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U S WEST, INC.,
Issuer
and
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
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FIRST SUPPLEMENTAL INDENTURE
Dated as of _________, 1995
Supplemental to Indenture dated as of ________, 1995
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FIRST SUPPLEMENTAL INDENTURE dated as of ________, 1995 (this
"Supplemental Indenture"), made and entered into by and between U S WEST, Inc.,
a corporation organized and existing under the laws of the State of Delaware
having its principal office at 0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000, and
The First National Bank of Chicago, a national banking association duly
organized and existing under the laws of the United States, as Trustee (the
"Trustee") under the indenture of the Company (the "Indenture") dated as of
_________, 1995.
WHEREAS Sections 9.01(6) and (7) of the Indenture provide that the
Company and Trustee may enter into one or more indentures supplemental to the
Indenture without the consent of any Securityholder, (a) to provide for the
issuance of and establish the form, terms and conditions of Securities of any
Series as provided by Section 2.02 thereof and (b) to make any change in the
Indenture that does not adversely affect the rights of any Securityholder in any
material respect; and
WHEREAS the Indenture also provides for the issuance from time to time
of unsecured and unsubordinated debentures, notes or other evidences of
indebtedness (the "Securities"), issuable for the purposes and subject to the
limitations contained in the Indenture; and
WHEREAS the Company has duly authorized the creation of a Series of
its Securities denominated its "_____% Exchangeable Notes Due ________, 199_"
representing up to_______________ of its "Debt Exchangeable for Common Stock
(SM)" (such Securities being referred to herein as the "DECS (SM)", the
principal amount of which is mandatorily exchangeable at Maturity into shares of
Common Stock, par value $0.10 per share (the "Enhance Common Stock"), of Enhance
Financial Services Group Inc., a New York corporation ("Enhance"), or, at the
option of the Company, cash, in either case at the Exchange Rate (as defined
herein); and
WHEREAS the entry into this Supplemental Indenture by the parties
hereto is in all respects authorized by the provisions of the Indenture; and
WHEREAS the Company has duly authorized the execution and delivery of
this Supplemental Indenture, and all things necessary have been done to make the
DECS, when executed by the Company and authenticated and delivered hereunder and
duly issued by the Company, the valid obligations of the Company, and to make
this Supplemental Indenture a valid agreement of the Company, in accordance with
their and its terms:
NOW, THEREFORE:
For and in consideration of the premises and purchase of the
Securities of any Series issued on or after the date hereof by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities of any such Series, as follows:
ARTICLE I
CERTAIN PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of the Indenture and this Supplemental Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article;
(2) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to the Indenture and this Supplemental Indenture as a whole
and not to any particular Article, Section or other subdivision; and
(3) capitalized terms used but not defined herein are used as they
are defined in the Indenture.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
"Closing Price" of any security on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security (regular way) on the NYSE on such date or, if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, or if such security is not so listed on a
United States national or regional securities exchange, as reported by the
NASDAQ National Market of the National Association of Securities Dealers, Inc.
Automated Quotation System, or, if such security is not so reported, the last
quoted bid price for such security in the over-the-counter market as reported by
the National Quotation Bureau or similar organization.
"DECS" has the meaning set forth in the recitals to this Supplemental
Indenture.
"Dilution Event" has the meaning set forth in Section 205(a)(ii).
"Enhance Common Stock" has the meaning set forth in the recitals to
this Supplemental Indenture.
"Exchange Rate" means a rate equal to, (a) if the Maturity Price per
share of Enhance Common Stock is greater than or equal to $_______(the
"Threshold Appreciation Price"), shares of Enhance Common Stock per DECS, (b) if
the Maturity Price is less than the Threshold Appreciation Price but is greater
than the Initial Price, a fractional share of Enhance Common Stock per DECS so
that the value thereof (determined at the Maturity Price) is equal to the
Initial Price (such fractional share being calculated to the nearest 1/10,000th
of a share or, if there is not a nearest 1/10,000th of a share, to the next
highest 1/10,000th of a share)
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and (c) if the Maturity Price is less than or equal to the Initial Price, one
share of Enhance Common Stock per DECS; PROVIDED, HOWEVER, that the Exchange
Rate is subject to adjustment from time to time pursuant to Section 204(a).
"Extraordinary Cash Dividend" has the meaning set forth in paragraph
(a)(vi) of Section 204(a).
"Initial Price" means $__________ per share of Enhance Common Stock.
"Maturity" means the date on which the principal of a DECS becomes due
and as provided therein or herein, whether at Stated Maturity or by declaration
of acceleration or otherwise.
"Maturity Price" means the average Closing Price per share of Enhance
Common Stock on the 20 Trading Days immediately prior to, but not including, the
date of Maturity; PROVIDED, HOWEVER, that if there are not 20 Trading Days for
the Enhance Common Stock occurring later than the 60th calendar day immediately
prior to, but not including, the date of Maturity, Maturity Price means the
market value per share of Enhance Common Stock as of Maturity as determined by
a nationally recognized independent investment banking firm retained for this
purpose by the Company.
"NYSE" means the New York Stock Exchange, Inc.
"Reorganization Event" has the meaning set forth in Section 204(b).
"Share Components" means the numbers of shares of Enhance Common Stock
per DECS specified in clauses (a) and (c) of the definition of "Exchange Rate"
set forth in this Article.
"Stated Maturity" means, when used with respect to any DECS, the date
specified in such DECS as the fixed date on which the principal of such DECS is
due and payable and, when used with respect to any installment of interest on a
DECS, the fixed date on which such installment of interest is due.
"Threshold Appreciation Price" has the meaning specified in the
definition of "Exchange Rate" set forth in this Article.
"Trading Day" means a day on which the security the Closing Price of
which is being determined (a) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (b) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
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"Transaction Value" means (x) for any cash received in any
Reorganization Event, the amount of cash received per share of Enhance Common
Stock, (y) for any property other than cash or securities received in any
Reorganization Event, an amount equal to the market value at Maturity of such
property received per share of Enhance Common Stock as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company and (z) for any securities received in any Reorganization
Event, an amount equal to the average Closing Price per share of such securities
on the 20 Trading Days immediately prior to Maturity multiplied by the number of
such securities received for each share of Enhance Common Stock; PROVIDED,
HOWEVER, that in the case of clause (z), if there are not 20 Trading Days for
such securities occurring later than the 60th calendar day immediately prior to,
but not including, the date of Maturity, Transaction Value means the market
value per share of such securities as of Maturity as determined by a nationally
recognized independent investment banking firm retained for such purpose by the
Company.
SECTION 102. EFFECT OF HEADINGS.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
SECTION 103. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Supplemental Indenture by the
Company shall bind its successors and assigns, whether so expressed or not.
SECTION 104. SEPARABILITY.
In case any provision in this Supplemental Indenture or the DECS shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 105. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Supplemental Indenture
by any of the provisions of the Trust Indenture Act, such required provision
shall control.
SECTION 106. BENEFITS OF SUPPLEMENTAL INDENTURE.
Nothing in this Supplemental Indenture, expressed or implied, shall
give to any person, other than the parties hereto and their successors
hereunder, and the Holders of the DECS any benefit or any legal or equitable
right, remedy or claim under this Supplemental Indenture.
SECTION 107. GOVERNING LAW.
THIS SUPPLEMENTAL INDENTURE AND THE DECS SHALL BE DEEMED TO BE A
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CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW
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YORK AND THIS SUPPLEMENTAL INDENTURE AND EACH SUCH DECS SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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ARTICLE II
The DECS
SECTION 201. TITLE AND TERMS.
There is hereby created under the Indenture a Series of Securities
known and designated as the "___% Exchangeable Notes Due 199_" of the Company.
The aggregate principal amount of DECS that may be authenticated and delivered
under this Indenture is limited to $____________, except for DECS authenticated
and delivered upon reregistration of, transfer of, or in exchange for, or in
lieu of, other DECS pursuant to Section 2.08, 2.09, 2.12, 3.06 or 9.05 of the
Indenture.
The Stated Maturity for payment of principal of the DECS shall be
__________, 199_ and the DECS shall bear interest (computed on the basis of a
360-day year of twelve 30-day months) at the rate of ___% per annum, from
______, 1995 or the most recent Interest Payment Date to which interest has been
paid or duly provided for, payable quarterly in arrears on __________,
_________, _________ and __________ of each year (commencing ______________,
1995), to the persons in whose names the DECS (or any predecessor securities)
are registered at the close of business on the _______, _______, _______ or
_______ next preceding such interest payment date, until principal thereof is
paid or made available for payment.
The DECS shall be initially issued in the form of a Global Security
and the Depositary for the DECS shall be the Depository Trust Company, New York,
New York.
The DECS shall not be redeemable prior to their Stated Maturity.
The DECS shall not be subject to any sinking fund.
The DECS shall be issuable in denominations of $___ and any integral
multiple thereof.
The DECS shall be issuable as Registered Securities only, without
coupons.
The Company shall not be obligated to pay any additional amount on the
DECS in respect of taxes, except as otherwise provided in Sections 206 and 302.
The form of DECS attached hereto as Exhibit A is hereby adopted,
pursuant to Section 9.01(7) of the Indenture, as a form of Securities of a
Series that consists of DECS.
The DECS shall be mandatorily exchangeable as provided in Section 202.
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SECTION 202. EXCHANGE AT MATURITY.
At Maturity the principal amount of each DECS shall be mandatorily
exchanged by the Company into a number of shares of Enhance Common Stock at
the Exchange Rate; PROVIDED, HOWEVER, that, pursuant to Section 203, no
fractional shares of Enhance Common Stock shall be issued. The Holders of
the DECS shall be responsible for the payment of any and all brokerage costs
upon the subsequent sale of such shares. The Company may, at its option, in
lieu of delivering shares of Enhance Common Stock, deliver cash in an amount
(calculated to the nearest 1/100th of a dollar per DECS or, if there is not a
nearest 1/100th of a dollar, then to the next higher 1/100th of a dollar)
equal to the product of the number of shares of Enhance Common Stock
otherwise deliverable on the date of Maturity multiplied by the Maturity
Price; PROVIDED, HOWEVER, that if such option in excersised, the Compay shall
deliver cash with respect to all, but not less than all, of the shares of
Enhance Common Stock that would otherwise be deliverable, except to those
Holders with respect to whom it has determinded delivery of cash may violate
applicable state law and as to whom it will deliver shares of Enhance Common
Stock as provided herein. In determining the amount of cash deliverable in
exchange for the DECS in lieu of shares of Enhance Common Stock pursuant to
the prior sentence hereof, if more than one DECS shall be surrendered for
exchange at one time by the same Holder, the amount of cash which shall be
delivered upon exchange shall be computed on the basis of the aggregate
number of DECS so surrendered at Maturity.
SECTION 203. NO FRACTIONAL SHARES.
If more than one DECS shall be surrendered for exchange pursuant to
Section 202 at one time by the same Holder, the number of full shares of Enhance
Common Stock which shall be delivered upon such exchange, in whole or in part,
as the case may be, shall be computed on the basis of the aggregate number of
DECS surrendered. No fractional shares or scrip representing fractional shares
of Enhance Common Stock shall be issued or delivered upon any exchange pursuant
to Section 202 of any DECS. In lieu of any fractional share of Enhance Common
Stock which, but for the immediately preceding sentence, would otherwise be
deliverable upon such exchange, the Company, through any applicable Paying
Agent, shall make a cash payment in respect of such fractional interest in an
amount equal to the value of such fractional shares at the Maturity Price. The
Company shall, upon such exchange of any DECS, provide cash to any applicable
Paying Agent in an amount equal to the cash payable with respect to any
fractional shares of Enhance Common Stock deliverable upon such exchange, and
the Company shall retain such fractional shares of Enhance Common Stock.
SECTION 204. ADJUSTMENT OF EXCHANGE RATE.
(a) ADJUSTMENT FOR DISTRIBUTIONS, RECLASSIFICATIONS, ETC. The
Exchange Rate shall be subject to adjustment from time to time as follows:
(i) If Enhance shall:
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(A) pay a dividend or make a distribution, in either case, with
respect to the Enhance Common Stock in shares of such stock;
(B) subdivide or split the outstanding shares of Enhance Common
Stock into a greater number of shares;
(C) combine the outstanding shares of Enhance Common Stock into
a smaller number of shares; or
(D) issue by reclassification (other than a reclassification
upon a Reorganization Event, as defined in paragraph (b) of this
Section) of shares of Enhance Common Stock any shares of common stock
of Enhance;
then, in any such event, the Exchange Rate shall be adjusted by adjusting
each of the Share Components of the Exchange Rate in effect immediately
prior to such event so that a Holder of any DECS shall be entitled to
receive, upon mandatory exchange pursuant to Section 202 of the principal
amount of such DECS at Maturity pursuant to either Share Component of the
Exchange Rate, the number of shares of Enhance Common Stock (or, in the
case of a reclassification referred to in clause (D) of this sentence, the
number of shares of other common stock of Enhance issued pursuant thereto)
which such Holder of such DECS would have owned or been entitled to receive
immediately following such event had such DECS been exchanged pursuant to
either Share Component of the Exchange Rate immediately prior to such event
or any record date with respect thereto. Each such adjustment shall become
effective at the opening of business on the Business Day next following the
record date for determination of Holders of Enhance Common Stock entitled
to receive such dividend or distribution in the case of a dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, split, combination or reclassification.
Each such adjustment shall be made successively.
(ii) If Enhance shall, after the date hereof, issue rights or
warrants to all holders of Enhance Common Stock entitling them to subscribe
for or purchase shares of Enhance Common Stock (other than rights to
purchase Enhance Common Stock pursuant to a plan for the reinvestment of
dividends or interest) at a price per share less than the current market
price of Enhance Common Stock (determined for purposes of this paragraph
(a)(ii) as the average Closing Price per share of Enhance Common Stock on
the 20 Trading Days immediately prior to the date such rights or warrants
are issued; PROVIDED, HOWEVER, that if there are not 20 Trading Days for
the Enhance Common Stock occurring later than the 60th calendar day
immediately prior to, but not including, such date, such current market
price shall be determined as the market value per share of Enhance Common
Stock as of such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company), then in
each case the Exchange Rate shall be adjusted by multiplying each of the
Share Components of the Exchange Rate in effect immediately prior to the
date of issuance of such rights or warrants, by a fraction, of which the
numerator shall be
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the number of shares of Enhance Common Stock outstanding on the date of
issuance of such rights or warrants, immediately prior to such issuance,
plus the number of additional shares of Enhance Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and of which
the denominator shall be the number of shares of Enhance Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of Enhance
Common Stock which the aggregate offering price of the total number of
shares of Enhance Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at such current market
price (calculated as the average Closing Price per share of Enhance Common
Stock on the 20 Trading Days immediately prior to the date such rights or
warrants are issued; PROVIDED, HOWEVER, that if there are not 20 Trading
Days for the Enhance Common Stock occurring later than the 60th calendar
day immediately prior to, but not including, such date, such current market
price shall be determined as the market value per share of such Enhance
Common Stock as of such date as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Company), which shall be determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing the
product so obtained by such current market price. Such adjustment shall
become effective at the opening of business on the Business Day next
following the record date for the determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of Enhance
Common Stock are not delivered after the expiration of such rights or
warrants, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such
rights or warrants been made upon the basis of delivery of only the number
of shares of Enhance Common Stock actually delivered. Each such adjustment
shall be made successively.
(iii) If Enhance shall pay a dividend or make a distribution to
all holders of Enhance Common Stock of evidences of its indebtedness or
other assets (excluding any dividends or distributions referred to in
clause (A) of paragraph (a)(i) of this Section, any shares of common stock
issued pursuant to a reclassification referred to in clause (D) of
paragraph (a)(i) of this Section above or any ordinary periodic cash
dividends that do not constitute Extraordinary Cash Dividends) or shall
issue to all holders of Enhance Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than those referred
to in paragraph (a)(ii) of this Section), then in each such case, the
Exchange Rate shall be adjusted by multiplying each of the Share Components
of the Exchange Rate in effect on the record date mentioned below, by a
fraction of which the numerator shall be the current market price per share
of the Enhance Common Stock on the record date for the determination of
stockholders entitled to receive such dividend or distribution (such
current market price being determined for purposes of this paragraph
(a)(iii) as the average Closing Price per share of Enhance Common Stock on
the 20 Trading Days immediately prior to such record date; PROVIDED,
HOWEVER, that if there are not 20 trading Days for the Enhance Common Stock
occurring later than the 60th calendar day immediately prior to, but not
including, such record date, such current market price shall be determined
as the
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market value per share of such Enhance Common Stock as of such record date
as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company), and of which the
denominator shall be such current market price per share of Enhance Common
Stock less the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive, and described in a
resolution adopted with respect thereto) as of such record date of the
portion of the assets or evidences of indebtedness so distributed or of
such subscription rights or warrants applicable to one share of Enhance
Common Stock. Each such adjustment shall become effective on the opening
of business on the Business Day next following the record date for the
determination of stockholders entitled to receive such dividend or
distribution. Each such adjustment shall be made successively.
(iv) Any shares of Enhance Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the
close of business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Enhance Common Stock
under paragraph (a)(ii) of this Section.
(v) All adjustments to the Exchange Rate shall be calculated to the
nearest 1/10,000th of a share of Enhance Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Exchange Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent therein;
PROVIDED, HOWEVER, that any adjustments which by reason of this paragraph
(a)(v) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. If an adjustment is made to the
Exchange Rate pursuant to paragraphs (a)(i), (a)(ii) or (a)(iii) of this
Section, an adjustment shall also be made to the Maturity Price solely to
determine which of clauses (a), (b) or (c) of the definition of Exchange
Rate set forth in Section 101 will apply upon an exchange at Maturity
pursuant to Section 202. The required adjustment to the Maturity Price
shall be made at Maturity by multiplying the Maturity Price by the number
or fraction determined under paragraphs (a)(i), (a)(ii) or (a)(iii) of this
Section by which the then existing Exchange Rate was multiplied to adjust
such rate. In the case of the reclassification of any shares of Enhance
Common Stock into any shares of common stock of Enhance other than Enhance
Common Stock, such shares of common stock shall be deemed shares of Enhance
Common Stock solely to determine the Maturity Price and to apply the
Exchange Rate at Maturity. Each such adjustment to the Exchange Rate and
the Maturity Price shall be made successively. This paragraph (a)(v) shall
be so used to adjust the definition of Maturity Price only as such term is
used for the first time in each of subparagraphs (a), (b) and (c) of the
definition of Exchange Rate set forth in Section 101.
(vi) For purposes of the foregoing, the term "Extraordinary Cash
Dividend" shall mean, with respect to any consecutive 365-day period, any
cash dividend with respect to Enhance Common Stock the amount of which,
together with the aggregate amount of all other such cash dividends on the
Enhance Common Stock
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occurring in such 365-day period, exceeds on a per share basis 10% of the
average of the Closing Prices per share of the Enhance Common Stock over
such 365-day period, and for purposes of applying the formula set forth in
clause (iii) above, the fair market value of such dividends being
calculated pursuant to such clause (iii) shall be equal to (x) the
aggregate amount of such cash dividend together with the amounts of such
other cash dividends occurring in such period minus (y) the aggregate
amount of such other cash dividends occurring in such period for which a
prior adjustment in the Exchange Rate was previously made under this
paragraph (a). In making the determinations required by the foregoing
sentence, the amount of cash dividends paid on a per share basis shall be
appropriately adjusted to reflect the occurrence during such period of any
event described in this paragraph (a).
(b) ADJUSTMENT FOR CONSOLIDATION, MERGER OR OTHER REORGANIZATION
EVENT. In the event of (i) any consolidation or merger of Enhance, or any
surviving entity or subsequent surviving entity of Enhance (an "Enhance
Successor"), with or into another entity (other than a merger or
consolidation in which Enhance is the continuing corporation and in which the
Enhance Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of
Enhance or another corporation), (ii) any sale, transfer, lease or conveyance
to another corporation of the property of Enhance, or any Enhance Successor,
as an entirety or substantially as an entirety, (iii) any statutory exchange
of securities of Enhance or any Enhance Successor with another corporation
(other than in connection with a merger or acquisition) or (iv) any
liquidation, dissolution or winding up of Enhance or any Enhance Successor
(any such event, a "Reorganization Event"), each Holder of DECS will receive
at Maturity, in lieu of shares of Enhance Common Stock, as required by
Section 202, cash in an amount equal to (a) if the Transaction Value is
greater than or equal to the Threshold Appreciation Price, _______ multiplied
by the Transaction Value, (b) if the Transaction Value is less than the
Threshold Appreciation Price but greater than the Initial Price, the Initial
Price and (c) if the Transaction Value is less than or equal to the Initial
Price, the Transaction Value. Notwithstanding the foregoing, in lieu of
delivering cash as provided above, the Company may at its option deliver an
equivalent value of securities or other property received in such
Reorganization Event, determined in accordance with clause (y) or (z) of the
definition of Transaction Value set forth in Section 101, as applicable. If
the Company elects to deliver securities or other property, Holders of DECS
will be responsible for the payment of any and all brokerage and other
transaction costs upon the sale of such securities or other property. The
kind and amount of securities into which the DECS shall be exchangeable after
consummation of such transaction shall be subject to adjustment as described
in paragraph (a) of this Section following the date of consummation of such
transaction.
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SECTION 205. NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS.
(a) Whenever the Exchange Rate is adjusted as herein provided, the
Company shall:
(i) forthwith compute the adjusted Exchange Rate in accordance
with Section 204 and prepare a certificate signed by an officer of the
Company setting forth the adjusted Exchange Rate, the method of calculation
thereof in reasonable detail, and the facts requiring such adjustment and
upon which such adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the adjustment, and file
such certificate forthwith with the Trustee; and
(ii) within 10 Business Days following the occurrence of an event
that permits or requires an adjustment to the Exchange Rate pursuant to
Section 204(a) (each, a "Dilution Event") or a Reorganization Event that
permits or requires a change in the consideration to be received by Holders
pursuant to Section 204(b) (or, in either case, if the Company is not aware
of such occurrence, as soon as practicable after becoming so aware),
provide written notice to the Trustee and to the Holders of the outstanding
DECS of the occurrence of such Dilution Event or Reorganization Event
including a statement in reasonable detail setting forth the method by
which any adjustment to the Exchange Rate or change in the consideration to
be received was determined and setting forth the revised Exchange Rate or
consideration, as the case may be, per DECS, provided, that, in respect of
any adjustment to the Maturity Price, such notice need only disclose the
factor by which the Maturity Price is to be multiplied pursuant to Section
204(a)(v) in order to determine which clause of the definition of the
Exchange Rate will apply at Maturity, it being understood that, until
Maturity, the Exchange Rate itself cannot be determined.
(b) In case at any time while any of the DECS are outstanding the
Company receives notice that:
(i) Enhance shall declare a dividend (or any other distribution)
on or in respect of the Enhance Common Stock to which Section 204(a)(i) or
(ii) shall apply (other than any cash dividends and distributions, if any,
paid from time to time by Enhance that do not constitute Extraordinary Cash
Dividends);
(ii) Enhance shall authorize the issuance to all holders of
Enhance Common Stock of rights or warrants to subscribe for or purchase
shares of Enhance Common Stock or of any other subscription rights or
warrants;
(iii) there shall occur any conversion or reclassification of
Enhance Common Stock (other than a subdivision or combination of
outstanding shares of such Enhance Common Stock) or any consolidation,
merger or reorganization to which Enhance is a party and for which approval
of any stockholders of Enhance is required, or the sale or transfer of all
or substantially all of the assets of Enhance; or
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(iv) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of Enhance;
then the Company shall promptly cause to be delivered to the Trustee and any
applicable Paying Agent and filed at the office or agency maintained for the
purpose of exchange of DECS at Maturity in the Borough of Manhattan, in The City
of New York by the Trustee (or any applicable Paying Agent), and shall promptly
cause to be mailed to the Holders of DECS at their last addresses as they shall
appear upon the registration books of the Security Registrar, at least 10 days
before the date hereinafter specified (or the earlier of the dates hereinafter
specified, in the event that more than one is specified), a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights or warrants, or, if a record is not to be taken,
the date as of which the holders of Enhance Common Stock of record to be
entitled to such dividend, distribution or grant of rights or warrants are to be
determined, or (y) the date, if known by the Company, on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective.
(c) On or prior to seven Business Days preceding the Stated Maturity
of the DECS, the Company will provide notice to the Holders of record of the
DECS and to the Trustee and will publish a notice in a daily newspaper of
national circulation stating whether the Company will deliver, in accordance
with Section 202, Enhance Common Stock or cash (or, in accordance with Section
204(b), cash or any other property or securities) upon the mandatory exchange of
the principal amount of the DECS; PROVIDED, HOWEVER, in the event the Company
intends to deliver cash, the Company shall have the right to require
certification as to the domicile and residency of each beneficial holder of
DECS, as a condition to delivery of such cash.
SECTION 206. TAXES.
(a) The Company will pay any and all documentary, stamp, transfer or
similar taxes that may be payable in respect of the transfer and delivery of
Enhance Common Stock pursuant hereto; PROVIDED, HOWEVER, that the Company shall
not be required to pay any such tax which may be payable in respect of any
transfer involved in the delivery of Enhance Common Stock in a name other than
that in which the DECS so exchanged were registered, and no such transfer or
delivery shall be made unless and until the person requesting such transfer has
paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
(b) The parties hereto hereby agree, and each Holder of a DECS by its
purchase of a DECS hereby agrees:
(i) to treat, for U.S. federal income tax purposes, each DECS as
a unit (the "unit characterization") consisting of (A) a debt obligation
(the "Exchange Note") with a fixed principal amount and issue price equal
to the principal amount of the DECS, bearing interest at the stated
interest rate, and with the principal amount unconditionally payable at
Maturity, and (B) a purchase contract (the "Purchase
12
Contract") pursuant to which the Holder agrees to use the principal payment
due on the Exchange Note to purchase, at Maturity, the Enhance Common Stock
to which the Holder is entitled to receive at that time (subject to the
Company's right to deliver cash in lieu of such Enhance Common Stock),
which treatment will require, among other things, the Holder to include in
income as interest, in accordance with its method of accounting, payments
made with respect to the DECS that are denominated as interest;
(ii) in the case of an initial purchase, to allocate the entire
purchase price of a DECS to the Exchange Note and to allocate no part
thereof to the Purchase Contract; and
(iii) to file all U.S. federal, state and local income and
franchise tax returns consistent with the unit characterization (unless
required otherwise by an applicable taxing authority).
SECTION 207. CANCELLATION OF SECURITY.
Upon receipt by the Trustee of DECS delivered to it for exchange under
this Article II, the Trustee shall cancel and dispose of the same as provided in
Section 2.13 of the Indenture.
ARTICLE III
Covenants
SECTION 301. LIMITATIONS ON TRADING DURING CERTAIN DAYS.
With respect to the DECS only and for the benefit of only the Holders
thereof, the Company hereby covenants that it will not, and it will cause each
of its Majority-Owned Subsidiaries (as defined below) not to, buy or sell shares
of Enhance Common Stock for their own account during the 20 days prior to the
Stated Maturity of the DECS. For purposes hereof, "Majority-Owned Subsidiary"
with respect to the Company means a subsidiary more than 50% of whose
outstanding securities representing the right, other than as affected by events
of default, to vote for the election of directors, is owned by the Company
and/or one or more of the Company's other Majority-Owned Subsidiaries.
SECTION 302. SHARES FREE AND CLEAR.
With respect to the DECS only and for the benefit of only the Holders
thereof, the Company covenants and warrants that upon exchange of a DECS at
Maturity pursuant to the Indenture and this Supplemental Indenture, the Holder
of a DECS shall receive all rights held by the Company in the Enhance Common
Stock for which such DECS is at such time exchangeable pursuant to this
Indenture, free and clear of any and all liens, claims, charges and encumbrances
other than any liens, claims, charges and encumbrances which may have been
placed on any Enhance Common Stock by the prior owner thereof, prior to the time
such Enhance Common Stock was acquired by the Company. Except as provided in
Section 206(a),
13
the Company will pay all taxes and charges with respect to the delivery of
Enhance Common Stock delivered in exchange for DECS hereunder. In addition, the
Company further warrants that any Enhance Common Stock so delivered in exchange
for DECS hereunder shall be free of any transfer restrictions (other than such
as are solely attributable to any Holder's status as an affiliate of Enhance).
Section 303. DISCHARGE OF INDENTURE.
With respect to the DECS only and for the benefit of only the Holders
thereof, the Company surrenders all rights and powers conferred on it by Article
8 of the Indenture.
ARTICLE IV
Miscellaneous
SECTION 401. CONFIRMATION OF INDENTURE.
The Indenture, as supplemented and amended by this Supplemental
Indenture and all other indentures supplemental thereto, is in all respects
ratified and confirmed, and the Indenture, this Supplemental Indenture and all
indentures supplemental thereto shall be read, taken and construed as one and
the same instrument.
SECTION 402. CONCERNING THE TRUSTEE.
The Trustee assumes no duties, responsibilities or liabilities by
reason of this Supplemental Indenture other than as set forth in the Indenture.
----------------------
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
14
In WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
U S WEST, INC.
By:___________________________
Name:
Title:
Attest:___________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:____________________________
Name:
Title:
Attest:___________________________
Name:
Title:
15
EXHIBIT A
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of the Depositary or a
nominee of the Depositary. Except as otherwise provided in Section 2.15 of the
Indenture, this Security may not be exchanged in whole or in part for securities
registered in the name of any person other than the Depositary or a nominee of
the Depositary and no transfers of this Security in whole or in part may be
registered in the name of any person other than the Depositary or a nominee of
the Depositary.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx) to the
Company or its agent for registration of transfer, exchange or payment, and any
security issued is registered in the name of Cede & Co., or such other name as
requested by an authorized representative of the Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.
NO. CUSIP NO. __________
Form of Face of DECS
U S WEST, INC.
_______ DECS (SM)
(Debt Exchangeable for Common Stock (SM) )
_____% Exchangeable Note due ________, 199_
(Subject to Exchange at Maturity into Shares of
Common Stock, Par Value $____ Per Share,
of Enhance Financial Services Group Inc.)
U S WEST, Inc., a Colorado corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____________ or registered assigns, the principal sum of ____________ DOLLARS
(or $____ for each Debt Exchangeable for Common Stock (each, a "DECS")
represented by this note) on __________, 199_ (subject to the mandatory exchange
provisions at Maturity described below), and to pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on such principal amount from
__________, 1995, or from the most recent Interest Payment Date (as defined
below) to which interest has
16
been paid or duly provided for, quarterly on __________, __________, __________
and ___________ of each year (each, an "Interest Payment Date" and,
collectively, the "Interest Payment Dates"), commencing __________, 1995, at the
rate per annum specified in the title of this note, until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
said Indenture, be paid to the person in whose name this DECS (or the DECS in
exchange or substitution for which this DECS was issued) is registered at the
close of business on the Regular Record Date (as defined below) for interest
payable on such Interest Payment Date. The Regular Record Date for any interest
payment is the close of business on the _____, _____, _____ or _____, as the
case may be, whether or not a Business Day (as defined below), next preceding
such Interest Payment Date, PROVIDED that interest payable at Maturity shall be
payable to the person to whom the principal hereof is payable. In any case
where such Interest Payment Date shall not be a Business Day, then
(notwithstanding any other provision of said Indenture or this DECS) payment of
such interest need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such date,
and, if such payment is so made, no interest shall accrue for the period from
and after such date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the registered Holder on such Regular
Record Date, as the case may be, and may be paid to the person in whose name
this DECS (or the DECS in exchange or substitution for which this DECS was
issued) is registered at the close of business on a record date for the payment
of such interest to be fixed by the Trustee for the DECS, notice whereof shall
be given to Holders of the DECS not less than 10 days prior to such record date,
or may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the DECS may be listed, and
upon such notice as may be required by such exchange. At Maturity, the
principal amount of this DECS will be mandatorily exchanged into a number of
shares of common stock, par value $0.10 per share (the "Enhance Common Stock"),
of Enhance Financial Services Group Inc. ("Enhance") at the Exchange Rate (as
defined below). The "Exchange Rate" is equal to (a) if the Maturity Price (as
defined below) is greater than or equal to $______ (the "Threshold Appreciation
Price"), _________________ shares of Enhance Common Stock per DECS, (b) if the
Maturity Price is less than the Threshold Appreciation Price but is greater than
$__________ (the "Initial Price"), a fractional share of Enhance Common Stock
per DECS so that the value thereof (determined at the Maturity Price) is equal
to the Initial Price (such fractional share being calculated to the nearest
1/10,000th of a share or, if there is not a nearest 1/10,000th of a share, to
the next higher 1/10,000th of a share) and (c) if the Maturity Price is less
than or equal to the Initial Price, one share of Enhance Common Stock per DECS.
ACCORDINGLY, THE VALUE OF THE ENHANCE COMMON STOCK TO BE RECEIVED BY HOLDERS OF
THE DECS (OR, AS DISCUSSED BELOW, THE CASH EQUIVALENT THAT MAY BE RECEIVED IN
LIEU OF SUCH SHARES) AT MATURITY WILL NOT NECESSARILY EQUAL THE PRINCIPAL AMOUNT
OF SUCH DECS. Any shares of Enhance Common Stock delivered by the Company to
the Holders of the DECS that are not affiliated with Enhance shall be free of
any transfer restrictions and the holders of DECS will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of such shares.
No fractional shares of Enhance Common Stock will be issued at Maturity as
provided in the Indenture. The Company may at its option, in lieu of delivering
shares of Enhance Common Stock, deliver
17
cash in an amount equal to the value of such number of shares of Enhance Common
Stock at the Maturity Price as provided in the Indenture. Notwithstanding the
foregoing, (i) in the case of certain dilution events, the Exchange Rate will be
subject to adjustment and (ii) in the case of certain reorganization events, the
property received by Holders of DECS at Maturity will be cash or other property,
as provided in the Indenture.
The "Maturity Price" is defined as the average Closing Price per share of
Enhance Common Stock on the 20 Trading Days immediately prior to (but not
including) Maturity or, under certain circumstances, the market value per share
of Enhance Common Stock as of the date of Maturity as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Company, as provided in the Indenture. The "Closing Price" of any security on
any date of determination means the closing sale price (or, if no closing price
is reported, the last reported sale price) of such security (regular way) on the
New York Stock Exchange (the "NYSE") on such date or, if such security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, or if such security is not so listed on a United States
national or regional securities exchange, as reported by the NASDAQ National
Market, or, if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization. A "Trading Day" is defined as a day
on which the security the Closing Price of which is being determined (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the- counter market that is the primary market for the
trading of such security. "Business Day" means any day that is not a Saturday,
a Sunday or a day on which the NYSE or banking institutions or trust companies
in The City of New York, New York are authorized or obligated by law or
executive order to close.
Interest on this DECS will be payable, and delivery of Enhance Common
Stock (or, at the Company's option, cash in an amount equal to the value of such
Enhance Common Stock) in exchange for the principal amount of this DECS at
Maturity will be made upon surrender of this DECS, at the office or agency of
the Company maintained for that purpose in The City of New York, New York, and
payment of interest on (and, if the Company elects not to deliver Enhance Common
Stock upon exchange at Maturity, the cash equivalent thereof payable upon
exchange for the principal amount of) this DECS will be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that at the
option of the Company payment of interest may be made by check mailed to the
address of the person entitled thereto as such address shall appear on the
register for the DECS.
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ADDITIONAL PROVISIONS OF THIS DECS ARE CONTAINED ON THE REVERSE HEREOF
AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS
PLACE.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee for this DECS by manual signature, this DECS shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose. "DECS" and "Debt Exchangeable for Common Stock" are service
marks of Salomon Brothers Inc.
In WITNESS WHEREOF, U S WEST, Inc. has caused this instrument to be
duly executed under its corporate seal.
Dated:
U S WEST, INC.
By:______________________
Name:
Title:
Attest:
Name:
19
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the Series designated herein and
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee,
By: ______________________
Authorized Signatory
Form of Reverse of DECS
U S WEST, INC.
_____% Exchangeable Note due _________________, 199_
(Subject to Exchange at Maturity into Shares of
Common Stock, Par Value $.10 Per Share,
of Enhance Financial Services Group Inc.)
This DECS is one of a duly authorized issue of debentures, notes or
other evidences of indebtedness (hereinafter called the "Securities") of the
Company of the Series hereinafter specified, which Series is limited to
______________ DECS, all such Securities issued and to be issued under an
indenture dated as of ________, 1995 between the Company and The First National
Bank of Chicago, as Trustee, as supplemented by a First Supplemental Indenture
dated as of ________, 1995 (as so supplemented and as may be further
supplemented from time to time, the "Indenture") between the Company and The
First National Bank of Chicago, as trustee (herein called the "Trustee", which
term includes any successor Trustee under the Indenture), pursuant to which the
Company has designated The First National Bank of Chicago as Trustee for the
DECS, to which Indenture and all other indentures supplemental thereto reference
is hereby made for a statement of the rights and limitation of rights thereunder
of the Holders of the Securities and of the rights, obligations, duties and
immunities of the Trustee for each Series of Securities and of the Company, and
the terms upon which the Securities are and are to be authenticated and
delivered. As provided in the Indenture, the Securities may be issued in one or
more Series, which different series may be issued in various aggregate principal
amounts, may be denominated in currencies other than U.S. Dollars, (including
composite currencies), may mature at different times, may bear interest, if any,
at different rates, may be subject to different redemption provisions, if any,
may be subject to different sinking, purchase of analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided
20
or permitted. This DECS is one of a Series of the Securities designated as
____% Exchangeable Notes Due ________ 199_.
The DECS may not be redeemed prior to Stated Maturity and are not
entitled to the benefit of any sinking fund.
The provisions contained in the Indenture for defeasance and discharge
of the entire principal of all the Securities of any Series upon compliance by
the Company with certain conditions set forth therein will not be applicable to
the DECS, as provided in a supplement to the Indenture.
If an Event of Default with respect to the DECS, as defined in the
Indenture, shall occur and be continuing, the principal of all DECS may be
declared due and payable and therefore will result in the mandatory exchange of
the principal amount thereof for Enhance Common Stock (or, at the Company's
option, cash), all in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each Series under the
Indenture at anytime by the Company with the consent of the Holders of not less
than a majority in aggregate principal amount of the Securities at the time
outstanding of each Series to be affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities of any Series at the time outstanding, on
behalf of the Holders of all the Securities of such Series, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences with respect to such Series.
Any such consent or waiver by the Holder of this DECS shall be conclusive and
binding upon such Holder and upon all future Holders of this DECS and of any
DECS issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent of waiver is made upon this DECS.
No reference herein to the Indenture and no provision of this DECS or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this DECS at
the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, this DECS is transferable on the register for the DECS, upon
surrender of this DECS for registration of transfer at the office or agency of
the Company to be maintained for that purpose in The City of New York, New York,
or at any other office or agency of the Company maintained for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar for the DECS duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new DECS, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. No service
charge shall be made for any such transfer or exchange, but the Company may
require payment of a sum
21
sufficient to cover any tax or other governmental charge payable in connection
with the registration of such transfer or exchange, other than certain exchanges
not involving any transfer.
Certain terms used in this DECS which are defined in the Indenture
have the meanings set forth therein.
THIS DECS SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company, the Trustee for the DECS and any agent of the Company or
such Trustee may treat the person in whose name this DECS is registered as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this DECS be overdue, and neither the Company,
such Trustee nor any such agent shall be affected by notice to the contrary.
22
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT- _______ Custodian _________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right Under Uniform Gifts to Minors Act
of survivorship and not as _________________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
----------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee
-------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Please Print or Type Name and Address Including Postal Zip Code of Assignee
--------------------------------------------------------------------------------
the within DECS and all rights thereunder, hereby irrevocably constituting and
appointing
--------------------------------------------------------------------- attorney
to transfer said DECS on the books of U S WEST, Inc. with full power of
--------------------------------------------------------------------------------
substitution in the premises.
Dated: ____________________________ ________________________________________
Signature
________________________________________
NOTICE: The signature to this
assignment must correspond with the name
as it appears upon the face of the
within DECS in every particular, without
alteration or enlargement or any change
whatsoever.
23
