-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Kb0jDQ+j8eCaoWMuPiHMHpJZSO6yCWjjmDAmG+a/CFiZALr4tXR6LNqOD//8orx1 rtt9U/nQyu4lRTcvVXW7kA== 0000912057-94-001185.txt : 19940331 0000912057-94-001185.hdr.sgml : 19940331 ACCESSION NUMBER: 0000912057-94-001185 CONFORMED SUBMISSION TYPE: 424B4 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US WEST INC CENTRAL INDEX KEY: 0000732718 STANDARD INDUSTRIAL CLASSIFICATION: 4813 IRS NUMBER: 840926774 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B4 SEC ACT: 33 SEC FILE NUMBER: 033-50047 FILM NUMBER: 94519255 BUSINESS ADDRESS: STREET 1: 7800 E ORCHARD RD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3037936629 MAIL ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US WEST CAPITAL FUNDING INC CENTRAL INDEX KEY: 0000794987 STANDARD INDUSTRIAL CLASSIFICATION: 6189 IRS NUMBER: 841028672 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B4 SEC ACT: 33 SEC FILE NUMBER: 033-50047-01 FILM NUMBER: 94519256 BUSINESS ADDRESS: STREET 1: 7800 E ORCHARD RD STE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3037936629 MAIL ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 424B4 1 424B4 FILED PURSUANT TO RULE 424b(4) FILE NO. 33-50047 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 22, 1993 (U S WEST Logo) 4,600,000 SHARES ----------- U S WEST, INC. COMMON STOCK (WITHOUT PAR VALUE) ------------- The last reported sale price of the Common Stock on the New York Stock Exchange on Match 30, 1994 was $39.875 per share. -------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNTS COMPANY * Per Share................................. $39.875 $0 $39.875 Total..................................... $183,425,000 $0 $183,425,000 * Before deducting estimated expenses of $100,000 payable by the Company. Proceeds to the Company will be in the form of a reduction of the Company's liability with respect to the U S WEST Benefit Assurance Trust.
-------------- The date of this Prospectus Supplement is March 30, 1994. ISSUANCE OF SHARES. U S WEST is issuing 4,600,000 shares of its Common Stock, no par value, directly to the U S WEST Benefit Assurance Trust for purposes of funding the post-retirement medical benefits of certain employees. The issuance of these shares will reduce the Company's liability with respect to the U S WEST Benefit Assurance Trust by approximately $183,325,000. This liability is included in the Company's financial statements in accordance with Statement of Financial Accounting Standard No. 106. EXPERTS. The consolidated financial statements and financial statement schedules included in U S WEST's Annual Report on Form 10-K for the year ended December 31, 1993 are incorporated by reference in reliance on the report of Coopers & Lybrand, independent certified public accountants, given upon the authority of that firm as experts in accounting and auditing. 2 PROSPECTUS (U S WEST Logo) $1,500,000,000 ----------- U S WEST, INC. COMMON STOCK AND PREFERRED STOCK ----------- U S WEST CAPITAL FUNDING, INC. DEBT SECURITIES UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, BY U S WEST, INC. --------- U S WEST, Inc. ("U S WEST") from time to time may offer shares of its Common Stock without par value (the "Common Stock") or Preferred Stock having a par value of $1.00 per share (the "Preferred Stock" and, together with the Common Stock, the "Equity Securities") on terms to be determined at the time of the offering. U S WEST Capital Funding, Inc., a wholly-owned subsidiary of U S WEST ("Capital Funding"), from time to time may offer its notes, debentures, or other debt securities (the "Debt Securities"), which will be unconditionally guaranteed as to payment of principal, premium, if any, and interest by U S WEST (the "Guaranties"). The Equity Securities and the Debt Securities (collectively, the "Securities") offered pursuant to this Prospectus may be issued in one or more issuances or series and will be limited to $1,500,000,000 aggregate public offering price. Certain specific terms of the particular Securities will be set forth in a supplement to this Prospectus (the "Prospectus Supplement") which will be delivered together with this Prospectus, including, where applicable, in the case of Preferred Stock, the specific title and stated value, any dividend, liquidation, redemption, voting and other rights, the initial public offering price and other special terms, and, in the case of the Debt Securities, the specific designation, aggregate principal amount, denomination, maturity, premium, if any, the rate (which may be fixed or variable), time and method of calculating payment of interest, if any, the place or places where principal of, premium, if any, and interest, if any, on such Debt Securities will be payable, optional or mandatory redemption and sinking fund provisions, if any, and any other specific terms in respect of the offering and sale of the Securities. The Securities may be offered and sold through one or more underwriters, directly by U S WEST or Capital Funding, or through dealers or agents. The names of any underwriters, dealers or agents involved in the distribution of the Securities in respect of which this Prospectus is being delivered, and any applicable discounts, commissions or allowances, will be set forth in the applicable Prospectus Supplement. See "Plan of Distribution" for possible indemnification arrangements for any underwriters, dealers or agents. U S WEST's Common Stock is listed on the New York Stock Exchange (the "NYSE") and the Pacific Stock Exchange under the symbol "USW." Unless otherwise provided in the Prospectus Supplement relating thereto, the Preferred Stock and the Debt Securities will not be listed on any securities exchange. -------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------- THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. -------------- The date of this Prospectus is September 22, 1993. No dealer, salesperson or any other individual has been authorized to give any information or to make any representation other than those contained or incorporated by reference in this Prospectus or any accompanying Prospectus Supplement and, if given or made, such information or representation must not be relied upon as having been authorized. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the Securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of U S WEST or Capital Funding since the date hereof. -------------- AVAILABLE INFORMATION U S WEST is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information concerning U S WEST can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements and other information concerning U S WEST may also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104, the securities exchanges on which shares of U S WEST Common Stock are listed. U S WEST and Capital Funding have filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents which have been filed by U S WEST with the Commission (File No. 1-8611) are incorporated herein by reference: (i) Annual Report on Form 10-K for the year ended December 31, 1992, (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, (iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, (iv) Current Reports on Form 8-K dated January 8, 1993, January 21, 1993, April 19, 1993, May 24, 1993, May 28, 1993, June 1, 1993, June 28, 1993, July 22, 1993, August 5, 1993, (as amended by Form 8-KA dated August 11, 1993), August 20, 1993 (the Current Report dated August 20, 1993 includes audited financial statements that have been reclassified to reflect the discontinuance by U S WEST of the operations of its Capital Assets segment, and a Management's Discussion and Analysis of Financial Condition and Results of Operations that has been restated for the same purpose) and September 17, 1993, (v) the description of the Common Stock of U S WEST contained in Item 11 of U S WEST's Registration Statement on Form 10, filed with the Commission on November 16, 1983, as amended, and (vi) the description of the Preferred Stock purchase rights as set forth in Item 1 of U S WEST's Registration Statement on Form 8-A, filed with the Commission on April 18, 1989. All documents filed by U S WEST pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date any such document is filed. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein) modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. U S WEST AND CAPITAL FUNDING WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO THE TREASURER, U S WEST, INC., 7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111 (TELEPHONE NUMBER (303) 793-6500). -------------- 2 U S WEST, INC. U S WEST was incorporated in 1983 under the laws of the State of Colorado and has its principal executive offices at 7800 East Orchard Road, Englewood, Colorado 80111 (telephone number (303) 793-6500). It is a diversified global communications company whose businesses include telecommunications, information services and marketing services. Its principal operating subsidiary provides communication services and data solutions to more than 25 million residential and business customers in 14 western and midwestern states. U S WEST CAPITAL FUNDING, INC. Capital Funding is a wholly-owned subsidiary of U S WEST and was incorporated under the laws of the State of Colorado in June 1986. Capital Funding was incorporated to provide financing to U S WEST and its affiliates through the issuance of indebtedness guaranteed by U S WEST. The principal executive offices of Capital Funding are located at 7800 East Orchard Road, Englewood, Colorado 80111 (telephone number (303) 793-6500). RECENT DEVELOPMENTS SALE OF ASSETS OF U S WEST FINANCIAL SERVICES, INC. On July 28, 1993, U S WEST's wholly owned corporate finance subsidiary, U S WEST Financial Services, Inc. ("USWFS"), entered into an agreement with NationsBank pursuant to which NationsBank will purchase from USWFS assets representing approximately $2,300,000,000 of USWFS's finance receivables (on a consolidated basis). The closing of the acquisition, which is expected to occur in the fourth quarter of this year, is subject to a number of conditions, including, among other things, the receipt by the parties of necessary regulatory approvals. ACQUISITION OF PARTNERSHIP INTEREST IN TIME WARNER ENTERTAINMENT COMPANY, L.P. On May 16, 1993, U S WEST entered into an Admission Agreement (the "Agreement") with Time Warner Entertainment Company, L.P. ("TWE") providing for the acquisition (the "Acquisition") by U S WEST of a 25.51% residual limited partnership interest in TWE for an aggregate purchase price of $2.5 billion (plus an amount equal to interest at the rate of 10% per annum from June 30, 1993 to the closing of the Acquisition), payable $1.5 billion in cash and $1 billion in the form of a four-year market rate, interest-bearing promissory note (each subject to the interest adjustment as described above). TWE is a Delaware limited partnership engaged in the ownership and operation of filmed entertainment, cable television and cable television programming businesses previously owned and operated by Time Warner, Inc. At the closing, U S WEST will also receive an option to increase its residual limited partnership interest from 25.51% to 31.84%. The option will be exercisable, in whole or in part, between the fifth and eleventh anniversaries of the closing of the Acquisition upon the obtainment of certain earnings thresholds for an aggregate cash exercise price of $1.25 billion to $1.8 billion (depending upon the year of exercise). Either U S WEST or TWE may elect that the exercise price of such option be paid by surrendering a portion of the limited partnership interest receivable upon exercise of such option. The closing of the Acquisition is subject to, among other conditions, the receipt of necessary regulatory and other third party approvals. In addition, the closing is subject to the completion by TWE of certain actions necessary to ensure compliance with the Modification of Final Judgment which restricts the kinds of activities and practices in which U S WEST and its affiliates may engage. There can be no assurance that such conditions to closing will be satisfied. The Agreement terminates by its terms if the closing does not occur by May 16, 1994; U S WEST expects the closing to occur by the end of 1993. Under the Agreement, TWE and U S WEST have agreed that TWE will use its best efforts to upgrade a substantial portion of its cable systems to "Full Service Network"-TM- capacity over the five years following the closing of the Acquisition. As cable systems are designated for such upgrade and after any 3 required approvals are obtained, US WEST and TWE will share joint control over those systems through a 50-50 management committee. In consideration for its expertise and participation in the management of the Full Service Network-TM-, U S WEST will receive a fee of $130 million payable over five years. ISSUANCE OF COMMON STOCK IN CONNECTION WITH SETTLEMENT OF ROSENBAUM V. U S WEST In connection with the settlement (the "Settlement") of certain class action litigation brought against U S WEST and certain individual defendants in ROSENBAUM V. U S WEST, INC. in the United States District Court for the District of Colorado (the "Court"), it is contemplated that U S WEST will issue to certified class members in such litigation certain non-transferable rights (the "Rights") to purchase shares of Common Stock directly from U S WEST on a commission-free basis at a 3% discount from the average of the high and low trading prices of such stock on the NYSE on a trading day to be designated in accordance with the Settlement (the "Settlement Day"). Class members eligible to purchase shares pursuant to the Settlement will be limited to those persons or entities who purchased more than twenty shares of Common Stock during the period from February 15, 1990 through March 6, 1992 (the "Class Period") and who do not opt out of the settlement class. The number of shares of Common Stock that any such class member will be entitled to purchase will be determined by dividing (a) the product of (i) the average of the high and low trading prices of the Common Stock, less a 3% discount, on the NYSE on the day the Court's order approving the Settlement becomes final, and (ii) 1/10 of the total number of shares purchased by such member during the Class Period by (b) the average of the high and low trading prices of the Common Stock on the NYSE, less a 3% discount, on the Settlement Day (which is expected to be approximately 60 days after the Court's order approving the Settlement becomes final). Class members who purchased twenty or fewer shares during the Class Period and who do not opt out of the settlement class will be entitled to receive cash in lieu of Rights. The Settlement is subject to approval by the Court and certain other conditions. A hearing with respect to the fairness of the Settlement is expected to be held in November 1993, and if the Settlement is approved and the other conditions are satisfied, U S WEST anticipates that shares of Common Stock will be issued to participating class members in the first quarter of 1994. However, because the Settlement is subject to approval of the Court and certain other conditions, there can be no assurance that any Rights or shares of Common Stock will be issued. In addition, the actual number of shares of Common Stock issuable on exercise of the Rights cannot be determined with certainty because such number of shares will be determined based on future market prices, which may fluctuate. The issuance of shares of Common Stock in connection with the Settlement may, among other things, have a dilutive effect on the shares of Common Stock outstanding at the time of such issuance, including shares of Common Stock issued in connection with the offerings contemplated herein prior to the issuance of the shares upon exercise of Rights. U S WEST estimates that approximately 240,000,000 shares of Common Stock were purchased during the Class Period by class members purchasing more than twenty shares during such period. Based on this estimate, and assuming that the average of the high and low trading prices of the Common Stock on the NYSE on both the day the Court's order approving the Settlement becomes final and the Settlement Day equals $45.00 (the average of the high and low trading prices of Common Stock on the NYSE on August 19, 1993), if the Rights are fully exercised, approximately 24,000,000 shares of Common Stock would be issued and the net proceeds from such issuance, after payment of estimated expenses, would be approximately $1,043,600,000. U S WEST cannot predict how many, if any, Rights will be exercised for shares of Common Stock. U S WEST intends to use the net proceeds from the issuance of the shares of Common Stock in the Settlement for the same purposes as described for Equity Securities in "Use of Proceeds" below. USE OF PROCEEDS U S WEST intends to use the net proceeds from the sale of the Equity Securities for general corporate purposes, including financing the Acquisition referred to above in "Recent Developments," investments in and advances to U S WEST's subsidiaries, other possible acquisitions, the reduction of short-term and long-term borrowings and other business opportunities. 4 Capital Funding will apply the net proceeds from the sale of the Debt Securities to its general funds to be used for loans to U S WEST and affiliates of U S WEST, which will in turn use the funds for general corporate purposes, including financing for the Acquisition, other possible acquisitions, the reduction of short-term and long-term borrowings and other business opportunities. The amount and timing of these loans will depend upon the future growth and financing requirements of U S WEST and its affiliates. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges of U S WEST for the periods indicated. For the purpose of calculating this ratio, earnings consist of income before income taxes and fixed charges (which earnings have been restated to reflect the classification of U S WEST's capital assets segment as a discontinued operation). Fixed charges include interest on indebtedness and the portion of rentals representative of the interest factor.
SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER 31, 30, - ------------------------------------ ------------ 1988 1989 1990 1991 1992 1992 1993 - ---- ---- ---- ---- ---- ---- ---- 4.17 3.79 4.07 3.11 (a) (a) 4.35 - ------------------------ (a) U S WEST reported a net loss of $614 million in 1992, which includes a charge of $1.793 billion for the transition effect of certain accounting changes related to retirement and post-employment benefits. Excluding such charge, this ratio would be 3.85 for the year ended December 31, 1992 and 4.00 for the six months ended June 30, 1992.
DESCRIPTION OF COMMON STOCK GENERAL U S WEST's authorized capital stock consists of 2,000,000,000 shares of Common Stock without par value and 50,000,000 shares of Preferred Stock having a par value of $1.00 per share. At the close of business on July 31, 1993, there were 416,625,194 shares of Common Stock outstanding and no shares of Preferred Stock outstanding. The following summary does not purport to be complete and is subject in all respects to the applicable provisions of the Colorado Corporation Code and U S WEST's Articles of Incorporation (the "Articles of Incorporation"). COMMON STOCK All holders of Common Stock have full voting rights and are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders. The Board of Directors of U S WEST is classified into three classes of approximately equal size, one-third elected each year. Shareholders do not have the right to cumulate votes in the election of directors and do not have a right of redemption or any preferential right of subscription for any securities of U S WEST, except as described below under "Rights Plan." There is no sinking fund related to the Common Stock. All outstanding shares of Common Stock are, and all shares of Common Stock offered by any Prospectus Supplement will, when issued, be, fully paid and nonassessable. Subject to preferences that may be applicable to any shares of Preferred Stock outstanding at the time, holders of Common Stock are entitled to dividends when and as declared by the Board of Directors from funds legally available therefor and are entitled, in the event of liquidation, to share ratably in all assets remaining after payment of liabilities. CHANGE OF CONTROL U S WEST's Articles of Incorporation include provisions designed to prevent the use of certain tactics in connection with a potential takeover of U S WEST. Article Nine of U S WEST's Articles of Incorporation includes a "fair price provision" which requires the affirmative vote of 80% of the outstanding shares of capital stock entitled to vote generally in the election of directors to approve certain 5 business combinations (including certain mergers, security issuances, recapitalizations, liquidations and the sale, lease or transfer of a substantial part of U S WEST's assets) involving U S WEST or a subsidiary and an owner of 10% or more of the outstanding Common Stock ("related person"), unless either (i) such business combination is approved by a majority of the directors unaffiliated with the related person or (ii) the shareholders receive a "fair price" for their holdings and other procedural requirements are met. A "fair price" is an amount at least equal to the greater of (i) the highest price per share paid by the related person for any shares acquired by it when it became a related person or within two years prior to the announcement of the proposed business combination, or (ii) the highest market value per share on the date of such announcement or the date the related person became such. Except as provided in Article Nine, the vote of a majority of the outstanding shares of capital stock entitled to vote generally in the election of directors is necessary to approve a plan of merger. Article Nine also provides that a vote of 80% of the outstanding shares of capital stock entitled to vote generally in the election of directors is necessary to remove a member of the Board of Directors, and that the Bylaws may be amended either by a vote of 80% of such outstanding shares or by the affirmative vote of two-thirds of the members of the Board of Directors. Article Nine may be amended by a vote of 80% of the outstanding shares unless the amendment was approved by two-thirds of the Board of Directors, in which case the amendment may be approved by a vote of sixty-six and two-thirds percent of the outstanding shares. RIGHTS PLAN On April 7, 1989, the Board of Directors declared a dividend of one preferred stock purchase right (the "Preferred Stock Purchase Right") for each share of Common Stock, payable to holders of record of Common Stock on or after April 19, 1989. Pursuant to the Rights Agreement dated as of April 7, 1989, one Preferred Stock Purchase Right automatically attaches to and trades together with each share of Common Stock issued by U S WEST, and will, therefore, attach to each share of Common Stock offered hereby. The Preferred Stock Purchase Rights will expire on April 6, 1999 unless redeemed earlier and will not be exercisable or transferable separately from the shares of Common Stock to which they are attached until the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of Common Stock, other than pursuant to an offer for all shares of Common Stock which the independent directors of U S WEST determine to be fair to and in the best interests of U S WEST and its shareholders ("Acquisition Trigger Date") or (ii) 10 business days following a public announcement of the commencement of a tender offer or exchange offer that would result in the offeror beneficially owning 30% or more of the outstanding shares of Common Stock ("Tender Offer Trigger Date"). At any time prior to an Acquisition Trigger Date the Preferred Stock Purchase Rights are redeemable in whole but not in part by the Board of Directors for $0.005 per Preferred Stock Purchase Right. The holder of a Preferred Stock Purchase Right has no rights as a shareholder of U S WEST unless and until such Preferred Stock Purchase Right is exercised. After an Acquisition Trigger Date, the Preferred Stock Purchase Rights may be traded independently from the Common Stock, and each Preferred Stock Purchase Right, except for those held by the Acquiring Person (which Preferred Stock Purchase Rights will be void), will entitle the holder thereof to acquire shares of Common Stock (or, in certain circumstances, property or other securities) with a market value equal to two times the exercise price of the Preferred Stock Purchase Right. If, after an Acquisition Trigger Date, (i) U S WEST is acquired in a merger or other business combination transaction in which U S WEST is not the surviving corporation (other than a merger which follows an offer approved by independent directors as described above) or (ii) more than 50% of U S WEST's assets or earning power is sold or transferred (other than in transactions in the ordinary course of business), each holder of a Preferred Stock Purchase Right, except for those Preferred Stock 6 Purchase Rights held by the Acquiring Person (which Preferred Stock Purchase Rights will be void), will thereafter have the right to acquire, upon exercise thereof, shares of common stock of the acquiring company having a value equal to two times the exercise price of the Preferred Stock Purchase Right. After a Tender Offer Trigger Date, the Preferred Stock Purchase Rights may be traded independently of the Common Stock, but remain redeemable by the Board of Directors until an Acquisition Trigger Date. This provision allows U S WEST to distribute the Preferred Stock Purchase Rights to shareholders in circumstances when an Acquisition Trigger Date is likely to occur. The Preferred Stock Purchase Rights have certain anti-takeover effects. The Preferred Stock Purchase Rights will cause substantial dilution to a person or group that attempts to acquire U S WEST unless the acquisition is conditional on a substantial number of Preferred Stock Purchase Rights being acquired. The Preferred Stock Purchase Rights, however, should not affect any prospective offeror willing to make an offer at an equitable price and which is otherwise in the best interests of U S WEST and its shareholders, as determined by the Board of Directors. The Preferred Stock Purchase Rights should not interfere with any merger or other business combination approved by the Board of Directors since the Board of Directors may, at its option, redeem the Preferred Stock Purchase Rights at any time until an Acquisition Trigger Date. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is Boston Financial Data Services, Inc., The BFDS Building, Two Heritage Drive, Quincy, Massachusetts 02171. DESCRIPTION OF PREFERRED STOCK GENERAL The following description of the terms of the Preferred Stock sets forth certain general terms and provisions of the Preferred Stock to which any Prospectus Supplement may relate. The particular terms of the Preferred Stock offered by any Prospectus Supplement and the extent, if any, to which such general terms do not apply to such Preferred Stock will be described in such Prospectus Supplement. The description of certain provisions of the Preferred Stock set forth below and in any Prospectus Supplement does not purport to be complete and is subject to and qualified in its entirety by reference to the Articles of Incorporation and to any resolution that may be adopted by the Board of Directors of U S WEST prescribing the designation, powers, and relative rights and preferences of the applicable series of the Preferred Stock (a "Resolution"). The Resolution, following its adoption by the Board of Directors of U S WEST, will be incorporated into a statement which will be filed with the Secretary of State of the State of Colorado prior to the issuance of the related series of Preferred Stock. Under the Articles of Incorporation and Colorado law, the Board of Directors of U S WEST has the authority, without further shareholder action, to provide for the issuance from time to time of a maximum of 50,000,000 shares of Preferred Stock, including shares issued or reserved for issuance, in one or more series and with such terms and at such times and for such consideration as the Board of Directors of U S WEST may determine. As of August 20, 1993, there were no outstanding shares of Preferred Stock. The Preferred Stock shall have the dividend, liquidation, redemption and voting rights set forth below unless otherwise specified in the applicable Prospectus Supplement. Reference is made to the Prospectus Supplement relating to the particular series of Preferred Stock offered thereby for specific terms. The authority of the Board of Directors of U S WEST includes the determination of the following with respect to the shares of any series of preferred stock: (i) the number of shares constituting that series and the distinctive designation of that series; (ii) the dividend rate on the shares of that series, whether dividends shall be cumulative, and if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) whether shares of that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) the stated value thereof; (v) whether or not the shares of that series shall be redeemable, and if 7 so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (vii) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the affairs of U S WEST, and the relative rights of priority, if any, of payment of shares of that series; and (viii) any other relative rights, preferences and limitations of that series as well as other variations in the relative rights and preferences as among different series. The Preferred Stock will, when issued, be fully paid and nonassessable. Unless otherwise specified in the Prospectus Supplement relating to a particular series of Preferred Stock, each series of Preferred Stock will rank senior to U S WEST's Common Stock. The holders of Preferred Stock will have no preemptive rights to subscribe for any additional securities which may be issued by U S WEST. The transfer agent, dividend disbursing agent and registrar for each series of Preferred Stock to be issued will be specified in the applicable Prospectus Supplement. DIVIDENDS The holders of Preferred Stock of each series will be entitled to receive, when, as and if declared by the Board of Directors of U S WEST, out of funds legally available therefor, cash dividends at such rates and on such dates as will be set forth in the Prospectus Supplement relating to such series. Such rates may be fixed or variable or both. If variable, the formula used for determining the dividend rate for each dividend period will be set forth in the Prospectus Supplement. Dividends will be payable to the holders of record of the applicable series of Preferred Stock as they appear in the stock registry of U S WEST on such record dates as will be fixed by the Board of Directors of U S WEST or in a Resolution. Dividends on any series of Preferred Stock may be cumulative ("Cumulative Preferred Stock") or noncumulative ("Noncumulative Preferred Stock"), as provided in the applicable Prospectus Supplement. If the Board of Directors of U S WEST fails to declare a dividend payable on a dividend payment date on any series of Noncumulative Preferred Stock, then the holders of such series of Preferred Stock will have no right to receive a dividend in respect of the dividend period ending on such dividend payment date, and U S WEST will have no obligation to pay the dividend accrued for such period, whether or not dividends on such series or on any securities ranking junior with respect to dividend payments to such series are declared payable on any future dividend payment dates. No full dividends will be declared or paid or set apart for payment on any stock of U S WEST ranking, as to dividends, on a parity with or junior to the Preferred Stock for any period unless full dividends with respect to such period on the Preferred Stock of each series (and any accumulated dividends on Cumulative Preferred Stock) have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment. When dividends with respect to such period are not paid in full upon any series of Preferred Stock and any other preferred stock of U S WEST ranking on a parity, as to dividends, with the Preferred Stock, all dividends declared or made with respect to such period upon the Preferred Stock of each series and any other preferred stock of U S WEST ranking on a parity, as to dividends, with the Preferred Stock shall be declared pro rata so that the amount of dividends declared per share on the Preferred Stock of each series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share (which, in the case of Noncumulative Preferred Stock, shall not include any accumulation in respect of unpaid dividends for prior dividend periods) on shares of each series of Preferred Stock and such other preferred stock bear to each other. Except as provided in the preceding sentence, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, the Common Stock or any other stock of U S WEST ranking junior to the Preferred Stock as to dividends and upon liquidation) may be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or any other stock of U S WEST ranking junior to or on a parity with the Preferred Stock as to dividends or upon liquidation. No Common Stock or any other stock of U S WEST ranking junior to or on a parity with the Preferred Stock as to dividends or upon liquidation 8 may be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by U S WEST (except by conversion into or exchange for stock of U S WEST ranking junior to the Preferred Stock as to dividends and upon liquidation) unless, in each case, the full dividends on each series of the Preferred Stock (including any accumulated dividends on Cumulative Preferred Stock) shall have been paid or declared and set aside for payment. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on any series of Preferred Stock which may be in arrears. REDEMPTION A series of Preferred Stock may be redeemable, in whole or in part, at the option of U S WEST, and may be subject to mandatory redemption pursuant to a sinking fund or otherwise, in each case upon terms, at the times and at the redemption prices set forth in the Prospectus Supplement relating to such series. Shares of Preferred Stock redeemed by U S WEST will generally be restored to the status of authorized but unissued shares of preferred stock. The Prospectus Supplement relating to a series of Preferred Stock which is subject to mandatory redemption will specify the number of shares of such series of Preferred Stock which shall be redeemed by U S WEST in each year commencing after a date to be specified, at a redemption price per share to be specified, together with an amount equal to all accrued and unpaid dividends thereon (including any accumulated dividends on cumulative Preferred Stock) to the date of redemption. The redemption price may be payable in cash, in capital stock, in cash received from the net proceeds of the issuance of capital stock of U S WEST or in other property, as specified in the Prospectus Supplement relating to such series of Preferred Stock. If fewer than all of the outstanding shares of any series of Preferred Stock are to be redeemed, the number of shares to be redeemed will be determined by the Board of Directors of U S WEST and such shares shall be redeemed pro rata (to the nearest whole share per holder) among the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustment to avoid redemption of fractional shares). Notwithstanding the foregoing, if any dividends, including any applicable accumulation, on the Preferred Stock of any series are in arrears, no shares of Preferred Stock of such series may be redeemed unless all outstanding Preferred Stock of such series are simultaneously redeemed, and U S WEST may not purchase or otherwise acquire any shares of Preferred Stock of such series; provided, however, that the foregoing will not prevent the purchase or acquisition of the Preferred Stock of such series pursuant to a purchase or exchange offer made on the same terms to all holders of such series of Preferred Stock. Notice of redemption will be given by mailing the same to each record holder of the shares to be redeemed, not less than 30 nor more than 60 days prior to the date fixed for redemption thereof, to the respective addresses of such holders as the same appears in the stock registry of U S WEST. Each such notice will state: (i) the redemption date; (ii) the number of shares and series of Preferred Stock to be redeemed; (iii) the redemption price; (iv) the place or places where certificates for such Preferred Stock are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. If fewer than all shares of any series of Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares to be redeemed from such holder. If notice of redemption has been given, from and after the redemption date for the shares of the series of Preferred Stock called for redemption (unless default shall be made by U S WEST in providing money for the payment of the redemption price of the shares so called for redemption), dividends on the shares of Preferred Stock so called for redemption cease to accrue and such shares will no longer be deemed to be outstanding, and all rights of the holders thereof as shareholders of U S WEST (except the right to receive the redemption price) will cease. Upon surrender in accordance with such notice of the certificates representing any shares so redeemed (properly endorsed or assigned for transfer, if the 9 Board of Directors of U S WEST shall so require and the notice shall so state), the redemption price set forth above will be paid out of funds provided by U S WEST. If fewer than all of the shares represented by any such certificate are redeemed, a new certificate will be issued representing the unredeemed shares without cost to the holder thereof. LIQUIDATION In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of U S WEST, the holders of shares of each series of Preferred Stock and any other preferred stock ranking on a parity with such series of Preferred Stock upon liquidation will be entitled to receive out of the assets of U S WEST available for distribution to shareholders, before any distribution of assets is made to holders of the Common Stock or any other class or series of stock of U S WEST ranking junior to such series of Preferred Stock upon liquidation, liquidating distributions in the amount set forth in the Prospectus Supplement relating to such series of Preferred Stock plus an amount equal to the sum of all accrued and unpaid dividends (whether or not earned or declared) for the then-current dividend period and, as to Cumulative Preferred Stock, for all dividend periods prior thereto. Neither the sale of all or substantially all of the property and assets of U S WEST, nor the merger or consolidation of U S WEST into or with any other corporation nor the merger or consolidation of any other corporation into or with U S WEST will be deemed to be a dissolution, liquidation or winding up of the affairs of U S WEST. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of U S WEST, the assets of U S WEST available for distribution to the holders of the Preferred Stock of any series and any other shares of stock of U S WEST ranking, as to any such distribution, on a parity with such series of Preferred Stock are insufficient to pay in full all amounts to which such holders are entitled, no such distribution will be made on account of any shares of any other series of Preferred Stock or other securities of U S WEST ranking, as to any such distribution, on a parity with the Preferred Stock of such series upon such dissolution, liquidation or winding up of the affairs of U S WEST unless proportionate distributive amounts are paid on account of the shares of Preferred Stock of such series, ratably, in proportion to the full distributive amounts to which holders of all such shares are respectively entitled upon such dissolution, liquidation or winding up of the affairs of U S WEST. After payment of the full amount of the liquidation distribution to which they are entitled, the holders of such series of Preferred Stock will have no right or claim to any of the remaining assets of U S WEST. VOTING Unless otherwise determined by the Board of Directors of U S WEST and indicated in the Prospectus Supplement applicable to a particular series of Preferred Stock, holders of Preferred Stock of that series will not have any voting rights except as set forth below or as otherwise from time to time required by law or by the requirements of any securities exchange on which such series of Preferred Stock is listed for trading. In the event U S WEST issues a series of Preferred Stock with voting rights, including any voting rights in the case of dividend arrearage, unless otherwise specified in the Prospectus Supplement relating to such series, each share will be entitled to one vote on matters on which holders of such shares are entitled to vote. In the case of any series of Preferred Stock having one vote per share on matters on which holders of such series are entitled to vote, the voting power of such series, on matters on which holders of such series and holders of any other series of Preferred Stock or another series of preferred stock of U S WEST are entitled to vote as a single class, will depend on the number of shares in such series, not the aggregate stated value, liquidation preference or initial offering price of the shares of such series of Preferred Stock. As long as any shares of Preferred Stock remain outstanding, U S WEST will not, without the affirmative vote or consent of the holders of at least a majority of all of the shares of Preferred Stock outstanding at the time (and all other series of preferred stock ranking on a parity with the Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the affairs of U S WEST and upon which like voting rights have been conferred and are then exercisable voting together as a single class without regard to series), given in person or by proxy, either in writing or at a meeting, (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to the Preferred Stock with respect to the payment of 10 dividends or the distribution of assets upon liquidation, dissolution or winding up of the affairs of U S WEST, or (ii) amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of the Articles of Incorporation or of the Resolution for any series of Preferred Stock designating such series of Preferred Stock and the rights and preferences thereof, so as to materially and adversely affect any rights and preferences of the Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock or the creation and issuance of other series of preferred stock, or any increase in the amount of authorized shares of Preferred Stock of any series, in each case ranking on a parity with or junior to Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the affairs of U S WEST will not be deemed to materially and adversely affect such rights and preferences, privileges or voting powers. DESCRIPTION OF DEBT SECURITIES AND GUARANTEES The following description sets forth certain general terms and provisions of the Debt Securities and Guarantees to which any Prospectus Supplement may relate. The particular terms and provisions of the series of Debt Securities offered by a Prospectus Supplement, and the extent to which such general terms and provisions described below may apply thereto, will be described in the Prospectus Supplement relating to such series of Debt Securities. The Debt Securities are to be issued under an Indenture ("Indenture"), dated as of April 15, 1988, among U S WEST, Capital Funding and First National Bank of Santa Fe (the "Trustee"). As of the date of this Prospectus, $215,000,000 of Debt Securities have been issued under the Indenture and $165,000,000 of such Debt Securities remain outstanding. The following summaries of certain provisions of the Debt Securities, the Guarantees and the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the Debt Securities, the Guarantees and the Indenture, including the definitions therein of certain terms. Wherever particular sections or defined terms of the Indenture are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. GENERAL The Indenture does not limit the aggregate principal amount of Debt Securities that can be issued thereunder and debt securities may be issued thereunder up to the aggregate principal amount which may be authorized from time to time by, or pursuant to a resolution of, Capital Funding's Board of Directors or by a supplemental indenture. Reference is made to the Prospectus Supplement for the following terms of the particular series of Debt Securities being offered hereby: (i) the title of the Debt Securities of the series; (ii) any limit upon the aggregate principal amount of the Debt Securities of the series; (iii) the date or dates on which the principal of the Debt Securities of the series will mature; (iv) the rate or rates (or manner of calculations thereof), if any, at which the Debt Securities of the series will bear interest, the date or dates from which any such interest will accrue and on which such interest will be payable, and, with respect to Debt Securities of the series in registered form, the record date for the interest payable on any interest payment date; (v) the place or places where the principal of and interest, if any, on the Debt Securities of the series will be payable; (vi) any redemption or sinking fund provisions; (vii) if other than the entire principal amount thereof, the portion of the principal amount of Debt Securities of the series which will be payable upon declaration of acceleration of the maturity thereof; (viii) whether the Debt Securities of the series will be issuable in registered or bearer form or both, any restrictions applicable to the offer, sale, or delivery of Debt Securities in bearer form ("bearer Debt Securities"), and whether and the terms upon which bearer Debt Securities will be exchangeable for Debt Securities in registered form ("registered Debt Securities") and vice versa; (ix) whether and under what circumstances Capital Funding will pay additional amounts on the Debt Securities of the series held by a person who is not a U.S. person (as defined below) in respect of taxes or similar charges withheld or deducted and, if so, whether Capital Funding will have the option to redeem such Debt Securities rather than pay such additional amounts; (x) whether the Debt Securities will be denominated or provide for payment in United States dollars or a foreign currency or units of two or more such foreign 11 currencies; and (xi) any additional provisions or other special terms not inconsistent with the provisions of the Indenture, including any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Debt Securities of such series. (Sections 2.01 and 2.02.) To the extent not described herein, principal, premium, if any, and interest will be payable, and the Debt Securities of a particular series will be transferable, in the manner described in the Prospectus Supplement relating to such series. Each series of Debt Securities will constitute unsecured and unsubordinated indebtedness of Capital Funding, and will rank on a parity with Capital Funding's other indebtedness, and will have the benefit of the Guarantees described herein. However, since U S WEST is a holding company, the right of U S WEST and, hence, the right of creditors of U S WEST (including the holders of the Debt Securities) to participate in any distribution of the assets of any subsidiaries of U S WEST, whether upon liquidation, reorganization, or otherwise, is subject to prior claims of creditors of the subsidiary, except to the extent that claims of U S WEST itself as a creditor of a subsidiary may be recognized. Debt Securities of any series may be issued as registered Debt Securities or bearer Debt Securities or both as specified in the terms of the series. Unless otherwise indicated in the Prospectus Supplement, Debt Securities will be issued in denominations of $1,000 and integral multiples thereof, and bearer Debt Securities will not be offered, sold, resold or delivered to U.S. persons in connection with their original issuance. For purposes of this Prospectus, "U.S. person" means a citizen, national or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States, or any political subdivision thereof, or an estate or trust which is subject to United States federal income taxation regardless of its source of income. To the extent set forth in the Prospectus Supplement, except in special circumstances set forth in the Indenture, interest on bearer Debt Securities will be payable only against presentation and surrender of the coupons for the interest installments evidenced thereby as they mature at a paying agency of Capital Funding located outside of the United States and its possessions. (Section 2.05(c).) Capital Funding will maintain such an agency for a period of two years after the principal of such bearer Debt Securities has become due and payable. During any period thereafter for which it is necessary in order to conform to United States tax law or regulations, Capital Funding will maintain a paying agent outside the United States and its possessions to which the bearer Debt Securities may be presented for payment and will provide the necessary funds therefor to such paying agent upon reasonable notice. (Section 2.04.) Bearer Debt Securities and the coupons related thereto will be transferable by delivery. (Section 2.08(e).) If appropriate, federal income tax consequences applicable to a series of Debt Securities will be described in the Prospectus Supplement relating thereto. GLOBAL SECURITIES The Debt Securities of a series may be issued in the form of one or more fully registered global securities (each a "Global Security") that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the Prospectus Supplement relating to such series. Unless and until it is exchanged for Debt Securities in definitive registered form, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. The specific terms of the depositary arrangements with respect to a series of Debt Securities will be described in the Prospectus Supplement relating to such series. Capital Funding anticipates that the following provisions will apply to all depositary arrangements. Upon the issuance of a Global Security, the Depositary for such Global Security will credit the accounts held with it with the respective principal amounts of the Debt Securities represented by such Global Security. Such accounts shall be designated by the underwriters or agents with respect to such 12 Debt Securities or by Capital Funding if such Debt Securities are offered and sold directly by Capital Funding. Ownership of beneficial interests in a Global Security will be limited to persons that have accounts with the Depositary for such Global Security ("participants") or persons that may hold interests through participants. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary for such Global Security or on the records of participants. The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture governing such Debt Securities. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture governing such Debt Securities. Principal, premium, if any, and interest payments on Debt Securities registered in the name of a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner of the Global Security representing such Debt Securities. Neither Capital Funding, the Trustee for such Debt Securities, any Paying Agent nor the Security Registrar for such Debt Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Security for such Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Capital Funding expects that the Depositary for a series of Debt Securities issued in the form of a Global Security, upon receipt of any payment of principal, premium or interest, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Security for such Debt Securities as shown on the records of such Depositary. Capital Funding also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If a Depositary for a series of Debt Securities is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by Capital Funding within 90 days, Capital Funding will issue Debt Securities of such series in definitive form in exchange for the Global Security representing such series of Debt Securities. In addition, Capital Funding may at any time and in its sole discretion determine not to have the Debt Securities of a series represented by a Global Security and, in such event, will issue Debt Securities of such series in definitive form in exchange for the Global Security representing such series of Debt Securities. In either instance, an owner of a beneficial interest in a Global Security will be entitled to have Debt Securities of the series represented by such Global Security equal in principal amount to such beneficial interest registered in its name and will be entitled to physical delivery of such Debt Securities in definitive form. Debt Securities of such series so issued in definitive form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only, without coupons. GUARANTEES U S WEST will unconditionally guarantee the due and punctual payment of the principal, premium, if any, and interest on the Debt Securities when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise. (Section 2.15.) The Guarantees will rank equally with all other unsecured and unsubordinated obligations of U S WEST. 13 EXCHANGE OF SECURITIES To the extent permitted by the terms of a series of Debt Securities authorized to be issued in registered form and bearer form, bearer Debt Securities may be exchanged for an equal aggregate principal amount of registered Debt Securities of the same series and date of maturity in such authorized denominations as may be requested upon surrender of the bearer Debt Securities with all unpaid coupons relating thereto, at an agency of Capital Funding maintained for such purpose and upon fulfillment of all other requirements of such agent. (Section 2.08(b).) As of the date of this Prospectus, United States Treasury regulations do not permit exchanges of registered Debt Securities for bearer Debt Securities and, unless such regulations are modified, the terms of a series of Debt Securities will not permit registered Debt Securities to be exchanged for bearer Debt Securities. LIENS ON ASSETS If, at any time, Capital Funding mortgages, pledges or otherwise subjects to any lien the whole or any part of any property or assets now owned or hereafter acquired by it, except as hereinafter provided, Capital Funding will secure the outstanding Debt Securities, and any other obligations of Capital Funding which may then be outstanding and entitled to the benefit of a covenant similar in effect to this covenant, equally and ratably with the indebtedness or obligations secured by such mortgage, pledge or lien, for as long as any such indebtedness or obligation is so secured. The foregoing covenant does not apply to the creation, extension, renewal, or refunding of mortgages or liens created or existing at the time property is acquired, created within 180 days thereafter, or created for the purpose of securing the cost of construction and improvement of property, or to the making of any deposit or pledge to secure public or statutory obligations or with any governmental agency at any time required by law in order to qualify Capital Funding to conduct its business or any part thereof or in order to entitle it to maintain self-insurance or to obtain the benefits of any law relating to workers' compensation, unemployment insurance, old age pensions or other social security, or with any court, board, commission or governmental agency as security incident to the proper conduct of any proceeding before it. Nothing contained in the Indenture prevents any entity other than Capital Funding from mortgaging, pledging or subjecting to any lien any of its property or assets, whether or not acquired from U S WEST or Capital Funding. (Section 4.03.) AMENDMENT AND WAIVER Subject to certain exceptions, the Indenture may be amended or supplemented by Capital Funding, U S WEST and the Trustee with the consent of the holders of a majority in principal amount of the outstanding Debt Securities of each series affected by the amendment or supplement (with each series voting as a class), or compliance with any provision may be waived with the consent of the holders of a majority in principal amount of the outstanding Debt Securities of each series affected by such waiver (with each series voting as a class). However, without the consent of each Debt Securityholder affected, an amendment or waiver may not (i) reduce the amount of Debt Securities whose holders must consent to an amendment or waiver; (ii) change the rate of or change the time for payment of interest on any Debt Security; (iii) change the principal of or change the fixed maturity of any Debt Security; (iv) waive a default in the payment of the principal of or interest on any Debt Security; (v) make any Debt Security payable in money other than that stated in the Debt Security; or (vi) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security. (Section 9.02.) The Indenture may be amended or supplemented without the consent of any Debt Securityholder (i) to cure any ambiguity, defect or inconsistency in the Indenture, the Debt Securities of any series or the Guarantees; (ii) to provide for the assumption of all the obligations of U S WEST or Capital Funding under the Debt Securities, any coupons related thereto, the Guarantees and the Indenture by any corporation in connection with a merger, consolidation, transfer or lease of Capital Funding's or U S WEST's property and assets substantially as an entirety, as provided for in the Indenture; (iii) to provide for uncertificated Debt Securities in addition to or in place of certificated Debt Securities; (iv) to make any change that does not adversely affect the rights of any Debt Securityholder; (v) to provide for the issuance of and establish the form and terms and conditions of a series of Debt Securities or the Guarantees endorsed 14 thereon or to establish the form of any certifications required to be furnished pursuant to the terms of the Indenture or any series of Debt Securities; or (vi) to add to the rights of Debt Securityholders. (Section 9.01.) MERGER U S WEST or Capital Funding may consolidate with or merge into, or transfer or lease its property and assets substantially as an entirety to, another entity if the successor entity is a corporation and assumes all the obligations, as the case may be, of Capital Funding, under the Debt Securities and any coupons related thereto and the Indenture, or of U S WEST, under the Guarantees and the Indenture, and if, after giving effect to such transaction, a Default or Event of Default would not occur or be continuing. Thereafter, all such obligations of U S WEST or Capital Funding, as the case may be, shall terminate. (Sections 5.01 and 5.02.) The general provisions of the Indenture do not afford holders of the Debt Securities protection in the event of a highly-leveraged transaction, reorganization, merger or similar transaction involving U S WEST or Capital Funding that may adversely affect holders of the Debt Securities. EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default" with respect to a series of Debt Securities: (i) default in the payment of interest on any Debt Security of such series for 90 days; (ii) default in the payment of the principal of any Debt Security of such series; (iii) failure by U S WEST or Capital Funding for 90 days after notice to it to comply with any of its other agreements in the Debt Securities of such series, in the Indenture, in the Guarantees, or in any supplemental indenture; and (iv) certain events of bankruptcy or insolvency of U S WEST or Capital Funding. (Section 6.01.) If an Event of Default occurs with respect to the Debt Securities of any series and is continuing, the Trustee or the holders of at least 25% in principal amount of all of the outstanding Debt Securities of that series may declare the principal (or, if the Debt Securities of that series are original issue discount Debt Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Debt Securities of that series to be due and payable. Upon such declaration, such principal (or, in the case of original issue discount Debt Securities, such specified amount) shall be due and payable immediately. (Section 6.02). Securityholders may not enforce the Indenture, the Debt Securities or the Guarantees, except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Debt Securities. (Section 7.01.) Subject to certain limitations, holders of a majority in principal amount of the Debt Securities of each series affected (with each series voting as a class) may direct the Trustee in its exercise of any trust power. (Section 6.05.) The Trustee may withhold from holders of Debt Securities notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. (Section 7.05.) CONCERNING THE TRUSTEE U S WEST and certain of its affiliates, including Capital Funding, maintain banking relationships in the ordinary course of business with the Trustee. In addition, the Trustee and certain of its affiliates serve as trustee, authenticating agent or paying agent with respect to certain debt securities of U S WEST and its affiliates. ERISA CONSIDERATIONS Unless otherwise indicated in the applicable Prospectus Supplement, the Securities may, subject to certain legal restrictions, be purchased and held by an employee benefit plan (a "Plan") subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or an individual retirement account or an employee benefit plan subject to section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the purchase and holding of the Securities is consistent with its fiduciary duties under ERISA and does not result in a non-exempt prohibited transaction as defined in section 406 of ERISA or section 4975 of the Code. Employee benefit 15 plans which are governmental plans (as defined in section 3(32) of ERISA) and certain church plans (as defined in section 3(33) of ERISA) are not subject to Title I of ERISA or section 4975 of the Code. The Securities may, subject to certain legal restrictions, be purchased and held by such plans. PLAN OF DISTRIBUTION DISTRIBUTION OF SECURITIES U S WEST may offer and sell the Equity Securities and Capital Funding may offer and sell the Debt Securities (i) to or through underwriting syndicates represented by managing underwriters, (ii) to or through underwriters without a syndicate, (iii) through dealers, (iv) through agents or (v) through a combination of any such methods of sale. The Prospectus Supplement with respect to each series of Securities will set forth the terms of the offering, including the name or names of any underwriters, dealers or agents, the purchase price and the net proceeds to U S WEST or Capital Funding, as the case may be, from such sale, any underwriting discounts, agency fees and other items constituting underwriters' or agents' compensation, the initial public offering price and any discounts or concessions allowed, re-allowed or paid to dealers. If any underwriters are involved in the offer and sale, the Securities will be acquired by the underwriters and may be resold by them from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Unless otherwise set forth in the accompanying Prospectus Supplement, the obligations of the underwriters to purchase the Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Securities described in such Prospectus Supplement if any are purchased. Any initial public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time. The Securities may be offered and sold by U S WEST or Capital Funding directly or through an agent or agents designated by U S WEST or Capital Funding from time to time, as the case may be. Unless otherwise indicated in the applicable Prospectus Supplement, any such agent or agents will be acting on a best efforts basis for the period of its or their appointment. Any agent participating in the distribution of the Securities may be deemed to be an "underwriter," as that term is defined in the Securities Act, of the Securities so offered and sold. The Securities also may be sold to dealers, at the applicable price to the public set forth in the applicable Prospectus Supplement relating to a particular series of the Securities, who later resell to investors. Such dealers may be deemed to be "underwriters" within the meaning of the Securities Act. U S WEST may issue Equity Securities directly to one or more of its pension plans for a purchase price per share equal to the public offering price less underwriting discounts and commissions, if any, or such other price as set forth in the applicable Prospectus Supplement. Underwriters, dealers and agents may be entitled, under agreements entered into with U S WEST and Capital Funding, to indemnification by U S WEST against certain liabilities, including liabilities under the Securities Act. The place and time of delivery for the Securities in respect of which this Prospectus is delivered will be set forth in the accompanying Prospectus Supplement, if appropriate. DELAYED DELIVERY ARRANGEMENTS If so indicated in the Prospectus Supplement, Capital Funding will authorize dealers or other persons acting as Capital Funding's agents to solicit offers by certain institutions to purchase Debt Securities from Capital Funding pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and others, but in all cases such institutions must be approved by Capital Funding. The obligations of any purchaser under any such contract will not be subject to any conditions except that (a) the purchaser of the Debt Securities shall not at the time of delivery be prohibited from purchasing such 16 securities under the laws of the jurisdiction to which such purchaser is subject and (b) if the Debt Securities are also being sold to underwriters, Capital Funding shall have sold to such underwriters the Debt Securities not sold for delayed delivery. The dealers and such other persons will not have any responsibility in respect of the validity or performance of such contracts. EXPERTS The consolidated financial statements and the financial statement schedules included in U S WEST's Annual Report on Form 10-K for the year ended December 31, 1992, as well as the consolidated financial statements included in U S WEST's Current Report on Form 8-K dated August 20, 1993, are incorporated herein by reference in reliance on the reports of Coopers & Lybrand, independent certified public accountants, given upon the authority of that firm as experts in accounting and auditing. LEGAL OPINIONS The validity of the Equity Securities and certain legal matters relating thereto will be passed upon for U S WEST by Stephen E. Brilz, Senior Attorney of U S WEST. Certain legal matters relating to the Debt Securities and the Guarantees to be offered hereby will be passed upon for U S WEST and Capital Funding by Stephen E. Brilz. 17 -----END PRIVACY-ENHANCED MESSAGE-----