-----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, mAVeGDccsNKN9mjGhz6LmblrlEPrmvoS4qX+H3KE/6jSOVhWCFrb2TlRIVzURIgY K1K4XiIhnIHksl19e20iSg== 0000912057-95-002948.txt : 19950502 0000912057-95-002948.hdr.sgml : 19950502 ACCESSION NUMBER: 0000912057-95-002948 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19950501 SROS: NYSE SROS: PSE 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: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-57889 FILM NUMBER: 95533111 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: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 841028672 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-57889-01 FILM NUMBER: 95533112 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WEST FINANCING I CENTRAL INDEX KEY: 0000938826 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-57889-02 FILM NUMBER: 95533113 BUSINESS ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037936500 MAIL ADDRESS: STREET 1: U S WEST FINANCING I STREET 2: 7800 EAST ORCHARD RD STE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WEST FINANCING II CENTRAL INDEX KEY: 0000938829 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-57889-03 FILM NUMBER: 95533114 BUSINESS ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037936500 MAIL ADDRESS: STREET 1: U S WEST FINANCING II STREET 2: 7800 EAST ORCHARD RD STE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WEST FINANCING III CENTRAL INDEX KEY: 0000938831 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-57889-04 FILM NUMBER: 95533115 BUSINESS ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037936500 MAIL ADDRESS: STREET 1: U S WEST FINANCING III STREET 2: 7800 EAST ORCHARD RD STE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80155 S-3/A 1 U S WEST S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ U S WEST, INC. COLORADO 84-0926774 U S WEST CAPITAL FUNDING, INC. COLORADO 84-1028672 U S WEST FINANCING I DELAWARE APPLIED FOR U S WEST FINANCING II DELAWARE APPLIED FOR U S WEST FINANCING III DELAWARE APPLIED FOR (Exact name of Registrant as (State of other Jurisdiction of (I.R.S. Employer Specified in its Charter) Incorporation or Organization) Identification Number)
7800 EAST ORCHARD ROAD ENGLEWOOD, COLORADO 80111 (303) 793-6500 (Name, address, including zip code, and telephone number, including area code, of each registrant's principal executive offices) ------------------------ STEPHEN E. BRILZ, ESQ. U S WEST, INC. 7800 EAST ORCHARD ROAD ENGLEWOOD, COLORADO 80111 (303) 793-6626 (Name, address, including zip code, and telephone number of agent for service for each registrant) PLEASE SEND COPIES OF ALL COMMUNICATIONS TO: DENNIS J. BLOCK, ESQ. AKIKO MIKUMO, ESQ. WEIL, GOTSHAL & MANGES 767 FIFTH AVENUE NEW YORK, NEW YORK 10153 (212) 310-8000 ------------------------ Approximate date of commencement of proposed sale to the public: From time to time after the effective date of the Registration Statement, as determined by market conditions. ------------------------ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. /X/ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED MAY 1, 1995 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED MAY __, 1995) [LOGO] PREFERRED SECURITIES U S WEST FINANCING I % TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPRS-SM- ") (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY U S WEST, INC. ------------ The % Trust Originated Preferred Securities (the "Preferred Securities") offered hereby evidence preferred undivided beneficial interests in the assets of U S WEST Financing I, a statutory business trust formed under the laws of the State of Delaware ("U S WEST Financing"). U S WEST, Inc., a Colorado corporation ("U S WEST"), will directly or indirectly own all the common securities (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities") representing undivided beneficial interests in the assets of U S WEST Financing. U S WEST Financing exists for the sole purpose of issuing the Preferred Securities and Common Securities and investing the proceeds thereof in an equivalent amount of % Subordinated Deferrable Interest Notes due 2025 ("Subordinated Debt Securities") of U S WEST Capital Funding, Inc., a Colorado corporation and wholly-owned subsidiary of U S WEST ("Capital Funding"). The Subordinated Debt Securities are fully and unconditionally guaranteed (the "Debt Guarantee") on a subordinated basis as to payment of principal, premium, if any, and interest by U S WEST. Upon an event of default under the Declaration (as defined herein), the holders of the Preferred Securities will have a preference over the holders of the Common Securities with respect to payments in respect of distributions and payments upon liquidation, redemption and otherwise. (CONTINUED ON NEXT PAGE) ------------------------ SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The Preferred Securities have been approved for listing, subject to official notice of issuance, on the New York Stock Exchange, Inc. (the "New York Stock Exchange"). Trading of the Preferred Securities on the New York Stock Exchange is expected to commence within a 30 day period after the initial delivery of the Preferred Securities. See "Underwriting." ------------------------ 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 TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROCEEDS TO INITIAL PUBLIC UNDERWRITING U S WEST OFFERING PRICE (1) COMMISSION (2) FINANCING (3)(4) Per Preferred Security................. $25.00 (3) $25.00 Total.................................. (3) (1) Plus accrued distributions, if any, from , 1995. (2) U S WEST, Capital Funding and U S WEST Financing have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) In view of the fact that the proceeds of the sale of the Preferred Securities will be invested in Subordinated Debt Securities, Capital Funding has agreed to pay to the Underwriters as compensation ("Underwriters' Compensation") for their arranging the investment therein of such proceeds, $ per Preferred Security (or $ in the aggregate); provided, that such compensation for sales of 10,000 or more Preferred Securities to a single purchaser will be $ per Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriters Compensation will be less than the aggregate amount specified in the preceding sentence. See "Underwriting." (4) Expenses of the offering which are payable by Capital Funding are estimated to be $ .
------------------------ The Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about , 1995. ------------------------
MERRILL LYNCH & CO.
------------------------ The date of this Prospectus Supplement is May __, 1995. - -SM-__ "Trust Originated Preferred Securities" and "TOPrS" are service marks of Merrill Lynch & Co., Inc. (CONTINUED FROM PREVIOUS PAGE) ____Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of ___% of the liquidation amount of $25 per Preferred Security, accruing from the date of original issuance and payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year commencing June 30, 1995 ("distributions"). The payment of distributions out of moneys held by U S WEST Financing, and payments on liquidation of U S WEST Financing or the redemption of Preferred Securities, as set forth below, are guaranteed by U S WEST (the "Preferred Securities Guarantee") to the extent U S WEST Financing has funds available therefor as described under "Description of the Preferred Securities Guarantees" in the accompanying Prospectus. The obligations of U S WEST under the Preferred Securities Guarantee are subordinate and junior in right of payment to all other liabilities of U S WEST, including the Debt Guarantee, and PARI PASSU with the most senior preferred stock issued by U S WEST. The obligations of Capital Funding under the Subordinated Debt Securities are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined herein) of Capital Funding, which aggregated approximately $1.4 billion at December 31, 1994, all of which is and will be fully and unconditionally guaranteed by U S WEST. The obligations of U S WEST under the Debt Guarantee are subordinate and junior in right of payment to all present and future Senior Indebtedness of U S WEST, which aggregated approximately $3.5 billion at December 31, 1994 (including the Senior Indebtedness of Capital Funding). ____The distribution rate and the distribution and other payment dates for the Preferred Securities will correspond to the interest rate and interest and other payment dates on the Subordinated Debt Securities, which, together with the Debt Guarantee, will be the sole assets of U S WEST Financing. As a result, if principal or interest is not paid on the Subordinated Debt Securities, or payments are not made under the Debt Guarantee, no amounts will be paid on the Preferred Securities. If Capital Funding does not make principal or interest payments on the Subordinated Debt Securities, and U S WEST does not make such payments under the Debt Guarantee, U S WEST Financing will not have sufficient funds to make distributions on the Preferred Securities, in which event the Preferred Securities Guarantee will not apply to such distributions until U S WEST Financing has sufficient funds available therefor. ____Capital Funding has the right to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period on the Subordinated Debt Securities, at any time, for up to 20 consecutive quarters (each, an "Extension Period"). If interest payments are so deferred, distributions will also be deferred. Despite such deferral, distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at an annual rate of ___% per annum, and during any Extension Period, holders of Preferred Securities will be required to include deferred interest income in their gross income for United States federal income tax purposes in advance of receipt of the cash interest payments attributable to such deferred income. There could be multiple Extension Periods of varying lengths throughout the term of the Subordinated Debt Securities. See "Description of the Subordinated Debt Securities and the Debt Guarantee -- Options to Extend Interest Payment Period," "Investment Considerations -- Option to Extend Interest Payment Period" and "Certain Federal Income Tax Consequences -- Original Issue Discount, Premium and Market Discount." ____The Subordinated Debt Securities are redeemable by Capital Funding (in whole or in part) from time to time, on or after ___________, 2000 or at any time in certain circumstances upon the occurrence of a Tax Event (as defined herein). If Capital Funding redeems Subordinated Debt Securities, U S WEST Financing must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debt Securities so redeemed at $25 per Preferred Security plus accrued and unpaid distributions thereon (the "Redemption Price") to the date fixed for redemption. See "Description of the Preferred Securities -- Mandatory Redemption." The Preferred Securities will be redeemed upon maturity of the Subordinated Debt Securities. The Subordinated Debt Securities mature on ___________, 2025, but the maturity date may be extended once only for up to an additional 19 years at the option of Capital Funding, provided certain financial covenants are met. See "Description of the Subordinated Debt Securities and the Debt Guarantee -- Option to Extend Maturity Date." In addition, upon the occurrence of a Special Event (as defined herein) arising from a change in law or a change in legal interpretation, unless the Subordinated Debt Securities are redeemed in the limited circumstances described below, U S WEST Financing shall be dissolved with the result that the Subordinated Debt Securities, together with the Debt Guarantees, will be distributed to the holders of the Preferred Securities, on a pro rata basis, in lieu of any cash distribution. In the case of a Special Event that is a Tax Event, Capital Funding will have the right in certain circumstances to redeem the Subordinated Debt Securities, which would result in the redemption by U S WEST Financing of the Trust Securities in the same amount on a pro rata basis. If the Subordinated Debt Securities are distributed to the holders of the Preferred Securities, Capital Funding will use its best efforts to have the Subordinated Debt Securities listed on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. See "Description of the Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Subordinated Debt Securities and the Debt Guarantee." ____In the event of the voluntary or involuntary dissolution, winding up or termination of U S WEST Financing, the holders of the Preferred Securities will be entitled to receive, for each Preferred Security, a liquidation amount of $25 plus accrued and unpaid distributions thereon (including interest thereon) to the date of payment, unless in connection with such dissolution, the Subordinated Debt Securities are distributed to the holders of the Preferred Securities. See "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution." ------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 U S WEST, INC. SUMMARY FINANCIAL INFORMATION The summary financial data below should be read in conjunction with the financial statements and notes thereto included in U S WEST's Annual Report on Form 10-K for the year ended December 31, 1994. See "Incorporation of Certain Documents by Reference" in the accompanying Prospectus. The summary financial data for the five years ended December 31, 1994 are derived from the consolidated financial statements of U S WEST which have been audited by Coopers & Lybrand L.L.P., independent certified public accountants. See "Experts" in the accompanying Prospectus.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 1994 1993 1992 1991 1990 ----------- ----------- ----------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) CONSOLIDATED INCOME STATEMENT DATA: Sales and other revenues................... $ 10,953 $10,294 $ 9,823 $ 9,528 $ 9,369 Income from continuing operations................................ 1,426(1) 476(2) 1,076 840(4) 1,145 Net income (loss).......................... 1,426 (2,806)(2) (614)(3) 553(4) 1,199 Earnings per common share from continuing operations................................ 3.14(1) 1.13(2) 2.61 2.09(4) 2.97 Earnings (loss) per common share........... 3.14 (6.69)(2) (1.49)(3) 1.38(4) 3.11 Dividends per common share................. $ 2.14 $ 2.14 $ 2.12 $ 2.08 $ 2.00 Weighted average common shares outstanding (in thousands)............................ 453,316 419,365 412,518 401,332 386,012 CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END): Short-term borrowings...................... $ 2,837 $ 1,776 $ 583 $ 367 $ 438 Long-term debt............................. 5,101 5,423 4,847 5,602 4,709 Preferred stock subject to mandatory redemption................................ 51 -- -- -- -- Shareholders' equity....................... 7,382 5,861 8,268 9,587 9,240 Total assets............................... 23,204 20,680 23,461 23,375 22,160 - ------------------------ (1) 1994 income from continuing operations included a gain of $105 ($0.23 per share) on the sale of 24.4 percent of U S WEST's joint venture interest in cable television and telephone operations in the United Kingdom (TeleWest Communications plc), a gain of $41 ($0.09 per share) on the sale of U S WEST's paging unit and a gain of $51 ($0.11 per share) on the sale of certain rural telephone exchanges. (2) 1993 income from continuing operations included a restructuring charge of $610 ($1.46 per share) and a charge of $54 ($0.13 per share) for the cumulative effect on deferred taxes of the 1993 federally mandated increase in income tax rates. Net income included charges of $100 ($0.24 per share) for the estimated loss on disposal of discontinued operations and $20 ($0.04 per share) for the cumulative effect on deferred taxes of the federally mandated increase in income tax rates related to discontinued operations. Net income also included extraordinary charges of $3,123 ($7.45 per share) for the discontinuance of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," and $77 ($0.18 per share) for the early extinguishment of debt. (3) 1992 net income included the effects of accounting charges totaling $1,793 ($4.35 per share) related to the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," and SFAS No. 112, "Employers' Accounting for Postemployment Benefits." (4) 1991 includes a restructuring charge that reduced income from continuing operations by $230 ($0.57 per share) and income from discontinued operations by $360 ($0.90 per share).
S-3 THE FOLLOWING INFORMATION CONCERNING U S WEST, CAPITAL FUNDING, U S WEST FINANCING, THE PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE, THE SUBORDINATED DEBT SECURITIES AND THE DEBT GUARANTEE SUPPLEMENTS, AND SHOULD BE READ IN CONJUNCTION WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS IN THE ACCOMPANYING PROSPECTUS. U S WEST, INC. U S WEST is a diversified global communications company engaged in the telecommunications, directory publishing, wireless communications and multimedia businesses. Telecommunications services are provided by U S WEST's principal subsidiary, U S WEST Communications, Inc. ("U S WEST Communications"), to more than 25 million residential and business customers in the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming (collectively, the "U S WEST Region"). Directory publishing, wireless communications and multimedia services are provided by other U S WEST subsidiaries to customers inside and outside the U S WEST Region. 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 for the sole purpose of providing financing to U S WEST and its affiliates through the issuance of indebtedness guaranteed by U S WEST and has no independent operations. U S WEST FINANCING I U S WEST Financing is a statutory business trust formed under Delaware law pursuant to (i) a declaration of trust, dated as of March 1, 1995, executed by U S WEST, as sponsor (the "Sponsor"), and the trustees of U S WEST Financing (the "U S WEST Trustees") and (ii) the filing of a certificate of trust with the Delaware Secretary of State on March 1, 1995. Such declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. The Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities. U S WEST will directly or indirectly acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of U S WEST Financing. U S WEST Financing exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of U S WEST Financing, (ii) investing the gross proceeds of the Trust Securities in the Subordinated Debt Securities and the Debt Guarantee and (iii) engaging in only those other activities necessary or incidental thereto. Pursuant to the Declaration, the number of U S WEST Trustees will initially be five. Three of the U S WEST Trustees (the "Regular Trustees") will be persons who are employees or officers of, or affiliated with, U S WEST. The fourth trustee will be a financial institution unaffiliated with U S WEST that will serve as property trustee under the Declaration and as indenture trustee for purposes of the Trust Indenture Act (the "Property Trustee"). The fifth U S WEST Trustee will be a financial institution or an affiliate thereof which maintains a principal place of business or residence in the State of Delaware (the "Delaware Trustee"). The First National Bank of Chicago will act as the Property Trustee and its affiliate will act as the Delaware Trustee until removed or replaced by the holder of the Common Securities. The First National Bank of Chicago will also act as indenture trustee under the Preferred Securities Guarantee (the "Preferred Guarantee Trustee"). See "Description of the Preferred Securities Guarantees" in the accompanying Prospectus. In certain circumstances, the holders of a majority of the Preferred Securities will be entitled to appoint one Regular Trustee (a "Special Regular Trustee"), who need not be an officer or employee of, or otherwise affiliated with, U S WEST. See "Description of the Preferred Securities -- Voting Rights." S-4 The Property Trustee will hold title to the Subordinated Debt Securities and the Debt Guarantee for the benefit of the holders of the Trust Securities and the Property Trustee will have the power to exercise all rights, powers and privileges under the Indenture (as defined herein) as the holder of the Subordinated Debt Securities and the Debt Guarantee. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the Subordinated Debt Securities and the Debt Guarantee for the benefit of the holders of Trust Securities. The Property Trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Preferred Guarantee Trustee will hold the Preferred Securities Guarantee for the benefit of the holders of the Preferred Securities. Subject to the right of the holders of the Preferred Securities to appoint a Special Regular Trustee, U S WEST, as the direct or indirect holder of all the Common Securities, will have the right to appoint, remove or replace any U S WEST Trustee and to increase or decrease the number of U S WEST Trustees, provided that the number of U S WEST Trustees shall be at least three, a majority of which shall be Regular Trustees. Capital Funding will pay all fees and expenses related to U S WEST Financing and the offering of the Trust Securities, the payment of which will be fully and unconditionally guaranteed by U S WEST. See "Description of the Subordinated Debt Securities and the Debt Guarantee -- Miscellaneous." The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are as set forth in the Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust Indenture Act. See "Description of the Preferred Securities." RECENT DEVELOPMENTS THE RECAPITALIZATION PLAN.__On April 10, 1995, U S WEST announced a plan (the "Recapitalization Plan") to create two classes of common stock intended to reflect separately the performance of U S WEST's telecommunications and multimedia businesses. One class of common stock (the "Communications Stock") would principally reflect the performance of the telecommunications businesses of U S WEST Communications and certain other subsidiaries of U S WEST in the U S WEST Region (the "Communications Group"). The other class of common stock (the "MediaVision Stock") would reflect the performance of U S WEST's cable and telephony operations outside the U S WEST Region, as well as U S WEST's wireless, directory publishing and multimedia content and services operations both inside and outside the U S WEST Region (the "MediaVision Group"). Under the Recapitalization Plan, the existing common stock of U S WEST would be converted into Communications Stock and shareholders of U S WEST would receive a tax-free distribution of MediaVision Stock. The Recapitalization Plan would enable U S WEST to report the results of the MediaVision Group separately from the results of the Communications Group and thereby give shareholders a better understanding of these businesses without diminishing the benefits of remaining a single corporation. Investors would be afforded the ability to invest in either or both stocks depending upon their investment objectives. The Recapitalization Plan will require the approval of U S WEST's shareholders. U S WEST expects to seek such approval at a special meeting of shareholders to be called for that purpose in the fall of 1995. The Recapitalization Plan will not affect the offer and sale of the Preferred Securities, the ability of U S WEST to issue the Debt Guarantee or the Preferred Securities Guarantee, or the ability of Capital Funding to issue the Subordinated Debt Securities. In addition, the Recapitalization Plan will not result in the transfer of any assets from U S WEST or any of its subsidiaries or alter the legal nature of U S WEST's obligations to its creditors, including its obligations under the Preferred Securities Guarantee and the Debt Guarantee. Creditors of U S WEST, including the holders of the Preferred Securities, will continue to benefit from the cash flow of the subsidiaries comprising both the Communications Group and the MediaVision Group, subject to the satisfaction of obligations by such subsidiaries. U S WEST does not believe the Recapitalization Plan will have any adverse effect on its credit rating. ____CABLE ACQUISITION.__On December 6, 1994, U S WEST acquired Wometco Cable Corp. and the assets of Atlanta Cable Partners, L.P. and Georgia Cable Partners (the "Atlanta Cable Properties") for approximately $1.2 billion. Together, the Atlanta Cable Properties serve approximately 65% of the cable customers in the S-5 Atlanta, Georgia metropolitan area. U S WEST expects that it will offer local exchange services as well as multimedia services in the Atlanta area as a result of this acquisition. The Atlanta Cable Properties will be included in the MediaVision Group. ____WIRELESS JOINT VENTURES.__On July 25, 1994, AirTouch Communications ("AirTouch") and U S WEST announced an agreement to combine their domestic cellular operations. This partnership will have a presence in 9 of the top 20 cellular markets in the country and will form the third largest cellular company in the United States, with more than 53 million potential customers ("POPs"). The transaction is expected to close in the second quarter of 1995 upon obtaining certain federal and state regulatory approvals. By combining their domestic cellular operations, U S WEST and AirTouch will create opportunities for new cost efficiencies in equipment purchasing, information systems, distribution, marketing and advertising. Each company's cellular operations initially will continue to operate as separately owned entities, but upon closing will report to a wireless management company, which will oversee both companies' domestic cellular operations and provide management and support services. The wireless management company will be managed by a committee comprised of the president and chief operating officer of AirTouch, three other AirTouch representatives, three representatives of U S WEST and one mutually agreed upon independent representative. AirTouch's initial equity ownership of this partnership will be approximately 70% and U S WEST's will be 30%. A merger of the two companies' domestic cellular operations will take place upon the earlier of July 25, 1998, the lifting of certain restrictions imposed on U S WEST in connection with the divestiture by AT&T Corp. of its local telephone businesses, or at any time at AirTouch's option. The agreement gives U S WEST strategic flexibility, including the right to exchange its interest in the joint venture for up to 19.9% of AirTouch common stock, with any excess amounts to be received in the form of AirTouch non-voting preferred stock. AirTouch and U S WEST also formed an equally owned partnership to bid on personal communications services ("PCS") licenses. ____In October 1994, a partnership between AirTouch and U S WEST and a partnership between Bell Atlantic Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX") formed PCS Primeco, L.P. ("PCS Primeco") for the purpose of bidding on PCS licenses being auctioned by the Federal Communications Commission (the "FCC"). The objective of PCS Primeco is to build and operate PCS networks where its partners do not operate cellular networks, thus enabling them to establish a national wireless network. In the FCC auction, which concluded in March 1995, PCS Primeco was awarded PCS licenses in 11 markets covering 57 million POPs, including licenses in Chicago, Dallas, Tampa, Houston, Miami and New Orleans. PCS Primeco will be governed by a board made up of three Bell Atlantic-NYNEX representatives and three AirTouch-U S WEST representatives. The four companies also formed a partnership to develop a national branding and marketing strategy and a common "look and feel" for wireless customers. The cellular properties of AirTouch and U S WEST will not be merged with those of Bell Atlantic and NYNEX. ____TELEWEST INITIAL PUBLIC OFFERING.__In 1994, TeleWest Communications plc ("TeleWest"), a venture with Tele-Communications, Inc., completed an initial public offering of its common stock. U S WEST's interest in TeleWest was reduced from 50% to 37.8% as a result of the offering, but based on the offering price, its interest is valued at $1.1 billion. TeleWest provides cable television and telephone services in the United Kingdom over a multimedia network which has been designed to provide a wide range of interactive and integrated entertainment, telecommunications and information services as they become available in the future. TeleWest owns all or part of 23 franchises in the United Kingdom that encompass 3.6 million homes. Through TeleWest, U S WEST gains experience in packaging video and telephone services that it intends to utilize in its operations outside the United Kingdom. U S WEST's interest in TeleWest will be included in the MediaVision Group. S-6 INVESTMENT CONSIDERATIONS ____Prospective purchasers of Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters: RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE, SUBORDINATED DEBT SECURITIES AND DEBT GUARANTEE ____U S WEST's obligations under the Preferred Securities Guarantee are subordinate and junior in right of payment to all liabilities of U S WEST, including the Debt Guarantee, and PARI PASSU with the most senior preferred stock issued by U S WEST. The obligations of Capital Funding under the Subordinated Debt Securities are subordinate and junior in right of payment to all present and future Senior Indebtedness of Capital Funding, all of which are, and will be, fully and unconditionally guaranteed by U S WEST. The obligations of U S WEST under the Debt Guarantee are subordinate and junior in right of payment to all present and future Senior Indebtedness of U S WEST. At December 31, 1994, Senior Indebtedness of U S WEST and Capital Funding aggregated approximately $3.5 billion and $1.4 billion, respectively. There are no terms in the Preferred Securities, the Subordinated Debt Securities, the Preferred Securities Guarantee or the Debt Guarantee that limit U S WEST's ability to incur additional indebtedness, including indebtedness that ranks senior to the Preferred Securities Guarantee and the Debt Guarantee. See "Description of the Preferred Securities Guarantees" and "Description of the Subordinated Debt Securities and the Debt Guarantees -- Subordination" in the accompanying Prospectus. RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE ____The Preferred Securities Guarantee guarantees to the holders of the Preferred Securities the payment of (i) any accrued and unpaid distributions which are required to be paid on the Preferred Securities, to the extent U S WEST Financing shall have funds available therefor, (ii) the Redemption Price, including all accrued and unpaid distributions, with respect to Preferred Securities called for redemption by U S WEST Financing, to the extent U S WEST Financing has funds available therefor and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of U S WEST Financing (other than in connection with the distribution of Subordinated Debt Securities to the holders of Preferred Securities or a redemption of all of the Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on the Preferred Securities to the date of payment, to the extent U S WEST Financing has funds available therefor and (b) the amount of assets of U S WEST Financing remaining available for distribution to holders of the Preferred Securities in liquidation of U S WEST Financing. The holders of a majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Preferred Guarantee Trustee under the Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to enforce the Preferred Securities Guarantee, any holder of Preferred Securities may, after a period of 30 days has elapsed from such holders written request to the Preferred Guarantee Trustee to enforce the Preferred Securities Guarantee, institute a legal proceeding directly against U S WEST to enforce the Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee, without first instituting a legal proceeding against U S WEST Financing, the Preferred Guarantee Trustee or any other person or entity. If Capital Funding were to default in its obligation to pay amounts payable on the Subordinated Debt Securities and U S WEST were to default on its obligations under the Debt Guarantee, U S WEST Financing would lack available funds for the payment of distributions or amounts payable on redemption of the Preferred Securities or otherwise, and in such event holders of the Preferred Securities would not be able to rely upon the Preferred Securities Guarantee for payment of such amounts. Instead, holders of the Preferred Securities would rely on the enforcement by the Property Trustee of its rights as registered holder of the Subordinated Debt Securities against Capital Funding pursuant to the terms of the Subordinated Debt Securities and against U S WEST under the Debt Guarantee and may also vote to appoint a Special Regular Trustee, who shall have the same rights, powers and privileges as the other Regular Trustees. See "Description of the Preferred Securities Guarantees -- Status of the Preferred Securities Guarantees" and "Description of the Subordinated Debt Securities and S-7 the Debt Guarantees -- Subordination" in the accompanying Prospectus. The Declaration provides that each holder of Preferred Securities by acceptance thereof agrees to the provisions of the Preferred Securities Guarantee and the Indenture. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES ____If (i) U S WEST fails to pay distributions in full on the Preferred Securities for six consecutive quarterly distribution periods or (ii) a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of Preferred Securities would rely on the enforcement by the Property Trustee of its rights as a holder of the Subordinated Debt Securities and Debt Guarantee against Capital Funding and U S WEST. In addition, the holders of a majority in aggregate liquidation amount of the Preferred Securities will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee to exercise the remedies available to it as a holder of the Subordinated Debt Securities and Debt Guarantee. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities or the Debt Guarantee, a holder of Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against Capital Funding or U S WEST to enforce the Property Trustee's rights under the Subordinated Debt Securities or the Debt Guarantee, as the case may be, without first instituting any legal proceeding against the Property Trustee or any other person or entity, including, in the case of the Debt Guarantee, against Capital Funding. Upon the occurrence of any of the events described in clauses (i) or (ii) above, the holders of the Preferred Securities also will be entitled, by majority vote, to appoint a Special Regular Trustee, who shall have the same rights, powers and privileges as the other Regular Trustees. OPTION TO EXTEND INTEREST PAYMENT PERIOD ____Capital Funding has the right under the Indenture to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period at any time, and from time to time, on the Subordinated Debt Securities. As a consequence of such an extension, quarterly distributions on the Securities would be deferred (but despite such deferral would continue to accrue with interest thereon) by U S WEST Financing during any such extended interest payment period. Such right to extend the interest payment period for the Subordinated Debt Securities is limited to a period not exceeding 20 consecutive quarters. In the event that Capital Funding exercises this right to defer payments of interest, then (a) U S WEST and Capital Funding shall not (and, if it is a wholly-owned subsidiary of U S WEST, U S WEST shall cause U S WEST Communications not to) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, including, in the case of U S WEST, the Communications Stock and the Media Vision Stock, and (b) U S WEST and Capital Funding shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to the Subordinated Debt Securities. Prior to the termination of any such extension period, Capital Funding may further extend the interest payment period, provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters. Upon the termination of any Extension Period and the payment of all amounts then due, Capital Funding may select a new Extension Period, subject to the above requirements. See "Description of the Preferred Securities -- Distributions" and "Description of the Subordinated Debt Securities and the Debt Guarantee -- Option to Extend Interest Payment Period." ____Should Capital Funding exercise its rights to defer payments of interest by extending the interest payment period, each holder of Preferred Securities will continue to accrue income for United States federal income tax purposes in respect of the deferred interest allocable to its Preferred Securities. As a result, holders of Preferred Securities will recognize income for United States federal income tax purposes in advance of the receipt of cash and will not receive the cash from U S WEST Financing related to such income if such holder disposes of its Preferred Securities prior to the record date for the date on which distributions of such amounts are made. Capital Funding has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debt Securities. S-8 However, should Capital Funding determine to exercise such right in the future, the market price of the Preferred Securities is likely to be affected. A holder that disposes of its Preferred Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Preferred Securities. In addition, as a result of the existence of Capital Funding's right to defer interest payments, the market price of the Preferred Securities (which represent an undivided beneficial interest in the Subordinated Debt Securities) may be more volatile than other securities on which original issue discount accrues that do not have such rights. See "Certain Federal Income Tax Consequences -- Original Issue Discount, Premium and Market Discount." SPECIAL EVENT DISTRIBUTION ____Upon the occurrence of a Special Event, U S WEST Financing shall be dissolved, except in the limited circumstances described below, with the result that the Subordinated Debt Securities, together with the Debt Guarantee, would be distributed to the holders of the Trust Securities in connection with the liquidation of U S WEST Financing. In the case of a Special Event that is a Tax Event, in certain circumstances Capital Funding shall have the right to redeem the Subordinated Debt Securities, in whole or in part, in which event U S WEST Financing will redeem the Trust Securities on a pro rata basis to the same extent as the Subordinated Debt Securities are redeemed. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." ____There can be no assurance as to the market prices for the Preferred Securities or the Subordinated Debt Securities that may be distributed in exchange for Preferred Securities if a dissolution or liquidation of U S WEST Financing were to occur. Accordingly, the Preferred Securities that an investor may purchase, or the Subordinated Debt Securities that the investor may receive on dissolution and liquidation of U S WEST Financing, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Subordinated Debt Securities upon the occurrence of a Special Event, prospective purchasers of Preferred Securities are also making an investment decision with regard to the Subordinated Debt Securities and should carefully review all the information regarding the Subordinated Debt Securities contained herein and in the accompanying Prospectus. See "Description of the Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Subordinated Debt Securities and the Debt Guarantee -- General." LIMITED VOTING RIGHTS ____Holders of Preferred Securities will have limited voting rights and, except for the rights of holders of Preferred Securities to appoint a Special Regular Trustee upon the occurrence of certain events described herein, will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, U S WEST Trustees, which voting rights are vested exclusively in the holder of the Common Securities. TRADING PRICE OF PREFERRED SECURITIES ____The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debt Securities. A holder who disposes of his Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Subordinated Debt Securities through the date of disposition in income as ordinary income (i.e., OID), and to add such amount to his adjusted tax basis in his pro rata share of the underlying Subordinated Debt Securities deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences -- Original Issue Discount, Premium and Market Discount" and "-- Sale of Certificates." FUTURE ACQUISITIONS ____In connection with the MediaVision Group's growth strategy, U S WEST from time to time engages in preliminary discussions regarding acquisitions, some of which may be significant and the funding for which may be obtained from internally generated funds, the incurrence of indebtedness, the issuance of equity or a combination thereof. The incurrence of indebtedness to fund such acquisitions and/or the assumption of indebtedness in connection with such acquisitions could result in a downgrading of U S WEST's credit rating and, as a result, have an adverse effect upon the market value of the Preferred Securities. S-9 CAPITALIZATION OF U S WEST ____The following table sets forth the unaudited consolidated capitalization of U S WEST at December 31, 1994, and as adjusted to reflect the application of the estimated net proceeds from the sale of the Preferred Securities. See "Use of Proceeds." The table should be read in conjunction with U S WEST's consolidated financial statements and notes thereto included in the documents incorporated by reference herein. See "Incorporation of Certain Documents by Reference" in the accompanying Prospectus.
AT DECEMBER 31, 1994 -------------------------- ACTUAL AS ADJUSTED(1) ------- ----------------- (DOLLARS IN MILLIONS) Short-term borrowings........................................ $ 2,837 $ ------- ------- ------- ------- Long-term borrowings......................................... $ 5,101 $ ------- ------- Guaranteed minority interest in trust holding subordinated debentures of subsidiary.................................... $ -- $ ------- ------- Preferred stock subject to mandatory redemption.............. $ 51 $ ------- ------- Common shareholders' equity: Common shares -- no par, 2,000,000,000 authorized; 469,343,048 outstanding................................. 8,056 Cumulative deficit....................................... (458) LESOP guarantee.......................................... (187) Foreign currency translation adjustment.................. (29) ------- ------- Total common shareholders' equity............................ 7,382 (2) ------- ------- Total capitalization......................................... $12,534 $ (2) ------- ------- ------- ------- - ------------------------ (1) Does not give effect to the shares of common stock, without par value, of U S WEST ("Common Stock"), that may be issued upon exercise of options to purchase 2,374,394 shares of Common Stock that are currently exercisable under U S WEST's stock option plans or upon conversion of U S WEST's Liquid Yield Option Notes due 2011 ("LYONS") into up to 9,894,278 shares of Common Stock (based on the number of options and LYONS outstanding on December 31, 1994). (2) The Recapitalization Plan, if implemented, will not affect the total common shareholders' equity or the total capitalization of U S WEST.
S-10 ACCOUNTING TREATMENT ____The financial statements of U S WEST Financing will be consolidated with U S WEST's financial statements, with the Preferred Securities shown as a guaranteed minority interest in trust holding subordinated debentures of a subsidiary. USE OF PROCEEDS ____The proceeds of the sale of the Preferred Securities will be invested by U S WEST Financing in Subordinated Debt Securities of Capital Funding. Capital Funding will loan the proceeds from the issuance of such Subordinated Debt Securities to U S WEST and its affiliates to be used for the reduction of short- term indebtedness incurred in connection with the acquisition of the Atlanta Cable Properties, and for general corporate purposes. DESCRIPTION OF THE PREFERRED SECURITIES ____The Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, the First National Bank of Chicago, will act as the indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Preferred Securities will include those stated in the Declaration and those made part of the Declaration by the Trust Indenture Act. The following summary of the principal terms and provisions of the Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registration Statement, of which this Prospectus Supplement is a part, the Trust Act and the Trust Indenture Act. GENERAL ____The Declaration authorizes the Regular Trustees to issue on behalf of U S WEST Financing the Preferred Securities, which represent preferred undivided beneficial interests in the assets of U S WEST Financing. All of the Common Securities will be owned, directly or indirectly, by U S WEST. The Common Securities rank pari passu, and payments will be made thereon on a pro rata basis, with the Preferred Securities, except that upon the occurrence of a Declaration Event of Default, the rights of the holders of the Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Declaration does not permit the issuance by U S WEST Financing of any securities other than the Trust Securities or the incurrence of any indebtedness by U S WEST Financing. Pursuant to the Declaration, the Property Trustee will own the Subordinated Debt Securities and the Debt Guarantee for the benefit of the holders of the Trust Securities. The payment of distributions out of money held by U S WEST Financing, and payments upon redemption of the Preferred Securities or liquidation of U S WEST Financing, are guaranteed by U S WEST to the extent described under "Description of the Preferred Securities Guarantees" in the accompanying Prospectus. The Preferred Guarantee Trustee, will hold the Preferred Securities Guarantee for the benefit of the holders of the Preferred Securities. The Preferred Securities Guarantee does not cover payment of distributions when U S WEST Financing does not have sufficient available funds to pay such distributions. In such event, the remedy of a holder of Preferred Securities is to vote to appoint a Special Regular Trustee and to direct the Property Trustee to enforce its rights under the Subordinated Debt Securities and the Debt Guarantee. See "Description of the Preferred Securities -- Voting Rights." DISTRIBUTIONS ____Distributions on the Preferred Securities will be fixed at a rate per annum of __% of the stated liquidation amount of $25 per Preferred Security. Distributions in arrears for more than one quarter will bear interest thereon at the rate per annum of __% thereof. The term "distributions" as used herein includes any such interest payable unless otherwise stated. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. S-11 ____Distributions on the Preferred Securities will be cumulative, will accrue from _________________ and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing _________________ when, as and if available for payment by the Property Trustee, except as otherwise described below. ____Capital Funding has the right under the Indenture to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period from time to time on the Subordinated Debt Securities which, if exercised, would defer quarterly distributions on the Preferred Securities (though such distributions would continue to accrue with interest since interest would continue to accrue on the Subordinated Debt Securities) during any such extended interest payment period. Such right to extend the interest payment period for the Subordinated Debt Securities is limited to a period not exceeding 20 consecutive quarters. In the event that Capital Funding exercises this right, then (a) U S WEST and Capital Funding shall not (and, if it is a wholly-owned subsidiary of U S WEST, U S WEST shall cause U S WEST Communications not to) declear or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, including, in the case of U S WEST, the Communications Stock and the Media Vision Stock, and (b) U S WEST and Capital Funding shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to the Subordinated Debt Securities. Prior to the termination of any such extension period, Capital Funding may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Upon the termination of any Extension Period and the payment of all amounts then due, Capital Funding may select a new Extension Period, subject to the above requirements. See "Description of the Subordinated Debt Securities and the Debt Guarantee -- Interest" and "-- Option to Extend Interest Payment Period." If distributions are deferred, the deferred distributions and accrued interest thereon shall be paid to holders of record of the Preferred Securities as they appear on the books and records of U S WEST Financing on the record date next following the termination of such deferral period. ____Distributions on the Preferred Securities must be paid on the dates payable to the extent that U S WEST Financing has funds available for the payment of such distributions in the Property Account. U S WEST Financing's funds available for distribution to the holders of the Preferred Securities will be limited to payments received under the Subordinated Debt Securities and the Debt Guarantee. See "Description of the Subordinated Debt Securities and the Debt Guarantee." The payment of distributions out of moneys held by U S WEST Financing is guaranteed by U S WEST to the extent set forth under "Description of the Preferred Securities Guarantees" in the accompanying Prospectus. ____Distributions on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of U S WEST Financing on the relevant record dates, which, as long as the Preferred Securities remain in book-entry only form, will be one Business Day (as defined herein) prior to the relevant payment dates. Such distributions will be paid through the Property Trustee, who will hold amounts received in respect of the Subordinated Debt Securities and the Debt Guarantee in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. In the event the Preferred Securities shall not continue to remain in book-entry only form, the Regular Trustees shall have the right to select relevant record dates which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which distributions are to be made on the Preferred Securities is not a Business Day, then payment of the distributions payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in the City of New York are authorized or required by law to close. S-12 MANDATORY REDEMPTION ____The Subordinated Debt Securities will mature on ___________, 2025, unless the maturity date is extended, and may be redeemed, in whole or in part, at any time on or after ___________, 2000 or at any time in certain circumstances upon the occurrence of a Tax Event. Upon the repayment of the Subordinated Debt Securities, whether at maturity or upon redemption, the proceeds from such repayment or payment shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debt Securities so repaid or redeemed at the Redemption Price; provided that holders of Trust Securities shall be given not less than 30 nor more than 60 days notice of such redemption. See "Description of the Subordinated Debt Securities and the Debt Guarantee." In the event that fewer than all of the outstanding Preferred Securities are to be redeemed, the Preferred Securities will be redeemed PRO RATA as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. SPECIAL EVENT REDEMPTION OR DISTRIBUTION ____"Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of such laws or regulations, there is more than an insubstantial risk that (i) U S WEST Financing would be subject to United States federal income tax with respect to income accrued or received on the Subordinated Debt Securities, (ii) interest payable to U S WEST Financing on the Subordinated Debt Securities would not be deductible by Capital Funding for United States federal income tax purposes or (iii) U S WEST Financing would be subject to more than a DE MINIMIS amount of other taxes, duties or other governmental charges, which change or amendment becomes effective on or after the date of this Prospectus Supplement. ____"Investment Company Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent counsel to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that U S WEST Financing is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after the date of this Prospectus Supplement. ____If, at any time, a Tax Event or an Investment Company Event (each, as defined above, a "Special Event") shall occur and be continuing, U S WEST Financing shall, except in the circumstances described below, be dissolved with the result that Subordinated Debt Securities with an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Trust Securities would be distributed to the holders of the Trust Securities, together with the Debt Guarantee, in liquidation of such holders' interests in U S WEST Financing on a pro rata basis, within 90 days following the occurrence of such Special Event; provided, however, that in the case of the occurrence of a Tax Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the holders of the Trust Securities will not recognize any gain or loss for United States federal income tax purposes as a result of such dissolution and distribution of Subordinated Debt Securities; and, provided, further, that, if at the time there is available to U S WEST Financing the opportunity to eliminate, within such 90 day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on U S WEST Financing, Capital Funding, U S WEST or the holders of the Trust Securities, U S WEST Financing will pursue such measure in lieu of dissolution. Furthermore, if in the case of the occurrence of a Tax Event, (i) Capital Funding has received an opinion (a "Redemption Tax Opinion") of nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that Capital Funding S-13 would be precluded from deducting the interest on the Subordinated Debt Securities for United States federal income tax purposes even after the Subordinated Debt Securities were distributed to the holders of Trust Securities in liquidation of such holders' interests in U S WEST Financing as described above or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to U S WEST Financing, Capital Funding shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Subordinated Debt Securities in whole or in part for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Trust Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debt Securities so redeemed shall be redeemed by U S WEST Financing at the Redemption Price on a pro rata basis; provided, however, that, if at the time there is available to Capital Funding or U S WEST Financing the opportunity to eliminate, within such 90 day period, the Tax Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on U S WEST Financing, Capital Funding, U S WEST or the holders of the Trust Securities, Capital Funding or U S WEST Financing will pursue such measure in lieu of redemption. ____If Subordinated Debt Securities, together with the Debt Guarantee, are distributed to the holders of the Preferred Securities, Capital Funding will use its best efforts to have the Subordinated Debt Securities listed on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. ____After the date for any distribution of Subordinated Debt Securities, together with the Debt Guarantee, upon dissolution of U S WEST Financing, (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) the depositary or its nominee, as the record holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Subordinated Debt Securities and the Debt Guarantee to be delivered upon such distribution and (iii) any certificates representing Preferred Securities not held by the depositary or its nominee will be deemed to represent Subordinated Debt Securities having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distribution on, such Preferred Securities, until such certificates are presented to Capital Funding or its agent for transfer or reissuance. ____There can be no assurance as to the market prices for the Preferred Securities or the Subordinated Debt Securities that may be distributed in exchange for the Preferred Securities if a dissolution and liquidation of U S WEST Financing were to occur. Accordingly, the Preferred Securities that an investor may purchase, or the Subordinated Debt Securities that the investor may receive on dissolution and liquidation of U S WEST Financing, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. REDEMPTION PROCEDURES ____U S WEST Financing may not redeem fewer than all of the outstanding Preferred Securities unless all accrued and unpaid distributions have been paid on all Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. ____If U S WEST Financing gives a notice of redemption in respect of Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York City time, on the redemption date, provided that Capital Funding has paid to the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Subordinated Debt Securities, U S WEST Financing will irrevocably deposit with the depositary funds sufficient to pay the applicable Redemption Price and will give the Depositary irrevocable instructions and authority to pay the Redemption Price to the holders of the Preferred Securities. See "-- Book-Entry Only Issuance -- The Depository Trust Company." If notice of redemption shall have been given and funds deposited as required, then immediately prior to the close of business on the date of such deposit, distributions will cease to accrue and all rights of holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other S-14 payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by U S WEST Financing or by U S WEST pursuant to the Preferred Securities Guarantee, distributions on such Preferred Securities will continue to accrue, from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. ____In the event that fewer than all of the outstanding Preferred Securities are to be redeemed, the Preferred Securities will be redeemed pro rata as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. ____Subject to the foregoing and to applicable law (including, without limitation, United States federal securities laws), U S WEST or its affiliates may, at any time and from time to time, purchase outstanding Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION ____In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of U S WEST Financing, the holders of the Preferred Securities at that time will be entitled to receive out of the assets of U S WEST Financing, after satisfaction of liabilities to creditors, distributions in an amount equal to the aggregate of the stated liquidation amount of $25 per Preferred Security plus accrued and unpaid distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such liquidation, dissolution, winding-up or termination, Subordinated Debt Securities in an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Preferred Securities have been distributed on a pro rata basis to the holders of Preferred Securities. ____If, upon any such dissolution, the Liquidation Distribution can be paid only in part because U S WEST Financing has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by U S WEST Financing on the Preferred Securities shall be paid on a pro rata basis. The holders of the Common Securities will be entitled to receive distributions upon any such dissolution pro rata with the holders of the Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Preferred Securities shall have a preference over the Common Securities. ____Pursuant to the Declaration, U S WEST Financing shall terminate (i) on ___________, 2050, the expiration of the term of U S WEST Financing, (ii) upon the bankruptcy of U S WEST, Capital Funding or the holder of the Common Securities, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to the holder of the Common Securities, U S WEST or Capital Funding, the filing of a certificate of cancellation with respect to U S WEST Financing, or the revocation of the charter of the holder of the Common Securities, U S WEST or Capital Funding and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) upon the distribution of the Subordinated Debt Securities, together with the Debt Guarantee, following the occurrence of a Special Event, (v) upon the redemption of all of the Trust Securities or (vi) upon the entry of a decree of a judicial dissolution of the holder of the Common Securities, U S WEST, Capital Funding or U S WEST Financing. DECLARATION EVENTS OF DEFAULT ____An event of default under the Indenture (an "Indenture Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"), provided that pursuant to the Declaration, the holder of the Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Common Securities until all Declaration Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Preferred Securities and only the holders of the Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration, and therefore the Indenture. S-15 ____Upon the occurrence of a Declaration Event of Default, the Property Trustee, as the sole holder of the Subordinated Debt Securities, will have the right under the Indenture to declare the principal of and interest on the Subordinated Debt Securities to be immediately due and payable. VOTING RIGHTS ____Except as provided below, under the Trust Act, the Trust Indenture Act and under "Description of the Preferred Securities Guarantees -- Amendments and Assignment" in the accompanying Prospectus and as otherwise required by law and the Declaration, the holders of the Preferred Securities will have no voting rights. ____If (i) U S WEST Financing fails to pay distributions in full on the Preferred Securities for 6 consecutive quarterly distribution periods or (ii) a Declaration Event of Default occurs and is continuing (each, an "Appointment Event"), then the holders of the Preferred Securities, acting as a single class, will be entitled by the majority vote of such holders to appoint a Special Regular Trustee. For purposes of determining whether U S WEST Financing has failed to pay distributions in full for 6 consecutive quarterly distribution periods, distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative distributions have been or contemporaneously are paid with respect to all quarterly distribution periods terminating on or prior to the date of payment of such cumulative distributions. Any holder of Preferred Securities (other than U S WEST or any of its affiliates) shall be entitled to nominate any person to be appointed as Special Regular Trustee. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees shall convene a meeting of the holders of Preferred Securities for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the holders of not less than 10% of the aggregate stated liquidation amount of the outstanding Preferred Securities will be entitled to convene such meeting. The provisions of the Declaration relating to the convening and conduct of the meetings of the holders will apply with respect to any such meeting. Any Special Regular Trustee so appointed shall cease to be a Special Regular Trustee if the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Notwithstanding the appointment of any Special Regular Trustee, Capital Funding shall retain all rights under the Indenture, including the right to defer payments of interest by extending the interest payment period as provided under "Description of the Subordinated Debt Securities and the Debt Guarantee -- Option to Extend Interest Payment Period." If such an extension occurs, there will be no Indenture Event of Default, and therefore no Declaration Event of Default, for failure to make any scheduled interest payment during the Extension Period on the date originally scheduled. ____The holders of a majority in aggregate liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as the holder of the Subordinated Debt Securities and Debt Guarantees, to (i) exercise the remedies available under the Indenture with respect to the Subordinated Debt Securities and Debt Guarantee, (ii) waive any past Indenture Event of Default which is waivable under Section 6.06 of the Base Indenture (as defined herein), or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debt Securities shall be due and payable, provided that where a consent under the Indenture would require the consent of more than a majority of the holders (a "Super-Majority") affected thereby, only the holders of at least such Super-Majority of the Preferred Securities may direct the Property Trustee to give such consent. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities or the Debt Guarantee, a holder of Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against Capital Funding or U S WEST to enforce the Property Trustee's rights under the Subordinated Debt Securities or the Debt Guarantee, as the case may be, without first instituting any legal proceeding against the Property Trustee or any other person or entity, including, in the case of the Debt Guarantee, against Capital Funding. The Property Trustee shall notify all holders of the Preferred Securities of any notice of default received from the Debt Trustee with respect to the Subordinated Debt Securities. Such notice shall state that such Indenture Event of Default also constitutes a Declaration Event of Default. Except in the case of directing the time, method and place of S-16 conducting a proceeding for a remedy, the Property Trustee shall not take any action described in clauses (i), (ii) or (iii) above unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, U S WEST Financing will not be classified as a corporation or a partnership for United States federal income tax purposes and that, following such action, each holder of Trust Securities will be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. In the event the consent of the Property Trustee, as the holder of the Subordinated Debt Securities and the Debt Guarantee, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Property Trustee shall request the direction of the holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the Trust Securities, voting together as a single class, provided that where a consent under the Indenture would require the consent of a Super-Majority, the Property Trustee may only give such consent at the direction of the holders of at least the proportion in liquidation amount of the Trust Securities which the relevant Super-Majority represents of the aggregate principal amount of the Subordinated Debt Securities outstanding. The Property Trustee shall not take any such action in accordance with the directions of the holders of the Trust Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, U S WEST Financing will not be classified as a corporation or a partnership for United States federal income tax purposes and that, following such action, each holder of Trust Securities will be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Any required approval or direction of holders of Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Preferred Securities will be required for U S WEST Financing to redeem and cancel Preferred Securities or distribute Subordinated Debt Securities in accordance with the Declaration. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities at such time that are owned by U S WEST or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, U S WEST shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. The procedures by which holders of Preferred Securities may exercise their voting rights are described below. See "-- Book-Entry Only Issuance -- The Depository Trust Company." Except in the limited circumstances described above in connection with the appointment of a Special Regular Trustee, holders of the Preferred Securities will have no rights to appoint or remove the U S WEST Trustees, who may be appointed, removed or replaced solely by U S WEST, as the direct or indirect holder of all the Common Securities. MODIFICATION OF THE DECLARATION The Declaration may be amended or modified if approved and executed by a majority of the Regular Trustees, provided that if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of U S WEST Financing other than pursuant to the terms of the Declaration, then the holders S-17 of the Trust Securities as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least 66 2/3% in liquidation amount of the Trust Securities affected thereby, provided that the right of holders of Preferred Securities to appoint a Special Regular Trustee shall not be modified without the consent of each holder of Preferred Securities, and provided, further, that if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause U S WEST Financing to be characterized for purposes of United States federal income taxation as an association taxable as a corporation or partnership or cause each holder of Trust Securities not to be treated as owning an undivided beneficial interest in the Subordinated Debt Securities, (ii) reduce or otherwise adversely affect the powers of the Property Trustee or (iii) cause U S WEST Financing to be deemed to be an "investment company" which is required to be registered under the 1940 Act. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS U S WEST Financing may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described below. U S WEST Financing may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of U S WEST Financing under the Trust Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Trust Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Trust Securities rank with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) Capital Funding expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Subordinated Debt Securities and U S WEST expressly acknowledges such trustee of such successor entity as the holder of the Debt Guarantee, (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose identical to that of U S WEST Financing, (vii) prior to such merger, consolidation, amalgamation or replacement, U S WEST has received an opinion of a nationally recognized independent counsel to U S WEST Financing experienced in such matters to the effect that (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), and (B) following such merger, consolidation, amalgamation or replacement, neither U S WEST Financing nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) U S WEST guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee and the guarantee of the Common Securities. Notwithstanding the foregoing, U S WEST Financing shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause U S WEST Financing or the S-18 successor entity to be classified as a corporation or a partnership for United States federal income tax purposes or, if as a result of such action, each holder of Trust Securities would not be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depositary for the Preferred Securities. The Preferred Securities will be issued only as fully registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully registered global Preferred Securities certificates will be issued, representing in the aggregate the total number of Preferred Securities, and will be deposited with DTC. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a global Preferred Security. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Securities ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. To facilitate subsequent transfers, all the Preferred Securities deposited by Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Preferred Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. S-19 Redemption notices shall be sent to Cede & Co. If less than all of the Preferred Securities are being redeemed, DTC will reduce pro rata the amount of the interest of each Direct Participant in the Preferred Securities to be redeemed; provided that if, as a result of such pro rata redemption, Direct Participants would hold fractional interests in the Preferred Securities, DTC will adjust the amount of the interest of each Direct Participant to be redeemed to avoid such fractional interests. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to U S WEST Financing as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Distribution payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the account of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, U S WEST Financing, Capital Funding or U S WEST, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of U S WEST Financing, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. Except as provided herein, a Beneficial Owner in a global Preferred Security will not be entitled to receive physical delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Preferred Securities. DTC may discontinue providing its services as securities depositary with respect to the Preferred Securities at any time by giving reasonable notice to U S WEST Financing. Under such circumstances, in the event that a successor securities depository is not obtained, Preferred Securities certificates are required to be printed and delivered. Additionally, the Regular Trustees (with the consent of U S WEST) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary) with respect to the Preferred Securities. In that event, certificates for the Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that U S WEST and U S WEST Financing believe to be reliable, but U S WEST and U S WEST Financing take no responsibility for the accuracy thereof. INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee, prior to the occurrence of a default with respect to the Trust Securities, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Property Trustee to take any action following a Declaration Event of Default. U S WEST and certain of its affiliates maintain a deposit account and banking relationship with the Property Trustee. The Property Trustee serves as trustee under the Preferred Securities Guarantee. The Property Trustee also serves as trustee under other indentures pursuant to which unsecured debt securities of affiliates of U S WEST are outstanding. S-20 REGISTRAR AND TRANSFER AGENT In the event that the Preferred Securities do not remain in book-entry only form, the following provisions would apply: The Property Trustee will act as paying agent and may designate an additional or substitute paying agent at any time. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of U S WEST Financing, but upon payment (with the giving of such indemnity as U S WEST Financing or U S WEST may require) in respect of any tax or other government charges which may be imposed in relation to it. U S WEST Financing will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. GOVERNING LAW The Declaration and the Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. MISCELLANEOUS The Regular Trustees are authorized and directed to operate U S WEST Financing in such a way so that (i) U S WEST Financing will not be deemed to be an "investment company" required to be registered under the 1940 Act or characterized for United States federal income tax purposes as an association taxable as a corporation or as a partnership and (ii) each holder of Trust Securities will be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. Capital Funding is authorized and directed to conduct its affairs so that the Subordinated Debt Securities will be treated as indebtedness of Capital Funding for United States federal income tax purposes. In this connection, the Regular Trustees and Capital Funding are authorized to take any action, not inconsistent with applicable law, the certificate of trust of U S WEST Financing, the Declaration or the certificate of incorporation of Capital Funding, that each of the Regular Trustees and Capital Funding determines in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect the interests of the holders of the Preferred Securities. DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES AND THE DEBT GUARANTEE Set forth below is a description of the specific terms of the Subordinated Debt Securities in which U S WEST Financing will invest with the proceeds of the issuance and sale of the Trust Securities. This description supplements the description of the general terms and provisions of the Subordinated Debt Securities set forth in the accompanying Prospectus under the caption "Description of the Subordinated Debt Securities and the Debt Guarantees." The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the description in the accompanying Prospectus and the Indenture (the "Base Indenture"), dated as of , 1995, among Capital Funding, U S WEST and Norwest Bank Minnesota, National Association, as Trustee (the "Debt Trustee"), as supplemented by a First Supplemental Indenture, dated as of , 1995 (the Base Indenture, as so supplemented, is hereinafter referred to as the "Indenture"), the forms of which are filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. Certain capitalized terms used herein are defined in the Indenture. Under certain circumstances involving the dissolution of U S WEST Financing following the occurrence of a Special Event, Subordinated Debt Securities may be distributed to the holders of Trust Securities in liquidation of U S WEST Financing. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." If the Subordinated Debt Securities are distributed to the holders of the Trust Securities, Capital Funding will use its best efforts to have the Subordinated Debt Securities listed on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. S-21 GENERAL The Subordinated Debt Securities will be issued as unsecured debt under the Indenture. The Subordinated Debt Securities will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate stated liquidation amount of the Preferred Securities and the capital contributed by Capital Funding in exchange for the Common Securities (the "U S WEST Payment"). The Subordinated Debt Securities are not subject to a sinking fund provision. The entire principal amount of the Subordinated Debt Securities will mature and become due and payable, together with any accrued and unpaid interest thereon, including Additional Interest (as defined herein), if any, on , 2025, subject to the election of Capital Funding to extend the scheduled maturity date of the Subordinated Debt Securities to a date not later than , 2044, provided that Capital Funding satisfies certain financial covenants. See "-- Option to Extend Maturity Date." The Subordinated Debt Securities will be fully and unconditionally guaranteed on a subordinated basis as to principal, premium, if any, and interest by U S WEST. See "Description of the Subordinated Debt Securities and the Debt Guarantees -- Debt Guarantees" in the accompanying Prospectus. If Subordinated Debt Securities are distributed to holders of the Preferred Securities in liquidation of such holders' interests in U S WEST Financing, such Subordinated Debt Securities will initially be issued as a Global Security (as defined below). As described herein, under certain limited circumstances, Subordinated Debt Securities may be issued in certificated form in exchange for a Global Security. See "-- Book-Entry and Settlement." In the event Subordinated Debt Securities are issued in certificated form, such Subordinated Debt Securities will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Subordinated Debt Securities issued as a Global Security will be made to the depositary for the Subordinated Debt Securities. In the event Subordinated Debt Securities are issued in certificated form, principal and interest will be payable, the transfer of the Subordinated Debt Securities will be registrable and Subordinated Debt Securities will be exchangeable for Subordinated Debt Securities of other denominations of a like aggregate principal amount at the corporate trust office of the Debt Trustee in New York, New York; provided, that payment of interest may be made at the option of Capital Funding by check mailed to the address of the persons entitled thereto. SUBORDINATION The Indenture provides that the Subordinated Debt Securities are subordinated and junior in right of payment to all Senior Indebtedness of Capital Funding and that the Debt Guarantee is subordinated and junior in right of payment to all Senior Indebtedness of U S WEST. No payment of principal of (including redemption and sinking fund payments), premium, if any, or interest on, the Subordinated Debt Securities and no payment under the Debt Guarantee may be made if any Senior Indebtedness of Capital Funding or U S WEST, as the case may be, is not paid when due, any applicable grace period with respect to such default has ended and such default has not been cured or waived or ceased to exist, or if the maturity of any Senior Indebtedness of Capital Funding or U S WEST, as the case may be, has been accelerated because of a default. Upon any distribution of assets of Capital Funding or U S WEST to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, premium, if any, and interest due or to become due on, all Senior Indebtedness of Capital Funding or U S WEST, as the case may be, must be paid in full before the holders of Subordinated Debt Securities or the Debt Guarantee are entitled to receive or retain any payment. The rights of the holders of the Subordinated Debt Securities and the Debt Guarantee will be subrogated to the rights of the holders of Senior Indebtedness of Capital Funding or U S WEST, as the case may be, to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Subordinated Debt Securities or the Debt Guarantee, as the case may be, are paid in full. In addition, the Subordinated Debt Securities and the Debt Guarantee will rank at least pari passu with all other subordinated debt securities and debt guarantees issued under the Base Indenture to other U S WEST Trusts or to other trusts, partnerships or other entities affiliated with U S WEST in connection with an issuance of securities similar to the Preferred Securities. S-22 The term "Senior Indebtedness" means, with respect to Capital Funding or U S WEST, (i) the principal, premium, if any, and interest in respect of (a) indebtedness of such obligor for money borrowed and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor including, without limitation, in the case of U S WEST, all obligations under its Liquid Yield Option Notes due 2011; (ii) all capital lease obligations of such obligor; (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such obligor for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that is by its terms subordinated to or PARI PASSU with the Subordinated Debt Securities or the Debt Guarantee, as the case may be, and (2) any indebtedness between or among such obligor or its affiliates. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. The Indenture does not limit the aggregate amount of Senior Indebtedness which may be issued by Capital Funding or U S WEST. As of December 31, 1994, Senior Indebtedness of U S WEST and Capital Funding aggregated approximately $3.5 billion and $1.4 billion, respectively. OPTIONAL REDEMPTION Capital Funding shall have the right to redeem the Subordinated Debt Securities, in whole or in part, from time to time, on or after , 2000, or at any time in certain circumstances upon the occurrence of a Tax Event as described under "Description of the Preferred Securities -- Special Event Redemption or Distribution," upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. If a partial redemption of the Preferred Securities resulting from a partial redemption of the Subordinated Debt Securities would result in the delisting of the Preferred Securities, Capital Funding may only redeem the Subordinated Debt Securities in whole. INTEREST Each Subordinated Debt Security shall bear interest at the rate of % per annum from the original date of issuance, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing June 30, 1995, to the person in whose name such Subordinated Debt Security is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. In the event the Subordinated Debt Securities shall not continue to remain in book-entry only form, Capital Funding shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Subordinated Debt Securities is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND MATURITY DATE The maturity date of the Subordinated Debt Securities is , 2025 (the "Scheduled Maturity Date"). Capital Funding, however, may, before the Scheduled Maturity Date, extend such maturity date no more than one time, for up to an additional 19 years from the Scheduled Maturity Date, provided that (a) Capital Funding is not in bankruptcy or otherwise insolvent, (b) Capital Funding is not in default on any S-23 subordinated debt securities issued to a U S WEST Trust or to any trustee of such trust in connection with an issuance of Trust Securities by such U S WEST Trust, (c) Capital Funding has made timely payments on the Subordinated Debt Securities for the immediately preceding 6 quarters without deferrals, (d) U S WEST Financing is not in arrears on payments of distributions on the Preferred Securities, (e) the Subordinated Debt Securities are rated Investment Grade by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization, and (g) the final maturity of the Subordinated Debt Securities is not later than the 49th anniversary of the issuance of the Preferred Securities. Pursuant to the Declaration, the Regular Trustees are required to give notice of Capital Funding's election to extend the Scheduled Maturity Date to the holders of the Preferred Securities. OPTIONS TO EXTEND INTEREST PAYMENT PERIOD Capital Funding shall have the right at any time, and from time to time, during the term of the Subordinated Debt Securities to defer payments of interest by extending the interest payment period for a period not exceeding 20 consecutive Extension Periods, at the end of which Extension Period, Capital Funding shall pay all interest then accrued and unpaid (including any Additional Interest (as defined herein)) (together with interest thereon at the rate specified for the Subordinated Debt Securities to the extent permitted by applicable law); provided, that, during any such Extension Period, (a) U S WEST and Capital Funding shall not (and, if it is a wholly-owned subsidiary of U S WEST, U S WEST shall cause U S WEST Communications not to) declare or pay any dividend or, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, including, in the case of U S WEST, the Communications Stock and the Media Vision Stock, and (b) U S WEST and Capital Funding shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to the Subordinated Debt Securities. Prior to the termination of any such Extension Period, Capital Funding may further defer payments of interest by extending the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Upon the termination of any Extension Period and the payment of all amounts then due, Capital Funding may select a new Extension Period, subject to the above requirements. No interest during an Extension Period, except at the end thereof, shall be due and payable. Capital Funding has no present intention of exercising its rights to defer payments of interest by extending the interest payment period on the Subordinated Debt Securities. If the Property Trustee shall be the sole holder of the Subordinated Debt Securities, Capital Funding shall give the Regular Trustees and the Property Trustee notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the Preferred Securities are payable or (ii) the date the Regular Trustees are required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such distribution is payable, but in any event not less than one Business Day prior to such record date. The Regular Trustees shall give notice of Capital Funding's selection of such Extension Period to the holders of the Preferred Securities. If the Property Trustee shall not be the sole holder of the Subordinated Debt Securities, Capital Funding shall give the holders of the Subordinated Debt Securities notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date Capital Funding is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Subordinated Debt Securities of the record or payment date of such related interest payment. ADDITIONAL INTEREST If at any time U S WEST Financing shall be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, Capital Funding will pay as additional interest ("Additional Interest") such additional amounts as shall be required so that the net amounts received and retained by U S WEST Financing after paying any such taxes, duties, assessments or other governmental charges will be not less than the amounts U S WEST Financing would have received had no such taxes, duties, assessments or other governmental charges been imposed. S-24 INDENTURE EVENTS OF DEFAULT In case any Indenture Event of Default shall occur and be continuing, the Property Trustee, as the holder of the Subordinated Debt Securities, will have the right to declare the principal of and the interest on the Subordinated Debt Securities (including any Additional Interest, if any) and any other amounts payable under the Indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Subordinated Debt Securities. See "Description of the Subordinated Debt Securities and the Debt Guarantees -- Events of Default" in the accompanying Prospectus for a description of the Events of Default. An Indenture Event of Default also constitutes a Declaration Event of Default. The holders of Preferred Securities in certain circumstances have the right to direct the Property Trustee to exercise its rights as the holder of the Subordinated Debt Securities and the Debt Guarantee. See "Description of the Preferred Securities -- Declaration Events of Default" and "-- Voting Rights." BOOK-ENTRY AND SETTLEMENT If distributed to holders of Preferred Securities in connection with the voluntary or involuntary dissolution, winding-up or liquidation of U S WEST Financing as a result of the occurrence of a Special Event, the Subordinated Debt Securities will be issued in the form of one or more global certificates (each, a "Global Security") registered in the name of the depositary or its nominee. Except under the limited circumstances described below, Subordinated Debt Securities represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Subordinated Debt Securities in definitive form. The Global Securities described above may not be transferred except by the depositary to a nominee of the depositary or by a nominee of the depositary to the depositary or another nominee of the depositary or to a successor depositary or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Subordinated Debt Securities in definitive form and will not be considered the holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Subordinated Debt Securities shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the depositary or its nominee or to a successor depositary or its nominee. Accordingly, each beneficial owner must rely on the procedures of the depositary and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. THE DEPOSITARY. If Subordinated Debt Securities are distributed to holders of Preferred Securities in liquidation of such holders' interests in U S WEST Financing, DTC will act as securities depositary for the Subordinated Debt Securities. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company." As of the date of this Prospectus Supplement, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. Capital Funding may appoint a successor to DTC or any successor depositary in the event DTC or such successor depositary is unable or unwilling to continue as depositary. None of U S WEST, Capital Funding, U S WEST Financing, the Debt Trustee, any paying agent and any other agent of U S WEST, Capital Funding or the Debt Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Subordinated Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DISCONTINUANCE OF THE DEPOSITARY'S SERVICES. A Global Security shall be exchangeable for Subordinated Debt Securities registered in the names of persons other than the depositary or its nominee only if (i) the depositary notifies Capital Funding that it is unwilling or unable to continue as a depositary for such Global S-25 Security and no successor depositary shall have been appointed, or if at any time the depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, at a time when the depositary is required to be so registered to act as such depositary and no successor depositary shall have been appointed, (ii) Capital Funding in its sole discretion determines that such Global Security shall be so exchangeable or (iii) there shall have occurred an Event of Default with respect to such Subordinated Debt Securities. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Subordinated Debt Securities registered in such names as the depositary shall direct. It is expected that such instructions will be based upon directions received by the depositary from its Participants with respect to ownership of beneficial interests in such Global Security. MISCELLANEOUS The Indenture will provide that Capital Funding will pay all fees and expenses related to (i) the offering of the Trust Securities and the Subordinated Debt Securities, (ii) the organization, maintenance and dissolution of U S WEST Financing, (iii) the retention of the U S WEST Trustees and (iv) the enforcement by the Property Trustee of the rights of holders of Preferred Securities. The payment of such fees and expenses will be fully and unconditionally guaranteed by U S WEST. EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES, THE DEBT GUARANTEE AND THE PREFERRED SECURITIES GUARANTEE As set forth in the Declaration, the sole purpose of U S WEST Financing is to issue Trust Securities and invest the proceeds thereof in the Subordinated Debt Securities. As long as payments of interest and other payments are made when due on the Subordinated Debt Securities, such payments will be sufficient to cover distributions and payments due on the Trust Securities primarily because (i) the aggregate principal amount of Subordinated Debt Securities will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and interest and other payment dates on the Subordinated Debt Securities will match the distribution rate and distribution and other payment dates for the Preferred Securities; (iii) Capital Funding shall pay for all costs and expenses of U S WEST Financing; and (iv) the Declaration provides that the U S WEST Trustees shall not cause or permit U S WEST Financing to, among other things, engage in any activity that is not consistent with the purposes of U S WEST Financing. Payments of distributions (to the extent funds therefor are available) and other payments due on the Preferred Securities (to the extent funds therefor are available) are guaranteed by U S WEST as and to the extent set forth under "Description of the Preferred Securities Guarantees" in the accompanying Prospectus. If Capital Funding does not make interest payments on the Subordinated Debt Securities purchased by U S WEST Financing and U S WEST does not make payments under the Debt Guarantee, it is expected that U S WEST Financing will not have sufficient funds to pay distributions on the Preferred Securities. The Preferred Securities Guarantee is a full and unconditional guarantee from the time of its issuance, but does not apply to any payment of distributions unless and until U S WEST Financing has sufficient funds for the payment of such distributions. If Capital Funding fails to make interest or other payments on the Subordinated Debt Securities when due (taking account of any Extension Period) and U S WEST fails to make payments under the Debt Guarantee with respect to such payments due on the Subordinated Debt Securities, the Declaration provides a mechanism whereby the holders of the Preferred Securities, using the procedures described in "Description of the Preferred Securities -- Voting Rights," may (i) appoint a Special Regular Trustee and (ii) direct the Property Trustee to enforce its rights under the Subordinated Debt Securities and Debt Guarantee, including proceeding directly against U S WEST to enforce the Debt Guarantee without first proceeding against Capital Funding under the Subordinated Debt Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities or the Debt Guarantee, a holder of Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against Capital Funding or U S WEST to enforce the S-26 Property Trustee's rights under the Subordinated Debt Securities or the Debt Guarantee, as the case may be, without first instituting any legal proceeding against the Property Trustee or any other person or entity, including, in the case of the Debt Guarantee, against Capital Funding. If U S WEST fails to make payments under the Preferred Securities Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the holders of the Preferred Securities may direct the Preferred Trustee to enforce its rights thereunder. If the Preferred Trustee fails to enforce the Preferred Securities Guarantee, any holder of Preferred Securities may, after a period of 30 days has elapsed from such holders written request to the Preferred Trustee to enforce the Preferred Securities Guarantee, institute a legal proceeding directly against U S WEST to enforce the Preferred Trustee's rights under the Preferred Securities Guarantee, without first instituting a legal proceeding against U S WEST Financing, the Preferred Trustee or any other person or entity. U S WEST and U S WEST Financing believe that the above mechanisms and obligations, taken together, are equivalent to a full and unconditional guarantee by U S WEST of payments due on the Preferred Securities. See "Description of the Preferred Securities Guarantees -- General" in the accompanying Prospectus. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a summary of certain of the principal United States federal income tax consequences of the purchase, ownership and disposition of the Preferred Securities to a holder that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized under the laws of the United States or any state thereof or the District of Columbia or an estate or trust the income of which is subject to United States federal income taxation regardless of source (a "U.S. Holder"). This summary does not address the United States federal income tax consequences to persons other than U.S. Holders. This summary is based on the United States federal income tax laws, regulations and rulings and decisions now in effect, all of which are subject to change, possibly on a retroactive basis. This summary does not address the tax consequences applicable to investors that may be subject to special tax rules such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors or persons that will hold the Preferred Securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment or as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of Preferred Securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Preferred Securities. CLASSIFICATION OF U S WEST FINANCING Upon the issuance of the Preferred Securities, Weil, Gotshal & Manges, counsel to U S WEST, Capital Funding and U S WEST Financing, will issue its opinion (the "Tax Opinion") to the effect that, under then current law and assuming full compliance with the terms of the Indenture and the Declaration (and certain other documents), and based on certain facts and assumptions contained in such opinion, U S WEST Financing will not be classified, for United States federal income tax purposes, as an association taxable as a corporation or a partnership, but rather, each holder of Preferred Securities will be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. Accordingly, each holder will be required to include in its gross income the original issue discount ("OID") accrued with respect to its allocable share of those Subordinated Debt Securities. Investors should be aware that the Tax Opinion does not address any other issue and is not binding on the Internal Revenue Service (the "Service") or the courts. ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT Because of the option that Capital Funding has, under the terms of the Subordinated Debt Securities, to defer payments of interest by extending interest payment periods for up to 20 quarters, all of the stated interest payments on those Subordinated Debt Securities will be treated as "original issue discount." S-27 Holders of debt instruments issued with OID must include that discount in income on an economic accrual basis before the receipt of cash attributable to the interest, regardless of their method of tax accounting. The amount of OID that accrues in any month will approximately equal the amount of the interest that accrues in that month at the stated interest rate. In the event that the interest payment period is extended, holders will continue to accrue OID approximately equal to the amount of the interest payment due at the end of the extended interest payment period on an economic accrual basis over the length of the extended interest period. Because income on the Preferred Securities will constitute OID, corporate holders of Preferred Securities will not be entitled to a dividends-received deduction with respect to any income earned on the Preferred Securities. To the extent a holder acquires its Preferred Securities at a price that is greater or less than the adjusted issue price of such holder's share of the Subordinated Debt Securities (which generally should approximate par plus accrued but unpaid interest), the holder may be deemed to have acquired its interest in the Subordinated Debt Securities with acquisition premium or with market discount, as the case may be. A holder who purchases Preferred Securities at a premium will be permitted to reduce the amount of OID required to be included in income to reflect the acquisition premium. A holder who purchases Preferred Securities at a market discount will also include the amount of such discount in income in accordance with the market discount rules described below. A holder that acquires its undivided beneficial interest in the Subordinated Debt Securities at a market discount generally will be required to recognize ordinary income to the extent of accrued market discount on the Debt Securities upon the retirement of the underlying Debt Securities or, to the extent of any gain, upon the disposition of the Preferred Securities. Such market discount would accrue ratably, or, at the election of the holder, under a constant yield method over the remaining term of the Subordinated Debt Securities. A holder will also be required to defer the deduction of a portion of the interest paid or accrued on indebtedness incurred to purchase or carry Preferred Securities that represent Subordinated Debt Securities acquired with market discount. In lieu of the foregoing, a holder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such holder in the taxable year of the election or thereafter, in which case the interest deferral rule will not apply. A holder may elect, in lieu of applying the market discount or premium rules described above, to account for all income under the Subordinated Debt Securities as if it were OID. A holder that makes this election and that is considered to have acquired its undivided beneficial interest in the Subordinated Debt Securities with market discount will be considered to have made the election described in the immediately preceding paragraph. RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF U S WEST FINANCING Under certain circumstances, as described under the caption "Description of the Preferred Securities -- Special Event Redemption or Distribution," Subordinated Debt Securities may be distributed to holders in exchange for the Preferred Securities and in liquidation of U S WEST Financing. Under a revenue ruling issued by the Service, such a distribution would be treated as a non-taxable event to each holder and each holder would receive an aggregate tax basis in the Subordinated Debt Securities equal to such holder's aggregate tax basis in its Preferred Securities. A holder's holding period in the Subordinated Debt Securities so received in liquidation of U S WEST Financing would include the period for which the Preferred Securities were held by such holder. SALES OF CERTIFICATES A holder that sells Preferred Securities will recognize gain or loss equal to the difference between its adjusted tax basis in the securities and the amount realized on the sale. A holder's adjusted tax basis in the Preferred Securities generally will be its initial purchase price increased by original issue discount previously includible in such holder's gross income to the date of disposition (and the accrual of market discount, if any) and decreased by payments received on the Preferred Securities. Subject to the market discount rules described above, any such gain or loss generally will be capital gain or loss. S-28 The Preferred Securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debt Securities. A holder who disposes of his Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Subordinated Debt Securities through the date of disposition in income as ordinary income (i.e., OID), and to add such amount to his adjusted tax basis in his pro rata share of the underlying Subordinated Debt Securities deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. INFORMATION REPORTING TO HOLDERS Subject to the qualifications discussed below, income on the Preferred Securities will be reported to holders on Forms 1099, which forms should be mailed to holders of Preferred Securities by January 31 following each calendar year. U S WEST Financing will be obligated to report annually to Cede & Co., as holder of record of the Preferred Securities, the OID related to the Subordinated Debt Securities that accrued during that year. U S WEST Financing currently intends to report such information on Form 1099 prior to January 31 following each calendar year even though U S WEST Financing is not legally required to report to record holders until April 15 following each calendar year. The Underwriters have indicated to U S WEST Financing that, to the extent that they hold Preferred Securities as nominees for beneficial holders, they currently expect to report to such beneficial holders on Forms 1099 by January 31 following each calendar year. Under current law, holders of Preferred Securities who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to U S WEST Financing. U S WEST Financing, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, beneficial holders of Preferred Securities who hold their Preferred Securities through the Underwriters will receive Forms 1099 reflecting the income on their Preferred Securities from such nominee holders rather than U S WEST Financing. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of, the Preferred Securities may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a credit against the holder's federal income tax, provided the required information is provided to the Service. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. S-29 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement (the "Underwriting Agreement"), U S WEST Financing has agreed to sell to each of the Underwriters named below, and each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representatives (the "Representatives"), has severally agreed to purchase the number of Preferred Securities set forth opposite its name below. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Preferred Securities offered hereby if any of the Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
NUMBER OF PREFERRED UNDERWRITER SECURITIES - --------------------------------------------------------------------------------- ---------- Merrill Lynch, Pierce, Fenner & Smith Incorporated........................................................... ---------- Total.................................................................. ---------- ----------
The Underwriters propose to offer the Preferred Securities in part directly to the public at the initial public offering price, as set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $. per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $. per Preferred Security to certain brokers and dealers. After the Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. In view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Subordinated Debt Securities of Capital Funding, the Underwriting Agreement provides that Capital Funding will agree to pay as compensation ("Underwriters' Compensation") for the Underwriters' arranging the investment therein of such proceeds, an amount in New York Clearing House (next day) funds of $. per Preferred Security (or $ in the aggregate) for the accounts of the several Underwriters, provided that such compensation for sales of 10,000 or more Preferred Securities to any single purchaser will be $. per Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriter's Compensation will be less than the aggregate amount specified in the preceding sentence. During a period of 30 days from the date of the Prospectus Supplement, neither U S WEST Financing, U S WEST nor Capital Funding will, without the prior written consent of the Underwriters, directly or indirectly, sell, offer to sell, grant any option for the sale of, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for Preferred Securities or any equity securities substantially similar to the Preferred Securities (except for any series of subordinated debt securities and the Preferred Securities offered hereby). S-30 The Preferred Securities have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. Trading of the Preferred Securities on the New York Stock Exchange is expected to commence within a 30 day period after the initial delivery of the Preferred Securities. The Representatives have advised U S WEST Financing that they intend to make a market in the Preferred Securities prior to the commencement of trading on the New York Stock Exchange. The Representatives will have no obligation to make a market in the Preferred Securities, however, and may cease market making activities, if commenced, at any time. Prior to this offering, there has been no public market for the Preferred Securities. In order to meet one of the requirements for listing the Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial holders. U S WEST, Capital Funding and U S WEST Financing have agreed to indemnify the Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act of 1933, as amended. Certain of the Underwriters engage in transactions with, and, from time to time, have performed services for, U S WEST and its subsidiaries in the ordinary course of business. LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon on behalf of U S WEST Financing by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to U S WEST Financing. The validity of the Subordinated Debt Securities, the Preferred Securities Guarantee, the Debt Guarantee and certain matters relating thereto will be passed upon on behalf of U S WEST and Capital Funding by Weil, Gotshal & Manges, New York, New York and on behalf of the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New York. Weil, Gotshal & Manges and Skadden, Arps, Slate, Meagher & Flom will rely on the opinion of Stephen E. Brilz, Senior Attorney and Assistant Secretary of U S WEST, as to all matters of Colorado law. Certain United States federal income taxation matters will be passed upon for U S WEST, Capital Funding and U S WEST Financing by Weil, Gotshal & Manges. S-31 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED MAY 1, 1995 PROSPECTUS [LOGO] $1,000,000,000 U S WEST CAPITAL FUNDING, INC. SUBORDINATED DEBT SECURITIES UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY U S WEST, INC. ------------ U S WEST FINANCING I U S WEST FINANCING II U S WEST FINANCING III PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY U S WEST, INC. ------------ U S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding") and a wholly-owned subsidiary of U S WEST, Inc., a Colorado corporation ("U S WEST"), may from time to time offer its subordinated debt securities (the "Subordinated Debt Securities") in one or more series and in amounts, at prices and on terms to be determined at the time of the offering. The Subordinated Debt Securities when issued will be unsecured obligations of Capital Funding and will be fully and unconditionally guaranteed as to payment of principal, premium, if any, and interest by U S WEST (the "Debt Guarantees"). Capital Funding's obligations under the Subordinated Debt Securities and U S WEST's obligations under the Debt Guarantees will be subordinate and junior in right of payment to certain other indebtedness of Capital Funding and U S WEST, respectively, as may be described in an accompanying Prospectus Supplement (the "Prospectus Supplement"). U S WEST Financing I, U S WEST Financing II and U S WEST Financing III (each, a "U S WEST Trust"), each a statutory business trust formed under the laws of Delaware, may from time to time offer preferred securities evidencing undivided beneficial interests in the assets of the respective U S WEST Trust ("Preferred Securities"). The payment of periodic cash distributions ("distributions") with respect to Preferred Securities of each of the U S WEST Trusts, out of moneys held by each of the U S WEST Trusts, and payments on liquidation, redemption or otherwise with respect to such Preferred Securities will be guaranteed by U S WEST to the extent described herein (each, a "Preferred Securities Guarantee"). U S WEST's obligations under the Preferred Securities Guarantees will be subordinate and junior in right of payment to all other liabilities of U S WEST and PARI PASSU with the most senior preferred stock issued by U S WEST. Subordinated Debt Securities may be issued and sold from time to time in one or more series by Capital Funding to a U S WEST Trust in connection with the investment of the proceeds from the offering of Preferred Securities and Common Securities (as defined herein) of such U S WEST Trust. The Subordinated Debt Securities subsequently may be distributed pro rata to holders of Preferred Securities and Common Securities in connection with the dissolution of such U S WEST Trust upon the occurrence of certain events as may be described in the Prospectus Supplement. Specific terms of the particular Subordinated Debt Securities of any series or the Preferred Securities of any U S WEST Trust in respect of which this Prospectus is being delivered (the "Offered Securities") will be set forth in the accompanying Prospectus Supplement with respect to such series of Subordinated Debt Securities or such Preferred Securities, which will describe, without limitation and where applicable the following: (i) in the case of Subordinated Debt Securities, the specific designation, aggregate principal amount, denomination, maturity, premium, if any, interest rate (or the method of determining such rate), if any, dates on which premium, if any, and interest, if any, will be payable, any redemption provisions, any sinking fund provisions, the initial public offering price, the subordination terms, any listing on a securities exchange and any other terms and (ii) in the case of Preferred Securities, the specific designation, number of Preferred Securities, distribution rate (or the method of determining such rate), dates on which distributions will be payable, liquidation amount, voting rights (if any), any redemption provisions, terms for any conversion or exchange into other securities (if any), the initial public offering price, any listing on a securities exchange, and any other rights, preferences, privileges, limitations and restrictions. The Offered Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Offered Securities shall not exceed $1,000,000,000. The Prospectus Supplement relating to any series of Offered Securities will contain information concerning certain United States federal income tax considerations, if applicable to the Offered Securities. --------------------- 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 May , 1995. The Offered Securities will be sold directly, through agents, underwriters or dealers as designated from time to time, or through a combination of such methods. If agents or any dealers or underwriters are involved in the sale of the Offered Securities in respect of which this Prospectus is being delivered, the names of such agents, dealers or underwriters and any applicable commissions or discounts will be set forth in or may be calculated from the Prospectus Supplement with respect to such Offered Securities. NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED BY U S WEST, CAPITAL FUNDING OR ANY OF THE U S WEST TRUSTS 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 CAPITAL FUNDING, ANY OF THE U S WEST TRUSTS OR U S WEST 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 Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. 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's common stock are listed. Capital Funding, the U S WEST Trusts and U S WEST 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") relating to the Offered Securities 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. No separate financial statements of Capital Funding or any of the U S WEST Trusts have been included herein. U S WEST does not consider that such financial statements would be material to holders of the Offered Securities because: (i) Capital Funding and each U S WEST Trust is a direct or indirect wholly-owned subsidiary of U S WEST, a reporting company under the Exchange Act, (ii) neither Capital Funding nor any U S WEST Trust has any independent operations but exists for the sole purpose of issuing, in the case of Capital Funding, debt securities guaranteed by U S WEST, and, in the case of the U S WEST Trusts, securities representing undivided beneficial interests in the assets of the U S WEST Trusts and investing the proceeds thereof in Subordinated Debt Securities guaranteed by U S WEST, and (iii) the obligations of Capital Funding under the Subordinated Debt Securities are fully and unconditionally guaranteed by U S WEST, and the obligations of each U S WEST Trust under the Trust Securities, to the extent funds are available therefor, are fully and unconditionally guaranteed by U S WEST. See "Description of the Preferred Securities Guarantees" and "Description of the Subordinated Debt Securities and the Debt Guarantees." 2 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, 1994, and (ii) Current Reports on Form 8-K dated January 19, 1995, April 10, 1995 and April 18, 1995. 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 or in any Prospectus Supplement shall be deemed to be modified or superseded for purposes of this Prospectus or in any Prospectus Supplement to the extent that a statement contained herein or therein (or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or therein) 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 or any Prospectus Supplement. U S WEST 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). ------------------------ 3 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 for the sole purpose of providing 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). THE U S WEST FINANCING TRUSTS Each of U S WEST Financing I, U S WEST Financing II and U S WEST Financing III is a statutory business trust formed under Delaware law pursuant to (i) a separate declaration of trust (each, a "Declaration") executed by U S WEST, as sponsor for such trust (the "Sponsor") and the U S WEST Trustees (as defined herein) of such trust and (ii) the filing of a certificate of trust with the Delaware Secretary of State on March 1, 1995. Each U S WEST Trust exists for the exclusive purposes of (i) issuing the Preferred Securities and common securities representing undivided beneficial interests in the assets of such Trust (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities"), (ii) investing the gross proceeds of the Trust Securities in the Subordinated Debt Securities and (iii) engaging in only those other activities necessary or incidental thereto. All of the Common Securities will be directly or indirectly owned by U S WEST. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities except that upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. U S WEST will, directly or indirectly, acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of each U S WEST Trust. Each U S WEST Trust has a term of approximately 55 years, but may earlier terminate as provided in the Declaration. Each U S WEST Trust's business and affairs will be conducted by the trustees (the "U S WEST Trustees") appointed by U S WEST, as the direct or indirect holder of all the Common Securities. The holder of the Common Securities will be entitled to appoint, remove or replace any of, or increase or reduce the number of, the U S WEST Trustees of a U S WEST Trust. The duties and obligations of such U S WEST Trustees shall be governed by the Declaration of such U S WEST Trust. A majority of the U S WEST Trustees (the "Regular Trustees") of each U S WEST Trust will be persons who are employees or officers of or affiliated with U S WEST. In certain limited circumstances set forth in a Prospectus Supplement, the holders of a majority of the Preferred Securities will be entitled to appoint one additional Regular Trustee, who need not be an employee or officer of or otherwise affiliated with U S WEST. One U S WEST Trustee of each U S WEST Trust will be a financial institution which will be unaffiliated with U S WEST and which shall act as property trustee and as indenture trustee for purposes of the Trust Indenture Act of 1939 (the "Trust Indenture Act"), pursuant to the terms set forth in a Prospectus Supplement (the "Property Trustee"). In addition, unless the Property Trustee maintains a principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, one U S WEST Trustee of each U S WEST Trust will have its principal place of business or reside in the State of Delaware. Capital Funding will pay all fees and expenses related to the U S WEST Trusts and the offering of Trust Securities, the payment of which will be guaranteed by U S WEST. The office of the Delaware Trustee for each U S WEST Trust in the State of Delaware is 300 King Street, Wilmington, Delaware 19801. The principal place of business of each U S WEST Trust shall be c/o U S WEST, Inc., 7800 East Orchard Road, Englewood, Colorado 80111 (telephone number (303) 793-6500). U S WEST, INC. U S WEST is a diversified global communications company engaged in the telecommunications, directory publishing, wireless communications and multimedia businesses. Telecommunications services are provided by U S WEST's principal subsidiary to more than 25 million residential and business customers in the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming (collectively, the "U S WEST Region"). Directory publishing, wireless communications and multimedia services are provided by other U S WEST subsidiaries 4 to customers both inside and outside the U S WEST Region. U S WEST was incorporated in 1983 under the laws of the State of Colorado and has its principal executive offices at 7800 Orchard Road, Englewood, Colorado 80111 (telephone number (303) 793-6500). RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges from continuing operations 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. Fixed charges include interest on indebtedness (excluding discontinued operations) and the portion of rentals representative of the interest factor.
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 4.07 3.11 3.85 2.38 4.85
USE OF PROCEEDS Each U S WEST Trust will invest all proceeds received from the sale of its Trust Securities in Subordinated Debt Securities. Unless otherwise specified in the Prospectus Supplement, Capital Funding will apply the net proceeds from the sale of the Subordinated 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 the reduction of short-term and long-term borrowings and other business opportunities. DESCRIPTION OF THE PREFERRED SECURITIES Each U S WEST Trust may issue, from time to time, only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration of each U S WEST Trust authorizes the Regular Trustees of such U S WEST Trust to issue on behalf of such U S WEST Trust one series of Preferred Securities. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the Declaration or made part of the Declaration by the Trust Indenture Act. Reference is made to the Prospectus Supplement relating to the Preferred Securities of a U S WEST Trust for specific terms, including (i) the distinctive designation of such Preferred Securities; (ii) the number of Preferred Securities issued by such U S WEST Trust; (iii) the annual distribution rate (or method of determining such rate) for Preferred Securities issued by such U S WEST Trust and the date or dates upon which such distributions shall be payable; provided, however, that distributions on such Preferred Securities shall be payable on a quarterly basis to holders of such Preferred Securities as of a record date in each quarter during which such Preferred Securities are outstanding; (iv) whether distributions on Preferred Securities issued by such U S WEST Trust shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions on Preferred Securities issued by such U S WEST Trust shall be cumulative; (v) the amount or amounts which shall be paid out of the assets of such U S WEST Trust to the holders of Preferred Securities of such U S WEST Trust upon voluntary or involuntary dissolution, winding-up or termination of such U S WEST Trust; (vi) the obligation, if any, of such U S WEST Trust to purchase or redeem Preferred Securities issued by such U S WEST Trust and the price or prices at which, the period or periods within which, and the terms and conditions upon which, Preferred Securities issued by such U S WEST Trust shall be purchased or redeemed, in whole or in part, pursuant to such obligation; (vii) the voting rights, if any, of Preferred Securities issued by such U S WEST Trust in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the holders of Preferred Securities, or of Preferred Securities issued by one or more U S WEST Trusts, or of both, as a condition to specified action or amendments to the Declaration of such U S WEST Trust; and (viii) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by such U S WEST Trust not inconsistent with the Declaration 5 of such U S WEST Trust or with applicable law. All Preferred Securities offered hereby will be guaranteed by U S WEST to the extent set forth below under "Description of the Preferred Securities Guarantees." Any applicable United States federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of Preferred Securities, each U S WEST Trust will issue one series of Common Securities. The Declaration of each U S WEST Trust authorizes the Regular Trustees of such trust to issue on behalf of such U S WEST Trust one series of Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by a U S WEST Trust will be substantially identical to the terms of the Preferred Securities issued by such trust and the Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities except that, upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. Except in certain limited circumstances, the Common Securities will also carry the right to vote to appoint, remove or replace any of the U S WEST Trustees of a U S WEST Trust. All of the Common Securities of a U S WEST Trust will be directly or indirectly owned by U S WEST. DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES Set forth below is a summary of information concerning the Preferred Securities Guarantees which will be executed and delivered by U S WEST for the benefit of the holders from time to time of Preferred Securities. Each Preferred Securities Guarantee will be qualified as an indenture under the Trust Indenture Act. The First National Bank of Chicago will act as indenture trustee under each Preferred Securities Guarantee (the "Preferred Guarantee Trustee"). The terms of each Preferred Securities Guarantee will be those set forth in such Preferred Securities Guarantee and those made part of such Preferred Securities Guarantee by the Trust Indenture Act. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of Preferred Securities Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. Each Guarantee will be held by the Preferred Guarantee Trustee for the benefit of the holders of the Preferred Securities of the applicable U S WEST Trust. GENERAL Pursuant to each Preferred Securities Guarantee, U S WEST will irrevocably and unconditionally agree, to the extent set forth therein, to pay in full, to the holders of the Preferred Securities issued by a U S WEST Trust, the Guarantee Payments (as defined herein) (except to the extent paid by such U S WEST Trust), as and when due, regardless of any defense, right of set-off or counterclaim which such U S WEST Trust may have or assert. The following payments with respect to Preferred Securities issued by a U S WEST Trust, to the extent not paid by such U S WEST Trust (the "Guarantee Payments"), will be subject to the Preferred Securities Guarantee thereon (without duplication): (i) any accrued and unpaid distributions which are required to be paid on such Preferred Securities, to the extent such U S WEST Trust shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid distributions (the "Redemption Price"), to the extent such U S WEST Trust has funds available therefor with respect to any Preferred Securities called for redemption by such U S WEST Trust and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of such U S WEST Trust (other than in connection with the distribution of Subordinated Debt Securities to the holders of Preferred Securities or the redemption of all of the Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment, to the extent such U S WEST Trust has funds available therefor and (b) the amount of assets of such U S WEST Trust remaining available for distribution to holders of such Preferred Securities in liquidation of such U S WEST Trust. U S WEST's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by U S WEST to the holders of Preferred Securities or by causing the applicable U S WEST Trust to pay such amounts to such holders. 6 Each Preferred Securities Guarantee will be a full and unconditional guarantee with respect to the Preferred Securities issued by the applicable U S WEST Trust from the time of issuance of such Preferred Securities, but will not apply to any payment of distributions except to the extent such U S WEST Trust shall have funds available therefor. If Capital Funding does not make interest payments on the Subordinated Debt Securities purchased by a U S WEST Trust and U S WEST does not fulfill its obligations under the Debt Guarantee relating to such Subordinated Debt Securities, such U S WEST Trust will not pay distributions on the Preferred Securities issued by such U S WEST Trust and will not have funds available therefor. See "Description of the Subordinated Debt Securities and the Debt Guarantees -- Certain Covenants." U S WEST has also agreed separately to irrevocably and unconditionally guarantee the obligations of the U S WEST Trusts with respect to the Common Securities (the "Common Securities Guarantees") to the same extent as the Preferred Securities Guarantee, except that upon an event of default under the Indenture, holders of Preferred Securities shall have priority over holders of Common Securities with respect to distributions and payments on liquidation, redemption or otherwise. CERTAIN COVENANTS OF U S WEST In each Preferred Securities Guarantee, U S WEST will covenant that, so long as any Preferred Securities issued by the applicable U S WEST Trust remain outstanding, if there shall have occurred any event that would constitute an event of default under such Preferred Securities Guarantee or the Declaration of such U S WEST Trust, then (a) U S WEST shall not (and shall cause Capital Funding and, if it is a wholly-owned subsidiary of U S WEST, U S WEST Communications, Inc. not to) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, and (b) U S WEST shall not (and shall cause Capital Funding not to) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to such Subordinated Debt Securities. MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT Except with respect to any changes which do not adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), each Preferred Securities Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% in liquidation amount of the outstanding Preferred Securities issued by the applicable U S WEST Trust. The manner of obtaining any such approval of holders of such Preferred Securities will be as set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in a Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of U S WEST and shall inure to the benefit of the holders of the Preferred Securities of the applicable U S WEST Trust then outstanding. TERMINATION Each Preferred Securities Guarantee will terminate as to the Preferred Securities issued by the applicable U S WEST Trust upon full payment of the Redemption Price of all Preferred Securities of such U S WEST Trust, upon distribution of the Subordinated Debt Securities held by such U S WEST Trust to the holders of the Preferred Securities of such U S WEST Trust or upon full payment of the amounts payable in accordance with the Declaration of such U S WEST Trust upon liquidation of such U S WEST Trust. Each Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities issued by the applicable U S WEST Trust must restore payment of any sums paid under such Preferred Securities or such Preferred Securities Guarantee. EVENTS OF DEFAULT An event of default under a Preferred Securities Guarantee will occur upon the failure of U S WEST to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Preferred Securities relating to such Preferred Securities Guarantee have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of the such Preferred Securities Guarantee or to direct the exercise of any trust or power conferred upon the Preferred Guarantee Trustee 7 under such Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to enforce such Preferred Securities Guarantee, any holder of Preferred Securities relating to such Preferred Securities Guarantee may, after a period of 30 days has elapsed from such holders written request to the Preferred Guarantee Trustee to enforce such Preferred Securities Guarantee, institute a legal proceeding directly against U S WEST to enforce the Preferred Guarantee Trustee's rights under such Preferred Securities Guarantee, without first instituting a legal proceeding against the relevant U S WEST, the Preferred Guarantee Trustee or any other person or entity. STATUS OF THE PREFERRED SECURITIES GUARANTEES The Preferred Securities Guarantees will constitute unsecured obligations of U S WEST and will rank (i) subordinate and junior in right of payment to all other liabilities of U S WEST, including the Debt Guarantees, (ii) PARI PASSU with the most senior preferred or preference stock now or hereafter issued by U S WEST and with any guarantee now or hereafter entered into by U S WEST in respect of any preferred or preference stock of any affiliate of U S WEST and (iii) senior to U S WEST's common stock. The terms of the Preferred Securities provide that each holder of Preferred Securities issued by such U S WEST Trust by acceptance thereof agrees to the subordination provisions and other terms of the Preferred Securities Guarantee relating thereto. The Preferred Securities Guarantees will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the guarantee without instituting a legal proceeding against any other person or entity). INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE The Preferred Guarantee Trustee, prior to the occurrence of a default with respect to a Preferred Securities Guarantee, undertakes to perform only such duties as are specifically set forth in such Preferred Securities Guarantee and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Preferred Guarantee Trustee is under no obligation to exercise any of the powers vested in it by a Preferred Securities Guarantee at the request of any holder of Preferred Securities, unless offered reasonable indemnity against the costs, expenses and liabilities which might be incurred thereby. U S WEST and certain of its affiliates maintain a deposit account and banking relationship with the Preferred Guarantee Trustee. The Preferred Guarantee Trustee serves as trustee under other indentures pursuant to which unsecured debt securities of affiliates of U S WEST are outstanding. GOVERNING LAW The Preferred Securities Guarantees will be governed by and construed in accordance with the internal laws of the State of New York. DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES AND THE DEBT GUARANTEES Subordinated Debt Securities may be issued from time to time in one or more series under an Indenture, dated as of , 1995 (the "Indenture"), among U S WEST, Capital Funding and Norwest Bank Minnesota, National Association, as Trustee (the "Debt Trustee"). The terms of the Subordinated Debt Securities will include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The following summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Indenture, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. Whenever particular provisions or defined terms in the Indenture are referred to herein, such provisions or defined terms are incorporated by reference herein. Section and Article references used herein are references to provisions of the Indenture unless otherwise noted. GENERAL The Subordinated Debt Securities will be unsecured, subordinated obligations of Capital Funding. The Indenture does not limit the aggregate principal amount of Subordinated Debt Securities which may be 8 issued thereunder and provides that the Subordinated Debt Securities may be issued from time to time in one or more series. The Subordinated Debt Securities are issuable in one or more series pursuant to an indenture supplemental to the Indenture or a resolution of Capital Funding's Board of Directors or a special committee thereof (each, a "Supplemental Indenture") (Section 2.01). In the event Subordinated Debt Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust, such Subordinated Debt Securities subsequently may be distributed pro rata to the holders of such Trust Securities in connection with the dissolution of such U S WEST Trust upon the occurrence of certain events described in the Prospectus Supplement relating to such Trust Securities. Only one series of Subordinated Debt Securities will be issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust. Reference is made to the Prospectus Supplement which will accompany this Prospectus for the following terms of the series of Subordinated Debt Securities being offered thereby: (i) the specific title of such Subordinated Debt Securities; (ii) any limit on the aggregate principal amount of such Subordinated Debt Securities; (iii) the date or dates on which the principal of such Subordinated Debt Securities is payable and the right, if any, to extend such date or dates; (iv) the rate or rates at which such Subordinated Debt Securities will bear interest or the method of determination of such rate or rates; (v) the date or dates from which such interest shall accrue, the interest payment dates on which such interest will be payable or the manner of determination of such interest payment dates and the record dates for the determination of holders to whom interest is payable on any such interest payment dates; (vi) the right, if any, to extend the interest payment periods and the duration of such extension; (vii) the period or periods within which, the price or prices at which, and the terms and conditions upon which, such Subordinated Debt Securities may be redeemed, in whole or in part, at the option of Capital Funding; (viii) the right and/or obligation, if any, of Capital Funding to redeem or purchase such Subordinated Debt Securities pursuant to any sinking fund or analogous provisions or at the option of the holder thereof and the period or periods for which, the price or prices at which, and the terms and conditions upon which, such Subordinated Debt Securities shall be redeemed or purchased, in whole or part, pursuant to such right and/or obligation; (ix) the terms of subordination; (x) the form of such Subordinated Debt Securities; (xi) if other than denominations of $25 or any integral multiple thereof, the denominations in which such Subordinated Debt Securities shall be issuable; (xii) any and all other terms with respect to such series; and (xiii) whether such Subordinated Debt Securities are issuable as a global security, and in such case, the identity of the depositary. (Section 2.01). The Indenture does not contain any provisions that afford holders of Subordinated Debt Securities protection in the event of a highly leveraged transaction involving U S WEST or Capital Funding. DEBT GUARANTEES The Indenture provides that U S WEST will fully and unconditionally guarantee the due and punctual payment of the principal, premium, if any, and interest on the Subordinated Debt Securities when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise. (Section 2.12) 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 Subordinated 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. SUBORDINATION The Subordinated Debt Securities will be subordinated and junior in right of payment to certain other indebtedness of Capital Funding and the Debt Guarantees will be subordinated and junior in right of payment to certain other indebtedness of U S WEST to the extent set forth in the Prospectus Supplement that will accompany this Prospectus. 9 CERTAIN COVENANTS If Subordinated Debt Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust and (i) there shall have occurred any event that would constitute an Event of Default or (ii) U S WEST shall be in default with respect to its payment of any obligations under the related Preferred Securities Guarantee or Common Securities Guarantee, then (a) U S WEST and Capital Funding shall not (and, if it is a wholly-owned subsidiary of U S WEST, U S WEST shall cause U S WEST Communications, Inc. not to) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, and (b) U S WEST and Capital Funding shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to such Subordinated Debt Securities. If Subordinated Debt Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust and Capital Funding shall have given notice of its election to defer payments of interest on such Subordinated Debt Securities by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) U S WEST and Capital Funding shall not (and, if it is a wholly-owned subsidiary of U S WEST, U S WEST shall cause U S WEST Communications, Inc. not to) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, and (b) U S WEST and Capital Funding shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by U S WEST or Capital Funding which rank pari passu with or junior to such Subordinated Debt Securities. In the event Subordinated Debt Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities of such U S WEST Trust, for so long as such Trust Securities remain outstanding, U S WEST will covenant (i) to directly or indirectly maintain 100% ownership of the Common Securities of such U S WEST Trust; provided, however, that any permitted successor of U S WEST under the Indenture may succeed to U S WEST's ownership of such Common Securities, (ii) to use its reasonable efforts to cause such U S WEST Trust (a) to remain a statutory business trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such U S WEST Trust, the redemption of all of the Trust Securities of such U S WEST Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such U S WEST Trust, and (b) to otherwise continue not to be classified as an association taxable as a corporation or partnership for United States federal income tax purposes and (iii) to use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. (Section 4.07). FORM, EXCHANGE, REGISTRATION AND TRANSFER Subordinated Debt Securities of each series will be issued in registered form and in either certificated form or represented by one or more global securities. If not represented by one or more global securities, Subordinated Debt Securities may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of the Debenture Registrar or at the office of any transfer agent designated by Capital Funding for such purpose with respect to any series of Subordinated Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. Such transfer or exchange will be effected upon the Debenture Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. Capital Funding has appointed the Debt Trustee as Debenture Registrar with respect to the Subordinated Debt Securities. (Section 2.05). If a Prospectus Supplement refers to any transfer agents (in addition to the Debenture Registrar) initially designated by Capital Funding with respect to any series of Subordinated Debt Securities, Capital Funding may at any time rescind the designation of any such transfer agent or approve a change in 10 the location through which any such transfer agent acts, except that Capital Funding will be required to maintain a transfer agent in each Place of Payment for such series. (Section 4.02). Capital Funding may at any time designate additional transfer agents with respect to any series of Subordinated Debt Securities. In the event of any redemption in part, Capital Funding shall not be required to (i) issue, register the transfer of or exchange any Subordinated Debt Securities during a period beginning at the opening of business 15 days before any selection for redemption of Subordinated Debt Securities of like tenor and of the series of which such Subordinated Debt Securities are a part, and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all holders of Subordinated Debt Securities of like tenor and of such series to be redeemed and (ii) register the transfer of or exchange any Subordinated Debt Securities so selected for redemption, in whole or in part, except the unredeemed portion of any Subordinated Debt Securities being redeemed in part. (Section 2.05). PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and premium (if any) on any Subordinated Debt Securities will be made only against surrender to the Paying Agent of such Subordinated Debt Securities. Unless otherwise indicated in an applicable Prospectus Supplement, principal of and any premium and interest, if any, on Subordinated Debt Securities will be payable, subject to any applicable laws and regulations, at the office of such Paying Agent or Paying Agents as Capital Funding may designate from time to time, except that at the option of Capital Funding payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Debenture Register with respect to such Subordinated Debt Securities. (Section 4.03). Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on a Subordinated Debt Security on any Interest Payment Date will be made to the person in whose name such Subordinated Debt Security (or predecessor security) is registered at the close of business on the Regular Record Date for such interest payment. (Section 2.03). Capital Funding will act as Paying Agent with respect to the Subordinated Debt Securities. Capital Funding may at any time designate additional Paying Agents or rescind the designation of any Paying Agents or approve a change in the office through which any Paying Agent acts, except that Capital Funding will be required to maintain a Paying Agent in each Place of Payment for each series of the respective Subordinated Debt Securities. (Sections 4.02 and 4.03). All moneys paid by Capital Funding to a Paying Agent for the payment of the principal of or premium or interest, if any, on any Subordinated Debt Securities of any series which remain unclaimed at the end of two years after such principal, premium, if any, or interest shall have become due and payable will be repaid to Capital Funding and the holder of such Subordinated Debt Securities will thereafter look only to Capital Funding for payment thereof. (Section 11.05). GLOBAL SECURITIES If any Subordinated Debt Securities of a series are represented by one or more global securities (each, a "Global Security"), the applicable Prospectus Supplement will describe the circumstances, if any, under which beneficial owners of interests in any such Global Security may exchange such interests for Subordinated Debt Securities of such series and of like tenor and principal amount in any authorized form and denomination. Principal of and any premium and interest on a Global Security will be payable in the manner described in the applicable Prospectus Supplement. (Section 2.11). The specific terms of the depositary arrangement with respect to any portion of a series of Subordinated Debt Securities to be represented by a Global Security will be described in the applicable Prospectus Supplement. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting U S WEST, Capital Funding and the Debt Trustee, with the consent of the holders of not less than a majority in principal amount of the Subordinated Debt Securities of each series which are affected by the modification, to modify the Indenture or any supplemental indenture affecting that series or the rights of the holders of that series of Subordinated Debt Securities; 11 provided that no such modification may, without the consent of the holder of each outstanding Subordinated Debt Security affected thereby, (i) extend the fixed maturity of any Subordinated Debt Securities of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the holder of each Subordinated Debt Security so affected or (ii) reduce the percentage of Subordinated Debt Securities, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each then outstanding Subordinated Debt Security affected thereby. (Section 9.02). In addition, U S WEST, Capital Funding and the Debt Trustee may execute, without the consent of any holder of Subordinated Debt Securities, any supplemental indenture for certain other usual purposes including the creation of any new series of Subordinated Debt Securities. (Sections 2.01, 9.01 and 10.01). EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events which has occurred and is continuing constitutes an "Event of Default" withrespect to each series of Subordinated Debt Securities: (a) failure for 90 days to pay interest on the Subordinated Debt Securities of that series, including any Additional Interest in respect thereof, when due; provided, however, that a valid extension of the interest payment period by Capital Funding shall not constitute a default in the payment of interest for this purpose; or (b) failure to pay principal or premium, if any, on the Subordinated Debt Securities of that series when due whether at maturity, upon redemption by declaration or otherwise, or to make any sinking fund payment with respect to that series; provided, however, that a valid extension of the maturity of such Subordinated Debt Securities shall not constitute a default for this purpose; or (c) failure to observe or perform any other covenant (other than those specifically relating to another series) contained in the Indenture for 90 days after written notice to Capital Funding from the Debt Trustee or the holders of at least 25% in principal amount of the outstanding Subordinated Debt Securities of that series; or (d) certain events in bankruptcy, insolvency or reorganization of U S WEST or Capital Funding; or (e) in the event Subordinated Debt Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust, the voluntary or involuntary dissolution, winding-up or termination of such U S WEST Trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such U S WEST Trust, the redemption of all of the Trust Securities of such U S WEST Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such U S WEST Trust. (Section 6.01). The holders of a majority in aggregate outstanding principal amount of any series of the Subordinated Debt Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debt Trustee for that series. (Section 6.06). The Debt Trustee or the holders of not less than 25% in aggregate outstanding principal amount of any particular series of the Subordinated Debt Securities may declare the principal due and payable immediately on default with respect to such series, but the holders of a majority in aggregate outstanding principal amount of such series may annul such declaration and waive the default with respect to such series if the default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Debt Trustee. (Sections 6.01 and 6.06). The holders of a majority in aggregate outstanding principal amount of any series of the Subordinated Debt Securities affected thereby may, on behalf of the holders of all the Subordinated Debt Securities of such series, waive any past default, except (i) a default in the payment of principal, premium, if any, or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Debt Trustee), (ii) a default in the covenant of each of U S WEST and certain of its subsidiaries not to 12 declare or pay dividends on, or redeem, purchase or acquire any of its capital stock during an interest deferral period, or (iii) a default in the covenant of Capital Funding to defer interest payments on all Subordinated Debt Securities held by the other U S WEST Trusts during such interest deferral period. (Section 6.06). CONSOLIDATION, MERGER AND SALE The Indenture does not contain any covenant which restricts the ability of U S WEST or Capital Funding to merge or consolidate with or into any other corporation, sell or convey all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. (Section 10.01). DEFEASANCE AND DISCHARGE Under the terms of the Indenture, U S WEST and Capital Funding will be discharged from any and all obligations in respect of the Subordinated Debt Securities of any series (except in each case for certain obligations to register the transfer or exchange of Subordinated Debt Securities, replace stolen, lost or mutilated Subordinated Debt Securities, maintain paying agencies and hold moneys for payment in trust) if Capital Funding deposits with the Debt Trustee, in trust, moneys or Government Obligations, in an amount sufficient to pay all the principal of, and interest on, the Subordinated Debt Securities of such series on the dates such payments are due in accordance with the terms of such Subordinated Debt Securities. (Sections 11.01 and 11.02). GOVERNING LAW The Indenture, the Subordinated Debt Securities and the Debt Guarantee will be governed by, and construed in accordance with, the internal laws of the State of New York. (Section 13.05). INFORMATION CONCERNING THE DEBT TRUSTEE The Debt Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. (Section 7.01). Subject to such provision, the Debt Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Subordinated Debt Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. (Section 7.02). The Debt Trustee is not required to expand or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debt Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. (Section 7.01). U S WEST and certain of its affiliates, including Capital Funding, maintain a deposit account and banking relationship with the Debt Trustee. The Debt Trustee serves as trustee under other indentures pursuant to which unsecured debt securities of U S WEST are outstanding. MISCELLANEOUS Capital Funding and U S WEST will have the right at all times to assign any of their respective rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of U S WEST; provided that, in the event of any such assignment, Capital Funding and U S WEST, as the case may be, will remain liable for all of their respective obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. (Section 13.11). PLAN OF DISTRIBUTION Capital Funding may sell any series of Subordinated Debt Securities and the U S WEST Trusts may sell the Preferred Securities being offered hereby in one or more of the following ways from time to time: (i) to underwriters for resale to the public or to institutional investors; (ii) directly to institutional investors; or (iii) through agents to the public or to institutional investors. The Prospectus Supplement with respect to any Offered Securities will set forth the terms of the offering of such Offered Securities, including the name or names of any underwriters or agents, the purchase price of such Offered Securities and the proceeds to 13 Capital Funding or the applicable U S WEST Trust, as the case may be, from such sale, any underwriting discounts or agency fees and other item's constituting underwriters' or agents' compensation, any initial public offering price, any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such Offered Securities may be listed. If underwriters are used in the sale, such Offered Securities will be acquired by the underwriters for their own account and may be resold 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 Prospectus Supplement, the obligations of the underwriters to purchase any series of Offered Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all of such series of Offered Securities, if any are purchased. Underwriters and agents may be entitled under agreements entered into with U S WEST, Capital Funding and/or a U S WEST Trust to indemnification by U S WEST, Capital Funding and/or such U S WEST Trust against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the underwriters or agents may be required to make in respect thereof. Underwriters and agents may be customers of, engage in transactions with, or perform services for U S WEST and its affiliates in the ordinary course of business. Each series of Offered Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Offered Securities are sold by Capital Funding or by a U S WEST Trust for public offering and sale may make a market in such Offered Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Offered Securities may or may not be listed on a national securities exchange. LEGAL OPINIONS Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon for the U S WEST Trusts by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the U S WEST Trusts. The validity of the Preferred Securities Guarantees, Subordinated Debt Securities and Debt Guarantees and certain legal matters relating thereto will be passed upon by Weil, Gotshal & Manges, New York, New York. Weil, Gotshal & Manges will rely on the opinion of Stephen E. Brilz, Senior Attorney of U S WEST, as to certain matters of Colorado law. Certain matters as to United States federal income taxation will also be passed upon by Weil, Gotshal & Manges. EXPERTS The consolidated financial statements and the consolidated financial statement schedule included in U S WEST's Annual Report on Form 10-K for the year ended December 31, 1994 are incorporated herein by reference in reliance on the reports of Coopers & Lybrand L.L.P., independent certified public accountants, given upon the authority of that firm as experts in accounting and auditing. 14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY U S WEST INC., U S WEST FINANCING I OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF U S WEST INC. OR U S WEST FINANCING I SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICIATION. ------------------------ TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ----- Summary Financial Information.................. S-3 U S WEST, Inc.................................. S-4 U S WEST Capital Funding, Inc.................. S-4 U S WEST Financing I........................... S-4 Recent Developments............................ S-5 Investment Considerations...................... S-7 Capitalization of U S WEST..................... S-10 Accounting Treatment........................... S-11 Use of Proceeds................................ S-11 Descriptions of the Preferred Securities....... S-11 Description of the Subordinated Debt Securities and the Debt Guarantee........................ S-21 Effect of Obligations Under the Subordinated Debt Securities, The Debt Guarantee and the Preferred Securities Guarantee................ S-26 Certain Federal Income Tax Consequences........ S-27 Underwriting................................... S-30 Legal Matters.................................. S-31 PROSPECTUS Available Information.......................... 2 Incorporation of Certain Documents by Reference..................................... 3 U S WEST Capital Funding, Inc.................. 4 The U S WEST Financing Trusts.................. 4 U S WEST, Inc.................................. 4 Ratio of Earnings to Fixed Charges............. 5 Use of Proceeds................................ 5 Description of the Preferred Securities........ 5 Description of the Preferred Securities Guarantees.................................... 6 Description of the Subordinated Debt Securities and the Debt Guarantees....................... 8 Plan of Distribution........................... 13 Legal Opinions................................. 14 Experts........................................ 14
__,000,000 PREFERRED SECURITIES [LOGO] U S WEST FINANCING I % TRUST ORIGINATED PREFERRED SECURITIES ("TOPRS") GUARANTEED TO THE EXTENT SET FORTH HEREIN BY U S WEST, INC. ------------------------ PROSPECTUS SUPPLEMENT ------------------------ MERRILL LYNCH & CO. ____ __, 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Securities and Exchange Commission Filing Fee.................. $344,827.59 Rating Agency Fees............................................. 200,000.00 Blue Sky Fees and Expenses..................................... 20,000.00 Trustee's Expenses............................................. 30,000.00 Printing and Engraving Fees.................................... 150,000.00 Accounting Fees and Expenses................................... 30,000.00 Legal Fees and Expenses........................................ 150,000.00 Miscellaneous.................................................. 5,172.41 ---------- Total...................................................... $930,000.00 ---------- ----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The By-laws of U S WEST and Capital Funding provide for the indemnification of directors and officers to the extent permissible under applicable law. Sections 7-109-101 through 7-109-110 of the Colorado Business Corporation Act (the "CBCA") specify the circumstances under which a corporation may indemnify its directors, officers, employees, fiduciaries or agents. For acts done in a person's "official capacity," the CBCA generally requires that an act be done in good faith and in a manner reasonably believed to be in the best interests of the corporation. In all other civil cases, the person must have acted in good faith and in a way that was not opposed to the corporation's best interests. In criminal actions or proceedings, the CBCA imposes an additional requirement that the actor had no reasonable cause to believe his conduct was unlawful. In any proceeding by or in the right of the corporation, or charging a person with the improper receipt of a personal benefit, no indemnification can be made, except that in a proceeding by or in the right of the corporation, indemnification for reasonable expenses incurred in connection with such proceeding is permitted. Indemnification is mandatory when any director or officer is wholly successful, on the merits or otherwise, in defending any civil or criminal proceeding. The Declaration of each U S WEST Trust provides that no Regular Trustee, affiliate of any Regular Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee, or any employee or agent of such U S WEST Trust or its affiliates (each an "Indemnified Person") shall be liable, responsible or accountable in damages or otherwise to such U S WEST Trust or any employee or agent of the trust or its affiliates for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of such U S WEST Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by such Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omission. The Declaration of each U S WEST Trust also provides that to the fullest extent permitted by applicable law, U S WEST shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of such U S WEST Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by such Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such act or omissions. The Declaration of each U S WEST Trust further provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by U S WEST prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified for the underlying cause of action as authorized by such Declaration. II-1 The directors and officers of Capital Funding and U S WEST and the Regular Trustees are covered by insurance policies indemnifying against certain liabilities, including certain liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), which might be incurred by them in such capacities and against which they cannot be indemnified by Capital Funding, U S WEST or the U S WEST Trusts. Any agents, dealers or underwriters who execute any of the agreements filed as Exhibit 1 to this registration statement will agree to indemnify Capital Funding's and U S WEST's directors and officers and the U S WEST Trustees who signed the registration statement against certain liabilities which might arise under the Securities Act with respect to information furnished to Capital Funding and U S WEST or any of the U S WEST Trusts by or on behalf of any such indemnifying party. ITEM 16. EXHIBITS. Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference to such previous filings. All other exhibits are provided as part of this electronic transmission. 1 - Form of Underwriting Agreement for offering of Preferred Securities. *4-A - Certificate of Trust of U S WEST Financing I. *4-B - Certificate of Trust of U S WEST Financing II. *4-C - Certificate of Trust of U S WEST Financing III. 4-D - Form of Amended and Restated Declaration of Trust. 4-E - Form of Indenture among U S WEST, Inc., U S WEST Capital Funding, Inc. and Norwest Bank Minnesota, National Association, as Trustee. 4-F - Form of Supplemental Indenture to Indenture to be used in connection with the issuance of Subordinated Debt Securities and Preferred Securities. 4-G - Form of Preferred Security (included in 4-D above). 4-H - Form of Subordinated Debt Security and Debt Guarantee (included in 4-F above). 4-I - Form of Preferred Securities Guarantee. 5-A - Opinion of Weil, Gotshal & Manges. 5-B - Opinions of Richards, Layton & Finger. 5-C - Opinion of Stephen E. Brilz, Esq. 8 - Opinion of Weil, Gotshal & Manges. (12) - Computation of Ratio of Earnings to Fixed Charges of U S WEST, Inc. (Exhibit 12 to Form 10-K for the year ending December 31, 1994, File No. 1-8611). 23-A - Consent of Independent Public Accountants. 23-B - Consent of Weil, Gotshal & Manges is contained in the opinions of counsel filed as Exhibits 5-A and 8. 23-C - Consent of Richards, Layton & Finger is contained in the opinion of counsel filed as Exhibit 5-B. 23-D - Consent of Stephen E. Brilz, Esq. is contained in the opinion of counsel filed as Exhibit 5-C. *24. - Powers of Attorney (the powers of attorney for the U S WEST Trustees of U S WEST Financing I, U S WEST Financing II and U S WEST Financing III are included in Exhibits 4-A, 4-B and 4-C, respectively). 25-A - Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Norwest Bank Minnesota, National Association, as Trustee under the Indenture. 25-B - Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of the First National Bank of Chicago, as Trustee under the Amended and Restated Declaration of Trust of U S WEST Financing I and the Preferred Securities Guarantee of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing I.
II-2 25-C - Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of the First National Bank of Chicago, as Trustee under the Amended and Restated Declaration of Trust of U S WEST Financing II and the Preferred Securities Guarantee of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing II. 25-D - Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of the First National Bank of Chicago, as Trustee under the Amended and Restated Declaration of Trust of U S WEST Financing III and the Preferred Securities Guarantee of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing III. - ------------------------ * Filed previously.
ITEM 17. UNDERTAKINGS. The Registrants hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of U S WEST's Annual Report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (and where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions referred to in Item 15 (other than the insurance policies referred to therein), or otherwise, the Registrants have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) to include any material information with respect to the Plan of Distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that the undertakings set forth in paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by U S WEST pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, U S WEST, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER, STATE OF COLORADO, ON THE 28TH DAY OF APRIL, 1995. U S WEST, Inc. By /s/ STEPHEN E. BRILZ ------------------------------------ Stephen E. Brilz Assistant Secretary PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE FOLLOWING DIRECTORS AND OFFICERS OF U S WEST, INC. IN THE CAPACITIES AND ON THE DATE INDICATED. PRINCIPAL EXECUTIVE OFFICER: RICHARD D. McCORMICK* Chairman of the Board, President and Chief Executive Officer PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: JAMES M. OSTERHOFF* Executive Vice President and Chief Financial Officer DIRECTORS: RICHARD B. CHENEY* REMEDIOS DIAZ-OLIVER* GRANT A. DOVE* ALLAN D. GILMOUR* PIERSON M. GRIEVE* SHIRLEY M. HUFSTEDLER* ALLEN F. JACOBSON* RICHARD D. MCCORMICK* MARILYN CARLSON NELSON* FRANK POPOFF* GLEN L. RYLAND* JERRY O. WILLIAMS* DANIEL YANKELOVICH* *By /s/ STEPHEN E. BRILZ -------------------------------------- Stephen E. Brilz Attorney-in-Fact Dated: April 28, 1995 II-5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, U S WEST CAPITAL FUNDING, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER, STATE OF COLORADO, ON THE 28TH DAY OF APRIL, 1995. U S WEST Capital Funding, Inc. By /s/ STEPHEN E. BRILZ ------------------------------------ Stephen E. Brilz Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement or amendment thereto has been signed below by the following directors and officers of U S WEST Capital Funding, Inc. in the capacities and on the date indicated. PRINCIPAL EXECUTIVE OFFICER: JAMES T. ANDERSON* President PRINCIPAL FINANCIAL OFFICER: Vice President and CHARLES J. BURDICK* Treasurer PRINCIPAL ACCOUNTING OFFICER: Vice President and JAMES R. TAUCHER* Controller DIRECTORS: JAMES T. ANDERSON* JAMES M. OSTERHOFF* *By /s/ STEPHEN E. BRILZ - ----------------------------------- Stephen E. Brilz Attorney-in-Fact Dated: April 28, 1995 II-6 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, U S WEST FINANCING I, U S WEST FINANCING II AND U S WEST FINANCING III CERTIFY THAT THEY HAVE REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER, STATE OF COLORADO, ON THE 28TH DAY OF APRIL, 1995. U S WEST Financing I By /s/ JAMES T. ANDERSON ------------------------------------ James T. Anderson, Trustee By /s/ CHARLES J. BURDICK ------------------------------------ Charles J. Burdick, Trustee By /s/ ROGER FOX ------------------------------------ Roger Fox, Trustee U S WEST Financing II By /s/ JAMES T. ANDERSON ------------------------------------ James T. Anderson, Trustee By /s/ CHARLES J. BURDICK ------------------------------------ Charles J. Burdick, Trustee By /s/ ROGER FOX ------------------------------------ Roger Fox, Trustee U S WEST Financing III By /s/ JAMES T. ANDERSON ------------------------------------ James T. Anderson, Trustee By /s/ CHARLES J. BURDICK ------------------------------------ Charles J. Burdick, Trustee By /s/ ROGER FOX ------------------------------------ Roger Fox, Trustee II-7 EX-1 2 EXHIBIT 1 _________ Preferred Securities U S WEST FINANCING [ ] (a Delaware Trust) ___% Trust Originated Preferred Securities ("TOPrS") (Liquidation Amount of $25 Per Preferred Security)SM FORM OF UNDERWRITING AGREEMENT ------------------------------ __, 1995 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated as Representative of the several Underwriters Merrill Lynch World Headquarters North Tower World Financial Center New York, New York 10281 Dear Sirs: U S WEST FINANCING [ ] (the "Trust"), a statutory business trust organized under the Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 ET SEQ.), U S WEST, Inc., a Colorado corporation (the "Guarantor"), and U S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding" and, together with the Trust and the Guarantor, the "Offerors") confirm their agreement (the "Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto (collectively, the "Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch is acting as representative (in such capacity, Merrill Lynch shall hereinafter be ____________________ SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of Merrill Lynch & Co., Inc. referred to as the "Representative"), with respect to the sale by the Trust and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of ___% Trust Originated Preferred Securities (liquidation amount of $25 per preferred security) of the Trust ("Preferred Securities") set forth in said Schedule A and with respect to the grant by the Trust to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of _______ additional Preferred Securities to cover over-allotments, in each case except as may otherwise be provided in the Pricing Agreement, as hereinafter defined. The aforesaid ______ shares of Preferred Securities (the "Initial Securities") to be purchased by the Underwriters and all or any part of the _______ shares of Common Stock subject to the option described in Section 2(b) hereof (the "Option Securities") are collectively hereinafter called the "Designated Securities". The Preferred Securities will be guaranteed by the Guarantor with respect to distributions and payments upon liquidation, redemption and otherwise (the "Preferred Securities Guarantee") pursuant to the Preferred Securities Guarantee Agreement (the "Preferred Securities Guaranty Agreement"), dated as of April __, 1995, between the Guarantor and The First National Bank of Chicago, as Trustee, and entitled to the benefits of certain backup undertakings described in the Prospectus with respect to Capital Funding's agreement pursuant to the Supplemental Indenture (as defined herein) to pay all expenses relating to administration of the Trust and the Guarantor's guarantee pursuant to the Supplemental Indenture of that undertaking (the "Undertakings"). The Preferred Securities and the related Preferred Securities Guarantees are referred to herein as the "Securities". Prior to the purchase and public offering of the Designated Securities by the several Underwriters, the Offerors and the Representative, acting on behalf of the several Underwriters, shall enter into an agreement substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the form of an exchange of any standard form of written telecommunication between the Offerors and the Representative and shall specify such applicable information as is indicated in Exhibit A hereto. The offering of the Designated Securities will be governed by this Agreement, as supplemented by the Pricing Agreement. From and after the date of the execution and delivery of the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement. 2 The Offerors have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 33-__) and a related preliminary prospectus for the registration under the Securities Act of 1933 (the "1933 Act") of (i) the Preferred Securities, (ii) the Preferred Securities Guarantee, (iii) $_______ million aggregate principal amount of Subordinated Deferrable Interest Notes (the "Subordinated Debt Securities") to be issued and sold to the Trust by Capital Funding and (iv) the guarantee by the Guarantor of the payment of principal, premium, if any, and interest on the Subordinated Debt Securities (the "Debt Guarantee"), have filed such amendments thereto, if any, and such amended preliminary prospectuses as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectuses as may hereafter be required. Such registration statement (as amended, if applicable) and the prospectus constituting a part thereof (including, in each case, all documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act and the information, if any, deemed to be part thereof pursuant to Rule 430A(b) of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations")), as from time to time amended or supplemented pursuant to the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") or otherwise, are herein after referred to as the "Registration Statement" and the "Prospectus", respectively, except that if any revised prospectus shall be provided to the Underwriters by the Offerors for use in connection with the offering of the Designated Securities, which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Offerors pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Underwriters for such use. All references in this Agreement to financial statements and schedules and other information that is "contained," "included" or "stated" in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information that are or are deemed to be incorporated by reference in the Registration Statement or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement or the Prospectus shall be deemed to mean and include the filing of any document under the 1934 Act that is or is deemed to be incorporated by reference in the Registration Statement or the Prospec- 3 tus, as the case may be. The Offerors understand that the Underwriters propose to make a public offering of the Securities as soon as the Representative deems advisable after the Pricing Agreement has been executed and delivered, and the Declaration (as defined herein), the Indenture (as defined herein), and the Preferred Securities Guarantee Agreement have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). The entire proceeds from the sale of the Securities will be combined with the entire proceeds from the sale by the Trust to the Guarantor of its common securities (the "Common Securities") guaranteed by the Guarantor, to the extent set forth in the Prospectus, with respect to distributions and payments upon liquidation, redemption and maturity (the "Common Securities Guarantee" and together with the Preferred Securities Guarantee and the Debt Guarantee, the "Guarantees") pursuant to the Common Securities Guarantee Agreement (the "Common Securities Guarantee Agreement" and, together with the Preferred Securities Guarantee Agreement, the "Guarantee Agreements"), dated as of April __, 1995, between the Guarantor and The First National Bank of Chicago, as Trustee, and will be used by the Trust to purchase the Subordinated Debt Securities issued by Capital Funding. The Preferred Securities and the Common Securities will be issued pursuant to the amended and restated declaration of trust of the Trust, dated as of April __, 1995 (the "Declaration"), among the Guarantor, as Sponsor, the trustees named therein (the "Trustees") and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Subordinated Debt Securities and the Debt Guarantee will be issued pursuant to an indenture, dated as of April __, 1995 (the "Base Indenture"), among the Guarantor, Capital Funding and Norwest Bank, as trustee (the "Debt Trustee"), and a supplement to the Base Indenture, dated as of April __, 1995 (the "Supplemental Indenture," and together with the Base Indenture and any other amendments or supplements thereto, the "Indenture"), among the Guarantor, Capital Funding and the Debt Trustee. Section 1. REPRESENTATIONS AND WARRANTIES. (a) The Offerors jointly and severally represent and warrant to each Underwriter as of the date hereof and as of the date of the Pricing Agreement (such latter date being hereinafter referred to as the "Representation Date") as follows: 4 (i) At the time the Registration Statement becomes effective and at the Representation Date, the Registration Statement will comply in all material respects with the requirements of the 1933 Act, the 1933 Act Regulations, the 1934 Act, the regulations of the Commission under the 1934 Act (the "1934 Act Regulations"), and the 1939 Act and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations"), and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, at the Representation Date (unless the term "Prospectus" refers to a prospectus that has been provided to the Underwriters by the Trust for use in connection with the offering of the Securities and that differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective, in which case, at the time it is first provided to the Underwriters for such use) and at Closing Time referred to in Section 2 hereof, will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Offerors in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or Prospectus. (ii) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, there has been no material adverse change or any development involving a prospective material adverse change in the financial condition or results of operation of the Guarantor and its subsidiaries taken as a whole. Section 2. SALE AND DELIVERY TO UNDER- WRITERS; CLOSING. (a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to pur- 5 chase from the Trust, at the price per security set forth in the Pricing Agreement, the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter (except as otherwise provided in the Pricing Agreement), plus any additional number of Initial Securities that such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. The purchase price per security to be paid by the several Underwriters for the Designated Securities shall be an amount equal to the initial public offering price. The initial public offering price per Preferred Security shall be a fixed price to be determined by agreement between the Representative and the Offerors. The initial public offering price and the purchase price, when so determined, shall be set forth in the Pricing Agreement. In the event that such prices have not been agreed upon and the Pricing Agreement has not been executed and delivered by all parties thereto by the close of business on the fourth business day following the date of this Agreement, this Agreement shall terminate forthwith, without liability of any party to any other party, unless otherwise agreed to by the Offerors and the Representative. As compensation to the Underwriters for their commitments hereunder and in view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Subordinated Debt Securities of Capital Funding, Capital Funding hereby agrees to pay at Closing Time (as defined below) to the Representative, for the accounts of the several Underwriters, a commission per Preferred Security determined by agreement between the Representative and the Guarantor for the Preferred Securities to be delivered by the Trust hereunder at Closing Time or relevant Date of Delivery (as defined below), as the case may be. The commission, when so determined, shall be set forth in the Pricing Agreement. (b) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional _______ Preferred Stock at the price per share set forth in the Pricing Agreement, less an amount per share equal to any dividends declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted will expire 30 days after the Representation Date and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial 6 Securities upon notice by the Representative to the Trust setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined, unless otherwise agreed by the Representative and the Trust. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities (except as otherwise provided in the Pricing Agreement), subject in each case to such adjustments as the Representative in its discretion shall make to eliminate any sales or purchases of fractional securities. (c) Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the office of Skadden, Arps, Slate, Meagher & Flom, or at such other place as shall be agreed upon by the Representative and the Trust, at 10:00 A.M. New York time on the fifth business day (unless postponed in accordance with the provisions of Section 10) following the fifth business day after execution of the Pricing Agreement, or such other time not later than ten business days after such date as shall be agreed upon by the Representative, the Trust, the Guarantor and Capital Funding (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates for, such Option Securities shall be made at the above-mentioned offices of Skadden, Arps, Slate, Meagher & Flom, or at such other place as shall be agreed upon by the Representative and the Trust, on each Date of Delivery as specified in the notice from the Representative to the Trust. Payment shall be made to the Company by certified or official bank check or checks drawn in New York Clearing House funds or similar next day funds payable to the order of the Trust to an account designated by the Trust, against delivery to the Representative for the respective accounts of the Underwriters of certificates for the Designated Securities to be purchased by them. Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and registered in such names as the 7 Representative may request in writing at least two business days before the Closing Time or the relevant Date of Delivery, as the case may be. It is understood that each Underwriter has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose check has not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder. The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination and packaging by the Representative not later than 10:00 A.M. on the last business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. At the Closing Time or each Date of Delivery, as the case may be, Capital Funding will pay, or cause to be paid, the commission payable at such time to the Underwriters under Section 2 hereof by certified or official bank check or checks payable to Merrill Lynch, Pierce, Fenner & Smith Incorporated in New York Clearing House funds or other similar next day funds. Section 3. COVENANTS OF THE OFFERORS. Each of the Offerors jointly and severally covenant with each Underwriter as follows: (a) The Offerors will notify the Representative immediately, and confirm the notice in writing, (i) of the effectiveness of the Registration Statement and any amendment thereto (including any post-effective amendment), (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Offerors will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. 8 (b) The Offerors will give the Representative notice of their intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Offerors propose for use by the Underwriters in connection with the offering of the Preferred Securities which differs from the prospectus on file at the Commission at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations), whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representative with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which the Representative or counsel for the Underwriters shall reasonably object unless the Company shall conclude that such amendment or supplement must be filed in accordance with applicable law. Subject to the foregoing, the Offerors will promptly prepare a supplement to the Prospectus to reflect the terms of the Designated Securities and the terms of the Offering. The Offerors will file the Prospectus as so supplemented pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act. (c) The Offerors will furnish to the Representatives copies of the Registration Statement, including all exhibits thereto, the Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as are reasonably requested. 9 (e) If any event shall occur as a result of which it is necessary to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Offerors will forthwith amend or supplement the Prospectus in accordance with paragraph (b) above so that, as so amended or supplemented, the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, and the Offerors will furnish to the Underwriters a reasonable number of copies of such amendment or supplement. (f) The Offerors will endeavor, in cooperation with the Underwriters, to qualify the Preferred Securities and Subordinated Debt Securities for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Representative may designate; provided, however, that each of the Offerors shall not be obligated to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. (g) The Trust will make generally available to its security holders as soon as practicable, an earnings statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a twelve-month period beginning not later than the first day of the Trust's fiscal quarter next following the "effective date" (as defined in said Rule 158) of the Registration Statement. (h) The Offerors will use their reasonable efforts to effect the listing of the Preferred Securities on the New York Stock Exchange; if the Preferred Securities are exchanged for Subordinated Debt Securities, Capital Funding will use its reasonable efforts to effect the listing of the Subordinated Debt Securities on the exchange on which the Preferred Securities were then listed. (i) During a period of 30 days from the date of the Pricing Agreement, neither the Trust, the Guarantor nor Capital Funding will, without the Representative's prior written consent, directly or indirectly, sell, offer to sell, grant any option for the sale of, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for Preferred Securities or any equity securities substantially similar to the Preferred Securities (except 10 for Preferred Securities issued pursuant to this Agreement). Section 4. PAYMENT OF EXPENSES. Capital Funding will pay all expenses incident to the performance of each Offeror's obligations under this Agreement, including, but not limited to, (i) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (ii) the printing of this Agreement and the Pricing Agreement, (iii) the preparation, issuance and delivery of the certificates for the Preferred Securities to the Underwriters, (iv) the fees and disbursements of the Guarantor's, Capital Funding's and the Trust's counsel and accountants, (v) the qualification of the Preferred Securities and Subordinated Debt Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of any blue sky survey and any legal investment survey, (vi) the printing and delivery to the Underwriters of copies of the Registration Statement as originally filed and of each amendment thereto, of each preliminary prospectus, and of the Prospectus and any amendments or supplements thereto, (vii) the printing and delivery to the Underwriters of copies of any blue sky survey and any legal investment survey, (viii) the fee of the National Association of Securities Dealers, Inc. (ix) the fees and expenses of the Debt Trustee, including the fees and disbursements of counsel for the Debt Trustee in connection with the Indenture and the Subordinated Debt Securities; (x) the fees and expenses of the Property Trustee and Delaware Trustee, including the fees and disbursements of counsel for the Property Trustee and Delaware Trustee in connection with the Declaration and the Certificate of Trust; (xi) any fees payable in connection with the rating of the Preferred Securities and Subordinated Debt Securities, (xii) the fees and expenses incurred in connection with the listing of the Preferred Securities and, if applicable, the Subordinated Debt Securities on the New York Stock Exchange, and (xiii) the cost and charges of any transfer agent or registrar and (xiv) the cost of qualifying the Preferred Securities with The Depository Trust Company. If this Agreement is terminated by the Representative in accordance with the provisions of Section 5 or Section 9 hereof, Capital Funding shall reimburse the Underwriters for all of their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters, which shall not exceed the amount set forth in the applicable Terms Agreement. 11 Section 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters hereunder are subject to the accuracy of the representations and warranties of the Offerors herein contained, to the performance by the Offerors of their obligations hereunder, and to the following further conditions: (a) The Registration Statement shall have become effective not later than 5:30 P.M. on the date hereof, or with the consent of the Representative, at a later time and date, not later, however, than 5:30 P.M. on the first business day following the date hereof, or at such later time and date as may be approved by the Representative; and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission. The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the 1933 Regulations and in accordance with Section 3(b) and prior to Closing Time the Offerors shall have provided evidence satisfactory to the Representative of such timely filing. (b) At Closing Time the Representative shall have received: (1) The favorable opinion, dated as of Closing Time, of Weil, Gotshal & Manges, counsel for the Offerors in form and substance reasonably satisfactory to counsel for the Underwriters, substantially in the form set forth in Annex 1. (2) The favorable opinion, dated as of Closing Time, of Stephen E. Brilz, Esq., Corporate Counsel for U S West, Inc., in form and substance satisfactory to counsel for the Underwriters, substantially in the form set forth in Annex 2. (3) The favorable opinion, dated as of Closing Time, of Richards, Layton & Finger, special Delaware counsel for the Offerors, the Guarantor and the Capital Funding, in form and substance satisfactory to counsel for the Underwriters, substantially in the form set forth in Annex 3. (4) The favorable opinion, dated as of Closing Time, of the Law Department of The First National Bank of Chicago, counsel of The First National Bank of Chicago, as Property Trustee under the Declaration, in form and substance satisfactory to counsel for the Underwriters, substantially in the form of Annex 4. 12 (5) The favorable opinion, dated as of Closing Time, of Pepper, Hamilton & Scheetz, special Delaware counsel for the Property Trustee, in form and substance satisfactory to counsel for the Underwriters, substantially to the effect set forth in Annex 5. (6) The favorable opinion, dated as of Closing Time, of Skadden, Arps, Slate, Meagher & Flom ("SASM&F"), counsel for the Underwriters, in form and substance satisfactory to the Underwriters. In giving its opinion, SASM&F may rely as to certain matters of Colorado law upon the opinion of Steven E. Brilz, Corporate Counsel for U S WEST Inc., which shall be delivered in accordance with Section 5(b)2 hereto, as to certain matters of Delaware law upon the opinion of Richards, Layton & Finger, special Delaware counsel to the Trust, which opinion shall be delivered in accordance with Section 5(b)3 hereto, as to certain matters of Illinois law upon the opinion of ______________________________________, counsel to the Property Trustee, which shall be delivered in accordance with Section 5(b)4 hereto, and as to certain other matters of Delaware law upon the opinion of Pepper, Hamilton & Scheetz, special Delaware counsel to the Property Trustee, which shall be delivered in accordance with Section 5(b)5 hereto. (c) At Closing Time, since the date of the Pricing Agreement (i) there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Guarantor and any of its subsidiaries, taken as a whole, which, in the judgment of the Representatives, materially impairs the investment quality of the Designated Securities and (ii) there has not been any decrease in the ratings of any of the debt securities of the Guarantor or Capital Funding or of the Preferred Securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) and no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its ratings of any of the debt securities of the Guarantor or Capital Funding or of the Preferred Securities. (d) At the time of the execution of this Agreement, the Representative shall have received from Coopers & Lybrand L.L.P. a letter dated such date, in form and substance satisfactory to the Representative, to the effect that: 13 (i) they are independent public accountants with respect to the Guarantor and its consolidated subsidiaries, including Capital Funding within the meaning of the 1933 Act and the 1933 Act Regulations; and the Trust is and will be treated as a consolidated subsidiary of the Guarantor pursuant to generally accepted accounting principles; (ii) in their opinion, the consolidated financial statements and any supplementary financial information and schedules audited (and, if applicable, prospective financial statements and/or pro forma financial information examined) by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the 1933 Act or the Exchange Act and the related published rules and regulations thereunder; and if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the consolidated interim financial statements, selected financial data, statements and/or condensed financial statements derived from audited financial statements of the Guarantor for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the Representatives; (iii) based upon limited procedures set forth in detail in such letter, nothing has come to their attention which causes them to believe that (A) the unaudited consolidated financial statements and supporting schedules of the Guarantor included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations or are not presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement, (B) the unaudited amounts of revenues, net income and net income per share set forth under "U S WEST, Inc. Summary Financial Information" in the Prospectus were not determined on a basis substantially consistent with that used in determining the corresponding amounts in the audited financial statements included in the Registration Statement, or 14 (C) at a specified date not more than five days prior to the date of this Agreement, there has been any change in the capital stock, the Guarantor and its subsidiaries, including Capital Funding, or any increase in the consolidated long-term debt of the Guarantor and its subsidiaries, including Capital Funding, or any decrease in consolidated net current assets or net assets as compared with the amounts shown on the date of the most recent consolidated balance sheet included in or incorporated by reference in the Registration Statement and the Prospectus (March 31, 1995 balance sheet included in the Registration Statement) or, during the period from the date of the most recent consolidated balance sheet included in or incorporated by reference in the Registration Statement and the Prospectus to a specified date not more than five days prior to the date of this Agreement, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated revenues, net income or net income per share of the Guarantor and its subsidiaries, including Capital Funding, except in all instances for changes, increases or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur; and (iv) in addition to the examination referred to in their opinions and the limited procedures referred to in clause (iii) above, they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included in the Registration Statement and Prospectus, or incorporated therein by reference, and which are specified by the Representative, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Guarantor and its subsidiaries, including Capital Funding, identified in such letter. (e) At Closing Time, the Representative shall have received from Coopers & Lybrand L.L.P. a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than five days prior to Closing Time. (f) At the Closing Time, the Representative shall have received (i) a certificate, dated as of 15 the Closing Time, of a Vice President of the Guarantor, (ii) a certificate, dated as of the Closing Time, of a Vice President of Capital Funding, and (iii) a certificate, dated as of the Closing Time, of a Trustee of the Trust, in each case in which such officers shall state that, to the best of their knowledge after reasonable investigation, the representations and warranties of the Offerors in this Agreement are true and correct, that the Offerors have complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time, that no stop order suspending the effectiveness of the Registration Statement is in effect and no proceedings for that purpose are pending or are contemplated by the Commission and that, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change in the financial position or results of operations of the Guarantor and any of its subsidiaries, taken as a whole, except as set forth in or contemplated by the Prospectus. (g) At Closing Time and each Date of Delivery, if any, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Preferred Securities as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Offeror, in connection with the issuance and sale of the Preferred Securities as herein contemplated shall be satisfactory in form and substance to the Representative and counsel for the Underwriters. (h) In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Offerors contained herein and the statements in any certificates furnished by the Offerors hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representative shall have received: (1) The certificates, each dated such Date of Delivery, of the relevant officer of the respective Offeror confirming that the respective certificates delivered at the Closing Time pursuant to Section 5(f) hereof remains true and correct as of such Date of Delivery. 16 (2) The favorable opinion of Weil, Gotshal & Manges, counsel for the Offerors, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(l). (3) The favorable opinion of Stephen E. Brilz, Esq., Corporate Counsel, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(2). (4) The favorable opinion of Richard, Layton & Finger Special Delaware, counsel for the Offerors, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(3). (5) The favorable opinion of The Legal Department of the First National Bank of Chicago, counsel of the First National Bank of Chicago, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(4). (6) The favorable opinion of Pepper, Hamilton & Scheetz, special Delaware counsel for the Property Trustee, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(5). (7) The favorable opinion of Skadden, Arps, Slate, Meagher & Flom, special counsel for Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Sections 5(b)(6). (8) A letter from Coopers & Lybrand L.L.P., in form and substance satisfactory to the Representative and 17 dated such Date of Delivery, substantially the same in form and substance as the letter furnished to the Representative pursuant to Section 5(d) hereof, except that the "specified date" in the letter furnished pursuant to this Section 5(h)(8) shall be a date not more than five days prior to such Date of Delivery. (i) At Closing Time, the Preferred Securities and the Subordinated Debt Securities shall be rated in one of the four highest rating categories for long term debt ("Investment Grade") by any nationally recognized statistical rating agency, and the Trust shall have delivered to the Representative a letter, dated the Closing Time, from such nationally recognized statistical rating agency, or other evidence satisfactory to the Representative, confirming that the Preferred Securities and the Subordinated Debt Securities have Investment Grade ratings. (j) At the Closing Time, the Preferred Securities shall have been approved for listing on the New York Stock Exchange upon notice of issuance. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representative by notice to the Offerors at any time at or prior to Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof. Section 6. INDEMNIFICATION (a) The Offerors agree to jointly and severally indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be part of the Registration Statement pursuant to Rule 430A(b) of the 1933 Act Regulations, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not 18 misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Guarantor; and (iii) against any and all reasonable expense as incurred (including, subject to Section 6(c) hereof, the fees and disbursements of counsel chosen by Merrill Lynch), in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Trust, the Guarantor or Capital Funding by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); and PROVIDED, FURTHER, that this indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any underwriter from whom the person asserting any such losses, liabilities, claims, damages or expenses purchased Securities, or any person controlling such Underwriter, if the Offerors sustain the burden that a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any such 19 amendments or supplements thereto), but excluding documents incorporated or deemed to be incorporated by reference, was not sent or given by or on behalf of such Underwriter to such person, if such is required by law, at or prior to the written confirmation of the sale of such Securities to such person and if the Prospectus (as so amended or supplemented, but excluding documents incorporated or deemed to be incorporated by reference therein) would have corrected the defect giving rise to such loss, liability, claim, damage or expense, it being understood that this proviso shall have no application if such defect shall have been corrected in a document which is incorporated or deemed to be incorporated by reference in the Prospectus. (b) The Guarantor and Capital Funding agree jointly and severally to indemnify the Trust against all loss, liability, claim, damage and expense whatsoever, as due from the Trust under Section 6(a) hereunder. (c) Each Underwriter severally agrees to indemnify and hold harmless the Offerors, their directors, trustees, each of its officers who signed the Registration Statement, and each person, if any, who controls the Offerors within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Offerors by such Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (d) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of any such action. If it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume 20 the defense of such action with counsel satisfactory to such indemnifying party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. The indemnifying party or parties shall not be liable under this Agreement with respect to any settlement made by any indemnified party or parties without prior written consent by the indemnifying party or parties to such settlement. Section 7. CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 6 hereof is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Offerors and the Underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Offerors and one or more of the Underwriters, as incurred, in such proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting compensation paid by Capital Funding appearing on the cover page of the Prospectus bears to the initial public offering price appearing thereon and the Offerors are responsible for the balance; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as such Underwriter, and each director of the Guarantor and Capital Funding, each officer of the Guarantor and Capital Funding who signed the Registration Statement, each trustee of the Trust and each person, if any, who controls an Offeror within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as the Offerors. 21 Section 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement and the Pricing Agreement, or contained in certificates of officers or Trustees of the Offerors submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Offerors and shall survive delivery of the Preferred Securities to the Underwriters. Section 9. TERMINATION OF AGREEMENT. (a) The Representative may terminate this Agreement, by notice to the Offerors, at any time at or prior to Closing Time (i) if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Registration Statement, any material adverse change or any development involving a prospective material adverse change, in the financial condition or results of operations of the Guarantor and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business, or (ii) if there has occurred any outbreak of hostilities or material escalation thereof or other calamity or crisis the effect of which is such as to make it, in the judgment of the Representative, impracticable to market the Designated Securities, (iii) if trading in the Designated Securities has been suspended by the Commission, or if trading generally on the New York Stock Exchange has been suspended, limited or restricted or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by said exchange or by order of the Commission or any other governmental authority, or if a banking moratorium has been declared by either Federal, New York or Colorado authorities or (iv) if there has been any decrease in the ratings of any of the debt securities of the Guarantor or Capital Funding or of the Preferred Securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) and such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the debt securities of the Guarantor or Capital Funding or of the Preferred Securities. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof. 22 Section 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of the Underwriters shall fail at Closing Time to purchase the Initial Securities that it or they are obligated to purchase under this Agreement and the Pricing Agreement (the "Defaulted Securities"), the Representative shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of Initial Securities, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of Initial Securities, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representative, or the Offerors shall have the right to postpone Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. Section 11. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representative at Merrill Lynch World Headquarters, North Tower, World Financial Center, New York, New York 10281- 1201, attention of ____________, Vice President; notices to the Trust, the Guarantor and Capital Funding shall be directed to them at 7800 East Orchard Road, Englewood, CO 80111, attention of Stephen E. Brilz, Esq., Corporate Counsel. 23 Section 12. PARTIES. This Agreement and the Pricing Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Trust, the Guarantor, and Capital Funding and their respective successors. Nothing expressed or mentioned in this Agreement or the Pricing Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Trust, the Guarantor, and Capital Funding and their respective successors and the controlling persons and officers, directors and trustees referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or the Pricing Agreement or any provision herein or therein contained. This Agreement and the Pricing Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Underwriters and the Trust, the Guarantor, and Capital Funding and their respective successors, and said controlling persons and officers, directors and trustees and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. Section 13. GOVERNING LAW AND TIME. This Agreement and the Pricing Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. Except as otherwise set forth herein, specified times of day refer to New York City time. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Trust a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Underwriters and the Trust, the Guarantor, and Capital Funding in accordance with its terms. Very truly yours, U S WEST, INC. By___________________________________________ Title: U S WEST CAPITAL FUNDING, INC. By___________________________________________ Title: U S WEST FINANCING I By___________________________________________ Title: Trustee By___________________________________________ Title: Trustee CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By________________________________ Authorized Signatory For itself and as Representative of the other Underwriters named in Schedule A hereto. 25 SCHEDULE A Number Name of Underwriter of Securities ------------------- ------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . ------------- ------------- EXHIBIT A 400,000 Preferred Securities U S WEST FINANCING I (a Delaware business trust) ____% Trust Originated Preferred Securities ("TOPrS") (Liquidation Amount of $25 Per Security) PRICING AGREEMENT ----------------- MERRILL LYNCH & CO. April __, 1995 Merrill Lynch, Pierce, Fenner & Smith Incorporated as Representative of the several Underwriters named in the within- mentioned Purchase Agreement Merrill Lynch World Headquarters North Tower World Financial Center New York, New York 10281 Dear Sirs: Reference is made to the Underwriting Agreement, dated April __, 1995 (the "Underwriting Agreement"), relating to the purchase by the several Underwriters named in Schedule A thereto, for whom Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representative (the "Representative"), of the above ____% Trust Originated Preferred Securities (the "Preferred Securities"), of U S WEST FINANCING I, a Delaware business trust (the "Trust"). Pursuant to Section 2 of the Underwriting Agreement, the Trust, U S WEST, Inc. (the "Guarantor"), a Colorado corporation, and U S WEST Capital Funding Inc. ("Capital Funding"), a Colorado corporation, agree with each Underwriter as follows: 1. The initial public offering price per security for the Preferred Securities, determined as provided in said Section 2, shall be $25.00. 2. The purchase price per security for the Preferred Securities to be paid by the several Underwriters shall be $25.00, being an amount equal to the initial public offering price set forth above; PROVIDED that the purchase price per Preferred Security for any Option Securities (as defined in the Purchase Agreement) purchased upon exercise of the over-allotment option described in Section 2(b) of the Purchase Agreement shall be reduced by an amount per share equal to any distribution declared by the Trust and payable on the Initial Securities (as defined in the Purchase Agreement) but not payable on the Option Securities. 3. The compensation per Preferred Security to be paid by Capital Funding to the several Underwriters in respect of their commitments hereunder shall be $_____; provided, however, that the compensation per Preferred Security for sales of 10,000 or more Preferred Securities to a single purchaser shall be $_____. 28 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Trust a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Underwriters and the Trust, the Guarantor, and Capital Funding in accordance with its terms. Very truly yours, U S WEST, INC. By________________________________________________ Title: U S WEST CAPITAL FUNDING, INC. By________________________________________________ Title: U S WEST FINANCING I By________________________________________________ Title: Trustee By________________________________________________ Title: Trustee CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By________________________________ Authorized Signatory For itself and as Representative of the other Underwriters named in the Underwriting Agreement. 2 EX-4.D 3 EXHIBIT 4-D ------------------------------------------ ------------------------------------------ AMENDED AND RESTATED DECLARATION OF TRUST U S WEST FINANCING [ ] Dated as of __________, 1995 ------------------------------------------- ------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I INTERPRETATION AND DEFINITIONS.................. 2 SECTION 1.1 Definitions.............................. 2 ARTICLE II TRUST INDENTURE ACT............................ 10 SECTION 2.1 Trust Indenture Act; Application......... 10 SECTION 2.2 Lists of Holders of Securities........... 10 SECTION 2.3 Reports by the Property Trustee.......... 11 SECTION 2.4 Periodic Reports to Property Trustee.................................. 11 SECTION 2.5 Evidence of Compliance with Conditions Precedent................................ 11 SECTION 2.6 Events of Default; Waiver................ 11 SECTION 2.7 Event of Default; Notice................. 13 ARTICLE III ORGANIZATION..................................... 14 SECTION 3.1 Name..................................... 14 SECTION 3.2 Office................................... 14 SECTION 3.3 Purpose.................................. 14 SECTION 3.4 Authority................................ 14 SECTION 3.5 Title to Property of the Trust........... 15 SECTION 3.6 Powers and Duties of the Regular Trustees................................. 15 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees................... 19 SECTION 3.8 Powers and Duties of the Property Trustee.................................. 21 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.................. 24 SECTION 3.10 Certain Rights of Property Trustee....... 26 SECTION 3.11 Delaware Trustee......................... 29 SECTION 3.12 Execution of Documents................... 30 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities................... 30 SECTION 3.14 Duration of Trust........................ 30 SECTION 3.15 Mergers.................................. 30 ARTICLE IV SPONSOR.......................................... 33 i Page ---- SECTION 4.1 Sponsor's Purchase of Common Securities............................... 33 SECTION 4.2 Responsibilities of the Sponsor.......... 33 ARTICLE V TRUSTEES....................................... 34 SECTION 5.1 Number of Trustees....................... 34 SECTION 5.2 Delaware Trustee......................... 35 SECTION 5.3 Property Trustee; Eligibility............ 35 SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally........... 36 SECTION 5.5 Initial Trustees......................... 36 SECTION 5.6 Appointment, Removal and Resignation of Trustees.............................. 37 SECTION 5.7 Vacancies among Trustees................. 39 SECTION 5.8 Effect of Vacancies...................... 39 SECTION 5.9 Meetings................................. 40 SECTION 5.10 Delegation of Power...................... 40 ARTICLE VI DISTRIBUTIONS.................................... 41 SECTION 6.1 Distributions............................ 41 ARTICLE VII ISSUANCE OF SECURITIES........................... 41 SECTION 7.1 General Provisions Regarding Securities............................... 41 ARTICLE VIII TERMINATION OF TRUST............................. 42 SECTION 8.1 Termination of Trust..................... 42 ARTICLE IX TRANSFER OF INTERESTS.......................... 44 SECTION 9.1 Transfer of Securities................... 44 SECTION 9.2 Transfer of Certificates................. 44 SECTION 9.3 Deemed Security Holders.................. 45 SECTION 9.4 Book Entry Interests..................... 45 SECTION 9.5 Notices to Clearing Agency............... 46 SECTION 9.6 Appointment of Successor Clearing Agency................................... 46 SECTION 9.7 Definitive Preferred Security Certificates............................. 47 ii Page ---- SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates...................... 48 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS................... 49 SECTION 10.1 Liability................................ 49 SECTION 10.2 Exculpation.............................. 49 SECTION 10.3 Fiduciary Duty........................... 50 SECTION 10.4 Indemnification.......................... 51 SECTION 10.5 Outside Businesses....................... 52 ARTICLE XI ACCOUNTING....................................... 52 SECTION 11.1 Fiscal Year.............................. 52 SECTION 11.2 Certain Accounting Matters............... 52 SECTION 11.3 Banking.................................. 54 SECTION 11.4 Withholding.............................. 54 ARTICLE XII AMENDMENTS AND MEETINGS........................ 54 SECTION 12.1 Amendments............................... 54 SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent................ 56 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE.............. 59 SECTION 13.1 Representations and Warranties of Property Trustee...................... 59 ARTICLE XIV MISCELLANEOUS.................................. 60 SECTION 14.1 Notices.................................. 60 SECTION 14.2 Governing Law............................ 61 SECTION 14.3 Intention of the Parties................. 62 SECTION 14.4 Headings................................. 62 SECTION 14.5 Successors and Assigns................... 62 SECTION 14.6 Partial Enforceability................... 62 SECTION 14.7 Counterparts............................. 62 iii CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- 310(a)............................................. 5.3(a) 310(b)............................................. 5.3(c) 310(c)............................................. Inapplicable 311(a)............................................. 2.2(b) 311(b)............................................. 2.2(b) 311(c)............................................. Inapplicable 312(a)............................................. 2.2(a) 312(b)............................................. 2.2(b) 313................................................ 2.3 314(a)............................................. 2.4 314(b)............................................. Inapplicable 314(c)............................................. 2.5 314(d)............................................. Inapplicable 314(f)............................................. Inapplicable 315(a)............................................. 3.9(b) 315(b)............................................. 2.8 315(c)............................................. 3.9(a) 315(d)............................................. 3.9(a) 316(a)............................................. Exhibit A, 2.6 316(c)............................................. 3.6(e) - ---------------- * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. iv AMENDED AND RESTATED DECLARATION OF TRUST OF U S WEST FINANCING [ ] _____ __, 1995 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of , 1995 by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), U S WEST, Inc., a Colorado corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Delaware Business Trust Act pursuant to a Declaration of Trust, dated as of March 1, 1995 (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of Delaware on March 1, 1995, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures of the Debenture Issuer and the Debenture Guarantees of the Sponsor endorsed thereon; WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the 1 Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 DEFINITIONS. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Amended and Restated Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration of Trust as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Appointment Event" means an event defined in the terms of the Preferred Securities as set forth in Exhibit A which entitles the Holders of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. 2 "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than a day on which banking institutions in New York, New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 DEL. C. Sections 3801 ET SEQ., as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Preferred Securities and in whose name or in the name of a nominee of that organization, shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means __, 1995. "Code" means the Internal Revenue Code of 1986. "Common Security" has the meaning specified in Section 7.1. "Common Securities Guarantee" means the guarantee agreement to be dated as of , 1995 of the Sponsor in respect of the Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex II to Exhibit A. 3 "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of: (i) the Trust; or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Guarantee" means the guarantee by the Sponsor of the Debentures endorsed thereon. "Debenture Issuer" means U S WEST Capital Funding, Inc., a Colorado corporation. "Debenture Trustee" means Norwest Bank Minnesota, National Association, as trustee under the Indenture until a successor is appointed thereunder and thereafter means such successor trustee. "Debentures" means the series of Debentures to be issued by the Debenture Issuer under the Indenture to be held by the Property Trustee pursuant to Section 3.6(c), a specimen certificate for such series of Debentures being Exhibit B. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Direction" by a Person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. 4 "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "DTC" means the Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time or any successor legislation. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Global Certificate" has the meaning set forth in Section 9.4. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means: (a) any Trustee; (b) any Affiliate of any Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of , 1995 among the Debenture Issuer, the Sponsor, as guarantor, and Norwest Bank Minnesota, National Association, as trustee and any indenture supplemental thereto pursuant to which the Debentures and the Debenture Guarantees are to be issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time or any successor legislation. "Legal Action" has the meaning set forth in Section 3.6(g). "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibit A. 5 "Majority in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities and by the Trust Indenture Act, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities voting separately as a class, who vote Securities of a relevant class and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents more than 50% of the above stated liquidation amount of all Securities of such class. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(i). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. 6 "Preferred Securities Guarantee" means the guarantee agreement to be dated as of , 1995 of the Sponsor in respect of the Preferred Securities. "Preferred Security" has the meaning specified in Section 7.1. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Annex I to Exhibit A. "Pricing Agreement" means the pricing agreement between the Trust, the Debenture Issuer, and the underwriters designated by the Regular Trustees with respect to the offer and sale of the Preferred Securities. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or if there are only two Regular Trustees, both of them. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person which owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, the chairman of the board of direc- 7 tors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended. "66-2/3% in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities and by the Trust Indenture Act, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities, voting separately as a class, who vote Securities of a relevant class and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions, to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents 66-2/3% of the above-stated liquidation amount of all Securities of such class. "Special Event" has the meaning set forth in the terms of the Securities. "Special Regular Trustee" means a Regular Trustee appointed by the Holders of a Majority in liquidation amount of the Preferred Securities in accordance with Section 5.6(a)(ii)(B). 8 "Sponsor" means U S WEST, Inc., a Colorado corporation or any successor entity in a merger, in its capacity as sponsor of the Trust. "Successor Property Trustee" means a successor Trustee possessing the qualifications to act as Property Trustee under Section 5.3(a). "10% in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities by the Trust Indenture Act, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities, voting separately as a class, who vote Securities of a relevant class and the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents 10% of the above stated liquidation amount of all Securities of such class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Preferred Securities in the form of Exhibit C. 9 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 TRUST INDENTURE ACT; APPLICATION. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) the Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act; (c) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 LISTS OF HOLDERS OF SECURITIES. (a) Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, PROVIDED THAT none of the Sponsor, the Debenture Issuer or the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in its 10 capacity as Paying Agent (if acting in such capacity) PROVIDED THAT the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders; and (b) the Property Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 EVENTS OF DEFAULT; WAIVER. (a) The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences provided that if the underlying Event of Default under the Indenture: 11 (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of the holders of greater than a majority in principal amount of the Debentures affected thereby (a "Super Majority") to be waived, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount the Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, PROVIDED THAT, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also be not waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such, the Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount the Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding, PROVIDED THAT, each Holder of Common Securities will be deemed to have waived any Event of Default with respect to the Common Securities and its consequences until all Events of 12 Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing provisions of this Section 2.6(b) upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of any Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 EVENT OF DEFAULT; NOTICE (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); PROVIDED, THAT, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Property Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written 13 notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 NAME. The Trust is named "U S WEST Financing [ ]", as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 OFFICE. The address of the principal office of the Trust is 7800 East Orchard Road, Englewood, CO 80111. On ten Business Days written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures and the Debenture Guarantees, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would (i) cause the Trust to be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership or (ii) cause each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures at any time the Securities are outstanding. SECTION 3.4 AUTHORITY. Subject to the limitations provided in this Declaration and to the specific duties of the Property 14 Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 3.8 with respect to the Debentures, the Debenture Guarantee and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES. The Regular Trustees shall have the exclusive power and authority and duty to cause the Trust to engage in the following activities: (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; PROVIDED, HOWEVER, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, PROVIDED FURTHER, there shall be no interests in the Trust other than the Securities and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Preferred Securities, at the direction of the Sponsor, to: 15 (i) execute and file with the Securities and Exchange Commission (the "Commission") the registration statement on Form S-3 prepared by the Sponsor in relation to the Preferred Securities, including any amendments thereto prepared by the Sponsor; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor as necessary in order to qualify or register all or part of the Preferred Securities in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application prepared by the Sponsor to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto prepared by the Sponsor; and (v) execute and enter into the Underwriting Agreement and Pricing Agreement providing for the sale of the Preferred Securities; (c) to acquire the Debentures and the Debenture Guarantee with the proceeds of the sale of the Preferred Securities and the Common Securities; PROVIDED, HOWEVER, that the Regular Trustees shall cause legal title to the Debentures and the Debenture Guarantee to be held of record in the name of the Property Trustee for the benefit of 16 the Holders of the Preferred Securities and the Common Securities; (d) to give the Debenture Issuer, the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event PROVIDED, THAT the Regular Trustees shall consult with the Debenture Issuer, the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, Section including for the purposes of Section 316(c) of the Trust Indenture Act and with respect to Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(f), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; 17 (j) to give the certificate to the Property Trustee required by Section 314(a)(4) of the Trust Indenture Act which certificate may be executed by any Regular Trustee; (k) to incur expenses which are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election (i) to defer payments of interest on the Debentures by extending the interest payment period under the Indenture or, (ii) to extend the scheduled maturity date on the Debentures; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action which may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, which the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6 including, but not limited to: 18 (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust not to be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but for each Holder of Securities to be treated as owning an undivided beneficial interest in the Debentures; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.3 and the Regular Trustees shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES. 19 (a) the Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under Section 6.06 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will be characterized as an association taxable as a corporation or a partnership and that 20 each Holder of Securities will not be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.8 POWERS AND DUTIES OF THE PROPERTY TRUSTEE. (a) The legal title to the Debentures and the Debenture Guarantee shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures and the Debenture Guarantee shall vest automatically in each Person who may hereafter be appointed as Property Trustee as set forth in Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered; (b) the Property Trustee shall not transfer its right, title and interest in the Debentures and the Debenture Guarantee to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee); (c) the Property Trustee shall: (i) establish and maintain a segregated non-interest bearing bank account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures and Debenture Guarantee held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Preferred Securities and the Common Securities from the Property Trustee Account in accordance with Sec- 21 tion 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account which is maintained with a banking institution the rating on whose long term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures and the Debenture Guarantees to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities; (d) the Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities; 22 (e) the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; (f) the Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and accepted that appointment in accordance with Section 5.6; (g) the Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures and the Debenture Guarantee under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures and the Debenture Guarantee, subject to the rights of the Holders pursuant to the terms of such Securities; (h) the Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to the Preferred Securities and any such Paying Agent shall Trustee required by Section comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed 23 by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee; and (i) subject to this Section 3.8, the Property Trustee shall have none of the powers or the authority of the Regular Trustees set forth in Section 3.6; The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner which is consistent with the purposes and functions of the Trust set forth in Section 3.3 and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration in Sections 2.2, 2.3, 2.7, 3.8, 3.9, 3.10 and 6.1 and in the terms of the Securities, and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (b) no provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of 24 all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration in Sections 2.2, 2.3, 2.7, 3.8, 3.9, 3.10 and 6.1 and in the terms of the Securities, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; 25 (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; and (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.10 CERTAIN RIGHTS OF PROPERTY TRUSTEE. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; 26 (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); (v) the Property Trustee may consult with counsel and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property 27 Trustee adequate security and indemnity which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee provided that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to 28 perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders of the Securities which instructions may only be given by the Holders of the same portion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. 29 SECTION 3.11 DELAWARE TRUSTEE Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees and the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for Trust Indenture Act. Any Paying the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 EXECUTION OF DOCUMENTS Unless otherwise determined by the Regular Trustees and except as otherwise required by the Business Trust Act, a majority of, or if there are only two, both of the Regular Trustees are authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.6, PROVIDED THAT any listing application prepared by the Sponsor referred to in Section 3.6(b)(iii) may be executed by any Regular Trustee. SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 DURATION OF TRUST. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for 55 years from the Closing Date. SECTION 3.15 MERGERS. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to 30 any corporation or other body, except as described in Section 3.15(b) and (c); (b) the Trust may, with the consent of a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; PROVIDED, THAT: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and maturity; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity which possesses the same powers and duties as the Property Trustee as the Holder of the Debentures and the Sponsor expressly acknowledges such trustee of the Successor Entity as the holder of the Debenture Guarantee; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issu- 31 ance, on any national securities exchange or other organization on which the Preferred Securities are then listed; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); (vi) such successor entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at 32 least to the extent provided by the Preferred Securities Guarantee; and (c) notwithstanding Section 3.15(b), the Trust shall not consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity for United States federal income tax purposes to be classified as an association taxable as a corporation or a partnership and each Holder of the Securities not to be treated as owning an undivided beneficial interest in the Debentures, except with the consent of Holders of 100% in liquidation amount of the Securities. ARTICLE IV SPONSOR SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date the Sponsor will purchase all the Common Securities issued by the Trust, at the same time as the Preferred Securities are sold, in an amount equal to 3% of the capital of the Trust. SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to take any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor 33 deems necessary or advisable in order to comply with the applicable laws of any such States; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement and Pricing Agreement providing for the sale of the Preferred Securities. ARTICLE V TRUSTEES SECTION 5.1 NUMBER OF TRUSTEES. The number of Trustees shall initially be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities: (i) and except as provided in Section 5.1(b)(ii) and 5.6(a)(ii)(B) with respect to the Special Regular Trustee, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in liquidation amount of the Preferred Securities appoint a Special Regular Trustee in accordance with Section 5.6, 34 PROVIDED THAT in any case, the number of Trustees shall be at least five (5) unless the Trustee that acts as the Property Trustee also acts as the Delaware Trustee pursuant to Section 5.2 in which case the number of Trustees shall be at least three(3). SECTION 5.2 DELAWARE TRUSTEE. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 PROPERTY TRUSTEE; ELIGIBILITY. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the re- 35 quirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications; and (b) if at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c); (c) if the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act; and (d) the Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity which shall act through one or more Authorized Officers. SECTION 5.5 INITIAL TRUSTEES. The initial Regular Trustees shall be: James T. Anderson 7800 East Orchard Road 36 Englewood, CO 80111 Charles J. Burdick 7800 East Orchard Road Englewood, CO 80111 Roger Fox 7800 East Orchard Road Englewood, CO 80111 The initial Delaware Trustee shall be: Michael J. Majchrzak 300 King Street Wilmington, DE 19801 The initial Property Trustee shall be: The First National Bank of Chicago One First National Plaza Suite 0126 Chicago, IL 60670-0126 SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities: (A) other than in respect to a Special Regular Trustee, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (B) if an Appointment Event has occurred and is continuing, one (1) additional Regular Trustee (the "Special Regular Trustee") may be appointed by vote of the Holders of a Majority in liquidation amount of the Preferred Securities, vot- 37 ing as a class at a meeting of the Holders of the Preferred Securities and such Special Regular Trustee may only be removed (otherwise than by the operation of Section 5.6(c)), by vote of the Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities; (b) (i) the Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a Successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor; and (c) a Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation, PROVIDED THAT a Special Regular Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the 38 Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; PROVIDED, HOWEVER, that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective until: (A) a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is excluded from the definition of an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Regular Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Regular Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Trustee as provided in this Section 5.6; and (d) the Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Property Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of registration in accordance with this Section 5.6 (e) if no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.7 VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, or any one 39 of them, shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 MEETINGS. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.10 DELEGATION OF POWER. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6 including any registration statement or amendment thereto filed with the Commission or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the 40 execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI DISTRIBUTIONS SECTION 6.1 DISTRIBUTIONS. If and to the extent that the Debenture Issuer makes a payment of interest and Additional Interest (as defined in the Indenture), premium and principal on the Debentures (or the Sponsor makes a payment in respect of the Debenture Guarantee) held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES. (a) The Regular Trustees shall, on behalf of the Trust, issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Preferred Securities"), and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Common Securities"). The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities; 41 (b) the Certificates shall be signed on behalf of the Trust by the Regular Trustees (or if there are more than two Regular Trustees by any two of the Regular Trustees). Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificate so signed shall be delivered by the Trust, such Certificate nevertheless may be delivered as though the person who signed such Certificate had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who shall, at the actual date of the execution of such Security, be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee; Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage; (c) the consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust; (d) upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable; and (e) every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by this Declaration. 42 ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 TERMINATION OF TRUST. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Common Securities, the Sponsor or the Debenture Issuer; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities, the Sponsor or the Debenture Issuer, the filing of a certificate of cancellation with respect to the Trust or the revocation of the Holder of the Common Securities, the Sponsor's or the Debenture Issuer's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Debenture Issuer or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures and Debenture Guarantees endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor; and 43 (b) as soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware; and (c) the provisions of Section 3.9 and Article X shall survive the termination of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 TRANSFER OF SECURITIES. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void; (b) subject to this Article IX, Preferred Securities shall be freely transferable; and (c) subject to this Article IX, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor, PROVIDED, THAT, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and each Holder of Securities would not be treated as owning an undivided beneficial interest in the Debentures; and (ii) the Trust or the transferee would be an Investment Company. 44 SECTION 9.2 TRANSFER OF CERTIFICATES. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the documents incorporated by reference herein. SECTION 9.3 DEEMED SECURITY HOLDERS. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trustees shall have actual or other notice thereof. SECTION 9.4 BOOK ENTRY INTERESTS. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing 45 such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. SECTION 9.5 NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications, specified herein to be given to the Preferred Security Holders, to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. 46 SECTION 9.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 9.7 DEFINITIVE PREFERRED SECURITY CERTIFICATES If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then: (c) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, such 47 instructions. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Preferred Securities may be listed, or to conform to usage. SECTION 9.8 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the 48 relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 LIABILITY. (a) Except as expressly set forth in this Declaration, the Debenture Guarantee, the Securities Guarantees and the terms of the Securities the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) be required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise; and (b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations. SECTION 10.2 EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and 49 (b) an Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3 FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration, subject to any duties or obligations imposed on the Property Trustee under Rule 3a-7, shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provide that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens 50 relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 INDEMNIFICATION. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an 51 Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). SECTION 10.5 OUTSIDE BUSINESSES. Any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. 52 SECTION 11.2 CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon, as of the end of each Fiscal Year, by a firm of independent certified public accountants selected by the Regular Trustees; (b) the Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) the Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust; and (d) the Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and 53 any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 BANKING. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; PROVIDED, HOWEVER, that all payments of funds in respect of the Debentures and the Debenture Guarantee held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; PROVIDED, HOWEVER, that the Property Trustee shall designate the sole signatories for the Property Trustee Account. SECTION 11.4 WITHHOLDING. The Trust and the Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over-withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. 54 ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 AMENDMENTS. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); PROVIDED, HOWEVER, that: (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to (a) cause the Trust to be characterized for purposes of United States federal income taxation as an association taxable as a corporation or a partnership and each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures; (b) reduce or otherwise adversely affect the powers of the Property Trustee; or (c) cause the Trust to be deemed to be an Investment Company which is required to be registered under the Investment Company Act; (ii) at such time after the Trust has issued any Securities which remain outstanding, any amendment which would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (iii) Section 9.1(c) and this Section 12.1 shall not be amended without 55 the consent of all of the Holders of the Securities; (iv) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (v) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities (except to the extent that such amendment relates to the Special Regular Trustee, in which case such amendment may only be made in accordance with the terms of the Preferred Securities). (b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of 56 such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of such class of Holders, if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met; and (b) except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the mini- 57 mum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Secu- 58 rities or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading, otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE. The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing under the laws of the United States, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to 59 applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any State or Federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. (e) The Property Trustee, pursuant to the Declaration, shall hold legal title and a valid ownership interest in the Debentures and the Debenture Guarantee under the law of its place of incorporation and Delaware law. (f) If the Property Trustee does not also act as the Delaware Trustee, the Delaware Trustee under Delaware law is a natural person who is a resident of the State of Delaware. (g) Pursuant to a Co-Trustee Agreement between the Property Trustee and the Delaware Trustee dated as of March 1, 1995, the Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against the Delaware Trustee in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). 60 ARTICLE XIV MISCELLANEOUS SECTION 14.1 NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): U S WEST FINANCING [ ] 7800 East Orchard Road Englewood, CO 80111 Attention: [ ] (b) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza Suite 0126 Chicago, IL 60670-0126 Attention: [ ] (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): U S WEST, Inc. 7800 East Orchard Road Englewood, CO 80111 Attention: [ ] (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed 61 address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3 INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust not be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but rather, the Trust be characterized as a grantor trust or otherwise in a manner that each Holder of Securities be treated as owning an undivided beneficial interest in the Debentures. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 SUCCESSORS AND ASSIGNS Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 62 SECTION 14.7 COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 63 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. James T. Anderson as Trustee - ----------------------------------- Charles J. Burdick as Trustee - ----------------------------------- Roger Fox as Trustee - ----------------------------------- Michael J. Majchrzak as Trustee - ----------------------------------- THE FIRST NATIONAL BANK OF CHICAGO as Trustee By: ------------------------- Name: Title: U S WEST, INC. as Sponsor By: ----------------------- Name: Title: 64 EXHIBIT A TERMS OF _% TRUST ORIGINATED PREFERRED SECURITIES __% TRUST ORIGINATED COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of _________, 1995 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. DESIGNATION AND NUMBER. (a) PREFERRED SECURITIES. Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $[_____ million ($_________)] and a liquidation amount with respect to the assets of the Trust of $25 per Preferred Security, are hereby designated for the purposes of identification only as "____% Trust Originated Preferred Securities" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. (b) COMMON SECURITIES. Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $[_______ million ($______)] and a liquidation amount with respect to the assets of the Trust of $25 per Common Security, are hereby designated for the purposes of identification only as "__% Trust Originated Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex II, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. (a) Periodic Distributions payable on each Security will be fixed at a rate per annum of [*.*]% (the "Coupon Rate") of the stated liquidation amount of $25 per Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used in these terms includes such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures or the Debenture Guarantee held by the Property Trustee. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed in such a 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from _________, 1995 and will be payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year, commencing on __________, 1995, except as otherwise described below. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each, an "Extension Period") and, as a consequence of such extension, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; PROVIDED THAT such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records 2 of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus Supplement dated ______, 1995 to the Prospectus dated ______, 1995 (together, the "Prospectus") of the Trust included in the Registration Statement on Form S-3 of the Sponsor, the Debenture Issuer, the Trust and certain other business trusts. The relevant record dates for the Common Securities shall be the same record date as the Preferred Securities. If the Preferred Securities shall not continue to remain in book-entry-only form, the relevant record dates for the Preferred Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer or the Sponsor having failed to make a payment under the Debentures or the Debenture Guarantee, as the case may be, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distrib- 3 uted Pro Rata (as defined herein) among the Holders of the Securities. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities to creditors, an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. REDEMPTION AND DISTRIBUTION. (a) Upon the repayment of the Debentures in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or pay- ment shall be simultaneously applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed, at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon at the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. 4 (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Paragraph 4(f)(ii) below. (c) If, at any time, a Tax Event or an Investment Company Event (each as defined below, and each a "Special Event") shall occur and be continuing the Regular Trustees shall dissolve the Trust and, after satisfaction of creditors, cause Debentures held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities, together with the Debt Guarantee in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90 Day Period"), PROVIDED, HOWEVER, that in the case of the occurrence of a Tax Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures and PROVIDED, FURTHER, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90 Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution. If, in the case of the occurrence of a Tax Event (i) the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be preclud- 5 ed from deducting the interest on the Debentures for United States federal income tax purposes even after the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this paragraph 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, the Debenture Issuer shall have the right at any time, upon not less than 30 nor more than 60 days notice, to redeem the Debentures in whole or in part for cash within 90 days following the occurrence of such Tax Event, and following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; PROVIDED, HOWEVER, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90 day period, the Tax Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus Supplement, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority therefore or therein, or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of the Prospectus Supplement, there is more than an insubstantial risk that (i) the Trust is or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable by the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in 6 part, by the Debenture Issuer for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent counsel experienced in practice under the Investment Company Act that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of the Prospectus Supplement. On and from the date fixed by the Regular Trustees for any distribution of Debentures and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Debentures and the Debenture Guarantee to be delivered upon such distribution and any certificates representing Securities, except for certificates representing Preferred Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Debentures and the Debenture Guarantee are distributed to holders of the Securities, 7 pursuant to the terms of the Indenture, the Debenture Issuer will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) REDEMPTION OR DISTRIBUTION PROCEDURES. (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed, by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata and, in the event Preferred Securities are held in book-entry only form by the Depository or its nominee (or any successor Clearing Agency or its nominee), the Depository will reduce Pro Rata the amount of the interest of each Clearing Agency Participant in the Preferred Securities to be redeemed; provided that if, as a result of such Pro Rata redemption, Clearing Agency Participants would hold fractional interests in the Preferred Securities, the Depository will adjust the amount of the interest of each Clearing Agency Participant to be redeemed to avoid such fractional interests. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevoca- 8 ble) then (a) while the Preferred Securities are in book-entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with the Depository (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give the Depositary irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities, and (b) if the Preferred Securities are issued in definitive form, with respect to the Preferred Securities, and with respect to the Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities which have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue, from the origi- 9 nal redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (a) in respect of the Preferred Securities, the Depository or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (b) in respect of the Common Securities to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. VOTING RIGHTS - PREFERRED SECURITIES. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If (i) the Trust fails to make Distributions in full on the Preferred Securities for 6 consecutive quarterly Distribution periods, or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee in accordance with Section 5.6(a)(ii)(b) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any person to be appointed as Special Regular Trustee. For purposes of determining whether the Trust has failed to make Distributions in full for 6 consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, 10 notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees will convene a meeting for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which notice of the meeting is sent to Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. A Special Regular Trustee may be removed without cause at any time by vote of the Holders of a Majority in liquidation amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities in accordance with Section 5.6(a)(ii)(b) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Regular Trustee, the Debenture Issuer shall retain all rights under the Indenture, including the right to extend the interest payment period on the Debentures. Subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Preferred Securities voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any pro- 11 ceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 6.06 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided, however, that where a consent under the Indenture would require the consent or act of the Holders greater than a majority in principal amount of Debentures affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will 12 include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor, or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. VOTING RIGHTS - COMMON SECURITIES. (a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Regular Trustee. (c) Subject to Section 2.6 of the Declaration and only after all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is 13 waivable under Section 6.06 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided, however, that where a consent or action under the Indenture would require the consent or act of the Holders of greater than a majority in principal amount of Debentures affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Pursuant to this paragraph 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought 14 and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Preferred Securities as a class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66-2/3% in liquidation amount of the Securities, voting together as a single class, provided, however, that the rights of Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Regular Trustee shall not be amended without the consent of each Holder of Preferred Securities, provided, further, if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66-2/3% in liquidation amount of such class of Securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures and the Debenture Guarantee is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Debentures or the Debenture Guarantee, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of the holders of greater than a majority in aggregate principal amount of the Debentures (a "Super Majority"), the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this paragraph 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United Stated federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. 8. PRO RATA. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the 15 aggregate liquidation amount of all Common Securities outstanding. 9. RANKING. The Preferred Securities rank PARI PASSU and payment thereon shall be made Pro Rata with the Common Securities except that where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. 10. LISTING. The Regular Trustees shall use their best efforts to cause the Preferred Securities to be listed for quotation on the New York Stock Exchange Limited. 11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional Securities. 13. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. 16 ANNEX I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT -] This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Preferred Securities CUSIP NO. Certificate Evidencing Preferred Securities of U S WEST FINANCING [ ] Preferred Securities. (liquidation amount $25 per Preferred Security) 17 U S WEST FINANCING [ ], a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that __________ (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _______ Trust Originated Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of __________, 1995, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Preferred Securities as set forth in Exhibit A to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. 18 IN WITNESS WHEREOF, the Trust has executed this certificate this day of __________ , 199_. [ ] as Trustee _______________________________________________________ [ ] as Trustee _______________________________________________________ _____________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________________________________________________ ________________________________________________________________________________ __________________________________________________________________________ agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ___________________________________________________ Signature: ______________________________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) 19 ANNEX II Certificate Number Number of Common Securities Certificate Evidencing Common Securities of U S WEST FINANCING [ ] Common Securities. (liquidation amount $25 per Common Security) U S WEST FINANCING [ ], a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ___________ (the "Holder") is the registered owner of Common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _______ Trust Originated Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of ____________, 1995, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Common Securities as set forth in Exhibit A to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. 20 IN WITNESS WHEREOF, the Trust has executed this certificate this day of ____________, 199__. [ ] as Trustee ________________________________________________________ [ ] as Trustee ________________________________________________________ _____________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________________________________________________ ________________________________________________________________________________ __________________________________________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: _______________________ Signature: __________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) 21 EXHIBIT B SPECIMEN OF DEBENTURE EXHIBIT C UNDERWRITING AGREEMENT EX-4.E 4 EXHIBIT 4-E - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U S WEST CAPITAL FUNDING, INC., Issuer U S WEST, INC., Guarantor AND NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee ___________________________________ INDENTURE Dated as of __________, 1995 ___________________________________ Guaranteed Subordinated Debt Securities - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Indenture - ------------------- ------------ 310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09 310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08 7.10 310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(a) 311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(b) 311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01 5.02(a) 312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(b) 312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(c) 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a) 313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(b) 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a) 5.04(b) 313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(c) 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03 314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.06 314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.06 314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a) 7.02 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01 315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b) 7.01(c) 315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06 8.04 316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04 316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01 317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02 317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08 ____________________ * This Cross-Reference Table does not constitute part of the Indenture and shall not have any bearing on the interpretation of any of its terms or provisions. TABLE OF CONTENTS* Page ---- PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I. DEFINITIONS SECTION 1.01. Definitions of Terms. . . . . . . . . . . . . . . . . . . . . 1 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Debt Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Governmental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 "herein", "hereof" and "hereunder. . . . . . . . . . . . . . . . . . . . . . 5 Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Preferred Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . 6 Responsible Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ____________________ * This Table of Contents does not constitute part of the Indenture and shall not have any bearing upon the interpretation of any of its terms or provisions. i Page ---- Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 U S WEST Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE II. ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES SECTION 2.01. Designation and Terms of Securities . . . . . . . . . . . 8 SECTION 2.02. Form of Securities and Trustee's Certificate. . . . . . . 10 SECTION 2.03. Denominations: Provisions for Payment. . . . . . . . . . 10 SECTION 2.04. Execution and Authentications . . . . . . . . . . . . . . 13 SECTION 2.05. Registration of Transfer and Exchange . . . . . . . . . . 14 SECTION 2.06. Temporary Securities. . . . . . . . . . . . . . . . . . . 15 SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities. . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.08. Cancellation. . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.09. Benefits of Indenture . . . . . . . . . . . . . . . . . . 17 SECTION 2.10. Authenticating Agent. . . . . . . . . . . . . . . . . . . 18 SECTION 2.11. Global Securities . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.12. Unconditional Guarantees. . . . . . . . . . . . . . . . . 20 SECTION 2.13. Execution of Guarantee. . . . . . . . . . . . . . . . . . 21 SECTION 2.14. Assumption by Guarantor . . . . . . . . . . . . . . . . . 22 ARTICLE III. REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS SECTION 3.01. Redemption. . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.02. Notice of Redemption. . . . . . . . . . . . . . . . . . . 23 SECTION 3.03. Payment Upon Redemption . . . . . . . . . . . . . . . . . 24 SECTION 3.04. Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 3.05. Satisfaction of Sinking Fund Payments with Debt Securities . . . . . . . . . . . . . . 25 SECTION 3.06. Redemption of Debt Securities for Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE IV. SECTION 4.01. Payment of Principal, Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . . 26 ii Page ---- SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . 26 SECTION 4.03. Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 4.04. Appointment to Fill Vacancy in Office of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 4.05. Compliance with Consolidation Provisions. . . . . . . . . 28 SECTION 4.06. Limitation on Dividends; Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 4.07. Covenants as to U S WEST Trusts . . . . . . . . . . . . . . . 29 ARTICLE V. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 5.01. Company to Furnish Trustee Names and Addresses of Securityholders. . . . . . . . . . . . . . . 30 SECTION 5.02. Preservation Of Information; Communications With Securityholders . . . . . . . . . . . 30 SECTION 5.03. Reports by the Guarantor. . . . . . . . . . . . . . . . . 31 SECTION 5.04. Reports by the Trustee. . . . . . . . . . . . . . . . . . 31 ARTICLE VI. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.02. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . 34 SECTION 6.03. Application of Moneys Collected . . . . . . . . . . . . . 36 SECTION 6.04. Limitation on Suits . . . . . . . . . . . . . . . . . . . 37 SECTION 6.05. Rights and Remedies Cumulative; Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . 38 SECTION 6.06. Control by Securityholders. . . . . . . . . . . . . . . . 39 SECTION 6.07. Undertaking to Pay Costs. . . . . . . . . . . . . . . . . 39 ARTICLE VII. CONCERNING THE TRUSTEE SECTION 7.01. Certain Duties and Responsibilities of Trustee. . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . 42 SECTION 7.03. Trustee Not Responsible for Recitals or Issuance or Securities. . . . . . . . . . . . . . . . . . 43 iii Page ---- SECTION 7.04. May Hold Securities . . . . . . . . . . . . . . . . . . . 44 SECTION 7.05. Moneys Held in Trust. . . . . . . . . . . . . . . . . . . 44 SECTION 7.06. Compensation and Reimbursement. . . . . . . . . . . . . . 44 SECTION 7.07. Reliance on Officers' Certificate . . . . . . . . . . . . 45 SECTION 7.08. Disqualification; Conflicting Interests . . . . . . . . . 45 SECTION 7.09. Corporate Trustee Required; Eligibility . . . . . . . . . 45 SECTION 7.10. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . 46 SECTION 7.11. Acceptance of Appointment By Successor. . . . . . . . . . 48 SECTION 7.12. Merger, Conversion, Consolidation or Succession to Business. . . . . . . . . . . . . . . . . . 49 SECTION 7.13. Preferential Collection of Claims Against the Company . . . . . . . . . . . . . . . . . . . 50 ARTICLE VIII. CONCERNING THE SECURITYHOLDERS SECTION 8.01. Evidence of Action by Securityholders . . . . . . . . . . 50 SECTION 8.02. Proof of Execution by Securityholders . . . . . . . . . . 51 SECTION 8.03. Who May be Deemed Owners. . . . . . . . . . . . . . . . . 51 SECTION 8.04. Certain Securities Owned by Company or Guarantor Disregarded. . . . . . . . . . . . . 52 SECTION 8.05. Actions Binding on Future Securityholders.. . . . . . . . . . . . . . . . . . . . . 52 ARTICLE IX. SUPPLEMENTAL INDENTURES SECTION 9.01. Supplemental Indentures Without the Consent of Securityholders. . . . . . . . . . . . . . . . 53 SECTION 9.02. Supplemental Indentures With Consent of Securityholders. . . . . . . . . . . . . . . . . . . . 54 SECTION 9.03. Effect of Supplemental Indentures . . . . . . . . . . . . 55 SECTION 9.04. Securities Affected by Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 9.05. Execution of Supplemental Indentures. . . . . . . . . . . 55 ARTICLE X. SUCCESSOR CORPORATION SECTION 10.01. Company or Guarantor May Consolidate, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 56 iv Page ---- SECTION 10.02. Successor Corporation Substituted . . . . . . . . . . . . 57 SECTION 10.03. Evidence of Consolidation, Etc. to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE XI. SATISFACTION AND DISCHARGE SECTION 11.01. Satisfaction and Discharge of Indenture . . . . . . . . . 58 SECTION 11.02. Discharge of Obligations. . . . . . . . . . . . . . . . . 59 SECTION 11.03. Deposited Moneys to be Held in Trust. . . . . . . . . . . 59 SECTION 11.04. Payment of Moneys Held by Paying Agents . . . . . . . . . 59 SECTION 11.05. Repayment to Company. . . . . . . . . . . . . . . . . . . 60 ARTICLE XII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01. No Recourse . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XIII. MISCELLANEOUS PROVISIONS SECTION 13.01. Effect on Successors and Assigns. . . . . . . . . . . . . 61 SECTION 13.02. Actions by Successor. . . . . . . . . . . . . . . . . . . 61 SECTION 13.03. Surrender of Company Powers . . . . . . . . . . . . . . . 61 SECTION 13.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 13.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 13.06. Treatment of Debt Securities as Debt. . . . . . . . . . . 62 SECTION 13.07. Compliance Certificates and Opinions. . . . . . . . . . . 62 SECTION 13.08. Payments on Business Days . . . . . . . . . . . . . . . . 63 SECTION 13.09. Conflict with Trust Indenture Act . . . . . . . . . . . . 63 SECTION 13.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 13.11. Separability. . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 13.12. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 64 v Page ---- ARTICLE XIV. SUBORDINATION OF SECURITIES SECTION 14.01. Subordination Terms. . . . . . . . . . . . . . . . . . . . . 64 TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 vi INDENTURE, dated as of _________________, 1995, among U S WEST Capital Funding, Inc., a Colorado corporation (the "Company"), U S WEST, Inc., a Colorado corporation (the "Guarantor") and Norwest Bank Minnesota, National Association, a national banking association, as trustee (the "Trustee"): WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of unsecured subordinated debt secu-rities (hereinafter referred to as the "Debt Securities"), in an unlimited aggregate principal amount to be issued from time to time in one or more series as in this Indenture provided, as registered Debt Securities without coupons, to be authenticated by the certificate of the Trustee; WHEREAS, for its lawful corporate purposes, the Guarantor has duly authorized the execution and delivery of this Indenture and deems it appropriate from time to time to issue its guarantee of the Securities on the terms herein provided (the "Guarantees" and, together with the Debt Securities, the "Securities"); WHEREAS, to provide the terms and conditions upon which the Debt Securities are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company and the Guarantor, in accordance with its terms, have been done. NOW, THEREFORE, in consideration of the premises and the purchase of the Securities by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the holders of Securities: ARTICLE I. DEFINITIONS SECTION 1.01. DEFINITIONS OF TERMS. The terms defined in this Section (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, as amended, or that are by reference in such Act defined in the Securities Act of 1933, as amended (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this instrument. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person, (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, (d) a partnership in which the specified Person is a general partner, (e) any officer or director of the specified Person, and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. "Authenticating Agent" means an authenticating agent with respect to all or any of the series of Securities appointed with respect to all or any series of the Securities by the Trustee pursuant to Section 2.10. "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company or the Guarantor, as the case may be, or any duly authorized committee of such Board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or Guarantor, as the case may be, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" means, with respect to any series of Securities, any day other than a day on which Federal or State banking institutions in the Borough of Manhattan, The City of New York, are authorized or obligated by law, executive order or regulation to close. 2 "Certificate" means a certificate signed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company or the Guarantor, as the case may be. The Certificate need not comply with the provisions of Section 13.06. "Common Securities" means undivided beneficial interests in the assets of a U S WEST Trust which rank pari passu with Preferred Securities issued by such U S WEST Trust; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Common Securities Guarantee" means any guarantee that the Guarantor may enter into with The First National Bank of Chicago or other Persons that operate directly or indirectly for the benefit of holders of Common Securities of such U S WEST Trust. "Company" means U S WEST Capital Funding, Inc., a corporation duly organized and existing under the laws of the State of Colorado, and, subject to the provisions of Article Ten, shall also include its successors and assigns. "Corporate Trust Office" means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at 6th Street & Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust Services Division, except that whenever a provision herein refers to an office or agency of the Trustee in the Borough of Manhattan, The City of New York, such office is located, at the date hereof, at 3 New York Plaza, New York, New York 10004. "Custodian" means any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law. "Declaration", with respect to a U S WEST Trust, means the Amended and Restated Declaration of Trust, dated ________________, of such U S WEST Trust. "Debt Securities" means the Debt Securities authenticated and delivered under this Indenture. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. 3 "Depositary" means, with respect to Securities of any series, for which the Company shall determine that such Securities will be issued as a Global Security, The Depository Trust Company, New York, New York, another clearing agency, or any successor registered as a clearing agency under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or other applicable statute or regulation, which, in each case, shall be designated by the Company pursuant to either Section 2.01 or 2.11. "Event of Default" means, with respect to Securities of a particular series any event specified in Section 6.01, continued for the period of time, if any, therein designated. "Global Security" means, with respect to any series of Securities, a Security executed by the Company and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with the Indenture, which shall be registered in the name of the Depositary or its nominee. "Governmental Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; PROVIDED, HOWEVER, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt. "Guarantee" means the agreement of the Guarantor, in the form set forth in Section 2.12 hereof, to be endorsed on the Debt Securities authenticated and delivered under this Indenture. "Guarantor" means U S WEST, Inc., a corporation duly organized and existing under the laws of the State of Colorado, 4 and, subject to the provisions of Article Ten, shall also include its successors and assigns. "herein", "hereof" and "hereunder", and other words of similar import, refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof. "Interest Payment Date", when used with respect to any installment of interest on a Debt Security of a particular series, means the date specified in such Debt Security or in a Board Resolution or in an indenture supplemental hereto with respect to such series as the fixed date on which an installment of interest with respect to Debt Securities of that series is due and payable. "Officers' Certificate" means a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller or the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be, that is delivered to the Trustee in accordance with the terms hereof. Each such certificate shall include the statements provided for in Section 13.06, if and to the extent required by the provisions thereof. "Opinion of Counsel" means an opinion in writing of legal counsel, who may be an employee of or counsel for the Company or the Guarantor, as the case may be, that is delivered to the Trustee in accordance with the terms hereof. Each such opinion shall include the statements provided for in Section 13.06, if and to the extent required by the provisions thereof. "Outstanding", when used with reference to Debt Securities of any series, means, subject to the provisions of Section 8.04, as of any particular time, all Debt Securities of that series theretofore authenticated and delivered by the Trustee under this Indenture, except (a) Debt Securities theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or that have previously been canceled; (b) Debt Securities or portions thereof for the payment or redemption of which moneys or Governmental Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and 5 segregated in trust by the Company (if the Company shall act as its own paying agent); PROVIDED, HOWEVER, that if such Debt Securities or portions of such Debt Securities are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article Three provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debt Securities in lieu of or in substitution for which other Debt Securities shall have been authenticated and delivered pursuant to the terms of Section 2.07. "Person" means any individual, corporation, partnership, joint- venture, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt and guarantee as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. "Preferred Securities" means undivided beneficial interests in the assets of a U S WEST Trust which rank pari passu with Common Securities issued by such U S WEST Trust; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Preferred Securities Guarantee" means any guarantee that the Guarantor may enter into with The First National Bank of Chicago or other Persons that operate directly or indirectly for the benefit of holders of Preferred Securities of such U S WEST Trust. "Responsible Officer" when used with respect to the Trustee means the Chairman of the Board of Directors, the President, any Vice President, the Secretary, the Treasurer, any trust officer, any corporate trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. 6 "Securities" means any Debt Securities with a Guarantee endorsed thereon. "Securityholder", "holder of Securities", "registered holder", or other similar term, means the Person or Persons in whose name or names a particular Security shall be registered on the books of the Company kept for that purpose in accordance with the terms of this Indenture. "Subsidiary" means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be owned, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. "Trustee" means Norwest Bank Minnesota, National Association, and, subject to the provisions of Article Seven, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, "Trustee" shall mean each such Person. The term "Trustee" as used with respect to a particular series of the Securities shall mean the trustee with respect to that series. "Trust Indenture Act", means the Trust Indenture, subject to the provisions of Sections 9.01, 9.02, and 10.01, as in effect at the date of execution of this instrument. "Trust Securities" means Common Securities and Preferred Securities. "U S WEST Trust" means each of U S WEST Financing I, U S WEST Financing II and U S WEST Financing III, each, a Delaware business trust. "Voting Stock", as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. 7 ARTICLE II. ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES SECTION 2.01. DESIGNATION AND TERMS OF SECURITIES. (a) The aggregate principal amount of Debt Securities that may be authenticated and delivered under this Indenture is unlimited. The Debt Securities may be issued in one or more series up to the aggregate principal amount of Debt Securities of that series from time to time authorized by or pursuant to a Board Resolution of the Company or pursuant to one or more indentures supplemental hereto, prior to the initial issuance of Debt Securities of any series, there shall be established in or pursuant to a Board Resolution of the Company, and set forth in an Officers' Certificate of the Company, or established in one or more indentures supplemental hereto: (1) the title of the Debt Security of the series (which shall distinguish the Debt Securities of the series from all other Debt Securities); (2) any limit upon the aggregate principal amount of the Debt Securities of that series that may be authenticated and delivered under this Indenture (except for Debt Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debt Securities of that series); (3) the date or dates on which the principal of the Debt Securities of the series is payable; (4) the rate or rates at which the Debt Securities of the series shall bear interest or the manner of calculation of such rate or rates, if any; (5) the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest will be payable or the manner of determination of such Interest Payment Dates and the record date for the determination of holders to whom interest is payable on any such Interest Payment Dates; (6) the right, if any, to extend the interest payment periods and the duration of such extension; 8 (7) the period or periods within which, the price or prices at which and the terms and conditions upon which, Debt Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Debt Securities of the series pursuant to any sinking fund or analogous provisions (including payments made in cash in participation of future sinking fund obligations) or at the option of a holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Debt Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) the subordination terms of the Debt Securities of the series; (10) the form of the Debt Securities of the series including the form of the Certificate of Authentication for such series; (11) if other than denominations of twenty-five U.S. dollars ($25) or any integral multiple thereof, the denominations in which the Debt Securities of the series shall be issuable; (12) any and all other terms with respect to such series (which terms shall not be inconsistent with the terms of this Indenture) including any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Debt Securities of that series; and (13) whether the Debt Securities are issuable as a Global Security and, in such case, the identity for the Depositary for such series. All Debt Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to any such Board Resolution or in any indentures supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution of the Company, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the 9 Officers' Certificate of the Company setting forth the terms of the series. (b) Prior to the issuance of any of the Guarantees, the exact form and terms of such Guarantees, which shall comply with the terms of Section 2.12 hereof and contain such additional terms as are permitted by this Indenture, shall be established by an Officers' Certificate of the Guarantor or in an indenture supplemental hereto. SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE. The Securities of any series and the Trustee's certificate of authentication to be borne by such Securities shall be substantially of the tenor and purport as set forth in one or more indentures supplemental hereto or as provided in a Board Resolution of the Company and as set forth in an Officers' Certificate of the Company and the Guarantor, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Securities of that series may be listed, or to conform to usage. SECTION 2.03. DENOMINATIONS: PROVISIONS FOR PAYMENT. The Securities shall be issuable as registered Securities and in the denominations of twenty-five U.S. dollars ($25) or any integral multiple thereof, subject to Section 2.01(10). The Securities of a particular series shall bear interest payable on the dates and at the rate specified with respect to that series. The principal of and the interest on the Securities of any series, as well as any premium thereon in case of redemption thereof prior to maturity, shall be payable in the coin or currency of the United States of America that at the time is legal tender for public and private debt, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City and State of New York. Each Security shall be dated the date of its authentication. Interest on the Securities shall be computed on the basis of a 360-day year composed of twelve 30-day months. The interest installment on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Securities of that series shall be paid to the Person in whose name said Security (or one or more Prede- 10 cessor Securities) is registered at the close of business on the regular record date for such interest installment. In the event that any Security of a particular series or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Security will be paid upon presentation and surrender of such Security as provided in Section 3.03. Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date for Security of the same series (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (1) or clause (2) below: (1) The Company may make payment of any Defaulted Interest on Securities to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Security Register (as hereinafter defined), not 11 less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on any Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustees of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Unless otherwise set forth in a Board Resolution of the Company or one or more indentures supplemental hereto establishing the terms of any series of Securities pursuant to Section 2.01 hereof, the term "regular record date" as used in this Section with respect to a series of Securities with respect to any Interest Payment Date for such series shall mean either the fifteenth day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the first day of a month, or the last day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the fifteenth day of a month, whether or not such date is a Business Day. Subject to the foregoing provisions of this Section, each Security of a series delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security of such series shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. 12 SECTION 2.04. EXECUTION AND AUTHENTICATIONS. The Debt Securities shall be signed on behalf of the Company by, and the Guarantees endorsed thereon shall be signed on behalf of the Guarantor by, its President or one of its Vice Presidents, under its corporate seal attested by its Secretary or one of its Assistant Secretaries. Signatures may be in the form of a manual or facsimile signature. The Company and the Guarantor may use the facsimile signature of any Person who shall have been a President or Vice President thereof, or of any Person who shall have been a Secretary or Assistant Secretary thereof, notwithstanding the fact that at the time the Securities shall be authenticated and delivered or disposed of such Person shall have ceased to be the President or a Vice President, or the Secretary or an Assistant Secretary, of the Company or the Guarantor, as the case may be. The seal of the Company and the Guarantor may be in the form of a facsimile of such seal and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. The Securities may contain such notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication by the Trustee. A Security shall not be valid until authenticated manually by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company and the Guarantor to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Securities, signed by its President or any Vice President and its Treasurer or any Assistant Treasurer, and the Trustee in accordance with such written order shall authenticate and deliver such Securities. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the form and terms thereof have been established in conformity with the provisions of this Indenture. 13 The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee. SECTION 2.05. REGISTRATION OF TRANSFER AND EXCHANGE. (a) Securities of any series may be exchanged upon presentation thereof at the office or agency of the Company designated for such purpose in the Borough of Manhattan, the City and State of New York, for other Securities of such series of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section. In respect of any Securities so surrendered for exchange, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange therefor the Security or Securities of the same series that the Securityholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. (b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose in the Borough of Manhattan, the City and State of New York, or such other location designated by the Company a register or registers (herein referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Securities and the transfers of Securities as in this Article provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Securities and transfer of Securities as herein provided shall be appointed as authorized by Board Resolution (the "Security Registrar"). Upon surrender for transfer of any Security at the office or agency of the Company designated for such purpose, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Security or Securities of the same series as the Security presented for a like aggregate principal amount. All Securities presented or surrendered for exchange or registration of transfer, as provided in this Section, shall be accompanied (if so required by the Company or the Security Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Security Registrar, duly 14 executed by the registered holder or by such holder's duly authorized attorney in writing. (c) No service charge shall be made for any exchange or registration of transfer of Securities, or issue of new Securities in case of partial redemption of any series, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.06, the second paragraph of Section 3.03 and Section 9.04 not involving any transfer. (d) The Company shall not be required (i) to issue, exchange or register the transfer of any Securities during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the Outstanding Securities of the same series and ending at the close of business on the day of such mailing, nor (ii) to register the transfer of or exchange any Securities of any series or portions thereof called for redemption. The provisions of this Section 2.05 are, with respect to any Global Security, subject to Section 2.11 hereof. SECTION 2.06. TEMPORARY SECURITIES. Pending the preparation of definitive Securities of any series, the Company and the Guarantor may execute, and the Trustee shall authenticate and deliver, temporary Securities (printed, lithographed or typewritten) of any authorized denomination. Such temporary Securities shall be substantially in the form of the definitive Securities in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Company. Every temporary Security of any series shall be executed by the Company and the Guarantor and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities of such series. Without unnecessary delay the Company and the Guarantor will execute and will furnish definitive Securities of such series and thereupon any or all temporary Securities of such series may be surrendered in exchange therefor (without charge to the holders), at the office or agency of the Company designated for the purpose in the Borough of Manhattan, the City and State of New York, and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Securities an equal aggregate principal amount of definitive Securities of such series, unless the Company advises the Trustee to the effect that definitive Securities need not be executed and furnished until 15 further notice from the Company. Until so exchanged, the temporary Securities of such series shall be entitled to the same benefits under this Indenture as definitive Securities of such series authenticated and delivered hereunder. SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. In case any temporary or definitive Security shall become mutilated or be destroyed, lost or stolen, the Company and the Guarantor (subject to the next succeeding sentence) shall execute, and upon the Company's request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Security of the same series, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substituted Security shall furnish to the Company, the Guarantor and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, the Guarantor and the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicant's Security and of the ownership thereof. The Trustee may authenticate any such substituted Security and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Security) if the applicant for such payment shall furnish to the Company, the Guarantor and the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company, the Guarantor and the Trustee of the destruction, loss or theft of such Security and of the ownership thereof. Every replacement Security issued pursuant to the provisions of this Section shall constitute an additional contractual obligation of the Company or the Guarantor, as the case may be, whether or not the mutilated, destroyed, lost or stolen Security shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this 16 Indenture equally and proportionately with any and all other Securities of the same series duly issued hereunder. All Securities shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.08. CANCELLATION. All Securities surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company, the Guarantor or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be cancelled by it, and no Securities shall be issued in lieu thereof except as expressly required or permitted by any of the provisions of this Indenture. On request of the Company at the time of such surrender, the Trustee shall deliver to the Company canceled Securities held by the Trustee. In the absence of such request the Trustee may dispose of canceled Securities in accordance with its standard procedures and deliver a certificate of disposition to the Company. If the Company or the Guarantor shall otherwise acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. SECTION 2.09. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Securities, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Securities (and, with respect to the provisions of Article Fourteen, the holders of Senior Indebtedness) any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Securities (and, with respect to the provisions of Article Fourteen, the holders of Senior Indebtedness). 17 SECTION 2.10. AUTHENTICATING AGENT. So long as any of the Securities of any series remain Outstanding there may be an Authenticating Agent for any or all such series of Securities which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Securities by the Trustee shall be deemed to include authentication by an Authenticating Agent for such series. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by Federal or State authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto. SECTION 2.11. GLOBAL SECURITIES. (a) If the Company shall establish pursuant to Section 2.01 that the Securities of a particular series are to be issued as a Global Security, then the Company shall execute and the Trustee shall, in accordance with Section 2.04, authenticate and deliver, a Global Security that (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all of the Outstanding Securities of such series, (ii) shall be registered in the name of the Depositary or its nominee, (iii) 18 shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the following effect: "Except as otherwise provided in Section 2.11 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor Depositary or to a nominee of such successor Depositary." (b) Notwithstanding the provisions of Section 2.05, the Global Security of a series may be transferred, in whole but not in part and in the manner provided in Section 2.05, only to another nominee of the Depositary for such series, or to a successor Depositary for such series selected or approved by the Company or to a nominee of such successor Depositary. (c) If at any time the Depositary for a series of the Securities notifies the Company that it is unwilling or unable to continue as Depositary for such series or if at any time the Depositary for such series shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation, and a successor Depositary for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, this Section 2.11 shall no longer be applicable to the Securities of such series and the Company will execute, and subject to Section 2.05, the Trustee will authenticate and deliver the Securities of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security of such series in exchange for such Global Security. In addition, the Company may at any time determine that the Securities of any series shall no longer be represented by a Global Security and that the provisions of this Section 2.11 shall no longer apply to the Securities of such series. In such event the Company and the Guarantor will execute and subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and deliver the Securities of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security of such series in exchange for such Global Security. Upon the exchange of the Global Security for such Securities in definitive registered form without coupons, in authorized denominations, the Global Security shall be canceled by the Trustee. Such Securities in definitive registered form issued in exchange for the Global Security pursuant to this Section 2.11(c) shall be registered in such names and in such authorized denominations as the Depositary, 19 pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Depositary for delivery to the Persons in whose names such Securities are so registered. SECTION 2.12. UNCONDITIONAL GUARANTEES. (FORM OF GUARANTEE) FOR VALUE RECEIVED, the Guarantor, hereby unconditionally guarantees to the holder of the Security upon which this Guarantee is endorsed the due and punctual payment of the principal of, sinking fund payment, if any, premium, if any, or interest on said Security, when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. The Guarantor agrees to determine, at least one business day prior to the date upon which a payment of principal of, sinking fund payment, if any, premium, if any, or interest on said Security is due and payable, whether the Company has available the funds to make such payment as the same shall become due and payable. In case of the failure of the Company punctually to pay any such principal, sinking fund payment, if any, premium, if any, or interest, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon redemption, or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrevocable, and absolute, irrespective of the validity, regularity, or enforceability of said Security or said Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Security with respect to any provisions thereof, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to said Security or indebtedness evidenced thereby, and all demands whatsoever and covenants that this Guarantee will not be 20 discharged except by complete performance of the obligations contained in said Security and in this Guarantee. The Guarantor shall be subrogated to all rights of the holder of said Security against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of the holders of all of the Securities then outstanding, be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation until the principal of and premium, if any, and interest on all Securities shall have been paid in full or payment thereof shall have been provided for in accordance with said Indenture. Notwithstanding anything to the contrary contained herein, if following any payment of principal or interest by the Company on the Securities to the holders of the Securities it is determined by a final decision of a court of competent jurisdiction that such payment shall be avoided by a trustee in bankruptcy (including any debtor-in-possession) as a preference under 11 U.S.C. Section 547 and such payment is paid by such holder to such trustee in bankruptcy, then and to the extent of such repayment, the obligations of the Guarantor hereunder shall remain in full force and effect. This Guarantee shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee (or the Authentication Agent). This Guarantee shall be governed by the laws of the State of New York. IN WITNESS WHEREOF, U S WEST, Inc. has caused this Guarantee to be signed in its corporate name by the facsimile signature of two of its officers thereunto duly authorized and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted or otherwise reproduced hereon. SECTION 2.13. EXECUTION OF GUARANTEE. To evidence the Guarantee to the Securityholders specified in Section 2.12, the Guarantor hereby agrees to execute the Guarantees, in substantially the form above recited, to be endorsed on each Security authenticated and delivered by the Trustee (or the Authenticating Agent). Each such Guarantee shall be signed on behalf of the Guarantor as set forth in Section 2.04 prior to the authentication of the Security on which it is 21 endorsed, and the delivery of such Security by the Trustee (or the Authenticating Agent), after the authentication thereof hereunder, shall constitute due delivery of such Guarantee on behalf of the Guarantor. SECTION 2.14. ASSUMPTION BY GUARANTOR. (a) The Guarantor may, without the consent of the Securityholders, assume all of the rights and obligations of the Company hereunder with respect to a series of Securities and under the Securities of such series if, after giving effect to such assumption, no Default or Event of Default shall have occurred and be continuing. Upon such an assumption, the Guarantor shall execute a supplemental indenture evidencing its assumption of all such rights and obligations of the Company and the Company shall be released from its liabilities hereunder and under such Securities as obligor on the Securities of such series. (b) The Guarantor shall assume all of the rights and obligations of the Company hereunder with respect to a series of Securities and under the Securities of such series if, upon a default by the Company in the due and punctual payment of the principal, sinking fund payment, if any, premium, if any, or interest on such Securities, the Guarantor is prevented by any court order or judicial proceeding from fulfilling its obligations under Section 2.12 with respect to such series of Securities. Such assumption shall result in the Securities of such series becoming the direct obligations of the Guarantor and shall be effected without the consent of the holders of the Securities of any series. Upon such an assumption, the Guarantor shall execute a supplemental indenture evidencing its assumption of all such rights and obligations of the Company, and the Company shall be released from its liabilities hereunder and under such Securities as obligor on the Securities of such series. ARTICLE III. REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS SECTION 3.01. REDEMPTION. The Company may redeem the Debt Securities of any series issued hereunder on and after the dates and in accordance with the terms established for such series pursuant to Section 2.01 hereof. 22 SECTION 3.02. NOTICE OF REDEMPTION. (a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Debt Securities of any series in accordance with the right reserved so to do, the Company shall, or shall cause the Trustee to, give notice of such redemption to holders of the Debt Securities of such series to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 90 days before the date fixed for redemption of that series to such holders at their last addresses as they shall appear upon the Security Register unless a shorter period is specified in the Debt Securities to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Security of any series designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Debt Securities of such series or any other series. In the case of any redemption of Debt Securities prior to the expiration of any restriction on such redemption provided in the terms of such Debt Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which Debt Securities of that series are to be redeemed, and shall state that payment of the redemption price of such Debt Securities to be redeemed will be made at the office or agency of the Company in the Borough of Manhattan, the City and State of New York, upon presentation and surrender of such Debt Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that from and after said date interest will cease to accrue and that the redemption is for a sinking fund, if such is the case. If less than all the Debt Securities of a series are to be redeemed, the notice to the holders of Debt Securities of that series to be redeemed in whole or in part shall specify the particular Debt Securities to be so redeemed. In case any Security is to be redeemed in part only, the notice that relates to such Security shall state the portion of the principal amount thereof to be redeemed, and shall state that on and after the redemption date, upon surrender of such Security, a new Security or Debt Securities of such series in principal amount equal to the unredeemed portion thereof and having endorsed thereon a duly executed Guarantee will be issued. 23 (b) If less than all the Debt Securities of a series are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debt Securities of the series to be redeemed, and thereupon the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to twenty-five U.S. dollars ($25) or any integral multiple thereof) of the principal amount of such Debt Securities of a denomination larger than $25, the Debt Securities to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Debt Securities to be redeemed, in whole or in part. The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by its President or any Vice President, instruct the Trustee or any paying agent to call all or any part of the Debt Securities of a particular series for redemption and to give notice of redemption in the manner set forth in this Section, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Security Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section. SECTION 3.03. PAYMENT UPON REDEMPTION. (a) If the giving of notice of redemption shall have been completed as above provided, the Debt Securities or portions of Debt Securities of the series to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption and interest on such Debt Securities or portions of Debt Securities shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such redemption price and accrued interest with respect to any such Security or portion thereof. On presentation and surrender of such Debt Securities on or after the date fixed for redemption at the place of payment specified in the notice, said Debt Securities shall be paid and redeemed at the applicable redemption price for such series, together with interest accrued thereon to the date fixed for redemption (but if the date fixed 24 for redemption is an interest payment date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 2.03). (b) Upon presentation of any Security of such series that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Security is presented shall deliver to the holder thereof, at the expense of the Company, a new Security or Debt Securities of the same series, having endorsed thereon a duly executed Guarantee, of authorized denominations in principal amount equal to the unredeemed portion of the Security so presented. SECTION 3.04. SINKING FUND. The provisions of Sections 3.04, 3.05 and 3.06 shall be applicable to any sinking fund for the retirement of Debt Securities of a series, except as otherwise specified as contemplated by Section 2.01 for Debt Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Debt Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Debt Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Debt Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 3.05. Each sinking fund payment shall be applied to the redemption of Debt Securities of any series as provided for by the terms of Debt Securities of such series. SECTION 3.05. SATISFACTION OF SINKING FUND PAYMENTS WITH DEBT SECURITIES. The Company (i) may deliver Outstanding Debt Securities of a series (other than any Debt Securities previously called for redemption) and (ii) may apply as a credit Debt Securities of a series that have been redeemed either at the election of the Company pursuant to the terms of such Debt Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Debt Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Debt Securities of such series required to be made pursuant to the terms of such Debt Securities as provided for by the terms of such series, PROVIDED that such Debt Securities have not been previously so credited. Such Debt Securities shall be 25 received and credited for such purpose by the Trustee at the redemption price specified in such Debt Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 3.06. REDEMPTION OF DEBT SECURITIES FOR SINKING FUND. Not less than 45 days prior to each sinking fund payment date for any series of Debt Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of the series, the portion thereof, if any, that is to be satisfied by delivering and crediting Debt Securities of that series pursuant to Section 3.05 and the basis for such credit and will, together with such Officers' Certificate, deliver to the Trustee any Debt Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Debt Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 3.02 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.02. Such notice having been duly given, the redemption of such Debt Securities shall be made upon the terms and in the manner stated in Section 3.03. ARTICLE IV. SECTION 4.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on the Debt Securities of that series at the time and place and in the manner provided herein and established with respect to such Debt Securities. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. So long as any series of the Securities remain Outstanding, the Company agrees to maintain an office or agency in the Borough of Manhattan, the City and State of New York, with respect to each such series and at such other location or locations as may be designated as provided in this Section 4.02, where (i) Securities of that series may be presented for payment, (ii) Securities of that series may be presented as hereinabove 26 authorized for registration of transfer and exchange, and (iii) notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by its President or a Vice President and delivered to the trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. SECTION 4.03. PAYING AGENTS. (a) If the Company shall appoint one or more paying agents for all or any series of the Securities, other than the Trustee, the Company will cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section: (1) that it will hold all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on the Securities of that series (whether such sums have been paid to it by the Company or by any other obligor of such Securities) in trust for the benefit of the Persons entitled thereto; (2) that it will give the Trustee notice of any failure by the Company (or by any other obligor of such Securities) to make any payment of the principal of (and premium, if any) or interest on the Securities of that series when the same shall be due and payable; (3) that it will, at any time during the continuance of any failure referred to in the preceding paragraph (a)(2) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and (4) that it will perform all other duties of paying agent as set forth in this Indenture. (b) If the Company shall act as its own paying agent with respect to any series of the Securities, it will on or before each due date of the principal of (and premium, if any) or 27 interest on Securities of that series, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due on Securities of that series until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Securities) to take such action. Whenever the Company shall have one or more paying agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with the paying agent a sum sufficient to pay the principal (an premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such paying agent is the Trustee) the Company will promptly notify the Trustee of this action or failure so to act. (c) Notwithstanding anything in this Section to the contrary, (i) the agreement to hold sums in trust as provided in this Section is subject to the provisions of Section 11.05, and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money. SECTION 4.04. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 4.05. COMPLIANCE WITH CONSOLIDATION PROVISIONS. Neither the Company nor the Guarantor will, while any of the Securities remain Outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other company unless the provisions of Article Ten hereof are complied with. 28 SECTION 4.06. LIMITATION ON DIVIDENDS; TRANSACTIONS WITH AFFILIATES. (a) If Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust and (i) there shall have occurred any event that would constitute an Event of Default or (ii) U S WEST shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee or Common Securities Guarantee relating to such U S WEST Trust, then (a) the Guarantor and the Company shall not (and, if it is a wholly-owned subsidiary of the Guarantor, the Guarantor shall cause U S WEST Communications, Inc. not to) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, and (b) the Guarantor and the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor or the Company which rank pari passu with or junior to such Securities. (b) If Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust and the Company shall have given notice of its election to defer payments of interest on such Securities by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) the Guarantor and the Company shall not (and, if it is a wholly-owned subsidiary of the Guarantor, the Guarantor shall cause U S WEST Communications, Inc. not to) declare or pay any dividend or, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, and (b) the Guarantor and the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor or the Company which rank pari passu with or junior to such Securities. SECTION 4.07. COVENANTS AS TO U S WEST TRUSTS. In the event Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust, for so long as such Trust Securities remain outstanding, the Guarantor will (i) maintain 100% direct or indirect ownership of the Common Securities of such U S WEST Trust; PROVIDED, HOWEVER, that any permitted successor of the Guarantor under the Indenture may succeed to the Guarantor's ownership of the Common Securities, (ii) use its reasonable efforts to cause such U S WEST Trust (a) to remain a business trust, except in connection with a distribution of Securities, the redemption of all of the Trust Securities of such U S West Trust or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such U S WEST Trust, and (b) to otherwise continue not to be treated as an association 29 taxable as a corporation or partnership for United States federal income tax purposes and (iii) to use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Securities. ARTICLE V. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 5.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF SECURITYHOLDERS. The Company will furnish or cause to be furnished to the Trustee (a) on a monthly basis on each regular record date (as defined in Section 2.03) a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of each series of Securities as of such regular record date, PROVIDED that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company and (b) at such other times as the Trustee may request in writing within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; PROVIDED, HOWEVER, that, in either case, no such list need be furnished for any series for which the Trustee shall be the Security Registrar. SECTION 5.02. PRESERVATION OF INFORMATION; COMMUNICATIONS WITH SECURITYHOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Securities contained in the most recent list furnished to it as provided in Section 5.01 and as to the names and addresses of holders of Securities received by the Trustee in its capacity as Security Registrar (if acting in such capacity). (b) The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished. (c) Securityholders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Securityholders with respect to their rights under this Indenture or under the Securities. 30 SECTION 5.03. REPORTS BY THE GUARANTOR. (a) The Guarantor covenants and agrees to file with the Trustee, within 15 days after the Guarantor is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Guarantor may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Guarantor is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports that may be required pursuant to Section 13 of the Exchange Act, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) The Guarantor covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from to time by the Commission, such additional information, documents and reports with respect to compliance by the Guarantor and the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Guarantor covenants and agrees to transmit by mail, first class postage prepaid, or reputable over-night delivery service that provides for evidence of receipt, to the Securityholders, as their names and addresses appear upon the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Guarantor pursuant to subsections (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. SECTION 5.04. REPORTS BY THE TRUSTEE. (a) On or before July 15 in each year in which any of the Securities are Outstanding, the Trustee shall transmit by mail, first class postage prepaid, to the Securityholders, as their names and addresses appear upon the Security Register, a brief report dated as of the preceding May 15, if and to the extent required under Section 313(a) of the Trust Indenture Act. 31 (b) The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act. (c) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Trustee with the Company, with each stock exchange upon which any Securities are listed (if so listed) and also with the Commission. The Company agrees to notify the Trustee when any Securities become listed on any stock exchange. ARTICLE VI. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 6.01. EVENTS OF DEFAULT. (a) Whenever used herein with respect to Securities of a particular series, "Event of Default" means any one or more of the following events that has occurred and is continuing: (1) the Company or the Guarantor defaults in the payment of any installment of interest upon any of the Securities of that series, as and when the same shall become due and payable, and continuance of such default for a period of 90 days; PROVIDED, HOWEVER, that a valid extension of an interest payment period by the Company in accordance with the terms of any indenture supplemental hereto, shall not constitute a default in the payment of interest for this purpose; (2) the Company or the Guarantor defaults in the payment of the principal of (or premium, if any, on) any of the Securities of that series as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to that series; PROVIDED, HOWEVER, that a valid extension of the maturity of such Securities in accordance with the terms of any indenture supplemental hereto shall not constitute a default in the payment of principal or premium, if any; (3) the Company or the Guarantor fails to observe or perform any other of its covenants or agreements with respect to that series contained in this Indenture or otherwise established with respect to that series of Securities pursuant to Section 2.01 hereof (other than a covenant or 32 agreement that has been expressly included in this Indenture solely for the benefit of one or more series of Securities other than such series) for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the holders of at least 25% in principal amount of the Securities of that series at the time Outstanding; (4) the Company or the Guarantor pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property or (iv) makes a general assignment for the benefit of its creditors; (5) a court of competent jurisdiction enters an order under any Bankruptcy Law that (i) is for relief against the Company or the Guarantor in an involuntary case, (ii) appoints a Custodian of the Company or the Guarantor for all or substantially all of their respective property, or (iii) orders the liquidation of the Company or the Guarantor, and the order or decree remains unstayed and in effect for 90 days; or (6) in the event Securities are issued to a U S WEST Trust or a trustee of such trust in connection with the issuance of Trust Securities by such U S WEST Trust, such U S WEST Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Securities to holders of Trust Securities in liquidation of their interests in such U S WEST Trust, (ii) the redemption of all of the outstanding Trust Securities of such U S WEST Trust or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such U S WEST Trust. (b) In each and every such case, unless the principal of all the Securities of that series shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Securities of that series then Outstanding hereunder, by notice in writing to the Company and the Guarantor (and to the Trustee if given by such Securityholders), may declare the principal of all the Securities of that series to be due and payable immediately, and upon any 33 such declaration the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Indenture or in the Securities of that series or established with respect to that series pursuant to Section 2.01 to the contrary. (c) At any time after the principal of the Securities of that series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the holders of a majority in aggregate principal amount of the Securities of that series then Outstanding hereunder, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of that series and the principal of (and premium, if any, on) any and all Securities of that series that shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that such payment is enforceable under applicable law, upon overdue installments of interest, at the rate per annum expressed in the Securities of that series to the date of such payment or deposit) and the amount payable to the Trustee under Section 7.06, and (ii) any and all Events of Default under the Indenture with respect to such series, other than the nonpayment of principal on Securities of that series that shall not have become due by their terms, shall have been remedied or waived as provided in Section 6.06. No such rescission and annulment shall extend to or shall affect any subsequent default or impair any right consequent thereon. (d) In case the Trustee shall have proceeded to enforce any right with respect to Securities of that series under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Guarantor and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken. SECTION 6.02. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) The Company and the Guarantor covenant that (1) in case it shall default in the payment of any installment of 34 interest on any of the Securities of a series, or any payment required by any sinking or analogous fund established with respect to that series as and when the same shall have become due and payable, and such default shall have continued for a period of 90 Business Days, or (2) in case it shall default in the payment of the principal of (or premium, if any, on) any of the Securities of a series when the same shall have become due and payable, whether upon maturity of the Securities of a series or upon redemption or upon declaration or otherwise, then, upon demand of the Trustee, the Company or the Guarantor will pay to the Trustee, for the benefit of the holders of the Securities of that series, the whole amount that then shall have been become due and payable on all such Securities for principal (and premium, if any) or interest, or both, as the case may be, with interest upon the overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law and, if the Securities are held by a U S WEST Trust or a trustee of such trust, without duplication of any other amounts paid by the Guarantor or such U S WEST Trust or trustee in respect thereof) upon overdue installments of interest at the rate per annum expressed in the Securities of that series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 7.06. (b) If the Company or the Guarantor shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or the Guarantor or other obligor upon the Securities of that series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or the Guarantor or other obligor upon the Securities of that series, wherever situated. (c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or judicial proceedings affected the Company or the Guarantor, or the creditors or property of either, the Trustee shall have power to intervene in such proceedings and take any action therein that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of Securities of such series allowed for the 35 entire amount due and payable by the Company or the Guarantor under the Indenture at the date of institution of such proceedings and for any additional amount that may become due and payable by the Company or the Guarantor after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable to the Trustee under Section 7.06; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the holders of Securities of such series to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Securityholders, to pay to the Trustee any amount due it under Section 7.06. (d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Securities of that series, may be enforced by the Trustee without the possession of any of such Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for payment to the Trustee of any amounts due under Section 7.06, be for the ratable benefit of the holders of the Securities of such series. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in the Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of that series or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.03. APPLICATION OF MONEYS COLLECTED. 36 Any moneys collected by the Trustee pursuant to this Article with respect to a particular series of Securities shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal (or premium, if any) or interest, upon presentation of the Securities of that series, and notation thereon the payment, if only partially paid, and upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 7.06; SECOND: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article Fourteen; and THIRD: To the payment of the amounts then due and unpaid upon Securities of such series for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. SECTION 6.04. LIMITATION ON SUITS. No holder of any Security of any series shall have any right by virtue or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (i) such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Securities of such series specifying such Event of Default, as hereinbefore provided; (ii) the holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee hereunder; (iii) such holder or holders shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; and (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action, suit or proceeding and (v) during such 60 day period, the holders of a majority in principal amount of the Securities of 37 that series do not give the Trustee a direction inconsistent with the request. Notwithstanding anything contained herein to the contrary, any other provisions of this Indenture, the right of any holder of any Security to receive payment of the principal of (and premium, if any) and interest on such Security, as therein provided, on or after the respective due dates expressed in such Security (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such holder and by accepting a Security hereunder it is expressly understood, intended and covenanted by the taker and holder of every Security of such series with every other such taker and holder and the Trustee, that no one or more holders of Securities of such series shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities of series. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 6.05. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER. (a) Except as otherwise provided in Section 2.07, all powers and remedies given by this Article to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Securities. (b) No delay or omission of the Trustee or of any holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or on acquiescence therein; and, subject to the provisions of Section 6.04, every power and remedy given by this Article or by law to the Trustee 38 or the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. SECTION 6.06. CONTROL BY SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding, determined in accordance with Section 8.04, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such series; PROVIDED, HOWEVER, that such direction shall not be in conflict with any rule of law or with this Indenture or be unduly prejudicial to the rights of holders of Securities of any other series at the time Outstanding determined in accordance with Section 8.04. Subject to the provisions of Section 7.01, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding affected thereby, determined in accordance with Section 8.04, may on behalf of the holders of all of the Securities of such series waive any past default in the performance of any of the covenants contained herein or established pursuant to Section 2.01 with respect to such series and its consequences, except (i) a default in the payment of the principal of, or premium, if any, or interest on, any of the Securities of that series as and when the same shall become due by the terms of such Securities otherwise than by acceleration (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal and any premium has been deposited with the Trustee (in accordance with Section 6.01(c)) or (ii) a default in the covenants contained in Section 4.06(a)(iii) or 4.06(b). Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 6.07. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Securities by such holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion 39 require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding more than 10% in aggregate principal amount of the Outstanding Securities of any series, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security of such series, on or after the respective due dates expressed in such Security or established pursuant to this Indenture. ARTICLE VII. CONCERNING THE TRUSTEE SECTION 7.01. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE. (a) The Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a series and after the curing of all Events of Default with respect to the Securities of that series that may have occurred, shall undertake to perform with respect to the Securities of such series such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Securities of a series has occurred (that has not been cured or waived), the Trustee shall exercise with respect to Securities of that series such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) prior to the occurrence of an Event of Default with respect to the Securities of a series and after the curing or 40 waiving of all such Events of Default with respect to that series that may have occurred: (i) the duties and obligations of the Trustee shall with respect to the Securities of such series be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Securities of such series except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to the Securities of such series conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirement of this Indenture; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee, was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Securities of any series at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Securities of that series; and (4) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to 41 it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in Section 7.01: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) Any request, direction, order or demand of the Company or the Guarantor mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company or the Guarantor, as the case may be, by the President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer thereof (unless other evidence in respect thereof is specifically prescribed herein); (c) The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon; (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to a series of the Securities (that has not been cured or waived) to exercise with respect to Securities of that series such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (e) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and 42 believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing so to do by the holders of not less than a majority in principal amount of the Outstanding Securities of the particular series affected thereby (determined as provided in Section 8.04); PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Company and the Guarantor or, if paid by the Trustee, shall be repaid by the Company and the Guarantor upon demand; and (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 7.03. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OR SECURITIES. (a) The recitals contained herein and in the Securities shall be taken as the statements of the Company and the Guarantor, and the Trustee assumes no responsibility for the correctness of the same. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. (c) The Trustee shall not be accountable for the use or application by the Company or the Guarantor of any of the Securities or of the proceeds of such Securities, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture or established 43 pursuant to Section 2.01, or for the use or application of any moneys received by any paying agent other than the Trustee. SECTION 7.04. MAY HOLD SECURITIES. The Trustee or any paying agent or Security Registrar, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not Trustee, paying agent or Security Registrar. SECTION 7.05. MONEYS HELD IN TRUST. Subject to the provisions of Section 11.05, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company and the Guarantor to pay thereon. SECTION 7.06. COMPENSATION AND REIMBURSEMENT. (a) The Company and the Guarantor covenant and agree to pay to the Trustee, and the Trustee shall be entitled to, such reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), as the Company, the Guarantor and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company and the Guarantor will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company and the Guarantor also covenant to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. 44 (b) The obligations of the Company and the Guarantor under this Section to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Securities. SECTION 7.07. RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof. SECTION 7.08. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 7.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee with respect to the Securities issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this 45 Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company and the Guarantor may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company or the Guarantor, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. SECTION 7.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) The Trustee or any successor hereafter appointed, may at any time resign with respect to the Securities of one or more series by giving written notice thereof to the Company and the Guarantor and by transmitting notice of resignation by mail, first class postage prepaid, to the Securityholders of such series, as their names and addresses appear upon the Security Register. Upon receiving such notice of resignation, the Company and the Guarantor shall promptly appoint a successor trustee with respect to Securities of such series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Securities of such series, or any Securityholder of that series who has been a bona fide holder of a Security or Securities for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any one of the following shall occur: (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 after written request therefor by the Company or the Guarantor or by any Securityholder who has been a bona fide holder of a Security or Securities for at least six months; or 46 (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or the Guarantor or by any such Securityholder; or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company or the Guarantor may remove the Trustee with respect to all Securities and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 6.08, unless the Trustee's duty to resign is stayed as provided herein, any Securityholder who has been a bona fide holder of a Security or Securities for at least six months may, on behalf of that holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding may at any time remove the Trustee with respect to such series by so notifying the Trustee, the Company and the Guarantor and may appoint a successor Trustee for such series with the consent of the Company and the Guarantor. (d) Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Securities of a series pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11. (e) Any successor trustee appointed pursuant to this Section may be appointed with respect to the Securities of one or more series or all of such series, and at any time there shall be only one Trustee with respect to the Securities of any particular series. 47 SECTION 7.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor trustee with respect to all Securities, every such successor trustee so appointed shall execute, acknowledge and deliver to the Company and the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the Guarantor or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor trustee with respect to the Securities of one or more (but not all) series, the Company, the Guarantor, the retiring Trustee and each successor trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates, (2) shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust, that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and that no Trustee shall be responsible for any act or failure to act on the part of any other Trustee hereunder; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein, such retiring Trustee shall with respect to the Securities of that or those series to 48 which the appointment of such successor trustee relates have no further responsibility for the exercise of rights and powers or for the performance of the duties and obligations vested in the Trustee under this Indenture, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor trustee relates; but, on request of the Company or the Guarantor or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor trustee, to the extent contemplated by such supplemental indenture, the property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor trustee relates. (c) Upon request of any such successor trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article. (e) Upon acceptance of appointment by a successor trustee as provided in this Section, the Company and the Guarantor shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Securityholders, as their names and addresses appear upon the Security Register. If the Company and the Guarantor fail to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company and the Guarantor. SECTION 7.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED that such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of 49 Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein. ARTICLE VIII. CONCERNING THE SECURITYHOLDERS SECTION 8.01. EVIDENCE OF ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Securities of a particular series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such majority or specified percentage of that series have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Securities of that series in Person or by agent or proxy appointed in writing. If the Company or the Guarantor shall solicit from the Securityholders of any series any request, demand, authorization, direction, notice, consent, waiver or other action, the Company or the Guarantor may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such series for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company or the Guarantor shall have no obligation to do so. If such a record date is fixed, such 50 request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of Outstanding Securities of that series have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Securities of that series shall be computed as of the record date; PROVIDED, HOWEVER, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 8.02. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 7.01, proof of the execution of any instrument by a Securityholder (such proof will not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Securities shall be sufficient if made in the following manner: (a) The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee. (b) The ownership of Securities shall be proved by the Security Register of such Securities or by a certificate of the Security Registrar thereof. (c) The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. SECTION 8.03. WHO MAY BE DEEMED OWNERS. Prior to the due presentment for registration of transfer of any Security, the Company, the Guarantor, the Trustee, any paying agent and any Security Registrar may deem and treat the Person in whose name such Security shall be registered upon the books of the Company as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal of, premium, if any, and (subject to Section 2.03) interest on such Security and for all other purposes; and neither the Company nor the 51 Guarantor nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary. SECTION 8.04. CERTAIN SECURITIES OWNED BY COMPANY OR GUARANTOR DISREGARDED. In determining whether the holders of the requisite aggregate principal amount of Securities of a particular series have concurred in any direction, consent of waiver under this Indenture, the Securities of that series that are owned by the Company or the Guarantor or any other obligor on the Securities of that series or by any Person directly or indirectly controlling or controlled by or under common control with the Company or the Guarantor or any other obligor on the Securities of that series shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Securities of such series that the Trustee actually knows are so owned shall be so disregarded. The Securities so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or the Guarantor or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 8.05. ACTIONS BINDING ON FUTURE SECURITYHOLDERS. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Securities of a particular series specified in this Indenture in connection with such action, any holder of a Security of that series that is shown by the evidence to be included in the Securities the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the holder of any Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Security, and of any Security issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation 52 in regard thereto is made upon such Security. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Securities of a particular series specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Guarantor, the Trustee and the holders of all the Securities of that series. ARTICLE IX. SUPPLEMENTAL INDENTURES SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF SECURITYHOLDERS. In addition to any supplemental indenture otherwise authorized by this Indenture, the Company and the Guarantor and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Securityholders, for one or more of the following purposes: (a) to cure any ambiguity, defect, or inconsistency herein, in the Securities of any series or in the Guarantees; (b) to comply with Article Ten; (c) to provide for uncertificated Securities in addition to or in place of certificated Securities; (d) to add to the covenants of the Company or the Guarantor for the benefit of the holders of all or any Series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company or the Guarantor; (e) to add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication, and delivery of Securities, as herein set forth; (f) to make any change that does not adversely affect the rights of any Securityholder in any material respect; or 53 (g) to provide for the issuance of and establish the form and terms and conditions of the Securities of any series and the Guarantees as provided in Section 2.01, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or any series of Securities, or to add to the rights of the holders of any series of Securities. The Trustee is hereby authorized to join with the Company and the Guarantor in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed by the Company, the Guarantor and the Trustee without the consent of the holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 9.02. SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 8.01) of the holders of not less than a majority in aggregate principal amount of the Securities of each series affected by such supplemental indenture or indentures at the time Outstanding, the Company and the Guarantor, when authorized by Board Resolutions, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner not covered by Section 9.01 the rights of the holders of the Securities of such series under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the holders of each Debenture then Outstanding and affected thereby, (i) extend the fixed maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the holder of each Security so affected or (ii) reduce the aforesaid percentage of Securities, the holders of which are required to consent to any such supplemental indenture. 54 It shall not be necessary for the consent of the Securityholders of any series affected thereby under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 9.03. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article or of Section 10.01, this Indenture shall, with respect to such series, be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company, the Guarantor and the holders of Securities of the series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.04. SECURITIES AFFECTED BY SUPPLEMENTAL INDENTURES. Securities of any series, affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article or of Section 10.01, may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which such series may be listed, as to any matter provided for in such series may be listed, as to any matter provided for in such supplemental indenture. If the Company and the Guarantor shall so determine, new Securities of that series so modified as to conform, in the opinion of the Board of Directors of the Company and the Guarantor, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company and the Guarantor, authenticated by the Trustee and delivered in exchange for the Securities of that series then Outstanding. SECTION 9.05. EXECUTION OF SUPPLEMENTAL INDENTURES. Upon the request of the Company and the Guarantor, accompanied by their Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders required to consent thereto as aforesaid, the Trustee shall join with the Company and the Guarantor in the execution of such supplemental 55 indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Section 7.01, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article and that it is proper for the Trustee under the provisions of this Article to join in the execution thereof. Promptly after the execution by the Company, the Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Securityholders of all series affected thereby as their names and addresses appear upon the Security Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. ARTICLE X. SUCCESSOR CORPORATION SECTION 10.01. COMPANY OR GUARANTOR MAY CONSOLIDATE, ETC. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company or the Guarantor with or into any other corporation or corporations (whether or not affiliated with the Company or the Guarantor, as the case may be), or successive consolidations or mergers in which the Company or the Guarantor, as the case may be, or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or the Guarantor, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company or the Guarantor, as the case may be, or its successor or successors) authorized to acquire and operate the same; PROVIDED, HOWEVER, the Company and the Guarantor hereby covenant and agree that, upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment, in the case of the Company, of the principal of (premium, if any) and interest on 56 all of the Debt Securities of all series in accordance with the terms of each series, according to their tenor or, in the case of the Guarantor, the performance of all obligations under the Guarantees, and the due and punctual performance and observance of all the covenants and conditions of this Indenture with respect to each series or established with respect to such series pursuant to Section 2.01 to be kept or performed by the Company or the Guarantor, as the case may be, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company or the Guarantor, as the case may be, shall have been merged, or by the entity which shall have acquired such property. SECTION 10.02. SUCCESSOR CORPORATION SUBSTITUTED. (a) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of, in the case of the Company, the due and punctual payment of the principal of, premium, if any, and interest on all of the Debt Securities of all series Outstanding or, in the case of the Guarantor, the performance of all obligations under the Guarantees, and the due and punctual performance of all of the covenants and conditions of this Indenture or established with respect to each series of the Securities pursuant to Section 2.01 to be performed by the Company or the Guarantor, as the case may be, with respect to each series, such successor corporation shall succeed to and be substituted for the Company or the Guarantor, as the case may be, with the same effect as if it had been named as the Company or the Guarantor, as the case may be, herein, and thereupon the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. (b) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. (c) Nothing contained in this Indenture or in any of the Securities shall prevent the Company or the Guarantor from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other Person (whether or not affiliated with the Company or the Guarantor). 57 SECTION 10.03. EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE. The Trustee, subject to the provisions of Section 7.01, may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or other disposition, and any such assumption, comply with the provisions of this Article. ARTICLE XI. SATISFACTION AND DISCHARGE SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a) the Company or the Guarantor shall have delivered to the Trustee for cancellation all Securities of a series theretofore authenticated (other than any Securities that shall have ben destroyed, lost or stolen and that shall have been replaced or paid as provided in Section 2.07) and Securities for whose payment money or Governmental Obligations have theretofore been deposited in trust or segregated and held in trust by the Company or the Guarantor (and thereupon repaid to the Company or the Guarantor or discharged from such trust, as provided in Section 11.05); or (b) all such Securities of a particular series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company or the Guarantor shall deposit or cause to be deposited with the Trustee as trust funds the entire amount in moneys or Governmental Obligations sufficient or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay at maturity or upon redemption all Securities of that series not theretofore delivered to the Trustee for cancellation, including principal (and premium, if any) and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company or the Guarantor shall also pay or cause to be paid all other sums payable hereunder with respect to such series by the Company and the Guarantor; then this Indenture shall thereupon cease to be of further effect with respect to such series except for the provisions of Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10, that shall survive until the date of maturity or redemption date, as the case may 58 be, and Sections 7.06 and 11.05, that shall survive to such date and thereafter, and the Trustee, on demand of the Company and the Guarantor and at the cost and expense of the Company and the Guarantor, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture with respect to such series. SECTION 11.02. DISCHARGE OF OBLIGATIONS. If at any time all such Securities of a particular series not heretofore delivered to the Trustee for cancellation or that have not become due and payable as described in Section 11.01 shall have been paid by the Company or the Guarantor by depositing irrevocably with the Trustee as trust funds moneys or an amount of Governmental Obligations sufficient to pay at maturity or upon redemption all such Securities of that series not theretofore delivered to the Trustee for cancellation, including principal (and premium, if any) and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company or the Guarantor shall also pay or cause to be paid all other sums payable hereunder by the Company and the Guarantor with respect to such series, then after the date such moneys or Governmental Obligations, as the case may be, are deposited with the Trustee the obligations of the Company and the Guarantor under this Indenture with respect to such series shall cease to be of further effect except for the provisions of Sections 2.03, 2.05, 2.07, 4,01, 4.02, 4,03, 7.06, 7.10 and 11.05 hereof that shall survive until such Securities shall mature and be paid. Thereafter, Sections 7.06 and 11.05 shall survive. SECTION 11.03. DEPOSITED MONEYS TO BE HELD IN TRUST. All moneys or Governmental Obligations deposited with the Trustee pursuant to Sections 11.01 or 11.02 shall be held in trust and shall be available for payment as due, either directly or through any paying agent (including the Company acting as its own paying agent), to the holders of the particular series of Securities for the payment or redemption of which such moneys or Governmental Obligations have been deposited with the Trustee. SECTION 11.04. PAYMENT OF MONEYS HELD BY PAYING AGENTS. In connection with the satisfaction and discharge of this Indenture all moneys or Governmental Obligations then held by any paying agent under the provisions of this Indenture shall, upon demand of the Company or the Guarantor, be paid to the Trustee and thereupon such paying agent shall be released from 59 all further liability with respect to such moneys or Governmental Obligations. SECTION 11.05. REPAYMENT TO COMPANY. Any moneys or Governmental Obligations deposited with any paying agent or the Trustee, or then held by the Company or the Guarantor, as the case may be, in trust for payment of principal of or premium or interest on the Securities of a particular series that are not applied but remain unclaimed by the holders of such Securities for at least two years after the date upon which the principal of (and premium, if any) or interest on such Securities shall have respectively become due and payable, shall be repaid to the Company or the Guarantor, as the case may be, on May 31 of each year or (if then held by the Company or the Guarantor) shall be discharged from such trust; and thereupon the paying agent and the Trustee shall be released from all further liability with respect to such moneys or Governmental Obligations, and the holder of any of the Securities entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company or the Guarantor for the payment thereof. ARTICLE XII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01. NO RECOURSE. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security or Guarantee, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or the Guarantor or of any predecessor or successor corporation, either directly or through the Company or the Guarantor or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or the Guarantor or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or 60 by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Securities. ARTICLE XIII. MISCELLANEOUS PROVISIONS SECTION 13.01. EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company or the Guarantor shall bind their respective successors and assigns, whether so expressed or not. SECTION 13.02. ACTIONS BY SUCCESSOR. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company or the Guarantor shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company or the Guarantor, as the case may be. SECTION 13.03. SURRENDER OF COMPANY POWERS. The Company or the Guarantor by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company or the Guarantor, as the case may be, and thereupon such power so surrendered shall terminate both as to the Company or the Guarantor, as the case may be, and as to any successor corporation. SECTION 13.04. NOTICES. 61 Except as otherwise expressly provided herein any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Securities to or on the Company or the Guarantor may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: c/o U S WEST, Inc., 7800 East Orchard Road, Englewood, Colorado 80111, Attention: Treasurer. Any notice, election, request or demand by the Company or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee. SECTION 13.05. GOVERNING LAW. This Indenture and each Security shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION 13.06. TREATMENT OF DEBT SECURITIES AS DEBT. It is intended that the Debt Securities will be treated as indebtedness and not as equity for federal income tax purposes. The provisions of this Indenture shall be interpreted to further this intention. SECTION 13.07. COMPLIANCE CERTIFICATES AND OPINIONS. (a) Upon any application or demand by the Company or the Guarantor to the Trustee to take any action under any of the provisions of this Indenture, the Company or the Guarantor, as the case may be, shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. (b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant in this Indenture shall include (1) a statement that the Person making such certificate or opinion 62 has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. SECTION 13.08. PAYMENTS ON BUSINESS DAYS. Except as provided pursuant to Section 2.01 pursuant to a Board Resolution, and as set forth in an Officers' Certificate, or established in one or more indentures supplemental to this Indenture, in any case where the date of maturity of interest or principal of any Security or the date of redemption of any Security shall not be a Business Day, then payment of interest or principal (and premium, if any) may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. SECTION 13.09. CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 13.10. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 13.11. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Securities of any series shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Securities, but this Indenture and such Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. 63 SECTION 13.12. ASSIGNMENT. Each of the Company and the Guarantor will have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary of the Guarantor, PROVIDED that, in the event of any such assignment, the Company or the Guarantor, as the case may be, will remain liable for all such obligations. Subject to the foregoing, the Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto. ARTICLE XIV. SUBORDINATION OF SECURITIES SECTION 14.01. SUBORDINATION TERMS. The payment by the Company of the principal of, premium, if any, and interest on any series of Debt Securities issued hereunder shall be subordinated to the extent set forth in an indenture supplemental hereto relating to such Debt Securities. The payment by the Guarantor of any obligation due under any Guarantees issued hereunder shall be subordinated to the extent set forth in an indenture supplemental hereto relating to such Guarantees. 64 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. U S WEST CAPITAL FUNDING, INC. By -------------------------------------- Attest: By --------------------------------- U S WEST, INC. By -------------------------------------- Attest: By --------------------------------- NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By -------------------------------------- 65 STATE OF ) COUNTY OF ) ss.: On the ____ day of ___________, 1995, before me personally came _______________________________ to me known, who, being by me duly sworn, did depose and say that he is the ______________ ___________________________________ of U S WEST CAPITAL FUNDING, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. -------------------------------------------------- NOTARY PUBLIC [seal] Commission expires STATE OF ) COUNTY OF ) ss.: On the ____ day of ___________, 1995, before me personally came _______________________________ to me known, who, being by me duly sworn, did depose and say that he is the ______________ ___________________________________ of U S WEST, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. -------------------------------------------------- NOTARY PUBLIC [seal] Commission expires 66 EX-4.F 5 EXHIBIT 4-F FIRST SUPPLEMENTAL INDENTURE, dated as of April __, 1995 (the "First Supplemental Indenture"), between U S WEST Capital Funding, Inc., a Colorado corporation (the "Company"), U S WEST, Inc., a Colorado corporation (the "Guarantor") and Norwest Bank Minnesota, National Association, as trustee (the "Trustee") under the Indenture dated as of April __, 1995 between the Company, the Guarantor and the Trustee (the "Indenture"). WHEREAS, the Company and the Guarantor executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company's unsecured subordinated debt securities guaranteed by the Guarantor, to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture; WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Debt Securities to be known as its ___% Subordinated Deferrable Interest Notes due 2025 (the "Notes"), and the Guarantor desires to provide for the issuance of a Guarantee of such Debt Securities (the "Note Guarantee"), the form and substance of such Notes and the Note Guarantee and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this First Supplemental Indenture; WHEREAS, U S WEST Financing [ ], a Delaware statutory business trust (the "Trust"), has offered to the public $[ ] aggregate liquidation amount of its ___% Trust Originated Preferred Securities (the "Preferred Securities"), representing undivided beneficial interests in the assets of the Trust and proposes to invest the proceeds from such offering in $[ ] aggregate principal amount of the Notes; and WHEREAS, the Company and the Guarantor have requested the Trustee execute and deliver this First Supplemental Indenture, and all requirements necessary to make this First Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company and to make the Guarantee endorsed thereon when executed by the Guarantor a valid obligation of the Guarantor, have been performed, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects: NOW THEREFORE, in consideration of the purchase and acceptance of the Notes by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Notes and the terms, provisions and conditions thereof, the Company and the Guarantor covenant and agree with the Trustee as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITION OF TERMS Unless the context otherwise requires: (a) a term defined in the Indenture has the same meaning when used in this First Supplemental Indenture; (b) a term defined anywhere in this First Supplemental Indenture has the same meaning throughout; (c) the singular includes the plural and vice versa; (d) a reference to a Section or Article is to a Section or Article of this First Supplemental Indenture; (e) headings are for convenience of reference only and do not affect interpretation; (f) the following terms have the meanings given to them in the Declaration: (i) Clearing Agency (ii) Delaware Trustee; (iii) Dissolution Tax Opinion; (iv) No Recognition Opinion; (v) Property Trustee; (vi) Preferred Security Certificate; (vii) Regular Trustees; (viii) Special Event; and (ix) Tax Event; and 2 (g) the following terms have the meanings given to them in this Section 1.1(g): "Declaration" means the Amended and Restated Declaration of Trust of U S WEST Financing I, a Delaware business trust, dated as of ___ April 1995. "Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration and the Notes held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Extended Maturity Date" means, if the Company elects to extend the Maturity Date in accordance with Section 2.2(b), the date selected by the Company which is after the Scheduled Maturity Date but before _________, 2044. "Maturity Date" means the date on which the Notes mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Scheduled Maturity Date" means ______________, 2025. "Senior Indentures" means with respect to the Company or Guarantor, (i) the principal, premium, if any, and interest in respect of (a) indebtedness of such obligor for money borrowed and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor including, without limitation, in the case of the Guarantor, all obligations under its Liquid Yield Option Notes due 2011; (ii) all capital lease obligations of such obligor; (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such obligor for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to 3 in clauses (i) through (iv) of other persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Notes, as the case may be, and (2) any indebtedness between or among such obligor and its Affiliates, including all other debt securities and guarantees in respect of those debt securities, issued to (y) any other U S WEST Trust or (z) any trusts, partnerships or any other entities affiliated with the Guarantor which is a financing vehicle of the Guarantor ("Financing Entity") in connection with an issuance by such Financing Entity of preferred securities or other securities which rank pari passu with, or junior to, the Preferred Securities. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE NOTES SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT There is hereby authorized: (a) a series of Debt Securities designated the "____% Subordinated Deferrable Interest Notes - due 2025", limited in aggregate principal amount to $[ million], which amount shall be as set forth in any written order of the Company for the authentication and delivery of Notes pursuant to Section 2.4 of the Indenture; and (b) a Guarantee of such Debt Securities. SECTION 2.2 MATURITY (a) The Maturity Date will be either: (i) the Scheduled Maturity Date; or (ii) if the Company elects to extend the Maturity Date beyond the Scheduled Maturity Date in accordance with Section 2.2(b), the Extended Maturity Date; 4 (b) the Company may at any time before the day which is 90 days before the Scheduled Maturity Date, elect to extend the Maturity Date only once to the Extended Maturity Date provided that the following conditions in this Section 2.2(b) are satisfied both at the date the Company gives notice in accordance with Section 2.2(c) of its election to extend the Maturity Date and at the Scheduled Maturity Date: (i) the Company is not in bankruptcy or otherwise insolvent; (ii) the Company is not in default on any Securities issued to any U S WEST Trust or any trustee of such U S WEST Trust in connection with the issuance of Trust Securities by such U S WEST Trust; (iii) the Company has made timely payments on the Debenture for the immediately preceding 18 months without deferrals; (iv) the Trust is not in arrears on payments of Distributions on the Trust Securities issued by it; and (v) the Notes are rated Investment grade or the equivalent by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization; and (c) if the Company elects to extend the Maturity Date in accordance with Section 2.2(b), the Company shall give notice to registered holders of the Notes, the Property Trustee and the Trust of the extension of the Maturity Date and the Extended Maturity Date at least [90] days before the Scheduled Maturity Date. 5 SECTION 2.3 FORM AND PAYMENT Except as provided in Section 2.4, the Notes shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Notes issued in certificated form will be payable, the transfer of such Notes will be registrable and such Notes will be exchangeable for Notes bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the registered holder of any Notes is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Notes held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.4 GLOBAL NOTE In connection with a Dissolution Event; (a) the Notes in certificated form may be presented to the Trustee by the Property Trustee in exchange for a Global Note in an aggregate principal amount equal to all Outstanding Notes, to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Global Note in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. Payments on the Notes issued as a Global Note will be made to the Depository; and (b) if any Preferred Securities are held in non book-entry certificated form, the Notes in certificated form may be present- 6 ed to the Trustee by the Property Trustee and any Preferred Security Certificate which represents Preferred Securities other than Preferred Securities held by the Clearing Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Notes presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Preferred Security Certificates will be cancelled and a Note, registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate cancelled will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. On issue of such Notes, Notes with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been cancelled. SECTION 2.5 INTEREST (a) Each Note will bear interest at the rate of ___% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, payable (subject to the provisions of Article Four) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date", commencing on ________ __, 1995), to the person in whose name such Note or any predecessor Note is registered, at the close of 7 business on the regular record date for such interest installment, which in respect of any Notes of which the Property Trustee is the registered holder of or a Global Note, shall be the close of business on the Business Day next preceding that Interest Payment Date. Notwithstanding the foregoing sentence, if the Preferred Securities are no longer in book-entry only form or if pursuant to the provisions of Section 2.11(c) of the Indenture the Notes are not represented by a Global Note, the Company may select a regular record date for such interest installment which shall be any date at least one Business Day before an Interest Payment Date. (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest in computed, will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Notes is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (c) If at any time while the Property Trustee is the holder of any Notes, the Trust or the Property Trustee is required to pay any taxes, duties assessments or governmental changes of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company will pay as additional interest ("Additional Interest") on the Notes held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties assessments or other governmental changes will be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other government changes been imposed. ARTICLE III REDEMPTION OF THE NOTES 8 SECTION 3.1 SPECIAL EVENT REDEMPTION If a Tax Event has occurred and is continuing and: (a) the Company has received a Redemption Tax Opinion; or (b) after receiving a Dissolution Tax Opinion, the Regular Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No Recognition Opinion cannot be delivered to the Trust, then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the registered holders of the Notes to redeem the Notes in whole or in part for cash within 90 days following the occurrence of such Tax Event (the "90 Day Period"), provided that, if at the time there is available to the Company the opportunity to eliminate within the 90 Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust, the Guarantor or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption; and provided, further, that the Company shall have no right to redeem the Notes while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Declaration. SECTION 3.2 OPTIONAL REDEMPTION BY COMPANY (a) Subject to the provisions of Article Three of the Indenture and to Section 3.2(b), the Company shall have the right to redeem the Notes, in whole or in part, from time to time, on or after __________ __,2000, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice 9 to the registered holder of the Notes, at the Optional Redemption Price. If the Notes are only partially redeemed pursuant to this Section 3.2, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption, the Notes are registered as a Global Note, the Depository shall determine by lot the principal amount of such Notes held by each Noteholder to be redeemed. (b) If a partial redemption of the Notes would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Notes in whole. SECTION 3.3 NO SINKING FUND The Notes are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD The Company shall have the right, at any time during the term of the Notes, from time to time to extend the interest payment period of such Notes for up to 20 consecutive quarters (the "Extended Interest Payment Period"). To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate for each quarter of the Extended Interest Payment Period. At the end of the Extended Interest Payment Period the Company shall pay all interest accrued and unpaid on the Notes including any Additional Interest 10 ("Deferred Interest") which shall be payable to the holders of the Notes in whose names the Notes are registered in the Security Register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. SECTION 4.2 NOTICE OF EXTENSION (a) If the Property Trustee is the only registered holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to both the Regular Trustees and the Property Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, or (ii) the date the Trust is required to give notice of the record date or the date such Distributions are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Notes written notice of its selection of such Extended Interest Payment Period 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is 11 required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Notes. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. ARTICLE V EXPENSES AND GUARANTEE SECTION 5.1 PAYMENT OF EXPENSES In connection with the offering, sale and issuance of the Notes to the Property Trustee in connection with the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs and expenses relating to the offering, sale and issuance of the Note, including commissions to the underwriters payable pursuant to the Underwriting Agreement and the Pricing Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 7.06 of the Indenture; (b) pay for all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, 12 including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. SECTION 5.2 GUARANTEE OF PAYMENT OF EXPENSES The Guarantor hereby fully and unconditionally guarantees the due and punctual payment of all amounts that become due and payable by the Company to any Person pursuant to Section 5.1. ARTICLE VI SUBORDINATION SECTION 6.1 AGREEMENT TO SUBORDINATE. The Company and the Guarantor covenant and agree, and each holder of Notes issued hereunder by holder's acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article Six; and each holder of a Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest on all Notes issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebted- 13 ness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. The payment by the Guarantor of any obligation due under the Guarantees issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article Six shall prevent the occurrence of any default or Event of Default hereunder. SECTION 6.2 DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company or the Guarantor in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company or the Guarantor, as the case may be, or in the event that the maturity of any Senior Indebtedness of the Company or the Guarantor, as the case may be, has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption and sinking fund payments) of, or premium, if any, or interest on the Notes, including payment with respect to any obligation due under the Guarantees. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any holder when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 6.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY. 14 Upon any payment by the Company or the Guarantor, or distribution of assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company or the Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company or the Guarantor, as the case may be, shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company or the Guarantor, as the case may be, on account of the principal (and premium, if any) or interest on the Notes; and upon any such dissolution or winding-up or liquidation or reorganization any payment by the Company or the Guarantor, or distribution of assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, to which the holders of the Note or the Trustee would be entitled to receive from the Company or the Guarantor, as the case may be, except for the provisions of this Article Six, shall be paid by the Company or the Guarantor, as the case may be, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the holders of the Notes or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company or the Guarantor, as the case may be) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the holders of Notes or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the holders of 15 the Notes before all Senior Indebtedness of the Company or the Guarantor is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company or the Guarantor, for application to the payment of all Senior Indebtedness of the Company or the Guarantor, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. For purposes of this Article Six, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company or the Guarantor as reorganized or readjusted, or securities of the Company or the Guarantor or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article Six with respect to the Notes to the payment of all Senior Indebtedness of the Company or the Guarantor, as the case may be, that may at the time be outstanding, PROVIDED that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company or the Guarantor with, or the merger of the Company or the Guarantor into, another corporation or the liquidation or dissolution of the Company or the Guarantor following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Ten of the Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Ten of the Indenture. Nothing in Section 6.2 or in this Section 6.3 shall apply to claims 16 of, or payments to, the Trustee under or pursuant to Section 7.6 of the Indenture. SECTION 6.4 SUBROGATION. Subject to the payment in full of all Senior Indebtedness of the Company or the Guarantor, the rights of the holders of the Notes shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company or the Guarantor, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders for such Senior Indebtedness of any cash, property or securities to which the holders of the Notes or the Trustee would be entitled except for the provisions of this Article Six, and no payment over pursuant to the provisions of this Article Six, to or for the benefit of the holders of such Senior Indebtedness by holders of the Notes or the Trustee, shall, as between (i) the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Notes or (ii) the Guarantor, its creditors other than the holders of Senior Indebtedness of the Guarantor, and the holders of the Notes, be deemed to be a payment by the Company or the Guarantor, as the case may be, to or on account of such Senior Indebtedness. It is understood that the provisions of this Article Six are and are intended solely for the purposes of defining the relative rights of the holders of the Notes, on the one hand, and the holders of such Senior Indebtedness on the other hand. Nothing contained in this Article Six or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between (i) the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Notes or (ii) the Guarantor, its creditors other than the holders of Senior Indebtedness of the Guarantor, and the holders of the Notes, the obligation of the Company or the Guarantor, as the case may be, which is absolute and unconditional, to pay to the holders of the Notes the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with 17 their terms, or is intended to or shall affect the relative rights of the holders of the Notes and creditors of the Company or the Guarantor, as the case may be, other than the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, nor shall anything herein or therein prevent the Trustee or the holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, subject to the rights, if any, under this Article Six of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company or the Guarantor, as the case may be, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company or the Guarantor referred to in this Article Six, the Trustee, subject to the provisions of Section 7.1 of the Indenture, and the holders of the Notes, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the holders of the Notes, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company or the Guarantor, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Six. SECTION 6.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each holder of Notes by such holder's acceptance thereof authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Six and appoints the Trustee such holder's attorney-in-fact for any and all such purposes. SECTION 6.6 NOTICE BY THE COMPANY AND THE GUARANTOR. 18 The Company or the Guarantor shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company or the Guarantor that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Six. Notwithstanding the provisions of this Article Six or any other provision of the Indenture and this First Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Six, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Principal Office of the Trustee from the Company or the Guarantor or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.1 of the Indenture, shall be entitled in all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received the notice provided for in this Section 6.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 7.1 of the Indenture, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article Six, the Trustee may request such Person to furnish evidence to the reasonable 19 satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Six, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 6.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Six in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Company or the Guarantor, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Six, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 7.1 of the Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to holders of Notes, the Company, the Guarantor or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article Six or otherwise. SECTION 6.8 SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness of the Company or the Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or the Guarantor, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company or the Guarantor, as the case may be, 20 with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company or the Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the holders of the Notes, without incurring responsibility to the holders of the Notes and without impairing or releasing the subordination provided in this Article Six or the obligations hereunder of the holders of the Notes to the holders of such Senior Indebtedness, do any one or more the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company or the Guarantor, as the case may be, and any other Person. ARTICLE VII 21 COVENANT TO LIST ON EXCHANGE SECTION 7.1 LISTING ON EXCHANGES If the Notes are to be issued as a Global Note in connection with the distribution of the Notes to the holders of the Preferred Securities issued by the Trust upon a Dissolution Event, the Company will use its best efforts to list such Notes on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. ARTICLE VIII FORM OF NOTE SECTION 8.1 FORM OF NOTE The Notes, the Note Guarantee and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF NOTE) [IF THE NOTE IS TO BE A GLOBAL NOTE, INSERT - This Note is a Global] Note within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Note is exchangeable for Notes registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Note (other than a transfer of this Note as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Note is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS 22 WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] No. __________________ $_____________ CUSIP No._____________ U S WEST Capital Funding, Inc. ____% SUBORDINATED DEFERRABLE INTEREST NOTE DUE 2025 U S WEST CAPITAL FUNDING, INC., a Colorado corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of _____________ Dollars on ____________, 2025 (or on such later date before ____, 2044 if the Company elects to extend the maturity date as further described herein), and to pay interest on said principal sum from ____________, 1995 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 31 and December 31 of each year commencing _____________, 1995 at the rate of _____% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Note is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in 23 each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Note (or one or more Predecessor Notes, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment [which shall be the close of business on the business] day next preceding such Interest Payment Date]. [IF PURSUANT TO THE PROVISIONS] OF SECTION 2.11(c) OF THE INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A GLOBAL NOTE -- which shall be the close of business on the ____ business day next preceding such Interest Payment Date]. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of this series of Notes not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Note is the Property Trustee, the payment of the principal of (and premium, if any) and interest on this Note will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Note is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full 24 of all Senior Indebtedness, and this Note is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication hereon has been executed by the Trustee referred to on the reverse side hereof, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Note are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. 25 IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated___________________ U S WEST CAPITAL FUNDING, INC. By______________________ [ ] Attest: By_____________________ Secretary 26 (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Notes of the series of Notes described in the within-mentioned Indenture. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION _________________________ ______________________ as Trustee or as Authentication Agent By_______________________ By_____________________ Authorized Signatory Authorized Signatory [FORM OF GUARANTEE] FOR VALUE RECEIVED, U S WEST, Inc., a Colorado corporation (the "Guarantor"), hereby unconditionally guarantees to the holder of the Security upon which this Guarantee is endorsed the due and punctual payment of the principal of, sinking fund payment, if any, premium, if any, or interest on said Security, when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. The Guarantor agrees to determine, at least one Business Day prior to the date upon which a payment of principal of, sinking fund payment, if any, premium, if any, or interest on said Security is due and payable, whether the Company has available the funds to make such payment as the same shall become due and payable. In case of the failure of the Company punctually to pay any such principal, sinking fund payment, if any, premium, if any, or interest, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon redemption, or otherwise, and as if such payment were made by the Company. 27 The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrevocable, and absolute, irrespective of the validity, regularity, or enforceability of said Security of said Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Security with respect to any provisions thereof, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to said Security or indebtedness evidenced thereby, and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in said Security and in this Guarantee. The Guarantor shall be subrogated to all rights of the holder of said Security against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of the holders of all of the Securities then outstanding, be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation until the principal of and premium, if any, and interest on all Securities shall have been paid in full or payment thereof shall have been provided for in accordance with said Indenture. Notwithstanding anything to the contrary contained herein, if following any payment of principal or interest by the Company on the Securities to the holders of the Securities it is determined by a final decision of a court of competent jurisdiction that such payment shall be avoided by a trustee in bankruptcy (including any debtor-in-possession) as a preference under 11 U.S.C. Section 547 and such payment is paid by such holder to such trustee in bankruptcy, then and to the extent of such repayment, the obligations of the Guarantor hereunder shall remain in full force and effect. The obligations of the Guarantor under this Guarantee are, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Guarantee is issued subject to the provisions of the Indenture with respect thereto. Each Holder of the Security upon which this Guarantee is endorsed, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder of the Security upon which this guarantee is endorsed, by his or her acceptance thereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each Holder upon said provisions. This Guarantee shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee (or the Authentication Agent). 28 This Guarantee shall be governed by the laws of the State of New York. IN WITNESS WHEREOF, U S WEST, Inc. has caused this Guarantee to be signed in its corporate name by the facsimile signature of two of its officers thereunto duly authorized and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted or otherwise reproduced hereon. U S WEST, Inc. _________________________[seal] _________________________ [Title] [Title] (FORM OF REVERSE OF NOTE) This Note is one of a duly authorized series of Notes of the Company (herein sometimes referred to as the "Notes"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of ____________ __, 1995 duly executed and delivered between the Company and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee")and U S WEST Inc., a Colorado corporation as Guarantor (the "Guarantor"), as supplemented by the First Supplemented Indenture dated as of ____________, 1995 between the Company and the Trustee (the Indenture as so supplemented, the "Indenture"), to which indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes. By the terms of the Indenture, the Notes are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This series of Notes is limited in aggregate principal amount as specified in said First Supplemental Indenture. Because of the occurrence and continuation of a Tax Event, in certain circumstances this Note will become due and payable at the principal amount together with any interest accrued thereon, (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines. The Company shall have the right to 29 redeem this Note at the option of the Company, without premium or penalty, in whole or in part at any time on or after _____________, 2000 (an "Optional Redemption"), at a redemption price equal to 100% of the principal amount plus any accrued but unpaid interest, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Notes are only partially redeemed by the Company pursuant to an Optional Redemption, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if, at the time of redemption, the Notes are registered as a Global Note, the Depository shall determine by lot the principal amount of such Notes held by each Noteholder to be redeemed. In the event of redemption of this Note in part only, a new Note or Notes of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Holder of each Note so affected or (ii) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Note then outstanding and affected thereby. The Indenture also contains provisions 30 permitting the Holders of a majority in aggregate principal amount of the Notes of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series. Any such consent or waiver by the registered Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Notes from time to time to extend the interest payment period of such Notes to up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Notes to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company in the bor- 31 ough of Manhattan, the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Note Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. [The debentures of this series are issuable only in registered form] without coupons in denominations of $25 and any integral multiple thereof.] [This Global Note is exchangeable for Notes in definitive form only under] certain limited circumstances set forth in the Indenture. Notes of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof.] As provided in the Indenture and subject to certain limitations [herein and] therein set forth, Notes of this series [so issued] are exchangeable for a like aggre- 32 gate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE IX ORIGINAL ISSUE OF NOTES SECTION 9.1 ORIGINAL ISSUE OF NOTES Notes in the aggregate principal amount of $________ may, upon execution of this First Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes to or upon the written order of the Company, signed by its Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE X MISCELLANEOUS SECTION 10.1 RATIFICATION OF INDENTURE The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 10.2 TRUSTEE NOT RESPONSIBLE FOR RECITALS The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. SECTION 10.3 GOVERNING LAW 33 This First Supplemental Indenture and each Note shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION 10.4 SEPARABILITY In case any one or more of the provisions contained in this First Supplemental Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this First Supplemental Indenture or of the Notes, but First Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 10.5 COUNTERPARTS This First Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. 34 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, on the date or dates indicated in the acknowledgements and as of the day and year first above written. U S WEST Capital Funding, Inc. By____________________________ Attest: _____________________________ Secretary U S WEST, Inc. By____________________________ Attest: _____________________________ Secretary 35 NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee By_______________________________ 36 STATE OF ) COUNTY OF ) ss.: On the ________ day of _____________, 1995, before me personally came ________________________ to be known, who, being by me duly sworn, did depose and say that he is the ________________________________ of U S WEST CAPITAL FUNDING, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. __________________________________ NOTARY PUBLIC [seal] Commission expires STATE OF ) COUNTY OF ) SS.: On the ______ day of ________________, 1995, before me personally came ______________________________ to be known, who, being by me duly sworn, did depose and say that he is the ____________________________________ of U S WEST, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. _________________________________ NOTARY PUBLIC [seal] Commission expires 37 EX-4.I 6 EXHIBIT 4-I ____________________________________ PREFERRED SECURITIES GUARANTEE AGREEMENT [ ] Dated as of __________, 1995 ____________________________________ CROSS-REFERENCE TABLE*
Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement ------------------- --------- 310(a) . . . . . . . . . . . . . . . . . . 4.1(a) 310(b) . . . . . . . . . . . . . . . . . . 4.1(c) 310(c) . . . . . . . . . . . . . . . . . . Inapplicable 311(a) . . . . . . . . . . . . . . . . . . 2.2(b) 311(b) . . . . . . . . . . . . . . . . . . 2.2(b) 311(c) . . . . . . . . . . . . . . . . . . Inapplicable 312(a) . . . . . . . . . . . . . . . . . . 2.2(a) 312(b) . . . . . . . . . . . . . . . . . . 2.2(b) 313. . . . . . . . . . . . . . . . . . . . 2.3 314(a) . . . . . . . . . . . . . . . . . . 2.4 314(b) . . . . . . . . . . . . . . . . . . Inapplicable 314(c) . . . . . . . . . . . . . . . . . . 2.5 314(d) . . . . . . . . . . . . . . . . . . Inapplicable 314(f) . . . . . . . . . . . . . . . . . . Inapplicable 315(a) . . . . . . . . . . . . . . . . . . 3.1(b) 315(b) . . . . . . . . . . . . . . . . . . 2.7 315(c) . . . . . . . . . . . . . . . . . . 3.1(a) 315(d) . . . . . . . . . . . . . . . . . . 3.1(a) 316(a) . . . . . . . . . . . . . . . . . . 5.4(a), 2.6
_______________ * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of _____________, 1995, is executed and delivered by U S WEST, Inc., a Colorado corporation (the "Guarantor"), and The First National Bank of Chicago, National Association, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of U S WEST Financing [ ], a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of _________, 1995, among the trustees of the Issuer named therein, the Guarantor as Sponsor and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof $__________ aggregate stated liquidation amount of Preferred Securities designated the ____% Trust Originated Preferred Securities (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires to irrevocably and unconditionally to agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee Agreement") in substantially identical terms to this Guarantee Agreement for the benefit of the holders of the Common Securities (as defined herein) except that if an Event of Default (as defined in the Indenture (as defined herein)), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Guarantee Agreement. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 DEFINITIONS AND INTERPRETATION In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "AFFILIATE" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933 as amended or any successor rule thereunder. "COMMON SECURITIES" means the securities representing common undivided beneficial interests in the assets of the Issuer. 2 "COVERED PERSON" means any Holder of Preferred Securities. "EVENT OF DEFAULT" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement. "GUARANTEE PAYMENTS" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions which are required to be paid on such Preferred Securities to the extent the Issuer shall have funds available therefore, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Indenture), has occurred and is continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee Agreement are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments. "HOLDER" shall mean any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Guarantor. "INDEMNIFIED PERSON" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee 3 Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Preferred Guarantee Trustee. "INDENTURE" means the Indenture dated as of April __, 1995 among U S WEST Capital Funding, Inc., a Colorado corporation (the "Debenture Issuer"), the Guarantor, as guarantor and Norwest Bank Minnesota, National Association, as trustee and any indenture supplemental thereto pursuant to which certain subordinated debt securities of the Debenture Issuer and the guarantee of the Guarantor endorsed thereon are to be issued to the Property Trustee of the Issuer. "MAJORITY IN LIQUIDATION AMOUNT OF THE SECURITIES" means, except as provided by the Trust Indenture Act, Holder(s) of Preferred Securities voting separately as a class, who vote Preferred Securities and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Preferred Securities voted by such Holders represents more than 50% of the above stated liquidation amount of all Preferred Securities. "OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 4 (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "PERSON" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "PREFERRED GUARANTEE TRUSTEE" means The First National Bank of Chicago until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Preferred Guarantee Trustee. "RESPONSIBLE OFFICER" means, with respect to the Preferred Guarantee Trustee, the chairman of the board of directors, the president, any vice- president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "SUCCESSOR PREFERRED GUARANTEE TRUSTEE" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 TRUST INDENTURE ACT; APPLICATION. 5 (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; SECTION 2.2 LISTS OF HOLDERS OF SECURITIES. (a) The Guarantor shall provide the Preferred Securities Trustee (i) within 14 days after January 1 and June 30 of each year, a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Preferred Securities ("List of Holders") as of such date, PROVIDED THAT the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee. The Preferred Guarantee may destroy any List of Holders previously given to it on receipt of a new List of Holders; and (b) the Preferred Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE. Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. 6 SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 EVENT OF DEFAULT; NOTICE (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Events of Default known to the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice, PROVIDED, THAT, the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors 7 and/or Responsible Officers, of the Preferred Guarantee Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Preferred Securities. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default except any Event of Default as to which the Preferred Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. SECTION 2.8 CONFLICTING INTERESTS The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE (a) This Guarantee Agreement shall be held by the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred Securities and the Preferred Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Preferred Guarantee Trustee The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) If an Event of Default has occurred and is continuing, the Preferred Guarantee Trustee shall enforce 8 this Guarantee Agreement for the benefit of the Holders of the Preferred Securities. (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (d) no provision of this Guarantee Agreement shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Preferred Guarantee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to 9 the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Preferred Guaranty Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repay- 10 ment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE. (a) Subject to the provisions of Section 3.1: (i) the Preferred Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Guarantee Agreement, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instru- 11 ment (or any rerecording, refiling or registration thereof); (v) the Preferred Guarantee Trustee may consult with counsel and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates, and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (vi) the Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee adequate security and indemnity which would satisfy a reasonable person in the position of the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee provided, that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement; 12 (vii) the Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action; and (x) whenever in the administration of this Guarantee Agreement the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right 13 or taking any other action hereunder the Preferred Guarantee Trustee (i) may request instructions from the Holders of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall at all times be a preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; (ii) be a corporation organized and doing business under the laws of the 14 United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; (b) if at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c); and (c) if the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE TRUSTEE. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor; 15 (b) the Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(b) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor; (c) the Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee; and (d) if no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Preferred Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Preferred Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1 GUARANTEE The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set- off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. 16 SECTION 5.2 WAIVER OF NOTICE AND DEMAND The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 OBLIGATIONS NOT AFFECTED The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; 17 (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 2.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation on the Holders or any other Person to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 RIGHTS OF HOLDERS (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon Preferred Guarantee Trustee under this Guarantee Agreement; and (b) if the Preferred Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Preferred Securities may, after a period of 30 days has elapsed from such Holder's written request to the Preferred Guarantee Trustee to enforce this Guarantee Agreement, institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other Person. 18 SECTION 5.5 GUARANTEE OF PAYMENT This Guarantee Agreement creates a guarantee of payment and not of collection. SECTION 5.6 SUBROGATION The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; PROVIDED, HOWEVER, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 INDEPENDENT OBLIGATIONS The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 LIMITATION OF TRANSACTIONS So long as any Preferred Securities remain outstanding, if there shall have occurred any event that would constitute an Event of Default or an event of default under the Declaration, then (a) the Guarantor shall not (and shall cause the Debenture Issuer and, if it is a wholly-owned subsidiary of the Guarantor, shall cause U S WEST Communications, Inc. not to) declare or pay any dividend on, make any distributions with respect to, or redeem, 19 purchase or make a liquidation payment with respect to, any of its capital stock, and (b) U S WEST shall not (and shall cause the Debenture Issuer not to) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor or the Debenture Issuer which rank pari passu with or junior to the Debenture. SECTION 6.2 RANKING This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, including the Debenture Guarantee, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 TERMINATION This Guarantee Agreement shall terminate upon full payment of the Redemption Price of all Securities, upon the distribution of the Debentures to the Holder's of all of the Preferred Securities or upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. 20 ARTICLE VIII INDEMNIFICATION SECTION 8.1 EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions; and (b) an Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions (as defined in the Declaration) to Holders of Preferred Securities might properly be paid. SECTION 8.2 INDEMNIFICATION. (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this in accordance with this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in 21 respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions; and (b) to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). ARTICLE IX MISCELLANEOUS SECTION 9.1 SUCCESSORS AND ASSIGNS All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 9.2 AMENDMENTS Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of at least 66-2/3% in liquidation amount of all the outstanding Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 9.3 NOTICES All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: 22 (a) if given to the Preferred Guarantee Trustee at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): The First National Bank of Chicago One First National Plaza Suite 0126 Chicago IL 60670-0126 (b) if given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): U S WEST, Inc. 7800 East Orchard Road Englewood, CO 80111 (c) if given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 BENEFIT This Guarantee Agreement is solely for the benefit of the Holders of the Preferred Securities and subject to Section 3.1(a) is not separately transferable from the Preferred Securities. SECTION 9.5 GOVERNING LAW THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 23 THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. U S WEST, Inc. By:________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO as Preferred Guarantee Trustee By:________________________ Name: Title: 24 EX-5.A 7 EXHIBIT 5-A Weil, Gotshal & Manges (a partnership including professional corporations) 767 Fifth Avenue New York, New York 10153 (212) 310-8000 April 28, 1995 U S WEST, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Ladies and Gentlemen: We have acted as counsel to U S WEST, Inc., a Colorado corporation ("U S WEST"), U S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding"), and U S WEST Financing I, U S WEST Financing II and U S WEST Financing III, each a Delaware business trust ("U S WEST Financing"), in connection with the preparation of the registration statement of U S WEST, Capital Funding and the Trusts on Form S-3 (33-57889), filed with the Securities and Exchange Commission (the "Commission") on March 1, 1995 and amended by Amendment No. 1 filed with the Commission on April 28, 1995 (as amended, the "Registration Statement"), relating to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of preferred securities of the Trusts (the "Preferred Securities") and subordinated debt securities of Capital Funding (the "Subordinated Debt Securities"). The Subordinated Debt Securities will be fully and unconditionally guaranteed by U S WEST (the "Debt Guarantees"). The Subordinated Debt Securities and the Debt Guarantee will be issued in accordance with the provisions of an indenture (the "Indenture") to be executed by U S WEST, Capital Funding and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), the form of which is being filed as an exhibit to the Registration Statement. The Preferred Securities will be guaranteed by U S WEST in the manner and to the extent set forth in a Guarantee Agreement (the "Preferred Securities Guarantees"), the form of which is being filed as an exhibit to the Registration Statement. In so acting, we have reviewed the Registration Statement, including the prospectus (the "Prospectus") and prospectus supplement (the "Prospectus Supplement") contained therein, and the form of Indenture, form of Subordinated Debt Security, form of Debt Guarantee and form of Preferred Securities Guarantee being filed with the Commission as exhibits to the Registration Statement. In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of U S WEST and Capital Funding, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of U S WEST and Capital Funding. Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that: 1. The Subordinated Debt Securities have been duly and validly authorized by Capital Funding and, when executed, authenticated, issued and delivered in the manner contemplated in the Indenture, will constitute legal, valid and binding obligations of Capital Funding, entitled to the benefits of the Indenture and enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent 2 that rights to indemnification thereunder may be limited by federal or state securities laws or public policy relating thereto. 2. The Debt Guarantees have been duly and validly authorized by U S WEST and, when executed, authenticated, issued and delivered in the manner contemplated in the Indenture, will constitute the legal, valid and binding obligations of U S WEST, entitled to the benefits of the Indenture and enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification thereunder may be limited by federal or state securities laws or public policy relating thereto. 3. The Preferred Securities Guarantees has been duly and validly authorized by U S WEST and, when executed and delivered by U S WEST, will constitute the legal, valid and binding obligation of U S WEST, enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). The opinions expressed herein are limited to the laws of the State of New York and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction, except that as to matters of Colorado law we have relied upon the opinion of Stephen E. Brilz, Esq. being filed as an exhibit to the Registration Statement. The opinions expressed herein are rendered solely for your benefit in connection with the transactions described herein. These opinions may not be used or relied upon by any other person, nor may this letter or any copies thereof be furnished to a third party, filed with a governmental agency, quoted, cited or otherwise referred to without our prior written consent. 3 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this firm under the headings "Legal Opinions" in the Prospectus and "Legal Matters" in the Prospectus Supplement, without admitting that we are "experts" under the Securities Act or the rules and regulations of the Commission issued thereunder with respect to any part of the Registration Statement, including this exhibit thereto. Very truly yours, /s/ Weil, Gotshal & Manges 4 EX-5.B 8 EXHIBIT 5-B Exhibit 5-B Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Telephone (302) 658-6541 Telecopier (302) 658-6548 April 28, 1995 U S West Financing I c/o U S West, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Re: U S West Financing I Ladies and Gentlemen: We have acted as special Delaware counsel for U S West, Inc., a Colorado corporation ("U S West"), and U S West Financing I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purpose of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated March 1, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on March 1, 1995; (b) The Declaration of Trust of the Trust, dated March 1, 1995, between U S West and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus subject to completion, dated April 28, 1995 (the "Prospectus"), and a preliminary prospectus supplement subject to completion, dated April 28, 1995 (the "Prospectus U S West Financing I April 28, 1995 Page 2 Supplement"), relating to the __% Trust Originated Preferred Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by U S West and the Trust with the Securities and Exchange Commission on or about April 28, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into between U S West, the trustees of the Trust named therein, and the holders, from time to time, of the undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated April 28, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purpose of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing U S West Financing I April 28, 1995 Page 3 of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated, pursuant to the Declaration, to (i) provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers of Preferred Security Certificates and the issuance of replacement Preferred Security Certificates, and (ii) provide security and indemnity in connection with requests of or directions to the Property Trustee to exercise its rights and powers under the Declaration. U S West Financing I April 28, 1995 Page 4 We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Telephone (302) 658-6541 Telecopier (302) 658-6548 April 28, 1995 U S West Financing II c/o U S West, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Re: U S West Financing II Ladies and Gentlemen: We have acted as special Delaware counsel for U S West, Inc., a Colorado corporation ("U S West"), and U S West Financing II, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purpose of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated as of March 1, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on March 1, 1995; (b) The Declaration of Trust of the Trust, dated as of March 1, 1995, between U S West and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus subject to completion, dated April 28, 1995 (the "Prospectus"), and a preliminary prospectus supplement subject to completion, dated April 28, 1995 (the "Prospectus U S West Financing II April 28, 1995 Page 2 Supplement"), relating to the __% Trust Originated Preferred Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by U S West and the Trust with the Securities and Exchange Commission on or about April 28, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into between U S West, the trustees of the Trust named therein, and the holders, from time to time, of the undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated April 28, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purpose of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing U S West Financing II April 28, 1995 Page 3 of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated, pursuant to the Declaration, to (i) provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers of Preferred Security Certificates and the issuance of replacement Preferred Security Certificates, and (ii) provide security and indemnity in connection with requests of or directions to the Property Trustee to exercise its rights and powers under the Declaration. U S West Financing II April 28, 1995 Page 4 We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Telephone (302) 658-6541 Telecopier (302) 658-6548 April 28, 1995 U S West Financing III c/o U S West, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Re: U S West Financing III Ladies and Gentlemen: We have acted as special Delaware counsel for U S West, Inc., a Colorado corporation ("U S West"), and U S West Financing III, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purpose of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated March 1, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on March 1, 1995; (b) The Declaration of Trust of the Trust, dated March 1, 1995, between U S West and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus subject to completion, dated April 28, 1995 (the "Prospectus"), and a preliminary prospectus supplement subject to completion, dated April 28, 1995 (the "Prospectus U S West Financing III April 28, 1995 Page 2 Supplement"), relating to the __% Trust Originated Preferred Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by U S West and the Trust with the Securities and Exchange Commission on or about April 28, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into between U S West, the trustees of the Trust named therein, and the holders, from time to time, of the undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated April 28, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purpose of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing U S West Financing III April 28, 1995 Page 3 of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated, pursuant to the Declaration, to (i) provide indemnity in connection with and pay taxes or governmental charges arising from transfers of Preferred Security Certificates, and (ii) provide security or indemnity in connection with and pay taxes or governmental charges arising from the issuance of replacement Preferred Security Certificates. U S West Financing III April 28, 1995 Page 4 We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger EX-5.C 9 EXHIBIT 5-C EXHIBIT 5-C April 28, 1995 U S WEST, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Re: U S WEST REGISTRATION STATEMENT ON FORM S-3 Gentlemen and Ladies: I have examined the Registration Statement on Form S-3 (File No. 33-57889) filed with the Securities and Exchange Commission (the "Commission") on March 1, 1995, and Amendment No.1 thereto filed with the Commission on April 28, 1995 (as amended, the "Registration Statement"), by U S WEST, Inc., a Colorado corporation (the "Company"), U S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding"), and U S WEST Financing I, U S WEST Financing II and U S WEST Financing III, each a Delaware Business Trust (the "Trusts"), relating to the registration under the Securities Act of 1933, as amended, of preferred securities of the Trusts (the "Preferred Securities") and subordinated debt securities of Capital Funding (the "Subordinated Debt Securities"). The Subordinated Debt Securities will be fully and unconditionally guaranteed by U S WEST (the "Debt Guarantees"). The Subordinated Debt Securities and the Debt Guarantees will be issued in accordance with the provisions of an indenture (the "Indenture") to be executed by the Company, Capital Funding and Norwest Bank Minnesota, National Association, as trustee, the form of which is being filed as an exhibit to the Registration Statement. The Preferred Securities will be guaranteed by U S WEST in the manner and to the extent set forth in a Guarantee Agreement (the "Preferred Securities Guarantees"), the form of which is being filed as an exhibit to the Registration Statement. In so acting, I have reviewed the Registration Statement, including the prospectus and prospectus supplement contained therein, the form of Indenture, the form of Debt Guarantee, the form of Preferred Securities Guarantee and the form of Subordinated Debt Securities being filed with the Commission as exhibits to the Registration Statement. In addition, I have examined originals or copies, certified or otherwise identified to my satisfaction, of such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of the Company and Capital Funding, and have made such inquiries of such officers and representatives, as I have deemed relevant and necessary as a basis for the opinions hereinafter set forth. In such examination, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion that have not been independently established, I have relied upon certificates or comparable documents of officers and representatives of the Company and Capital Funding. Based on the foregoing, and subject to the qualifications stated herein, I am of the opinion that: 1. The Company and Capital Funding are corporations duly incorporated and validly existing under the laws of the State of Colorado. 2. The Company has all requisite corporate power and authority to execute and deliver the Debt Guarantees, the Indenture and the Preferred Securities Guarantees and to perform its obligations thereunder. Capital Funding has all requisite corporate power and authority to execute and deliver the Subordinated Debt Securities and the Indenture and to perform its obligations thereunder. 3. The execution and delivery of the Debt Guarantees, the Indenture and the Preferred Securities Guarantees by the Company has been duly authorized by all necessary corporate action on the part of the Company. The execution and delivery of the Subordinated Debt Securities and the Indenture by Capital Funding has been duly authorized by all necessary corporate action on the part of Capital Funding. This opinion is rendered solely for your benefit in connection with the transactions described herein. Without my prior written consent, this opinion may not be relied upon by you in any other context or by any other person, except that your outside counsel, Weil, Gotshal & Manges, and counsel to your underwriters, Skadden, Arps, Slate, Meagher & Flom, may rely on this opinion as to matters governed by the laws of the State of Colorado in rendering to you their respective opinions, copies of which are included as exhibits to the Registration Statement. This opinion is limited to the present laws of the State of Colorado, 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 be changed by legislative action, judicial decision, or otherwise. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and I further consent to the use of my name under the captions "Legal Opinions" in the prospectus and "Legal Matters" in the prospectus supplement forming a part of the Registration Statement. Very truly yours, /s/ Stephen E. Brilz Stephen E. Brilz EX-8 10 EXHIBIT 8 EXHIBIT 8 April 28, 1995 U S WEST, Inc. 7800 East Orchard Road Englewood, Colorado 80111 Ladies and Gentlemen: We have acted as special counsel to U S WEST, Inc., a Colorado corporation ("U S WEST"), U S WEST Capital Funding, Inc., a Colorado corporation and a wholly-owned subsidiary of U S WEST ("Capital Funding"), and U S WEST Financing I, a Delaware business trust ("U S WEST Financing"), in connection with the preparation of the registration statement on Form S-3 (33-57889), filed with the Securities and Exchange Commission (the "Commission") on March 1, 1995 and amended by Amendment No. 1 filed with the Commission on April 28, 1995 (as amended, the "Registration Statement"), relating to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of U S WEST Financing's Trust Originated Preferred Securities (the "Preferred Securities") and Capital Funding's Subordinated Deferrable Interest Notes due 2025 (the "Subordinated Debt Securities"). The Preferred Securities will be issued in accordance with the provisions of the Amended and Restated Declaration of Trust (the "Declaration") to be executed by U S WEST, as sponsor, and the trustees of U S WEST Financing. Capitalized terms not otherwise defined herein shall have the same meaning ascribed thereto in the prospectus supplement contained in the Registration Statement (the "Prospectus Supplement"). In so acting, we have reviewed the Registration Statement, including the Prospectus Supplement and the prospectus contained therein (the "Prospectus"), the Declaration, the form U S WEST, Inc. April 28, 1995 Page 2 of Preferred Securities and the form of Common Securities contained in the Declaration, and the form of Indenture and the form of the Preferred Securities Guarantee being filed with the Commission as exhibits to the Registration Statement (collectively, the "Agreements"). In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents and other instruments, and have made such inquiries of such officers and representatives of U S WEST, Capital Funding and U S WEST Financing, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. We have further assumed (i) that the Securities as executed and delivered by the requisite signatories thereto will conform in substance and form in all material respects to the respective forms thereof examined by us, (ii) timely compliance by all parties to the various Agreements to the terms thereof (without waiver or amendment of any of the terms thereof) and (iii) that the Agreements constitute all the agreements, arrangements and understandings between or among the parties thereto with respect to the transactions contemplated therein and to the Securities and that the representations and warranties contained therein are true. The terms of the Agreements and the Securities are incorporated herein by reference. Based on the foregoing, it is our opinion that, assuming full compliance with the Agreements, U S WEST Financing will not be classified, for United States federal income tax purposes, as an association taxable as a corporation or a partnership, but rather, each holder of Preferred Securities will be treated as owning an undivided beneficial interest in the Subordinated Debt Securities. The foregoing opinion is based on current provisions of the Code, the Treasury Regulations promulgated thereunder (including proposed Treasury Regulations), published pronouncements of the Internal Revenue Service, and case law, any of which may be changed at any time with retroactive effect. We express no opinion as to any matters not specifically covered by U S WEST, Inc. April 28, 1995 Page 3 the foregoing opinion or as to the effect on the matters covered by this opinion of the laws of any other jurisdiction. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this firm under the headings "Legal Opinions" in the Prospectus and "Certain Federal Income Tax Consequences" and "Legal Matters" in the Prospectus Supplement, without admitting that we are "experts" under the Securities Act or the rules and regulations of the Commission issued thereunder with respect to any part of the Registraton Statement. This opinion may not be used for any other purpose and may not otherwise be relied upon by, or disclosed to, any other person, quoted or referred to. Very truly yours, /s/ Weil, Gotshal & Manges EX-23.A 11 EXHIBIT 23-A Exhibit 23-A CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of U S WEST, Inc. (the "Company") on Form S-3 (File Nos. 33-57889) of our reports, which include an explanatory paragraph regarding the discontinuance of accounting for the operations of U S WEST Communications, Inc. in accordance with Statement of Financial Accounting Standard No. 71, "Accounting for the Effects of Certain Types of Regulation," in 1993, and a change in the method of accounting for postretirement benefits other than pensions and other postemployment benefits in 1992, dated January 18, 1995, on our audits of the consolidated financial statements and the consolidated financial statement schedule of U S WEST, Inc., as of December 31, 1994 and 1993, and for the three years ended December 31, 1994, 1993 and 1992. We also consent to the reference to our firm under the caption "Experts." /s/ Coopers & Lybrand L.L.P. Denver, Colorado April 28, 1995 EX-25.A 12 EXHIBIT 25-A - -------------------------------------------------------------------------------- Exhibit 25-A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ---------------------------- ___ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) NORWEST BANK MINNESOTA NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A NATIONAL BANKING ASSOCIATION 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No. bank) SIXTH STREET AND MARQUETTE AVENUE MINNEAPOLIS, MINNESOTA 55479 (Address of principal executive offices) (Zip code) ----------------------------- U.S. WEST, INC. U.S. WEST CAPITAL FUNDING, INC. (Exact name of obligor as specified in its charter) COLORADO 84-0926774 COLORADO 84-1028672 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7800 EAST ORCHARD ROAD ENGLEWOOD, COLORADO 80111 (Address of principal executive offices) (Zip code) ------------------------------ GUARANTEE OF SUBORDINATED DEBT SECURITIES BY U.S. WEST, INC. SUBORDINATED DEBT SECURITIES OF U.S. WEST CAPITAL FUNDING, INC. (Title of the indenture securities) - -------------------------------------------------------------------------------- Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-15 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this Statement of Eligibility. Norwest Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of Articles of Association of the trustee now in effect.* Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of the Northwestern National Bank of Minneapolis and the Minnesota Loan and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the certificate of the Comptroller of the Currency dated May 1, 1983, authorizing Norwest Bank Minneapolis, National Association, to set as fiduciary.* Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.* Exhibit 5. Not Applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.** Exhibit 8. A copy of the certificate dated May 10, 1983 of name change from Northwestern National Bank Minneapolis to Norwest Bank Minneapolis, National Association.* Exhibit 9. A copy of the certificate dated January 11, 1988, of name change from Norwest Bank Minneapolis, National Association to Norwest Bank Minnesota, National Association.* * Incorporated by reference to the exhibit of the same number filed with the registration statement number 33-66086. ** Incorporated by reference to the exhibit of the same number filed with the registration statement number 33-90108. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Norwest Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 17th day of April, 1995. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Raymond S. Haverstock ----------------------- Raymond S. Haverstock Assistant Vice President EXHIBIT 6 April 17,1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321 (b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal or State authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Raymond S. Haverstock Assistant Vice President EX-25.B 13 EXHIBIT 25-B SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 -------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ___ -------- THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) -------- U S WEST FINANCING I (Exact name of co-registrant as specified in its charter) Delaware To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of Principal Executive Offices) (Zip Code) U S WEST, INC. (Exact name of co-registrant as specified in its charter) Colorado To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of principal executive office) (Zip Code) Preferred Securities of U S WEST Financing I Guarantee of Preferred Securities of U S WEST, Inc. (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISION AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington, D.C.. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. * EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 13th day of April, 1995. The First National Bank of Chicago, Trustee, By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT April 13, 1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of (i) an Amended and Restated Declaration of Trust of U S West Financing I and (ii) a Preferred Securities Guarantee Agreement of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing I, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 7 A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1994 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC-BALANCE SHEET C400 (-- DOLLAR AMOUNTS IN ------------ -------- THOUSANDS RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . . . . . . . 0081 3,776,149 1.a. b. Interest-bearing balances(2). . . . . . . . . . . . . 0071 7,670,634 1.b. 2. Securities a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . . . . . . . . . . 1754 163,225 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . . . . . . . . . . . 1773 533,857 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold. . . . . . . . . . . . . . . . . . 0276 4,037,205 3.a. b. Securities purchased under agreements to resell . . . 0277 423,381 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C). . . . . . . . . . . . . . . . . . . . RCFD 2122 15,617,618 4.a. b. LESS: Allowance for loan and lease losses. . . . . . RCFD 3123 351,191 4.b. c. LESS: Allocated transfer risk reserve. . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . 2125 15,266,427 4.d. 5. Assets held in trading accounts. . . . . . . . . . . . . 3545 8,227,304 5. 6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . . . . . . . 2145 512,222 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . 2150 46,996 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . . . . . . 2130 7,571 8. 9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . 2155 507,151 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . . 2143 120,504 10. 11. Other assets (from Schedule RC-F). . . . . . . . . . . . 2160 1,250,306 11. 12. Total assets (sum of items 1 through 11) . . . . . . . . 2170 42,542,932 12. - ---------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposits not held in trading accounts.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- SCHEDULE RC-CONTINUED DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU ----------------- ------------ LIABILITIES 13. Deposits a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) . . . . . . . . . . . . . RCON 2200 15,103,504 13.a. (1) Noninterest-bearing(1). . . . . . . . . . . . . . RCON 6631 6,129,078 13.a.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCON 6636 8,974,426 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II). . . . . . . . RCFN 2200 10,633,999 13.b. (1) Noninterest bearing . . . . . . . . . . . . . . . RCFN 6631 460,916 13.b.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCFN 6636 10,173,083 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . . . . RCFD 0278 2,883,499 14.a. b. Securities sold under agreements to repurchase. . . . RCFD 0279 502,401 14.b. 15. a. Demand notes issued to the U.S. Treasury. . . . . . . RCON 2840 112,289 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . . . RCFD 3548 4,798,720 15.b. 16. Other borrowed money: a. With original maturity of one year or less. . . . . . RCFD 2332 2,355,421 16.a. b. With original maturity of more than one year. . . . . RCFD 2333 382,801 16.b. 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 275,794 17. 18. Bank's liability on acceptance executed and outstanding. . . . . . . . . . . . . . . . . . . . . . . RCFD 2920 507,151 18. 19. Subordinated notes and debentures. . . . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-C) . . . . . . . . . RCFD 2930 860,989 20. 21. Total liabilities (sum of items 13 through 20) . . . . . RCFD 2948 39,641,568 21. 22. Limited-Life preferred stock and related surplus . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus. . . . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,273,657 25. 26. a. Undivided profits and capital reserves. . . . . . . . RCFD 3632 431,545 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . RCFD 8434 (4,184) 26.b. 27. Cumulative foreign currency translation adjustments. . . RCFD 3284 (512) 27. 28. Total equity capital (sum of items 23 through 27). . . . RCFD 3210 2,901,364 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . . . . RCFD 3300 42,542,932 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ./RCFD 6724 N/A/ M.1. 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits.
EX-25.C 14 EXHIBIT 25-C SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 -------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ___ -------- THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) -------- U S WEST FINANCING II (Exact name of co-registrant as specified in its charter) Delaware To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of Principal Executive Offices) (Zip Code) U S WEST, INC. (Exact name of co-registrant as specified in its charter) Colorado To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of principal executive office) (Zip Code) Preferred Securities of U S WEST Financing II Guarantee of Preferred Securities of U S WEST, Inc. (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISION AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington, D.C.. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. * EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 13th day of April, 1995. The First National Bank of Chicago, Trustee, By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT April 13, 1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of (i) an Amended and Restated Declaration of Trust of U S West Financing II and (ii) a Preferred Securities Guarantee Agreement of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing II, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 7 A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1994 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC-BALANCE SHEET C400 (-- DOLLAR AMOUNTS IN ------------ -------- THOUSANDS RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . . . . . . . 0081 3,776,149 1.a. b. Interest-bearing balances(2). . . . . . . . . . . . . 0071 7,670,634 1.b. 2. Securities a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . . . . . . . . . . 1754 163,225 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . . . . . . . . . . . 1773 533,857 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold. . . . . . . . . . . . . . . . . . 0276 4,037,205 3.a. b. Securities purchased under agreements to resell . . . 0277 423,381 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C). . . . . . . . . . . . . . . . . . . . RCFD 2122 15,617,618 4.a. b. LESS: Allowance for loan and lease losses. . . . . . RCFD 3123 351,191 4.b. c. LESS: Allocated transfer risk reserve. . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . 2125 15,266,427 4.d. 5. Assets held in trading accounts. . . . . . . . . . . . . 3545 8,227,304 5. 6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . . . . . . . 2145 512,222 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . 2150 46,996 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . . . . . . 2130 7,571 8. 9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . 2155 507,151 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . . 2143 120,504 10. 11. Other assets (from Schedule RC-F). . . . . . . . . . . . 2160 1,250,306 11. 12. Total assets (sum of items 1 through 11) . . . . . . . . 2170 42,542,932 12. - ---------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposits not held in trading accounts.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- SCHEDULE RC-CONTINUED DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU ----------------- ------------ LIABILITIES 13. Deposits a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) . . . . . . . . . . . . . RCON 2200 15,103,504 13.a. (1) Noninterest-bearing(1). . . . . . . . . . . . . . RCON 6631 6,129,078 13.a.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCON 6636 8,974,426 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II). . . . . . . . RCFN 2200 10,633,999 13.b. (1) Noninterest bearing . . . . . . . . . . . . . . . RCFN 6631 460,916 13.b.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCFN 6636 10,173,083 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . . . . RCFD 0278 2,883,499 14.a. b. Securities sold under agreements to repurchase. . . . RCFD 0279 502,401 14.b. 15. a. Demand notes issued to the U.S. Treasury. . . . . . . RCON 2840 112,289 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . . . RCFD 3548 4,798,720 15.b. 16. Other borrowed money: a. With original maturity of one year or less. . . . . . RCFD 2332 2,355,421 16.a. b. With original maturity of more than one year. . . . . RCFD 2333 382,801 16.b. 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 275,794 17. 18. Bank's liability on acceptance executed and outstanding. . . . . . . . . . . . . . . . . . . . . . . RCFD 2920 507,151 18. 19. Subordinated notes and debentures. . . . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-C) . . . . . . . . . RCFD 2930 860,989 20. 21. Total liabilities (sum of items 13 through 20) . . . . . RCFD 2948 39,641,568 21. 22. Limited-Life preferred stock and related surplus . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus. . . . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,273,657 25. 26. a. Undivided profits and capital reserves. . . . . . . . RCFD 3632 431,545 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . RCFD 8434 (4,184) 26.b. 27. Cumulative foreign currency translation adjustments. . . RCFD 3284 (512) 27. 28. Total equity capital (sum of items 23 through 27). . . . RCFD 3210 2,901,364 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . . . . RCFD 3300 42,542,932 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ./RCFD 6724 N/A/ M.1. 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits.
EX-25.D 15 EXHIBIT 25-D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 -------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ___ -------- THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) -------- U S WEST FINANCING III (Exact name of co-registrant as specified in its charter) Delaware To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of Principal Executive Offices) (Zip Code) U S WEST, INC. (Exact name of co-registrant as specified in its charter) Colorado To Be Applied For (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 7800 East Orchard Road Englewood, Colorado 80111 (Address of principal executive office) (Zip Code) Preferred Securities of U S WEST Financing III Guarantee of Preferred Securities of U S WEST, Inc. (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISION AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington, D.C.. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. * EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418). Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 13th day of April, 1995. The First National Bank of Chicago, Trustee, By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT April 13, 1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of (i) an Amended and Restated Declaration of Trust of U S West Financing III and (ii) a Preferred Securities Guarantee Agreement of U S WEST, Inc. for the benefit of the holders of Preferred Securities of U S WEST Financing III, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State Authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO By: /S/ STEVEN M. WAGNER ------------------------------------- Steven M. Wagner, Vice President EXHIBIT 7 A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-1 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1994 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC-BALANCE SHEET C400 (-- DOLLAR AMOUNTS IN ------------ -------- THOUSANDS RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . . . . . . . 0081 3,776,149 1.a. b. Interest-bearing balances(2). . . . . . . . . . . . . 0071 7,670,634 1.b. 2. Securities a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . . . . . . . . . . 1754 163,225 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . . . . . . . . . . . 1773 533,857 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold. . . . . . . . . . . . . . . . . . 0276 4,037,205 3.a. b. Securities purchased under agreements to resell . . . 0277 423,381 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C). . . . . . . . . . . . . . . . . . . . RCFD 2122 15,617,618 4.a. b. LESS: Allowance for loan and lease losses. . . . . . RCFD 3123 351,191 4.b. c. LESS: Allocated transfer risk reserve. . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . 2125 15,266,427 4.d. 5. Assets held in trading accounts. . . . . . . . . . . . . 3545 8,227,304 5. 6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . . . . . . . 2145 512,222 6. 7. Other real estate owned (from Schedule RC-M) . . . . . . 2150 46,996 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . . . . . . 2130 7,571 8. 9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . 2155 507,151 9. 10. Intangible assets (from Schedule RC-M) . . . . . . . . . 2143 120,504 10. 11. Other assets (from Schedule RC-F). . . . . . . . . . . . 2160 1,250,306 11. 12. Total assets (sum of items 1 through 11) . . . . . . . . 2170 42,542,932 12. - ---------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposits not held in trading accounts.
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/94 ST-BK: 17-1630 FFIEC 031 Address: One First National Plaza, Suite 0460 Page RC-2 City, State Zip: Chicago, IL 60670-0460 FDIC Certificate No.: 0/3/6/1/8 --------- SCHEDULE RC-CONTINUED DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU ----------------- ------------ LIABILITIES 13. Deposits a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) . . . . . . . . . . . . . RCON 2200 15,103,504 13.a. (1) Noninterest-bearing(1). . . . . . . . . . . . . . RCON 6631 6,129,078 13.a.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCON 6636 8,974,426 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II). . . . . . . . RCFN 2200 10,633,999 13.b. (1) Noninterest bearing . . . . . . . . . . . . . . . RCFN 6631 460,916 13.b.(1) (2) Interest-bearing. . . . . . . . . . . . . . . . . RCFN 6636 10,173,083 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased . . . . . . . . . . . . . . . RCFD 0278 2,883,499 14.a. b. Securities sold under agreements to repurchase. . . . RCFD 0279 502,401 14.b. 15. a. Demand notes issued to the U.S. Treasury. . . . . . . RCON 2840 112,289 15.a. b. Trading Liabilities . . . . . . . . . . . . . . . . . RCFD 3548 4,798,720 15.b. 16. Other borrowed money: a. With original maturity of one year or less. . . . . . RCFD 2332 2,355,421 16.a. b. With original maturity of more than one year. . . . . RCFD 2333 382,801 16.b. 17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 275,794 17. 18. Bank's liability on acceptance executed and outstanding. . . . . . . . . . . . . . . . . . . . . . . RCFD 2920 507,151 18. 19. Subordinated notes and debentures. . . . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-C) . . . . . . . . . RCFD 2930 860,989 20. 21. Total liabilities (sum of items 13 through 20) . . . . . RCFD 2948 39,641,568 21. 22. Limited-Life preferred stock and related surplus . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus. . . . . . RCFD 3838 0 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,273,657 25. 26. a. Undivided profits and capital reserves. . . . . . . . RCFD 3632 431,545 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . RCFD 8434 (4,184) 26.b. 27. Cumulative foreign currency translation adjustments. . . RCFD 3284 (512) 27. 28. Total equity capital (sum of items 23 through 27). . . . RCFD 3210 2,901,364 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . . . . RCFD 3300 42,542,932 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ./RCFD 6724 N/A/ M.1. 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits.
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