination Date then in effect. If the Company wishes to request an extension of each Bank's Commitment, it shall give notice to that effect to the Agent not less than 45 days and not more than 60 days prior to the Termination Date then in effect, whereupon the Agent shall promptly notify each of the Banks of such request. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, as it may elect in its discretion, within 30 days of such notice to the Agent. If any Bank shall not have responded affirmatively within such 30-day period, such Bank shall be deemed to have rejected the Company's proposal to extend its Commitment, and only the Commitments of those Banks which have responded affirmatively shall be extended, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit H hereto duly completed and signed by the Borrower, the Company, the Agent and all of the Banks which have responded affirmatively. The Agent shall provide to the Company, no later than 10 days prior to the Termination Date then in effect, a list of the Banks which have responded affirmatively. The Extension Agreement shall be executed and delivered no later than five days prior to the Termination Date then in effect, and no extension of the Commitments pursuant to this subsection (b) shall be legally binding on any party hereto unless and until such Extension Agreement is so executed and delivered. The Company and the Borrower may decline to execute and deliver such Extension Agreement if any Bank has rejected the Company's proposal to extend its Commitment or has failed to execute and deliver such Extension Agreement, and will promptly notify the Agent and the Banks if it so declines. (c) Additional Commitments. At any time during the Revolving Credit Period (unless the Commitments shall have been reduced pursuant to Section 2.09(b)), if no Default shall have occurred and be continuing at such time, the Company may, if it so elects, increase the aggregate amount of the Commitments, either by designating a Person not theretofore a Bank and acceptable to the Agent to become a Bank or by agreeing with an existing Bank that such Bank's Commitment shall be increased. Upon execution and delivery by the Company, the Borrower and such Bank or other Person of an instrument of assumption in form and amount satisfactory to the Administrative Agent, such existing Bank shall have a Commitment as therein set forth or such other Person shall become a Bank with a Commitment as therein set forth and all the rights and obligations of a Bank with such a Commitment hereunder; provided that (i) the Company shall provide prompt notice of such increase to the Agent, which shall promptly notify the other Banks, (ii) the aggregate amount of each such increase which is effective on any day shall be at least $50,000,000 and (iii) the aggregate amount of the Commitments shall at no time exceed $1,250,000,000. Upon any increase in the aggregate amount of the Commitments pursuant to this subsection (c), within five Domestic Business Days in the case of each Group of Domestic Loans outstanding, and at the end of the then current Interest Period with respect thereto in the case of each Group of Euro-Dollar Loans then outstanding, the Borrower shall prepay such Group in its entirety, and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 3, the Borrower shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Domestic Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing bear interest initially at the Base Rate or at a Euro-Dollar Rate, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01(a), the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 9:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day prior to the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 10.01 not later than (x) 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly (and in any event no later than 11:00 A.M. (New York time) on (i) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (ii) the proposed date of Borrowing, in the case of an Absolute Rate Auction) notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:15 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless any applicable condition specified in Article 3 has not been satisfied, as determined by the Agent in accordance with Article 3, the Agent will make the funds so received from the Banks immediately available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to Noon (New York City time) on the date of such Borrowing) that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. If the Borrower shall have repaid such corresponding amount of such Bank, such Bank shall reimburse the Borrower for any loss on account thereof incurred by the Borrower. SECTION 2.05. Notes. (a) The Loans of each Bank to the Borrower shall be evidenced by a single Note of the Borrower payable to the order of such Bank for the account of its Applicable Lending Office, unless such Bank requests otherwise, in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to the Borrower. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type to the Borrower be evidenced by a separate Note of the Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01, the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it to the Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of the Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to the Borrower then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan by a Bank included in any Borrowing made pursuant to Section 2.01(a) shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Termination Date for such Bank. Each Loan included in any Borrowing made pursuant to Section 2.03 shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the last day of the Interest Period applicable thereto. SECTION 2.07. Interest Rates. (a) Each Domestic Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on the last day of each calendar quarter and, with respect to the principal amount of any Domestic Loan converted to a Euro-Dollar Loan, on each date a Domestic Loan is so converted. Any overdue principal of or interest on any Domestic Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Domestic Loans for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Domestic Loans for such day) and (ii) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (d) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07 as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Facility Fees. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or earlier date of termination of the Commitments in their entirety) to but excluding the date the Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of the Loans. Accrued facility fees shall be payable quarterly in arrears on the last day of each calendar quarter and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). "Facility Fee Rate" means a rate per annum determined in accordance with the Pricing Schedule. SECTION 2.09. Termination or Reduction of Commitments. (a) During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. (b) If the Separation has not been consummated on or before November 8, 1998, the Commitments shall be ratably reduced by 50% on the next succeeding Domestic Business Day. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8), as follows: (i) if such Loans are Domestic Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Domestic Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by such Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Domestic Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.11. Prepayments. (a) Subject in the case of any Euro-Dollar Loans to Section 2.13, the Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Domestic Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)), or, upon three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (b) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Each such prepayment shall be applied to prepay ratably the Loans of the several Banks included in the relevant Group or Borrowing. (d) On the date of any reduction of Commitments pursuant to Section 2.09(b), the Borrower shall repay such principal amount (together with accrued interest thereon) of outstanding Loans, if any, as may be necessary so that after such repayment (i) the aggregate outstanding principal amount of each Bank's Committed Loans does not exceed the amount of such Bank's Commitment as then reduced, and (ii) the aggregate unpaid principal amount of all outstanding Loans does not exceed the aggregate amount of the Commitments as then reduced. Any such prepayment shall be made in accordance with all applicable provisions of this Agreement (including without limitation subsections (a) (other than as to amount), (b) and (c) of this Section 2.11). SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without off set or counterclaim, to the Agent at its address referred to in Section 10.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Domestic Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Borrower fails to borrow, convert, continue or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.11(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Change of Control. If a Change of Control shall occur, the Company will, within ten days after the occurrence thereof, give each Bank notice thereof, which notice shall describe in reasonable details the facts and circumstances giving rise thereto and shall specify an Optional Termination Date for purposes of this Section (the "Optional Termination Date") which date shall not be less than 30 nor more than 60 days after the date of such notice. Each Bank may, by notice to the Company and the Agent given not less than three Domestic Business Days prior to the Optional Termination Date, terminate its Commitment (if any), which shall thereupon be terminated, and declare the Note held by it (together with accrued interest thereon) and any other amounts payable hereunder for its account to be, and such Note and such other amounts shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower, in each case effective on the Optional Termination Date. A "Change of Control" shall occur if any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Company; or, during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. The Separation shall not constitute a Change of Control. ARTICLE 3 CONDITIONS SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following (in the case of any document, dated the Closing Date unless otherwise indicated): (a) a duly executed Note of the Borrower for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of Thomas O. McGimpsey, Esq., counsel for the Company and the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to the Agent that the commitments under the Existing Credit Agreements have been terminated and that the principal and interest on all loans and accrued fees outstanding thereunder have been paid in full; (e) evidence satisfactory to the Agent of the payment of all fees and other amounts payable to the Agent for the account of the Banks or the Agent on or prior to the Closing Date, including, to the extent invoiced, reimbursement of all out-of-pocket expenses (including, without limitation, legal fees and expenses) required to be reimbursed or paid by the Borrower or the Company hereunder; and (f) all documents the Agent may reasonably request relating to the existence of the Company and the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to May 30, 1998; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) the fact that, immediately before and after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties contained in this Agreement shall be true on and as of the date of such Borrowing (except, in the case of the representations and warranties contained in Section 4.04(b), as disclosed by the Borrower to the Banks in writing in the Notice of Borrowing relating to such Borrowing). Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. SECTION 3.03. Loans after Separation. The obligation of any Bank to make or maintain a Loan after the Separation is subject to receipt by the Agent of the following documents, each dated or effective on the date of consummation of the Separation: (a) an instrument, satisfactory in form and substance to the Agent, and duly executed and delivered by USW-C, Inc. pursuant to which USW-C, Inc. (to be renamed U S WEST, Inc.) assumes the obligations of U S WEST, Inc. (to be renamed MediaOne Group, Inc.) under this Agreement; (b) evidence satisfactory to it that the Separation has been consummated substantially on the terms described in the Proxy Statement; (c) an opinion of Thomas O. McGimpsey, Esq., counsel for USW-C, Inc., substantially in the form of Exhibit E hereto with such modifications as are acceptable to the Agent and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and (d) all documents the Agent may reasonably request relating to the existence of USW-C, Inc., the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the satisfaction of the foregoing conditions. ARTICLE 4 REPRESENTATIONS AND WARRANTIES Each of the Company and the Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. Each of the Company and the Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company and the Borrower of this Agreement and by the Borrower of the Notes are within such Person's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Person or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person or any Significant Subsidiary or result in the creation or imposition of any Lien on any material asset of such Person or any Significant Subsidiary. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and the Borrower, and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1997 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Arthur Andersen L.L.P. and set forth in the Company's 1997 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 1997 there has been no material adverse change in the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole (it being understood that the consummation of the Separation shall not be considered such a change). SECTION 4.05. Litigation. Except as disclosed in the Company's 1997 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where failure to comply would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Environmental Matters. (a) The operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws except such non-compliance which would not (if enforced in accordance with applicable law) reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. (b) Except as specifically identified in Schedule 4.07, the Company and each of its Subsidiaries have obtained all material licenses, permits, authorizations and registrations required under any Environmental Laws ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Company and each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits. (c) Except as specifically identified in Schedule 4.07, (i) none of the Company, any of its Subsidiaries or any of their present property or operations are subject to any outstanding written order from or settlement or consent agreement with any governmental authority or other Person, nor is any of the foregoing subject to any judicial or docketed administrative proceedings, respecting any Environmental Laws or Hazardous Substances with a potential liability in excess of $1,000,000 and (ii) there are no other conditions or circumstances known to the Company which may give rise to any claims respecting any Environmental Laws arising from the operations of the Company or its Subsidiaries (including, without limitation, off-site liabilities), or any additional costs of compliance with Environmental Laws, that would reasonably be expected to have a material adverse effect on the financial position or results of operations of the Company and its Subsidiaries, considered as a whole. SECTION 4.08. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. SECTION 4.09. Subsidiaries. Each of the Company's corporate Significant Subsidiaries (including, but not limited to, the Borrower) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted. SECTION 4.10. Not an Investment Company. Neither the Company nor the Borrower is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.11. Full Disclosure. All written information heretofore furnished by the Company or the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company or the Borrower to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. ARTICLE 5 COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 95 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Arthur Andersen L.L.P. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer (or such officer's designee, designated in writing by such officer) or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) within five Domestic Business Days after any officer of the Company or the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company or the Borrower setting forth the details thereof and the action which the Company or the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other than any amendment on Form 8-K the sole purpose of which is to file exhibits relating to existing Debt meeting the requirements of clause (ii) of the definition of Debt) which the Company shall have filed with the Securities and Exchange Commission; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (h) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries and the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Maintenance of Property; Insurance. (a) The Company will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will maintain, and will cause each Significant Subsidiary to maintain (either in the name of the Borrower or in such Significant Subsidiary's own name), with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried; provided that, in lieu of any such insurance, the Company and any Significant Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Company or such Significant Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles and practice. SECTION 5.03. Maintenance of Existence. The Company will, and will cause each Significant Subsidiary to, preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.03 shall prohibit or interfere with the Company's publicly announced strategy to discontinue or dispose of in one or more transactions the financial services businesses of it or of any of its Subsidiaries. SECTION 5.04. Compliance with Laws. The Company will comply, and will cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and for which adequate reserves in conformity with generally accepted accounting principles have been established. SECTION 5.05. Inspection of Property, Books and Records. The Company will keep, and will cause each Significant Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. SECTION 5.06. Subsidiary Debt. (a) Prior to the Separation, total debt of all Consolidated Subsidiaries (excluding Debt of a Consolidated Subsidiary to the Company or to a Wholly-Owned Consolidated Subsidiary) ("Subsidiary Debt") will at no time exceed 250% of Consolidated Net Worth. (b) After the Separation, Subsidiary Debt as of the last day of any fiscal quarter of the Company ending during any period set forth below will not exceed the percentage of Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on such date set forth below opposite such period; provided that in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA for each fiscal quarter (a "Relevant Quarter") beginning after the Separation and ending on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters.
Period Percentage Prior to December 31, 1999 150% December 31, 1999- December 30, 2000 140% December 31, 2000- December 30, 2001 130% On or after December 31, 2001 125%
(c) For purposes of this Section, any preferred stock of a Consolidated Subsidiary other than the Borrower which is held by a Person other than the Company or a Wholly-Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in the Debt of such Consolidated Subsidiary. SECTION 5.07. Debt Coverage. (a) Prior to the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries will at all times be less than 70% of the sum of consolidated Debt of the Company and its Consolidated Subsidiaries and consolidated shareowners' equity of the Company and its Consolidated Subsidiaries. (b) After the Separation, consolidated Debt of the Company and its Consolidated Subsidiaries as of the last day of any fiscal quarter of the Company will not exceed 400% of Consolidated EBITDA for the four consecutive fiscal quarters of the Company ending on such date; provided that in the case of any four fiscal quarter period ending prior to the first anniversary of the Separation, Consolidated EBITDA for such period shall equal Consolidated EBITDA for each fiscal quarter (a "Relevant Quarter") beginning after the Separation and ending on or prior to the last day of such period, multiplied by a fraction, the numerator of which is four and the denominator of which is the number of Relevant Quarters. SECTION 5.08. Negative Pledge. Neither the Company nor the Borrower will, and the Company will not permit any Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $265,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof. (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien on assets or capital stock of Minor Subsidiaries which secures Debt of Persons which are not Consolidated Subsidiaries in which the Company or any of its Subsidiaries has made investments ("Joint Ventures"), but for the payment of which Debt no other recourse may be had to the Company or any Subsidiaries ("Limited Recourse Debt"), or any Lien on equity interests in a Joint Venture securing Limited Recourse Debt of such Joint Venture; (g) any Lien arising out of the refinancing, replacement, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (h) Liens arising in the ordinary course of business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (i) Liens not otherwise permitted by and in addition to the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $750,000,000. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Company will not (i) consolidate with or merge into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person. The Company will retain ownership, directly or indirectly, of at least 80% of the capital stock, and at least 80% of the voting power, of U S WEST Communications, Inc. ("Communications"), and will cause Communications to continue to own substantially all of the telecommunications assets it owns on the date of this Agreement. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds will include any use for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. SECTION 5.11. Year 2000 Compatibility. The Company shall take all reasonable action necessary to ensure that the computer based systems of the Company and its Subsidiaries are able to operate and effectively process data including dates on or after January 1, 2000, except that such action shall not be required to the extent that the failure to take such action would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. At the request of the Agent, the Company shall provide assurance reasonably acceptable to the Agent of the year 2000 compatibility of the Company and its Subsidiaries. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof; (b) the Company or the Borrower shall fail to observe or perform any covenant contained in Sections 5.06 to 5.10, inclusive; (c) the Company or the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 10 days (or, in the case of Section 5.11, 30 days) after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Company or the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment or payments, in the aggregate in excess of $100,000,000, in respect of any Material Debt when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt; (g) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize or otherwise acquiesce in any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $100,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $100,000,000; (j) a judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days; (k) the Company shall repudiate in writing any of its obligations under Article 9 or any such obligation shall be unenforceable against the Company in accordance with its terms, or the Company shall so assert in writing; (l) prior to the Separation, one or more events or conditions shall occur which result in a default under any agreement or agreements in respect of any Material Debt that is subject to the Indentures and as a consequence of such default or defaults the Company or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Debt and such payment, consideration or benefit is determined by the Required Banks, after taking into account any payment, consideration or benefit made, given or agreed to be given by such holders to the Company or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Debt; or (m) the Separation shall have occurred on terms and conditions which are not substantially the same as those set forth in the Proxy Statement; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and/or (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company or the Borrower, without any notice to the Company or the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company, the Borrower or any Subsidiary or affiliate of the Company or the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Company or the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company or the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent (with the consent of the Company, such consent not to be unreasonably withheld), which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $400,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE 8 CHANGES IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the market for such Interest Period, or (b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Euro-Dollar Loans advise the Agent that the Adjusted London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Domestic Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Domestic Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Domestic Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) Any and all payments by the Company or the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Company or the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Person shall make such deductions, (iii) such Person shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Person shall furnish to the Agent, at its address referred to in Section 10.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a) imposed by the United States. (e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Company or the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to the Borrower which would otherwise be made by such Bank as (or continued as or converted into) Euro-Dollar Loans shall instead be Domestic Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans to the Borrower has been repaid (or converted to a Domestic Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Domestic Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Domestic Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or (iii) any Bank has not signed an amendment or waiver which must be signed by all the Banks to become effective, and such amendment or waiver has been signed by the Super-Majority Banks, the Company shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Banks) to purchase the Notes and assume the Commitment of such Bank. ARTICLE 9 GUARANTY SECTION 9.01. The Guaranty. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by the Borrower under this Agreement. Upon failure by the Borrower to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. SECTION 9.02. Guaranty Unconditional. The obligations of the Company hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against the Borrower, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement In Certain Circumstances. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and the Borrower under this Agreement shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. SECTION 9.04. Waiver by the Company. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. SECTION 9.05. Subrogation. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof. SECTION 9.06. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. SECTION 9.07. Release upon Separation. So long as, immediately before and after the consummation of the Separation, no Default shall have occurred and be continuing, simultaneously with such consummation, USW-C, Inc. (to be renamed U S WEST, Inc.) shall succeed to all of the rights, duties and obligations of U S WEST, Inc. (to be renamed MediaOne Group, Inc.) ("Old U S WEST") hereunder, whereupon Old U S WEST shall have no further rights, duties and obligations hereunder, in each case automatically, without any further action on the part of any party hereto. ARTICLE 10 MISCELLANEOUS SECTION 10.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company, the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified pursuant to this Section 10.01 and telephonic confirmation of receipt thereof is received, or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received. SECTION 10.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 10.03. Expenses; Indemnification. (a) The Company shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that (i) no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction and (ii) the Company shall not be liable for any settlement entered into by an Indemnitee without its consent (which shall not be unreasonably withheld). (c) Each Indemnitee agrees to give the Company prompt written notice after it receives any notice of the commencement of any action, suit or proceeding for which such Indemnitee may wish to claim indemnification pursuant to subsection (b). The Company shall have the right, exercisable by giving written notice within fifteen Domestic Business Days after the receipt of notice from such Indemnitee of such commencement, to assume, at the Company's expense, the defense of any such action, suit or proceeding; provided, that such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at such Indemnitee's expense unless (1) the Company shall have agreed to pay such fees and expenses; (2) the Company shall have failed to assume the defense of such action, suit or proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnitee in any such action, suit or proceeding; or (3) such Indemnitee shall have been advised by independent counsel in writing (with a copy to the Company) that there may be one or more defenses available to such Indemnitee which are in conflict with those available to the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the Company's expense, the Company shall be obligated to assume the expense, it being understood, however, that the Company shall not be liable for the fees or expenses of more than one separate firm of attorneys, which firm shall be designated in writing by such Indemnitee). SECTION 10.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 10.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company, the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, except as provided below, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) amend or waive the provisions of Article 9 or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 10.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Company nor the Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans, with (and subject to) the written consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that if a Participant is an affiliate of such grantor Bank or is another Bank, no such consent shall be required. In the event of any such grant by a Bank of a participating interest to a Participant, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company, the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below but which is consented to in accordance with this subsection (b) shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent, which consents shall not be unreasonably withheld; provided that (i) if an Assignee is an affiliate of such transferor Bank or is another Bank, no such consent shall be required; (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and (iii) any assignment shall not be less than $15,000,000, or if less, shall constitute an assignment of all of such Bank's rights and obligations under this Agreement and the Notes except for any rights retained in accordance with clause (ii) of this proviso. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 10.07. Termination of Existing Credit Agreements. The Company and each of the Banks that is also a "Bank" party to the Existing Credit Agreements agrees that the "Commitments" as defined in the Existing Credit Agreements shall be terminated in their entirety on the Effective Date. Each of such Banks waives (a) any requirement of notice of such termination pursuant to Section 2.09 of the Existing Credit Agreements and (b) any claim to any facility fees or other fees under the Existing Credit Agreements for any day on or after the Effective Date. Each of the Company and the Borrower (i) represents and warrants that (x) after giving effect to the preceding sentences of this Section 10.07, the commitments under the Existing Credit Agreements will be terminated effective not later than the Effective Date, (y) no loans are, as of the date hereof, or will be, as of the Effective Date, outstanding under the Existing Credit Agreements and (ii) covenants that all accrued and unpaid facility fees and any other amounts due and payable under the Existing Credit Agreements shall have been paid on or prior to the Effective Date. SECTION 10.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the Company and the Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 10.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of counterparts hereof signed by each of the Company, the Borrower, the Banks and the Agent (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 10.11. Confidentiality. Each of the Agent and the Banks agrees to use its reasonable best efforts to keep confidential any information delivered or made available by the Company or the Borrower to it which is clearly stated by the Company or the Borrower to be confidential; provided that nothing herein shall prevent the Agent or any Bank from disclosing such information (i) to the Agent or any other Bank in connection with the transactions contemplated hereby, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Company and its Subsidiaries, provided that such Person is not (x) known to it to be bound by a confidentiality agreement with the Company or its Subsidiaries or (y) known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy hereunder or under the Notes or (viii) to any actual or proposed participant or assignee of all or any of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. U S WEST CAPITAL FUNDING, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter U S WEST, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Rahn Porter USW-C, INC. By Name: Title: 7800 East Orchard Road Englewood, Colorado 80111 Facsimile number: 303-793-6307 Telephone number: 303-793-6250 Attention: Sean Foley Commitments $55,555,556 REVOLVING COMMITMENT VEHICLE CORPORATION By Name: Title: $55,555,556 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By Name: Title: $55,555,556 THE CHASE MANHATTAN BANK By Name: Title: $55,555,556 MELLON BANK, N.A. By Name: Title: $53,333,333 ABN AMRO BANK N.V. By Name: Title: By Name: Title: $53,333,333 THE BANK OF NEW YORK By Name: Title: $53,333,333 BANK ONE, COLORADO, N.A. By Name: Title: $53,333,333 CITIBANK, N.A. By Name: Title: $53,333,333 KEYBANK NATIONAL ASSOCIATION By Name: Title: $53,333,333 NATIONSBANK, N.A. By Name: Title: $44,444,444 COMMERZBANK AG LOS ANGELES BRANCH By Name: Title: By Name: Title: $44,444,444 FLEET NATIONAL BANK By Name: Title: $32,222,222 CANADIAN IMPERIAL BANK OF COMMERCE By Name: Title: $30,000,000 BANKERS TRUST COMPANY By Name: Title: $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO By Name: Title: $30,000,000 KREDIETBANK N.V. By Name: Title: By Name: Title: $30,000,000 THE ROYAL BANK OF SCOTLAND PLC By Name: Title: $30,000,000 WELLS FARGO BANK, N.A. By Name: Title: $16,666,667 BANK OF HAWAII By Name: Title: $16,666,667 BARCLAYS BANK PLC By Name: Title: $16,666,667 BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH By Name: Title: By Name: Title: $16,666,667 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT By Name: Title: $16,666,667 LEHMAN COMMERCIAL PAPER INC. By Name: Title: $16,666,667 MERRILL LYNCH CAPITAL CORPORATION By Name: Title: $16,666,667 NORWEST BANK COLORADO, NATIONAL ASSOCIATION By Name: Title: $16,666,667 THE TOKAI BANK, LIMITED By Name: Title: $16,666,667 U.S. BANK NATIONAL ASSOCIATION By Name: Title: $11,111,111 BANQUE NATIONALE DE PARIS By Name: Title: By Name: Title: $11,111,111 ROYAL BANK OF CANADA By Name: Title: $11,111,111 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. By Name: Title: By Name: Title: $3,333,333 THE PROVIDENT BANK. By Name: Title: Total Commitments: $1,000,000,000 =========== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title: 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Mark Connor Facsimile number: 302-634-1092 Telephone number: 302-634-4218 PRICING SCHEDULE The "Euro-Dollar Margin" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
Level Level Level Level Level Level Status I II III IV V VI Euro-Dollar Margin: Usage less than 50% .1175% .125% .145% .185% .215% .250% Usage greater than or equal to 50% .1675% .175% .195% .235% .265% .300% Facility Fee .070% .075% .080% .090% .110% .150% Rate ===================== ============ ============= ============= ============ ============= ============
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date after the Separation if, at such date, the Borrower's outstanding senior unsecured long-term debt securities are rated A+ or higher by S&P or A1 or higher by Moody's. "Level II Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated A or higher by S&P or A2 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists (x) at any date prior to the Separation, and (y) at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated A- or higher by S&P or A3 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated BBB+ or higher by S&P or Baa1 or higher by Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date after the Separation if, at such date, (i) the Borrower's outstanding senior unsecured long-term debt securities are rated BBB or higher by S&P or Baa2 or higher by Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date after the Separation if, at such date, none of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "S&P" means Standard & Poor's Ratings Group, a New York corporation, and its successors or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Required Banks, with the approval of the Company, by notice to the Agent and the Company. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Usage" means at any date the percentage equivalent of a fraction (i) the numerator of which is the sum of the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date, and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the Usage for each date on or after the date of such termination shall be deemed to be greater than 50%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower guaranteed by the Company, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. SCHEDULE 4.07 Environmental Matters NONE. EXHIBIT A NOTE New York, New York ________, 19__ For value received, U S WEST CAPITAL FUNDING, INC., a Colorado corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date therefor specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the inaccuracy of, or the failure of the Bank to make, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Five-Year Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. U S WEST, Inc., has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this Note. U S WEST CAPITAL FUNDING, INC. By Title:
LOANS AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------------------ Date Amount of Type of Loan Amount of Maturity Date Notation Made Loan Principa By Repaid - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: U S WEST Capital Funding, Inc. Re: Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed on the signature pages thereof, the other agents named therein and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. -------- 1Amount must be $25,000,000 or a larger multiple of $5,000,000. 2Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. Terms used herein have the meanings assigned to them in the Credit Agreement. U S WEST CAPITAL FUNDING, INC. By________________________ Title: EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to U S WEST Capital Funding, Inc. (the "Borrower") Pursuant to Section 2.03 of the Five-Year Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks parties thereto, the other agents named therein and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [10:30 A.M.] [9:15 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By______________________________ Authorized Officer EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent") Re: Money Market Quote to U S WEST Capital Funding, Inc. (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** - ---------- * As specified in the related Invitation.
(notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Five-Year Credit Agreement dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the Banks listed on the signature pages thereof, the other agents named therein and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer - ---------- ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 7 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY AND THE BORROWER To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Gentlemen and Ladies: I have acted as counsel for U S WEST, Inc., USW-C, Inc. and U S WEST Capital Funding, Inc., in connection with the Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998, among them, the banks listed on the signature pages thereof, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the instruction of the client pursuant to Section 3.01(b) of the Credit Agreement. I am familiar with the proceedings taken by the Company, USW-C, Inc. and the Borrower in connection with the authorization, execution and delivery of the Credit Agreement and the Notes, and I have examined such documents, certificates, and such other matters of fact and questions of law as I have deemed relevant under the circumstances to express an informed opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Company and USW-C, Inc. are each corporations duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and each has all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. 2. The execution, delivery and performance by the Company, USW-C, Inc. and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental body, agency or official. 3. The execution, delivery and performance by the Company, USW-C, Inc. and the Borrower of the Credit Agreement and by the Borrower of the Notes will not (i) result in a breach or violation of, conflict with, or constitute a default under, the articles of incorporation or bylaws of such Person or any material law or regulation or any material order, judgment, agreement or instrument to which such Person is a party or by which such Person is bound, or (ii) result in the creation or imposition of any Lien on any asset of such Person. 4. The Credit Agreement constitutes a valid and binding agreement of the Company, USW-C, Inc. and the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 5. To my knowledge, and except as disclosed in the Company's 1997 Form 10-K (as amended by Form 10-K/A) as filed with the Securities and Exchange Commission, there is no action, suit or proceeding pending against or threatened against, or, to the best of my knowledge affecting the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement or the Notes. 6. The Borrower and each of the Company's other corporate Significant Subsidiaries are corporations validly existing and in good standing under the laws of their jurisdictions of incorporation, and have all corporate powers and all governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted, except where the absence of any such license, authorization, qualification, consent or approval would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries considered as one enterprise. For purposes of my opinion set forth in numbered paragraph 4 above, I have assumed that the laws of the State of New York, which are stated to govern the Credit Agreement and the Notes, are the same as the laws of the State of Colorado. In rendering the opinions set forth herein, I have assumed that the Credit Agreement and the Notes will conform to the specimens thereof examined by me, that the signatures on all documents examined by me were genuine, and the authenticity of all documents submitted to me as originals or as copies of originals, assumptions which I have not independently verified. This opinion is furnished by me as counsel for the Company and the Borrower and is solely for your benefit and the benefit of any Assignee under the Credit Agreement. Without my prior written consent, this opinion may not be relied upon by you or any Assignee in any other context or by any other person. This opinion may not be quoted, in whole or in part, or copies thereof furnished, to any other person without my prior written consent, except that you may furnish copies hereof (a) to your auditors and attorneys, (b) to any state or federal authority having regulatory jurisdiction over you or the Company or the Borrower, (c) pursuant to order or legal process of any court or governmental agency, (d) in connection with any legal action to which you are a party arising out of the transactions contemplated by the Credit Agreement, and (e) to any Participant or proposed Participant in the Commitment of any Bank. This opinion is limited to the present laws of the State of Colorado and the General Corporation Law of the State of Delaware, to present judicial interpretations thereof, and to the facts as they presently exist, and I assume no responsibility as to the applicability or effect of the laws of any other jurisdiction. In rendering this opinion, I assume no obligation to revise or supplement this opinion should the present laws of the State of Colorado or the General Corporation Law of the State of Delaware be changed by legislative action, judicial decision, or otherwise. Very truly yours, Thomas O. McGimpsey EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT To the Banks and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the Five-Year Credit Agreement (the "Credit Agreement") dated as of May 8, 1998 among U S WEST Capital Funding, Inc., U S WEST, Inc., USW-C, Inc., the banks listed on the signature pages thereof (the "Banks"), the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that, assuming that the execution, delivery and performance by the Company and the Borrower of the Credit Agreement and by the Borrower of the Notes are within such Person's corporate powers and have been duly authorized by all necessary corporate action, the Credit Agreement constitutes a valid and binding agreement of the Company and the Borrower and the Notes constitute valid and binding obligations of the Borrower. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, __ 199_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), U S WEST, Inc. (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Five-Year Credit Agreement dated as of May 8, 1998 among the Company, USW-C, Inc., the Borrower named therein, the Assignor and the other Banks party thereto, as Banks, the other agents named therein and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.3 It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees to that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Company and the Agent. This Agreement is conditioned upon the consent of the Company and the Agent pursuant to Section 10.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 10.06(c) the Company agrees to cause the Borrower to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility - -------- 3 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. with respect to, the solvency, financial condition, or statements of the Company or the Borrower, or the validity and enforceability of the obligations of the Company or the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By Title: [ASSIGNEE] By Title: [U S WEST, INC. By Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title:] EXHIBIT H EXTENSION AGREEMENT US WEST Capital Funding, Inc. US WEST, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 60 Wall Street New York, NY 10260 Gentlemen: The undersigned hereby agree to extend the Revolving Credit Period under the Five-Year Credit Agreement dated as of May 8, 1998 among US WEST Capital Funding, Inc., US WEST, Inc., USW-C, Inc., the Banks listed therein, the other agents named therein and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Credit Agreement") for 364 days to ____________ __, ____. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. It may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK]1 By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. [NAME OF BANK]1 By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: [NAME OF BANK]* By Title: - -------- 1 Insert names of Banks which have responded affirmatively in accordance with Section 2.01(b) of the Credit Agreement. Agreed and accepted: US WEST CAPITAL FUNDING, INC. By Title US WEST, INC. By Title MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By Title EX-12 6 EXHIBIT 12.1 Exhibit 12 U S WEST, Inc. RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Dollars in Millions)
Quarter Ended 3/31/98 3/31/97 - ------------------------------------------ -------- -------- Income before income taxes and extraordinary item $ 365 $ 400 Interest expense (net of amounts capitalized) 247 278 Interest factor on rentals (1/3) 25 25 Equity losses in unconsolidated ventures (less than 50% owned) 75 105 Guaranteed minority interest expense 22 22 -------- -------- Earnings $ 734 $ 830 Interest expense $ 263 $ 288 Interest factor on rentals (1/3) 25 25 Guaranteed minority interest expense 22 22 Preferred stock dividends (pre-tax equivalent) 23 22 -------- -------- Fixed charges $ 333 $ 357 Ratio of earnings to combined fixed charges and preferred stock dividends 2.20 2.32 - ------------------------------------------ -------- --------
EX-12 7 EXHIBIT 12.2 Exhibit 12 U S WEST, Inc. RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Millions)
Quarter Ended 3/31/98 3/31/97 - ------------------------------------------ -------- -------- Income before income taxes and extraordinary item $ 365 $ 400 Interest expense (net of amounts capitalized) 247 278 Interest factor on rentals (1/3) 25 25 Equity losses in unconsolidated ventures (less than 50% owned) 75 105 Guaranteed minority interest expense 22 22 -------- -------- Earnings $ 734 $ 830 Interest expense $ 263 $ 288 Interest factor on rentals (1/3) 25 25 Guaranteed minority interest expense 22 22 -------- -------- Fixed charges $ 310 $ 335 Ratio of earnings to fixed charges 2.37 2.48 - ------------------------------------------ -------- --------
EX-12 8 EXHIBIT 12.3 Exhibit 12 U S WEST Financial Services, Inc. RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Thousands)
Quarter Ended 3/31/98 3/31/97 - ------------------------------------------ -------- -------- Income before income taxes $ 1,025 $ 6,671 Interest expense 7,729 5,424 Interest factor on rentals (1/3) 2 21 -------- -------- Earnings $ 8,756 $ 12,116 Interest expense $ 7,729 $ 5,424 Interest factor on rentals (1/3) 2 21 -------- -------- Fixed charges $ 7,731 $ 5,445 Ratio of earnings to fixed charges 1.13 2.23 - ------------------------------------------ -------- --------
A Termination Agreement and Guarantee was entered into on June 24, 1994 between U S WEST, Inc. and U S WEST Capital Corporation and U S WEST Financial Services, Inc. (USWFS). The Agreement terminates the Support Agreement dated January 5, 1990 whereby U S WEST, Inc. agreed to provide financial support to USWFS. The Agreement provides replacement financial support in the form of a direct guarantee by U S WEST of all outstanding indebtedness of USWFS. EX-27 9 FDS --
5 0000732718 U S WEST, Inc. 1,000,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 521 0 2,053 0 202 3,517 39,791 21,135 39,880 6,447 13,178 1,180 923 10,871 (442) 39,880 3,967 3,967 0 0 3,152 0 247 365 153 212 0 0 0 212 0.72 0.71
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