-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E7wx0mlz+5c/S0yqXfWVybN4KK2ot4Wt2XUs0E5Mto6axAyK+N8wM6C2JEf2ZayB S7GJLz/X/3ga7WbGnvHgyA== 0000912057-99-008973.txt : 19991213 0000912057-99-008973.hdr.sgml : 19991213 ACCESSION NUMBER: 0000912057-99-008973 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19991210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WEST INC /DE/ CENTRAL INDEX KEY: 0001054522 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840953188 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-92523 FILM NUMBER: 99772604 BUSINESS ADDRESS: STREET 1: 1801 CALIFORNIA STREET STREET 2: SUITE 390 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036722700 MAIL ADDRESS: STREET 1: 1801 CALIFORNIA STREET STREET 2: SUITE 390 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: USW-C INC DATE OF NAME CHANGE: 19980204 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-4 SEC ACT: SEC FILE NUMBER: 333-92523-01 FILM NUMBER: 99772605 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 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ U S WEST, INC. U S WEST (formerly "USW-C, Inc.") CAPITAL FUNDING, INC.
(Exact name of each registrant as specified in its charter) DELAWARE 4811 COLORADO (State or other jurisdiction of (Primary Standard Industrial (State or other jurisdiction of incorporation or organization) Classification Code Number) incorporation or organization) 84-0953188 84-1028672 (I.R.S. Employer (I.R.S. Employer Identification Number) Identification Number)
1801 CALIFORNIA STREET DENVER, COLORADO 80202 (303) 672-2700 (Address, including zip code, and telephone number, including area code, of both registrants' principal executive offices) THOMAS O. MCGIMPSEY, ESQ. U S WEST, INC. 1801 CALIFORNIA STREET, SUITE 5100 DENVER, COLORADO 80202 (303) 672-2700 (Name, address, including zip code, and telephone number of agent for service for both registrants) COPIES TO: DENNIS J. BLOCK, ESQ. CADWALADER, WICKERSHAM & TAFT 100 MAIDEN LANE NEW YORK, NEW YORK 10038 (212) 504-6000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. ------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instructions G, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT* OFFERING PRICE* REGISTRATION FEE 6 7/8% Notes issued by U S WEST Capital Funding, Inc......................... $1,150,000,000 100% $1,150,000,000 $303,600 Guarantees constituting guarantees of the 6 7/8% Notes by U S WEST, Inc...... $1,150,000,000 ** ** None
* Estimated solely for the purpose of calculating the registration fee. ** No separate consideration will be received for the Guarantees. ------------------ 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PROSPECTUS, DATED DECEMBER 10, 1999, IS SUBJECT TO COMPLETION AND AMENDMENT THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS [LOGO] U S WEST CAPITAL FUNDING, INC. Offer to exchange all of our Outstanding $1,150,000,000 6 7/8% Notes due August 15, 2001 for $1,150,000,000 6 7/8% Notes due August 15, 2001 which have been registered under the Securities Act of 1933 PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST ON THE NEW 6 7/8% NOTES IS UNCONDITIONALLY GUARANTEED BY U S WEST, INC. Our offer to exchange old 6 7/8% Notes for new 6 7/8% Notes which have been registered under the Securities Act of 1933, will be open until 5:00 p.m. New York City Time, on , 2000, unless we extend the offer. If the anticipated merger with Qwest Communications International Inc. is consummated, U S WEST will be merged with and into Qwest, and Qwest will become the guarantor of the old and new 6 7/8% Notes. See "RECENT DEVELOPMENTS--MERGER WITH QWEST" on page 9. Application will be made to list the new 6 7/8% Notes on the Luxembourg Stock Exchange. There will be no active domestic public market for the new 6 7/8% Notes. YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 7 OF THIS PROSPECTUS. THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT US AND U S WEST WHICH IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. YOU CAN OBTAIN DOCUMENTS CONTAINING THIS INFORMATION THROUGH US OR THE SECURITIES AND EXCHANGE COMMISSION. DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE FROM US WITHOUT CHARGE, EXCLUDING ALL EXHIBITS, UNLESS WE HAVE SPECIFICALLY INCORPORATED BY REFERENCE AN EXHIBIT IN THIS PROSPECTUS. YOU MAY OBTAIN DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS BY REQUESTING THEM IN WRITING OR BY TELEPHONE FROM: INVESTOR RELATIONS, U S WEST, INC., 1801 CALIFORNIA STREET, DENVER, COLORADO 80202, TELEPHONE NUMBER (303) 896-1277. SEE "WHERE YOU CAN FIND MORE INFORMATION." If you would like to request documents from us, please do so by , 2000 to receive them before the exchange offer expires. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2000. TABLE OF CONTENTS
PAGE -------- Forward-Looking Information May Prove Inaccurate............ 1 Where You Can Find More Information......................... 2 Prospectus Summary.......................................... 3 Risk Factors................................................ 7 U S WEST Capital Funding, Inc............................... 9 U S WEST, Inc............................................... 9 Recent Developments......................................... 9 Management.................................................. 13 The Exchange Offer.......................................... 17 Use of Proceeds............................................. 24 Capitalization of U S WEST, Inc............................. 25 Ratio of Earnings to Fixed Charges.......................... 25 Capitalization of U S WEST Capital Funding, Inc............. 26 Description of New 6 7/8% Notes............................. 27 Registration Rights......................................... 37 Certain U.S. Federal Tax Considerations..................... 40 Plan of Distribution........................................ 43 Legal Matters............................................... 44 Experts..................................................... 44 General Information......................................... 44
This prospectus was prepared by us and U S WEST and includes particulars given in compliance with the rules governing the listing of securities on the Luxembourg Stock Exchange for the purpose of giving information with regard to us and U S WEST. We and U S WEST confirm, having made all reasonable inquiries, that to the best of our and its knowledge and belief, there are no other material facts the omission of which would make any statement in this prospectus misleading in any material respect. i FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE Some of the information presented in this prospectus or incorporated by reference herein constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although U S WEST believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its businesses and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include: - greater than anticipated competition from new entrants into the local exchange, intraLATA toll, wireless, data and directories markets, causing loss of customers and increased price competition; - changes in demand for U S WEST products and services, including optional custom calling features; - higher than anticipated employee levels, capital expenditures and operating expenses (such as costs associated with interconnection and Year 2000 remediation); - the loss of significant customers; - pending and future state and federal regulatory changes affecting the telecommunications industry, including changes that could have an impact on the competitive environment and service pricing in the local exchange market; - acceleration of the deployment of additional services and/or advanced new services to customers, such as broadband data, wireless and video services, which would require substantial expenditure of financial and other resources; - changes in economic conditions in the various markets served by U S WEST's operations; - higher than anticipated start-up costs associated with new business opportunities; - delays in U S WEST's ability to begin offering interLATA long-distance services; - consumer acceptance of broadband services, including telephony, data and wireless services; - delays in the development of anticipated technologies or the failure of such technologies to perform according to expectations; and - timing and completion of the recently announced merger with Qwest and the subsequent integration of the businesses of the two companies. See "RECENT DEVELOPMENTS--MERGER WITH QWEST." To the extent that this prospectus contains forward-looking information regarding Qwest, please see the forward-looking information safe harbor statements contained in documents Qwest has filed with the Securities and Exchange Commission (the "SEC" or the "Commission"). To the extent that this prospectus contains forward-looking information regarding the anticipated merger with Qwest, please see "RISK FACTORS--RISK FACTORS RELATED TO THE MERGER WITH QWEST." You should not construe these cautionary statements as an exhaustive list or as any admission by U S WEST regarding the adequacy of its disclosures. U S WEST cannot always predict or determine after the fact what factors would cause actual results to differ materially from those indicated by its forward-looking statements or other statements. In addition, you are urged to consider statements that include the terms "believes," "belief," "expects," "plans," "objectives," "anticipates," "intends," or the like to be uncertain and forward-looking. All cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. U S WEST does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur. 1 WHERE YOU CAN FIND MORE INFORMATION U S WEST files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document it files at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C., 20549, and in New York, New York, and Chicago, Illinois. For further information on the public reference rooms, please call the SEC at 1-800-SEC-0330. U S WEST's SEC filings are also available to the public from the SEC's web site at http://www.sec.gov. In addition, its SEC filings may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The SEC allows us to "incorporate by reference" into this prospectus certain information that U S WEST files with the SEC, which means that we can disclose important information to you by referring to that information in this prospectus. Information incorporated by reference is considered a part of this prospectus, and later information filed with the SEC will automatically update and supersede previous information. We incorporate by reference the documents listed below and any future filings (including filings made after the date on which the registration statement was initially filed with the SEC and before the registration statement becomes effective) made by U S WEST with the SEC under Sections 13(a), 13(c), 14, 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"): - U S WEST's Annual Report on Form 10-K for the year ended December 31, 1998, as amended by Form 10-K/A filed March 24, 1999; - U S WEST's Current Reports on Form 8-K filed January 13, 1999, January 15, 1999, January 22, 1999, February 23, 1999, February 25, 1999, February 26, 1999, April 7, 1999, April 22, 1999, May 12, 1999, May 18, 1999, May 21, 1999, May 26, 1999, June 18, 1999, June 22, 1999, July 7, 1999, July 21, 1999, July 26, 1999, as amended by Form 8-K/A filed July 27, 1999, September 20, 1999, October 22, 1999 and November 2, 1999; - U S WEST's Tender Offer Statement on Schedule 14D-1 and Schedule 13D filed May 21, 1999, as amended May 24, 1999, June 7, 1999, June 11, 1999, June 18, 1999, June 18, 1999, June 21, 1999, June 24, 1999, June 29, 1999 and August 16, 1999; - U S WEST's Proxy Statement on Schedule 14A dated September 17, 1999; and - U S WEST's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999. You may obtain a copy of these filings, at no cost, by writing or telephoning U S WEST, or by contacting Investor Relations through an e-mail link on U S WEST's web page, at: Investor Relations U S WEST, Inc. 1801 California Street Denver, Colorado 80202 (303) 896-1277 http://www.uswest.com Copies of these documents, and any future annual and interim reports filed by U S WEST with the SEC, will be available, free of charge, at the principal office of Kredietbank S.A. Luxembourg, Corporate Trust Department, 43, Boulevard Royal, L-2955, Luxembourg, telephone number 352 4797 3913. Separate financial statements of Capital Funding are not publicly available. You should rely only on the information in this prospectus or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. We are not making any offer of these debt securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front page of this prospectus. 2 PROSPECTUS SUMMARY WHO WE ARE U S WEST Capital Funding, Inc. (the "Company" or "Capital Funding" which may be referred to as "we," "us," or "our") is a wholly owned subsidiary of U S WEST, Inc. ("U S WEST"). We provide financing to U S WEST and its affiliates by issuing debt guaranteed by U S WEST. We are a Colorado corporation and our principal executive offices are located at 1801 California Street, Denver, Colorado 80202, telephone number (303) 672-2700. U S WEST is a diversified communications company providing services principally to customers in a 14-state mountain and western region of the United States. This region is comprised of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. U S WEST's services include telecommunications and related services, wireless services, high-speed data and Internet services, and directory services. The major component of U S WEST is U S WEST Communications, Inc., which has more than 25 million residential and business customers for communication services. U S WEST is a Delaware corporation and its principal executive offices are located at 1801 California Street, Denver, Colorado 80202, telephone number (303) 672-2700. U S WEST has one class of common stock, par value $.01 per share. For additional information, please refer to the documents we have incorporated by reference. See "WHERE YOU CAN FIND MORE INFORMATION." THE EXCHANGE OFFER On August 25, 1999, we issued $1,150,000,000 aggregate principal amount of 6 7/8% Notes (the "old 6 7/8% Notes") to certain initial purchasers in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The terms of the new 6 7/8% Notes and the old 6 7/8% Notes are substantially identical in all material respects, except that the new 6 7/8% Notes will be freely transferable by the holders, except as otherwise provided in this prospectus. We are offering to exchange $1,000 principal amount of new 6 7/8% Notes (together with the old 6 7/8% Notes, the "6 7/8% Notes") in exchange for each $1,000 principal amount of old 6 7/8% Notes (the "exchange offer"). The new 6 7/8% Notes issued in the exchange offer may be offered for resale or resold by holders without having to comply with the registration and prospectus delivery requirements of the Securities Act, provided that: - the new 6 7/8% Notes are acquired in the ordinary course of the holders' business and the holders have no arrangement with any person to engage in a distribution of new 6 7/8% Notes, and - the holders are not "affiliates" of U S WEST or broker-dealers who purchased old 6 7/8% Notes directly from us to resell under Rule 144A or any other available exemption under the Securities Act. Each holder, other than a broker-dealer, must acknowledge that it is not engaged in and does not intend to engage in a distribution of the new 6 7/8% Notes and has no arrangement to participate in a distribution of new 6 7/8% Notes. Each broker-dealer that receives new 6 7/8% Notes for its own account in the exchange offer must acknowledge that it will comply with the prospectus delivery requirements of the Securities Act in connection with any resale of the new 6 7/8% Notes. Broker-dealers who acquired old 6 7/8% Notes directly from us and not as a result of market-making activities or other 3 trading activities may not participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to resell the old 6 7/8% Notes. EXPIRATION DATE........................ The exchange offer will expire at 5:00 p.m., New York City time, on , 2000, or a later date and time to which we extend it (the "expiration date"). WITHDRAWAL............................. The tender of the old 6 7/8% Notes in the exchange offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on 2000, or a later date and time to which we extend the offer. INTEREST ON THE NEW 6 7/8% NOTES AND THE OLD 6 7/8% NOTES................. Interest on the new 6 7/8% Notes will accrue from the date of the original issuance of the old 6 7/8% Notes or from the date of the last periodic payment of interest on the old 6 7/8% Notes, whichever is later. No additional interest will be paid on the old 6 7/8% Notes tendered and accepted for exchange. PROCEDURES FOR TENDERING OLD 6 7/8% NOTES................................ To accept the exchange offer, you must complete, sign and date a copy of the letter of transmittal and mail or otherwise deliver it, together with the old 6 7/8% Notes and any other required documentation, to the exchange agent at the address set forth in this prospectus. Persons holding the old 6 7/8% Notes through the Depository Trust Company and wishing to accept the exchange offer must do so under the Depository Trust Company's automated tender offer program. Under this program, each tendering participant will agree to be bound by the letter of transmittal. EXCHANGE AGENT......................... Bank One Trust Company, National Association. FEDERAL INCOME TAX CONSIDERATIONS...... In the opinion of our counsel, the exchange of old 6 7/8% Notes for new 6 7/8% Notes in the exchange offer will not be a taxable exchange for United States federal income tax purposes. EFFECT OF NOT TENDERING................ Old 6 7/8% Notes that are not tendered or that are tendered but not accepted will continue to be subject to the existing restrictions on transfer. We will have no further obligation to register the old 6 7/8% Notes under the Securities Act.
4 THE NEW 6 7/8% NOTES Some of the terms and conditions described below are subject to important limitations and exceptions. The "DESCRIPTION OF NEW 6 7/8% NOTES" section of this prospectus beginning on page 27 contains a more detailed description of the terms and conditions of the new 6 7/8% Notes. ISSUER................................. U S WEST Capital Funding, Inc., a Colorado corporation. GUARANTOR.............................. U S WEST, Inc., a Delaware corporation. If the anticipated merger with Qwest Communications International Inc. ("Qwest") is consummated, U S WEST will be merged with and into Qwest, and Qwest will become the guarantor of the 6 7/8% Notes. See "RECENT DEVELOPMENTS--MERGER WITH QWEST." SECURITIES OFFERED..................... $1,150,000,000 principal amount of new 6 7/8% Notes due 2001. MATURITY............................... August 15, 2001. INTEREST RATE.......................... 6 7/8% per annum, calculated using a 360-day year of twelve 30 day months. INTEREST PAYMENT DATES................. February 15, 2000, August 15, 2000, February 15, 2001, and August 15, 2001. RANKING................................ The new 6 7/8% Notes will rank equally with all of our other unsecured and unsubordinated indebtedness. As of September 30, 1999, we had approximately $6.8 billion of debt outstanding, not counting debt of U S WEST's other subsidiaries. The 6 7/8% Notes are obligations guaranteed by U S WEST, and if the merger with Qwest is consummated, Qwest will become the guarantor of the 6 7/8% Notes. Each of U S WEST and Qwest is a holding company with no material assets other than the stock of its subsidiaries. Both U S WEST's and Qwest's subsidiaries conduct substantially all of their respective operations and own substantially all of their respective assets at the subsidiary level. As a result, the 6 7/8% Notes effectively rank junior to all existing and future debt, trade payables and other liabilities of U S WEST's subsidiaries other than Capital Funding before the merger, and the subsidiaries of Qwest after the merger. OPTIONAL REDEMPTION.................... We can redeem the 6 7/8% Notes at any time at a redemption price determined as described under "DESCRIPTION OF NEW 6 7/8% NOTES--OPTIONAL REDEMPTION" on page 28. LISTING................................ Application will be made to list the new 6 7/8% Notes on the Luxembourg Stock Exchange.
RISK FACTORS We urge you to carefully review the risk factors beginning on page 7 for a discussion of factors you should consider before exchanging your old 6 7/8% Notes for new 6 7/8% Notes. 5 SELECTED FINANCIAL DATA FOR U S WEST, INC. The table below shows selected historical financial information for U S WEST. The information has been prepared using the consolidated financial statements of U S WEST as of the dates indicated and for each of the fiscal periods presented. Interim operating results are not necessarily indicative of results that may be expected for the full year (in millions).
(UNAUDITED) NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------------------- ------------------- 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- -------- -------- Operating revenues.............................. $10,132 $10,508 $11,168 $11,479 $12,378 $ 9,174 $ 9,757 Operating expenses.............................. 7,616 7,931 8,356 8,703 9,329 6,876 7,232 Operating income................................ 2,516 2,577 2,812 2,776 3,049 2,298 2,525 Income before extraordinary item and cumulative effect of change in accounting principle(1)... 1,403 1,431 1,501 1,527 1,508 1,140 957 Net income(2)................................... 1,403 1,423 1,535 1,524 1,508 1,140 957 Pro forma income(3)............................. * * * * 1,436 1,068 * Total assets.................................... 16,317 16,960 17,279 17,667 18,407 18,061 20,960 Total debt(4)................................... 6,147 6,782 6,545 5,715 9,919 9,833 13,133 Debt to total capital ratio..................... 64.7% 65.0% 61.6% 56.7% 92.9% 94.0% 98.9% EBITDA(5)....................................... $ 4,444 $ 4,644 $ 4,970 $ 4,939 $ 5,248 $ 3,923 $ 4,288 Interest expense................................ 381 429 448 405 543 378 519 Capital expenditures............................ 2,513 2,770 2,831 2,672 2,905 1,920 2,819 Telephone network access lines in service (thousands)................................... 14,299 14,795 15,424 16,033 16,601 16,408 16,912 Billed access minutes of use (millions): Interstate.................................... 43,768 47,801 52,039 55,362 58,927 43,868 46,207 Intrastate.................................... 8,507 9,504 10,451 11,729 12,366 9,206 9,625 Total employees................................. 55,246 54,552 51,477 51,110 54,483 53,758 56,634 Telephone company employees..................... 47,493 47,934 45,427 43,749 46,310 45,654 47,758 Telephone company employees per 10,000 access lines......................................... 33.2 32.4 29.5 27.3 27.9 27.8 28.2 Dividends paid on common stock.................. * * $ 939 $ 992 $ 1,056 $ 787 $ 917
- ------------------------------ (1) 1999 income includes terminated merger-related expenses of $282. 1998 income includes separation expenses of $68 associated with the separation (the "Separation") of U S WEST's former parent company ("Old U S WEST") into two independent companies and an asset impairment charge of $21. 1997 income includes a $152 regulatory charge related primarily to the 1997 Washington State Supreme Court ruling that upheld a Washington rate order, a gain of $32 on the sale of an interest in Bell Communications Research, Inc. and a gain of $48 on the sales of local telephone exchanges. 1996 income includes a gain of $36 on the sales of local telephone exchanges and the current effect of $15 from adopting Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." 1995 income includes a gain of $85 on the sales of local telephone exchanges and costs of $8 associated with a 1995 recapitalization. 1994 income includes a gain of $51 on the sales of local telephone exchanges. (2) 1997 net income was reduced by an extraordinary charge of $3 for the early extinguishment of debt. 1996 net income includes a gain of $34 for the cumulative effect of the adoption of FAS No. 121. 1995 net income was reduced by an extraordinary item of $8 for the early extinguishment of debt. (3) Pro forma income reflects the incremental interest expense associated with the U S WEST Dex indebtedness assumed in the Separation ("Dex Indebtedness") from the beginning of the period through the Separation date. (4) 1998 and 1999 debt includes $3,900 of Dex Indebtedness. (5) Earnings before interest, taxes, depreciation, amortization and other ("EBITDA"). U S WEST considers EBITDA an important indicator of the operational strength and performance of its business. EBITDA, however, should not be considered as an alternative to operating or net income as an indicator of the performance of U S WEST's business or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. * Information has not been presented. 6 RISK FACTORS You should carefully consider the following discussion of risks, and the other information included or incorporated by reference in this prospectus in evaluating us and U S WEST and our and their business before participating in the exchange offer: RISK FACTORS RELATED TO THE EXCHANGE Holders of old 6 7/8% Notes who do not exchange their old 6 7/8% Notes for new 6 7/8% Notes will continue to be subject to the restrictions on transfer of the old 6 7/8% Notes, as set forth in the legends on the old 6 7/8% Notes. The old 6 7/8% Notes may not be offered or sold unless they are registered under the Securities Act or are exempt from registration. See "THE EXCHANGE OFFER." RISK FACTORS RELATED TO THE MERGER WITH QWEST U S WEST and Qwest entered into an Agreement and Plan of Merger, dated as of July 18, 1999 and amended by Amendment No. 1, dated as of September 8, 1999 (the "Qwest Merger Agreement"), a copy of which is attached to U S WEST's Schedule 14A dated September 17, 1999. U S WEST and Qwest are independent companies and will continue to remain independent until the completion of the merger. Upon completion of the merger, holders of U S WEST common stock will receive, for each share of U S WEST common stock, subject to the collar and the cash option described in the Qwest Merger Agreement, shares of Qwest common stock having a value of $69. The merger is subject to the approval of the Federal Communications Commission ("FCC") and other state regulatory reviews. DIFFICULTIES IN COMBINING OPERATIONS AND REALIZING SYNERGIES. U S WEST and Qwest have entered into the Qwest Merger Agreement with the expectation that the merger will result in certain benefits, including operating efficiencies, cost savings, synergies and other benefits. Achieving the benefits of the merger will depend in part upon the integration of the businesses of U S WEST and Qwest in an efficient manner, which both companies believe will require considerable effort. In addition, the consolidation of operations will require substantial attention from management. The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on the revenues, levels of expenses and operating results of the combined company. No assurance can be given that U S WEST and Qwest will succeed in integrating their operations in a timely manner or without encountering significant difficulties or that the expected operating efficiencies, cost savings, synergies and other benefits from such integration will be realized. REGULATORY APPROVALS MAY BE DELAYED OR CONDITIONED. Completion of the merger is conditioned on receipt of all material regulatory consents and approvals required under the applicable statutes, policies and rules governing the FCC and state public utility commissions. There can be no assurance that such approvals will be granted on a timely basis, or without materially adverse conditions which could affect the combined company's ability to service its debt, including the 6 7/8% Notes. DIVESTITURE OF IN-REGION INTERLATA BUSINESS. The Telecommunications Act of 1996 currently prohibits U S WEST from providing long distance telecommunications services between Local Access and Transport Areas (LATAs) within its 14 state region, and between these LATAs and locations outside its region. Upon the completion of the merger, the interLATA service prohibition also would apply to Qwest. Consequently, upon the completion of the merger, it is anticipated that Qwest will discontinue providing such interLATA services, and such services will be divested under separate agreements. There can be no assurance that the terms and conditions under which the divestitures will be made will permit Qwest to receive the full economic value of its in-region interLATA business. Furthermore, completion of the merger could be delayed if the necessary divestitures cannot be completed on a timely basis. The combined company will continue to provide long distance services outside the U S WEST region. The parties have anticipated some loss 7 of out-of-region long distance business as a result of the discontinuance of in-region business. However, there can be no assurance that these losses will not be materially greater than expected or will not materially affect the combined company's ability to service its debt, including the 6 7/8% Notes. FUTURE PROVISION OF INTERLATA SERVICES. U S WEST and, upon completion of the merger, the combined company will be allowed to provide in-region interLATA services upon satisfaction of certain regulatory conditions primarily related to local exchange telephone competition. These restrictions will be lifted on a state by state basis following further proceedings in certain states in which U S WEST conducts business and at the FCC. U S WEST expects the combined company to work actively to meet the applicable requirements so that interLATA services can be provided in particular states beginning in 2000 or 2001, but there can be no assurance that they will be successful in that regard. Even after elimination of the interLATA restrictions the combined company's long distance operations will be subject to various regulatory constraints, including the requirement that interLATA services be offered through a subsidiary that is structurally separated from the combined company's local exchange services. There can be no assurance that these regulations will not have a material adverse effect on the combined company's ability to compete or will not materially affect its ability to service its debt, including the 6 7/8% Notes. U S WEST IS DEPENDENT ON ITS SUBSIDIARIES FOR REPAYMENT OF DEBT. The 6 7/8% Notes are obligations guaranteed by U S WEST, and, if the merger with Qwest is consummated, Qwest will become the guarantor of the 6 7/8% Notes. Each of U S WEST and Qwest is a holding company with no material assets other than the stock of its subsidiaries. Both U S WEST and Qwest conduct substantially all of their respective operations and own substantially all of their respective assets at the subsidiary level. As a result, the 6 7/8% Notes effectively will rank junior to all existing and future debt, trade payables and other liabilities of U S WEST's subsidiaries other than Capital Funding before the merger, and the subsidiaries of Qwest after the merger. The rights of U S WEST before the merger, and the rights of Qwest after the merger, and hence the rights of their respective creditors (including holders of the 6 7/8% Notes through U S WEST's guarantee of payment of principal, premium, if any, and interest (the "Guarantees")) to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise would be subject to the prior claims of the subsidiary's creditors, except to the extent that claims of U S WEST or Qwest, as applicable, itself as a creditor of the subsidiary may be recognized. After the payment of the subsidiary's liabilities, the subsidiary may not have enough assets remaining to pay U S WEST before the merger and Qwest after the merger, to permit their respective creditors, including the holders of the 6 7/8% Notes through the Guarantees, to be paid. OTHER RISKS U S WEST may decide to accelerate the deployment of additional services and/or advanced new services to customers, such as broadband data, wireless and video services, which would require substantial expenditure of financial and other resources. Such acceleration could have a material adverse effect on U S WEST's financial condition or results of operations. CREDIT RATINGS After U S WEST announced on May 17, 1999 that it had entered into an agreement and plan of merger with Global Crossing Ltd., a Bermuda company ("Global Crossing") (as described under "RECENT DEVELOPMENTS" below), the ratings assigned to the senior unsecured indebtedness of U S WEST and our company were downgraded to Baa1 from A3 by Moody's Investors Services, Inc. ("Moody's"). Furthermore, due to uncertainty involving required approvals and other matters relating to the initial Global Crossing merger announcement, each of Moody's, Standard & Poor's Ratings Services ("Standard & Poor's"), and Duff & Phelps Credit Rating Co. ("Duff & Phelps") have placed the ratings assigned to U S WEST's and our senior unsecured indebtedness under review, in each case, with implications for possible downgrade. Following the announcement of the Qwest Merger 8 Agreement, none of the ratings assigned to U S WEST's and our senior unsecured indebtedness were changed by Moody's, Duff & Phelps and Standard & Poor's. However, these ratings continue to be under review by the rating agencies. Because the proposed Qwest merger is not expected to be consummated before mid-2000, it is possible that U S WEST and our ratings will remain under review throughout much of the term of the 6 7/8% Notes and could affect the market value of the 6 7/8% Notes. The current credit ratings for our and U S WEST's senior unsecured indebtedness are as follows:
MOODY'S STANDARD & POOR'S DUFF & PHELPS ------- ----------------- ------------- Baa1 A- A
U S WEST CAPITAL FUNDING, INC. We are a wholly-owned subsidiary of U S WEST. We provide financing to U S WEST and its affiliates by issuing debt guaranteed by U S WEST. We are a Colorado corporation. Our principal executive offices are located at 1801 California Street, Denver, Colorado 80202, and our telephone number is (303) 672-2700. U S WEST, INC. U S WEST is a diversified communications company providing services principally to customers in a 14-state mountain and western region of the United States. This region is comprised of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. U S WEST's services include telecommunications and related services, wireless services, high-speed data and Internet services, and directory services. The major component of U S WEST is U S WEST Communications, Inc., which provides communications services to more than 25 million residential and business customers. U S WEST is a Delaware corporation. Its principal executive offices are located at 1801 California Street, Denver, Colorado 80202, and its telephone number is (303) 672-2700. U S WEST has one class of common stock, par value $.01 per share. For additional information about U S WEST, please refer to the documents we have incorporated by reference. See "WHERE YOU CAN FIND MORE INFORMATION." RECENT DEVELOPMENTS MERGER WITH QWEST On July 18, 1999, U S WEST and Qwest entered into the Qwest Merger Agreement, a copy of which is attached to U S WEST's Current Report on Form 8-K filed July 21, 1999, which is incorporated by reference in this prospectus. U S WEST and Qwest are independent companies and will continue to remain independent until the completion of the merger. Upon completion of the merger, holders of U S WEST common stock will receive, for each share of U S WEST common stock, subject to the collar and the cash option described in the Qwest Merger Agreement, shares of Qwest common stock having a value of $69. The merger is subject to the approval of the FCC and other state regulatory reviews. Prior to the execution of the Qwest Merger Agreement, U S WEST entered into a Termination Agreement (the "Termination Agreement") with Global Crossing, terminating the Agreement and Plan of Merger, dated as of May 16, 1999, between U S WEST and Global Crossing (the "Global Crossing Merger Agreement"). In connection with the Global Crossing Merger Agreement, U S WEST completed a cash tender offer for approximately 39 million shares (or approximately 9.5%) of Global Crossing common stock at a price of $62.75 per share (the "Tender Offer"). As consideration for the termination of the Global Crossing Merger Agreement, U S WEST paid Global Crossing $140 million in cash and 2,231,076 shares of Global Crossing common stock. Qwest lent $140 million in cash to U S WEST, and Qwest entered into an agreement to buy $140 million in services from Global Crossing. A copy of the Termination Agreement is attached to U S WEST's Current Report on Form 8-K filed July 21, 1999, which is incorporated by reference in this prospectus. 9 QWEST Qwest is a broadband, Internet communications services company with a high-capacity fiber optic communications network. Qwest's communications services business offers Internet and multimedia services as well as traditional voice communications services. Its Internet and multimedia services include services related to the transmission of image, data and voice information. Qwest provides services to business customers, governmental agencies and consumers in domestic and international markets. Qwest also provides wholesale services to other communications providers, including Internet service providers and other data service companies. Qwest's network uses both Internet communications technology and traditional telephone communications technology. Communications on the Internet are governed by Internet communications protocol, a standard that allows communication across the Internet regardless of the hardware and software used. The Qwest Macro Capacity-Registered Trademark- Fiber Network, designed with the newest optical networking, spans more than 18,500 miles in the United States, with an additional 315-mile network to be completed by the end of the year. In addition, KPNQwest, Qwest's European joint venture with KPN, the Dutch telecommunications company, is building and will operate a high-capacity European fiber optic, Internet-based network that will span 9,150 miles when it is completed in 2001. Qwest has a 1,400-route-mile extension of the U.S. network into Mexico and owns capacity on three undersea systems linking the network to Europe. Qwest is also part of a consortium of communications companies that is building a submarine 13,125-mile, four-fiber pair cable system connecting the U.S. to Japan that is expected to be capable of transmitting information at the rate of 640 gigabits per second. Qwest is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the SEC relating to its business, financial condition and other matters. Such information may be examined and copies may be obtained from the SEC as described under "WHERE YOU CAN FIND MORE INFORMATION." Such information should also be on file at the office of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. U S WEST encourages you to read such reports in their entirety and to review other publicly available information about Qwest before making an investment decision. The information contained in this section of the prospectus regarding Qwest has been derived from the publicly available documents described in the preceding paragraph. Neither we nor U S WEST have independently verified the accuracy or completeness of the Qwest information, and neither we nor U S WEST makes any representation or warranty, express or implied, regarding the Qwest information contained in this prospectus. REASONS FOR THE MERGER In the past several years, the communications industry has experienced a significant increase in mergers, acquisitions and consolidations among local service providers, long distance providers, broadband Internet providers, cable television companies and other emerging technology companies. These industry changes have resulted from significant competitive, regulatory and technological changes over the last few years and are an indication that the most effective competitors in the communications industry are expected to be those companies that offer the most complete array of products and services without geographic limitations. Strong national and international players, which have formed and are forming through mergers, acquisitions and alliances, are looking to lead the telecommunications industry by offering customers one-stop shopping for their communications services, including broadband Internet services. U S WEST's strategy is to provide customers with integrated advanced communications products and services through its enhanced network capacity and capability, custom calling features, integration of wireline and wireless services, and its broadband Internet products and services. Through its directories 10 business, U S WEST also provides directory services throughout its 14-state region, and is expanding that service onto the Internet through electronic publishing. By combining, U S WEST expects to bring together U S WEST's innovative local communications and broadband Internet access capability with Qwest's advanced network and broadband Internet service capability. Through this combination, U S WEST believes that the combined company will be able to offer customers in the United States and worldwide more choices and greater access to next generation telecommunications and broadband Internet based services, including web hosting and value added web based applications. The combined company will also be able to share resources and capitalize on synergies that U S WEST anticipates will speed U S WEST's ability to compete effectively at the top tier of the telecommunications industry. U S WEST also believes that the merger will enable both companies to achieve their mutual goals more quickly than either company could have achieved separately. See "FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE." U S WEST believes that the merger will create a stronger competitor and will provide significant value for its shareholders, employees and customers for the following reasons, among others: - U S WEST believes that the combination of U S WEST and Qwest will create a benchmark large-capitalization growth company with increasing revenues and profits. - U S WEST expects the combination of U S WEST and Qwest will enable the combined company to achieve gross revenue, net financial and operational synergies. U S WEST also expects that these synergies will be comprised of (1) incremental revenues as the combined company expands its local, data, Internet Protocol and long-distance services; (2) operating cost savings in areas such as network operations and maintenance, sales and marketing, billing, and customer and back office support; and (3) capital savings through elimination of duplication in the companies' planned network buildouts and in other infrastructure and back-office areas. - U S WEST believes the combination of U S WEST and Qwest will accelerate the strategic development of both companies and will enable the combined company to grow faster than each company could grow individually and will increase total revenues and profits faster than each company would accomplish individually. In particular, U S WEST expects that the combination will accelerate the delivery of Internet-based broadband communications services provided by Qwest to the large customer base of U S WEST and will bring together complementary assets, resources and expertise and the network infra-structure, applications, services and customer distribution channels of both companies and that the combination of customer bases, assets, resources and expertise in a timely manner will permit the combined company to compete more effectively in rapidly consolidating industries. U S WEST believes the combination will also enable the combined company to rapidly increase its customer base for their respective products by acquiring the other company's customer bases. The combined company would have an expanding client base of more than 29 million customers, including many multinational corporations. - U S WEST believes worldwide broadband end-to-end infrastructure, expanded range of products and services, access to both companies' customers, people and processes and combined use of both companies' distribution and operating systems will create growth for the combined company and that, as a large company with global scale and scope, multiple capabilities, end-to-end broadband connectivity, and a full suite of data, voice and video products and services, the combined company can successfully compete in the telecommunications industry in the long-term. - U S WEST believes the combined company will be able to redeploy capital toward new investment in Internet applications and hosting, out-of-region facilities based competitive local exchange service, out-of-region broadband access and Internet services, wireless expansion and video entertainment. 11 - U S WEST believes the combined company will be able to obtain the required regulatory approvals to permit the merger to close in a timely manner without the imposition by regulators of conditions that would prevent it from obtaining substantially all of the expected benefits of the merger. THE SEPARATION On October 25, 1997, the Board of Directors of U S WEST's former parent company ("Old U S WEST") adopted a proposal to separate Old U S WEST into two independent companies (the "Separation"). Old U S WEST conducted its businesses through two groups: (i) the U S WEST Communications Group (the "Communications Group"), which included the communications businesses of Old U S WEST, and (ii) the U S WEST Media Group (the "Media Group"), which included the multimedia and directory businesses of Old U S WEST. On June 4, 1998, stockholders of Old U S WEST voted in favor of the Separation, which became effective June 12, 1998. As part of the Separation, Old U S WEST contributed to U S WEST the businesses of the Communications Group and the domestic directories business of the Media Group known as Dex. The alignment of Dex with U S WEST is referred to in this prospectus as the "Dex Alignment." Old U S WEST has continued as an independent public company comprised of the businesses of the Media Group, other than Dex, and has been renamed MediaOne Group, Inc. In connection with the Dex Alignment: (i) Old U S WEST distributed, as a dividend to holders of Media Group common stock, approximately 16,341,000 shares of U S WEST's common stock (net of the redemption of approximately 305,000 fractional shares) with an aggregate value of $850 million and (ii) U S WEST refinanced $3.9 billion of Old U S WEST debt, formerly allocated to the Media Group. 12 MANAGEMENT DIRECTORS OF CAPITAL FUNDING Our directors and their principal occupations as of the date of this prospectus are set forth in the following table.
NAME PRINCIPAL OCCUPATION - ---- -------------------- Allan R. Spies............................... Executive Vice President and Chief Financial Officer, U S WEST Janet K. Cooper.............................. Vice President--Finance and Controller, U S WEST Sean P. Foley................................ Vice President--Treasurer, U S WEST
The business address of our directors is 1801 California Street, Denver, Colorado 80202, U.S.A. DIRECTORS OF U S WEST The directors of U S WEST and their principal occupations, business experience and other directorships as of the date of this prospectus are set forth in the following table.
NAME PRINCIPAL OCCUPATION - ---- -------------------- LINDA G. ALVARADO PRINCIPAL OCCUPATION AND BUSINESS President and Chief Executive Officer of Alvarado EXPERIENCE: Construction, Inc. since 1978 OTHER DIRECTORSHIPS: Cyprus Amax Minerals Company; Engelhard Corporation; Pitney Bowes, Inc. CRAIG R. BARRETT PRINCIPAL OCCUPATION: President and Chief Executive Officer of Intel Corporation since 1998. BUSINESS EXPERIENCE: President and Chief Operating Officer of Intel Corporation from 1997 to 1998, Executive Vice President and Chief Operating Officer from 1993-1997 and Executive Vice-President from 1990-1993. Senior Vice-President and General Manager of the Microcomputer Components Group of Intel Corporation from 1989 to 1990. Vice President/Senior Vice-President and General Manager of the Components Technology and Manufacturing Group of Intel Corporation from 1985 to 1989, and Vice President from 1984 to 1985. Various technology, engineering and manufacturing management positions with Intel Corporation from 1974 to 1984. Professor of Engineering at Stanford University from 1965 to 1974. OTHER DIRECTORSHIPS: Intel Corporation; SEMATECH
13 HANK BROWN PRINCIPAL OCCUPATION: President of the University of Northern Colorado since 1998. BUSINESS EXPERIENCE: Director of the Center for Public Policy for the University of Denver from 1997 to 1998. United States Senator for the State of Colorado from 1991 to 1997. United States Congressman for the State of Colorado from 1981 to 1991. Various positions with Monfort of Colorado Incorporated from 1969 to 1981. United States Navy from 1962 to 1966. Attorney and Certified Public Accountant. OTHER DIRECTORSHIPS: Sealed Air Corporation JERRY J. COLANGELO PRINCIPAL OCCUPATION: Owner, Chairman and Chief Executive Officer of the Arizona Diamondbacks since 1995. President and Chief Executive Officer of the Phoenix Suns, NBA since 1987. BUSINESS EXPERIENCE: General Manager of the Phoenix Suns, NBA from 1968 to 1987. Head Scout and Director of Merchandising for the Chicago Bulls, NBA from 1966 to 1968. Associate of D.O. Klein & Associates from 1964 to 1965. Partner at the House of Charles, Inc. from 1962 to 1964. OTHER DIRECTORSHIPS: Phoenix Art Museum; Phoenix Community Alliance; Arizona Diamondbacks; Phoenix Suns Charities MANUEL A. FERNANDEZ PRINCIPAL OCCUPATION: Chairman of the Gartner Group since 1995. BUSINESS EXPERIENCE: Chief Executive Officer of the Gartner Group from 1995 to 1998; President from 1991 to 1995. President and Chief Executive Officer of Dataquest, Inc. from 1984 to 1991. President and Chief Executive Officer of Gavilan Computer Corporation from 1982 to 1984. President of Zilog Incorporated from 1977 to 1982. OTHER DIRECTORSHIPS: Black & Decker; Brunswick Corporation GEORGE J. HARAD PRINCIPAL OCCUPATION: Chairman of the Board of Boise Cascade Corporation since 1995. President and Chief Executive Officer of Boise Cascade Corporation since 1994. BUSINESS EXPERIENCE: President and Chief Operating Officer of Boise Cascade Corporation from 1991 to 1994. Chairman of the Board of Boise Cascade Office Products Corporation since 1995. OTHER DIRECTORSHIPS: Allendale Insurance Company
14 PETER S. HELLMAN PRINCIPAL OCCUPATION: Former President and Chief Operating Officer of TRW Inc. (1995-1999). BUSINESS EXPERIENCE: Assistant President of TRW Inc. from 1994 to 1995. Chief Financial Officer from 1992 to 1994. Vice President and Chief Financial Officer from 1991 to 1992. Vice President and Treasurer from 1989 to 1991. Various positions with BP America from 1979 to 1989 and the Irving Trust Company from 1972 to 1979. OTHER DIRECTORSHIPS: Arkwright Mutual Insurance Company MARILYN CARLSON NELSON PRINCIPAL OCCUPATION: President, Chief Executive Officer and Vice Chair of Carlson Companies, Inc., Co-Chair Carlson Wagonlit Travel. BUSINESS EXPERIENCE: Since joining Carlson Companies in 1989, Ms. Nelson has held various positions with Carlson Companies including Director, Chief Operating Officer and Senior Vice President of Carlson Holdings, Inc. Ms. Nelson is also President elect of Travel Industry of America, and a member of the United States National Tourism Organization, World Travel and Tourism Council, International Advisory Council, Center for International Leadership and Committee of 200. OTHER DIRECTORSHIPS: Exxon Corporation; Carlson Companies, Inc. FRANK POPOFF PRINCIPAL OCCUPATION: Chairman of The Dow Chemical Company since 1992. BUSINESS EXPERIENCE: Chief Executive Officer of The Dow Chemical Company from 1987 to 1995. OTHER DIRECTORSHIPS: American Express Company; Chemical Financial Corporation; United Technologies Corporation SOLOMON D. TRUJILLO PRINCIPAL OCCUPATION: President and Chief Executive Officer of U S WEST since 1998. Chairman since 1999. BUSINESS EXPERIENCE: President and Chief Executive Officer of the Communications Group of Old U S WEST from 1995 to 1998. President and Chief Executive Officer of U S WEST Dex, Inc. from 1992 to 1995. Mr. Trujillo joined The Mountain States Telephone and Telegraph Company in 1974 and has been affiliated with U S WEST and its predecessors since that time, serving in various marketing, sales, finance and public policy positions. OTHER DIRECTORSHIPS: BankAmerica Corporation; Dayton Hudson Corporation
The business address of the directors of U S WEST is 1801 California Street, Denver, Colorado 80202, U.S.A. 15 OFFICERS OF U S WEST In addition to the directors named above, the following persons, all of whom are full-time employees of U S WEST, hold the offices indicated in the following table as of the date of this prospectus. NAME OFFICE - --------------------------------------- ---------------------------------------------------------- Solomon D. Trujillo.................... Chairman, President and Chief Executive Officer Betsy J. Bernard....................... Executive Vice President--Retail Markets Janet K Cooper......................... Vice President--Finance and Controller Sean P. Foley.......................... Vice President--Treasurer John A. Kelley, Jr..................... President of Wholesale--U S WEST Communications, Inc. Mark D. Roellig........................ Executive Vice President--Public Policy, Human Resources & Law, General Counsel and Secretary James A. Smith......................... Executive Vice President and President of U S WEST Dex, Inc. Allan R. Spies......................... Executive Vice President and Chief Financial Officer Gregory M. Winn........................ Executive Vice President--Operations and Technology
The business address of the officers of U S WEST is 1801 California Street, Denver, Colorado 80202, U.S.A. 16 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We originally issued and sold the old 6 7/8% Notes on August 25, 1999 in an offering exempt from registration under the Securities Act in reliance upon the exemptions provided by Section 4(2), Rule 144A and Regulation S of the Securities Act. Accordingly, the old 6 7/8% Notes may not be transferred in the United States unless registered or unless an exemption from the registration requirements of the Securities Act and applicable state securities laws is available. As a condition to the sale of the old 6 7/8% Notes, we, U S WEST and the initial purchasers of the old 6 7/8% Notes (the "initial purchasers") entered into a registration rights agreement dated as of August 20, 1999 (the "Registration Rights Agreement"). In the Registration Rights Agreement, we agreed that we would use our reasonable best efforts to: - file with the SEC a registration statement under the Securities Act with respect to the new 6 7/8% Notes within 150 calendar days of August 25, 1999 (or by January 21, 2000), - cause a registration statement to be declared effective under the Securities Act within 180 calendar days after August 25, 1999 (or by February 21, 2000), - keep the exchange offer open for not less than 30 calendar days (or longer if required by applicable law) after the date that notice of the exchange offer is mailed to the holders of the old 6 7/8% Notes, and - consummate the exchange offer within 225 calendar days of August 25, 1999 (or by April 6, 2000). We have filed a copy of the Registration Rights Agreement as an exhibit to the registration statement of which this prospectus is a part. The registration statement satisfies certain of our obligations under the Registration Rights Agreement. TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD 6 7/8% NOTES This prospectus and the accompanying letter of transmittal together make up the exchange offer. On the terms and subject to the conditions set forth in this prospectus and the letter of transmittal, we will accept for exchange any old 6 7/8% Notes that are properly tendered on or before the expiration date unless they are withdrawn as permitted below. We will issue $1,000 principal amount at maturity of new 6 7/8% Notes in exchange for each $1,000 principal amount at maturity of outstanding old 6 7/8% Notes surrendered in the exchange offer. Holders of the old 6 7/8% Notes may tender some or all of their old 6 7/8% Notes, however, old 6 7/8% Notes may be exchanged only in integral multiples of $1,000. The form and terms of the new 6 7/8% Notes are the same as the form and terms of the old 6 7/8% Notes except that the exchange will be registered under the Securities Act and the new 6 7/8% Notes will not bear legends restricting their transfer. The new 6 7/8% Notes will evidence the same debt as the old 6 7/8% Notes and will be issued under the same indenture. The exchange offer is not conditioned upon any minimum principal amount of old 6 7/8% Notes being tendered. As of the date of this prospectus, an aggregate of $1,150,000,000 in principal amount at maturity of the old 6 7/8% Notes is outstanding. This prospectus is first being sent on or about , 2000, to all holders of old 6 7/8% Notes known to us. Holders of the old 6 7/8% Notes do not have any appraisal or dissenters' rights under the indenture in connection with the exchange offer. 17 We may, at any time or from time to time, extend the period of time during which the exchange offer is open and delay acceptance for exchange of any old 6 7/8% Notes, by giving written notice of the extension to the holders as described below. During the extension, all old 6 7/8% Notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any old 6 7/8% Notes not accepted for exchange for any reason will be returned without expense to the tendering holder as promptly as practicable after the expiration of the exchange offer. We reserve the right to amend or terminate the exchange offer if any of the conditions of the exchange offer are not met. The conditions of the exchange offer are specified below under "--CONDITIONS OF THE EXCHANGE OFFER." We will give written notice of any extension, amendment, nonacceptance or termination to the holders of the old 6 7/8% Notes as promptly as practicable. Any extension to be issued by means of a press release or other public announcement will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. PROCEDURES FOR TENDERING OLD 6 7/8% NOTES The tender of old 6 7/8% Notes by a holder as set forth below and the acceptance by us will create a binding agreement between the tendering holder and us upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. Except as set forth below, a holder who wishes to tender old 6 7/8% Notes for exchange must send a completed and signed letter of transmittal, including all other documents required by the letter of transmittal, to the exchange agent at one of the addresses set forth below under "--EXCHANGE AGENT" on or before the expiration date. In addition, either: - the exchange agent must receive before the expiration date certificates for the old 6 7/8% Notes along with the letter of transmittal, - the exchange agent must receive confirmation before the expiration date of a book-entry transfer of the old 6 7/8% Notes into the exchange agent's account at The Depository Trust Company ("DTC") as described below, or - the holder must comply with the guaranteed delivery procedures described below. The method of delivery of old 6 7/8% Notes, letters of transmittal and all other required documents, including delivery through DTC, is at the election and risk of the holders. If the delivery is by mail, we recommend that holders use registered mail, properly insured, with return receipt requested. In all cases, holders should allow sufficient time to assure timely delivery. Holders should not send letters of transmittal or old 6 7/8% Notes to us. Some beneficial owners' of old 6 7/8% Notes are registered in the name of a broker, dealer, commercial bank, trustee or other nominee. If one of those beneficial owners wishes to tender, the beneficial owner should contact the registered holder of the old 6 7/8% Notes promptly and instruct the registered holder to tender on the beneficial owner's behalf. If one of those beneficial owners wishes to tender on its own behalf, then before completing and signing the letter of transmittal and delivering its old 6 7/8% Notes, the beneficial owner must either register ownership of the old 6 7/8% Notes in the beneficial owner's name or obtain a properly completed power of attorney from the registered holder of old 6 7/8% Notes. The transfer of record ownership may take considerable time. If the letter of transmittal is signed by a person other than the registered holder of the old 6 7/8% Notes, the old 6 7/8% Notes must be endorsed or accompanied by appropriate powers of attorney. In either case, the letter of transmittal must be signed exactly as the name of the registered holder that appears on the old 6 7/8% Notes. 18 Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed unless the old 6 7/8% Notes surrendered for exchange are tendered: - by a registered holder of the old 6 7/8% Notes who has not completed the box entitled "SPECIAL ISSUANCE INSTRUCTIONS" or "SPECIAL DELIVERY INSTRUCTIONS" on the letter of transmittal, or - for the account of a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an eligible guarantor institution. Eligible guarantor institutions include: - a member of a registered national securities exchange, or - a member of the National Association of Securities Dealers, Inc., or - a commercial bank or trustee having an office or correspondent in the United States. If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantees must be by an eligible guarantor institution. If old 6 7/8% Notes are registered in the name of a person other than a signer of the letter of transmittal, the old 6 7/8% Notes surrendered for exchange must be endorsed by the registered holder with the signature guaranteed by an eligible guarantor institution. Alternatively, the old 6 7/8% Notes may be accompanied by a written assignment, signed by the registered holder with the signature guaranteed by an eligible guarantor institution. All questions as to the validity, form, eligibility, time of receipt and acceptance of old 6 7/8% Notes tendered for exchange will be determined by us in our sole discretion, and our determination shall be final and binding. We reserve the absolute right to reject any tenders of any old 6 7/8% Notes not properly tendered or any old 6 7/8% Notes whose acceptance might, in our judgment or the judgment of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any old 6 7/8% Notes either before or after the expiration date. The interpretation of the terms and conditions of the exchange offer as to any old 6 7/8% Notes either before or after the expiration date by us will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old 6 7/8% Notes for exchange must be cured within a reasonable period of time as we shall determine. Neither we, U S WEST, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of old 6 7/8% Notes for exchange. Any old 6 7/8% Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless otherwise provided in the letter of transmittal, as soon as practicable. If the letter of transmittal or any old 6 7/8% Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless waived by us, those persons must submit proper evidence satisfactory to us of their authority to act. By tendering, each holder will represent to us: - that it is not an "affiliate," as defined in Rule 405 of the Securities Act, of us or U S WEST, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, - that it is not a broker-dealer tendering Registrable Securities (as defined in the Registration Rights Agreement described herein) acquired directly from us, - that it is acquiring the new 6 7/8% Notes in the ordinary course of its business, and - at the time of the closing of the exchange offer it has no arrangement or understanding to participate in the distribution, within the meaning of the Securities Act, of the new 6 7/8% Notes. 19 If the holder is a broker-dealer that will receive new 6 7/8% Notes for its own account in exchange for old 6 7/8% Notes that were acquired as a result of market-making activities or other trading activities, the holder may be deemed to be an "underwriter" within the meaning of the Securities Act. Such holder will be required to acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new 6 7/8% Notes. However, by so acknowledging and by delivering a prospectus, the holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. ACCEPTANCE OF OLD 6 7/8% NOTES FOR EXCHANGE; DELIVERY OF NEW 6 7/8% NOTES Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old 6 7/8% Notes properly tendered and will issue the new 6 7/8% Notes promptly after acceptance of the old 6 7/8% Notes. See "--CONDITIONS OF THE EXCHANGE OFFER" below. We will be deemed to have accepted properly tendered old 6 7/8% Notes for exchange when we have given oral or written notice to the exchange agent. For each old 6 7/8% Note validly tendered to us, the holder of the old 6 7/8% Note will receive a new 6 7/8% Note having a principal amount equal to the principal amount of the tendered old 6 7/8% Note. The new 6 7/8% Notes will bear interest at the same rate and on the same terms as the old 6 7/8% Notes. Consequently, interest on the new 6 7/8% Notes will accrue at a rate of 6 7/8% per annum and will be payable semiannually in arrears on February 15, 2000, August 15, 2000, February 15, 2001 and August 15, 2001. Interest on each new 6 7/8% Note will accrue from the last interest payment date on which interest was paid on the surrendered old 6 7/8% Note or, if no interest has been paid on such old 6 7/8% Note, from the date of the original issuance thereof. The issuance of new 6 7/8% Notes for old 6 7/8% Notes that are accepted for exchange in the exchange offer will be made only after timely receipt by the exchange agent of certificates for the old 6 7/8% Notes or a timely book-entry confirmation of the old 6 7/8% Notes into the exchange agent's account at the book-entry transfer facility, a completed and signed letter of transmittal and all other required documents. If any tendered old 6 7/8% Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer, or if old 6 7/8% Notes are submitted for a greater amount than the holder desires to exchange, the unaccepted or non-exchanged old 6 7/8% Notes will be returned without expense to the tendering holder as promptly as practicable after the exchange offer expires or terminates. In the case of old 6 7/8% Notes tendered by book-entry procedures described below, the non-exchanged old 6 7/8% Notes will be credited to an account maintained with the book-entry transfer facility. CONDITIONS OF THE EXCHANGE OFFER We will not be required to accept for exchange any old 6 7/8% Notes and may terminate or amend the exchange offer prior to the expiration date, if we determine that we are not permitted to effect the exchange offer because of: - any changes in law, or applicable interpretations by the SEC, or - any action or proceeding is instituted or threatened in any court or governmental agency with respect to the exchange offer. If we determine that any of the conditions are not satisfied, we may refuse to accept any old 6 7/8% Notes and return all tendered old 6 7/8% Notes to the tendering holders or extend the exchange offer and retain all old 6 7/8% Notes tendered prior to the expiration date, subject to the rights of holders to 20 withdraw such old 6 7/8% Notes or waive such unsatisfied conditions with respect to the exchange offer and accept all properly tendered old 6 7/8% Notes which have not been withdrawn. If such waiver or amendment constitutes a material change to the exchange offer, we will promptly disclose such waiver or amendment by means of a prospectus supplement that will be distributed to the registered holders of the old 6 7/8% Notes and we will extend the exchange offer to the extent required by Rule 14e-1 under the Exchange Act. Holders may have certain rights and remedies against us under the Registration Rights Agreement if we fail to close the exchange offer, whether or not the conditions stated above occur. These conditions are not intended to modify those rights or remedies. See "REGISTRATION RIGHTS." BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account for the old 6 7/8% Notes at the book-entry transfer facility for the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in the book-entry transfer facility's systems may make book-entry delivery of old 6 7/8% Notes by causing the book-entry transfer facility to transfer the old 6 7/8% Notes into the exchange agent's account at the book-entry transfer facility in accordance with the book-entry transfer facility's procedures for transfer. However, although delivery of old 6 7/8% Notes may be effected through book-entry transfer at the book-entry transfer facility, the letter of transmittal or facsimile, or an agent's message, with any required signature guarantees and any other required documents, must be received by the exchange agent at one of the addresses set forth below under "--EXCHANGE AGENT" on or before the expiration date or the guaranteed delivery procedures described below must be complied with. The term "agent's message" means a message, transmitted by DTC to the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant stating that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce the letter of transmittal against the participant. GUARANTEED DELIVERY PROCEDURES If a registered holder wishes to tender his old 6 7/8% Notes and the old 6 7/8% Notes are not immediately available, or time will not permit the holder's old 6 7/8% Notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on time, the old 6 7/8% Notes may nevertheless be exchanged if: - the tender is made through an eligible guarantor institution, - before the expiration date, the exchange agent has received from the eligible guarantor institution an agent's message with respect to guaranteed delivery or a completed and signed letter of transmittal, or a facsimile, and a notice of guaranteed delivery, substantially in the form provided by us. Delivery may be made by telegram, telex, facsimile transmission, mail or hand delivery. The letter of transmittal and notice of guaranteed delivery must set forth the name and address of the holder of the old 6 7/8% Notes and the amount of the old 6 7/8% Notes being tendered, state that the tender is being made and guarantee that within five trading days on the New York Stock Exchange ("NYSE") after the date of signing of the notice of guaranteed delivery, the certificates for all physically tendered old 6 7/8% Notes, in proper form for transfer, or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent, and - the certificates for all physically tendered old 6 7/8% Notes, in proper form for transfer, or a book-entry confirmation and all other documents required by the letter of transmittal, are received by the exchange agent within five NYSE trading days after the date of signing the notice of guaranteed delivery. 21 WITHDRAWAL RIGHTS Tenders of old 6 7/8% Notes may be withdrawn at any time prior to the close of business on the expiration date. For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at one of the addresses set forth below under "--EXCHANGE AGENT." Notice may be sent by telegram, telefax, facsimile transmission, mail or hand delivery. Any notice of withdrawal must: - specify the name of the person who tendered the old 6 7/8% Notes to be withdrawn, - identify the old 6 7/8% Notes to be withdrawn, including the amount of the old 6 7/8% Notes, - where certificates for old 6 7/8% Notes have been transmitted, specify the name in which the old 6 7/8% Notes are registered, if different from that of the withdrawing holder, and - state that such holder of the old 6 7/8% Notes is withdrawing his election to have such old 6 7/8% Notes tendered. If certificates for old 6 7/8% Notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution unless the holder is an eligible guarantor institution. If old 6 7/8% Notes have been tendered under the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn old 6 7/8% Notes and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form, eligibility and time of receipt of the notices, and our determination shall be final and binding on all parties. Any old 6 7/8% Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old 6 7/8% Notes that have been tendered for exchange but that are not exchanged for any reason will be returned to the holder without cost to the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. In the case of old 6 7/8% Notes tendered by book-entry transfer into the exchange agent's account at the book-entry transfer facility under the book-entry transfer procedures described above, the old 6 7/8% Notes will be credited to an account with the book-entry transfer facility specified by the holder. Properly withdrawn old 6 7/8% Notes may be re- tendered by following one of the procedures described under "--PROCEDURES FOR TENDERING OLD 6 7/8% NOTES" above at any time on or before the expiration date. EXCHANGE AGENT Bank One Trust Company, National Association has been appointed as the exchange agent for the exchange offer. All signed letters of transmittal should be directed to the exchange agent at the addresses set forth below. Questions and requests for assistance, requests for additional copies of this 22 prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows: By Mail: By Hand: Bank One Trust Company, National Association Bank One Trust Company, National Association Attention: Exchanges Attention: Exchanges Global Corporate Trust Services Global Corporate Trust Services 1 Bank One Plaza, Mail Suite IL 1-0122 One North State Street, 9th Floor Chicago, IL 60670-0122 Chicago, IL 60602 or or Bank One Trust Company, National Association Bank One Trust Company, National Association Attention: Exchanges Attention: Exchanges Global Corporate Trust Services Global Corporate Trust Services 14 Wall Street, 8th Floor 14 Wall Street, 8th Floor New York, NY 10005 New York, NY 10005
For information call: (800) 524-9472 Fax: 312-407-8853 E-mail: bondholder@em.fcnbd.com By Overnight Mail or Courier: Bank One Trust Company, National Association Attention: Exchanges Global Corporate Trust Services One North State Street, 9th Floor Chicago, IL 60602 or Bank One Trust Company, National Association Attention: Exchanges Global Corporate Trust Services 14 Wall Street, 8th Floor New York, NY 10005 Delivery of a letter of transmittal to an address other than as set forth above or transmission of instructions via facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal. FEES AND EXPENSES We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer and holders who tender old 6 7/8% Notes will not be required to pay brokerage commissions or fees. We will pay the expenses that will be incurred in connection with the exchange offer. We estimate the expenses will be approximately $ . ACCOUNTING TREATMENT For accounting purposes, we will recognize no gain or loss as a result of the exchange offer. The expenses of the exchange offer will be amortized over the term of the new 6 7/8% Notes. 23 TRANSFER TAXES Holders who instruct us to register new 6 7/8% Notes in the name of a person other than the registered tendering holder will be responsible for paying any applicable transfer tax, as will holders who request that old 6 7/8% Notes not tendered or not accepted in the exchange offer be returned to a person other than the registered tendering holder. In all other cases, no transfer taxes will be due. REGULATORY MATTERS We are not aware of any governmental or regulatory approvals that are required in order to complete the exchange offer. CONSEQUENCES OF FAILURE TO EXCHANGE Participation in the exchange offer is voluntary. Old 6 7/8% Notes that are not exchanged for new 6 7/8% Notes will remain restricted securities. Accordingly, those old 6 7/8% Notes may only be transferred: - to a person who the seller reasonably believes is a qualified institutional buyer under Rule 144A under the Securities Act, - in an offshore transaction under Rule 903 or Rule 904 of Regulation S under the Securities Act, or - under Rule 144 under the Securities Act (if available); and in accordance with all applicable securities laws of the states of the United States. Following the consummation of the exchange offer, neither we nor U S WEST will have any further obligation to such holders to provide for registration under the Securities Act, except that under certain circumstances, we are required to file a shelf registration statement under the Securities Act. See "REGISTRATION RIGHTS." PAYMENT OF ADDITIONAL INTEREST UPON REGISTRATION DEFAULTS If we fail to meet our obligations to complete the exchange offer or file a shelf registration statement, additional interest will accrue on the 6 7/8% Notes. For additional information regarding payments of additional interest, please see "REGISTRATION RIGHTS." USE OF PROCEEDS We will not receive any proceeds from the issuance of the new 6 7/8% Notes or the closing of the exchange offer. 24 CAPITALIZATION OF U S WEST, INC. The following table sets forth, at September 30, 1999, the unaudited consolidated historical capitalization of U S WEST. The table should be read in conjunction with the historical financial statements and Notes thereto of U S WEST included in the documents incorporated by reference in this prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
HISTORICAL UNAUDITED AT SEPTEMBER 30, 1999 ---------------------- (DOLLARS IN MILLIONS) Short-term debt.......................................... $3,379 ====== Long-term debt........................................... $9,754 Total shareowners' equity(1)(2)(3)....................... 152 ------ Total capitalization..................................... $9,906 ======
- ------------------------------ (1) U S WEST has 2,000,000,000 shares of common stock authorized. On September 30, 1999, 505,305,886 shares of U S WEST common stock were issued and outstanding. (2) U S WEST has 200,000,000 shares of preferred stock authorized. As of September 30, 1999, no shares of U S WEST preferred stock were issued and outstanding. (3) As a result of the Termination Agreement, the remaining shares of Global Crossing common stock held by U S WEST from the Tender Offer (approximately 37 million shares) will be carried at their current market value, with differences between original cost and market value reflected as an adjustment to shareowners' equity. As of September 30, 1999, U S WEST's remaining investment in shares of Global Crossing had a market value of approximately $981 million. See "RECENT DEVELOPMENTS--MERGER WITH QWEST." Except as set forth above and in publicly available documents filed with the SEC, there has been no material change in the capitalization of U S WEST since September 30, 1999. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth U S WEST's ratio of earnings to fixed charges for each of the periods indicated.
HISTORICAL(1) PRO FORMA(2) - --------------------------------------------------------------------------------------- ------------- UNAUDITED UNAUDITED NINE MONTHS ENDED YEAR ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, - ----------------------------------------------------------------- ------------------- ------------- 1994 1995 1996 1997 1998 1998 1999 1998 - --------------------- -------- -------- -------- -------- -------- -------- ------------- 5.38 5.01 5.20 5.67 4.75 4.98 3.76 4.02
- ------------------------------ (1) Historical ratios are based on the historical results of the Communications Group and Dex, as if each such business operated as a separate entity for all periods presented but exclude the effects of $3.9 billion of the Dex Indebtedness which was refinanced by U S WEST in connection with the Dex Alignment. See "RECENT DEVELOPMENTS--THE SEPARATION." (2) Based on the unaudited pro forma combined results of U S WEST which give effect to the refinancing of the Dex Indebtedness in connection with the Dex Alignment. These pro forma results do not give effect to the anticipated merger with Qwest. In determining these ratios, U S WEST has computed "earnings" by adding income before income taxes, extraordinary items and cumulative effect of change in accounting principle and fixed charges. "Fixed charges" consist of interest on indebtedness and the portion of rentals representative of the interest factor. 25 CAPITALIZATION OF U S WEST CAPITAL FUNDING, INC. The following table sets forth, at September 30, 1999, our unaudited historical capitalization. The table should be read in conjunction with the historical financial statements and Notes thereto of U S WEST included in the documents incorporated by reference herein See "WHERE YOU CAN FIND MORE INFORMATION."
HISTORICAL UNAUDITED AT SEPTEMBER 30, 1999 ---------------------- (DOLLARS IN MILLIONS) Short-term debt.......................................... $2,288 ====== Long-term debt........................................... $4,636 Total shareowners' equity(1)............................. 44 ------ Total capitalization..................................... $4,680 ======
- ------------------------------ (1) We have one (1) share of stock authorized, and have issued one (1) share of stock to U S WEST. Except as set forth above and in publicly available documents filed with the SEC, there has been no material change in our capitalization since September 30, 1999. 26 DESCRIPTION OF NEW 6 7/8% NOTES GENERAL The new 6 7/8% Notes will be issued as a separate series of debt securities ("Debt Securities") under an indenture dated as of June 29, 1998, as supplemented and amended from time to time (the "Indenture"), among us, U S WEST and Bank One Trust Company, National Association, as successor to The First National Bank of Chicago, as trustee (the "Trustee"). The new 6 7/8% Notes and the old 6 7/8% Notes are considered together to be a single series for all purposes under the Indenture. The following summaries of the material provisions of the Indenture do not purport to be complete and are subject to and are qualified in their entirety by reference to all of the provisions of the Indenture, which provisions of the Indenture are incorporated herein by reference. Capitalized and other terms not otherwise defined herein shall have the meanings given to them in the Indenture. You may obtain a copy of the Indenture from us upon request. See "WHERE YOU CAN FIND MORE INFORMATION." The Indenture does not limit the aggregate principal amount of Debt Securities which may be issued under it and provides that Debt Securities may be issued from time to time in one or more series. All Debt Securities, including the new 6 7/8% Notes are, and will be, unconditionally guaranteed as to payment of principal, premium, if any, and interest by U S WEST. As of the date of this prospectus, the principal amount of Debt Securities outstanding under the Indenture is $5.65 billion. Since the new 6 7/8% Notes will constitute a separate series of Debt Securities under the Indenture, holders of old 6 7/8% Notes who do not exchange such old 6 7/8% Notes for new 6 7/8% Notes will vote together as a separate series of Debt Securities with holders of such new 6 7/8% Notes of that series for all relevant purposes under the Indenture. In that regard, the Indenture requires that certain actions by the holders under such old 6 7/8% Notes (including acceleration following an Event of Default) must be taken, and certain rights must be exercised, by specified minimum percentages of the aggregate principal amount of the outstanding Notes of that series. In determining whether holders of the requisite percentage in principal amount of the Notes of that series have given any notice, consent or waiver or taken any other action permitted under the Indenture, any old 6 7/8% Notes which remain outstanding after the exchange offer will be aggregated with the new 6 7/8% Notes and the holders of the old 6 7/8% Notes and the new 6 7/8% Notes will each vote together as a single series for all purposes. Accordingly, all references in this section will be deemed to mean, at any time after the exchange offer is consummated, the requisite percentage in aggregate principal amount of the old 6 7/8% Notes and the new 6 7/8% Notes. The 6 7/8% Notes initially will be limited to $1,150,000,000 aggregate principal amount. We and U S WEST may "reopen" any series of debt securities and issue additional securities of that series. The 6 7/8% Notes will be issued only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The 6 7/8% Notes are our unsecured obligations and rank equally with all of our other unsecured and unsubordinated indebtedness. The Guarantees are unsecured obligations of U S WEST and rank equally with all other unsecured and unsubordinated indebtedness of U S WEST. However, because U S WEST is a holding company which conducts substantially all of its operations through subsidiaries, the right of U S WEST, and hence the right of creditors of U S WEST (including holders of the 6 7/8% Notes through the Guarantees), to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise is necessarily subject to the prior claims of creditors of such subsidiary, except to the extent that claims of U S WEST itself as a creditor of the subsidiary may be recognized. The 6 7/8% Notes will bear interest at the rate of 6 7/8% per annum from August 25, 1999, or from the most recent interest payment date to which interest has been paid or duly provided for, payable semiannually in arrears on February 15, 2000, August 15, 2000, February 15, 2001 and August 15, 2001 (each, an "Interest Payment Date"), to the persons in whose names the 6 7/8% Notes are registered at the close of business on the February 1 or August 1, as the case may be, immediately preceding such 27 Interest Payment Date. Interest will be calculated on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date, maturity date or redemption date is a Legal Holiday in New York, New York, the required payment shall be made on the next succeeding day that is not a Legal Holiday as if it were made on the date such payment was due and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, maturity date or redemption date, as the case may be, to such next succeeding day. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in The City of New York are not required to be open. The 6 7/8% Notes will mature and the principal amount will be payable on August 15, 2001. The 6 7/8% Notes will not have the benefit of any sinking fund. The Trustee, through its corporate trust office in the Borough of Manhattan in The City of New York (in such capacity, the "Paying Agent") will act as our paying agent with respect to the 6 7/8% Notes. Payments of principal, premium, if any, and interest on the 6 7/8% Notes will be made by us through the Paying Agent to DTC. See "--BOOK-ENTRY ONLY; DELIVERY AND FORM." The principal of, premium, if any, and interest on the 6 7/8% Notes will be payable in U.S. dollars or in such other coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. No service charge will be made for any registration of, transfer or exchange of 6 7/8% Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The 6 7/8% Notes may be presented for registration of transfer or exchange at the office of the Paying Agent in the Borough of Manhattan in the City of New York, or at any other office or agency maintained by us or the Paying Agent for such purpose. OPTIONAL REDEMPTION The 6 7/8% Notes will be redeemable at our option, in whole at any time or in part from time to time, on at least 15 days but not more than 60 days prior written notice mailed to the registered holders thereof, at a redemption price equal to the greater of (i) 100% of the principal amount of the 6 7/8% Notes to be redeemed or (ii) the sum, as determined by the Quotation Agent (as defined below), of the present values of the principal amount of the 6 7/8% Notes to be redeemed and the remaining scheduled payments of interest thereon from the redemption date to August 15, 2001 (the "Remaining Life") discounted from their respective scheduled payment dates to the redemption date on a semiannual basis (assuming a 360-day year consisting of 30-day months) at the Treasury Rate (as defined below) plus 10 basis points, plus, in either case, accrued interest thereon to the date of redemption. If money sufficient to pay the redemption price of and accrued interest on all of the 6 7/8% Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Trustee or Paying Agent on or before the redemption date and certain other conditions are satisfied, then on and after such redemption date, interest will cease to accrue on such 6 7/8% Notes (or such portion thereof) called for redemption. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life. "Comparable Treasury Price" means, with respect to any redemption date, the average of two Reference Treasury Dealer Quotations for such redemption date. "Quotation Agent" means the Reference Treasury Dealer appointed by us. 28 "Reference Treasury Dealer" means each of Merrill Lynch Government Securities Inc. and J.P. Morgan Securities Inc., and their successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), Capital Funding shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, calculated on the third business day preceding such redemption date using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. We or U S WEST may at any time, and from time to time, purchase the 6 7/8% Notes at any price or prices in the open market or otherwise. BOOK-ENTRY ONLY; DELIVERY AND FORM The new 6 7/8% Notes will initially be issued in the form of global securities held in book-entry form. The new 6 7/8% Notes will be deposited with the Trustee as custodian for DTC and DTC or its nominee will initially be the sole registered holder of the new 6 7/8% Notes. Except as set forth below, a global security may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC. Investors may elect to hold interests in the global securities directly through DTC (in the United States), Cedelbank or Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), as the case may be, if they are participants in such systems, or indirectly through organizations that are participants in such systems. Cedelbank and Euroclear will hold interests on behalf of their participants through customers' securities accounts in Cedelbank's and Euroclear's names on the books of their respective depositaries, which are participants in DTC. will act as depository for Cedelbank and will act as depositary for Euroclear (in such capacities, the "U.S. Depositaries"). When a global security is issued, DTC or its nominee will credit, on its internal system, the accounts of persons holding through it with the principal amounts of the individual beneficial interest represented by the global security purchased by those persons in the offering of the new 6 7/8% Notes. The accounts were initially designated by the initial purchasers of the old 6 7/8% Notes with respect to old 6 7/8% Notes sold by the initial purchasers. Only participants that have accounts with DTC or persons that hold interests through participants can own beneficial interests in a global security. Ownership of beneficial interests by participants in a global security will be shown on records maintained by DTC or its nominee for the global security, and that ownership interest will be transferred only through those records. Ownership of beneficial interests in the global security by persons that hold through participants will be shown on records maintained by the participant, and the transfer of that ownership interest within the participant will occur only through the participant's records. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of the securities in definitive form. Those limits and laws may make it more difficult to transfer beneficial interests in a global security. We will make payments on the new 6 7/8% Notes represented by any global security to DTC or its nominee as the sole registered owner and the sole holder of the new 6 7/8% Notes represented by the global security. Neither we, U S WEST nor the Trustee, any agent of ours or the 29 initial purchasers will have any responsibility for any aspect of DTC's reports relating to beneficial ownership interests in a global security representing any new 6 7/8% Notes or for reviewing any of DTC's records relating to the beneficial ownership interests. DTC has advised us that upon receipt of any payment on any global security, DTC will immediately credit, on its book-entry registration and transfer system, the accounts of participants with payments in amounts proportionate to their beneficial interests in the principal or face amount of the global security. Payments of interest and principal of global securities held through Cedelbank or Euroclear will be credited to the cash accounts of Cedelbank participants or Euroclear participants, as the case may be, in accordance with the relevant system's rules and procedures. We expect that payments by participants to owners of beneficial interests in a global security held through those participants will be governed by standing instructions and customary practices as is now the case with securities held for customer accounts registered in "street name" and will be the sole responsibility of the participants subject to any statutory or regulatory requirements as may be in effect from time to time. So long as DTC or its nominee is the registered owner of the global security, DTC or its nominee will be considered the sole owner or holder of the new 6 7/8% Notes represented by the global security for the purposes of receiving payment on the new 6 7/8% Notes, receiving notices and for all other purposes under the Indenture and the new 6 7/8% Notes. Except as provided above, owners of beneficial interests in a global security will not be entitled to receive physical delivery of certificated new 6 7/8% Notes and will not be considered the holders of the global security for any purposes under the Indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the procedures of DTC and, if the person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the global security or the Indenture. We understand that under existing industry practices, if we request any action of holders or an owner of a beneficial interest in a global security wants to take any action that a holder is entitled to take under the Indenture, DTC would authorize the participants holding the beneficial interest to take that action, and the participants would authorize beneficial owners owning through the participants to take the action on the instructions of beneficial owners owning through them. DTC has advised us that it will take any action permitted to be taken by a holder of new 6 7/8% Notes only at the direction of a participant to whose account with DTC interests in the global security are credited and only as to the portion of the aggregate principal amount of the new 6 7/8% Notes as to which the participant has given that direction. DTC has advised us that DTC is a limited-purpose trust company organized under the Banking Law of the State of New York, a "banking organization" within the meaning of 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 under the Exchange Act. DTC was created to hold the securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in the securities through electronic book-entry changes in accounts of the participants. This eliminates the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant. CERTIFICATED NEW 6 7/8% NOTES New 6 7/8% Notes represented by a global security are exchangeable for certificated new 6 7/8% Notes only if: - DTC notifies us that it is unwilling or unable to continue as a depository for the global security or if at any time DTC ceases to be a registered clearing agency, and a successor depository is not appointed by us within 90 days, 30 - we notify the Trustee that the global security will be so transferable, registrable and exchangeable, or - an event of default with respect to the new 6 7/8% Notes has occurred and is continuing. Any global security that is exchangeable for certificated new 6 7/8% Notes under the preceding sentence will be transferred to, and registered and exchanged for, certificated new 6 7/8% Notes in authorized denominations and registered in names that DTC or its nominee holding the global security may direct. Subject to the foregoing, a global security is not exchangeable, except for a global security of the same denomination to be registered in the name of DTC or its nominee. If a global security becomes exchangeable for certificated new 6 7/8% Notes: - certificated new 6 7/8% Notes will be issued only in fully registered form in denominations of $1,000 or integral multiples, - payments will be made and transfers will be registered at the office or agency of us maintained for that purposes, and - no service charge will be made for any issuance of the certificated new 6 7/8% Notes, although we may require payment to cover any tax or governmental charge imposed. DTC management is aware that some computer applications, systems, and the like for processing data ("Systems") that are dependent upon calendar dates, including dates before, on, and after January 1, 2000, may encounter "Year 2000 problems." DTC has informed its participants and other members of the financial community (the "Industry") that it has developed and is implementing a program so that its Systems, as the same relate to the timely payment of distributions (including principal and income payments) to security holders, book-entry deliveries, and settlement of trades within DTC ("DTC Services"), continue to function appropriately. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally, DTC's plan includes a testing phase, which is expected to be completed within appropriate time frames. However, DTC's ability to perform properly its services is also dependent upon other parties, including but not limited to issuers and their agents, as well as DTC's direct and indirect participants and third party vendors from whom DTC licenses software and hardware, and third party vendors on whom DTC relies for information or the provision of services, including telecommunication and electrical utility service providers, among others. DTC has informed the Industry that it is contacting (and will continue to contact) third party vendors from whom DTC acquires services to: (i) impress upon them the importance of such services being Year 2000 compliant; and (ii) determine the extent of their efforts for Year 2000 remediation (and, as appropriate, testing) of their services. In addition, DTC is in the process of developing such contingency plans as it deems appropriate. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty, or contract modification of any kind. GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES Settlement for the new 6 7/8% Notes represented by the global securities will be made in immediately available funds. We will make all payments of principal and interest on the 6 7/8% Notes in immediately available funds. The new 6 7/8% Notes will trade in DTC's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the new 6 7/8% Notes will therefore be required by DTC to settle in immediately available funds. 31 Secondary market trading between Cedelbank participants and/or Euroclear participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Cedelbank and Euroclear and will be settled using the procedures applicable to conventional eurobonds in immediately available funds. Cross-market transfers between persons holding directly or indirectly through DTC and persons holding directly or indirectly through Cedelbank or Euroclear participants will be effected in accordance with DTC's rules on behalf of the relevant European international clearing system by its U.S Depositary. Such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect final settlement on its behalf by delivering or receiving the 6 7/8% Notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Cedelbank participants and Euroclear participants may not deliver instructions directly to DTC. Because of time-zone differences, credits of the 6 7/8% Notes received in Cedelbank or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and will be credited the business day following the DTC settlement date. Such credits or any transactions in such 6 7/8% Notes settled during such processing will be reported to the relevant Euroclear or Cedelbank participants on such business day. Cash received in Cedelbank or Euroclear as a result of sales of 6 7/8% Notes by or through a Cedelbank participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Cedelbank or Euroclear cash account only as of the business day following settlement in DTC. Although DTC, Cedelbank and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of interests in the global securities among participants of DTC, Cedelbank and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of Capital Funding, U S WEST or the Trustee will have any responsibility for the performance by DTC, Cedelbank and Euroclear, or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTAIN COVENANTS Other than as described below under "--LIMITATION ON LIENS," the Indenture does not contain any provisions that would limit our or U S WEST's ability to incur indebtedness or that would afford holders of 6 7/8% Notes protection in the event of a sudden and significant decline in our or U S WEST's credit quality or a takeover, recapitalization or highly leveraged or similar transaction involving us or U S WEST. Accordingly, we or U S WEST could in the future enter into transactions that could increase the amount of indebtedness outstanding at that time or otherwise adversely affect our or U S WEST's capital structure or credit rating. See "RECENT DEVELOPMENTS." Qwest's indentures contain restrictive covenants limiting its ability to pay dividends, make investments, create liens, sell assets, enter into transactions with affiliates, borrow money and engage in mergers and consolidations. These restrictions could limit financing by the combined company following the merger. See "RECENT DEVELOPMENTS." Qwest's indentures are attached as exhibits to various documents Qwest has filed with the SEC. 32 LIMITATION ON LIENS The Indenture contains a covenant that if we mortgage, pledge or otherwise subject to any lien all or some of our property or assets, we will secure the 6 7/8% Notes, any other outstanding Debt Securities and any of our other obligations which may then be outstanding and entitled to the benefit of a covenant similar in effect to such covenant, equally and proportionally with the indebtedness or obligations secured by such mortgage, pledge or lien, for as long as any such indebtedness or obligation is so secured. This covenant does not apply to: - the creation, extension, renewal or refunding of (a) mortgages or liens created or existing at the time property is acquired, (b) mortgages or liens created within 180 days after property is acquired, or (c) mortgages or liens securing the cost of construction or improvement of property, or - the making of any deposit or pledge to secure public or statutory obligations or with any governmental agency at any time required by law in order to qualify us to conduct all or some part of our business or in order to entitle us to maintain self-insurance or to obtain the benefits of any law relating to workmen's compensation, unemployment insurance, old age pensions or other social security, or with any court, board, commission or governmental agency as security incident to the proper conduct of any proceeding before it. The Indenture does not prevent any other entity from mortgaging, pledging or subjecting to any lien any of its property or assets, whether or not acquired from us or U S WEST (Section 4.03). CONSOLIDATION, MERGER AND SALE OF ASSETS We may, without the consent of the holders of the 6 7/8% Notes or any other outstanding Debt Securities, consolidate with, merge into or be merged into, or transfer or lease our property and assets substantially as an entirety to another entity. However, we may only do this if: - the successor entity is a corporation and assumes by supplemental indenture all of our obligations under the 6 7/8% Notes, any other outstanding Debt Securities and the Indenture, and - after giving effect to the transaction, no Default or Event of Default has occurred and is continuing. After that time, all of our obligations under the 6 7/8% Notes, any other outstanding Debt Securities and the Indenture terminate (Section 5.01). U S WEST may, without the consent of the holders of any of the 6 7/8% Notes, or any other outstanding Debt Securities, consolidate with, merge into or be merged into, or transfer or lease its property and assets substantially as an entirety to another entity. However, U S WEST may only do this if: - the successor entity is a corporation and assumes by supplemental indenture all of its obligations under the Guarantees and the Indenture, and - after giving effect to the transaction, no Default or Event of Default has occurred and is continuing. After that time, all of U S WEST's obligations under the Guarantees and the Indenture terminate (Section 5.02). 33 EVENTS OF DEFAULT Any one of the following is an Event of Default with respect to any series of Debt Securities, including the 6 7/8% Notes (Section 6.01): - if we or U S WEST default in the payment of interest on the Debt Securities of such series, and such default continues for 90 days, - if we or U S WEST default in the payment of the principal of any Debt Security of such series when the same becomes due and payable at maturity, upon redemption, or otherwise, - if we or U S WEST fail to comply with any of our or their other agreements in the Debt Securities of such series, in the Indenture or in any supplemental indenture under which the Debt Securities of such series were issued, which failure continues for 90 days after we or U S WEST receives notice from the Trustee or the holders of at least 25% in principal amount of all of the outstanding Debt Securities of that series, and - if certain events of bankruptcy or insolvency occur with respect to us or U S WEST. If an Event of Default with respect to the Debt Securities of any series occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of all of the outstanding Debt Securities of that series may declare the principal (or, if the Debt Securities of that series are original issue discount securities, such portion of the principal amount as may be specified in the terms of that series) of all the Debt Securities of that series to be due and payable. When such declaration is made, such principal (or, in the case of original issue discount securities, such specified amount) will be immediately due and payable (Section 6.02). The holders of a majority in principal amount of Debt Securities of that series may rescind such declaration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived (other than nonpayment of principal or interest that has become due solely as a result of acceleration). Holders of Debt Securities may not enforce the Indenture, the Debt Securities or the Guarantees, except as provided in the Indenture (Section 6.06). The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Debt Securities (Section 7.01(e)). Subject to certain limitations, the holders of more than 50% in principal amount of the Debt Securities of each series affected (with each series voting as a class) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power of the Trustee (Section 6.05). The Trustee may withhold from holders of Debt Securities notice of any continuing default (except a default in the payment of principal or interest) if it determines in good faith that withholding notice is in their interests (Section 7.05). AMENDMENT AND WAIVER With the written consent of the holders of more than 50% of the principal amount of the outstanding Debt Securities of each series that will be affected (with each series voting as a class), we, U S WEST and the Trustee may amend or supplement the Indenture or modify the rights of the holders of Debt Securities of that series. Such majority of holders may also waive compliance by us or U S WEST with any provision of the Indenture, any supplemental indenture or the Debt Securities of any such series except a default in the payment of principal or interest. However, without the consent of the holder of each Debt Security affected, an amendment or waiver may not (Section 9.02): - reduce the amount of Debt Securities whose holders must consent to an amendment or waiver, - change the rate or the time for payment of interest, - change the principal or the fixed maturity, - waive a default in the payment of principal, premium, if any, or interest, 34 - make any Debt Security payable in a different currency, or - make any change in the provisions of the Indenture concerning (a) waiver of existing defaults (Section 6.04), (b) rights of holders of Debt Securities to receive payment (Section 6.07), or (c) amendments and waivers with consent of holders of Debt Securities (Section 9.02(a), third sentence). We, U S WEST and the Trustee may amend or supplement the Indenture without the consent of any holder of any of the Debt Securities (Section 9.01): - to cure any ambiguity, defect or inconsistency in the Indenture, the Debt Securities or the Guarantees, - to provide for the assumption of all of our obligations under the Debt Securities and the Indenture or of U S WEST's obligations under the Guarantees and the Indenture by any corporation in connection with a merger, consolidation or transfer or lease of our or U S WEST's property and assets substantially as an entirety, - to provide for uncertificated Debt Securities in addition to or instead of certificated Debt Securities, - to add to the covenants made by us or U S WEST for the benefit of the holders of any series of Debt Securities or to surrender any right or power conferred upon us in the Indenture, - 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 the Debt Securities, - to make any change that does not adversely affect the rights of any holder of Debt Securities, - to provide for the issuance of and establish the form and terms and conditions of a series of Debt Securities or the Guarantees, or to establish the form of any certifications required to be furnished pursuant to the terms of the Indenture or any series of Debt Securities, - to add to the rights of holders of any of the Debt Securities, or - to secure any Debt Securities as provided under the heading "--LIMITATION ON LIENS." SATISFACTION AND DISCHARGE We and U S WEST may terminate all of our or their obligations under the 6 7/8% Notes and the Indenture with respect to the 6 7/8% Notes or any installment of interest on the 6 7/8% Notes if we or U S WEST irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient to pay, when due, principal and interest on the 6 7/8% Notes to maturity or redemption or such installment of interest, as the case may be, and if all other conditions set forth in the 6 7/8% Notes are met (Section 8.01). GUARANTEES As described in more detail above under "--GENERAL", U S WEST has unconditionally guaranteed the payment of principal and interest on the Notes when and as such payments become due and payable. The Guarantees rank equally with all other unsecured and unsubordinated obligations of U S WEST. The 6 7/8% Notes and the guarantees are unsecured obligations of Capital Funding and U S WEST, respectively, and rank pari passu among them LUXEMBOURG PAYING AND TRANSFER AGENT In the event that definitive 6 7/8% Notes are issued, holders of the 6 7/8% Notes will be able to receive payments thereon and effect transfers thereof at the offices of our paying and transfer agent in 35 Luxembourg. We have initially appointed Kredietbank S.A. Luxembourg as paying agent and transfer agent in Luxembourg with respect to the 6 7/8% Notes issued in definitive form, and as long as the 6 7/8% Notes are listed on the Luxembourg Stock Exchange, we will maintain a paying and transfer agent in Luxembourg. Any change in the Luxembourg paying agent and transfer agent will be published in Luxembourg. See "--NOTICES." NOTICES Notices to holders of the 6 7/8% Notes will be sent by mail to the registered holders and will be published, whether the 6 7/8% Notes are in global or definitive form, and so long as the 6 7/8% Notes are listed on the Luxembourg Stock Exchange, in a daily newspaper of general circulation in Luxembourg. It is expected that publication will be made in Luxembourg in the LUXEMBURGER WORT. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. So long as the 6 7/8% Notes are listed on the Luxembourg Stock Exchange, any change in the Luxembourg paying agent and transfer agent will be published in Luxembourg in the manner set forth above. GOVERNING LAW The Indenture and the 6 7/8% Notes will be governed by, and construed in accordance with, the laws of the State of New York, applicable to agreements made and to be performed wholly within such jurisdiction. CONCERNING THE TRUSTEE AND THE PAYING AGENT We and certain of our affiliates maintain banking and other business relationships in the ordinary course of business with Bank One Trust Company, National Association. In addition, Bank One Trust Company, National Association and certain of its affiliates serve as trustee, authenticating agent, or paying agent with respect to certain Debt Securities previously issued by us and our affiliates. 36 REGISTRATION RIGHTS Based on existing interpretations of the Securities Act by the staff of the SEC ("the Staff") set forth in several no-action letters to third parties, and subject to the immediately following sentence, we and U S WEST believe that the new 6 7/8% Notes to be issued pursuant to the exchange offer may be offered for resale, resold and otherwise transferred by the holders thereof (other than holders who are broker-dealers) without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, any purchaser of old 6 7/8% Notes who is an affiliate of us or U S WEST or who intends to participate in the exchange offer for the purpose of distributing the new 6 7/8% Notes, or any broker-dealer who purchased the old 6 7/8% Notes from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act: - will not be able to rely on the interpretations of the Staff set forth in the above-mentioned no-action letters, - will not be entitled to tender such old 6 7/8% Notes in the exchange offer, and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the old 6 7/8% Notes unless such sale or transfer is made pursuant to an exemption from such requirements. Neither we nor U S WEST intend to seek our own no-action letter, and there can be no assurance that the Staff would make a similar determination with respect to the new 6 7/8% Notes as it has in such no-action letters to third parties. Each holder of the old 6 7/8% Notes (other than certain specified holders) who wishes to exchange the old 6 7/8% Notes for new 6 7/8% Notes in the exchange offer will be required to represent that: - it is not an affiliate of us or U S WEST, - it is not a broker-dealer tendering Registrable Securities (as defined in the Registration Rights Agreement) acquired directly from us, - the Notes to be exchanged for new 6 7/8% Notes in the exchange offer were acquired in the ordinary course of its business, and - at the time of the exchange offer, it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the new 6 7/8% Notes. In addition, in connection with any resale of new 6 7/8% Notes, any broker-dealer who acquired the new 6 7/8% Notes for its own account as a result of market-making or other trading activities (a "Participating Broker-Dealer") must deliver a prospectus meeting the requirements of the Securities Act. The SEC has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the new 6 7/8% Notes other than a resale of an unsold allotment from the original sale thereof, with the prospectus contained in the registration statement filed in connection with the exchange offer (the "Exchange Offer Registration Statement"). Under the Registration Rights Agreement, we and U S WEST are required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such new 6 7/8% Notes for a period of 225 calendar days from the issuance of the new 6 7/8% Notes. If: - because of any change in law or in currently prevailing interpretations of the Staff, we or U S WEST are not permitted to effect the exchange offer, - the exchange offer is not consummated within 225 calendar days of the closing date, or 37 - in the case of any holder that participates in the exchange offer, such holder does not receive new 6 7/8% Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours or U S WEST within the meaning of the Securities Act or as a broker-dealer), then in each case, we or U S WEST will promptly deliver to the holders written notice thereof; and at our or U S WEST's sole expense: - as promptly as practicable (but in no event more than 90 days after so required or requested pursuant to the Registration Rights Agreement), file a shelf registration statement covering resales of the old 6 7/8% Notes (the "Shelf Registration Statement"), - use our reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as soon as practicable, and - use our reasonable best efforts to keep effective the Shelf Registration Statement until the earlier of two years (or, if Rule 144(k) is amended to provide a shorter restrictive period, such shorter period) after the closing date or such time as all of the applicable old 6 7/8% Notes have been sold thereunder. We or U S WEST will, if a Shelf Registration Statement is filed, provide to each holder copies of the prospectus that is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement for the Notes has become effective and take certain other actions as are required to permit unrestricted resales of the old 6 7/8% Notes. A holder that sells old 6 7/8% Notes pursuant to the Shelf Registration Statement will be required to be named as a selling security holder in the related prospectus, to provide information related thereto and to deliver such prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such a holder (including certain indemnification rights and obligations). Neither we nor U S WEST shall have any obligation to include in the Shelf Registration Statement holders who do not deliver such information to us or U S WEST. If we or U S WEST fail to comply with certain provisions of the Registration Rights Agreement, in each case as described below, then a special interest premium (the "Special Interest Premium") shall become payable in respect of the old 6 7/8% Notes. If: - the Exchange Offer Registration Statement is not filed with the SEC on or prior to the 150th calendar day following August 25, 1999 (or by January 22, 2000), - the Exchange Offer Registration Statement is not declared effective on or prior to the 180th calendar day following August 25, 1999 (or by February 21, 2000), or - the exchange offer is not consummated or the Shelf Registration Statement is not declared effective on or prior to the 225th calendar day following August 25, 1999 (or by April 6, 2000); the Special Interest Premium shall accrue in respect of the old 6 7/8% Notes, from and including the next calendar day following each of (a) such 150-day period in the case of the first bullet listed above, (b) such 180-day period in the second bullet listed above and (c) such 225-day period in the case of the third bullet listed above, in each case at a rate equal to 0.25% per annum. The aggregate amount of the Special Interest Premium in respect of each of the old 6 7/8% Notes, payable pursuant to the above provisions, will in no event exceed 0.25% per annum. If the Exchange Offer Registration Statement is not declared effective on or prior to the 225th calendar day following August 25, 1999 and we and U S WEST shall request holders of old 6 7/8% Notes to provide the information called for by the Registration Rights Agreement for inclusion in the Shelf Registration 38 Statement, the old 6 7/8% Notes owned by holders who do not deliver such information to us and U S WEST when required pursuant to the Registration Rights Agreement will not be entitled to any Special Interest Premium for any day after the 225th day following August 25, 1999. Upon: - filing of the Exchange Offer Registration Statement after the 150-day period described above, - effectiveness of the Exchange Offer Registration Statement after the 180-day period described above, or - consummation of the exchange offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 225-day period described above, the interest rate on the old 6 7/8% Notes from the day of such filing, effectiveness or consummation, as the case may be, will be reduced to the original interest rate set forth on the cover page of this prospectus for the old 6 7/8% Notes. If a Shelf Registration Statement is declared effective pursuant to the foregoing paragraphs, and if we and U S WEST fail to keep such Shelf Registration Statement continuously (a) effective or (b) useable for resales for the period required by the Registration Rights Agreement due to certain circumstances relating to pending corporate developments, public filings with the SEC and similar events, or because the prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and such failure continues for more than 60 days (whether or not consecutive) in any twelve-month period (the 61st day being referred to as the "Default Day"), then from the Default Day until the earlier of: - the date that the Shelf Registration Statement is again deemed effective or is usable, - the date that is the second anniversary of the closing date (or, if Rule 144(k) is amended to provide a shorter restrictive period, such shorter period), or - the date as of which all of the new 6 7/8% Notes are sold pursuant to the Shelf Registration Statement, the Special Interest Premium in respect of the old 6 7/8% Notes shall accrue at a rate equal to 0.25% per annum. If we or U S WEST fail to keep the Shelf Registration Statement continuously effective or useable for resales pursuant to the preceding paragraph, we or U S WEST shall give the holders notice to suspend the sale of the old 6 7/8% Notes and shall extend the relevant period referred to above during which we or U S WEST are required to keep effective the Shelf Registration Statement (or the period during which Participating Broker-Dealers are entitled to use the prospectus included in the Exchange Offer Registration Statement in connection with the resale of new 6 7/8% Notes) by the number of days during the period from and including the date of the giving of such notice to and including the date when holders shall have received copies of the supplemented or amended prospectus necessary to permit resales of the old 6 7/8% Notes or to and including the date on which we or U S WEST have given notice that the sale of the old 6 7/8% Notes may be resumed, as the case may be. Each old 6 7/8% Note contains a legend to the effect that the holder thereof, by its acceptance thereof, will be deemed to have agreed to be bound by the provisions of the Registration Rights Agreement. The Registration Rights Agreement is governed by, and construed in accordance with, the laws of the State of New York. This summary of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a form of which is available upon request to us or U S WEST. In addition, the information set forth above concerning certain interpretations and positions taken by the Staff is not intended to constitute legal advice, and prospective investors should consult their own legal advisors with respect to such matters. 39 CERTAIN U.S. FEDERAL TAX CONSIDERATIONS The following discussion summarizes certain U.S. federal tax consequences of an exchange of old 6 7/8% Notes for new 6 7/8% Notes in the exchange offer and the purchase, beneficial ownership and disposition of new 6 7/8% Notes. For purposes of this summary, a "U.S. Holder" means a beneficial owner of an old 6 7/8% or a new 6 7/8% Note that is for U.S. federal income tax purposes: - an individual who is a citizen or resident of the United States; - a corporation, partnership or other business entity created or organized under the laws of the United States or any state thereof (including the District of Columbia); - an estate the income of which is subject to U.S. federal income taxation regardless of its source; or - a trust with respect to which a court within the United States is able to exercise primary supervision over its administration, and one or more United States persons have the authority to control all of its substantial decisions. An individual may, subject to certain exceptions, be deemed to be a resident of the United States by reason of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). A "Non-U.S. Holder" is a beneficial owner of an old 6 7/8% Note or a new 6 7/8% Note that is not a U.S. Holder. This summary is based on interpretations of the Internal Revenue Code of 1986, as amended (the "Code"), regulations issued thereunder, and rulings and decisions currently in effect (or in some cases proposed), all of which are subject to change. Any such change may be applied retroactively and may adversely affect the federal tax consequences described herein. This summary addresses only holders that own old 6 7/8% Notes or will own new 6 7/8% Notes as capital assets and not as part of a "straddle" or a "conversion transaction" for U.S. federal income tax purposes or as part of some other integrated investment. This summary does not discuss all of the tax consequences that may be relevant to particular investors or to investors subject to special treatment under the U.S. federal income tax laws (such as life insurance companies, tax-exempt entities, regulated investment companies, securities dealers, and investors whose functional currency is not the U.S. dollar). Persons considering the exchange of their old 6 7/8% Notes for new 6 7/8% Notes and persons considering the purchase of new 6 7/8% Notes should consult their tax advisors concerning the application of U.S. federal tax laws to their particular situations as well as any consequences of the exchange of the old 6 7/8% Notes for new 6 7/8% Notes and of the purchase, beneficial ownership and disposition of new 6 7/8% Notes arising under the laws of any state or other taxing jurisdiction. U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER TO U.S. HOLDERS AND NON-U.S. HOLDERS The exchange of old 6 7/8% Notes for new 6 7/8% Notes pursuant to the exchange offer will not be a taxable event for U.S. federal income tax purposes. U.S. Holders and Non-U.S. Holders will not recognize any taxable gain or loss as a result of such exchange and will have the same tax basis and holding period in the new 6 7/8% Notes as they had in the old 6 7/8% Notes immediately before the exchange. U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS TREATMENT OF INTEREST. Stated interest on the new 6 7/8% Notes will be taxable to U.S. Holders as ordinary interest income as the interest accrues or is paid in accordance with the holder's regular method of accounting. MARKET DISCOUNT. If a U.S. Holder acquires a new 6 7/8% Note for an amount that is less than its principal amount by more than a DE MINIMIS amount (generally 0.25% of the principal amount 40 multiplied by the number of remaining whole years to maturity), the amount of the difference will be treated as "market discount." In the event a U.S. Holder acquires a new 6 7/8% Note with market discount, unless the U.S. Holder elects to include such market discount in income as it accrues, a U.S. Holder will be required to treat any principal payment on, and any gain on the sale, exchange, retirement or other disposition (including a gift) of, a new 6 7/8% Note as ordinary income to the extent of any accrued market discount that has not previously been included in income. In general, market discount on the new 6 7/8% Notes will accrue ratably over the remaining term of the new 6 7/8% Notes or, at the election of the U.S. Holder, under a constant yield method. In addition, a U.S. Holder could be required to defer the deduction of all or a portion of the interest paid on any indebtedness incurred or continued to purchase or carry a new 6 7/8% Note unless the U.S. Holder elects to include market discount in income currently. Such an election applies to all debt instruments held by a taxpayer and may not be revoked without the consent of the Internal Revenue Service (the "IRS"). AMORTIZATION OF BOND PREMIUM. A U.S. Holder that purchases a new 6 7/8% Note for an amount in excess of its stated principal amount will be considered to have purchased the Note at a premium. The U.S. Holder may elect to amortize such premium (as an offset to interest income), using a constant yield method, over the remaining term of the new 6 7/8% Note (or to an earlier call date if it results in a smaller amount of amortizable bond premium). Such election, once made, generally applies to all debt instruments held or subsequently acquired by the U.S. Holder on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS. A U.S. Holder that elects to amortize such premium must reduce its tax basis in the related 6 7/8% Note by the amount of the premium amortized during its holding period. If a U.S. Holder does not elect to amortize the premium, the amount of such premium will be included in the U.S. Holder's tax basis for purposes of computing gain or loss in connection with a taxable disposition of the new 6 7/8% Note. SALE OR OTHER DISPOSITION OF NEW 6 7/8% NOTES In general, upon the sale, retirement or other taxable disposition of a new 6 7/8% Note, a U.S. Holder will recognize taxable gain or loss equal to the difference between (i) the amount of the cash and the fair market value of any property received on the sale, retirement or other taxable disposition (not including any amount attributable to accrued but unpaid interest or accrued market discount not previously included in income) and (ii) the U.S. Holder's adjusted tax basis in the new 6 7/8% Note. A U.S. Holder's adjusted tax basis in a new 6 7/8% Note generally will be equal to the cost of the Note to such U.S. Holder, increased by the amount of any market discount previously included in income by the U.S. Holder and reduced by the amount of any payments received by the U.S. Holder, other than payments of qualified stated interest, and by the amount of amortizable bond premium taken into account. Subject to the discussion of market discount above, gain or loss realized on the sale, retirement or other taxable disposition of a new 6 7/8% Note will be capital gain or loss. U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OWNERSHIP OF NEW 6 7/8% NOTES For purposes of the following summary, interest and gain on the sale, exchange or other disposition of a new 6 7/8% Note will be considered "U.S. trade or business income" if such income or gain is: - effectively connected with the conduct of a trade or business in the United States; or - in the case of a treaty resident, attributable to a permanent establishment (or, in the case of an individual, to a fixed base) in the United States. TREATMENT OF INTEREST. A Non-U.S. Holder that is not subject to U.S. federal income tax as a result of any direct or indirect connection to the United States other than its ownership of a new 6 7/8% Note will not be subject to U.S. federal income or withholding tax in respect of interest income on the new 6 7/8% Note if: - the interest is not U.S. trade or business income; 41 - the Non-U.S. Holder provides an appropriate statement on IRS Form W-8 or Form W-8BEN, together with all appropriate attachments, signed under penalties of perjury, identifying the Non-U.S. Holder and stating, among other things, that the Non-U.S. Holder is not a United States person for U.S. federal income tax purposes; and - the Non-U.S. Holder is not a "10-percent shareholder" or a "related controlled foreign corporation" with respect to the Company as specially defined for U.S. federal income tax purposes. If a new 6 7/8% Note is held through a securities clearing organization or certain other financial institutions, the organization or institution may provide a signed statement to eliminate withholding tax. However, in such case, the signed statement must be accompanied by a copy of the IRS Form W-8 or Form W-8BEN or the substitute form provided by the beneficial owner to the organization or institution. For interest paid with respect to a new 6 7/8% Note after December 31, 2000, a Non-U.S. Holder that is treated as a partnership for U.S. federal tax purposes generally will be required to provide an IRS Form W-8IMY and to attach an appropriate certification by each beneficial owner of the Non-U.S. Holder (including in certain cases, such beneficial owner's beneficial owners). Prospective investors, including foreign partnerships and their partners, should consult their tax advisors regarding these possible additional reporting requirements. To the extent these conditions are not met, a 30% withholding tax will apply to interest income on the new 6 7/8% Note, unless an income tax treaty reduces or eliminates such tax or unless the interest is U.S. trade or business income with respect to such Non-U.S. Holder and the Non-U.S. Holder provides an appropriate statement to that effect. In the latter case, such Non-U.S. Holder generally will be subject to U.S. federal income tax with respect to all income from the new 6 7/8% Notes at regular rates applicable to U.S. taxpayers. Additionally, in such event, Non-U.S. Holders that are corporations could be subject to a branch profits tax on such income. TREATMENT OF DISPOSITIONS OF NEW 6 7/8% NOTES. In general, a Non-U.S. Holder will not be subject to U.S. federal income tax on any amount received (other than amounts in respect of accrued but unpaid interest) upon retirement or disposition of a new 6 7/8% Note unless such Non-U.S. Holder is an individual present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition and certain other requirements are met, or unless the gain is U.S. trade or business income. In the latter event, Non-U.S. Holders generally will be subject to U.S. federal income tax with respect to such gain at regular rates applicable to U.S. taxpayers. Additionally, in such event, Non-U.S. Holders that are corporations could be subject to a branch profits tax on such gain. TREATMENT OF NEW 6 7/8% NOTES FOR U.S. FEDERAL ESTATE TAX PURPOSES. An individual Non-U.S. Holder (who is not domiciled in the United States for U.S. federal estate tax purposes at the time of death) will not be subject to U.S. federal estate tax in respect of a new 6 7/8% Note, so long as the Non-U.S. Holder is not a "10-percent shareholder" with respect to the Company as specially defined for U.S. federal income tax purposes and payments of interest on such new 6 7/8% Note would not have been considered U.S. trade or business income at the time of such Non-U.S. Holder's death. U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX FOR NON-U.S. HOLDERS Under certain circumstances, the Code requires "information reporting" annually to the IRS and to each holder of new 6 7/8% Notes, and "backup withholding" at a rate of 31% with respect to certain payments made on or with respect to the new 6 7/8% Notes. Backup withholding generally does not apply with respect to certain holders of new 6 7/8% Notes, including corporations, tax-exempt organizations, qualified pension and profit sharing trusts and individual retirement accounts. A Non-U.S. Holder that provides an IRS Form W-8 or Form W-8BEN, together with all appropriate attachments, signed under penalties of perjury, identifying the Non-U.S. Holder and stating that the Non-U.S. Holder is not a United States person, will not be subject to IRS reporting requirements and 42 U.S. backup withholding. With respect to interest paid after December 31, 2000, IRS Forms W-8BEN will generally be required from the beneficial owners of interests in a Non-U.S. Holder that is treated as a partnership for U.S. federal income tax purposes. The payment of the proceeds on the disposition of a new 6 7/8% Note to or through the U.S. office of a broker generally will be subject to information reporting and backup withholding at a rate of 31% unless the Non-U.S. Holder either certifies its status as a Non-U.S. Holder under penalties of perjury on IRS Form W-8 or Form W-8BEN (as described above) or otherwise establishes an exemption. The payment of the proceeds on the disposition of a new 6 7/8% Note by a Non-U.S. Holder to or through a non-U.S. office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the non-U.S. broker is a "U.S. related person" (as defined below). The payment of proceeds on the disposition of a new 6 7/8% Note by a Non-U.S. Holder to or through a non-U.S. office of a U.S. broker or a U.S. related person generally will not be subject to backup withholding but will be subject to information reporting unless the Non-U.S. Holder certifies its status as a Non-U.S. Holder under penalties of perjury or the broker has certain documentary evidence in its files as to the Non-U.S. Holder's foreign status and the broker has no actual knowledge to the contrary. For this purpose, a "U.S. related person" is: - a "controlled foreign corporation" as specially defined for U.S. federal income tax purposes; - a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a U.S. trade or business; or - for payments made after December 31, 2000, a foreign partnership if at any time during its tax year one or more of its partners are United States persons who, in the aggregate, hold more than 50% of the income or capital interest of the partnership or if, at any time during its taxable year, the partnership is engaged in the conduct of a U.S. trade or business. Backup withholding is not an additional tax and may be refunded (or credited against the Non-U.S. Holder's U.S. federal income tax liability, if any), provided that certain required information is furnished. The information reporting requirements may apply regardless of whether withholding is required. Copies of the information returns reporting such interest and withholding also may be made available to the tax authorities in the country in which a Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives new 6 7/8% Notes for its own account in the exchange offer must acknowledge that it acquired the old 6 7/8% Notes for its own account as a result of market-making or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the new 6 7/8% Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A Participating Broker-Dealer may use this prospectus, as it may be amended or supplemented from time to time, in connection with resales of new 6 7/8% Notes received in exchange for old 6 7/8% Notes where the old 6 7/8% Notes were acquired as a result of market-making activities or other trading activities. Under the Registration Rights Agreement, we and U S WEST have agreed that for a period of 225 calendar days after the expiration date, we will make this prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any resale of new 6 7/8% Notes. 43 We will not receive any proceeds from any sale of the new 6 7/8% Notes by any Participating Broker-Dealer. New 6 7/8% Notes received by Participating Broker-Dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new 6 7/8% Notes or a combination of the methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of the new 6 7/8% Notes. Any Participating Broker-Dealer that resells new 6 7/8% Notes that were received by it for its own account in the exchange offer and any broker or dealer that participates in a distribution of the new 6 7/8% Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of new 6 7/8% Notes and any commissions or concessions received by those persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 225 calendar days after closing of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any Participating Broker-Dealer that requests the documents in the letter of transmittal. We have agreed to pay all expenses incident to our or U S WEST's performance of, or compliance with, the Registration Rights Agreement and all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the old 6 7/8% Notes but excluding commissions or concessions of any brokers or dealers, and will indemnify the holders, including any broker-dealers, and certain parties related to the holders against certain liabilities, including liabilities under the Securities Act. We have not entered into any arrangements or understandings with any person to distribute the new 6 7/8% Notes to be received in the exchange offer. LEGAL MATTERS Certain legal matters with respect to the 6 7/8% Notes will be passed upon for us and U S WEST by Cadwalader, Wickersham & Taft, New York, New York, and by Thomas O. McGimpsey, Senior Attorney and Assistant Secretary of U S WEST. Cadwalader, Wickersham & Taft, New York, New York is also passing on certain federal income tax matters in connection with the 6 7/8% Notes. EXPERTS The audited financial statements and schedule of U S WEST for the year ended December 31, 1998 included in U S WEST's Annual Report on Form 10-K, as amended by Form 10-K/A filed March 24, 1999, and in U S WEST's Proxy Statement on Schedule 14A dated March 24, 1999, and the selected condensed consolidated financial statements in U S WEST's Current Report on Form 8-K dated February 24, 1999, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, which are incorporated by reference in this prospectus and in the registration statement in reliance upon the authority of said firm as experts in giving said reports. GENERAL INFORMATION INCORPORATION, REGISTERED AND PRINCIPAL EXECUTIVE OFFICES, AUTHORIZED SHARES Old U S WEST was one of seven regional holding companies formed in connection with the court ordered divestiture of American Telephone and Telegraph Company ("AT&T") which occurred on January 1, 1984. U S WEST was incorporated as a wholly-owned subsidiary of Old U S WEST on 44 December 23, 1997. As a result of the Separation, U S WEST became a separate publicly-traded company. U S WEST is incorporated under the laws of the State of Delaware. The address of the registered office of U S WEST in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name of U S WEST's registered agent at that address is The Corporation Trust Company. The principal executive offices of U S WEST are located at 1801 California Street, Denver, Colorado 80202. U S WEST is authorized to issue 2 billion shares of common stock and 200 million shares of preferred stock. As of September 30, 1999, 505,001,883 shares of U S WEST common stock were issued and outstanding, and no shares of U S WEST preferred stock were issued or outstanding. The share capital of U S WEST is fully paid. U S WEST does not have any convertible debt securities. A description of U S WEST's principal activities is set forth in this prospectus and in documents incorporated by reference herein. We are a wholly-owned subsidiary of U S WEST which provides financing to U S WEST and its affiliates. We were incorporated under the laws of the State of Colorado on June 10, 1986. The address of our registered office is 1675 Broadway, Denver, Colorado 80202. The name of the registered agent at that address is The Corporation Trust Company. Our principal executive offices are located at 1801 California Street, Denver, Colorado 80202. We are authorized to issue one share of stock without par value. As of the date of this prospectus, we have issued one share of stock to U S WEST. Our issued share capital is fully paid. We do not have any convertible debt securities. LISTING The old 6 7/8% Notes are listed on the Luxembourg Stock Exchange. Application will be made to list the new 6 7/8% Notes on the Luxembourg Stock Exchange. In connection with the listing of the 6 7/8% Notes, our Articles of Incorporation, Bylaws and Restated Certificate of Incorporation and a legal notice relating to the issuance of the 6 7/8% Notes were deposited with "Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg," where copies thereof may be obtained upon request. We will also inform the Luxembourg Stock Exchange of the Interest Payment Dates, the interest rate for each interest period, and the amount paid on each Interest Payment Date. Copies of the above documents and interest rate information, together with this prospectus, the Indenture and U S WEST's Annual Report on Form 10-K for the year ended December 31, 1998, as amended by Form 10-K/A filed March 24, 1999 ("1998 10-K"), as well as all future Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, so long as any of the 6 7/8% Notes are outstanding and listed on the Luxembourg Stock Exchange, will be made available, free of charge, at the main office of Kredietbank S.A. Luxembourg. The purchase agreement pursuant to which the 6 7/8% Notes were originally issued and agreements relating to the Guarantees will also be available for inspection at Kredietbank S.A. Luxembourg, which will act as intermediary between the Luxembourg Stock Exchange, us and the holders of the 6 7/8% Notes so long as the 6 7/8% Notes are in global form. The consolidated financial statements contained in U S WEST's 1998 Form 10-K have been audited by Arthur Andersen LLP. AUTHORIZATION The 6 7/8% Notes were originally issued pursuant to authority granted by our Board of Directors on May 16, 1999, as such authority may be supplemented from time to time. The Guarantees were originally entered into pursuant to authority granted by our Board of Directors of U S WEST on May 16, 1999, as such authority may be supplemented from time to time. 45 MATERIAL CHANGE There has been no material adverse change in the financial position or operations of U S WEST and its subsidiaries (including Capital Funding) on a consolidated basis since December 31, 1998, except as disclosed in this prospectus or in the documents incorporated by reference in this prospectus. LITIGATION Except as disclosed in this prospectus or in documents incorporated by reference in this prospectus, neither U S WEST, nor any of its subsidiaries (including Capital Funding), is involved in any legal or arbitration proceedings, nor, to U S WEST's knowledge, are any legal or arbitration proceedings pending or threatened involving U S WEST or any of its subsidiaries (including Capital Funding), which have had during the 12 months prior to the date of this prospectus a material adverse effect on the financial position of U S WEST and its subsidiaries (including Capital Funding) on a consolidated basis. U S WEST and certain subsidiaries (including Capital Funding) are defendants in various legal proceedings involving matters generally incidental to their business. Although it is difficult to predict the ultimate outcome of these proceedings, management of U S WEST believes, based on discussions with counsel, that any ultimate liability will not have a material adverse effect on the consolidated financial position or results of operations of U S WEST and its subsidiaries (including Capital Funding). IDENTIFICATION NUMBERS The new 6 7/8% Notes have been accepted for clearance through DTC, Euroclear and Cedelbank CUSIP: 912912AU6; ISIN: US912912AU64; Common Code: . 46 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law (the "DGCL") permits the board of directors of U S WEST, Inc. ("U S WEST") to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by him or her in connection with any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his or her being or having been a director, officer, employee or agent of U S WEST, in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933 (the "Securities Act"). The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. U S WEST's Restated Certificate of Incorporation and Bylaws provide for indemnification of its directors and officers to the fullest extent permitted by law. As permitted by section 102 of the DGCL, U S WEST's Restated Certificate of Incorporation eliminates a director's personal liability for monetary damages to U S WEST and its stockholders arising from a breach or alleged breach of a director's fiduciary duty except for liability under section 174 of the DGCL, for liability for any breach of the director's duty of loyalty to U S WEST or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or for any transaction from which the director derived an improper personal benefit. The Bylaws of U S WEST Capital Funding, Inc. ("Capital Funding") provide for the indemnification of directors and officers to the extent permissible under applicable law. Section 7-109-102 of the Colorado Business Corporation Act (the "CBCA") specifies the circumstances under which a corporation may indemnify its directors, officers, employees 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, except for court-ordered indemnification for reasonable expenses occurred, can be made. Indemnification is mandatory when any director or officer is wholly successful, on the merits or otherwise, in defending any civil or criminal proceeding. The directors and officers of U S WEST and Capital Funding are covered by insurance policies indemnifying against certain liabilities, including certain liabilities arising under the Securities Act which might be incurred by them in such capacities and against which they cannot be indemnified by U S WEST and Capital Funding. The agents, dealers or underwriters who executed the agreements filed as Exhibit 1 to this registration statement agreed to indemnify U S WEST and Capital Funding directors and their officers who signed the registration statement against certain liabilities which might arise under the Securities Act with respect to information furnished to U S WEST and Capital Funding by or on behalf of any such indemnifying party. II-1 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. Exhibits identified in parentheses below are on file with the Commission and are incorporated herein by reference to such previous filings. All other exhibits are provided as part of this electronic transmission.
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 1-A Purchase Agreement, dated August 20, 1999, among U S WEST Capital Funding, Inc., U S WEST, Inc., J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the initial purchasers named therein. (2-A) Separation Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and U S WEST, Inc. (formerly USW-C, Inc.), dated June 5, 1998 (Exhibit 99.1 to Form 8-K/A dated June 26, 1998, File No. 1-14087). (2-A.1) Amendment to the Separation Agreement between MediaOne Group, Inc. (formerly U S WEST, Inc.) and U S WEST, Inc. (formerly USW-C, Inc.), dated June 12, 1998 (Exhibit 10(p) to Form 10-K/A for the year ended December 31, 1998, File No. 1-14087). (2-A.2) Offer to Purchase; Letter of Transmittal relating to the Common Stock; Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees; Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients; Notices of Guaranteed Delivery relating to the Common Stock; Press Release issued by the Offeror and the Company on May 17, 1999; and Guidelines for Certificate of Taxpayer Identification Number on Substitute Form W-9, each dated May 21, 1999 (Exhibits (a)(1) through (a)(7) to Schedule 14D-1, dated May 21, 1999, as amended). (2-A.3) Agreement and Plan of Merger, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit 2 to Form 8-K, dated May 21, 1999, File No. 1-14087). (2-A.4) Tender Offer and Purchase Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(2) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.5) Voting Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(3) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.6) Standstill Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(4) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.7) Tender and Voting Agreement, dated as of May 16, 1999, between U S WEST, Inc., Global Crossing Ltd. and each of the parties listed on the signature page thereto (Exhibit (c)(5) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.8) Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and each person whose name appears on the signature page thereto (Exhibit (c)(6) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.9) Letter Agreement, dated as of May 16, 1999, between U S WEST, Inc. and Global Crossing Ltd. (Exhibit 99 to Form 8-K, dated May 21, 1999, File No. 1-14087). (2-A.10) Transfer Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and each person whose name appears on the signature page thereto (Exhibit (c)(8) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended).
II-2
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (2-A.11) Agreement and Plan of Merger between U S WEST, Inc. and Qwest Communications International Inc., dated as of July 18, 1999 and amended by Amendment No. 1, dated as of September 8, 1999 (Annex A to Schedule 14A dated September 17, 1999). (2-A.12) Voting Agreement among each of the stockholders listed on the signature page thereto and U S WEST, Inc., dated as of July 18, 1999 (Exhibit 10.1 to Form 8-K, dated July 20, 1999, File No. 1-14087). (2-A.13) Termination Agreement between U S WEST, Inc. and Global Crossing Ltd., dated as of July 18, 199 (Exhibit 10.2 to Form 8-K, dated July 20, 1999, File No. 1-14087). (2-A.14) Amendment No. 1, dated as of July 18, 1999, to Tender Offer and Purchase Agreement, dated as of May 16, 1999, between U S WEST, Inc. and Global Crossing Ltd. (Exhibit 2-A.14 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (3-A.1). Restated Certificate of Incorporation for U S WEST, Inc. (Exhibit 3A to Form S-4/A Registration Statement No. 333-45765, filed March 18, 1998. 3-A.2 Articles of Incorporation for U S WEST Capital Funding, Inc. (3-B.1) Bylaws of U S WEST, Inc. (formerly "USW-C, Inc."), effective as of June 12, 1998 (Exhibit 3(ii) to Form 8-K/A dated June 26, 1998, File No. 1-14087). 3-B.2 Bylaws of U S WEST Capital Funding, Inc. (4-A) Form of Rights Agreement between U S WEST, Inc. (formerly "USW-C, Inc.") and State Street Bank and Trust Company, as Rights Agent, dated as of June 1, 1998 (Exhibit 4-A to the Form S-4/A Registration Statement No. 333-45765, filed April 2, 1998). (4-A.1) Amendment No. 1 to Rights Agreement between U S WEST, Inc. and State Street Bank and Trust Company, dated as of May 16, 1999 (Exhibit 4 to Form 8-K, dated May 21, 1999, File No. 1-14087). (4-A.2) Amendment No. 2 to Rights Agreement between U S WEST, Inc. and State Street Bank and Trust Company, dated as of July 18, 1999 (Exhibit 4-A.2 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). 4-A.3 Registration Rights Agreement, dated August 20, 1999, between U S WEST Capital Funding, Inc., U S WEST, Inc., J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 4-B Form of Letter of Transmittal.* (4-C) Indenture dated as of June 29, 1998 by and among U S WEST Capital Funding, Inc., U S WEST, Inc. and The First National Bank of Chicago (now known as Bank One Trust Company, National Association) as Trustee filed as Exhibit 4(a) to Form 8-K dated November 18, 1998, File No. 1-14087. The form or forms of debt securities with respect to each particular series of debt securities registered hereunder will be filed as an exhibit to a Current Report on Form 8-K of U S WEST, Inc. and incorporated herein by reference. 5-A.1 Opinion of Cadwalader, Wickersham & Taft with respect to legality of the securities being registered. 5-A.2 Opinion of Thomas O. McGimpsey, Senior Attorney and Assistant Secretary of U S WEST, Inc., with respect to legality of the securities being registered. 8 Opinion of Cadwalader, Wickersham & Taft with respect to certain tax matters (included in Exhibit 5-A.1). (10-A) Employee Matters Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated June 5, 1998 (Exhibit 99.2 to Form 8-K/A dated June 26, 1998, File No. 1-14087).
- ------------------------ * To be filed by amendment. II-3
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (10-B) Tax Sharing Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated June 5, 1998 (Exhibit 99.3 to Form 8-K/A dated June 26, 1998, File No. 1-14087). (10-C) 364-Day Credit Agreement, dated May 8, 1998, with Morgan Guaranty Trust Company of New York, as administrate agent (Exhibit 10A to Form 10-Q for the quarter ended March 31, 1998, File No. 1-14087). (10-D) Five year Credit Agreement, dated May 8, 1998, with Morgan Guaranty Trust Company of New York, as administrative agent (Exhibit 10B to Form 10-Q for the quarter ended March 31, 1998, File No. 1-14087). (10-D.1) Amendment No. 1 to Credit Agreements dated as of June 30, 1998 to the 364-Day Credit Agreement and the Five-year Credit Agreement, each dated as of May 8, 1998, among U S WEST Capital Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereto and Morgan Guaranty Trust Company of New York (Exhibit 10(e)(1) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-D.2) Amended and Restated Credit Agreement, dated as of May 7, 1999, among U S WEST Capital Funding, Inc., U S WEST, Inc. and the banks listed on the signature pages thereof (Exhibit (b)(4) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (10-D.3) Amendment to Credit Agreements, dated as of June 11, 1999, which further amends (i) the 364-Day Credit Agreement dated as of May 8, 1999, as amended and (ii) the Five-Year Credit Agreement dated as of May 8, 1998, as amended, among U S WEST Capital Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereto, and Morgan Guaranty Trust Company of New York (Exhibit 10-D.3 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-D.4) 364-Day $1.5 billion Credit Agreement dated as of June 11, 1999, among U S WEST Capital Funding, inc., and U S WEST, Inc., the banks listed therein and Morgan Guaranty Trust Company of New York, as administrative agent (Exhibit (b)(6) to Amendment No. 3 to Schedule 14D-1 and Schedule 13D, dated June 11, 1999, filed on behalf of Global Crossing Ltd. and U S WEST, Inc.). (10-D.5) Assignment and Assumption Agreement among each institution listed on Schedule 1 thereto, U S WEST, Inc. and Morgan Guaranty Trust Company of New York, dated as of July 6, 1999 (Exhibit 10-D.5 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-E) 364-Day Credit Agreement, among the banks listed therein, U S WEST Communications, Inc. and Morgan Guaranty Trust Company of New York, as administrative agent, dated as of May 19, 1999 (Exhibit 10-E to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-F) Amendment No. 1 to Credit Agreement to the 364-Day Credit Agreement, dated as of May 19, 1998, among U S WEST Communications, Inc., U S WEST, Inc., the banks listed on the signature pages thereto and Morgan Guaranty Trust Company of New York, as administrative agent, dated as of June 11, 1999 (Exhibit 10-F to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-G) Change of Control Agreement for the President and Chief Executive Officer (Exhibit 10(f) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087). (10-G.1) Retention Agreement for the Chairman, Chief Executive Officer and President of U S WEST, Inc., dated as of September 7, 1999 (Exhibit 10-G.1 to Form 8-K dated September 20, 1999, File No. 1-14087). (10-H) Form of Change of Control Agreement for Tier II Executive (Exhibit 10(g) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087.
II-4
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (10-H.1) Form of Retention Agreement for Executive Officers of U S WEST, Inc. (Exhibit 10-H.1 to Form 8-K dated September 20, 1999, File No. 1-14087). (10-I) Form of Executive Severance Agreement (Exhibit 10(h) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087). (10-J) 1998 U S WEST Stock Plan (Exhibit 10-A to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-K) U S WEST Long-Term Incentive Plan (Exhibit 10-D to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-L) U S WEST Executive Short-Term Incentive Plan (Exhibit 10-E to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-M) U S WEST 1998 Broad Based Stock Option Plan dated June 12, 1998 (Exhibit 10(l) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-N) U S WEST Deferred Compensation Plan, amended and restated effective as of June 12, 1998 (Exhibit 10(m) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-O) U S WEST 1998 Stock Plan, as amended June 22, 1998 (Exhibit 10(n) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-O.1) 1998 U S WEST Stock Plan, as amended August 6, 1999 (Exhibit 10-O.1 to Form 10-Q for the quarter ended September 30, 1999, File No. 1-14087). (10-O.2) 1999 U S WEST Stock Plan, as amended August 6, 1999 (Exhibit 10-O.2 to Form 10-Q for the quarter ended September 30, 1999, File No. 1-14087). (10-P) Shareowner Investment Plan dated June 12, 1998 (Form S-3 Registration Statement No. 333-52781, filed May 15, 1998). (10-Q) Form of Non-Qualified Stock Option Agreement (Exhibit 10-Q to Form 10-Q for the quarter ended March 31, 1999, File No. 1-14087). (10-R) Form of Agreement for Purchase and Sale of Telephone Exchanges, dated as of June 16, 1999, between Citizens Utilities Company and U S WEST Communications, Inc. (Exhibit 99 to Form 8-K, dated June 17, 1999, File No. 1-14087). 12 Computation of Ratio of Earnings to Fixed Charges. (13) U S WEST 1998 Summary Annual Report to Stockholders (Exhibit 13 to Form 8-K dated February 24, 1999, File No. 1-14087). (21) Subsidiaries of the Registrant (Exhibit 21 to Form 10-K/A for the year ended December 31, 1998). 23-A Consent of Arthur Andersen LLP. 23-B Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5-A.1). 24 Powers of Attorney. (25) Statement of Eligibility of Trustee (Exhibit 25 to Form S-3 dated May 6, 1998, File No. 333-51907). (99) Annual Report on Form 11-K for the U S WEST Savings Plan/ESOP for the year ended December 31, 1998 (Exhibit 99 to Form 10-K/A filed by amendment on Form SE, File No. 1-14087), Paper Copy (P).
II-5 ITEM 22. UNDERTAKINGS. (a) The undersigned hereby undertakes: (1) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) under the Securities Act, the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) That every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415 under the Securities Act, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission (the "Commission") such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceedings) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (e) The undersigned hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) 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. II-6 (f) The undersigned hereby undertakes: (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. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (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. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) 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 us pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed part of the registration statement as of the time it was declared effective. (5) For 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-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, U S WEST, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on the 10th day of December, 1999. U S WEST, INC. By: /s/ THOMAS O. MCGIMPSEY ----------------------------------------- Thomas O. McGimpsey ASSISTANT SECRETARY
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the date indicated. PRINCIPAL EXECUTIVE OFFICER: /s/ SOLOMON D. TRUJILLO ------------------------------------------- President and Chief Executive Officer Solomon D. Trujillo PRINCIPAL FINANCIAL OFFICER: /s/ ALLAN R. SPIES ------------------------------------------- Executive Vice President and Chief Financial Allan R. Spies Officer PRINCIPAL ACCOUNTING OFFICER: /s/ JANET K. COOPER ------------------------------------------- Vice President--Finance and Controller Janet K. Cooper DIRECTORS: /s/ LINDA G. ALVARADO ------------------------------------------- Linda G. Alvarado /s/ CRAIG R. BARRETT ------------------------------------------- Craig R. Barrett /s/ THE HONORABLE HANK BROWN ------------------------------------------- The Honorable Hank Brown /s/ JERRY J. COLANGELO ------------------------------------------- Jerry J. Colangelo /s/ MANUEL A. FERNANDEZ ------------------------------------------- Manuel A. Fernandez /s/ GEORGE J. HARAD ------------------------------------------- George J. Harad /s/ PETER S. HELLMAN ------------------------------------------- Peter S. Hellman
II-8 /s/ MARILYN CARLSON NELSON ------------------------------------------- Marilyn Carlson Nelson /s/ FRANK P. POPOFF ------------------------------------------- Frank P. Popoff /s/ SOLOMON D. TRUJILLO ------------------------------------------- Solomon D. Trujillo
Dated: December 10, 1999 II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, U S WEST Capital Funding, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on the 10th day of December, 1999. U S WEST CAPITAL FUNDING, INC. By: /s/ THOMAS O. MCGIMPSEY ----------------------------------------- Thomas O. McGimpsey ASSISTANT SECRETARY
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the date indicated. PRINCIPAL EXECUTIVE OFFICER: /s/ ALLAN R. SPIES ------------------------------------------- President Allan R. Spies PRINCIPAL FINANCIAL OFFICER: /s/ SEAN P. FOLEY ------------------------------------------- Vice President--Treasurer Sean P. Foley PRINCIPAL ACCOUNTING OFFICER: /s/ JANET K. COOPER ------------------------------------------- Vice President--Finance and Controller Janet K. Cooper DIRECTORS: /s/ ALLAN R. SPIES ------------------------------------------- Allan R. Spies /s/ JANET K. COOPER ------------------------------------------- Janet K. Cooper /s/ SEAN P. FOLEY ------------------------------------------- Sean P. Foley
Dated: December 10, 1999 II-10 EXHIBIT INDEX(1)
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 1-A Purchase Agreement, dated August 20, 1999, among U S WEST Capital Funding, Inc., U S WEST, Inc., J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the initial purchasers named therein. (2-A) Separation Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and U S WEST, Inc. (formerly USW-C, Inc.), dated June 5, 1998 (Exhibit 99.1 to Form 8-K/A dated June 26, 1998, File No. 1-14087). (2-A.1) Amendment to the Separation Agreement between MediaOne Group, Inc. (formerly U S WEST, Inc.) and U S WEST, Inc. (formerly USW-C, Inc.), dated June 12, 1998 (Exhibit 10(p) to Form 10-K/A for the year ended December 31, 1998, File No. 1-14087). (2-A.2) Offer to Purchase; Letter of Transmittal relating to the Common Stock; Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees; Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients; Notices of Guaranteed Delivery relating to the Common Stock; Press Release issued by the Offeror and the Company on May 17, 1999; and Guidelines for Certificate of Taxpayer Identification Number on Substitute Form W-9, each dated May 21, 1999 (Exhibits (a)(1) through (a)(7) to Schedule 14D-1, dated May 21, 1999, as amended). (2-A.3) Agreement and Plan of Merger, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit 2 to Form 8-K, dated May 21, 1999, File No. 1-14087). (2-A.4) Tender Offer and Purchase Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(2) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.5) Voting Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(3) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.6) Standstill Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and U S WEST, Inc. (Exhibit (c)(4) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.7) Tender and Voting Agreement, dated as of May 16, 1999, between U S WEST, Inc., Global Crossing Ltd. and each of the parties listed on the signature page thereto (Exhibit (c)(5) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.8) Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and each person whose name appears on the signature page thereto (Exhibit (c)(6) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.9) Letter Agreement, dated as of May 16, 1999, between U S WEST, Inc. and Global Crossing Ltd. (Exhibit 99 to Form 8-K, dated May 21, 1999, File No. 1-14087). (2-A.10) Transfer Agreement, dated as of May 16, 1999, between Global Crossing Ltd. and each person whose name appears on the signature page thereto (Exhibit (c)(8) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (2-A.11) Agreement and Plan of Merger between U S WEST, Inc. and Qwest Communications International Inc., dated as of July 18, 1999 and amended by Amendment No. 1, dated as of September 8, 1999 (Annex A to Schedule 14A dated September 17, 1999). (2-A.12) Voting Agreement among each of the stockholders listed on the signature page thereto and U S WEST, Inc., dated as of July 18, 1999 (Exhibit 10.1 to Form 8-K, dated July 20, 1999, File No. 1-14087).
- ------------------------ (1) Exhibits identified in parentheses are on file with the Commission and are incorporated herein by reference to such previous filings. All other exhibits are provided as part of this electronic transmission.
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (2-A.13) Termination Agreement between U S WEST, Inc. and Global Crossing Ltd., dated as of July 18, 199 (Exhibit 10.2 to Form 8-K, dated July 20, 1999, File No. 1-14087). (2-A.14) Amendment No. 1, dated as of July 18, 1999, to Tender Offer and Purchase Agreement, dated as of May 16, 1999, between U S WEST, Inc. and Global Crossing Ltd. (Exhibit 2-A.14 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (3-A.1). Restated Certificate of Incorporation for U S WEST, Inc. (Exhibit 3A to Form S-4/A Registration Statement No. 333-45765, filed March 18, 1998). 3-A.2 Articles of Incorporation for U S WEST Capital Funding, Inc. (3-B.1) Bylaws of U S WEST, Inc. (formerly "USW-C, Inc."), effective as of June 12, 1998 (Exhibit 3(ii) to Form 8-K/A dated June 26, 1998, File No. 1-14087). 3-B.2 Bylaws of U S WEST Capital Funding, Inc. (4-A) Form of Rights Agreement between U S WEST, Inc. (formerly "USW-C, Inc.") and State Street Bank and Trust Company, as Rights Agent, dated as of June 1, 1998 (Exhibit 4-A to the Form S-4/A Registration Statement No. 333-45765, filed April 2, 1998). (4-A.1) Amendment No. 1 to Rights Agreement between U S WEST, Inc. and State Street Bank and Trust Company, dated as of May 16, 1999 (Exhibit 4 to Form 8-K, dated May 21, 1999, File No. 1-14087). (4-A.2) Amendment No. 2 to Rights Agreement between U S WEST, Inc. and State Street Bank and Trust Company, dated as of July 18, 1999 (Exhibit 4-A.2 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). 4-A.3 Registration Rights Agreement, dated August 20, 1999, between U S WEST Capital Funding, Inc., U S WEST, Inc., J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 4-B Form of Letter of Transmittal* (4-C) Indenture dated as of June 29, 1998 by and among U S WEST Capital Funding, Inc., U S WEST, Inc. and The First National Bank of Chicago (now known as Bank One Trust Company, National Association) as Trustee filed as Exhibit 4(a) to Form 8-K dated November 18, 1998, File No. 1-14087. The form or forms of debt securities with respect to each particular series of debt securities registered hereunder will be filed as an exhibit to a Current Report on Form 8-K of U S WEST, Inc. and incorporated herein by reference. 5-A.1 Opinion of Cadwalader, Wickersham & Taft with respect to legality of the securities being registered. 5-A.2 Opinion of Thomas O. McGimpsey, Senior Attorney and Assistant Secretary of U S WEST, Inc., with respect to legality of the securities being registered. 8 Opinion of Cadwalader, Wickersham & Taft with respect to certain tax matters (included in Exhibit 5-A.1). (10-A) Employee Matters Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated June 5, 1998 (Exhibit 99.2 to Form 8-K/A dated June 26, 1998, File No. 1-14087). (10-B) Tax Sharing Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated June 5, 1998 (Exhibit 99.3 to Form 8-K/A dated June 26, 1998, File No. 1-14087). - ------------------------------------------------------------------------------------ * To be filed by amendment.
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (10-C) 364-Day Credit Agreement, dated May 8, 1998, with Morgan Guaranty Trust Company of New York, as administrate agent (Exhibit 10A to Form 10-Q for the quarter ended March 31, 1998, File No. 1-14087). (10-D) Five year Credit Agreement, dated May 8, 1998, with Morgan Guaranty Trust Company of New York, as administrative agent (Exhibit 10B to Form 10-Q for the quarter ended March 31, 1998, File No. 1-14087). (10-D.1) Amendment No. 1 to Credit Agreements dated as of June 30, 1998 to the 364-Day Credit Agreement and the Five-year Credit Agreement, each dated as of May 8, 1998, among U S WEST Capital Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereto and Morgan Guaranty Trust Company of New York (Exhibit 10(e)(1) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-D.2) Amended and Restated Credit Agreement, dated as of May 7, 1999, among U S WEST Capital Funding, Inc., U S WEST, Inc. and the banks listed on the signature pages thereof (Exhibit (b)(4) to Schedule 14D-1 and Schedule 13D, dated May 21, 1999, as amended). (10-D.3) Amendment to Credit Agreements, dated as of June 11, 1999, which further amends (i) the 364-Day Credit Agreement dated as of May 8, 1999, as amended and (ii) the Five-Year Credit Agreement dated as of May 8, 1998, as amended, among U S WEST Capital Funding, Inc., U S WEST, Inc., the banks listed on the signature pages thereto, and Morgan Guaranty Trust Company of New York (Exhibit 10-D.3 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-D.4) 364-Day $1.5 billion Credit Agreement dated as of June 11, 1999, among U S WEST Capital Funding, inc., and U S WEST, Inc., the banks listed therein and Morgan Guaranty Trust Company of New York, as administrative agent (Exhibit (b)(6) to Amendment No. 3 to Schedule 14D-1 and Schedule 13D, dated June 11, 1999, filed on behalf of Global Crossing Ltd. and U S WEST, Inc.). (10-D.5) Assignment and Assumption Agreement among each institution listed on Schedule 1 thereto, U S WEST, Inc. and Morgan Guaranty Trust Company of New York, dated as of July 6, 1999 (Exhibit 10-D.5 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-E) 364-Day Credit Agreement, among the banks listed therein, U S WEST Communications, Inc. and Morgan Guaranty Trust Company of New York, as administrative agent, dated as of May 19, 1999 (Exhibit 10-E to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-F) Amendment No. 1 to Credit Agreement to the 364-Day Credit Agreement, dated as of May 19, 1998, among U S WEST Communications, Inc., U S WEST, Inc., the banks listed on the signature pages thereto and Morgan Guaranty Trust Company of New York, as administrative agent, dated as of June 11, 1999 (Exhibit 10-F to Form 10-Q for the quarter ended June 30, 1999, File No. 1-14087). (10-G) Change of Control Agreement for the President and Chief Executive Officer (Exhibit 10(f) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087). (10-G.1) Retention Agreement for the Chairman, Chief Executive Officer and President of U S WEST, Inc., dated as of September 7, 1999 (Exhibit 10-G.1 to Form 8-K dated September 20, 1999, File No. 1-14087). (10-H) Form of Change of Control Agreement for Tier II Executive (Exhibit 10(g) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087. (10-H.1) Form of Retention Agreement for Executive Officers of U S WEST, Inc. (Exhibit 10-H.1 to Form 8-K dated September 20, 1999, File No. 1-14087). (10-I) Form of Executive Severance Agreement (Exhibit 10(h) to Form 10-Q for the quarter ended June 30, 1998, File No. 1-14087).
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- (10-J) 1998 U S WEST Stock Plan (Exhibit 10-A to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-K) U S WEST Long-Term Incentive Plan (Exhibit 10-D to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-L) U S WEST Executive Short-Term Incentive Plan (Exhibit 10-E to the Form S-4 Registration Statement No. 333-45765, filed February 6, 1998, as amended). (10-M) U S WEST 1998 Broad Based Stock Option Plan dated June 12, 1998 (Exhibit 10(l) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-N) U S WEST Deferred Compensation Plan, amended and restated effective as of June 12, 1998 (Exhibit 10(m) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-O) U S WEST 1998 Stock Plan, as amended June 22, 1998 (Exhibit 10(n) to Form 10-Q for the quarter ended September 30, 1998, File No. 1-14087). (10-O.1) 1998 U S WEST Stock Plan, as amended August 6, 1999 (Exhibit 10-O.1 to Form 10-Q for the quarter ended September 30, 1999, File No. 1-14087). (10-O.2) 1999 U S WEST Stock Plan, as amended August 6, 1999 (Exhibit 10-O.2 to Form 10-Q for the quarter ended September 30, 1999, File No. 1-14087). (10-P) Shareowner Investment Plan dated June 12, 1998 (Form S-3 Registration Statement No. 333-52781, filed May 15, 1998). (10-Q) Form of Non-Qualified Stock Option Agreement (Exhibit 10-Q to Form 10-Q for the quarter ended March 31, 1999, File No. 1-14087). (10-R) Form of Agreement for Purchase and Sale of Telephone Exchanges, dated as of June 16, 1999, between Citizens Utilities Company and U S WEST Communications, Inc. (Exhibit 99 to Form 8-K, dated June 17, 1999, File No. 1-14087). 12 Computation of Ratio of Earnings to Fixed Charges. (13) U S WEST 1998 Summary Annual Report to Stockholders (Exhibit 13 to Form 8-K dated February 24, 1999, File No. 1-14087). (21) Subsidiaries of the Registrant (Exhibit 21 to Form 10-K/A for the year ended December 31, 1998). 23-A Consent of Arthur Andersen LLP. 23-B Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5-A.1). 24 Powers of Attorney. (25) Statement of Eligibility of Trustee (Exhibit 25 to Form S-3 dated May 6, 1998, File No. 333-51907). (99) Annual Report on Form 11-K for the U S WEST Savings Plan/ESOP for the year ended December 31, 1998 (Exhibit 99 to Form 10-K/A filed by amendment on Form SE, File No. 1-14087), Paper Copy (P).
EX-1.A 2 EXHIBIT 1-A Exhibit 1-A PURCHASE AGREEMENT U S WEST CAPITAL FUNDING, INC. $1,150,000,000 6 7/8% NOTES DUE AUGUST 15, 2001 UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY U S WEST, INC. August 20, 1999 J.P. Morgan Securities Inc. Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated As Representatives of the several Initial Purchasers named in Schedule I hereto c/o J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260-0060 Ladies and Gentlemen: U S WEST Capital Funding, Inc., a Colorado corporation (the "COMPANY"), proposes to issue and sell to the several Initial Purchasers listed in Schedule I hereto (the "INITIAL PURCHASERS") for whom J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives (the "REPRESENTATIVES"), $1,150,000,000 principal amount of its 6 7/8% Notes due August 15, 2001 (the "SECURITIES"). The Securities will be unconditionally guaranteed as to payment of principal, premium, if any, and interest (the "GUARANTEES") by U S WEST, Inc., a Delaware corporation (the "GUARANTOR"), and will be issued pursuant to the provisions of an Indenture, dated as of June 29, 1998 (the "INDENTURE"), among the Company, the Guarantor and The First National Bank of Chicago, as trustee (the "TRUSTEE"). The Securities will have the benefit of a Registration Rights Agreement, dated as of August 20, 1999 (the "Registration Rights Agreement"), among the Company, the Guarantor and the Initial Purchasers, pursuant to which the Company and the Guarantor have agreed, for the benefit of the Initial Purchasers and their respective direct and indirect transferees and assigns, to register the Securities and the Guarantees under the Securities Act of 1933, as amended (the "SECURITIES ACT") subject to the terms and conditions therein specified. The sale of the Securities to the Initial Purchasers will be made without registration of the Securities and the Guarantees under the Securities Act, in reliance upon exemptions therefrom. In connection with the sale of the Securities, the Company and the Guarantor have prepared an offering memorandum dated the date hereof (the "OFFERING MEMORANDUM"), for the information of the Initial Purchasers and for delivery to prospective purchasers of the Securities. All references in this Agreement to financial statements and schedules and other information which is "contained," "included," "stated" or "given" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Offering Memorandum. The Guarantor has entered into an Agreement and Plan of Merger, dated as of July 18, 1999 (as the same may have been or may hereafter be amended or supplemented from time to time, the "MERGER AGREEMENT"), with Qwest Communications International Inc. ("QWEST"), a Delaware corporation, pursuant to which the Guarantor will merge with and into Qwest (the "MERGER") with Qwest being the surviving corporation in the Merger. The Company and the Guarantor hereby agree with the Initial Purchasers as follows: 1. The Company agrees to issue and sell the Securities to the several Initial Purchasers as hereinafter provided, and each Initial Purchaser, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees to purchase, severally and not jointly, from the Company the respective principal amount of Securities set forth opposite such Initial Purchaser's name in Schedule I hereto at a price (the "PURCHASE PRICE") equal to 99.524% of their principal amount, plus accrued interest, if any, from August 25, 1999 to the date of payment and delivery. 2. The Company and the Guarantor understand that the Initial Purchasers intend (i) to offer privately pursuant to Rule 144A and pursuant to Regulation S under the Securities Act their respective portions of the Securities as soon after this Agreement has become effective as in the judgment of the Initial Purchasers is advisable and (ii) initially to offer the Securities upon the terms set forth in the Offering Memorandum. Each of the Company and the Guarantor confirms that it has authorized the Initial Purchasers, subject to the restrictions set forth below, to distribute copies of the Offering Memorandum in connection with the offering of the Securities. Each Initial Purchaser hereby severally makes to the Company and the Guarantor the following representations and agreements: (i) it is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act; and (ii) (A) it will not solicit offers for, or offer to sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act ("REGULATION D")) and (B) it will solicit 2 offers for the Securities only from, and will offer the Securities only to, persons who it reasonably believes to be (x) in the case of offers inside the United States, "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act and (y) in the case of offers outside the United States, to persons other than U.S. persons ("FOREIGN PURCHASERS", which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)) that, in each case, in purchasing the Securities are deemed to have represented and agreed as provided in the Offering Memorandum; With respect to offers and sales outside the United States, as described in clause (ii)(B)(y) above, each Initial Purchaser hereby severally represents and agrees with the Company and the Guarantor that: (i) it understands that no action has been or will be taken by the Company or the Guarantor that would permit a public offering of the Securities, or possession or distribution of the Offering Memorandum or any other offering or publicity material relating to the Securities, in any country or jurisdiction where action for that purpose is required; (ii) it will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes the Offering Memorandum or any such other material, in all cases at its own expense; (iii) it understands that the Securities have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Rule 144A under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; (iv) it has offered the Securities and will offer and sell the Securities (x) as part of its distribution at any time and (y) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, only in accordance with Rule 903 of Regulation S. Accordingly, neither such Initial Purchaser, nor any of its Affiliates, nor any persons acting on its behalf has engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities, and such Initial Purchaser, its Affiliates and any such persons have complied and will comply with the offering restrictions requirement of Regulation S; (v) it agrees that, at or prior to confirmation of sales of the Securities, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: 3 "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise prior to 40 days after the closing of the offering, except in either case in accordance with Regulation S (or Rule 144A, if available) under the Securities Act. Terms used above have the meaning given to them by Regulation S"; and (vi) it agrees that (i) it has not offered or sold Securities and, prior to six months after the issue date of such Securities, will not offer or sell any such Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with an issue of Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)(Exemptions) Order 1996 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on. Terms used in this Section 2 and not otherwise defined in this Agreement have the meanings given to them by Regulation S. 3. Payment for the Securities shall be made by wire transfer in immediately available funds to the account specified by the Company to the Representatives at 9:00 A.M., New York City time, on August 25, 1999, or at such other time on the same or such other date, not later than the fifth Business Day thereafter, as the Representatives and the Company may agree upon in writing. The time and date of such payment are referred to herein as the "CLOSING DATE". As used herein, the term "BUSINESS DAY" means any day other than a day on which banks are permitted or required to be closed in New York City. Payment for the Securities shall be made against delivery (x) with respect to Securities to be resold to "qualified institutional buyers" by the Initial Purchasers, to the nominee of The Depository Trust Company for the respective accounts of the several Initial Purchasers of the Securities of one or more global notes (collectively, the "RESTRICTED GLOBAL NOTES") representing such Securities and (y) with respect to Securities to be resold to foreign purchasers by the Initial Purchasers, to the nominee of The Depository Trust Company for the respective accounts of the several Initial Purchasers of the Securities of one or more Regulation S global notes (collectively, the "REGULATION S GLOBAL NOTES" and, together with the Restricted Global Notes, the "GLOBAL NOTES") representing such Securities, with any transfer taxes payable in connection with the transfer to the Initial Purchasers of the Securities duly paid by the Company. The Global 4 Notes will be made available for inspection by the Initial Purchasers at the office of Brown & Wood LLP, One World Trade Center, New York, New York 10048 not later than 1:00 P.M., New York City time, on the Business Day prior to the Closing Date. 4. The Company and the Guarantor represent and warrant to each Initial Purchaser that: (a) the Offering Memorandum (other than the information concerning Qwest contained under the captions "Recent Developments - Merger with Qwest - Qwest" and "Selected Financial Data for Qwest Communications International Inc." and the historical financial information of Qwest in the section entitled "Unaudited Pro Forma Financial Information", as to which no representation is made) will not, in the form used by the Initial Purchasers to confirm sales of the Securities and as of the Closing Date, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at such dates, not misleading; PROVIDED, HOWEVER, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with written information furnished to the Company or the Guarantor by any Initial Purchaser, or on behalf of any Initial Purchaser by the Representatives, specifically for use therein; (b) the documents incorporated by reference in the Offering Memorandum (the "INCORPORATED DOCUMENTS"), when they were filed with the Securities and Exchange Commission (the "COMMISSION"), conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Offering Memorandum, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act, and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (c) the financial statements of the Guarantor, together with the related schedules and notes thereto, included and incorporated by reference in the Offering Memorandum present fairly the consolidated financial position of the Guarantor and its consolidated subsidiaries as of the dates indicated and the statement of operations, shareowners' equity and cash flows of the Guarantor and its consolidated subsidiaries for the periods specified; and said financial statements have been prepared in conformity with generally accepted accounting principles and practices applied on a consistent basis throughout the periods involved; (d) the pro forma financial statements of the Guarantor and Qwest and the related notes thereto included in the Offering Memorandum, to the best 5 knowledge of the Company and the Guarantor, present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to the pro forma financial statements and have been properly complied on the bases described therein, and the assumptions used therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein; (e) since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) there has been no material adverse change in the financial condition or results of operations of the Company or of the Guarantor and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"), (B) there have been no transactions entered into by the Company or by the Guarantor or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company or the Guarantor and its subsidiaries, taken as a whole, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company or the Guarantor on any class of its capital stock, except for regular quarterly dividends on the Guarantor's common stock, par value $.01 per share, in amounts that are consistent with past practice; provided, however, that the Guarantor's quarterly dividend paid in August 1999 was $.75 per share; (f) this Agreement has been duly authorized, executed and delivered by each of the Company and the Guarantor; (g) the Indenture has been duly authorized, executed and delivered by each of the Company and the Guarantor and (assuming the due authorization, execution and delivery by the Trustee) constitutes the legal, valid and binding agreement of the Company and the Guarantor enforceable against each of them in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law); (h) the Registration Rights Agreement has been duly authorized by the Company and the Guarantor and, when executed and delivered by the Company and the Guarantor, will constitute a valid and binding agreement of each of the Company and the Guarantor, enforceable against the Company and the Guarantor in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except that enforcement of 6 rights to indemnification and contribution contained therein may be limited by applicable Federal or state laws or the public policy underlying such laws; (i) the Securities have been duly authorized and, at the Closing Date, will have been duly executed by the Company and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture; (j) the Guarantees have been duly authorized and, at the Closing Date, will have been duly executed by the Guarantor and, when issued and delivered in the manner provided for in the Indenture, will constitute legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture; (k) the Exchange Notes (as defined in the Registration Rights Agreement) have been duly authorized and, when authenticated, issued and delivered in the manner provided for in the Indenture and issued and delivered in exchange for the Securities in the manner contemplated in the Registration Rights Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture; (l) the Exchange Guarantees (as defined in the Registration Rights Agreement) have been duly authorized and, when authenticated, issued and delivered in the manner provided for in the Indenture and issued and delivered in the manner contemplated in the Registration Rights Agreement, will constitute valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their terms, except as the enforcement thereof may be limited by 7 bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law); (m) the Securities, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Indenture and the Registration Rights Agreement will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum; (n) the execution, delivery and performance of this Agreement and the Registration Rights Agreement and the consummation of the transactions contemplated herein and therein (including, without limitation, the issuance and sale of the Securities and the Guarantees) and compliance by the Company and the Guarantor with their respective obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the Guarantor or any subsidiary of the Guarantor pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company, the Guarantor or any subsidiary of the Guarantor is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, the Guarantor or any subsidiary of the Guarantor is subject (collectively, "AGREEMENTS AND INSTRUMENTS") (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or bylaws of the Company, the Guarantor or any subsidiary of the Guarantor or, to the best knowledge of the Company and the Guarantor, any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company, the Guarantor or any subsidiary of the Guarantor or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness of the Company, the Guarantor or any subsidiary of the Guarantor (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company, the Guarantor or any subsidiary of the Guarantor; (o) the Merger Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Guarantor, enforceable against the Guarantor in accordance with its terms; (p) other than as set forth in the Offering Memorandum, there is not pending or, to the knowledge of the Company or the Guarantor, threatened any 8 action, suit, proceeding, inquiry or investigation to which the Company, the Guarantor or any subsidiary of the Guarantor is a party or to which the assets, properties or operations of the Company, the Guarantor or any subsidiary of the Guarantor is subject, before or by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect or which might reasonably be expected to materially and adversely affect the assets, properties or operations of the Company, the Guarantor and any subsidiary of the Guarantor, taken as a whole, or the consummation of the transactions contemplated by this Agreement or the Indenture or the performance by the Company or the Guarantor of their respective obligations thereunder; (q) the Guarantor and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "GOVERNMENTAL LICENSES") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Guarantor and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Guarantor nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect; (r) none of the Company, the Guarantor or any of their respective affiliates (as defined in Rule 501(b) of Regulation D) has directly, or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which is or will be integrated with the sale of the Securities in a manner that would require the registration under the Securities Act of the offering contemplated by the Offering Memorandum; (s) none of the Company, the Guarantor, any affiliate of the Company or the Guarantor or any person acting on its or their behalf has offered or sold the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, or by means of any directed selling efforts within the meaning of Rule 902 under the Securities Act, and the Company, the Guarantor, any affiliate of the Company and the Guarantor and any person acting on its or their behalf has complied with and will implement the "offering restrictions" requirements of Regulation S; (t) the Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act; 9 (u) assuming the accuracy of the representations of the Initial Purchasers contained in Section 2 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities in the manner contemplated by this Agreement to register the Securities under the Securities Act or to qualify an indenture under the Trust Indenture Act of 1939 (the "TRUST INDENTURE ACT"); and (v) none of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations T, U, and X of the Board of Governors of the Federal Reserve System. 5. The Company and the Guarantor covenant and agree with each of the several Initial Purchasers as follows: (a) to deliver to the Initial Purchasers as many copies of the Offering Memorandum (including all amendments and supplements thereto) as the Initial Purchasers may reasonably request; (b) before distributing any amendment or supplement to the Offering Memorandum, to furnish to the Representatives a copy of the proposed amendment or supplement for review and not to distribute any such proposed amendment or supplement to which the Representatives reasonably object; (c) if, at any time prior to the earlier of (i) three months from the date of the Offering Memorandum and (ii) notice by the Representatives to the Company and the Guarantor of the completion of the initial placement of the Securities, any event shall occur as a result of which the Offering Memorandum as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with law, forthwith to prepare and furnish, at the expense of the Company, to the Initial Purchasers and to the dealers (whose names and addresses the Representatives will furnish to the Company) to which Securities may have been sold by the Initial Purchasers on behalf of the Initial Purchasers and to any other dealers upon request, such amendments or supplements to the Offering Memorandum as may be necessary to correct such statement or omission or to effect compliance with law; (d) to endeavor to qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request and to continue such qualification in effect so long as reasonably required for distribution of the Securities; PROVIDED that the Company shall not be required to file a general consent to service of process in any jurisdiction; 10 (e) during the period of two years after the date hereof, to furnish to the Initial Purchasers, as soon as practicable after the end of each fiscal year, a copy of the Guarantor's annual report to shareholders, if any, for such year, and to furnish to the Initial Purchasers and to counsel to the Initial Purchasers, (i) as soon as available, a copy of each report of the Guarantor filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other non-confidential information concerning the Guarantor or the Company as the Initial Purchasers may reasonably request; (f) during the period beginning on the date hereof and continuing to and including the Business Day following the Closing Date, not to, directly or indirectly, sell, offer to sell, grant any option for the sale of, or otherwise dispose of, any of its senior debt securities having a maturity of one year or more without the prior written consent of the Representatives; (g) to use the net proceeds received by the Company from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Memorandum under the caption "Use of Proceeds"; (h) if requested by the Representatives, to use its best efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (i) to furnish to the holders of the Securities no later than 90 days after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Guarantor and its consolidated subsidiaries certified by independent public accountants) and, no later than 45 days after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the Offering Memorandum), consolidated summary financial information of the Guarantor and its subsidiaries of such quarter in reasonable detail; (j) during the period of two years after the Closing Date, the Company and the Guarantor will not, and will not permit any of their respective controlled "affiliates" (as defined in Rule 144 under the Securities Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (k) whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder and under the Registration Rights Agreement, including without limiting the generality of the foregoing, all fees, costs and expenses (i) incident to the preparation, issuance, execution, authentication and delivery of the Securities, including any expenses of the Trustee, (ii) incident to the preparation, printing and distribution of the Offering Memorandum (including all exhibits, amendments and supplements thereto), (iii) incurred in connection with the registration or qualification and determination of 11 eligibility for investment of the Securities under the laws of such jurisdictions as the Representatives may designate (including reasonable fees of counsel for the Initial Purchasers and their disbursements) and the printing of memoranda relating thereto, (iv) in connection with the approval for trading of the Securities on any securities exchange or inter-dealer quotation system (as well as in connection with the designation of the Securities as PORTAL securities, if so requested), (v) in connection with the printing (including word processing and duplication costs) and delivery of this Agreement, the Indenture, any Preliminary and Supplemental Blue Sky Memoranda and any Legal Investment Survey and the furnishing to Initial Purchasers and dealers of copies of the Offering Memorandum, including mailing and shipping, as herein provided, (vi) payable to rating agencies in connection with the rating of the Securities, if applicable, and (vii) any expenses incurred by the Company in connection with a "road show" presentation to potential investors; (l) while the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) and cannot be sold without restriction under Rule 144(k) under the Securities Act, the Company and the Guarantor will, during any period in which the Guarantor is not subject to Section 13 or 15(d) under the Exchange Act or is not complying with the reporting requirements thereof, make available to the purchasers and any holder of Securities in connection with any sale thereof and any prospective purchaser of Securities and securities analysts, in each case upon request, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act (or any successor thereto); (m) neither the Company nor the Guarantor will take any action prohibited by Regulation M under the Exchange Act, in connection with the distribution of the Securities contemplated hereby; (n) none of the Company, the Guarantor, any of their respective affiliates (as defined in Rule 501(b) under the Securities Act) or any person acting on behalf of the Company, the Guarantor or such affiliate will solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio; and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; (o) none of the Company, the Guarantor, any of their respective affiliates (as defined in Rule 144(a)(1) under the Securities Act) or any person acting on behalf of any of the foregoing will engage in any directed selling efforts with respect to the Securities within the meaning of Regulation S under the Securities Act; and (p) none of the Company, the Guarantor, any of their respective affiliates (as defined in Regulation 501(b) of Regulation D under the Securities Act) or any person acting on behalf of the Company, the Guarantor or such affiliate 12 will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) which will be integrated with the sale of the Securities in a manner which would require the registration under the Securities Act of the Securities and the Company and the Guarantor will take all action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for purposes of the Securities Act with the offering contemplated hereby. 6. The several obligations of the Initial Purchasers hereunder to purchase the Securities on the Closing Date are subject to the performance by the Company and the Guarantor of their respective obligations hereunder and to the following additional conditions: (a) the representations and warranties of the Company and the Guarantor contained herein are true and correct on and as of the Closing Date as if made on and as of the Closing Date, the statements of the officers of the Company and the Guarantor made pursuant to the provisions hereof are true and correct and the Company and the Guarantor shall have complied with all agreements and all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; (b) except as previously disclosed to the Initial Purchasers by the Company, the Guarantor or Qwest, as applicable, prior to the execution of this Agreement, on or after the date of this Agreement and prior to the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of (i) any downgrading, (ii) any intended or potential downgrading or (iii) any review or possible change that does not indicate an improvement, in the rating accorded any debt securities of or guaranteed by the Company, the Guarantor or Qwest by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (c) since the respective dates as of which information is given in the Offering Memorandum, there shall not have been any change in the financial condition of the Company or of the Guarantor and its subsidiaries, taken as a whole, or of Qwest and its subsidiaries, taken as a whole, or in the earnings, affairs or business prospects of the Company or of the Guarantor and its subsidiaries, taken as a whole, or of Qwest and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which is, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Securities on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum; (d) the Representatives shall have received on and as of the Closing Date a certificate of the President, any Vice President, the Treasurer or any Assistant Treasurer of the Company in which such officers shall state that, to the best of their knowledge after reasonable investigation, the representations and warranties of the Company in this Agreement are true and correct as if made at and 13 as of the Closing Date, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and that, since the respective dates as of which information is given in the Offering Memorandum, there has been no material adverse change in the financial condition or results of operations of the Company, or, to the best knowledge of the Company, of Qwest, and its subsidiaries, taken as a whole, except as set forth in or contemplated by the Offering Memorandum; (e) the Representatives shall have received on and as of the Closing Date a certificate of the President, any Vice President, the Treasurer or any Assistant Treasurer of the Guarantor in which such officers shall state that, to the best of their knowledge after reasonable investigation, the representations and warranties of the Guarantor in this Agreement are true and correct as if made at and as of the Closing Date, that the Guarantor has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and that, since the respective dates as of which information is given in the Offering Memorandum, there has been no material adverse change in the financial condition or results of operations of the Guarantor and its subsidiaries, taken as a whole, or, to the best knowledge of the Guarantor, of Qwest, and its subsidiaries, taken as a whole, except as set forth in or contemplated by the Offering Memorandum; (f) Cadwalader, Wickersham & Taft, counsel for the Company and the Guarantor, shall have furnished to the Representatives their written opinion, dated the Closing Date, in form and substance satisfactory to the Representatives, to the effect that: (i) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (ii) The Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (iii) The execution, delivery and performance of the Indenture by the Company and the Guarantor have been duly authorized by all necessary corporate action on the part of the Company and the Guarantor. The Indenture has been duly and validly executed and delivered by the Company and the Guarantor and (assuming the due authorization, execution and delivery thereof by the Trustee), constitutes the legal, valid and binding agreement of the Company and the Guarantor enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's rights and remedies generally, and subject, as to 14 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). (iv) The Securities, when duly executed and authenticated in the manner contemplated in the Indenture and issued and delivered to the Initial Purchasers against payment therefor in accordance with the provisions hereof, will constitute legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (v) The Guarantees, when duly executed in the manner contemplated in the Indenture and issued and delivered to the Initial Purchasers in accordance with the provisions of this Agreement, will constitute legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (vi) The Exchange Notes (as defined in the Registration Rights Agreement) have been duly authorized and, when duly executed in the manner contemplated in the Indenture and issued and delivered in exchange for the Securities in the manner contemplated in the Registration Rights Agreement, will constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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 will be in the form contemplated by, and entitled to the benefits of, the Indenture. (vii) The Exchange Guarantees (as defined in the Registration Rights Agreement) have been duly authorized and, when duly executed in the manner contemplated in the Indenture and issued and delivered in the manner contemplated in the Registration Rights Agreement, will constitute legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to applicable bankruptcy, 15 insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (viii) The execution, delivery and performance of this Agreement by the Company and the Guarantor have been duly authorized by all necessary corporate action on the part of the Company and the Guarantor; and this Agreement has been duly and validly executed and delivered by each of the Company and the Guarantor. (ix) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantor, and is a valid and binding agreement of the Company and the Guarantor, enforceable against the Company and the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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 that enforcement of rights to indemnification and contribution contained therein may be limited by applicable federal or state laws or the public policy underlying such laws. (x) The Merger Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (xi) No consent, approval, authorization or other action by, or filing or registration with, any federal governmental authority is required in connection with the execution and delivery by the Company or the Guarantor of the Indenture or the issuance and sale of the Securities and the Guarantees to the Initial Purchasers pursuant to the terms of this Agreement, except such consents, approvals, authorizations or registrations as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Initial Purchasers. (xii) The statements in the Offering Memorandum under the headings "Description of Notes", "Exchange Offer; Registration Rights" and "Notice to Investors" insofar as such statements constitute a summary of certain 16 provisions of the documents referred to therein, are accurate in all material respects. (xiii) The Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act. (xiv) Based upon the representations, warranties and agreements of the Company and the Guarantor in Sections 4(r), 4(s), 5(n), 5(o), 5(p) and 6(a) of this Agreement and of the Initial Purchasers in Section 2 of this Agreement and on the truth and accuracy of the representations and agreements deemed to be made by the purchasers of the Securities contained in the Offering Memorandum, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under this Agreement or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with Section 2 of this Agreement to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act; PROVIDED, HOWEVER, that such counsel need not express any opinion with respect to the conditions under which the Securities may be further resold. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and the Guarantor and of public officials. Such counsel may also rely as to matters of Colorado law upon the opinion referred to in Section 6(g) without independent verification. In addition, such counsel shall state that it has participated in conferences with representatives of the Company, the Guarantor and with the Representatives and their counsel, at which conferences the contents of the Offering Memorandum and related matters were discussed; such counsel has not independently verified and are not passing upon and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum and the limitations inherent in the examination made by such counsel and the nature and extent of such counsel's participation in such conferences are such that such counsel is unable to assume, and does not assume, any responsibility for the accuracy, completeness or fairness of such statements; however, based upon such counsel's participation in the aforesaid conferences, no facts have come to its attention which lead it to believe that the Incorporated Documents (except as to the financial statements and the notes thereto, and the other financial, statistical and accounting data included or incorporated by reference therein or omitted therefrom, as to which such counsel need express no belief), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder or that the Offering Memorandum (except as to the financial statements and the notes thereto, and the other financial, statistical and accounting data included or incorporated by reference therein or omitted therefrom), as of its issue date or at the Closing Date, contained or contains any untrue statement of a material fact or 17 omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such opinion may state that it does not address the impact on the opinions contained therein of any litigation or ruling relating to the divestiture by American Telephone and Telegraph Company of ownership of its operating telephone companies (the "DIVESTITURE"). The opinion of Cadwalader, Wickersham & Taft described above shall be rendered to the Initial Purchasers and the Company at the request of the Company and shall so state therein. (g) Thomas O. McGimpsey, a Senior Attorney and Secretary for the Company and a Senior Attorney and Assistant Secretary for the Guarantor, shall have furnished to the Initial Purchasers his written opinion, dated the Closing Date, in form and substance satisfactory to the Initial Purchasers, to the effect that: (i) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (ii) The Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (iii) The execution, delivery and performance of the Indenture by the Company and the Guarantor have been duly authorized by all necessary corporate action on the part of the Company and the Guarantor. The Indenture has been duly and validly executed and delivered by the Company and the Guarantor and (assuming the due authorization, execution and delivery thereof by the Trustee), constitutes the legal, valid and binding agreement of the Company and the Guarantor enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (iv) The Securities, when duly executed and authenticated in the manner contemplated in the Indenture and issued and delivered to the Initial Purchasers against payment therefor in accordance with the provisions hereof, will constitute legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, 18 insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (v) The Guarantees, when duly executed in the manner contemplated in the Indenture and issued and delivered to the Initial Purchasers in accordance with the provisions hereof, will constitute legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (vi) The Exchange Notes (as defined in the Registration Rights Agreement) have been duly authorized and, when duly executed in the manner contemplated in the Indenture and issued and delivered in exchange for the Securities in the manner contemplated in the Registration Rights Agreement, will constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (vii) The Exchange Guarantees (as defined in the Registration Rights Agreement) have been duly authorized and, when duly executed in the manner contemplated in the Indenture and issued and delivered in the manner contemplated in the Registration Rights Agreement, will constitute legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (viii) The execution, delivery and performance of this Agreement by the Company and the Guarantor have been duly authorized by all necessary corporate action on the part of the Company and the Guarantor; and this Agreement has been duly and validly executed and delivered by each of the Company and the Guarantor. 19 (ix) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantor, and is a valid and binding agreement of the Company and the Guarantor, enforceable against the Company and the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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 that enforcement of rights to indemnification and contribution contained therein may be limited by applicable federal or state laws or the public policy underlying such laws. (x) The execution, delivery and performance of the Merger Agreement by the Guarantor has been duly authorized by all necessary corporate action on the part of the Guarantor. The Merger Agreement has been duly and validly executed and delivered by the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditor's 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). (xi) To the best of his knowledge, neither the Company, the Guarantor nor any of its subsidiaries is in violation of its charter or by-laws and no default by the Company, the Guarantor or any of its subsidiaries exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Offering Memorandum. (xii) All state regulatory consents, approvals, authorizations or other orders (except as to the state securities or Blue Sky laws, as to which such counsel need express no opinion) legally required for the execution of the Indenture and the issuance and sale of the Securities and the Guarantees to the Initial Purchasers pursuant to the terms of this Agreement have been obtained; PROVIDED that such counsel may rely on opinions of local counsel satisfactory to said counsel. (xiii) The enforceability and the legal, valid and binding nature of the respective agreements and obligations of the Company and the Guarantor set forth in the Indenture, the Registration Rights Agreement, the Securities, the Guarantees, the Exchange Notes and the Exchange Guarantees (collectively, the "AGREEMENTS") are not affected by, and the performance of the obligations set forth in such Agreements, the issuance and sale of the 20 Securities and the Guarantees and the consummation of the transactions contemplated by such Agreements are not prevented or restricted by, any action, suit, proceeding, order or ruling relating to or issued or arising as a result of, the Divestiture. (xiv) To the best of such counsel's knowledge, there is not pending or threatened any action, suit, proceeding, inquiry or investigation to which the Company, the Guarantor or any subsidiary of the Guarantor is a party or to which the assets, properties or operations of the Company, the Guarantor or any subsidiary of the Guarantor is subject, before or by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect or which might reasonably be expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated by this Agreement, the Registration Rights Agreement or the Indenture or the performance by the Company or the Guarantor of their respective obligations hereunder or thereunder. In rendering such opinion, such counsel may rely as to matters of New York law upon the opinion referred to in Section 6(f) without independent verification. (h) on the date of the issuance of the Offering Memorandum and also on the Closing Date, Arthur Andersen LLP shall have furnished to the Initial Purchasers letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Representatives, containing statements and information of the type customarily included in accountants "comfort letters" to underwriters with respect to the financial statements and certain financial information of the Company, the Guarantor and Qwest contained in the Offering Memorandum; (i) the Initial Purchasers shall have received on and as of the Closing Date an opinion of Brown & Wood LLP, counsel to the Initial Purchasers, with respect to the validity of the Indenture and the Securities, and such other related matters as the Initial Purchasers may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (j) the Initial Purchasers shall have received prior to the Closing Date a copy of the Registration Rights Agreement, in the form and substance satisfactory to the Initial Purchasers, duly executed by the Company and the Guarantor, and the Registration Rights Agreement shall be in full force and effect at the Closing Date; and (k) on or prior to the Closing Date the Company shall have furnished to the Initial Purchasers such further certificates and documents as the Initial Purchasers shall reasonably request. 21 7. (a) The Company and the Guarantor jointly and severally agree to indemnify and hold harmless each Initial Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Initial Purchaser may become subject, as incurred, under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Memorandum or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will reimburse each Initial Purchaser, as incurred, for any legal or other expenses reasonably incurred by such Initial Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action or amounts paid in settlement of any litigation or investigation or proceeding related thereto if such settlement is effected with the written consent of the Company and the Guarantor; PROVIDED, HOWEVER, that the Company and the Guarantor will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the Company or the Guarantor by any Initial Purchaser, or on behalf of any Initial Purchaser by the Representatives, specifically for use therein. (b) Each Initial Purchaser will indemnify and hold harmless the Company and the Guarantor against any losses, claims, damages or liabilities to which the Company or the Guarantor may become subject, as incurred, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Memorandum or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or the Guarantor by such Initial Purchaser, or on behalf of such Initial Purchaser by the Representatives, specifically for use therein, and will reimburse the Company and the Guarantor, as incurred, for any legal or other expenses reasonably incurred by the Company and the Guarantor in connection with investigating or defending any such loss, claim, damage, liability or action. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 7. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that 22 it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. 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. (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantor on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantor or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations in this subsection (d) to contribute are several in proportion to the respective principal amount of the Securities set forth opposite their names in Schedule I hereto, and not joint. 23 (e) The obligations of the Company and the Guarantor under this Section 7 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Initial Purchasers under this Section 7 shall be in addition to any liability which the respective Initial Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company or the Guarantor within the meaning of the Securities Act or the Exchange Act. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Initial Purchaser or any person controlling any Initial Purchaser or by or on behalf of the Company or the Guarantor or any person controlling the Company or the Guarantor and (iii) acceptance of and payment for any of the Securities. 8. Notwithstanding anything herein contained, this Agreement may be terminated in the absolute discretion of the Initial Purchasers, by notice given to the Company and the Guarantor, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of or guaranteed by the Company, the Guarantor or Qwest shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Initial Purchasers, is material and adverse and which, in the judgment of the Initial Purchasers, makes it impracticable to market the Securities on the terms and in the manner contemplated in the Offering Memorandum. 9. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date any one or more of the Initial Purchasers shall fail or refuse to purchase Securities which it or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of the Securities to be purchased on such date, the other Initial Purchasers shall be obligated severally in the proportions that the principal amount of Securities set forth opposite their respective names in Schedule I bears to the aggregate principal amount of Securities set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as the Initial Purchasers may specify, to purchase the Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the principal 24 amount of Securities that any Initial Purchaser has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 9 by an amount in excess of one-tenth of such principal amount of Securities without the written consent of such Initial Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase Securities which it or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Securities with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Securities to be purchased on such date, and arrangements satisfactory to the Initial Purchasers, the Company and the Guarantor for the purchase of such Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser, the Company or the Guarantor. In any such case either the Initial Purchasers, the Company or the Guarantor shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Offering Memorandum or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement. 10. If this Agreement shall be terminated by the Initial Purchasers, or any of them, because of any failure or refusal on the part of the Company or the Guarantor to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company or the Guarantor shall be unable to perform its obligations under this Agreement or any condition of the Initial Purchasers' obligations cannot be fulfilled, (i) the Company and the Guarantor shall remain responsible for the expenses to be paid or reimbursed by them pursuant to Section 5(k) and (ii) the Company and the Guarantor agree to reimburse the Initial Purchasers or such Initial Purchasers as have so terminated this Agreement with respect to themselves, severally, for the out-of-pocket expenses reasonably incurred by such Initial Purchasers in connection with this Agreement or the offering contemplated hereunder, not exceeding $75,000, and for the fees and disbursements of their counsel. 11. This Agreement shall inure to the benefit of and be binding upon the Company, the Guarantor, the Initial Purchasers, any controlling persons referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No Initial Purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. 12. 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 Initial Purchasers shall be given to the Initial Purchasers c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New York 10260 (telefax: 648-5909); Attention: Syndicate Department. Notices to the Company and the Guarantor shall be given to each of them at 1801 California Street, Denver, Colorado 80202 (telefax: (303) 896-6468); Attention: Sean P. Foley. 25 13. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. 26 If the foregoing is in accordance with your understanding, please sign and return four counterparts hereof. Very truly yours, U S WEST CAPITAL FUNDING, INC. By: /s/ Sean P. Foley -------------------------- Name: Sean P. Foley Title: Treasurer U S WEST, INC. By: /s/ Sean P. Foley -------------------------- Name: Sean P. Foley Title: Treasurer Accepted: August 20, 1999 J.P. MORGAN SECURITIES INC. MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: J.P. MORGAN SECURITIES INC. By: /s/ John E. Simmons -------------------------- Name: John E. Simmons Title: Vice President For themselves and as Representatives of the other Initial Purchasers named in Schedule I hereto. 27 SCHEDULE I
Principal Amount of Securities Initial Purchaser To Be Purchased ----------------- --------------- J.P. Morgan Securities Inc............................... $431,250,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated....... 431,250,000 Banc of America Securities LLC........................... 57,500,000 Lehman Brothers Inc...................................... 57,500,000 Salomon Smith Barney Inc................................. 57,500,000 ABN AMRO Incorporated.................................... 11,500,000 Banc One Capital Markets, Inc............................ 11,500,000 BNY Capital Markets, Inc................................. 11,500,000 Commerzbank Capital Markets Corporation.................. 11,500,000 Fleet Securities, Inc.................................... 11,500,000 Mellon Financial Markets, Inc............................ 11,500,000 Norwest Investments Services Inc......................... 11,500,000 Muriel Siebert & Co., Inc................................ 11,500,000 Utendahl Capital Partners, L.P........................... 11,500,000 The Williams Capital Group, L.P.......................... 11,500,000 -------------- Total: $1,150,000,000
EX-3.A-2 3 EXHIBIT 3-A.2 Exhibit 3-A.2 ARTICLES OF INCORPORTION of U S WEST Capital Funding, Inc. I, the undersigned natural person of the age of eighteen years or more, acting as incorporator of a corporation under the Colorado Corporation Code, adopt the following Articles of Incorporation for such corporation: ARTICLE ONE. The name of the corporation is U S WEST Capital Funding, Inc. ARTICLE TWO. The aggregate number of shares of stock which the corporation shall have authority to issue is one (1) share without par value. ARTICLE THREE. Cumulative voting shall not be allowed in the election of directors of the corporation. ARTICLE FOUR. Shareholders shall have no preemptive right to acquire additional unissued or treasury shares of the corporation or securities convertible into shares or carrying stock purchase warrants or privileges. ARTICLE FIVE. The address of the corporation's initial registered office in the State of Colorado is 7800 East Orchard Road, Suite 480, Englewood, Colorado 80111. The name of the corporation's initial registered agent at such address is Brian M. Bell. ARTICLE SIX. The number of directors constituting the initial board of directors of the corporation is three (3). The names and addresses of the persons who are to serve as directors until the first annual meeting of the shareholders or until their successors are elected and qualified are:
NAME ADDRESS Laurence W. DeMuth, Jr. 7800 East Orchard Road, Suite 200 Englewood, CO 80111 Howard P. Doerr 7800 East Orchard Road, Suite 200 Englewood, CO 80111 John C. Willemssen 7800 East Orchard Road, Suite 200 Englewood, CO 80111
Exhibit 3-A.2 ARTICLE SEVEN. The name and address of the incorporator is Brian M. Bell, 7800 East Orchard Road, Suite 480, Englewood, Colorado 80111. IN WITNESS WHEREOF, I HAVE EXECUTED THESE Articles of Incorporation in duplicate this 9th day of June, 1986. /s/ BRIAN M. BELL ------------------------------ BRIAN M. BELL STATE OF COLORADO ) ) ss. COUNTY OF ARAPAHOE ) Before me, Marsha A. Berger, a Notary Public in and for said County and State, personally appeared Brian M. Bell, who acknowledged before me that he signed the foregoing Articles of Incorporation as the incorporator and that the facts contained therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 9th day of June, 1986. /s/ MARSHA A. BERGER ------------------------------ NOTARY PUBLIC Marsha A. Berger 7800 East Orchard Road Englewood, CO 80111 My Commission Expires: January 25, 1990 EX-3.B-2 4 EXHIBIT 3-B.2 Exhibit 3-B.2 RESTATED BYLAWS OF U S WEST CAPITAL FUNDING, INC. Adopted May 15, 1995 As Amended on August 31, 1995 and August 9, 1996 Exhibit 3-B.2 RESTATED BYLAWS of U S WEST CAPITAL FUNDING, INC. ARTICLE ONE OFFICES The principal office of the corporation shall be designated from time to time by the corporation and may be within or outside of Colorado. The corporation may have such other offices, either within or outside of Colorado, as the Board of Directors may designate or as the business of the corporation may require from time to time. The registered office of the corporation required by the Colorado Business Corporation Act to be maintained in Colorado may be, but need not be, identical with the principal office, and the address of the registered office may be changed from time to time by the Board of Directors. ARTICLE TWO SHAREHOLDERS Section 1. ANNUAL MEETING. The annual meeting of the shareholders shall be held on the first Friday in March in each year, at an hour to be named in the notice of the meeting, or at such other date and time as the Board of Directors shall determine, for the purpose of electing Directors of the corporation and for the transaction of such other business as may come before the meeting. If the annual meeting is not held on the day designated, or at any adjournment thereof, the Board of Directors shall cause a meeting in lieu thereof to be held as soon thereafter as is convenient. Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called for any purpose. Such meetings may be called by the President or by the Board of Directors, and shall be called by the President at the request of holders of shares representing at least ten percent (10%) of all of the votes entitled to be cast on any issue proposed to be considered at the meeting. Section 3. PLACE OF MEETING. The Board of Directors may designate any place either within or outside Colorado as the place of meeting for any annual meeting or for any special meeting. If no designation is made, or if a special meeting is called other than by the Board of Directors, the place of the meeting shall be the principal office of the corporation. Section 4. NOTICE OF MEETING. Written notice stating the place, date, and hour of the meeting shall be given delivered not less than ten (10) days nor more than sixty (60) days before the date of the meeting, except that, (i) if the authorized shares are to be increased, at least thirty (30) days' notice shall be given, or (ii) any other longer notice period is required by the Colorado Business Corporation Act. Notice of a special meeting shall include a description of the purpose or purposes of the meeting. Notice shall be given personally or by U.S. mail (postage prepaid), private carrier, telegraph, teletype, electronically transmitted facsimile or other 1 Exhibit 3-B.2 form of wire or wireless communication by or at the direction of the President, the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. Section 5. RECORD DATE. For the purpose of determining shareholders entitled to (i) notice of or to vote at any meeting of shareholders or any adjournment thereof, (ii) receive distributions or share dividends, or (iii) demand a special meeting, or to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix, in advance, a date as the record date for the determination of shareholders. Such date shall be not more than seventy (70) days, and for a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders is made as provided in this Section, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. Notwithstanding the above, the record date for determining the shareholders entitled to take action without a meeting or entitled to be given notice of action so taken shall be the date a writing upon which the action is taken is first received by the corporation. Section 6. QUORUM. One-third of the votes entitled to be cast on a matter by a voting group shall constitute a quorum of that voting group for action on that matter. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number is required by law or the Articles of Incorporation. If a quorum is not represented at any meeting of the shareholders, such meeting may be adjourned for a period not to exceed one hundred twenty (120) days for any one adjournment. Section 7. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy by signing an appointment form or similar writing, either personally or by his duly authorized attorney-in-fact. The proxy appointment form or similar writing shall be filed with the Secretary of the corporation before or at the time of the meeting. The appointment of a proxy is effective when received by the corporation and is valid for eleven (11) months unless a different period is expressly provided in the appointment form or similar writing. Section 8. INFORMAL ACTION BY SHAREHOLDERS. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a written consent (or counterparts thereof) that sets forth the action so taken is signed by all of the shareholders entitled to vote with respect to the subject matter thereof and received by the corporation. Such consent shall have the same force and effect as a unanimous vote of the shareholders and may be stated as such in any document. Action taken under this Section 8 is effective as of the date the last writing necessary to effect the action is received by the corporation, unless a different effective date is specified, in which case such specified date shall be the effective date for such action. 2 Exhibit 3-B.2 ARTICLE THREE BOARD OF DIRECTORS Section 1. GENERAL POWERS. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of its Board of Directors, except as otherwise provided in the Colorado Business Corporation Act or the Articles of Incorporation. Section 2. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors shall consist of three (3) persons of the age of eighteen years or older who need not be a shareholder of the corporation or a resident of Colorado. A Director of the corporation shall be elected at the annual meeting of the shareholders and shall serve until the next succeeding annual meeting and thereafter until his successor shall have been elected and qualified. (As amended August 31, 1995 and August 9, 1996) Section 3. VACANCIES. A vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the shareholders or the Board of Directors. If the Directors remaining in office constitute fewer than a quorum of the Board, the Directors may fill the vacancy by the affirmative vote of a majority of all the Directors remaining in office. Whether elected by the Directors or the shareholders, a Director shall hold office until the next annual shareholders' meeting at which Directors are elected. Section 4. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without notice immediately after and at the same place as the annual meeting of shareholders and at such other times as shall be fixed by the Board. The Board of Directors may designate any place, either within or outside Colorado, as the place of meeting for any regular meeting. Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called at any time by or at the request of the President or any of the Directors. The person or persons authorized to call special meetings of the Board may fix any place, either within or outside Colorado, as the place for holding any special meeting. Section 6. NOTICE. Notice need not be given of regular meetings of the Board of Directors, nor need notice be given of adjourned meetings. Notice of special meetings shall be given at least two (2) days prior to the meeting by written notice either personally delivered or mailed to each Director at his business address, or by notice transmitted by telegraph, telex, electronically transmitted facsimile or other form of wire or wireless communication. If mailed, such notice shall be deemed to be given and to be effective on the earlier of (i) three (3) days after such notice is deposited in the U.S. mail (postage prepaid), or (ii) the date shown on the return receipt, if mailed by registered or certified mail return receipt requested. If notice is given by telex, electronically transmitted facsimile or other similar form of wire or wireless communication, such notice shall be deemed to be given and to be effective when sent. A Director may waive notice of a meeting before or after the time and date of the meeting by a writing signed by such Director. Such waiver shall be delivered to the corporation for filing with the corporate records. Further, attendance of the Director at a meeting shall constitute a waiver of notice of that meeting, except when the Director attends for the express purpose of objecting to the transaction of any business at that the meeting because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. 3 Exhibit 3-B.2 Section 7. QUORUM AND VOTING. A majority of the number of Directors fixed by these Bylaws shall constitute a quorum for the transaction of business, and the acts of a majority of Directors present at a meeting at which a quorum is present shall constitute the acts of the Board of Directors. If, at any meeting of the Board of Directors, less than a quorum is present, a majority of those present may adjourn the meeting from time to time without further notice, for a period not to exceed sixty (60) days at any one adjournment. Section 8. COMPENSATION. Directors shall be entitled to receive from the corporation such compensation and reimbursement for expenses as the Board of Directors may determine from time to time. Section 9. COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the Board in office when the action is taken, designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution, shall have all the authority of the Board of Directors; except that no such committee shall have the authority to (i) declare dividends or distributions, (ii) approve or propose to shareholders actions or proposals required by the Colorado Business Corporation Act to be approved by shareholders, (iii) fill vacancies on the Board of Directors or any committee thereof, (iv) amend the Articles of Incorporation, (v) adopt, amend or repeal the Bylaws, (vi) approve a plan of merger not requiring shareholder approval, (vii) reduce earned or capital surplus, (viii) authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors, or (ix) authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares. The Board of Directors shall have the power at any time to fill vacancies in, to change the size or membership of, and to discharge any such committee. Neither the designation of any such committee, the delegation of authority to such committee, nor any action by such committee pursuant to its authority shall alone constitute compliance by any member of the Board of Directors or a member of the committee in question with his responsibility to conform to the standard of care set forth in Article Three, Section 12 of these Bylaws. Section 10. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at a meeting of the Directors or any committee designated by the Board of Directors may be taken without a meeting if a written consent (or counterparts there) that sets forth the action so taken is signed by all of the Directors entitled to vote with respect to the action taken. Such consent shall have the same force and effect as a unanimous vote of the Directors or committee members and may be stated as such in any document. Unless the consent specifies a different effective date, action taken under this Section 10 is effective at the time the last Director signs a writing describing the action taken, unless, before such time, any Director has revoked his consent by a writing signed by the Director and received by the President or the Secretary of the corporation. Section 11. TELEPHONIC MEETINGS. Members of the Board of Directors or any committee designated by such Board may participate in a meeting of the Board or committee by means of communication by which all persons participating in the meeting can hear each other during the meeting. Such participation shall constitute presence at the meeting. Section 12. STANDARD OF CARE. A Director shall perform his duties as a Director, including, without limitation, his duties as a member of any committee of the Board, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with 4 Exhibit 3-B.2 the care an ordinarily prudent person in a like position would exercise under similar circumstances. In performing his duties, a Director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by the persons herein designated. However, he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A Director shall not be liable to the corporation or its shareholders for any action he takes or omits to take as a Director, if, in connection with such action or omission, he performs his duties in compliance with this Section 12. The designated persons on whom a Director is entitled to rely are (i) one or more officers or employees of the corporation whom the Director reasonably believes to be reliable and competent in the matters presented, (ii) legal counsel, public accountant, or other person as to matters which the Director reasonably believes to be within such person's professional or expert competence, or (iii) a committee of the Board of Directors on which the Director does not serve if the Director reasonably believes the committee merits confidence. ARTICLE FOUR OFFICERS Section 1. ENUMERATION OF OFFICES. The corporation shall have as officers a President, one or more Vice Presidents, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. The corporation may also have a Chief Financial Officer, a General Counsel, and a Controller as the Board may elect. Such other officers as may be deemed necessary may also be elected by the Board of Directors. One person may hold more than one office. In all cases where the duties of any officer is not prescribed by the Bylaws or by the Board of Directors, such officer shall follow the orders and instruction of the President of the corporation. Section 2. TERM OF OFFICE. The officers of the corporation shall be elected by the Board of Directors at each annual meeting of the Board held after each annual meeting of the shareholders or as soon thereafter as conveniently may be. Each officer shall hold office until a successor is elected and qualified or until such officer's resignation, death or removal. Section 3. REMOVAL. Any officer may be removed at any time with or without cause by action of the shareholders, the Board of Directors or an officer(s) authorized by the Board. Section 4. VACANCIES. A vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board of Directors, or by an officer(s) authorized by the Board, for the unexpired portion of the officer's term. Section 5. PRESIDENT; POWERS AND DUTIES. Subject to the direction and supervision of the Board of Directors, the President shall be the chief executive officer of the corporation, and shall have general and active control of its affairs and business and general supervision of its officers, agents and employees. The President shall preside at all meetings of the shareholders and the Board of Directors. Any document may be signed by the President or any other person who may be thereunto authorized by the President or the Board of Directors (said authorization to be in writing and filed with the Secretary of the corporation). 5 Exhibit 3-B.2 Section 6. VICE PRESIDENTS; POWERS AND DUTIES. Each Vice President shall have such powers and perform such duties as may be assigned by the Board of Directors or the President. In case of the absence or disability of the President, or a vacancy in the office, a Vice President designated by the President or the Board of Directors shall exercise all the powers and perform all the duties of the President. Section 7. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall attend all meetings of the shareholders and the Board of Directors and shall keep the minutes for such meetings in one or more books provided for that purpose. The Secretary shall be custodian of the corporate records, except those required to be in the custody of the Treasurer or the Controller, shall keep the seal of the corporation and shall execute and affix the seal of the corporation to all documents duly authorized for execution under seal on behalf of the corporation, and shall perform all of the duties incidental to the office of Secretary, as well as such other duties as may be assigned by the President or the Board of Directors. The Assistant Secretaries shall perform such of the Secretary's duties as the Secretary shall from time to time direct. In case of the absence or disability of the Secretary, or a vacancy in the office, an Assistant Secretary designated by the President or the Board of Directors, if the office is not vacant, shall perform the duties of the Secretary. Section 8. TREASURER AND ASSISTANT TREASURERS; POWERS AND DUTIES. The Treasurer shall have care and custody of the funds and securities of the corporation, shall deposit such funds in the name and to the credit of the corporation with such depositories as the Treasurer shall approve, shall disburse the funds of the corporation for proper expenses and dividends, and as may be ordered by the Board of Directors, taking proper vouchers for such disbursements. The Treasurer shall perform all of the duties incident to the office of Treasurer, as well as such other duties as may be assigned by the President or the Board of Directors. In the event there is no Chief Financial Officer, the Treasurer shall perform the duties of Chief Financial Officer. In the event there is no Controller, the Treasurer shall also be the principal accounting officer of the corporation and shall perform the duties incident to the office of Controller The Assistant Treasurers shall perform such of the Treasurer's duties as the Treasurer shall from time to time direct. In case of the absence or disability of the Treasurer, or a vacancy in the office, an Assistant Treasurer designated by the President or the Board of Directors, if the office is not vacant, shall perform the duties of the Treasurer. Section 9. CHIEF FINANCIAL OFFICER; POWERS AND DUTIES. The Chief Financial Officer shall be responsible for maintaining the financial integrity of the corporation, shall prepare the financial plans for the corporation and shall monitor the financial performance of the corporation and its subsidiaries, as well as performing such other duties as may be assigned by the President or the Board of Directors. Section 10. GENERAL COUNSEL; POWERS AND DUTIES. The General Counsel shall be a licensed attorney at law and shall be the chief legal officer of the corporation. The General Counsel shall have such power and exercise such authority and provide such counsel to the corporation as deemed necessary or desirable to enforce the rights and protect the property and integrity of the corporation, shall also have the power, authority, and responsibility for securing for the corporation all legal advice, service and counseling, and shall perform all of the duties incident to the office of General Counsel, as well as such other duties as may be assigned by the President or the Board of Directors. 6 Exhibit 3-B.2 Section 11. CONTROLLER AND ASSISTANT CONTROLLERS; POWERS AND DUTIES. The Controller shall be the chief accounting officer of the corporation and shall keep and maintain in good and lawful order all accounts required by law and shall have sole control over, and ultimate responsibility for, the accounts and accounting methods of the corporation and the compliance of the corporation with all systems of accounts and accounting regulations prescribed by law. The Controller shall audit, to such extent and at such times as may be required by law or as the Controller may think necessary, all accounts and records of corporate funds or property, by whomsoever kept, and for such purposes shall have access to all such accounts and records. The Controller shall make and sign all necessary and proper accounting statements and financial reports of the corporation, and shall perform all of the duties incident to the office of Controller, as well as such other duties as may be assigned by the President or the Board of Directors. The Assistant Controllers shall perform such of the Controller's duties as the Controller shall from time to time direct. In case of the absence or disability of the Controller, or a vacancy in the office, an Assistant Controller designated by the President or the Board of Directors, if the office is not vacant, shall perform the duties of the Controller. Section 12. SALARIES. The salaries of all officers of the corporation shall be fixed by or in the manner provided by the Board of Directors. If authorized by a resolution of the Board, the salary of any officer other than the President may be fixed by the President or a committee of the Board. No officer shall be disqualified from receiving a salary by reason of also being a Director of the corporation. ARTICLE FIVE STOCK CERTIFICATES The shares of the corporation shall be represented by certificates in such form and shall contain such information consistent with law as shall be approved by the Board of Directors. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant Secretary of the corporation and may be sealed with the seal of the corporation or a facsimile thereof. Any or all of the signatures upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or an employee of the corporation. If any officer who has signed or whose facsimile signature has been placed upon such certificate has ceased to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer at the date of its issue. ARTICLE SIX Indemnification of Directors, Officers, and Employees Section 1. SCOPE OF INDEMNIFICATION. (a) The corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise, by reason of the fact that such person is or was serving in an indemnified capacity, except to the extent that any such indemnification against a particular liability is expressly prohibited by applicable law or where a judgment or other final adjudication adverse to the indemnified representative establishes, or where the corporation determines, that 7 Exhibit 3-B.2 his or her acts or omissions (i) were in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) were not in good faith or involved intentional misconduct or a knowing violation of law, or (iii) resulted in receipt by such person of an improper personal benefit. The rights granted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification, contribution, or advancement of expenses may be entitled under any statute, certificate or articles of incorporation, agreement, contract of insurance, vote of shareholders or disinterested directors, or otherwise. The rights of indemnification and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time and shall inure to the benefit of the heirs, executors, administrators, and personal representatives of such a person. (b) If an indemnified representative is not entitled to indemnification with respect to a portion of any liabilities to which such person may be subject, the corporation shall nonetheless indemnify such indemnified representative to the maximum extent for the remaining portion of the liabilities. (c) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the indemnified representative is not entitled to indemnification. (d) To the extent permitted by law, the payment of indemnification provided for by this Article, including the advancement of expenses pursuant to Section 2, with respect to proceedings other than those brought by or in the right of the corporation, shall be subject to the conditions that the indemnified representative shall give the corporation prompt notice of any proceeding, that the corporation shall have complete charge of the defense of such proceeding and the right to select counsel for the indemnified representative, and that the indemnified representative shall assist and cooperate fully in all matters respecting the proceeding and its defense or settlement. The corporation may waive any or all of the conditions set forth in the preceding sentence. Any such waiver shall be applicable only to the specific payment for which the waiver is made and shall not in any way obligate the corporation to grant such waiver at any future time. In the event of a conflict of interest between the indemnified representative and the corporation that would disqualify the corporation's counsel from representing the indemnified representative under the rules of professional conduct applicable to attorneys, it shall be the policy of the corporation to waive any or all of the foregoing conditions subject to such limitations or conditions as the corporation shall deem to be reasonable in the circumstances. (e) For purposes of this Article: (1) "indemnified capacity" means any and all past, present, or future services by an indemnified representative in one or more capacities as a director, officer, employee, or agent of the corporation or, at the request of the corporation, as a director, officer, employee, agent, fiduciary, or trustee of another corporation, partnership, joint venture, trust, employee benefit plan, or other entity or enterprise; any indemnified representative serving an 8 Exhibit 3-B.2 affiliate of the corporation in any capacity shall be deemed to be doing so at the request of the corporation; an "affiliate of the corporation" means an entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the corporation; (2) "indemnified representative" means any and all directors, officers, and employees of the corporation and any other person designated as an indemnified representative by the Board of Directors of the corporation; (3) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damage, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, expert witness fees, costs of investigation, litigation and appeal costs, attorneys' fees, and disbursements); and (4) "proceeding" means any threatened, pending, or completed action, suit, appeal, or other proceeding of any nature, whether civil, criminal, administrative, or investigative, whether formal or informal, whether external or internal to the corporation, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 2. ADVANCING EXPENSES. As provided by the Colorado Business Corporation Act and to the maximum extent permitted by such law, the corporation shall pay the reasonable expenses incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 1. Before making any such advance payment of expenses, the corporation shall receive an undertaking by or on behalf of the indemnified representative to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation pursuant to this Article. Such undertaking shall be an unlimited, unsecured general obligation of the indemnified representative and shall be accepted without reference to the ability of such person to make repayment. No advance shall be made by the corporation if a determination is reasonably and promptly made by the Board of Directors by majority vote of a quorum of disinterested directors, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterest directors so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, the indemnified representative has acted in such a manner as to permit or require the denial of indemnification pursuant to the provisions of Section 1. ARTICLE SEVEN MISCELLANEOUS Section 1. CORPORATE SEAL. The official seal for the corporation shall be circular in form and shall contain the name of the corporation and the words, "Corporate Seal" and "Colorado." Section 2. FISCAL YEAR. The fiscal year of the corporation shall be as established by the Board of Directors. Section 3. WAIVER OF NOTICE. When any notice is required to be given to any shareholder or Director of the corporation under the provisions of these Bylaws or under the provisions of the Articles of Incorporation or under the provisions of the Colorado Business Corporation Act, a waiver thereof, in writing, signed by the person entitled to such notice whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice. 9 Exhibit 3-B.2 Section 4. ADOPTION OR AMENDMENT OF BYLAWS. The Board of Directors shall have power, to the maximum extent permitted by the Colorado Business Corporation Act, to make, amend and repeal the Bylaws of the corporation at any regular or special meeting of the Board unless the shareholders, in making, amending or repealing a particular bylaw, expressly provide that the Directors may not amend or repeal such bylaw. The shareholders also shall have the power to make, amend or repeal the Bylaws of the corporation at any annual meeting or at any special meeting called for that purpose. Section 5. GENDER. The masculine gender is used in these Bylaws as a matter of convenience only and shall be interpreted to include the feminine and neuter genders as the circumstances indicate. Section 6. CONFLICTS. In the event of any irreconcilable conflict between these Bylaws and either the corporation's Articles of Incorporation or applicable law, the latter shall control. 10 EX-4.A-3 5 EXHIBIT 4-A.3 Exhibit 4-A.3 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and entered into as of August 20, 1999 among U S WEST, Inc., a Delaware corporation (the "Guarantor"), U S WEST Capital Funding, Inc., a Colorado corporation (the "COMPANY"), and the Initial Purchasers (as hereinafter defined). This Agreement is made pursuant to the Purchase Agreement dated August 20, 1999 (the "PURCHASE AGREEMENT"), among the Guarantor, the Company, as issuer of the 6 7/8% Notes due August 15, 2001 (the "Notes"), and the Initial Purchasers, which provides for, among other things, the sale by the Company to the Initial Purchasers of the aggregate principal amount of Notes specified therein. The Notes will be unconditionally guaranteed as to payment of principal, premium, if any, and interest by the Guarantor (the "Guarantees", and together with the Notes, the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Guarantor and the Company have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "ADVICE" shall have the meaning set forth in the last paragraph of Section 3 hereof. "AFFILIATE" has the same meaning as given to that term in Rule 405 under the Securities Act or any successor rule thereunder. "APPLICABLE PERIOD" shall have the meaning set forth in Section 3(t) hereof. "BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed. "CLOSING TIME" shall mean the Closing Time as defined in the Purchase Agreement. "COMPANY" shall have the meaning set forth in the preamble to this Agreement and also includes the Company's successors and permitted assigns. "DEPOSITARY" shall mean The Depository Trust Company, or any other depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary must have an address in the Borough of Manhattan, The City of New York. "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(b) hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE GUARANTEES" shall mean the Guarantor's unconditional guarantee of principal, premium, if any, and interest of the Exchange Notes containing terms identical in all material respects to the Guarantees. "EXCHANGE NOTES" shall mean the 6 7/8% Notes due August 15, 2001 issued by the Company under the Indenture containing terms identical in all material respects to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid or duly provided for on the Notes or, if no such interest has been paid, from the date of their original issue, (ii) they will not contain terms with respect to transfer restrictions under the Securities Act, (iii) they will not provide for any Special Interest Premium thereon and (iv) they will be entitled to the benefit of the Exchange Guarantees) to be offered to Holders of Notes in exchange for Notes pursuant to the Exchange Offer. "EXCHANGE OFFER" shall mean the offer by the Company to the Holders to exchange all of the Registrable Securities for a like amount of Exchange Notes pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a) hereof. "GUARANTEES" shall have the meaning set forth in the preamble to this Agreement. "HOLDER" shall mean any Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "INDENTURE" shall mean the Indenture, dated as of June 29, 1998, between the Company, as issuer, and The First National Bank of Chicago, as trustee, as the same may be amended or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS" shall mean J.P. Morgan Securities Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC, Lehman Brothers Inc., Salomon Smith Barney Inc., ABN AMRO Incorporated, Banc One Capital Markets, Inc., BNY Capital Markets, Inc., Commerzbank Capital Markets Corporation, Fleet Securities, Inc., Mellon Financial Markets, Inc., Norwest Investments Services Inc., Muriel Siebert & Co., Inc., Utendahl Capital Partners, L.P. and The Williams Capital Group, L.P. "INSPECTORS" shall have the meaning set forth in Section 3(n) hereof. 2 "ISSUE DATE" shall mean August 25, 1999, the initial date of delivery of the Notes from the Company to the Initial Purchasers. "ISSUER" shall mean the Company as defined in the preamble hereto. "MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate principal amount of outstanding Notes and Exchange Notes. "NOTES" shall have the meaning set forth in the preamble to this Agreement. "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in Section 3(t) hereof. "PERSON" shall mean an individual, partnership, corporation, trust or unincorporated organization, limited liability corporation, or a government or agency or political subdivision thereof. "PROSPECTUS" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all documents incorporated by reference therein. "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble to this Agreement. "RECORDS" shall have the meaning set forth in Section 3(n) hereof. "REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED, HOWEVER, that any Securities shall cease to be Registrable Securities when any of the following occurs: (i) a Registration Statement with respect to such Securities for the exchange or resale thereof shall have been declared effective under the Securities Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act or are eligible to be sold without restriction as contemplated by Rule 144(k), (iii) such Securities shall have ceased to be outstanding or (iv) such Securities shall have been exchanged for Exchange Notes together with the Exchange Guarantees upon consummation of the Exchange Offer and are thereafter freely tradable by the Holder thereof (other than an Affiliate of the Company or the Guarantor). "REGISTRATION EXPENSES" shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantor with this Agreement, including without limitation: (i) all SEC or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one counsel for all underwriters and Holders as 3 a group in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities) and compliance with the rules of the NASD, (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements of counsel for the Company and the Guarantor and of the independent certified public accountants of the Company and the Guarantor and its subsidiaries, including the expenses of any "cold comfort" letters required by or incident to the performance of and compliance with this Agreement, (vi) the reasonable fees and expenses of the Trustee and its counsel and any exchange agent or custodian, and (vii) the reasonable fees and expenses of any special experts retained by the Company and the Guarantor in connection with any Registration Statement. "REGISTRATION STATEMENT" shall mean any registration statement of the Company and the Guarantor which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "RULE 144(k) PERIOD" shall mean the period of two years (or such shorter period as may hereafter be referred to in Rule 144(k) under the Securities Act (or similar successor rule)) commencing on the Issue Date. "SEC" shall mean the Securities and Exchange Commission. "SECURITIES" shall have the meaning set forth in the preamble to this Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended from time to time. "SHELF REGISTRATION" shall mean a registration effected pursuant to Section 2(b) hereof. "SHELF REGISTRATION EVENT" shall have the meaning set forth in Section 2(b) hereof. "SHELF REGISTRATION EVENT DATE" shall have the meaning set forth in Section 2(b) hereof. "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) hereof which covers all of the Registrable Securities (except Registrable Securities which the Holders have elected not to include in such Shelf Registration Statement or the Holders of which have not complied with their obligations under the penultimate paragraph of Section 3 hereof or under the penultimate sentence of Section 2(b) hereof) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "SPECIAL INTEREST PREMIUM" shall have the meaning set forth in Section 2(e) hereof. 4 "TIA" shall have the meaning set forth in Section 3(k) hereof. "TRUSTEE" shall mean the trustee under the Indenture. 2. REGISTRATION UNDER THE SECURITIES ACT. (a) EXCHANGE OFFER. Except as set forth in Section 2(b) below, the Company and the Guarantor shall, for the benefit of the Holders, at the Company's cost, use its reasonable best efforts to (i) file with the SEC within 150 calendar days after the Issue Date an Exchange Offer Registration Statement on an appropriate form under the Securities Act relating to the Exchange Offer, (ii) cause such Exchange Offer Registration Statement to be declared effective under the Securities Act by the SEC not later than the date which is 180 calendar days after the Issue Date, (iii) keep such Exchange Offer Registration Statement effective for not less than 30 calendar days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders and (iv) cause the Exchange Offer to be consummated within 225 calendar days after the Issue Date. Promptly after the effectiveness of the Exchange Offer Registration Statement, the Company shall commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for a like principal amount of Exchange Notes together with the Exchange Guarantees (provided that such Holder (i) is not an Affiliate of the Company or the Guarantor, (ii) is not a broker-dealer tendering Registrable Securities acquired directly from the Company, (iii) acquires the Exchange Securities in the ordinary course of such Holder's business and (iv) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and under state securities or blue sky laws. In connection with the Exchange Offer, the Company and the Guarantor shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Exchange Offer open for acceptance for a period of not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "EXCHANGE PERIOD"); (iii) utilize the services of the Depositary for the Exchange Offer with respect to Notes represented by a global certificate; (iv) permit Holders to withdraw tendered Registrable Securities at any time prior to the close of business, New York City time, on the last Business Day of the Exchange Period, by sending to the institution specified in the notice to Holders, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing his election to have such Registrable Securities exchanged; (v) notify each Holder that any Registrable Security not tendered by such Holder in the Exchange Offer will remain outstanding and continue to accrue interest but will not retain any 5 rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (vi) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. As soon as practicable after the close of the Exchange Offer, the Company and the Guarantor shall: (i) accept for exchange all Registrable Securities or portions thereof duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and letter of transmittal which is an exhibit thereto; (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and the Guarantor; and (iii) issue, and cause the Trustee under the Indenture to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Notes as are surrendered by such Holder, and the Guarantor will execute the Exchange Guarantees. Interest on each Exchange Note issued pursuant to the Exchange Offer will accrue from the last date on which interest was paid or duly provided for on the Note surrendered in exchange therefor or, if no interest has been paid on such Note, from the Issue Date. To the extent not prohibited by any law or applicable interpretation of the staff of the SEC, the Company and the Guarantor shall use reasonable best efforts to complete the Exchange Offer as provided above, and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions other than the conditions referred to in Section 2(b)(i) and (ii) below and those conditions that are customary in similar exchange offers. Each Holder of Registrable Securities who wishes to exchange such Registrable Securities for Exchange Securities in the Exchange Offer will be required to make certain customary representations in connection therewith, including, in the case of any Holder, representations that (i) it is not an Affiliate of the Company or the Guarantor, (ii) it is not a broker-dealer tendering Registrable Securities acquired directly from the Company, (iii) the Exchange Securities to be received by it are being acquired in the ordinary course of its business and (iv) at the time of the Exchange Offer, it has no arrangements or understandings with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities. The Company and the Guarantor shall inform the Initial Purchasers, after consultation with the Trustee, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders in order to facilitate the tender of Registrable Securities in the Exchange Offer. Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS, solely with respect to Exchange Securities held by Participating Broker-Dealers, and the Company and the Guarantor 6 shall have no further obligation to register the Registrable Securities held by any Holder pursuant to Section 2(b) of this Agreement. (b) SHELF REGISTRATION. If (i) because of any change in law or in currently prevailing interpretations thereof by the staff of the SEC, the Company or the Guarantor is not permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof, (ii) the Exchange Offer is not consummated within 225 days after the Issue Date or (iii) upon the request of any Initial Purchaser with respect to any Registrable Securities held by it, if such Initial Purchaser is not permitted, in the reasonable opinion of Brown & Wood LLP, pursuant to applicable law or applicable interpretations of the staff of the SEC, to participate in the Exchange Offer and thereby receive securities that are freely tradeable without restriction under the Securities Act and applicable blue sky or state securities laws (other than due solely to the status of such Initial Purchaser as an Affiliate of the Company or the Guarantor or as a Participating Broker-Dealer)(any of the events specified in (i), (ii) or (iii) being a "SHELF REGISTRATION EVENT", and the date of occurrence thereof, the "SHELF REGISTRATION EVENT DATE"), then in addition to or in lieu of conducting the Exchange Offer contemplated by Section 2(a), as the case may be, the Company and the Guarantor shall promptly notify the Holders in writing thereof and shall, at its cost, file as promptly as practicable after such Shelf Registration Event Date and, in any event, within 90 days after such Shelf Registration Event Date, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities (other than Registrable Securities owned by Holders who have elected not to include such Registrable Securities in such Shelf Registration Statement or who have not complied with their obligations under the penultimate paragraph of Section 3 hereof or under the penultimate sentence of this Section 2(b), and shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC as soon as practicable. No Holder of Registrable Securities shall be entitled to include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder and furnishes to the Company and the Guarantor in writing, within 15 days after receipt of a request therefor, such information as the Company and the Guarantor may, after conferring with counsel with regard to information relating to Holders that would be required by the SEC to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Company and the Guarantor all information with respect to such Holder necessary to make the information previously furnished to the Company and the Guarantor by such Holder not materially misleading. The Company and the Guarantor agree to use their reasonable best efforts to keep the Shelf Registration Statement continuously effective and the Prospectus usable for resales for the earlier of: (a) the Rule 144(k) Period or (b) such time as all of the securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be Registrable Securities (the "EFFECTIVENESS PERIOD"). The Company and the Guarantor shall not permit any securities other than (i) the Company's and the Guarantor 's issued and outstanding securities currently possessing incidental registration rights and (ii) Registrable Securities, to be included in the Shelf Registration. The Company and the Guarantor will, in the event a Shelf Registration Statement is declared effective, provide to each Holder of Registrable Securities covered thereby a reasonable number of copies of the Prospectus which is a part of the 7 Shelf Registration Statement, notify each such Holder when the Shelf Registration has become effective and take any other action required to permit unrestricted resales of the Registrable Securities. The Company and the Guarantor further agree, if necessary, to supplement or amend the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantor for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registrations, and the Company and the Guarantor agree to furnish to the Holders of Registrable Securities covered by such Shelf Registration Statement copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) EXPENSES. The Company and the Guarantor shall pay all Registration Expenses in connection with any Registration Statement filed pursuant to Section 2(a) and/or 2(b) hereof and will reimburse the Initial Purchasers for the reasonable fees and disbursements of Brown & Wood LLP incurred in connection with the Exchange Offer. Except as provided herein, each Holder shall pay all expenses of its counsel, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; PROVIDED, HOWEVER, that if, after it has been declared effective, the offering of Registrable Securities pursuant to such Exchange Offer Registration Statement or Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Offer Registration Statement or Shelf Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. The Company and the Guarantor will be deemed not to have used their reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if they voluntarily take any action that would result in any such Registration Statement not being declared effective or that would result in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period, unless such action is required by applicable law. (e) SPECIAL INTEREST PREMIUM. In the event that: (i) the Exchange Offer Registration Statement is not filed with the SEC on or prior to the 150th day after the Issue Date, then, commencing on the 151st day after the Issue Date, a special interest premium (the "Special Interest Premium") shall accrue on the principal amount of the Notes at a rate of 0.25% per annum; (ii) the Exchange Offer Registration Statement is not declared effective by the SEC on or prior to the 180th day after the Issue Date, then, commencing on the 181st day after the Issue Date, a Special Interest Premium shall accrue on the principal amount of the Notes at a rate of 0.25% per annum; 8 (iii) (A) the Company has not exchanged Exchange Notes for all Notes validly tendered,or the Guarantor has not executed the Exchange Guarantees in respect of the Exchange Notes, in accordance with the terms of the Exchange Offer on or prior to the 225th day after the Issue Date or (B) if the Shelf Registration Statement is required to be filed pursuant to Section 2(b) but is not declared effective by the SEC on or prior to the 225th day after the Issue Date, then, commencing on the 226th day after the Issue Date, a Special Interest Premium shall accrue on the principal amount of the Notes at the rate of 0.25% per annum; or (iv) the Shelf Registration Statement has been declared effective and such ShelfRegistration Statement ceases to be effective or the Prospectus ceases to be usable for resales (A) at any time prior to the expiration of the Effectiveness Period or (B) if related to corporate developments, public filings or similar events or to correct a material misstatement or omission in the Prospectus, for more than 60 days (whether or not consecutive) in any twelve-month period, then a Special Interest Premium shall accrue on the principal amount of the Notes at a rate of 0.25% per annum commencing on the day (in the case of (A) above), or the 61st day after (in the case of (B) above), such Shelf Registration Statement ceases to be effective or the Prospectus ceases to be usable for resales; PROVIDED, HOWEVER, that the aggregate amount of the Special Interest Premium in respect of the Notes may not exceed 0.25% per annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of the Exchange Offer Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Exchange Offer Registration Statement (in the case of clause (ii) above), (3) upon the exchange of Exchange Notes for all Notes validly tendered and execution of the Exchange Guarantees (in the case of clause (iii)(A) above) or upon the effectiveness of the Shelf Registration Statement (in the case of clause (iii) (B) above) or (4) the earlier of (y) such time as the Shelf Registration Statement which had ceased to remain effective or the Prospectus which had ceased to be usable for resales again becomes effective and usable for resales and (z) the expiration of the Effectiveness Period (in the case of clause (iv) above), the Special Interest Premium on the principal amount of the Notes as a result of such clause (or the relevant subclause thereof) shall cease to accrue; PROVIDED, FURTHER, HOWEVER, that if the Exchange Offer Registration Statement is not declared effective by the SEC on or prior to the 225th day after the Issue Date and the Company and the Guarantor shall request Holders to provide the information required by the SEC for inclusion in the Shelf Registration Statement, the Notes owned by Holders who do not provide such information when required pursuant to Section 2(b) will not be entitled to any Special Interest Premium for any day after the 225th day after the Issue Date. Any Special Interest Premium due pursuant to Section 2(e)(i), (ii), (iii) or (iv) above will be payable in cash on the next succeeding February 15 or August 15, as the case may be, to Holders on the relevant record dates for the payment of interest pursuant to the Indenture. (f) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the Holders, the Company and the Guarantor acknowledge that any failure by the Company and the Guarantor to comply with its respective obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of 9 any such failure, any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantor's obligations under Section 2(a) and Section 2(b) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of the Company and the Guarantor with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company and the Guarantor shall use their reasonable best efforts to: (a) prepare and file with the SEC a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within the relevant time period specified in Section 2 hereof on the appropriate form under the Securities Act, which form shall (i) be selected by the Company and the Guarantor, (ii) in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and, in the case of an Exchange Offer, be available for the exchange of Registrable Securities, and (iii) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; the Company and the Guarantor shall use their reasonable best efforts to cause such Registration Statement to become effective and remain effective (and, in the case of a Shelf Registration Statement, the Prospectus to be usable for resales) in accordance with Section 2 hereof; PROVIDED, HOWEVER, that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Holders of the Registrable Securities and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed; and the Company and the Guarantor shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document if the Majority Holders of the Registrable Securities, depending solely upon which Holders must be afforded the opportunity of such review, or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object in a timely manner; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the Effectiveness Period or the Applicable Period, as the case may be, and cause each Prospectus to be supplemented, if so determined by the Company and the Guarantor or requested by the SEC, by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Securities Act, and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the 10 disposition of all securities covered by each Registration Statement during the Effectiveness Period or the Applicable Period, as the case may be, in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities included in the Shelf Registration Statement, at least three Business Days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders of the Registrable Securities, (ii) furnish to each Holder of Registrable Securities included in the Shelf Registration Statement and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary prospectus, and any amendment or supplement thereto, and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities and (iii) consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities included in the Shelf Registration Statement in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (d) in the case of a Shelf Registration, register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions by the time the applicable Registration Statement is declared effective by the SEC as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request in writing in advance of such date of effectiveness, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that the Company and the Guarantor shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (iii) subject itself to taxation in any such jurisdiction if it is not then so subject; (e) (1) in the case of a Shelf Registration or (2) if Participating Broker-Dealers from whom the Company and the Guarantor have received prior written notice that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, are seeking to sell Exchange Securities and are required to deliver Prospectuses, promptly notify each Holder of Registrable Securities, or such Participating Broker-Dealers, as the case may be, their counsel and the managing underwriters, if any, and promptly confirm such notice in writing (i) when a Registration Statement has become 11 effective and when any post-effective amendments thereto become effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the qualification of the Registrable Securities or the Exchange Securities to be offered or sold by any Participating Broker-Dealer in any jurisdiction described in Section 3(d) hereof or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any purchase agreement, securities sales agreement or other similar agreement cease to be true and correct in all material respects, (v) of the happening of any event or the failure of any event to occur or the discovery of any facts, during the Effectiveness Period, which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which causes such Registration Statement or Prospectus to 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, as well as any other corporate developments, public filings with the SEC or similar events causing such Registration Statement not to be effective or the Prospectus not to be useable for resales and (vi) of the reasonable determination of the Company and the Guarantor that a post-effective amendment to the Registration Statement would be appropriate; (f) obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities included within the coverage of such Shelf Registration Statement, without charge, at least one conformed copy of each Registration Statement relating to such Shelf Registration and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends (except any customary legend borne by securities held through The Depository Trust Company or any similar depository) and in such denominations (consistent with the provisions of the Indenture and the officers' certificate establishing the forms and the terms of the Notes pursuant to the Indenture) and registered in such names as the selling Holders or the underwriters may reasonably request at least two Business Days prior to the closing of any sale of Registrable Securities pursuant to such Shelf Registration Statement; 12 (i) in the case of a Shelf Registration or an Exchange Offer Registration, promptly after the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii), 3(e)(v) (subject to a 60-day grace period within any twelve-month period) or 3(e)(vi) hereof, prepare a supplement or post-effective amendment to such Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company shall notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company and the Guarantor have amended or supplemented the Prospectus to correct such misstatement or omission; (j) obtain a CUSIP number for the Exchange Securities or the Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with certificates for the Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary; (k) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, and effect such changes to such documents as may be required for them to be so qualified in accordance with the terms of the TIA and execute, and cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such documents to be so qualified in a timely manner; (l) in the case of a Shelf Registration, enter into such agreements (including underwriting agreements) as are customary in underwritten offerings and take all such other appropriate actions in connection therewith as are reasonably requested by the Holders of at least 25% in aggregate principal amount of the Registrable Securities in order to expedite or facilitate the registration or the disposition of the Registrable Securities; (m) in the case of a Shelf Registration, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, if requested by (x) an Initial Purchaser, in the case where such Initial Purchaser holds Notes acquired by it as part of its initial placement and Holders of at least 25% in aggregate principal amount of the Registrable Securities covered thereby: (i) make such representations and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Company, the Guarantor, the subsidiaries of the Guarantor, and if applicable, Quest Communications International Inc. as then conducted and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be 13 incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company and the Guarantor and updates thereof (which may be in the form of a reliance letter) in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority in amount of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters (it being agreed that the matters to be covered by such opinion may be subject to customary qualifications and exceptions); (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company, the Guarantor, and the subsidiaries of the Guarantor (and, if necessary, any other independent certified public accountants of any business acquired or to be acquired by the Guarantor for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and such other matters as reasonably requested by such underwriters in accordance with Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters) customary for such agreements with respect to all parties to be indemnified pursuant to said Section (including, without limitation, such underwriters and selling Holders); and in the case of an underwritten registration, the above requirements shall be satisfied at each closing under the related underwriting agreement or as and to the extent required thereunder; (n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, make reasonably available for inspection by any selling Holder of Registrable Securities or Participating Broker-Dealer, as applicable, who certifies to the Company and the Guarantor that it has a current intention to sell Registrable Securities pursuant to the Shelf Registration, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder, Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during the Company's and the Guarantor's normal business hours, all financial and other records, pertinent organizational and operational documents and properties of the Company, the Guarantor and the Guarantor's subsidiaries (collectively, the "RECORDS") as shall 14 be reasonably necessary to enable them to conduct due diligence activities, and cause the officers, trustees and employees of the Company, the Guarantor and the Guarantor's subsidiaries to supply all relevant information in each case reasonably requested by any such Inspector in connection with such Registration Statement; records and information which the Company and the Guarantor determine, in good faith, to be confidential and any Records and information which it notifies the Inspectors are confidential shall not be disclosed to any Inspector except where (i) the disclosure of such Records or information is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or is necessary in connection with any action, suit or proceeding or (iii) such Records or information previously has been made generally available to the public; each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree in writing that Records and information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company and the Guarantor unless and until such is made generally available to the public through no fault of an Inspector or a selling Holder; and each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree in writing that it will, upon learning that disclosure of such Records or information is sought in a court of competent jurisdiction, or in connection with any action, suit or proceeding, give notice to the Company and the Guarantor and allow the Company and the Guarantor at their expense to undertake appropriate action to prevent disclosure of the Records and information deemed confidential; (o) comply with all applicable rules and regulations of the SEC so long as any provision of this Agreement shall be applicable and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 60 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company and the Guarantor after the effective date of a Registration Statement, which statements shall cover said 12-month periods, provided that the obligations under this paragraph (o) shall be satisfied by the timely filing of quarterly and annual reports on Forms 10-Q and 10-K under the Exchange Act; (p) upon consummation of an Exchange Offer, if requested by the Trustee, obtain an opinion of counsel to the Company and the Guarantor addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer, substantially to the effect that (i) the Company has duly authorized, executed and delivered the Exchange Notes and the Exchange Notes constitutes a legal, valid and binding obligation of the Company, enforceable 15 against the Company, in accordance with its terms (with customary exceptions) and (ii) the Guarantor has duly authorized, executed and delivered the Exchange Guarantees and the Exchange Guarantees constitute a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor, in accordance with its terms (with customary exceptions); (q) if an Exchange Offer is to be consummated, upon delivery of the Registrable Securities by Holders to the Company and the Guarantor (or to such other Person as directed by the Company and the Guarantor), in exchange for the Exchange Securities, the Company shall mark, or cause to be marked, on such Notes delivered by such Holders that such Notes are being cancelled in exchange for the Exchange Securities; it being understood that in no event shall such Notes be marked as paid or otherwise satisfied; (r) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (s) take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (t) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which section shall be reasonably acceptable to the Initial Purchasers or another representative of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities (a "PARTICIPATING BROKER-DEALER") and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchasers or such other representative, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Company and the Guarantor the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary Prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request (the Company and the Guarantor hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto by any Person subject to the prospectus 16 delivery requirements of the Securities Act, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto), (iii) use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such Persons must comply with such requirements under the Securities Act and applicable rules and regulations in order to resell the Exchange Securities; PROVIDED, HOWEVER, that such period shall not be required to exceed 225 days (or such longer period if extended pursuant to the last sentence of Section 3 hereof) (the "APPLICABLE PERIOD"), and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer"; and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act; and (B) in the case of any Exchange Offer Registration Statement, the Company and the Guarantor agree to deliver to the Initial Purchasers or to another representative of the Participating Broker-Dealers, if reasonably requested by an Initial Purchaser or such other representative of Participating Broker-Dealers, on behalf of the Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel in form and substance reasonably satisfactory to such Initial Purchaser or such other representative of the Participating Broker-Dealers, covering the matters customarily covered in opinions requested in connection with Exchange Offer Registration Statements and such other matters as may be reasonably requested (it being agreed that the matters to be covered by such opinion may be subject to customary qualifications and exceptions), (ii) an officers' certificate substantially similar to that specified in Section 6(d) and (e) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities and (iii) upon the effectiveness of the Exchange Offer Registration Statement, comfort letters, in each case, in customary form if permitted by Statement on Auditing Standards No. 72. 17 The Company and the Guarantor may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company and the Guarantor such information regarding such seller as may be required by the staff of the SEC to be included in a Registration Statement. The Company and the Guarantor may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. The Company and the Guarantor shall have no obligation to register under the Securities Act the Registrable Securities of a seller who so fails to furnish such information. In the case of a Shelf Registration Statement, or if Participating Broker-Dealers who have notified the Company and the Guarantor that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in this Section 3(t) hereof are seeking to sell Exchange Securities and are required to deliver Prospectuses, each Holder agrees that, upon receipt of any notice from the Company and the Guarantor of the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing (the "ADVICE") by the Company and the Guarantor that the use of the applicable Prospectus may be resumed, and, if so directed by the Company and the Guarantor, such Holder will deliver to the Company and the Guarantor (at the Company's and the Guarantor's expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities or Exchange Securities, as the case may be, current at the time of receipt of such notice. If the Company and the Guarantor shall give any such notice to suspend the disposition of Registrable Securities or Exchangeable Securities, as the case may be, pursuant to a Registration Statement, the Company and the Guarantor shall use its reasonable best efforts to file and have declared effective (if an amendment) as soon as practicable after the resolution of the related matters an amendment or supplement to the Registration Statement and shall extend the period during which such Registration Statement is required to be maintained effective and the Prospectus usable for resales pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Company and the Guarantor shall have made available to the Holders (x) copies of the supplemented or amended Prospectus necessary to resume such dispositions or (y) the Advice. 4. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any Registration Statement, the Company and the Guarantor shall indemnify and hold harmless the Initial Purchasers, each Holder, each underwriter who participates in an offering of the Registrable Securities, each Participating Broker-Dealer, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their respective directors, officers, employees and agents, 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 any Registration Statement (or any amendment or supplement thereto), covering Registrable Securities or Exchange Securities, as applicable, or the omission or alleged omission therefrom of a material fact 18 required to be stated 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; provided that (subject to Section 4(d) hereof) any such settlement is effected with the prior written consent of the Company and the Guarantor; and (iii) against any and all expenses whatsoever, as incurred (including the reasonable fees and disbursements of counsel chosen by such Holder, such Participating Broker-Dealer, or any underwriter (except to the extent otherwise expressly provided in Section 4(c) hereof)), reasonably incurred 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, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished in writing to the Company and the Guarantor by the Initial Purchasers or such Holder, underwriter or Participating Broker-Dealer for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Each of the Initial Purchasers and each Holder, underwriter or Participating Broken-Dealer agrees, severally and not jointly, to indemnify and hold harmless the Company and each Person, if any, who controls the Company and the Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company and the Guarantor by such Holder expressly for use in such Registration Statement (or any amendment thereto), or any such Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that in the case of a Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) 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 under this Section 4 to the 19 extent that it is not materially prejudiced by such failure as a result thereof, and in any event shall not relieve it from liability which it may have otherwise on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 4(a) or (b) above, counsel to the indemnified parties shall be selected by such parties. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to 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. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional written release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have validly requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) In order to provide for just and equitable contribution in circumstances under which any of the indemnity provisions set forth in this Section 4 is for any reason held to be unenforceable by an indemnified party although applicable in accordance with its terms, the Company, the Guarantor and the Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company, the Guarantor and the Holders, as incurred; PROVIDED, HOWEVER, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person that was not guilty of such fraudulent misrepresentation. As between the Company and the Guarantor and the Holders, such parties shall contribute to such aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect the relative fault of the Company and the Guarantor, on the one hand, and the Holders, on the other hand, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantor, on the one hand, and of the Holders, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state 20 a material fact relates to information supplied by the Company and the Guarantor, on the one hand, or by or on behalf of the Holders, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 4 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the relevant equitable considerations. For purposes of this Section 4, each Affiliate of a Holder, and each director, officer and employee and Person, if any, who controls a Holder or such Affiliate within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Holder and each Person, if any, who controls the Company and the Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company and the Guarantor. 5. PARTICIPATION IN AN UNDERWRITTEN REGISTRATION. No Holder may participate in an underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in the underwriting arrangement approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents reasonably required under the terms of such underwriting arrangements. 6. SELECTION OF UNDERWRITERS. The Holders of Registrable Securities covered by the Shelf Registration Statement who desire to do so may sell the Securities covered by such Shelf Registration in an underwritten offering, subject to the provisions of Section 3(l) hereof. In any such underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering; PROVIDED, HOWEVER, that such underwriters and managers must be reasonably satisfactory to the Company and the Guarantor. 7. MISCELLANEOUS. (a) RULE 144 AND RULE 144A. For so long as the Company and the Guarantor are subject to the reporting requirements of Section 13 or 15 of the Exchange Act and any Registrable Securities remain outstanding, the Company and the Guarantor will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder; PROVIDED, HOWEVER, that if the Company and the Guarantor ceases to be so required to file such reports, it will, upon the request of any Holder of Registrable Securities, (a) make publicly available such information as is necessary to permit sales of its securities pursuant to Rule 144 under the Securities Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales of its securities pursuant to Rule 144A under the Securities Act, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. 21 Upon the request of any Holder of Registrable Securities, the Company and the Guarantor will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) NO INCONSISTENT AGREEMENTS. The Company and the Guarantor have not entered into, nor will the Company or the Guarantor on or after the date of this Agreement enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Guarantor's other issued and outstanding securities under any such agreements. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and the Guarantor has obtained the written consent of Holders of a majority in aggregate principal amount of the outstanding Registrable Notes or a majority in aggregate principal amount of the outstanding Registrable Debentures affected by such amendment, modification, supplement, waiver or departure; PROVIDED that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. Notwithstanding the foregoing sentence, (i) this Agreement may be amended, without the consent of any Holder of Registrable Securities, by written agreement signed by the Company, the Guarantor and the Initial Purchasers, to cure any ambiguity, correct or supplement any provision of this Agreement that may be inconsistent with any other provision of this Agreement or to make any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with other provisions of this Agreement, (ii) this Agreement may be amended, modified or supplemented, and waivers and consents to departures from the provisions hereof may be given, by written agreement signed by the Company, the Guarantor and the Initial Purchasers to the extent that any such amendment, modification, supplement, waiver or consent is, in their reasonable judgment, necessary or appropriate to comply with applicable law (including any interpretation of the Staff of the SEC) or any change therein and (iii) to the extent any provision of this Agreement relates to an Initial Purchaser, such provision may be amended, modified or supplemented, and waivers or consents to departures from such provisions may be given, by written agreement signed by such Initial Purchaser, the Guarantor and the Company. (d) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company and the Guarantor by means of a notice given in accordance with the provisions of this Section 7(d), which address initially is, with respect to each Initial Purchaser, the address set forth in the Purchase Agreement; and (ii) if to the Company or the Guarantor, initially at the Company's and Guarantor's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(d). 22 All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (f) THIRD PARTY BENEFICIARIES. Each Holder and any Participating Broker-Dealer shall be third party beneficiaries of the agreements made hereunder among the Initial Purchasers, the Guarantor and the Company, and the Initial Purchasers shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. (j) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 23 (k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company, the Guarantor or their Affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 24 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. U S WEST, INC. By: /s/ Sean P. Foley -------------------------- Name: Sean P. Foley Title: Treasurer U S WEST CAPITAL FUNDING, INC. By: /s/ Sean P. Foley -------------------------- Name: Sean P. Foley Title: Treasurer Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: J.P. MORGAN SECURITIES INC. For itself and as Representative of the several Initial Purchasers By: /s/ John E. Simmons ----------------------------------- Authorized Signatory 25 EX-5.A-1 6 EXHIBIT 5-A.1 CADWALADER ---------- Cadwalader, Wickersham & Taft 100 Maiden Lane New York New York, NY 10038 Washington Tel: 212 504-6000 Charlotte Fax: 212 504-6666 London December 10, 1999 U S WEST Capital Funding, Inc. U S West, Inc. 1801 California Street Denver, Colorado 80202 Re: Registration Statement on Form S-4 ---------------------------------- Ladies and Gentlemen: We have acted as special counsel to U S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding"), and U S WEST, Inc., a Delaware corporation ("U S WEST"), in connection with the preparation and filing by Capital Funding and U S WEST with the Securities and Exchange Commission (the "Commission") of a Preliminary Prospectus, dated December 10, 1999 (the "Prospectus") included in a Registration Statement on Form S-4 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the registration by Capital Funding of $1,150,000,000 aggregate principal amount of its 6-7/8% Notes due August 15, 2001 (the "Securities"), unconditionally guaranteed (the "Guarantees") as to payment of principal and interest by U S WEST. The Registration Statement also relates to the offer by Capital Funding to exchange the Securities and Guarantees for all of its outstanding $1,150,000,000 aggregate principal amount of 6-7/8% Notes due August 15, 2001 (the "Old Notes") and the related guarantees (the "Old Guarantees"), previously issued pursuant to the Purchase Agreement, dated August 20, 1999 and filed as an exhibit to the Registration Statement. The Securities and the Guarantees will be issued pursuant to the terms of the Registration Rights Agreement, dated as of August 20, 1999 among Capital Funding, U S WEST and the initial purchasers party thereto (the "Registration Rights Agreement") and filed as an exhibit to the Registration Statement. U S WEST Capital Funding Inc. -2- December 10, 1999 In rendering the opinions set forth below, we have examined and relied upon, among other things, (a) the Registration Statement, including the Prospectus constituting a part thereof, (b) the Indenture, dated as of June 29, 1998 (the "Indenture"), among U S WEST, Capital Funding and The First National Bank of Chicago, as trustee (the "Trustee"), filed as an exhibit to the Registration Statement, (c) the Registration Rights Agreement, (d) the Old Notes, (e) the Old Guarantees, (f) the forms of Securities and Guarantees and (g) originals, copies or specimens, certified or otherwise identified to our satisfaction, of such certificates, corporate and public records, agreements and instruments and other documents as we have deemed appropriate as a basis for the opinions expressed below. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents, agreements and instruments submitted to us as originals, the conformity to original documents, agreements and instruments of all documents, agreements and instruments submitted to us as copies or specimens, the authenticity of the originals of such documents, agreements and instruments submitted to us as copies or specimens, and the accuracy of the matters set forth in the documents, agreements and instruments we reviewed. As to any facts material to such opinions that were not known to us, we have relied upon statements and representations of officers and other representatives of Capital Funding and U S WEST. Except as expressly set forth herein, we have not undertaken any independent investigation (including, without limitation, conducting any review, search or investigation of any public files, records or dockets) to determine the existence or absence of the facts that are material to our opinions, and no inference as to our knowledge concerning such facts should be drawn from our reliance on the representations of Capital Funding and U S WEST in connection with the preparation and delivery of this letter. In addition, we have assumed that the Guarantees and the Securities will be executed and delivered in substantially the form in which they are filed as exhibits to the Registration Statement. We express no opinion concerning the laws of any jurisdiction other than the laws of the State of New York, the General Corporation Law of the State of Delaware with respect to the opinion set forth in paragraph 2 below and the federal tax laws of the United States with respect to the opinion set forth in paragraph 3 below. With respect to the matters set forth in paragraph 1 below covered by the laws of the State of Colorado, we have relied on the opinion of Thomas O. McGimpsey, Senior Attorney and Secretary of Capital Funding and Senior Attorney and Assistant Secretary of U S WEST. While we are not licensed to practice law in the State of Delaware, we have reviewed applicable provisions of the Delaware General Corporation Law as we have deemed appropriate in connection with the opinions expressed herein. Based upon and subject to the qualifications set forth herein, we are of the opinion that: 1. The Securities, when duly executed and authenticated in the manner contemplated in the Indenture and issued and delivered in exchange for the Old U S WEST Capital Funding Inc. -3- December 10, 1999 Notes as contemplated in the Prospectus, will be legally issued and will constitute binding agreements of Capital Funding, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors' rights generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 2. The Guarantees, when duly executed in the manner contemplated in the Indenture and issued and delivered in exchange for the Old Guarantees as contemplated in the Prospectus, will be legally issued and will constitute binding agreements of U S WEST, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors' rights generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 3. The statements made in the Prospectus under the caption "Certain U.S. Federal Tax Considerations," insofar as such statements purport to summarize certain federal income tax laws of the United States or legal conclusions with respect thereto, have been reviewed by us and constitute a fair summary of the principal U.S. federal tax consequences of the purchase, ownership and disposition of the Securities. All such statements are based upon current law, which is subject to change, possibly with retroactive effect. Further, there can be no assurance that the Internal Revenue Service will not take a contrary position. We assume no obligation to update or supplement this letter to reflect any facts, circumstances, laws, rules or regulations, or any changes thereto, or any court or other authority or body decisions or governmental or regulatory authority determinations which may hereafter occur or come to our attention. We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the reference to this Firm in the Prospectus constituting a part of the Registration Statement under the caption "Legal Matters," without admitting that we are "experts" within the meaning of 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. Very truly yours, /s/ Cadwalader, Wickersham & Taft EX-5.A-2 7 EXHIBIT 5-A.2 Exhibit 5-A.2 December 10, 1999 U S WEST, Inc. U S WEST Capital Funding, Inc. 1801 California Street Denver, CO 80202 Re: U S WEST, Inc. and U S WEST Capital Funding, Inc. Form S-4 Registration Statement for Exchange Offer Gentlemen and Ladies: As counsel to U S WEST, Inc. ("U S WEST") and U S WEST Capital Funding, Inc. ("Capital Funding") (collectively, the "Registrants"), I have examined the Registration Statement on Form S-4 filed contemporaneously herewith (the "Registration Statement") with the Securities and Exchange Commission (the "Commission"), in connection with the registration under the Securities Act of 1933, as amended, of $1,150,000,000 of (a) Capital Funding's 6 7/8% Notes due August 15, 2001 (the "New Notes") to be exchanged for its outstanding 6 7/8% Notes due August 15, 2001 (the "Old Notes") and (b) U S WEST's guarantees (the "New Guarantees") relating to the New Notes to be exchanged for its outstanding guarantees (the "Old Guarantees") on the Old Notes. I have examined the Indenture, dated June 29, 1998, by and among U S WEST, Capital Funding and First National Bank of Chicago, as trustee, under which the New Notes and New Guarantees are to be issued (the "Indenture"), and such other documents, certificates and matters of fact as I have deemed necessary for purposes of this opinion. I am familiar with the proceedings taken and proposed to be taken by the Registrants in connection with the proposed authorization, issuance and exchange of New Notes and New Guarantees for Old Notes and Old Guarantees. I am also familiar with the opinion of Cadwalader, Wickersham & Taft, qualified to practice in New York, concerning the validity, legality, and binding effect of the Old Notes and Old Guarantees and New Notes and New Guarantees under New York law, upon which opinion I relied in delivering my opinion pursuant to Section 6(g) of the Purchase Agreement, which has been filed as an exhibit to the Registration Statement. Based upon the foregoing, and in reliance thereon, it is my opinion that, subject to the terms of the New Notes and New Guarantees being otherwise in compliance with then applicable law, when the New Notes and New Guarantees have been duly authorized, executed, authenticated and delivered in accordance with the terms of the Registration Rights Agreement, which has been filed as an exhibit to the Registration Statement, and the applicable resolutions of the respective Board of Directors of the Registrants, and any legally required consents, approvals, authorizations, and other orders of the Commission or any other judicial or regulatory authorities to be obtained, and, to the extent applicable, the articles or certificate of incorporation and bylaws of the Registrants and the Indenture, the New Notes and New Guarantees will constitute legally Exhibit 5-A.2 issued and binding obligations of Capital Funding and U S WEST, respectively, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally, and except that the remedies of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 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 caption "Legal Opinions" in the Prospectus forming a part of the Registration Statement. Very truly yours, /s/ Thomas O. McGimpsey ------------------------------ Thomas O. McGimpsey EX-12 8 EXHIBIT 12 Exhibit 12 U S WEST, INC. EARNINGS TO FIXED CHARGES (Dollars in Millions)
Year Ended 9/30/99 9/30/98 ------- ------- Pro forma income before income taxes and extraordinary item $ 1,714 $ 1,843 Interest expense (net of amounts capitalized) 519 378 Interest factor on rentals (1/3) 68 64 ------- ------- Earnings $ 2,301 $ 2,285 Interest expense $ 544 $ 395 Interest factor on rentals (1/3) 68 64 ------- ------- Fixed charges $ 612 $ 459 Ratio of earnings to fixed charges 3.76 4.98 ------- -------
Quarter Ended 9/30/99 9/30/98 ------- ------- Income before income taxes and extraordinary item $ 396 $ 608 Interest expense (net of amounts capitalized) 203 172 Interest factor on rentals (1/3) 24 20 ------- ------- Earnings $ 623 $ 800 Interest expense $ 213 $ 178 Interest factor on rentals (1/3) 24 20 ------- ------- Fixed charges $ 237 $ 198 Ratio of earnings to fixed charges 2.63 4.04 ------- -------
EX-23.A 9 EXHIBIT 23-A [LETTERHEAD] Exhibit 23-A CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form S-4 registration statement of our report dated January 22, 1999 (except with respect to Note 12 and Note 14, as to which the date is March 22, 1999), on the consolidated balance sheets of U S WEST, Inc. (formerly known as USW-C, Inc., the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1998, included in the Company's Form 10-K/A dated March 24, 1999 and the selected consolidated financial statements in U S WEST, Inc.'s Current Report on Form 8-K dated February 25, 1999, and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Denver, Colorado, December 10, 1999. EX-24 10 EXHIBIT 24 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, U S WEST, Inc., a Delaware corporation (hereinafter referred to as the "Company"), proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, (the "Registration Statement") for the registration of Guarantees of $1,150,000,000 of debt securities to be issued by U S WEST Capital Funding, Inc.; and WHEREAS, each of the undersigned is a Director of the Company; NOW, THEREFORE, each of the undersigned constitutes and appoints THOMAS O. MCGIMPSEY, as attorney for him or her and in his or her name, place, and stead, and in his or her capacity as a Director of the Company, to execute and file such Registration Statement, and thereafter to execute and file any amended registration statement or statements or supplements thereto, hereby giving and granting to said attorney full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as he or she might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorney may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney this 3rd day of December 1999. /s/ LINDA G. ALVARADO /s/ MANUEL A. FERNANDEZ - ----------------------------- ------------------------------ Linda G. Alvarado Manuel A. Fernandez /s/ CRAIG R. BARRETT /s/ PETER S. HELLMAN - ----------------------------- ------------------------------ Craig R. Barrett Peter S. Hellman /s/ THE HONORABLE HANK BROWN /s/ MARILYN CARLSON NELSON - ----------------------------- ------------------------------ The Honorable Hank Brown Marilyn Carlson Nelson /s/ JERRY J. COLANGELO /s/ FRANK P. POPOFF - ----------------------------- ------------------------------ Jerry J. Colangelo Frank P. Popoff /s/ GEORGE J. HARAD /s/ SOLOMON D. TRUJILLO - ----------------------------- ------------------------------ George J. Harad Solomon D. Trujillo
Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, U S WEST Capital Funding, Inc., a Colorado corporation (hereinafter referred to as the "Company"), proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, (the "Registration Statement") for the registration of $1,150,000,000 of debt securities to be issued by the Company; and WHEREAS, each of the undersigned is an Officer or Director, or both, of the Company as indicated below each signature; NOW, THEREFORE, each of the undersigned constitutes and appoints THOMAS O. MCGIMPSEY, as attorney for him or her and in his or her name, place, and stead, and in his or her capacity as an Officer or Director of the Company, to execute and file such Registration Statement, and thereafter to execute and file any amended registration statement or statements or supplements thereto, hereby giving and granting to said attorney full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as he or she might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorney may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney this 3rd day of December 1999. /s/ ALLAN R. SPIES ----------------------------------- Allan R. Spies President and Director /s/ JANET K. COOPER ----------------------------------- Janet K. Cooper Vice President - Finance and Controller and Director /s/ SEAN P. FOLEY ----------------------------------- Sean P. Foley Vice President and Treasurer and Director Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, U S WEST, Inc., a Delaware corporation (hereinafter referred to as the "Company"), proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, (the "Registration Statement") for the registration of Guarantees of $1,150,000,000 of debt securities to be issued by U S WEST Capital Funding, Inc.; and WHEREAS, each of the undersigned is an Officer or Director, or both, of the Company as indicated below each signature; NOW, THEREFORE, each of the undersigned constitutes and appoints THOMAS O. MCGIMPSEY, as attorney for him and in his name, place, and stead, and in his capacity as an Officer or Director, or both, of the Company, to execute and file such Registration Statement, and thereafter to execute and file any amended registration statement or statements or supplements thereto, hereby giving and granting to said attorney full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney this 3rd day of December 1999. /s/ SOLOMON D. TRUJILLO ----------------------------------- Solomon D. Trujillo President and Chief Executive Officer and Director /s/ ALLAN R. SPIES ----------------------------------- Allan R. Spies Executive Vice President and Chief Financial Officer /s/ JANET K. COOPER ----------------------------------- Janet K. Cooper Vice President - Finance and Controller -----END PRIVACY-ENHANCED MESSAGE-----