0001019056-01-500495.txt : 20011101
0001019056-01-500495.hdr.sgml : 20011101
ACCESSION NUMBER: 0001019056-01-500495
CONFORMED SUBMISSION TYPE: SC TO-I
PUBLIC DOCUMENT COUNT: 18
FILED AS OF DATE: 20011031
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: QWEST COMMUNICATIONS INTERNATIONAL INC
CENTRAL INDEX KEY: 0001037949
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 841339282
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC TO-I
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-53477
FILM NUMBER: 1771616
BUSINESS ADDRESS:
STREET 1: 1801 CALIFORNIA ST
CITY: DENVER
STATE: CO
ZIP: 80202
BUSINESS PHONE: 3039921400
MAIL ADDRESS:
STREET 1: 1801 CALIFORNIA ST
CITY: DENVER
STATE: CO
ZIP: 80202
FORMER COMPANY:
FORMER CONFORMED NAME: QUEST COMMUNICATIONS INTERNATIONAL INC
DATE OF NAME CHANGE: 19970416
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: QWEST COMMUNICATIONS INTERNATIONAL INC
CENTRAL INDEX KEY: 0001037949
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 841339282
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC TO-I
BUSINESS ADDRESS:
STREET 1: 1801 CALIFORNIA ST
CITY: DENVER
STATE: CO
ZIP: 80202
BUSINESS PHONE: 3039921400
MAIL ADDRESS:
STREET 1: 1801 CALIFORNIA ST
CITY: DENVER
STATE: CO
ZIP: 80202
FORMER COMPANY:
FORMER CONFORMED NAME: QUEST COMMUNICATIONS INTERNATIONAL INC
DATE OF NAME CHANGE: 19970416
SC TO-I
1
qwest_to.txt
SCHEDULE TO
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE TO
(Rule 14d-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
QWEST COMMUNICATIONS INTERNATIONAL INC.
(Name of Subject Company (Issuer) and Name of Filing Person (Offeror))
----------------
Options To Purchase Common Stock, $.01 Par Value, of Qwest Communications
International Inc. Granted to Eligible Employees Under The Qwest
Communications International Inc. Equity Incentive Plan
(Title of Class of Securities)
----------------
749121109
(CUSIP Number of Class of Underlying Securities)
----------------
Yash Rana
Associate General Counsel and Assistant Secretary,
Qwest Communications International Inc.
1801 California Street, Denver, Colorado 80202
(303) 992-1400
(Name, Address and Telephone Numbers of Person Authorized
to Receive Notices and Communications on Behalf of Filing Persons))
--------------------
Copy to:
Steven L. Grossman, Esq.
O'Melveny & Myers, LLP
1999 Avenue of the Stars, 7th Floor, Los Angeles, California 90067
(310) 553-6700
CALCULATION OF FILING FEE
=============================================================================
Transaction Value(1) Amount of Filing Fee(2)
-----------------------------------------------------------------------------
$212,734,897 $42,547
=============================================================================
(1) Calculated solely for the purpose of determining the amount of the filing
fee. This amount assumes that options to purchase 37,453,327 shares of Qwest
Communications International Inc. Common Stock, par value $0.01 per share
("Common Stock"), having an aggregate value of $212,734,897 as of October
30, 2001, will be exchanged pursuant to this offer. The aggregate value of
such options was calculated based on the Black-Scholes option-pricing model.
(2) The amount of the filing fee, calculated in accordance with Rule 0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50th of 1% of the
transaction value.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[ ] third-part tender offer subject to Rule 14d-1.
|X| issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer [ ].
The filing of this Schedule TO shall not be construed as an admission
by Qwest Communications International Inc. that the offer described below
constitutes an issuer tender offer for purposes of the Securities Exchange Act
of 1934 and the rules promulgated thereunder.
ITEM 1. SUMMARY TERM SHEET
The information set forth under "Summary of Offer Expiring November 30,
2001" beginning on page 1 of the Exchange Offer Circular, dated October 31, 2001
(the "Exchange Offer Circular"), attached hereto as Exhibit (a)(1), is
incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION
(a) The name of the issuer is Qwest Communications International Inc.,
a Delaware corporation (the "Company"). The address of the Company's principal
executive offices is 1801 California Street, Denver, Colorado 80202. The
Company's telephone number is (303) 992-1400.
(b) This Tender Offer Statement on Schedule TO relates to an offer by
the Company to eligible employees of the Company (as described in the Exchange
Offer Circular) to exchange Eligible Options (as defined in the Exchange Offer
Circular) and Recent Options (as defined in the Exchange Offer Circular) to
purchase shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), for new non-qualified stock options (the "New Options") to be
granted by the Company under the Company's Equity Incentive Plan. The offer by
the Company, and the exchange of Eligible Options and Recent Options for New
Options, are each made upon the terms and conditions described in the Exchange
Offer Circular and the related Election Form and Release Agreement attached
hereto as Exhibit (a)(2) and incorporated herein by reference (the "Election
Form").
The information set forth in the response to Question 45 ("How many
Eligible Options are there?") in the Exchange Offer Circular is incorporated
herein by reference.
(c) The information set forth in the response to Question 43 ("What is
the price of our common stock?") in the Exchange Offer Circular is incorporated
herein by reference. No trading market exists for the Eligible Options or the
Recent Options.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON
(a) The Company is also the filing person. The information set forth
under Item 2(a) above is incorporated by reference. The information set forth in
the second paragraph of the response to Question 46 ("How does the Offer relate
to Qwest's directors and executive officers?") in the Exchange Offer Circular is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION
(a) The following information is incorporated herein by reference:
(i) the terms and conditions set forth in the Election Form;
and
(ii) the following information set forth in the Exchange Offer
Circular: the information set forth under the caption
"Summary of Offer Expiring November 30, 2001"; the
responses to Questions 10 through 31 under the caption
"Terms of the Offer - The Offer"; the information set forth
under the caption "Terms of the Offer - Terms and
Conditions of New Options to be granted in June 2002,"
including, without limitation, the responses to Questions
32 through 37; the responses to Questions 40 through 42 and
Questions 45 through 47 under the caption "Terms of the
Offer - Other Provisions; Administration"; and the
information set forth under the caption "Terms of the Offer
- Federal Income Tax and Social Security Consequences,"
including, without limitation, the responses to Questions
50 through 54.
(b) The information set forth in the response to Question 46 ("How does
the Offer relate to Qwest's directors and executive officers?") in the Exchange
Offer Circular is incorporated herein by reference.
ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
(e) The information set forth in the response to Question 46 ("How does
the Offer relate to Qwest's directors and executive officers?") in the Exchange
Offer Circular is incorporated herein by reference. The Qwest Communications
International Inc. Equity Incentive Plan, filed as Exhibit (d)(1) hereto,
contains information regarding the Eligible Options and Recent Options, and is
incorporated herein by reference.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) The following information from the Exchange Offer Circular is
incorporated herein by reference: the information set forth under the caption
"Summary of Offer Expiring November 30, 2001"; the information set forth under
the caption "Terms of the Offer - Background and Reasons for the Offer,"
including the responses to Questions 1 through 5; the information contained in
the response to Question 6 under the caption "Terms of the Offer - Benefits and
Risks of the Offer"; and the information contained in the responses to Question
44 and 47 under the caption "Terms of the Offer - Other Provisions;
Administration."
(b) The following information is incorporated herein by reference:
(i) the terms and conditions of the offer set forth in the
Election Form; and
(ii) the following information set forth in the Exchange Offer
Circular: the information set forth under the caption
"Summary of Offer Expiring November 30, 2001"; the
information set forth in the response to Question 6 under
the caption "Terms of the Offer - Benefits and Risks of the
Offer"; the information set forth under the caption "Terms
of the Offer - The Offer," including, without limitation,
the information in the responses to Questions 10 through
31; and the information in the response to Question 32
under the caption "Terms of the Offer - Description of
Terms and Conditions of New Options to be Granted in June
2002."
2
(c) The information set forth in the response to Question 46 ("How does
the Offer relate to Qwest's directors and executive officers?") and in the
response to Question 48 ("Is Qwest contemplating any other transactions?") in
the Exchange Offer Circular is incorporated herein by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The following information set forth in the Exchange Offer Circular
is incorporated herein by reference: the information set forth under the caption
"Summary of Offer Expiring November 30, 2001"; the information set forth under
the caption the "Terms of the Offer - Terms and Conditions of New Options to be
granted in June 2002, including without limitation, the information set forth in
the responses to Questions 32 through 37; and the information set forth in the
responses to Question 42 and Question 45 under the caption "Terms of the Offer -
Other Provisions; Administration."
(b) The following information is incorporated herein by reference:
(i) the terms and conditions set forth in the Election Form;
and
(ii) the information set forth in the responses to Question 12
("What are the conditions to the Offer?") and Question 14
("How may I accept the Offer?") in the Exchange Offer
Circular.
(d) Not applicable.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) The information set forth in the response to Question 46 ("How does
the Offer relate to Qwest's directors and executive officers?") in the Exchange
Offer Circular is incorporated herein by reference.
(b) The information set forth in the response to Question 46 ("How does
the Offer relate to Qwest's directors and executive officers?") in the Exchange
Offer Circular is incorporated herein by reference.
ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
(a) Not applicable.
ITEM 10. FINANCIAL STATEMENTS
(a) the following information is incorporated herein by reference:
(1) the information set forth in the Exchange Offer Circular
in the response to Question 44 ("What information is
available regarding Qwest?") and under "Additional
Information; Incorporation of Documents by Reference";
3
(2) Audited financial statements of Qwest and its consolidated
subsidiaries for the fiscal years ended December 31, 1999
and December 31, 2000 as shown on pages F-13 through F-47
of Exhibit 13 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, as amended on Form
10- K/A, filed with the SEC on August 20, 2001;
(3) pages 1 to 14 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2001, filed with the
SEC on August 14, 2001;
(4) Exhibit 12 - "Computation of Ratios of Earnings to Fixed
Charges" - to the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 and the ratios of
earnings to fixed charges included in Attachment E to the
Exchange Offer Circular; and
(5) the book value per share data included in Attachment E to
the Exchange Offer Circular.
(b) Not applicable.
ITEM 11. ADDITIONAL INFORMATION
(a) The following information set forth in the Exchange Offer Circular
is incorporated herein by reference:
(i) the information set forth in the responses to Question 44
("What information is available regarding Qwest?"),
Question 46 ("How does the Offer relate to Qwest's
directors and executive officers?") and Question 49 ("Are
there any regulatory requirements or other approvals that
Qwest must comply with or obtain?"); and
(ii) the information contained in the "Additional Information;
Incorporation of Documents by Reference" section in the
Exchange Offer Circular is incorporated herein by
reference.
(b) Not applicable.
ITEM 12. EXHIBITS
(a) (1) Exchange Offer Circular dated October 31, 2001, with exhibits
(which include (i) the Prospectus for the Qwest Communications International
Inc. Equity Incentive Plan in Attachment A, (ii) the Forms of Nonqualified Stock
Option Agreements in Attachments B-D, and (iii) Selected Financial Data in
Attachment E)
(a) (2) Form of Election Form and Release Agreement
(a) (3) Form of Statement of Employee Stock Option Holdings
(a) (4) Form of Confirmation Card
4
(a) (5) Press Release issued on October 31, 2001
(a) (6) Email Message to Employees Announcing Exchange Offer
(a) (7) Form of Cover Letter to Employees Accompanying Exchange Offer
Documents and to appear on the Qwest Communications
International Inc. Human Resources Website
(a) (8) Form of Cover Letter to Employees Included in Mailing of
Exchange Offer Documents
(a) (9) Addendum to Offer Circular for Non-U.S. Employees
(a) (10) Questions and Answers to appear on the Qwest Communications
International Inc. Human Resources Website
(a) (11) Qwest Human Resources Website Full Screen Message
(a) (12) Reminder Message to Employees to Review Offering Circular
contained on Qwest Human Resources Website
(a) (13) Form of Reminder of Deadline
(a) (14) Transcription of Recorded Message on Stock Administration
Toll Free Phone Line
(a) (15) The Company's Annual Report on Form 10-K for the year ended
December 31, 2000, filed with the Securities and Exchange
Commission (the "SEC") on March 16, 2001, as amended on Form
10-K/A, filed with the SEC on August 20, 2001 (incorporated
herein by reference)
(a) (16) Audited financial statements for Qwest and its consolidated
subsidiaries for the fiscal years ended December 31, 1999 and
December 31, 2000 in Pages F-13 to F-47 of Exhibit 13 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2000, as amended on Form 10-K/A, filed with the
SEC on August 20, 2001 (incorporated herein by reference)
(a) (17) The Company's Quarterly Reports on Forms 10-Q for the
quarters ended March 31, 2001 and June 30, 2001, filed with
the SEC on May 15, 2001, and August 14, 2001, respectively
(each incorporated herein by reference)
(a) (18) The Company's Current Reports on Forms 8-K filed with the SEC
on March 22, 2001, March 29, 2001, April 5, 2001, April 25,
2001, April 27, 2001, May 17, 2001, June 5, 2001 (as amended
by the Company's Current Report on Form 8-K/A filed with the
SEC on June 5, 2001), June 8, 2001, June 20, 2001, June 21,
2001, July 20, 2001, July 26, 2001 (as amended by the
5
Company's Current Report on Form 8-K/A filed with the SEC on
July 26, 2001) August 7, 2001 (as amended by the Company's
Current Report on Form 8-K/A filed with the SEC on August 13,
2001), September 10, 2001 and October 31, 2001 (each
incorporated herein by reference)
(b) Not applicable.
(d) (1) Qwest Communications International Inc. Equity Incentive
Plan
(d) (2) Form of Nonqualified Stock Option Agreement
(d) (3) Form of Restricted Stock Agreement
(g) Not applicable
(h) Not applicable
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3
Not applicable.
6
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Schedule TO is true, complete and
correct.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ YASH RANA
---------------------------------------------------
Yash Rana
Associate General Counsel and Assistant Secretary
Date: October 31, 2001
7
EXHIBIT INDEX
Exhibit
Number Description of Document
---------------- -----------------------------------------------------------
(a)(1) Exchange Offer Circular dated October 31, 2001, with
exhibits (which include (i) the Prospectus for the Qwest
Communications International Inc. Equity Incentive Plan in
Attachment A, (ii) the Forms of Nonqualified Stock Option
Agreements in Attachments B-D, and (iii) Selected Financial
Data in Attachment E)
(a)(2) Form of Election Form and Release Agreement
(a)(3) Form of Statement of Employee Stock Option Holdings
(a)(4) Form of Confirmation Card
(a)(5) Press Release issued on October 31, 2001
(a)(6) Email Message to Employee Announcing Exchange Offer
(a)(7) Form of Cover Letter to Employees Accompanying Exchange
Offer Documents and to appear on the Qwest Communications
International Inc. Human Resources Website
(a)(8) Form of Cover letter to Employees Included in Mailing of
Exchange Offer Documents
(a)(9) Addendum to Offer Circular for Non- U.S. Employees
(a)(10) Questions and Answers to appear on the Qwest Communications
International Inc. Human Resources Website
(a)(11) Qwest Communications International Inc. Human Resources
Website Full Screen Message
(a)(12) Reminder Message to Employees to Review Offering Circular
contained on Qwest Human Resources Website
(a)(13) Form of Reminder of Deadline
(a)(14) Transcription of Recorded Message on Stock Administration
Toll Free Phone Line
(a)(15) The Company's Annual Report on Form 10-K for the year ended
December 31, 2000, filed with the SEC on March 16, 2001, as
amended on Form 10-K/A, filed with the SEC on August 20,
2001 (incorporated herein by reference)
(a)(16) Audited financial statements for Qwest and its consolidated
subsidiaries for the fiscal years ended December 31, 1999
and December 31, 2000 in Pages F-13 to F-47 of Exhibit 13
of the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, as amended on Form 10-K/A, filed
with the SEC on August 20, 2001 (incorporated herein by
reference)
(a)(17) The Company's Quarterly Reports on Forms 10-Q for the
quarters ended March 31, 2001 and June 30, 2001, filed with
the SEC on May 15, 2001, and August 14, 2001, respectively
(each incorporated herein by reference)
(a)(18) The Company's Current Reports on Forms 8-K filed with the
SEC on March 22, 2001, March 29, 2001, April 5, 2001, April
25, 2001, April 27, 2001, May 17, 2001, June 5, 2001 (as
amended by the Company's Current Report on Form 8-K/A filed
with the SEC on June 5, 2001), June 8, 2001, June 20, 2001,
June 21, 2001, July 20, 2001, July 26, 2001 (as amended by
the Company's Current Report on Form 8-K/A filed with the
SEC on July 26, 2001) August 7, 2001 (as amended by the
Company's Current Report on Form 8-K/A filed with the SEC
on August 13, 2001), September 10, 2001 and October 31,
2001 (each incorporated herein by reference)
(d)(1) Qwest Communications International Inc. Equity Incentive
Plan.
(d)(2) Form of Nonqualified Stock Option Agreement
(d)(3) Form of Restricted Stock Agreement
8
EX-99.A.1
3
ex_a-1.txt
EXHIBIT 99(A)(1)
This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933, as amended.
QWEST COMMUNICATIONS INTERNATIONAL INC.
OFFER TO EXCHANGE CERTAIN
OUTSTANDING QWEST STOCK OPTIONS
EXPIRES NOVEMBER 30, 2001
OFFER CIRCULAR
Qwest Communications International Inc. ("Qwest," "we" or "us") is
offering our employees the right to exchange outstanding nonqualified stock
options granted under our Equity Incentive Plan with an exercise price equal to
or greater than $35 per share for the right to receive a new stock option grant
under our Equity Incentive Plan. This offer is referred to as the "Offer." The
terms and conditions of the Offer and the right to receive new options are
described in this Offer Circular.
You may participate in the Offer only if we or one of our affiliates
employ you at the expiration time of the Offer. You are not eligible to
participate in the Offer, however, if you are a union employee or one of our
senior officers. Even if you are eligible, you do not have to accept the Offer.
If you are eligible to participate in the Offer, you may elect to
tender in the Offer any or all of your options granted under our Equity
Incentive Plan with an exercise price of $35 or more. If you elect to tender any
of those options in the Offer, you must also tender all Qwest stock options
granted to you on or after May 29, 2001 whether or not those options have an
exercise price of $35 or more. You may not tender any options that you received
as an employee of U S WEST, Inc. LCI International, Inc. or Icon CMT Corp. Also,
if you want to tender any option of a particular stock option grant, you must
tender all stock options outstanding under that grant (whether or not vested).
If you want to accept the Offer, your election to accept the Offer must
be received by the expiration time of the Offer. The expiration time of the
Offer is 5:00 p.m., Mountain Standard Time, on November 30, 2001. We may,
however, extend the expiration time. This Offer Circular includes more detailed
instructions for making an election to accept the Offer. The last time you
received options, we sent you all the option information you need to complete
the election form. For your convenience, we are also sending to you at the
address we have for you an option statement showing the same information.
Any options that you tender in the Offer will terminate at the
expiration time of the Offer. If you elect to accept the Offer, you release all
of your rights with respect to the options that you tender in the Offer and we
will grant new options to you on June 3, 2002 (or, if this is not a trading day,
the first trading day after June 3, 2002). We will extend the grant date of the
new options if we extend the expiration time of the Offer. However, if you
exchange any options and your employment terminates for any reason whatsoever
before the date that the new options are actually granted, or if you are on
unpaid leave on that date, you will not receive any new options, and any options
that you tendered in the Offer will not be reinstated. Your election to accept
the Offer does not in any way change your status as an at-will employee. That
means that you are not guaranteed employment for any period of time. If you
accept the Offer, you are ineligible to receive any additional stock option
grants until after the new stock options referred to below are granted.
Subject to the employment requirement described in the preceding
paragraph, if you accept the Offer we will grant you new options covering the
same number of shares as the number of shares that are subject to the options
that you elect to tender in the Offer. This number of shares may be adjusted,
however, for stock splits, recapitalizations and similar events. The new options
will be nonqualified stock options and will have a per share exercise price
equal to the closing market price of our common stock on the date that the new
options are granted. The new options will vest, subject to your continued
employment, in four equal installments on each of the first four anniversaries
of the date that the new options are granted and will be subject to a new ten
year term. We expect that the other terms and conditions of the new options will
be substantially similar to those of the corresponding options that you elect to
tender in the Offer.
We must provide you with detailed information because the Offer is a
legal proceeding. While we recognize that you may feel intimidated by the length
of this Offer Circular, it is important that you read the detailed terms of the
Offer that are contained in the "Terms of the Offer" section in this Offer
Circular. Also be sure to read the "Risk Factors" section in this Offer
Circular. Capitalized terms used in this Offer Circular are defined in this
Offer Circular.
The Date of this Offer Circular is October 31, 2001.
TABLE OF CONTENTS
Summary of Offer Expiring November 30, 2001................................. 1
Risk Factors................................................................ 4
Terms of the Offer.......................................................... 6
Background and Reasons for the Offer............................... 6
Benefits and Risks of the Offer.................................... 7
The Offer.......................................................... 8
Description of Terms and Conditions of New Options to be Granted
in June 2002....................................................... 16
Other Provisions; Administration................................... 19
Federal Income Tax and Social Security Consequences................ 24
Additional Information; Incorporation Of Documents By Reference............ 27
Attachments:
A. Prospectus for Qwest Equity Incentive Plan.................... A-1
B. Form of Nonqualified Stock Option Agreement A................. B-1
C. Form of Nonqualified Stock Option Agreement B................. C-1
D. Form of Nonqualified Stock Option Agreement C................. D-1
E. Selected Financial Data ...................................... E-1
INDEX OF DEFINED TERMS
Page
----
Cancelled Options........................................................... 2
Company..................................................................... 1
Election Form............................................................... 2
Eligible Options............................................................ 1
Exchange.................................................................... 1
FICA........................................................................ 25
KPN......................................................................... 23
New Option Agreement........................................................ 16
New Option Grant Date....................................................... 3
New Options................................................................. 2
Offer.................................................................Cover Page
Qwest.................................................................Cover Page
Recent Options.............................................................. 1
SEC......................................................................... 23
i
SUMMARY OF OFFER EXPIRING NOVEMBER 30, 2001
The following is a summary of some of the key terms and conditions of the Offer.
It is important that you read the detailed terms of the Offer that are contained
in the "Terms of the Offer" section in this Offer Circular. You should also be
sure to read the "Risk Factors" section in this Offer Circular.
o Reasons for the Offer. In September 2000, we granted most of our
non-union employees stock options under our Equity Incentive Plan to
buy 200 shares of our common stock. You may also hold other stock
options that were granted under our Equity Incentive Plan.
Unfortunately, because of the current economic condition and the
decline in our stock price most of the stock options held by our
employees no longer provide the incentives that we intended when we
granted them. To help provide you with the right incentives, our Board
of Directors approved this option exchange program. You, of course, do
not have to accept the Offer. In making your decision, be sure to bear
in mind the factors described under "Risk Factors" below.
o Employees eligible for the Offer. You must be an employee of the
Company at the expiration time of the Offer in order to participate in
the Offer. Union employees and certain senior officers are not,
however, eligible to participate in the Offer. The term "Company" is
used in this Offer Circular to mean Qwest and/or any other corporation
or entity, or any subsidiary or division thereof, that is affiliated
with Qwest though stock ownership and is designated as an "Affiliate
Corporation" by our Board of Directors.
o Options eligible for the Offer. If you accept the Offer, the options
that you elect to tender in the Offer will be exchanged (the
"Exchange") for the conditional right to be granted new options. You
may only tender options granted under our Equity Incentive Plan that
have a per share exercise price of $35 or higher. However, if you do
elect to tender any options with an exercise price of $35 or higher,
you must also tender all Qwest stock options granted to you on or after
May 29, 2001, whether or not those options have a per share exercise
price of $35 or higher. Also, if you want to tender any option of a
particular stock option grant, you must tender all stock options
outstanding under that grant (whether or not vested). (If you have
exercised a portion of a stock option grant, that portion is not
considered outstanding.) You may not tender any options that you
received as an employee of U S WEST, Inc., LCI International, Inc. or
Icon CMT Corp.
Stock options granted under our Equity Incentive Plan that have a per
share exercise price of $35 or higher are referred to as "Eligible
Options" because they are eligible to be tendered in the Offer. Qwest
stock options granted on or after May 29, 2001 are referred to as
"Recent Options" because they have been granted in about the last six
months and they must be tendered if you want to accept the Offer.
For details of the Offer, see the "Terms of the Offer" section of this
Offer Circular generally. The right to a new grant of options is
conditional because you must be a full-time, non-union employee of the
Company on the date that the new options are granted in order to
receive a new option grant.
o Additional information about the Offer. The last time you received
options, we sent you all the option information you need to complete
the election form. For your convenience, we are also sending to you at
the address we have for you an option statement showing the same
information. If you need another copy of the option statement or if you
have other questions, you may contact the Qwest Stock Administration
department at StockAdmin2@Qwest.com or at the following address or
telephone number:
1
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
A Qwest Stock Administration representative will generally be available
at that location (during normal business hours) or through that
telephone number from 8:00 a.m. to 7:00 p.m., Mountain Standard Time,
each business day until the expiration time of the Offer.
We understand that the decision whether or not to participate in the
Offer will be a challenging one for many employees. The Offer does
carry considerable risk, and there are no guarantees as to our future
stock performance. So, the decision to participate in the Offer must be
your personal decision, and it will depend largely on your assumptions
about the future overall economic environment, the performance of the
overall market and companies in our sector and our own business,
performance and stock price.
o How to Accept the Offer. First, review the information in this Offer
Circular and the documents referred to in this Offer Circular. Then,
complete, sign and date the Election Form and Release Agreement (the
"Election Form") referred to in the response to Question 14 below. The
Election Form must be filed with us in the manner and within the time
period indicated in that response.
By accepting the Offer, you also: (1) tender all of your Recent
Options; (2) agree to the cancellation of the options that you tender
in the Offer including your Recent Options; and (3) release all of your
rights and remedies with respect to the options that you tender in the
Offer, including your Recent Options, except the conditional right to
the grant of new options as described in this Offer Circular. Your
release will be void if we withdraw the Offer before the expiration
time of the Offer.
o Expiration Time. The Offer will expire at 5:00 p.m., Mountain Standard
Time, on November 30, 2001. We may, however, extend the Offer. If you
want to accept the Offer for all or a portion of your outstanding
Eligible Options and agree to tender all of your Recent Options, we
must receive your election before the expiration time of the Offer;
otherwise, you will be deemed to have rejected the Offer.
o Consequences of Not Accepting the Offer. As indicated above, you do not
have to accept the Offer. If you decline, or if you do not timely
return a valid election to accept the Offer, your Eligible Options and
Recent Options will remain outstanding subject to their existing terms.
o Grant of New Options. If you accept the Offer, the Eligible Options
that you elect to exchange as well as all of your Recent Options will
terminate at the expiration time of the Offer. These terminated
Eligible Options and Recent Options are referred to as your "Cancelled
Options." You will then have a conditional right to receive a new
option grant from us. The new options that we will grant are referred
to as "New Options." The right to a grant of New Options is conditional
because you must be a full-time, non-union employee of the Company on
the date that the New Options are granted in order to receive a New
Option grant.
Your New Options will cover the same number of shares as the number of
shares that are subject to your Eligible Options and Recent Options
that are cancelled in the Exchange. The per share exercise price of the
New Options will be the closing market price of a share of our common
stock on the New Option Grant Date. The New Options will be subject to
a new ten year term and a new four year vesting schedule. Other than
the exercise price, new option term and new vesting schedule, we expect
that the terms and conditions of the New Options will be substantially
similar to those of the corresponding Cancelled Options.
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The New Options will be granted on June 3, 2002. If June 3, 2002 is not
a trading day, the New Option Grant date will be the first trading day
after June 3, 2002. If we extend the Offer, we will adjust the New
Option Grant Date to correspond to the new expiration time of the
Offer. The date that the New Options are granted is referred to as the
"New Option Grant Date."
If you accept the Offer, you are ineligible to receive any additional
stock option grants until after the New Option Grant Date.
Our Board of Directors has approved the Offer. However, you must make your own
decision to accept or reject the Offer. None of our Board of Directors, our
management, or our affiliates makes any recommendation whether you should accept
or reject the Offer.
We have not authorized anyone to make any recommendation on our behalf as to
whether you should accept the Offer. You should rely only on the information
contained in this Offer Circular and the information contained in the documents
expressly referred to in this Offer Circular.
We have not authorized anyone to give you any information or to make any
representations in connection with the Offer other than the information and the
representations contained in this Offer Circular and in the documents expressly
referred to in this Offer Circular.
If anyone makes any recommendation or representation to you or gives you any
information that is not contained in this Offer Circular or in the documents
expressly referred to in this Offer Circular, even if that person is an employee
or other representative of the Company, you must not rely upon that
recommendation, representation or other information as having been authorized by
the Company.
If you have any questions about the impact of the Offer on your financial
status, you should consult your financial advisor.
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RISK FACTORS
The value of your Eligible Options and Recent Options may be greater or
lesser than the New Options offered to you in the Exchange. As noted below, the
New Options will be subject to a new four-year vesting schedule. In certain
circumstances, you will not be granted New Options even if you tendered Eligible
Options and Recent Options that terminated in connection with the Exchange.
If you accept the Offer, your Eligible Options and Recent Options will
terminate. If you accept the Offer, your Eligible Options that you elect to
exchange and all of your Recent Options (if any) will terminate at the
expiration time of the Offer and, as described in more detail in the response to
Question 19 below, you release all of your rights with respect to your Cancelled
Options (except the right to receive New Options on the terms and subject to the
conditions described in this Offer Circular). If you accept the Offer, you are
ineligible to receive any additional stock option grants until after the New
Option Grant Date.
If you terminate employment with Qwest before the New Option Grant
Date, you will not receive any New Options. You have no right to continued
employment with the Company. If you resign, quit or die, or if your employment
with the Company terminates for any reason whatsoever before the New Option
Grant Date, or if you are on unpaid leave on the New Option Grant Date, we will
not grant you any New Options and you will not have a right to any of your
Cancelled Options. You will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you otherwise would
have received.
On September 10, 2001, we announced (1) that the Company would reduce
its workforce by about 4,000 jobs by the end of the first quarter of 2002, and
(2) that the Company would also eliminate about 1,000 staff positions while
adding about 1,000 quota-bearing sales executives in its global business markets
unit. Therefore, the Company currently expects to eliminate a total of about
5,000 positions through attrition and layoffs by the end of the first quarter of
2002. Only a portion of those layoffs have occurred. We expect the remainder of
the layoffs to occur periodically over the next few months and during the first
quarter of 2002. We could announce additional layoffs, or otherwise terminate
your employment, before the New Option Grant Date or before your New Options are
vested.
A layoff constitutes a termination of your employment with the Company.
If you are laid off before your New Options are granted on the New Option Grant
Date, your Cancelled Options cannot be reinstated and will be lost forever, and
you will not receive any New Options that would have been granted on the New
Option Grant Date. Even if you receive New Options, they may not vest before a
termination of employment. You will not receive any other consideration, amount
or benefit for your Cancelled Options.
The New Options could have a higher exercise price than your Eligible
Options and Recent Options. The new grant could be at a higher exercise price
than your Eligible Options or Recent Options, which would reduce the value of
the New Options. The per share exercise price of the New Options will be the
closing market price of our common stock on the New Option Grant Date.
Therefore, because we will not grant the New Options until the New Option Grant
Date, the New Options may have a higher exercise price than any Cancelled
Options or a price not significantly lower than their current exercise price.
This risk of a higher exercise price may be even greater for your Recent Options
because, due to their recent grant, they may have a much lower exercise price
than any of your Eligible Options. This is important because the value of the
New Options increases as the exercise price decreases. In light of this and
other risks of tendering, you may be better off keeping your Eligible Options
and Recent Options rather than tendering them in the Exchange. We recommend that
you obtain current market quotations for our common stock before deciding
whether to participate in the Exchange.
The New Options may not be granted if a change of control occurs before
the New Option Grant Date. If a change of control of Qwest or certain
reorganizations of Qwest occur before the New Options are granted, or if we sell
a business unit or subsidiary in which you work, it is possible that the
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acquiror or purchaser in that transaction would decide not to issue New Options.
It is also possible that your employment by the Company would be terminated
before the New Option Grant Date or before the New Option vests. In each case,
that means you would not receive any value from any New Options and your
Cancelled Options would not be reinstated. In addition, the announcement of a
change of control transaction regarding, or reorganization of, Qwest could have
a substantial effect on our stock price, including substantial price
appreciation, which could reduce or eliminate the potential benefits of the New
Options.
The New Options are subject to a new vesting schedule. The New Options
will vest over four years from the New Option Grant Date. Therefore, if you
accept the Offer and your employment terminates before your New Options are
vested, your unvested New Options will terminate even though the Cancelled
Options that you exchanged had already vested or may have vested if you had not
exchanged them.
The New Options may have different terms than the Cancelled Options. We
expect that each New Option will be evidenced by an option agreement in a form
similar to the applicable form attached to this Circular as Exhibit B, C, or D.
We expect that the form of option agreement attached as Exhibit B will be used
for New Options that correspond to Cancelled Options that were granted before
February 1, 2000. We expect that the form of option agreement attached as
Exhibit C will be used for New Options that correspond to Cancelled Options that
were granted on or after February 1, 2000 but before June 30, 2000. We expect
that the form of option agreement attached as Exhibit D will be used for New
Options that correspond to Cancelled Options that were granted on or after June
30, 2000. However, we reserve the authority contemplated by our Equity Incentive
Plan to make adjustments relative to the New Options, before and after they are
granted, consistent with the authority that our Board of Directors had with
respect to the Cancelled Options. In the period before the New Option Grant
Date, such adjustments or termination of rights would occur without prior notice
to you.
Our Board of Directors has approved the Offer. However, you must make
your own decision to accept or reject the Offer. None of our Board of Directors,
our management, or our affiliates makes any recommendation whether you should
accept or reject the Offer.
We have not authorized anyone to make any recommendation on our behalf
as to whether you should accept the Offer. You should rely only on the
information contained in this Offer Circular and the information contained in
the documents expressly referred to in this Offer Circular.
We have not authorized anyone to give you any information or to make
any representations in connection with the Offer other than the information and
the representations contained in this Offer Circular and in the documents
expressly referred to in this Offer Circular.
If anyone makes any recommendation or representation to you or gives
you any information that is not contained in this Offer Circular or in the
documents expressly referred to in this Offer Circular, even if that person is
an employee or other representative of the Company, you must not rely upon that
recommendation, representation or other information as having been authorized by
the Company.
If you have any questions about the impact of the Offer on your
financial status, you should consult your financial advisor.
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TERMS OF THE OFFER
The precise terms and conditions of the Offer are contained in the responses to
the following questions:
o Background and Reasons for the Offer: Questions 1 through 5
o Benefits and Risks of the Offer: Questions 6 through 9
o The Offer: Questions 10 through 31
o Description of Terms and Conditions of New Options to be
Granted in June 2002: Questions 32 through 39
o Other Provisions; Administration: Questions 40 through 49
o Federal Income Tax and Social Security Consequences: Questions
50 through 54
Capitalized terms not otherwise defined in this section have the meanings given
to them elsewhere in this Offer Circular. See the Index of Defined Terms on page
i.
Background and Reasons for the Offer
This section generally describes why we are making the Offer and answers some
questions that you may have regarding the general structure of the Offer.
1. Why is Qwest making the Offer?
We are making this Offer because we believe that your stock
options no longer provide the incentives we had intended. Many
of our employees have stock options with exercise prices
significantly above our current and recent trading prices. We
are offering this program on a voluntary basis to allow our
employees to choose whether to keep their current stock
options at their current exercise prices, or to cancel certain
of those options for a conditional promise to be granted New
Options at a price not now known. We are not required to make
this Offer.
The Offer gives you a conditional opportunity to receive
options that over time may have a greater potential to
increase in value. We believe that, under the circumstances,
this is the most efficient way to incent employees to increase
shareowner value.
2. Why is Qwest making the Offer at this time?
Our Board of Directors determined that this was an appropriate
time to make the Offer. We believe that, under the
circumstances, this is the most effective way to incent our
employees to increase shareowner value.
3. How did you arrive at the $35 price for determining Eligible
Options?
In establishing the $35 price, our Board of Directors
considered, among other things, current and recent trading
prices of our common stock and that of other communications
companies, current economic conditions, prospects for a
recovery in the national and regional economy, and the levels
of intended incentives.
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4. Why can't Qwest just reprice my options, as I have seen done
at other companies?
Simply amending a stock option grant to reduce its exercise
price potentially results in accounting charges for us that
would reduce our reported income. Also, repricing does not
impose any new requirements on optionholders, such as a new
vesting schedule, so many investors see repricings as a "one
way" street that benefits optionholders but not their company.
The new vesting terms of New Options are intended to ease
these concerns and balance the benefits of this Offer to the
Company.
5. Why can't I just be granted additional new options?
Granting additional options will result in the issuance of
additional shares that would "dilute" the current ownership of
shareowners. Our Board of Directors determined that, under the
circumstances, the Offer was the most effective way to incent
our employees without unduly diluting our shareowners.
Benefits and Risks of the Offer
This section generally describes some of the potential benefits and risks of the
Offer.
6. How does the Offer potentially benefit the Company?
We believe the Eligible Options held by our employees do not
provide the incentives we had intended. We believe that this
program provides the right incentives for our employees to
increase shareowner value. Also, the shares that were reserved
for issuance under the Plan with respect to any Cancelled
Options will again become part of the pool of shares that are
available for award grants under the Plan, including the grant
of the New Options.
7. Are my New Options guaranteed to be more valuable?
No. Generally, your New Options will potentially be more
valuable than your Cancelled Options only if they are granted
at an exercise price that is less than the exercise price of
your Cancelled Options. The exercise price of the New Options
will be determined as described in the response to Question 33
below. There is no guarantee that your New Options will have
an exercise price that is less than the exercise price of your
Cancelled Options. Your New Options will increase in value if
the market price of our common stock increases. We cannot
guarantee stock price performance.
8. What are the risks of the Offer?
The Offer involves risks as described in the "Risk Factors"
section of this Offer Circular, which include, among others,
the risk that the New Options could be less valuable than the
Cancelled Options surrendered if the exercise price of the New
Options is greater than the exercise price of your Eligible
Options and Recent Options, and the risk that because the New
Options will vest over four years from the New Option Grant
Date, you may not be employed by the Company to receive any
value on the New Option Grant Date or on the dates on which
the New Options vest. Therefore, it is important that you read
all of the details, terms and conditions contained in this
Offer Circular so that you can make an informed decision as to
whether to accept this Offer.
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9. What other companies have instituted a program like the Offer?
Many companies, including Nortel and Sprint Corp., have
adopted similar option exchange programs rather than amending
outstanding options to reprice them or granting additional
options. Other companies like Microsoft and Cisco have instead
granted more options to employees. We believe that is not
appropriate in our case for the reasons given above.
The Offer
This section describes the terms of the Offer, including the deadline for
accepting the Offer, eligibility rules, how to accept the Offer, which options
may be tendered in the Offer, and other terms and conditions of the Offer. The
terms of the Offer set forth in this Offer Circular control if there is any
inconsistency between this Offer Circular and any other document.
10. What is the deadline for the Offer?
If you want to accept the Offer, the deadline for submitting
your Election Form is 5:00 p.m., Mountain Standard Time, on
November 30, 2001, unless we, in our sole discretion, extend
the Offer. If you do not return your Election Form before that
deadline, you will not be allowed to participate in the
Exchange.
11. Who is eligible to participate in the Offer?
You are eligible to participate in the Offer only if (1) you
are a full-time employee of the Company at the expiration time
of the Offer, (2) you are a non-union employee at that time,
and (3) you are not a selected senior officer of Qwest at that
time.
If you are employed by the Company in Japan or Hong Kong, or
if you are a Qwest employee expatriated to KPNQwest, you will
be eligible to participate in the Offer if you satisfy the
eligibility criteria described in the previous paragraph.
Otherwise, if you are employed outside of the United States,
you will not be eligible to participate in the Offer.
12. What are the conditions to the Offer?
The Offer is conditioned on your being employed with the
Company as described in the response to Question 11 above,
except that your employment is determined as of the New Option
Grant Date. In addition, the Offer is conditioned on your
satisfactorily completing and returning to us your election
form by 5:00 p.m., Mountain Standard Time, on November 30,
2001, as described in the response to Question 14 below. If
you resign, quit or die, or if your employment with the
Company terminates for any reason whatsoever before the New
Option Grant Date, or if you are on unpaid leave on the New
Option Grant Date, we will not grant you any New Options and
you will not have a right to any of your Cancelled Options.
You will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
13. What stock options may I tender/exchange in the Offer?
If you are eligible to participate in the Offer, you may
tender in the Exchange any Qwest stock option that was
originally granted under our Equity Incentive Plan with a per
share exercise price of $35 or more (these are referred to as
"Eligible Options"). You cannot exchange options that you
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received as an employee of U S WEST, LCI or Icon CMT. Only
options that were granted under our Equity Incentive Plan are
Eligible Options. In addition to any other options that may
qualify as Eligible Options, if you received an option grant
under our Equity Incentive Plan for 200 shares on September 7,
2000, those options will qualify as Eligible Options.
If you choose to participate in the Offer by tendering some or
all of your Eligible Options, you must also exchange all stock
options granted to you on or after May 29, 2001 whether or not
those options otherwise qualify as Eligible Options (these are
referred to as your "Recent Options"). Also, if you want to
tender any portion of a particular stock option grant, you
must tender all stock options outstanding under that grant
(whether or not vested).
14. How may I accept the Offer?
Read Offer Circular and Election Form. To accept the Offer,
you should first review this Offer and Election Form Circular
and the documents referred to in this Offer Circular.
You should then obtain the Election Form. You may print an
Election Form from the Q or you may request one from Qwest
Stock Administration at StockAdmin2@Qwest.com or at the
following address or telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer.
Assemble Option Information. You should then assemble the
option information that you will need to complete the Election
Form. The last time you received options, we sent you all the
option information you need to complete the election form. For
your convenience, we are also sending to you at the address we
have for you an option statement showing the same information.
If you need another copy, please contact Qwest Stock
Administration at the email address, address or telephone
number given above.
Complete, Sign and Date Election Form. You should then
complete, sign and date the Election Form. If you want to
accept the Offer, you must indicate on the Election Form that
you accept the Offer and agree to the terms of the release set
forth in the Election Form. That is, you should indicate
whether you accept the Offer with respect to all of your
Eligible Options or indicate the grants of Eligible Options
that you want to exchange.
You must list on the Election Form all the Eligible Options
that you want to exchange, except that, if you want to
exchange all your Eligible Options, you may check the box on
the Election Form to indicate that you elect to exchange all
your Eligible Options. In either case, if you elect to
exchange any Eligible Option you will be deemed to have
elected to exchange all your Recent Options whether or not you
list them on the Election Form.
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Return Election Form. You should then mail, hand deliver or
fax the completed, signed and dated Election Form to Qwest at
the following address for receipt prior before 5:00 p.m.,
Mountain Standard Time, on November 30, 2001, or any later
expiration time to which the Offer has been extended:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer.
We cannot accept Election Forms by e-mail or any other means
of delivery other than those means identified above. For your
convenience, a postage-paid pre-addressed envelope is included
with your package of Offer materials that is being sent to you
for you to use to return your Election Form to us. If you do
not use the enclosed pre-addressed envelope to return this
form to Qwest, you must pay all mailing or courier costs to
deliver this form to Qwest. The method by which you deliver
the signed Election Form to Qwest is at your option and risk,
even if you use the pre-addressed envelope, and delivery will
be effective only when the form is actually received by Qwest.
In all cases, you should allow sufficient time to ensure
timely delivery. If we do not receive a valid Election Form
from you prior to the deadline described in the response to
Question 10, you will be deemed to have rejected the Exchange
Offer.
If you do not receive an Election Form or need additional
information, please visit the Q or contact Qwest Stock
Administration. If you request an Election Form, be sure to
allow at least two business days for delivery to you.
Neither we nor any other person is obligated to give you
notice of any defects or irregularities in any election, nor
will anyone incur any liability for failure to give any such
notice. We will determine, in our discretion, all questions as
to the form and validity, including time of receipt, of
elections. Our determination of these matters will be final
and binding.
Qwest Stock Administration intends to return a confirmation of
receipt card to you by mail that you will fill out and send in
with your election form to confirm that your election form has
been received. This card only means that we have received
something from you. It does not mean that you completed the
Election Form correctly.
Other. If the Election Form is signed by trustees, executors,
administrators, guardians, attorneys-in-fact or others acting
in a fiduciary or representative capacity, such persons should
so indicate when signing, and unless we have waived this
requirement, submit evidence satisfactory to Qwest of their
authority to act in this capacity.
Your election to accept or reject the Offer will become
irrevocable upon the expiration time of the Offer. Be sure to
read your Election Form. The effectiveness of any election
that you may make to accept the Offer is subject to the
eligibility conditions described in the responses to Question
11 above.
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Your election to participate in the Exchange pursuant to the
terms and conditions described in this Offer Circular
constitutes your acceptance of the terms and conditions of the
Offer. Our acceptance for cancellation of the Eligible Options
that you elect to tender and any Recent Options will
constitute a binding agreement between you and us on the terms
and subject to the conditions of the Offer Circular.
The Offer does not apply with respect to any options that you
may own other than your Eligible Options and Recent Options.
You are responsible for the method of delivery of your
Election Form and ensuring that we receive your Election Form
before the expiration time of the Offer. You should allow
sufficient time to ensure timely delivery of your Election
Form. If you miss the deadline, you will not be allowed to
participate in the Offer.
15. Can I choose which options I want to tender?
If you have only one Eligible Option grant, you must either
accept or reject the Offer as to that entire grant. That is,
you cannot accept the Offer as to only a portion of your
option. For example, you cannot accept the Offer with respect
to the unvested portion of your option but reject the Offer
with respect to the vested portion of your option. If you
accept the Offer for your Eligible Option, you will be deemed
to have accepted the Offer for all your Recent Options,
whether or not you indicate that you intend to tender any or
all of your Recent Options.
If you have multiple Eligible Option grants, you may choose to
tender one or more of your Eligible Option grants in the
Exchange. However, as to any particular Eligible Option grant,
you must either accept or reject the Offer as to that entire
grant. Although you can specify which of your Eligible Options
you want to tender, you cannot tender only a portion of any
particular grant.
For example, if you have one Eligible Option for 100 shares,
you cannot accept the Offer with respect to only 50 of those
shares but reject the Offer with respect to the other 50
shares, even if the Eligible Option has already vested as to
those 50 other shares. In any case, if you accept the Offer
for any of your Eligible Options, you must accept the Offer
for all your Recent Options.
If you own any Recent Options, some of your Recent Options may
also qualify as Eligible Options (in other words, they were
granted under our Equity Incentive Plan with an exercise price
of $35 or higher). Because your election to tender any of your
Eligible Options will require you to tender all of your Recent
Options, you will not have any choice as to whether to tender
any Eligible Options that are also Recent Options. For
example, assume that you have both an Eligible Option for 100
shares granted two years ago and an Eligible Option for 200
shares granted two months ago. The Eligible Option granted two
months ago would also be a Recent Option. Therefore, if you
choose to tender the Eligible Option for 100 shares granted
two years ago, you will also have to tender the Eligible
Option for 200 shares granted two months ago because that
option also constitutes a Recent Option. However, if you only
choose to tender the Eligible Option for 200 shares that was
granted two months ago, you will not have to tender the
Eligible Option for 100 shares granted two years ago because
that option does not qualify as a Recent Option.
As noted above, you may not partially tender any particular
Eligible Option grant. For example, if you have both a grant
of an Eligible Option for 100 shares and a grant of an
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Eligible Option for 300 shares (neither of which are Recent
Options), you may elect to cancel both, either or neither of
these grants. However, you may not elect to tender just 50
shares of the 100 share grant or partially tender either
option grant. Likewise, if an option grant is partially vested
and partially unvested, you cannot choose to tender only the
unvested portion.
16. Can I tender options that I have already exercised?
No. The Offer applies only to the portions of your Eligible
Options that are unexercised and outstanding as of the
expiration time of the Offer. It does not apply in any way to
shares that you purchased by exercising options or to any
portion of an Eligible Option that you exercise before the
expiration time of the Offer.
If you have exercised an Eligible Option in its entirety, that
option is no longer outstanding and is therefore not included
in the Offer. However, if you have exercised an Eligible
Option grant in part, the remaining outstanding unexercised
portion of the option grant is included in the Offer and may
be tendered in the Exchange.
For example, if you have an Eligible Option for 100 shares,
but you have already exercised it with respect to 50 shares,
you may tender the unexercised portion of the Eligible Option
relating to the 50 remaining shares.
17. Do I have to pay money or taxes if I accept the Offer?
No. Whether or not you accept the Offer, you will not have to
make any payments to us until you exercise your stock options.
If you accept the Offer, there will be no federal income taxes
consequences for the Exchange. See the responses to Questions
50-54 below.
18. What if I change my mind?
If you file an Election Form and want to change or withdraw
your election, you may do so by filing a new Election Form
indicating your new acceptance or rejection of the Offer in
accordance with the procedures described above so that we
receive your new Election Form before the expiration time of
the Offer. We will rely on the last Election Form that you
validly file and we receive before the expiration time of the
Offer.
If you want to change your election and you need a new
Election Form, you may print one from the Q or you may request
one from Qwest Stock Administration at StockAdmin2@Qwest.com
or at the following address or telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer. If you request an Election Form, be sure to
allow at least two business days for delivery to you.
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19. What is the release that is included in the Election Form?
By signing your Election Form and indicating that you accept
the Offer, you agree to cancel the designated Eligible Options
and your Recent Options and agree to the provisions of a
release set forth in the Election Form. The release will
operate as an unconditional release by you and your trustees,
executors, administrators, guardians, attorneys-in-fact or
others acting in a fiduciary or representative capacity of all
rights and remedies relating to your Cancelled Options.
By agreeing to the release, you agree that your exchanged
Eligible Options and Recent Options, and all of your rights
with respect to your exchanged Eligible Options and Recent
Options, automatically terminate at the expiration time of the
Offer. You retain, of course, your conditional right to
receive New Options on the terms and conditions described in
this Offer Circular.
20. Can the Offer be modified?
Yes. Prior to the expiration time of the Offer, we may, in our
sole discretion, extend, modify or revoke the Offer. We will
notify you if the Offer is revoked. You will also be notified
(and given an opportunity to change any Election Form that you
may have previously filed) if we modify the Offer in any
material manner. The New Option Grant Date is scheduled to be
June 3, 2002. If June 3, 2002 is not a trading day, the New
Option Grant date will be the first trading day after June 3,
2002. If we extend the Offer, we will adjust the New Option
Grant Date to correspond to the new expiration time of the
Offer.
Subject to our right to modify or revoke the Offer, the only
condition to participating in the Offer is that you must be
eligible (as described in the responses to Question 11 above)
to participate in the Exchange as of the expiration time of
the Offer. See the response to Question 37 below for
conditions applicable to New Option grants.
We are not aware of any jurisdiction where the Exchange, the
Offer, or the grant of New Options would violate applicable
law. If we become aware of any jurisdiction where the Exchange
or the Offer would violate applicable law, we will revoke the
Offer in cases where applicable law cannot be satisfied. We
may, where necessary, make New Option grants conditional on
any required legal filings or approvals, modify the terms of
the New Options to the extent necessary to satisfy applicable
law, and we may delay the grant of New Options in cases where
filings or approvals are required and have not been obtained.
21. What happens if I accept the Offer but my employment
terminates before the expiration time of the Offer?
If you accept the Offer but you cease to be a full-time
employee of the Company before the expiration time of the
Offer or you are not otherwise eligible to participate (see
the responses to Questions 11 and 12 above), the release that
you gave in accepting the Offer will be void and your Eligible
Options and your Recent Options will be treated as if they had
not been tendered or cancelled.
22. What happens if I accept the Offer but my employment
terminates before the New Option Grant Date?
If your employment with the Company is terminated by you or by
the Company for any reason whatsoever after the expiration
time of the Offer and before the New Option Grant Date, or if
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you are on unpaid leave on the New Option Grant Date, you will
not have a right to any Cancelled Options, and you will not
have a right to the New Options that would have otherwise been
granted to you on the New Option Grant Date. You should
carefully consider this issue, particularly if you are
thinking about retiring or resigning before the New Option
Grant Date.
Therefore, if you are not a full-time employee of the Company
at the expiration time of the Offer and on the New Option
Grant Date, you will not receive any New Options in exchange
for your Cancelled Options. You also will not receive any
other consideration for the Cancelled Options or with respect
to New Options that would have otherwise been granted to you.
This result is the same even if you are terminated by the
Company for no reason or are laid off or the subject of a
workforce reduction.
23. What happens if I accept the Offer but I go on leave before
the expiration time of the Offer?
If you take a leave of absence, you will be treated as being
employed by the Company for purposes of the Offer while on
leave for as long as your leave is a paid leave of absence.
Examples of paid leaves generally include workers compensation
leave, short term disability with pay (including approved
maternity or paternity leave), long term disability, military
leave, and birth/adoption/guardianship leave. If you are on an
unpaid leave of absence at the expiration time of the Offer,
then you will not be eligible to participate in the Offer
unless we are required by law to still treat you as an
employee for this purpose. Examples of unpaid leave generally
include surplus transition leave, personal unpaid leave,
family and medical leave (other than approved maternity and
paternity leave), and educational leave.
24. What happens if I accept the Offer but my employment
terminates before the New Option Grant Date?
If you die or if your employment with the Company terminates
for any reason whatsoever before the New Option Grant Date, or
you are on unpaid leave on the New Option Grant Date, we will
not grant you any New Options and you will not have a right to
any of your Cancelled Options. If you are on an unpaid leave
of absence on the New Option Grant Date, you will not be
granted New Options and you will not have a right to any of
your Cancelled Options unless we are required by law to still
treat you as an employee for this purpose. In either case, you
will not receive any other consideration for your Cancelled
Options or with respect to the New Options that you otherwise
would have received.
25. What will happen to my Eligible Options and Recent Options if
I do not accept the Offer?
Participation in the Offer is entirely voluntary. If you do
not accept the Offer (or if you do not accept the Offer with
respect to all of your Eligible Options), your Eligible
Options that you do not elect to tender in the Offer will
remain outstanding in accordance with their terms. However, if
you accept the Offer with respect to any of your Eligible
Options in any grant, you must also exchange all your other
Eligible Options that were included in the same grant and all
of your Recent Options.
If you do not accept the Offer, your Recent Options granted on
or after May 29, 2001 will also remain outstanding in
accordance with their terms.
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26. Will I be eligible to receive future grants of options under
Qwest's benefit plans?
If you accept the Offer, you are ineligible to receive any
additional stock option grants until after the New Option
Grant Date. This is because it would result in potential
accounting charges that we wish to avoid.
If you do not accept the Offer, you continue to be eligible
for additional option grants. In other words, the six month
ineligibility period for grants will not apply to you.
However, we do not have any current intention to issue options
on a broad basis in 2002 (other than the New Options).
27. How does the Offer affect my overall compensation?
You might choose to think of your paycheck as your short-term
compensation, your potential quarterly bonus as your mid-term
compensation and your stock options as your long-term
compensation. Taken together, these components represent a
comprehensive compensation package. You should also consider
the employment and related compensation commitment described
in the response to Question 37 below.
28. Is there any tax consequence to my participation in the
Exchange?
If you exchange your Eligible Options and Recent Options (if
any) for New Options, you will not be required under current
law to recognize income for United States federal income tax
purposes at the time of the Exchange or at the date that the
New Options are granted. See the responses to Questions 50-54
below.
29. If I accept the Offer, will the grant and exercise of New
Options affect my benefits under Company-sponsored retirement
plans?
No. The New Options will not affect those benefits. Income
that you would have recognized if you had exercised your
Eligible Options or Recent Options in the ordinary course
would have been excluded from your compensation for purposes
of determining your benefits under other Company-sponsored
retirement plans. Similarly, income recognized in connection
with exercising your New Options will be excluded from your
compensation for purposes of determining your benefits under
Company-sponsored retirement plans. Any value associated with
an option grant is also excluded from your compensation for
these purposes.
30. What happens if Qwest is subject to a change in control, asset
sale, merger or other reorganization before the New Options
are granted?
If a change of control or certain other reorganization of
Qwest occurs before we grant the New Options, we expect that
the successor or purchaser would agree to assume or substitute
other outstanding options of Qwest and would agree to assume
the obligation to issue New Options. However, we cannot
guarantee that any successor or purchaser would agree to
assume existing options or any obligation to issue New
Options. Therefore, it is possible that you may not receive
any New Options, securities of the surviving company or other
consideration in exchange for your Cancelled Options if Qwest
is subject to a change of control, sells assets or otherwise
reorganizes before the New Options are granted. In addition,
the announcement of a change of control transaction regarding
Qwest before the New Option Grant Date could have a
substantial effect on our stock price, including substantial
stock price appreciation, which could reduce or eliminate
potential benefits provided by the Offer.
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The preceding paragraph describes the general consequences of
a change of control or other reorganization of Qwest
generally. You may also be affected if Qwest or an affiliate
sells a subsidiary, a division or a part of the Company for
which you work. In those circumstances, if you were
transferred to the acquiring company, the acquiring company
would likely not have to agree to issue New Options under the
Offer. Consequently, if you are employed by the subsidiary or
in the division or business that is sold and you do not
continue to be employed by the Company following the sale,
then the sale will constitute the termination of your
employment with the Company for purposes of the Offer and the
New Options. In those circumstances, you would not be entitled
to receive options to purchase stock or securities of the
acquiring company or any other consideration in exchange for
your Cancelled Options.
We also reserve the right to take any action, including
entering into a merger, asset purchase or sale or similar
transaction, or shutting down a business unit, whether or not
it adversely affects the grant of the New Options under the
Offer or the likelihood that the New Options will be granted.
31. After the grant of my New Option, what happens if my options
again end up "underwater"?
There is no guarantee that your New Options will have an
exercise price that is less than the exercise price of your
Cancelled Options or that the market price of Qwest common
stock will ever exceed the exercise price of your New Options.
We cannot guarantee stock price performance. Furthermore, we
currently do not expect to make a similar stock option
exchange offer in the future.
Description of Terms and Conditions of New Options to be Granted in June 2002
This section provides important information regarding the New Options to be
granted as part of the Offer. The information in this section is qualified in
its entirety by the more detailed information set forth in the form of
Nonqualified Option Agreement that will evidence each grant of New Options (the
applicable "New Option Agreement") and by the more detailed information set
forth in our Equity Incentive Plan. You may obtain a copy of our Equity
Incentive Plan by request without charge from Qwest and it is also available
from the SEC (see "Additional Information; Incorporation of Documents by
Reference" section below). Copies of the forms of New Option Agreements that may
be used in connection with the Exchange are attached as Attachments B, C and D
to this Offer Circular. As described below, the form of New Option Agreement
that will be used to evidence any particular New Option will depend on the
change of control provisions that applied to the corresponding Cancelled Option.
You should read all applicable attachments to this Offer Circular.
Our Equity Incentive Plan or the applicable New Option Agreement will control if
any discrepancy exists between the information presented in this Offer Circular
with respect to the New Options and the terms of our Equity Incentive Plan or
the applicable New Option Agreement.
32. If I accept the Offer, how many New Options will I be granted?
If you timely accept the Offer, you are eligible to
participate in the Exchange and you are a full-time employee
of the Company on the New Option Grant Date, you will be
granted New Options with respect to the same number of shares
as the number of shares covered by your Cancelled Options. For
example, if you tender an Eligible Option that covered 100
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shares, which had been exercised as to 20 shares prior to the
expiration time of the Offer, and was outstanding as to 80
shares at the time it terminated pursuant to the Exchange,
your New Option would cover 80 shares.
In general, if we increase or decrease the number, or change
the rights and privileges, of our outstanding shares of common
stock by payment of a stock dividend, stock split or other
distribution upon the shares payable in common stock, or
through a subdivision, combination, consolidation,
reclassification or recapitalization involving our outstanding
common stock, we will proportionately adjust the number,
rights and privileges of the securities to be subject to New
Options as if they had been outstanding on the date that any
of these events occur. The mere issuance of additional shares
by Qwest in an acquisition or other transaction, however,
typically would not result in any such adjustment.
We do not guarantee that you will receive any value if you
accept the Offer. The value you receive will depend on, among
other things, the exercise price of your Cancelled Options,
the exercise price of your New Options, whether or not you
remain employed by the Company or the New Options otherwise
vest, and the market price of our common stock when you sell
the shares that you acquire when you exercise your New
Options.
33. What will be the exercise price of the New Options?
The per share exercise price of the New Options will be the
closing market price of our common stock as reported by the
New York Stock Exchange on the New Option Grant Date. The New
Option Grant Date will be June 3, 2002 or, if that day is not
a trading day, the first trading day after June 3, 2002. If we
extend the Offer, we will adjust the New Option Grant Date to
correspond to the new expiration time of the Offer.
34. When will the New Options vest?
If you accept the Offer, the New Options that you are granted
will vest and become exercisable over four years as follows:
(1) one-fourth of the New Options will vest on the first
anniversary of the New Option Grant Date, (2) one-fourth of
the New Options will vest on the second anniversary of the New
Option Grant Date, (3) one-fourth of the New Options will vest
on the third anniversary of the New Option Grant Date and (4)
one-fourth of your New Options will vest on the fourth
anniversary of the New Option Grant Date, subject, in each
case, to your continued employment by the Company through the
applicable vesting date. All New Options will be subject to
this vesting schedule, regardless of the fact that all or a
portion of your Cancelled Options may have already vested.
For example, assume that you decide to tender the one Eligible
Option that you own for 200 shares. At the expiration time of
the Offer the option is 25% vested. Assuming that you are
still employed on the New Option Grant Date (assuming it is
June 3, 2002), we will grant you a New Option for 200 shares.
Your New Option will vest in four equal installments, with 25%
vesting on June 3, 2003, June 3, 2004, June 3, 2005 and June
3, 2006. The fact that your Eligible Option was already 25%
vested when it was cancelled does not affect the vesting
schedule of your New Option.
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35. What are the termination provisions of the New Options?
New Options will each be subject to a new ten year option term
beginning on New Option Grant Date. The New Options will
remain subject to the same termination of employment
provisions as your Cancelled Options.
36. What will be the change of control provisions of my New
Option?
The New Options granted in exchange for your Cancelled Options
will be subject to the same change of control provisions as
your Cancelled Options. Your different Eligible Option grants
and Recent Option grants, if applicable, may now be subject to
different change of control provisions. If this is the case,
your New Option grants will be evidenced by different forms of
New Option Agreements to reflect these different provisions.
37. What will be the other terms and conditions of my New Options?
You must make an employment commitment to receive a New
Option. That is, Section 7.2(f) of our Equity Incentive Plan
requires that you reaffirm on the New Option Grant Date your
agreement to remain in the employ of the Company for a
continuous period of at least one year after that date at your
rate of compensation then in effect, even though the Company
may terminate your employment and change your compensation
before, during or after the one-year period. You were required
to make this reaffirmation when you received your other
options from the Company. If you do not make that
reaffirmation when you receive a New Option, you will not be
granted any New Options and you will not have a right to any
of your Cancelled Options. If we determine that we will not
require written affirmations, your acceptance of your New
Option will constitute your affirmation of the employment
agreement referred to above.
The New Options will be subject to a new ten year term,
starting on the New Option Grant Date. Other than the new
exercise price, new option term and new vesting schedule, we
expect that your New Options will otherwise be subject to
substantially the same terms and conditions as the
corresponding Cancelled Options. However, we reserve the
authority contemplated by our Equity Incentive Plan to make
adjustments relative to the New Options, before and after they
are granted, consistent with the authority that our Board of
Directors had with respect to the Cancelled Options. In the
period before the New Option Grant Date, such adjustments or
termination of rights would occur without prior notice to you.
Also see the response to Question 20 above.
You will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
38. What is a stock option?
A stock option is a right granted by a corporation to an
individual or entity to buy a specified number of shares of
the company's stock at a fixed price during a specified period
of time.
39. What is an "exercise price"?
An exercise price, also called the strike price or grant
price, is the fixed price that you pay to buy your shares when
you exercise your stock option.
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Other Provisions; Administration
This section describes certain other aspects of the Offer, including the fact
that the Offer does not confer any employment rights, certain administrative
information regarding the Offer and, since Qwest is making the Offer, certain
information about Qwest.
40. Does the Offer give me any rights to continued employment by
the Company?
No. The Offer does not have any effect on your employment
status or give you any right to continued employment with the
Company or any of its affiliates. You will remain an at-will
employee regardless of whether you elect to participate in the
Exchange. That means that you are not guaranteed employment
for any period of time.
If you die or if your employment with the Company terminates
for any reason whatsoever before the New Option Grant Date, or
if you are on unpaid leave on the New Option Grant Date, we
will not grant you any New Options and you will not have a
right to any of your Cancelled Options. If you are on an
unpaid leave of absence on the New Option Grant Date, you will
not be granted New Options and you will not have a right to
any of your Cancelled Options unless we are required by law to
still treat you as an employee for this purpose. In either
case, you will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
If we sell a subsidiary or any other event or transaction
occurs that results in a Qwest affiliate or subsidiary not
continuing as such an affiliate or subsidiary after the event
or transaction, and you are employed by the affected affiliate
or subsidiary, you will be deemed to have terminated
employment with the Company for purposes of the Exchange and
any of your New Options unless, after the event or
transaction, you are otherwise employed by Qwest or another
entity that is then a Qwest subsidiary or affiliate.
41. How do I make a claim for payment of other benefits I may be
owed?
If you accept the Offer, you generally will not have to take
any other action to receive the grant of New Options in
exchange for your Cancelled Options. If, however, you believe
that you are being denied a benefit to which you are entitled,
you should file a written request with Qwest Stock
Administration. The request should include the reasons for
your claim. Any written claim request should be sent to:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 10th Floor
Denver, Colorado 80202
42. Who will administer and pay the costs of administering the
Exchange?
We will make all administrative decisions regarding the
Exchange. Without limiting that authority, we have the
authority, in our sole discretion, to determine all questions
as to form of documents and the validity, eligibility, and
acceptance of any election to participate in the Offer. Our
determination on these matters will be final and binding on
all persons. We reserve the right to waive any condition of
the Offer. We are not obligated to give any notice of any
defects or irregularities in Election Forms, nor will anyone
incur any liability if you fail to return a valid Election
Form.
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We will pay the expenses of administering the Exchange and the
grant of New Options.
We will not retain, nor will we pay any fees or commissions
for, any broker, dealer, or other person to solicit elections
to accept the Offer. Any such solicitation is prohibited.
43. What is the price of our common stock?
Shares of our common stock are traded on the New York Stock
Exchange under the symbol "Q." On October 30, 2001, the
closing price of a share of our common stock was $16.00. The
following table presents the high and low sales prices per
share of Qwest common stock for the periods indicated, as
reported on the New York Stock Exchange:
Period High Low
------ ---- ---
Year Ending December 31, 2001:
First Quarter $ 47.5000 $ 33.2500
Second Quarter $ 40.9000 $ 29.8200
Third Quarter $ 31.1500 $ 16.5000
Fourth Quarter (to October 30, 2001) $ 18.9000 $ 15.6000
Year Ended December 31, 2000:
First Quarter $ 64.0000 $ 37.0000
Second Quarter $ 54.2500 $ 39.5000
Third Quarter $ 57.8750 $ 44.5000
Fourth Quarter $ 51.4375 $ 32.3750
Year Ended December 31, 1999:
First Quarter $ 37.4063 $ 25.6250
Second Quarter $ 48.0625 $ 32.5625
Third Quarter $ 35.9375 $ 26.1250
Fourth Quarter $ 44.0000 $ 29.8750
You should obtain current market quotations for our common
stock before you decide whether you should accept the Offer.
The value of our common stock will fluctuate in the future and
we cannot and do not predict any future values for our common
stock.
44. What information is available regarding Qwest?
Qwest is making the Offer. We are a leading broadband Internet
communications company that provides advanced communication
services, data, multimedia and Internet-based services on a
national and global basis; and wireless services, local
telecommunications and related services and directory services
in a 14-state local service area. A Fortune 100 company, we
principally serve large and mid-size business and government
customers on a national and international basis, as well as
residential and small business customers primarily in our
14-state local service area.
We are incorporated under the laws of the State of Delaware
and have our principal executive offices at 1801 California
Street, Denver, Colorado 80202, telephone number 303-992-1400.
Attachment E to this Offer Circular summarizes certain of our
consolidated financial data. Additional information about us,
including certain more detailed financial statements, is
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available from the documents referred to and incorporated by
reference under "Additional Information: Incorporation of
Documents by Reference" below.
45. How many Eligible Options are there?
The Offer is being made only with respect to your Eligible
Options and Recent Options that are outstanding as of the
expiration time of the Offer. As of September 30, 2001, there
were 1,664,535,549 shares of Qwest common stock outstanding
and we had granted stock options and other awards covering up
to an additional 121,190,582 shares of Qwest common stock
(note that the awards referred to in the response to Question
46 below are not included in this number because the awards
were not granted until October 24, 2001).
Of the shares subject to those stock options and other awards,
approximately 35.7 million shares (approximately 2.1% of the
outstanding shares) were subject to the Eligible Options and
approximately 1.8 million shares (approximately 0.1% of the
outstanding shares) were subject to the Recent Options
outstanding at that time. (None of the awards referred to in
the response to Question 46 below and granted on October 24,
2001 constitute Eligible Options or Recent Options that can be
exchanged in the Offer.)
46. How does the Offer relate to Qwest's directors and executive
officers?
Our directors and certain senior officers are not eligible to
participate in the Exchange.
Our directors and executive officers, and their positions and
offices, are as follows: Philip F. Anschutz (Chairman of the
Board), Joseph P. Nacchio (Chairman and Chief Executive
Officer, and Director), Linda G. Alvarado (Director), Craig R.
Barrett (Director), Hank Brown (Director), Thomas J. Donohue
(Director), Jordan L. Haines (Director), Cannon Y. Harvey
(Director), Peter S. Hellman (Director), Vinod Khosla
(Director), Marilyn Carlson Nelson (Director), Frank P. Popoff
(Director), Craig D. Slater (Director), W. Thomas Stephens
(Director), Joel M. Arnold (Executive Vice President - Global
Accounts), Clifford S. Holtz (Executive Vice President
National Business Accounts), Afshin Mohebbi (President and
Chief Operating Officer), James A. Smith (Executive Vice
President - National Consumer Markets), Robin R. Szeliga
(Executive Vice President and Chief Financial Officer), and
Drake S. Tempest (Executive Vice President, General Counsel,
Chief Administrative Officer and Secretary). The address of
each director and executive officer is c/o Qwest
Communications International Inc., 1801 California Street,
Denver, Colorado 80202.
Please see our proxy statement for our annual meeting of
shareholders held on May 2, 2001 for more information
regarding the compensation of directors and certain executive
officers and the amount of Qwest securities that our directors
and executive officers beneficially owned, for periods or as
of the dates set forth in that statement. This proxy statement
is available upon request as described below under "Additional
Information; Incorporation of Documents by Reference."
There were no stock option or stock transactions involving our
directors and executive officers within the 60 days before the
commencement of the Offer, except for the grants of the stock
options and restricted stock described in the following
paragraph.
Our Board approved certain stock option and restricted stock
grants on October 24, 2001. Those grants were made to persons
who are not eligible to participate in the Offer. Messrs.
Nacchio, Mohebbi, Arnold, Holtz, Smith and Tempest and Ms.
Szeliga were granted new stock options covering 7,250,000
shares, 1,000,000 shares, 500,000 shares, 175,000 shares,
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250,000 shares, 600,000 shares, and 600,000 shares of our
common stock, respectively, each with an exercise price of
$16.81 per share. Messrs. Arnold and Tempest and Ms. Szeliga
were each granted restricted stock awards covering 100,000,
200,000 and 100,000 shares, respectively. The stock option
grants have maximum ten-year terms and vest in four equal
annual installments of 25% on each of the first four
anniversaries of the date of grant beginning on October 24,
2002, except that Mr. Nacchio's stock options vest in four
installments as follows: 2,500,000 shares on August 1, 2004,
500,000 shares on December 1, 2004, 2,500,000 shares on August
1, 2005 and 1,750,000 shares on December 1, 2005; and Mr.
Mohebbi's stock options vest in two installments as follows:
500,000 shares on April 1, 2004 and 500,000 shares on April 1,
2005. The shares of restricted stock vest in four equal annual
installments of 25% on February 1, 2003, February 1, 2004,
February 1, 2005 and February 1, 2006. These option grants and
restricted stock awards are evidenced by award agreements in
the forms customarily used by us. These forms are attached as
exhibits to the Tender Offer Statement on Schedule TO that we
filed with the Securities and Exchange Commission and that is
referred to in the "Additional Information; Incorporation of
Documents by Reference" section below.
In connection with the award grants identified in the
preceding paragraph, Mr. Nacchio's employment agreement with
us was extended through December 31, 2005 and each of Messrs.
Nacchio's and Mohebbi's annual base salary was adjusted
effective as of January 1, 2002 to $1,500,000 and $850,000,
respectively. Each of their annual bonus targets (expressed as
a percentage of base salary) for 2002 will be 250% and 200%,
respectively, of base salary. In addition, we loaned Mr.
Mohebbi $4,000,000, interest free, that will be forgiven over
five years, in 20% installments so long as he remains
satisfactorily employed.
47. What are the general accounting consequences to the Company of
the Exchange?
We believe that we will not incur any compensation expense
solely as a result of the transactions contemplated by the
Exchange because we will not grant any New Options until a
date that occurs more than six months and one day after the
expiration time of the Offer (the New Options are scheduled to
be granted on June 3, 2002 or later). Further, the exercise
price of all New Options will equal the closing market price
of our common stock on the New Option Grant Date.
If we were to grant any options before the scheduled New
Option Grant Date to any option holder electing to participate
in the Exchange, our grant of those options (assuming the
applicable per share exercise price is less than the exercise
price of the options tendered in the Exchange) would be
treated for financial reporting purposes as a variable award
to the extent that the number of shares subject to the
newly-granted options is equal to or less than the number of
the option holder's option shares tendered in the Exchange. In
this event, we would be required to record as compensation
expense the amount by which the market value of the shares
subject to the newly granted options exceeds the exercise
price of those shares. This compensation expense would accrue
as a variable accounting charge to our earnings over the
period that the newly granted options are outstanding. We
would have to adjust this compensation expense periodically
during the option term based on increases or decreases in the
market value of the shares subject to the newly granted
options.
Similar accounting rules will trigger a variable accounting
charge to our earnings if outstanding options are terminated
and, within the six-month period preceding the termination,
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other stock options were granted at an exercise price that is
less than the exercise price of the terminated options. To
avoid this potential accounting charge, we are requiring that
you tender all of your Recent Options in the Exchange if you
want to tender any of your Eligible Options.
48. Is Qwest contemplating any other transactions?
We must disclose whether we are contemplating certain types of
transactions in connection with the Offer. Except as otherwise
disclosed below and elsewhere in this Offer Circular and in
our filings with the Securities and Exchange Commission (the
"SEC"), and while we reserve the right to contemplate and
effect any of these transactions from time to time, we
currently have no plans or proposals that relate to or would
result in:
o an extraordinary transaction, such as a merger,
reorganization or liquidation, involving us or any of
our subsidiaries;
o any purchase, sale or transfer of a material amount
of our assets or the assets of any of our
subsidiaries;
o any material change in our present dividend rate or
policy, or our indebtedness or capitalization;
o any change in our present Board of Directors or
executive officers, including, but not limited to,
any plans or proposals to change the number or the
term of directors or to fill any existing vacancies
on our Board or to change any material term of the
employment contract of any executive officer;
o any other material change in our corporate structure
or business;
o our common stock being de-listed from a national
securities exchange;
o our common stock becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended;
o the suspension of our obligation to file reports
under Section 15(d) of the Securities Exchange Act of
1934, as amended;
o the acquisition by any person of any of our
securities or the disposition of any of our
securities (other than as a result of the exercise of
stock options or the payment of other award granted
under our incentive compensation plans); or
o any changes in our articles of incorporation, bylaws
of other governing instruments or any actions that
could impede the acquisition of control of Qwest.
On October 18, 2001, we announced an agreement to purchase
approximately 14 million shares of KPNQwest common stock from
the other major shareholder in KPNQwest, Koninklijke KPN N.V.
("KPN"). The agreed upon purchase price was $4.58 per share.
After completion of the purchase, we will own approximately
47.5% of the voting power of the KPNQwest stock. As part of
the agreement, KPN granted an option to us to purchase some or
all of KPN's shares in KPNQwest in March of 2002. The
purchase, which is subject to several conditions including
antitrust pre-clearance in the United States of America and
several European jurisdictions, and KPNQwest shareholder
23
approval of certain amendments to the KPNQwest articles of
association, is expected to be completed before December 31,
2001. We will continue to account for our proportionate share
of KPNQwest's operations under the equity method of
accounting.
49. Are there any regulatory requirements or other approvals that
Qwest must comply with or obtain?
We are not aware of any license or regulatory permits that are
important to our business that might be adversely affected by
the exchange and cancellation of Eligible Options and Recent
Options or the issuance of New Options as contemplated by the
Offer. In addition, we are not aware of any approval that is
required from any government authority or agency for the
cancellation of Eligible Options and Recent Options and the
grant of New Options as contemplated by the Offer, other than
those that we have obtained or that we expect to obtain.
Federal Income Tax and Social Security Consequences
Questions 50 through 53 below discuss the material United States federal income
tax and Social Security considerations that relate to the Exchange. Question 54
below comments on state, local and foreign tax matters. We cannot and do not
guarantee any particular tax consequences. You should consult your own tax
advisors.
The Company may withhold any amounts required by law (including U.S. federal,
state or local, or foreign, income, employment or other taxes) to be withheld
with respect to the Exchange and the exercise of New Options. In the event that
the Company does not elect for any reason to withhold amounts necessary to
satisfy any applicable tax withholding obligations that arise, the Company may
withhold such amounts from compensation otherwise payable to you or you must pay
or provide for the payment of such amounts to the Company. The amount of tax
withheld by the Company may not be sufficient to pay the actual tax liability
due, and you will be responsible for any shortfall.
50. What is the tax effect of the Exchange?
If you accept the Offer, there will be no federal income tax
consequences with respect to the cancellation of your
exchanged Eligible Options and Recent Options or with respect
to the grant of your New Options.
51. What is the income tax effect of the New Option grants and
shares I receive when I exercise my vested New Options?
The New Options granted to you will not be taxed for income
tax purposes until the year in which you exercise the New
Options. The amount of income that you will recognize with
respect to the shares distributed will equal the excess of the
fair market value of a share of our common stock over the
exercise price paid for the shares (the "spread"). The income
that you recognize with respect to the exercise of New Options
will constitute ordinary income, not capital gain. You will
pay federal income tax based on the tax rates in effect for
the year in which you exercise your New Options, rather than
based on the tax rates in effect for the year 2001 or 2002.
We will be entitled to a business expense deduction equal to
the amount of ordinary income that you recognize with respect
to the exercised New Option. We will be allowed the deduction
in the year in which you recognize ordinary income.
24
The fair market value of our common stock that you receive
when you exercise your New Options will be the "tax basis" for
the stock. If you later sell the stock, any gain or loss that
you realize from the sale (determined based on your tax basis
in the stock) will be taxable to you either as short-term or
long-term capital gain or loss, depending on how long you own
the shares before you sell them. Generally, you must own the
shares for more than one year before you sell them in order to
qualify for long-term capital gain treatment.
52. What are the tax withholding requirements with respect to the
New Options?
The Federal Insurance Contributions Act ("FICA") imposes two
types of taxes - Social Security tax (at 6.2%) and Medicare
tax (at 1.45%) - on both employers and employees for wages
paid to employees. The Social Security tax is a percentage of
wages up to the Social Security wage base limitation, which is
$80,400 for the year 2001. The Social Security wage base is
adjusted annually. Once you have paid Social Security tax for
a given year on an amount of wages from a particular employer
equal to the wage base limitation, no further Social Security
tax is payable on that year's wages from that employer.
Currently, there is no wage base limitation for Medicare tax
purposes. Thus, all wages paid to you are subject to Medicare
tax.
Income tax withholding is also required on wages paid to
employees. The Company will withhold federal income taxes on
the "spread" upon the exercise of your options at the
supplemental wage withholding rate (currently 27.5%). State
and local income tax withholding also may be required,
depending on your state of employment. For purposes of the
following illustration, the state tax withholding rate is
assumed to be 6%. (The California supplemental wage
withholding rate is 6%.)
The "spread" on the New Options will be treated as wages
received for FICA and income tax purposes in the year(s) of
exercise. Income taxes and FICA taxes will be withheld at the
time(s) of exercise. The amount of income tax withholding may
not be sufficient to cover your actual income tax liability.
For Example: Assume that you accept the Offer and that you are
granted 300 New Options for your exchanged Eligible Options at
a per share exercise price of $15. Further assume that you
exercise 100 of your vested New Options when the fair market
value of a share is $20. You will recognize $500 of ordinary
income in that year. Required withholding would be as follows:
$38.25 for FICA (assuming the Social Security wage base had
not been met at the time of payment) (7.65% of $500 = $38.25);
$137.50 for federal income taxes (27.5% of $500 = $137.50);
and $30 for state income taxes (at an assumed state
withholding rate of 6%, 6% of $500 = $30). Thus, the total
withholding obligation would be $205.75 ($38.25 + 137.50 + $30
= $205.75).
We may make provisions and take whatever steps as we may deem
necessary or appropriate to withhold all federal, state, local
and other taxes required by law to be withheld with respect to
the exercise of any New Option. For example, we may deduct the
amount of any required withholding taxes from any other amount
then or thereafter payable to you or may require you to pay to
us in cash the amount required to be withheld.
25
53. Could a change in tax law affect my benefits?
Yes. Congress may change the relevant tax and Social Security
law at any time, and these changes may be retroactive to
before the date of enactment. These changes may have a
material effect on the benefit you expect to receive by
electing to participate in or by not electing to participate
in the Exchange.
54. What are the local and foreign income tax consequences of the
New Options?
We are unaware of any state and local income tax consequences
in the United States of the Exchange and the grant and
exercise of New Options that differ from the United States
federal income tax consequences described and cross-referenced
above.
Foreign taxes are beyond the scope of this discussion. If you
reside in a jurisdiction outside of the United States, you
should consult with your own tax advisors.
26
ADDITIONAL INFORMATION;
INCORPORATION OF DOCUMENTS BY REFERENCE
If you have any questions with respect to the Offer, the New Options,
or any other matters discussed in this Offer Circular, please contact Qwest
Stock Administration at StockAdmin2@Qwest.com or at the following address or
telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
A Qwest Stock Administration representative will generally be available
at that location (during normal business hours) or through that telephone number
from 8:00 a.m. to 7:00 p.m., Mountain Standard Time, each business day until the
expiration time of the Offer.
We are a reporting company under the Securities Exchange Act of 1934,
as amended, and are required to file periodic and other reports with the SEC.
These reports include financial material and other information about Qwest.
We have filed a Tender Offer Statement on Schedule TO with the SEC with
respect to the Offer. This Offer Circular does not contain all of the
information included in the Schedule TO and its exhibits.
The following documents that we have filed with the SEC are
incorporated by reference into this Offer Circular:
o Our Annual Report on Form 10-K for the year ended December 31,
2000 (as amended by our Annual Report on Form 10-K/A filed
with the SEC on August 20, 2001);
o Our Quarterly Reports on Forms 10-Q for the quarters ended
March 31, 2001 and June 30, 2001; and
o Our Current Reports on Forms 8-K filed with the SEC on March
22, 2001, March 29, 2001, April 5, 2001, April 25, 2001, April
27, 2001, May 17, 2001, June 5, 2001 (as amended by our
Current Report on Form 8/K-A filed with the SEC on June 5,
2001), June 8, 2001, June 20, 2001, June 21, 2001, July 20,
2001, July 26, 2001 (as amended by our Current Report on Form
8/K-A filed with the SEC on July 26, 2001), August 7, 2001 (as
amended by our Current Report on Form 8/K-A filed with the SEC
on August 13, 2001), September 10, 2001 and October 31, 2001.
Copies of the foregoing documents can be inspected and copied at:
o the Public Reference Room of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549; and
o the SEC Midwest Regional Office, CitiCorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60061.
You may also obtain copies of these documents by mail at prescribed
rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
27
Reports, proxy statements and other information concerning Qwest can
also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, 18th Floor, New York, New York 10005, and at the offices of the Pacific
Exchange, 301 Pine Street, San Francisco, California 94104.
You also may view the Schedule TO and the incorporated documents at the
SEC's Internet web site at: http://www.sec.gov or on the Q.
You may also obtain without charge, upon oral or written request, a
copy of the Schedule TO and any document that has been incorporated by reference
(except the exhibits to any such document) into this Offer Circular or any other
report or document required to be given to you under SEC Rule 428(b).
You may also request Qwest documents from Qwest Stock Administration at
StockAdmin2@Qwest.com or at the following address or telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
28
ATTACHMENT A
PROSPECTUS FOR QWEST EQUITY INCENTIVE PLAN
------------------------------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
QWEST COMMUNICATIONS INTERNATIONAL INC.
EQUITY INCENTIVE PLAN, AS AMENDED
October 31, 2001
GENERAL
-------
EQUITY INCENTIVE PLAN
The Company adopted the Qwest Communications International Inc. Equity
Incentive Plan (the "Plan") effective June 23, 1997, as amended. The purpose of
the Plan is to provide employees, consultants and non-employee directors
selected for participation in the Plan with additional incentives to remain in
the long-term service of Qwest and to create in such employees, consultants and
non-employee directors a more direct interest in the future success of Qwest by
relating incentive compensation to increases in stockholder value.
The Plan has been amended and restated several times. The most recent
amendment and restatement was effective as of October 4, 2000. This Prospectus
summarizes the principal terms of the Plan. Because this Prospectus is only a
summary, it does not describe every detailed provision in the Plan document. If
there is any conflict between the Plan document and this Prospectus, the Plan
document will always control. A holder of an award granted under the Plan who
has a question about any Plan provision should refer to the Plan document.
The Plan permits the grant of non-qualified stock options, incentive
stock options, stock appreciation rights, restricted stock, stock units, stock
bonuses and other stock grants to selected employees (including employees who
are members of the Company's board of directors (the "Board")) of the Company
and affiliated companies, selected consultants to the Company and affiliated
companies and selected members of the Board who are not employees of the Company
or an affiliated company ("non-employee directors"). The maximum number of
shares of the Company's common stock ("Common Stock") that may be subject to
awards under the Plan at any time is equal to 10% of the total number of shares
that are issued and outstanding at such time (determined as of the close of
trading on the New York Stock Exchange on the trading day immediately preceding
such time), reduced by the number of shares subject to outstanding awards
granted under the Plan and outstanding options granted under any Plan or
arrangement of the Company or a subsidiary of the Company (excluding the
Company's Employee Stock Purchase Plan) at such time. The maximum number of
shares as to which incentive stock options may be granted is 75 million. The
number of shares is subject to adjustment on account of stock splits, stock
dividends and other changes in the Common Stock. Shares of Common Stock covered
by unexercised non-qualified or incentive stock options that expire, terminate
or are canceled, together with shares of Common Stock that are forfeited
pursuant to a restricted stock grant or any other award (other than an option)
under the Plan or that are used to pay withholding taxes or the option exercise
price, will again be available for grant under the Plan.
Participation. The Plan provides that awards may be made to eligible
employees and consultants who are responsible for the Company's growth and
profitability. The Plan also provides that non-qualified options may be granted
from time to time to non-employee directors. The Company currently considers all
A-1
of its employees, consultants and non-employee directors to be eligible for
grant of awards under the Plan. As of October 26, 2001, there are approximately
64,000 eligible employees.
Administration. The Plan is ordinarily administered by a subcommittee
of the Company's Compensation Committee (the "Committee"), which operates under
the authority of and serves at the permission of the Board. The Board may change
the specific members of the Board who serve on the Committee at will. The
Committee must be structured at all times so that it satisfies the "non-employee
director" requirement of Rule 16b-3 under the Securities Exchange Act of 1934
(the "Exchange Act"). To the extent practicable, the Company intends to satisfy
the similar requirement for administration by "outside" directors under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), with
respect to grants to employees whose compensation is subject to Section 162(m)
of the Code. The Committee has the sole discretion to determine the employees,
consultants and non-employee directors to whom awards may be granted under the
Plan, the manner in which such awards will vest, and all other terms and
conditions of the awards. The Committee may, however, delegate to specific
officers of Qwest the power and authority to grant awards under the Plan to
specific groups of employees and consultants and may condition or restrict such
delegated power and authority as the Committee determines in its sole
discretion. The Committee has delegated the power and authority to the Company's
Chairman and Chief Executive Officer to grant awards to employees and
consultants who are not subject to Section 16(b) of the Exchange Act. The
Committee determines grants to non-employee directors. The Committee or its
delegee may grant awards under the Plan to employees, consultants and
non-employee directors in such numbers and at such times during the term of the
Plan as the Committee shall determine, except that the maximum number of shares
subject to one or more options or stock appreciation rights granted during any
calendar year to any employee, consultant or non-employee director is 40,000,000
shares of Common Stock, and except that incentive options may be granted only to
employees. In granting options, stock appreciation rights, restricted stock and
stock units, the Committee will take into account such factors as it may deem
relevant in order to accomplish the Plan's purposes, including one or more of
the following: the extent to which performance goals have been met, the duties
of the respective employees, consultants and non-employee directors and their
present and potential contributions to the Company's success. The Board may
assume or change the administration of the Plan from time to time.
Exercise of Options. The Committee or its delegee determines the
exercise price for each option; however, incentive stock options must have an
exercise price that is at least equal to the fair market value of the Common
Stock on the date the incentive stock option is granted (and at least equal to
110% of fair market value in the case of an incentive stock option granted to an
employee who owns Common Stock having more than 10% of the combined voting power
of all classes of the Company's stock). An option holder may exercise an option
by written notice and payment of the exercise price (i) in cash or certified
funds, (ii) by the surrender of a number of shares of Common Stock already owned
by the option holder for at least six months with a fair market value equal to
the exercise price, or (iii) through a broker's transaction by directing the
broker to sell all or a portion of the Common Stock to pay the exercise price or
make a loan to the option holder to permit the option holder to pay the exercise
price. The Company may permit option holders who are subject to the withholding
of federal and state income tax as a result of exercising an option to satisfy
the income tax withholding obligation through the withholding of a portion of
the Common Stock to be received upon exercise of the option.
Non Transferability of Options and Other Awards. Except as provided
otherwise by the Committee or its delegee at the time of grant or thereafter,
options, stock appreciation rights, stock units and restricted stock awards
granted under the Plan are not transferable other than by will or by the laws of
descent and distribution.
Effect of a Termination of Services on Options and Other Awards. Except
as provided otherwise by the Committee or its delegatee at the time that an
Option is granted, an option typically will terminate, to the extent that it is
not exercisable upon or prior to a termination of service with the Company. The
Plan, and agreements under it, however, also provide that even if it is
exercisable, the Option will terminate if a termination is by the Company for
cause (as defined) or will terminate within limited post-termination exercise
periods that differ depending on whether a termination of service resulted from
A-2
an option holder's death, Disability, or termination by the Company for any
reason other than for cause, Disability or death, subject in all cases to
earlier expiration at the end of the Option period.
Stock Appreciation Rights held by participants upon a termination of
service typically are exercisable within the same time periods as, and upon the
same conditions with respect to reasons for a termination of services, as are
specified for options.
With respect to Restricted Stock Awards, the Plan generally provides
that upon a participant's death, Disability or retirement in accordance with the
Company's established retirement policy, all required periods of service and
other restrictions applicable to Restricted Stock Awards held by the participant
will lapse with respect to a pro rata part of each Award held by the participant
based on the ratio between the number of full months of employment or continued
service completed at the time of termination of service from the grant of each
Award to the total number of months of employment or continued service required
for the Award to be non forfeitable. The remaining portion will be forfeited and
the shares subject to the forfeiture must be immediately returned to Qwest. If a
participant's service terminates for any other reason, the Restricted Stock
Award, to the extent that it has not become non-forfeitable, will be forfeited,
and the shares subject to the forfeiture must be immediately returned to Qwest.
You should refer to your own award agreement for the specific
consequences of a termination of your services.
Forfeiture of Option in Other Circumstances. The option agreements
under the Plan generally provide that if a grantee competes with the Company or
otherwise harms the interests of the Company (including, for example but without
limitation, engaging in criminal conduct, violating the Company's policies, or
disclosing or misusing confidential information), the Option will terminate.
Refer to your own award agreement for the specific provisions applicable to
your Option.
Change in Control. Options and other awards granted under the Plan may
vest upon or, in connection with a termination of employment, after a "change in
control" of the Company depending on the terms of the option or other award
described in the agreement or other instrument documenting the option or other
award or the resolutions of the Committee or its delegee that grant the option
or other award. A "change in control" occurs if either
(i) any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than Anschutz
Company, The Anschutz Corporation, any entity or organization
controlled by Philip F. Anschutz (collectively, the "Anschutz
Entities") or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
fifty percent (50%) or more of either (A) the then-outstanding shares
of Stock ("Outstanding Shares") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Voting Power") or
(ii) at any time during any period of three consecutive
years (not including any period prior to June 23, 1997), individuals
who at the beginning of such period constitute the Board (and any new
director whose election by the Board or whose nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority thereof.
Merger and Reorganization. Except as provided otherwise by the
Committee or its delegee at the time an award is granted, upon the occurrence of
(i) the reorganization (other than a bankruptcy reorganization), merger or
consolidation of the Company (other than a reorganization, merger or
consolidation in which the Company is the continuing company and that does not
result in any reclassification or change in the outstanding shares of Common
A-3
Stock), (ii) the sale of all or substantially all of the assets of the Company
(other than a sale in which the Company continues as a holding company of an
entity that conducts the business formerly conducted by the Company), or (iii)
the dissolution or liquidation of the Company, the Plan and all outstanding
options will terminate automatically when the event occurs if the Company gives
the option holders 30 days' prior written notice of the event. Notice will also
be given to holders of other awards. Notice is not required for a merger or
consolidation or for a sale of the Company if the Company, the successor, or the
purchaser makes adequate provision for the assumption of the outstanding options
and awards or the substitution of new options and awards on terms comparable to
the outstanding options and awards. When the notice is given, all outstanding
options fully vest and can be exercised prior to the event and other awards
become exercisable and payable.
Amendment and Termination. The Board may amend the Plan in any respect
at any time provided stockholder approval is obtained when necessary or when the
Board concludes it to be desirable, but no amendment can impair any option,
stock appreciation right, award or unit previously granted or deprive an option
holder, without his or her consent, of any Common Stock previously acquired. The
Plan will terminate in 2007 unless sooner terminated by the Board. Plan
termination will not affect then outstanding options or other awards Plan
termination will not affect then outstanding options or other awards.
ERISA AND FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the Plan for a typical grantee is only a summary and does not
cover, among other things, foreign, state, or local tax consequences or estate
and gift tax consequences of participation in the Plan. Differences in grantees'
financial situations may cause the tax consequences of participation in the Plan
to vary. Therefore, each grantee is urged to consult his or her own legal
counsel, accountant, or other tax advisor regarding the tax consequences of
participation in the Plan to him or her.
Grant and Exercise of Nonqualified Options. A grantee will not
recognize any compensation upon the grant of a nonqualified option. Upon
exercise of the nonqualified option, the amount by which the fair market value
of the shares at the time of exercise exceeds the exercise price must be treated
as compensation received by the grantee. If, however, the sale of the Common
Stock at a profit would subject the grantee to liability under Section 16(b) of
the Exchange Act ("Section 16(b)"), the grantee will recognize compensation
equal to the excess of (i) the fair market value of the Common Stock on the
earlier of the date that is six months after the date of exercise or the date
the grantee can sell the Common Stock without Section 16(b) liability over (ii)
the exercise price. The grantee can make an election under section 83(b) of the
Code to measure the compensation as of the date the non-qualified option is
exercised. See "Exercise of Options With Stock" below for the consequences of
using previously acquired stock to exercise a nonqualified option.
Grantees must make appropriate arrangements with the Company to pay the
applicable federal, state, or local tax withholding resulting from the receipt
of compensation. The Company will be entitled to a deduction, in an amount equal
to the compensation recognized by the grantee, for the Company's taxable year
that ends with or within the taxable year in which the grantee recognizes
compensation, if and to the extent such amount is an ordinary and necessary
business expense, satisfies the test of reasonable compensation, and satisfies
the requirements of Code section 162(m) described below.
The grantee's basis for the Stock will be equal to the sum of (1) the
exercise price of the shares and (2) the compensation includable in income with
respect to the exercise of such Option, if any. The holding period will begin on
the day after the day the Option is exercised.
Grant and Exercise of Incentive Options. A grantee will not recognize
any income upon the grant or exercise of an incentive option, nor will the
Company be allowed a corresponding deduction. See, "Exercise Of Options With
Stock" below for the consequences of using previously acquired stock to exercise
an incentive option. See, "Alternative Minimum Tax" below for the application of
the alternative minimum tax to the exercise of an incentive option.
A-4
If the grantee holds the shares for at least two years after the
incentive option was granted and at least one year after the incentive option
was exercised (the "Incentive Option Holding Period"), any gain or loss upon a
taxable disposition of the shares will be long-term capital gain or loss. The
grantee's basis, for purposes of determining gain or loss, is equal to the
exercise price.
If the grantee disposes of any shares before the end of the Incentive
Option Holding Period, the disposition will be treated as a "disqualifying
disposition." If the grantee makes a disqualifying disposition of any shares,
the value of the Common Stock on the date the incentive option was exercised
over the exercise price, limited to the amount received upon the disposition,
will be treated as ordinary income rather than as capital gain. Any gain in
excess of the value of the Common Stock on the date the incentive option was
exercised over the exercise price will be treated as long-term or short-term
capital gain, depending on how long the Common Stock was held. If the grantee
receives less than the exercise price, the loss will be a short-term or
long-term capital loss, depending on how long the Common Stock was held.
Upon a disqualifying disposition, the Company will be allowed a
deduction in an amount equal to the ordinary income recognized by the grantee,
provided that such amount is an ordinary and necessary business expense, meets
the reasonable compensation test, and satisfies the requirements of Code section
162(m) as described below.
Exercise of Options With Stock. Nonqualified Options. If a grantee
exercises a nonqualified option by paying the exercise price with shares of
Common Stock, the grantee will be treated as having made a nontaxable exchange
of the number of shares surrendered for an equal number of shares received (the
"Exchange Stock"). The basis and holding period of the Exchange Stock received
will be the same as the basis and holding period of the Common Stock
surrendered.
All shares received in excess of the Exchange Stock (the "Excess
Stock") are treated as compensation to the grantee, and the Company will have a
corresponding deduction to the extent the amount is an ordinary and necessary
business expense, satisfies the test of reasonable compensation, and satisfies
the requirements of Code section 162(m) described below. In general, the amount
of compensation is equal to the fair market value of the Excess Stock on the
date the nonqualified option is exercised. However, a grantee who is subject to
Section 16(b) should refer to the first paragraph of "Grant and Exercise of
Non-Qualified Options" for the effect of Section 16(b). The grantee must make
appropriate arrangements with the Company to pay the applicable federal, state,
or local tax withholding resulting from the receipt of compensation. The Excess
Stock has a basis equal to the compensation included in income with respect to
the acquisition of such Excess Stock and a holding period that begins on the day
after the date the nonqualified option is exercised.
For example, if a grantee exercises a nonqualified option by
surrendering 20 shares of Common Stock and receives 50 shares of Stock, 20 of
the 50 shares will be treated as Exchange Stock; the remaining 30 shares will be
treated as Excess Stock.
When shares of Common Stock acquired through the exercise of a
nonqualified option are disposed of, the shares constituting Excess Stock are
deemed to be the first disposed of; the next shares disposed of are the shares
of Exchange Stock having the lowest basis; the shares of Exchange Stock having
the highest basis are deemed to be the last shares disposed of.
Incentive Options. If a grantee exercises an incentive option by paying
the exercise price with either (1) shares of Common Stock previously acquired
pursuant to an incentive option that have been held for all requisite holding
periods or (2) shares of Common Stock not acquired pursuant to an incentive
option, the grantee will be treated as having received Exchange Stock (the
number of shares received equal to the number of shares surrendered) and Excess
Stock (the remaining number of shares received). The Exchange Stock will have a
basis and holding period that are the same as the basis and holding period of
the Common Stock surrendered. The Excess Stock will have a basis of zero and its
holding period will begin on the day after the date the incentive option is
exercised. There will be no gain or loss on the transaction; however, the
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bargain element (the difference between the fair market value of the Common
Stock and the exercise price) will be treated as an item of adjustment as
described under "Alternative Minimum Tax" below. Moreover, both the Exchange
Stock and the Excess Stock must be held for the Incentive Option Holding Period
to avoid a disqualifying disposition.
If a grantee exercises an incentive option by paying the exercise price
with shares of Common Stock previously acquired pursuant to an incentive option
that have not been held for the Incentive Option Holding Period, the grantee
will have made a disqualifying disposition of the Common Stock surrendered. The
grantee will be treated as having first disposed of the shares with the lowest
basis. The grantee will have compensation equal to the difference between the
fair market value of the Stock (on the date the previous incentive option was
exercised) and the amount paid for the Common Stock. The Exchange Stock received
will have a basis equal to the basis of the Common Stock surrendered (increased
by the amount of compensation recognized by the grantee) and a holding period
that will be the same as the holding period of the Common Stock surrendered. The
Excess Stock will have a basis of zero and its holding period will begin on the
day after the day the incentive option is exercised. Other than the recognition
of income as a result of the disqualifying disposition, there will be no gain or
loss; however, the difference between the fair market value of the Common Stock
and the exercise price will be treated as an item of adjustment as described
under "Alternative Minimum Tax" below. The Exchange Stock and Excess Stock
received must be held for the Incentive Option Holding Period to avoid a
disqualifying disposition of the Exchange Stock and Excess Stock received.
When shares of Common Stock acquired through the exercise of an
incentive option with Common Stock are disposed of, the shares constituting
Excess Stock are deemed to be the first disposed of; the next shares disposed of
are the shares of Exchange Stock having the lowest basis; the shares of Exchange
Stock having the highest basis are deemed to be the last shares disposed of.
The rules regarding the exercise of incentive options with previously
acquired Common Stock are complex; moreover, they are set forth in proposed
Treasury Regulations, which are subject to change.
ANY GRANTEE WHO CONTEMPLATES EXERCISING AN OPTION BY PAYING THE EXERCISE PRICE
WITH PREVIOUSLY ACQUIRED STOCK IS STRONGLY URGED TO CONSULT WITH HIS/HER OWN TAX
ADVISOR PRIOR TO MAKING SUCH AN EXERCISE.
Restricted Stock. The federal income tax consequences of a grant of
Restricted Stock depend on whether the grantee elects, under Code section 83(b),
to be taxed at the date of grant of the shares.
If the section 83(b) election is not made, the grantee will not
recognize taxable income at the time of grant of the Restricted Stock. When the
restrictions on the shares lapse, if the Common Stock is then transferable or is
no longer subject to a substantial risk of forfeiture, the grantee will
recognize ordinary income in an amount equal to the fair market value of the
Restricted Stock at that time. If the shares are forfeited before the
restrictions lapse, the grantee will not recognize any income with respect to
the forfeited shares.
If the section 83(b) election is made, the grantee will recognize
ordinary income at the time of grant of the Restricted Stock in an amount equal
to the fair market value of the shares at that time, determined without regard
to any restrictions. If the shares are forfeited before the restrictions lapse,
the grantee will not be entitled to a deduction on account of the forfeiture.
A grantee is subject to withholding of applicable federal (and
generally, state and local) tax at the time he recognizes income as a result of
the grant of Restricted Stock or the lapse of the restrictions. Dividends
received by the grantee prior to that time are taxed as additional compensation,
not as dividend income.
The grantee's tax basis in the Restricted Stock is the amount
recognized as ordinary income with respect to the shares. The grantee's gain or
loss upon a subsequent taxable disposition of the shares is a capital gain or
loss if the grantee holds the shares as capital assets.
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The Company will be entitled to a deduction in the same amount as the
income recognized by the grantee from the grant of the Restricted Stock or the
lapse of restrictions for the Company's taxable year that ends with or within
the grantee's taxable year. The Company is also entitled to a deduction for any
dividends paid before the grantee recognizes income. The Company's deduction is
subject to the condition that such amounts are an ordinary and necessary
business expense, meet the reasonable compensation test, and satisfy the
requirements of Code section 162(m), as described below.
Stock Appreciation Rights. A grantee will not recognize any income on
the grant of a Stock Appreciation Right. Upon the exercise of the Stock
Appreciation Right, the grantee will recognize compensation and the Company will
be entitled to a tax deduction. The amount of the compensation and deduction
equals the fair market value of the Common Stock and cash acquired on the date
the Stock Appreciation Right is exercised. However, if the sale of any Common
Stock received upon exercise of a Stock Appreciation Right would subject the
grantee to liability under Section 16(b), the grantee will be taxed on the value
of the Stock on the earlier of (a) the date that is six months after the date
the Stock Appreciation Right was exercised or (b) the date the grantee could
sell the Stock at a profit without being subject to suit under Section 16(b).
The grantee may, however, make an election under Code section 83(b) to be taxed
at the time the Stock Appreciation Right is exercised.
Stock Units. In general, stock units are not subject to tax when they
are granted. When a grantee receives payment for a stock unit, the amount paid
is treated as compensation. The compensation is equal to the amount of cash paid
or, if the payment is made in shares of Common Stock, the fair market value of
the Common Stock on the date the Common Stock is distributed. However, if the
sale of any Common Stock received with respect to a stock unit would subject the
grantee to liability under Section 16(b), the grantee will be taxed on the value
of the Common Stock on the earlier of (a) the date that is six months after the
date the Common Stock is distributed, or (b) the date the grantee could sell the
Common Stock at a profit without being subject to suit under Section 16(b). The
grantee may, however, make an election under Code section 83(b) to be taxed at
the time the Common Stock is distributed.
The Company will be entitled to a deduction, in an amount equal to the
compensation recognized by the grantee, for the Company's taxable year that ends
with or within the taxable year in which the grantee recognizes compensation, if
and to the extent such amount is an ordinary and necessary business expense,
satisfies the test of reasonable compensation, and satisfies the requirements of
Code section 162(m) described below. The grantee's basis for the Common Stock
will be equal to the compensation recognized by the grantee with respect to the
Common Stock, and the grantee's holding period will begin just after the day as
of which the compensation with respect to the Common Stock is determined.
If the Common Stock distributed is subject to restrictions, the tax
consequences are the same as described in "Restricted Stock" above.
Stock Bonus. A grantee who receives a bonus of Common Stock that is not
subject to restrictions will recognize compensation, subject to applicable tax
withholding, equal to the fair market value of the Common Stock on the date it
is distributed less any amount paid for the Common Stock. However, if the sale
of any Common Stock received as a bonus would subject the grantee to liability
under Section 16(b), the grantee will be taxed on the value of the Common Stock
on the earlier of (a) the date that is six months after the date the Common
Stock was distributed or (b) the date the grantee could sell the Common Stock at
a profit without being subject to suit under Section 16(b). The grantee may,
however, make an election under Code section 83(b) to be taxed at the time the
Common Stock is distributed.
The Company will be entitled to a deduction, in an amount equal to the
compensation recognized by the grantee, for the Company's taxable year that ends
with or within the taxable year in which the grantee recognizes compensation, if
and to the extent such amount is an ordinary and necessary business expense,
satisfies the test of reasonable compensation, and satisfies the requirements of
Code section 162(m) described below. The grantee's basis for the Common Stock
will be equal to the amount paid for the Common Stock plus the compensation
A-7
recognized by the grantee with respect to the Common Stock, and the grantee's
holding period will begin just after the day as of which the compensation with
respect to the Common Stock is determined.
If the Common Stock distributed as a stock bonus is restricted, the tax
consequences are the same as described in "Restricted Stock" above.
Disposition of Stock. Upon a taxable disposition of shares of Common
Stock acquired under the Plan, any amount received by the grantee in excess of
his basis for the Common Stock will generally be treated as long- or short-term
capital gain, depending upon the holding period of the shares. If upon
disposition the grantee receives an amount that is less than his basis, the loss
will generally be treated as a long- or short-term capital loss, depending upon
the holding period of the shares.
Alternative Minimum Tax. The amount by which the fair market value of
Common Stock acquired upon exercise of an incentive option exceeds the exercise
price is an item of adjustment for purposes of the alternative minimum tax,
although if such Common Stock is disposed of in the same year in which the
incentive option is exercised, such amount will avoid characterization as an
item of adjustment. In the event of any long-term capital gain on sale or
exchange of shares of Common Stock acquired under the Plan, the amount of such
gain will be included in minimum taxable income. Computation of the alternative
minimum tax is complex and depends on the financial situation of each taxpayer.
Grantees are urged to consult their own tax advisors with respect to this
matter.
Change In Control. The value of the acceleration of vesting and payment
upon certain changes in control may be treated as an "excess parachute payment"
within the meaning of Code section 280G for certain grantees and such grantees
may be subject to an excise tax equal to 20% of the "excess parachute payment."
The Company would not be entitled to a deduction for any amount treated as an
"excess parachute payment."
Tax Code Limitations on Deductibility. Code section 162(m) limits the
deductibility, for federal income tax purposes, of compensation paid to certain
employees of the Company to $1 million with respect to any such employee during
any taxable year of the Company. However, certain exceptions apply to this
limitation, including exceptions for compensation paid because of the attainment
of certain performance goals. The Company will endeavor to comply with the
requirements of the Code with respect to the grant and payment of performance
based awards under the Plan so as to be eligible for the performance based
exception, but it may not be possible in all cases to satisfy the requirements
for the exception and the Company may, in its sole discretion, determine that in
one or more cases it is in the Company's best interests not to satisfy the
requirements of the Code for the exception.
"ERISA" Provisions. The Plan is not subject to any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and is not
a "qualified" plan as defined in Code section 401(a). The information contained
in this Section, ERISA AND FEDERAL INCOME TAX CONSEQUENCES, is based on existing
law, which is subject to change.
Accounting Treatment. The accounting treatment for options is different
from the federal income tax treatment for the Company. Generally, the grant of
an option does not affect net income so long as the option price is equal to or
greater than the market value on the date of grant. Options granted at a price
less than the market value on the date of grant are deemed to be compensatory
and the amount of the discount is deducted from net income of the Company during
the vesting period of the option.
Participants in the Plan may obtain information about the Plan and the
administrators of the Plan by writing to the Company at 1801 California Street,
Suite 5200, Denver, Colorado or calling (303) 992-1400.
A-8
SALE OF STOCK
Affiliates of the Company (persons who, directly or indirectly through
one or more intermediaries, control, are controlled by, or are under common
control with the Company) are restricted in the resale of Common Stock by the
provisions of Rule 144 promulgated under the Securities Act of 1933.
Restrictions include a limitation on the amount of Common Stock which may be
resold in any three-month period, a limitation on the manner of sale and an
obligation to file a notice with the Securities and Exchange Commission. An
affiliate may also sell Common Stock pursuant to a separate, current
registration statement.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Securities and Exchange
Commission are incorporated by reference into this Prospectus:
(1) The Company's annual report on Form 10-K for year ended
December 31, 2000 (as amended by the Company's Annual Report on Form 10-K/A
filed on August 20, 2001).
(2) The Company's quarterly reports on Form 10-Q for the quarters
ended March 31, 2001 and June 30, 2001.
(3) The Company's current reports on Form 8-K filed on March 22,
2001, March 29, 2001, April 5, 2001, April 25, 2001, April 27, 2001, May 17,
2001, June 5, 2001 (as amended by our Current Report on Form 8/K-A filed with
the SEC on June 5, 2001), June 8, 2001, June 20, 2001, June 21, 2001, July 20,
2001, July 26, 2001 (as amended by our Current Report on Form 8/K-A filed with
the SEC on July 26, 2001), August 7, 2001 (as amended by our Current Report on
Form 8/K-A filed with the SEC on August 13, 2001), September 10, 2001 and
October 31, 2001.
(4) The description of Common Stock of the Company is incorporated
by reference to the Company's registration statement filed with the Commission
on Form S-4/A (Registration No. 333-49915) filed under the Securities Act of
1993 on May 13, 1998.
(5) All documents filed by Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus (but
before the Company files a post-effective amendment indicating that all
securities offered by this Prospectus have been sold or that Company has
de-registered all securities remaining unsold) will be deemed to be incorporated
by reference into this Prospectus (and such documents will be a part of this
Prospectus) from the date that such documents are filed with the Securities and
Exchange Commission. These documents generally include the Company's annual,
quarterly, and current financial and other reports filed with the Securities and
Exchange Commission.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner of the Company's securities, to whom this
Prospectus is delivered, upon oral or written request of such person, a copy of
any and all information incorporated by reference in this Prospectus, an annual
report to stockholders of the Company and copies of all reports, proxy
statements and other communications delivered to its security holders generally,
except exhibits to such information which is incorporated by reference (unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Such requests may be made by contacting:
ROBIN R. SZILEGA
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
QWEST COMMUNICATIONS INTERNATIONAL INC.
1801 CALIFORNIA STREET, SUITE 5200
DENVER, COLORADO 80202
(303) 992-1400
A-9
ATTACHMENT B
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT A
(Form of Agreement to be used for New Options
that correspond to Eligible Options that were granted before February 1, 2000.)
-------------------------------------------------------------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
This Option Agreement (the "Agreement") is made as of the _____ day of June,
2002, between Qwest Communications International Inc., a Delaware Corporation
(the "Company"), and (the "Optionee").
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan, the Company desires to afford the Optionee the opportunity to
purchase shares of Common Stock, par value $.01 per share (the "Common Shares"),
of the Company.
NOW, THEREFORE, in connection with the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the meanings
given thereto in the Plan. The terms and provisions of the Plan (including but
not limited to Section 7.2 of the Plan) are incorporated herein by reference. In
the event of a conflict or inconsistency between the terms and provisions of the
Plan and the terms and provisions of this Agreement, the terms and provisions of
the Plan shall govern and control.
2. GRANT OF OPTIONS.
The Company hereby grants to the Optionee the right and option (the "Option" or
"Options") to purchase up to, but not exceeding the aggregate, Common Shares,
subject to adjustment under Article IV of the Plan, on the terms and conditions
herein set forth.
3. PURCHASE PRICE.
The purchase price of each Common Share covered by the Option shall be $_____
(the "Purchase Price"), subject to adjustment under Article IV of the Plan.
4. TERM OF OPTIONS.
The term of the Option shall be ten (10) years from the date hereof, subject to
earlier termination as provided in Sections 6 and 8 hereof and in the Plan.
5. VESTING OF OPTIONS.
The Option, subject to the terms, conditions and limitations contained herein,
shall vest and become exercisable with respect to the Common Shares in
installments of 25% one year from the date hereof and in additional installments
of 25% on each subsequent anniversary thereafter; provided that, with respect to
each such installment, the Optionee has remained in continuous employment with
the Company from the date hereof through the date such installment is designated
to vest.
Notwithstanding the vesting schedule set forth in the Plan and this Agreement
governing the terms of the Options, the Options will vest and become immediately
exercisable upon the occurrence of a Change in Control, or in the event of the
Optionee's death or Disability.
B-1
6. TERMINATION OF EMPLOYMENT.
(a) Except as set forth in the Plan, in the event the Optionee's
employment with the Company is terminated for reasons other
than due to death, disability, or cause, the Option shall
remain exercisable for a period of up to three months after
cessation of employment, to the extent exercisable at the time
of cessation of employment. In the event the Optionee's
employment with the Company terminates by reason of death or
disability, the Option shall remain exercisable for a period
of up to twenty-four (24) months after cessation of
employment, to the extent exercisable at the time of cessation
of employment. In the event the Optionee's employment with the
Company is terminated by the Company for cause, the Option
shall immediately lapse as of the date of such termination
whether or not exercisable on such date. Upon any cessation of
the Optionee's employment with the Company, the Option shall
lapse as to any Common Shares for which it has yet to become
exercisable as of the date of cessation of employment.
(b) The word "Company" as used in this Section 6 and 7 shall
include the Company and any Affiliated Corporation of the
Company.
(c) For purposes of this Agreement, "cause" shall mean willful
misconduct, a willful failure to perform the Optionee's
duties, insubordination, theft, dishonesty, conviction of a
felony or any other willful conduct that is materially
detrimental to the Company or such other cause as the Board of
Directors of the Company in good faith reasonably determines
provides cause for the discharge of the Optionee.
7. FORFEITURE OF OPTION.
Notwithstanding any other provision of this Agreement, if the Optionee engages
in any activity in competition with any activity of the Company, or otherwise
contrary or harmful to the interests of the Company, including but not limited
to (i) conduct related to the Optionee's employment for which either criminal or
civil penalties against the Optionee may be sought, (ii) violation of Company
policies, including without limitation, the Company's insider trading policy,
(iii) accepting employment with or serving as a consultant, or advisor or in any
other capacity to an employer that is in competition with or acting against the
interests of the Company, including employing or recruiting any present, former
or future employee of the Company, (iv) disclosing or misusing any confidential
information or material concerning the Company, or (v) participating in a
hostile takeover attempt, then this Option shall become void, shall be forfeited
and shall terminate effective the date on which the Optionee enters into such
activity, unless the Option was terminated sooner by operation of another term
or condition of this Agreement or the Plan.
8. TRANSFERABILITY OF OPTION.
Except to the extent permitted by the Committee in accordance with the
provisions of the Plan, the Optionee may not voluntarily or involuntarily
pledge, hypothecate, assign, sell or otherwise transfer the Option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime, the Option shall be exercisable only by the Optionee.
9. NO RIGHTS AS A SHAREHOLDER.
The Optionee shall have no rights as a shareholder with respect to any Common
Shares until the date of issuance to the Optionee of a certificate evidencing
such Common Shares. No adjustments, other than as provided in Article IV of the
Plan, shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions for which the record date is
prior to the date the certificate for such Common Shares is issued.
B-2
10. REGISTRATION: GOVERNMENTAL APPROVAL.
The Option granted hereunder is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration, or
qualifications of Common Shares issuable upon exercise of the Option is required
by any securities exchange or under any state or Federal law, rule or
regulation, or the consent or approval of any governmental regulatory body or
other person is necessary or desirable as a condition of, or in connection with,
the issuance of Common Shares, no Common Shares shall be issued, in whole or in
part, unless such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions or with such conditions as are
acceptable to the Committee.
11. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice to the Company, Attention: Manager, Stock
Administration. Such notice shall state the election to exercise the Option and
the number of Common Shares in respect of which the Option is being exercised,
shall be signed by the person or persons so exercising the Option and shall be
accompanied by payment in full of the Purchase Price for such Common shares.
Payment of such Purchase Price shall be made in United States dollars by
certified check or bank cashier's check payable to the order of the Company or
by wire transfer to such account as may be specified by the Company for this
purpose. Subject to such procedures and rules as may be adopted from time to
time by the Committee, the Optionee may also pay such Purchase Price by (i)
tendering to the Company Common Shares with an aggregate Fair Market Value on
the date of exercise equal to such Purchase Price provided that such Common
Shares must have been held by the Optionee for more than six (6) months, (ii)
delivery to the Company of a copy of irrevocable instructions to a stockbroker
to sell Common Shares or to authorize a loan from the stockbroker to the
Optionee and to deliver promptly to the Company an amount sufficient to pay such
Purchase Price, or (iii) any combination of the methods of payment described in
clauses (i) and (ii) and in the preceding sentence. The certificate for Common
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option. All Common Shares
purchased upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
12. INCOME TAX WITHHOLDING.
The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all federal, state, local and
other taxes required by law to be withheld with respect to the exercise of the
Option and the issuance of the Common Shares, including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, or requiring the Optionee, or the
beneficiary or legal representative of the Optionee, to pay to the Company the
amount required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations.
13. NON-QUALIFIED STOCK OPTION.
The Option granted hereunder is not intended to be an "incentive stock option"
within the meaning of Section 422 of the Code.
14. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
15. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws of
the State of Delaware.
B-3
16. HEADINGS.
Headings are for the convenience of the parties and are not deemed to be part of
this Agreement.
17. EXECUTION.
This Agreement is voidable by the Company if the Optionee does not execute the
Agreement within 30 days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: _____________________________________
OPTIONEE:
_________________________________________
B-4
ATTACHMENT C
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT B
(Form of Agreement to be used for New Options that correspond
to Eligible Options that were granted on or after February 1, 2000
but before June 30, 2000.)
--------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
This Option Agreement (the "Agreement") is made as of the _____ day of June,
2002, between Qwest Communications International Inc., a Delaware Corporation
(the "Company"), and (the "Optionee").
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan, the Company desires to afford the Optionee the opportunity to
purchase shares of Common Stock, par value $.01 per share (the "Common Shares"),
of the Company.
NOW, THEREFORE, in connection with the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the meanings
given thereto in the Plan. The terms and provisions of the Plan (including but
not limited to Section 7.2 of the Plan) are incorporated herein by reference. In
the event of a conflict or inconsistency between the terms and provisions of the
Plan and the terms and provisions of this Agreement, the terms and provisions of
the Plan shall govern and control.
2. GRANT OF OPTIONS.
The Company hereby grants to the Optionee the right and option (the "Option" or
"Options") to purchase up to, but not exceeding in the aggregate, ___________
Common Shares, subject to adjustment under Article IV of the Plan, on the terms
and conditions herein set forth.
3. PURCHASE PRICE.
The purchase price of each Common Share covered by the Option shall be $_____
(the "Purchase Price"), subject to adjustment under Article IV of the Plan.
4. TERM OF OPTIONS.
The term of the Option shall be ten (10) years from the date hereof, subject to
earlier termination as provided in Sections 6 and 8 hereof and in the Plan.
5. VESTING OF OPTIONS.
The Option, subject to the terms, conditions and limitations contained herein,
shall vest and become exercisable with respect to the Common Shares in
installments of 25% one year from the date hereof and in additional installments
of 25% on each subsequent anniversary thereafter; provided that, with respect to
each such installment, the Optionee has remained in continuous employment with
the Company from the date hereof through the date such installment is designated
to vest.
Notwithstanding the vesting schedule set forth above, the Options will vest and
become immediately exercisable in the event of the Optionee's death or
Disability and under the circumstances described in Section 7 below.
C-1
6. TERMINATION OF EMPLOYMENT.
(a) Except as set forth in the Plan, in the event the Optionee's
employment with the Company is terminated for reasons other
than due to death, Disability, or cause, the Option shall
remain exercisable for a period of up to three months after
cessation of employment, to the extent exercisable at the time
of cessation of employment. In the event the Optionee's
employment with the Company terminates by reason of death or
Disability, the Option shall remain exercisable for a period
of up to twenty-four (24) months after cessation of
employment, to the extent exercisable at the time of cessation
of employment. In the event the Optionee's employment with the
Company is terminated by the Company for cause, the Option
shall immediately lapse as of the date of such termination
whether or not exercisable on such date. Upon any cessation of
the Optionee's employment with the Company, the Option shall
lapse as to any Common Shares for which it has yet to become
exercisable as of the date of cessation of employment.
(b) For purposes of this Agreement, "cause" shall mean willful
misconduct, a willful failure to perform the Optionee's
duties, insubordination, theft, dishonesty, conviction of a
felony or any other willful conduct that is materially
detrimental to the Company or such other cause as the Board of
Directors of the Company in good faith reasonably determines
provides cause for the discharge of the Optionee.
7. CHANGE OF CONTROL
(a) For purposes of this Agreement, "change in control" shall have
the meaning set forth in the Plan.
(b) In the event there is both a change in control and subsequent
termination of the Optionee's employment with the Company (i)
by the Company for reasons other than cause or (ii) by the
Optionee because of a material diminution of his duties and
responsibilities, in each case following a change in control,
the Option shall vest in full and become immediately
exercisable on the date of such termination, and shall remain
vested and exercisable during the remaining term thereof.
8. FORFEITURE OF OPTION.
Notwithstanding any other provision of this Agreement, if the Optionee engages
in any activity in competition with any activity of the Company, or otherwise
contrary or harmful to the interests of the Company, including but not limited
to (i) conduct related to the Optionee's employment for which either criminal or
civil penalties against the Optionee may be sought, (ii) violation of Company
policies, including without limitation, the Company's insider trading policy,
(iii) accepting employment with or serving as a consultant, or advisor or in any
other capacity to an employer that is in competition with or acting against the
interests of the Company, including employing or recruiting any present, former
or future employee of the Company, (iv) disclosing or misusing any confidential
information or material concerning the Company, or (v) participating in a
hostile takeover attempt, then this Option shall become void, shall be forfeited
and shall terminate effective the date on which the Optionee enters into such
activity, unless the Option was terminated sooner by operation of another term
or condition of this Agreement or the Plan.
9. TRANSFERABILITY OF OPTION.
Except to the extent permitted by the Committee in accordance with the
provisions of the Plan, the Optionee may not voluntarily or involuntarily
pledge, hypothecate, assign, sell or otherwise transfer the Option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime, the Option shall be exercisable only by the Optionee.
C-2
10. NO RIGHTS AS A SHAREHOLDER.
The Optionee shall have no rights as a shareholder with respect to any Common
Shares until the date of issuance to the Optionee of a certificate evidencing
such Common Shares. No adjustments, other than as provided in Article IV of the
Plan, shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions for which the record date is
prior to the date the certificate for such Common Shares is issued.
11. REGISTRATION: GOVERNMENTAL APPROVAL.
The Option granted hereunder is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration, or
qualifications of Common Shares issuable upon exercise of the Option is required
by any securities exchange or under any state or Federal law, rule or
regulation, or the consent or approval of any governmental regulatory body or
other person is necessary or desirable as a condition of, or in connection with,
the issuance of Common Shares, no Common Shares shall be issued, in whole or in
part, unless such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions or with such conditions as are
acceptable to the Committee.
12. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice to the Company, Attention: Manager, Stock
Administration. Such notice shall state the election to exercise the Option and
the number of Common Shares in respect of which the Option is being exercised,
shall be signed by the person or persons so exercising the Option and shall be
accompanied by payment in full of the Purchase Price for such Common shares.
Payment of such Purchase Price shall be made in United States dollars by
certified check or bank cashier's check payable to the order of the Company or
by wire transfer to such account as may be specified by the Company for this
purpose. Subject to such procedures and rules as may be adopted from time to
time by the Committee, the Optionee may also pay such Purchase Price by (i)
tendering to the Company Common Shares with an aggregate Fair Market Value on
the date of exercise equal to such Purchase Price provided that such Common
Shares must have been held by the Optionee for more than six (6) months, (ii)
delivery to the Company of a copy of irrevocable instructions to a stockbroker
to sell Common Shares or to authorize a loan from the stockbroker to the
Optionee and to deliver promptly to the Company an amount sufficient to pay such
Purchase Price, or (iii) any combination of the methods of payment described in
clauses (i) and (ii) and in the preceding sentence. The certificate for Common
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option. All Common Shares
purchased upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
13. INCOME TAX WITHHOLDING.
The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all federal, state, local and
other taxes required by law to be withheld with respect to the exercise of the
Option and the issuance of the Common Shares, including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, or requiring the Optionee, or the
beneficiary or legal representative of the Optionee, to pay to the Company the
amount required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations.
14. NON-QUALIFIED STOCK OPTION.
The Option granted hereunder is not intended to be an "incentive stock option"
within the meaning of Section 422 of the Code.
C-3
15. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
16. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws of
the State of Delaware.
17. HEADINGS.
Headings are for the convenience of the parties and are not deemed to be part of
this Agreement.
18. EXECUTION.
This Agreement is voidable by the Company if the Optionee does not execute the
Agreement within 30 days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: _____________________________________
OPTIONEE:
_________________________________________
C-4
ATTACHMENT D
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT C
(Form of Agreement to be used for New Options that correspond to
Eligible Options that were granted on or after June 30, 2000
or to Recent Options.)
----------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
This Option Agreement (the "Agreement") is made as of the _____ day of June,
2002, between Qwest Communications International Inc., a Delaware Corporation
(the "Company"), and (the "Optionee").
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan, the Company desires to afford the Optionee the opportunity to
purchase shares of Common Stock, par value $.01 per share (the "Common Shares"),
of the Company.
NOW, THEREFORE, in connection with the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the meanings
given thereto in the Plan. The terms and provisions of the Plan are incorporated
herein by reference. In the event of a conflict or inconsistency between the
terms and provisions of the Plan and the terms and provisions of this Agreement,
the terms and provisions of the Plan shall govern and control.
2. GRANT OF OPTIONS.
The Company hereby grants to the Optionee the right and option (the "Option" or
"Options") to purchase up to, but not exceeding in the aggregate, ___________
Common Shares, on the terms and conditions herein set forth.
3. PURCHASE PRICE.
The purchase price of each Common Share covered by the Option shall be $_____
(the "Purchase Price").
4. TERM OF OPTIONS.
The term of the Option shall be ten (10) years from the date hereof, subject to
earlier termination as provided in Sections 6 and 8 hereof.
5. VESTING OF OPTIONS.
The Option, subject to the terms, conditions and limitations contained herein,
shall vest and become exercisable with respect to the Common Shares in
installments of 20% one year from the date hereof and in additional installments
of 20% on each subsequent anniversary thereafter; provided that, with respect to
each such installment, the Optionee has remained in continuous employment with
the Company from the date hereof through the date such installment is designated
to vest.
D-1
Notwithstanding the vesting schedule set forth above, the Options will vest and
become immediately exercisable in the event of the Optionee's death or
Disability and under the circumstances described in Section 7 below.
Notwithstanding anything to the contrary in any other agreement, plan or other
document, the Optionee agrees that no provision in any severance, separation,
change of control, retention, employment or other plan or agreement between the
Optionee and any of U S WEST, Inc. and its subsidiaries or of which the Optionee
was a beneficiary shall affect the terms of the Option granted hereunder.
6. TERMINATION OF EMPLOYMENT.
(a) Except as set forth in the Plan, in the event the Optionee's
employment with the Company is terminated for reasons other
than due to death, Disability, or cause, the Option shall
remain exercisable for a period of up to three months after
cessation of employment, to the extent exercisable at the time
of cessation of employment. In the event the Optionee's
employment with the Company terminates by reason of death or
Disability, the Option shall remain exercisable for a period
of up to twenty-four (24) months after cessation of
employment, to the extent exercisable at the time of cessation
of employment. In the event the Optionee's employment with the
Company is terminated by the Company for cause, the Option
shall immediately lapse as of the date of such termination
whether or not exercisable on such date. Upon any cessation of
the Optionee's employment with the Company, the Option shall
lapse as to any Common Shares for which it has yet to become
exercisable as of the date of cessation of employment.
(b) For purposes of this Agreement, "cause" shall mean willful
misconduct, a willful failure to perform the Optionee's
duties, insubordination, theft, dishonesty, conviction of a
felony or any other willful conduct that is materially
detrimental to the Company or such other cause as the Board of
Directors of the Company in good faith reasonably determines
provides cause for the discharge of the Optionee.
7. CHANGE OF CONTROL
(a) For purposes of this Agreement, "change in control" shall have
the meaning set forth in the Plan.
(b) In the event there is both a change in control and subsequent
termination by the Company of the Optionee's employment with
the Company for reasons other than cause, the Option shall
vest in full and become immediately exercisable on the date of
such termination, and shall remain vested and exercisable
during the remaining term thereof.
8. FORFEITURE OF OPTION.
Notwithstanding any other provision of this Agreement, if the Optionee engages
in any activity in competition with any activity of the Company, or otherwise
contrary or harmful to the interests of the Company, including but not limited
to (i) conduct related to the Optionee's employment for which either criminal or
civil penalties against the Optionee may be sought, (ii) violation of Company
policies, including without limitation, the Company's insider trading policy,
(iii) accepting employment with or serving as a consultant, or advisor or in any
other capacity to an employer that is in competition with or acting against the
interests of the Company, including employing or recruiting any present, former
or future employee of the Company, (iv) disclosing or misusing any confidential
information or material concerning the Company, or (v) participating in a
hostile takeover attempt, then this Option shall become void, shall be forfeited
and shall terminate effective the date on which the Optionee enters into such
activity, unless the Option was terminated sooner by operation of another term
or condition of this Agreement or the Plan.
D-2
9. TRANSFERABILITY OF OPTION.
Except to the extent permitted by the Committee in accordance with the
provisions of the Plan, the Optionee may not voluntarily or involuntarily
pledge, hypothecate, assign, sell or otherwise transfer the Option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime, the Option shall be exercisable only by the Optionee.
10. NO RIGHTS AS A SHAREHOLDER.
The Optionee shall have no rights as a shareholder with respect to any Common
Shares until the date of issuance to the Optionee of a certificate evidencing
such Common Shares. No adjustments, other than as provided in Article IV of the
Plan, shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions for which the record date is
prior to the date the certificate for such Common Shares is issued.
11. REGISTRATION: GOVERNMENTAL APPROVAL.
The Option granted hereunder is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration, or
qualifications of Common Shares issuable upon exercise of the Option is required
by any securities exchange or under any state or Federal law, rule or
regulation, or the consent or approval of any governmental regulatory body or
other person is necessary or desirable as a condition of, or in connection with,
the issuance of Common Shares, no Common Shares shall be issued, in whole or in
part, unless such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions or with such conditions as are
acceptable to the Committee.
12. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice to the Company, Attention: Manager, Stock
Administration. Such notice shall state the election to exercise the Option and
the number of Common Shares in respect of which the Option is being exercised,
shall be signed by the person or persons so exercising the Option and shall be
accompanied by payment in full of the Purchase Price for such Common shares.
Payment of such Purchase Price shall be made in United States dollars by
certified check or bank cashier's check payable to the order of the Company or
by wire transfer to such account as may be specified by the Company for this
purpose. Subject to such procedures and rules as may be adopted from time to
time by the Committee, the Optionee may also pay such Purchase Price by (i)
tendering to the Company Common Shares with an aggregate Fair Market Value on
the date of exercise equal to such Purchase Price provided that such Common
Shares must have been held by the Optionee for more than six (6) months, (ii)
delivery to the Company of a copy of irrevocable instructions to a stockbroker
to sell Common Shares or to authorize a loan from the stockbroker to the
Optionee and to deliver promptly to the Company an amount sufficient to pay such
Purchase Price, or (iii) any combination of the methods of payment described in
clauses (i) and (ii) and in the preceding sentence. The certificate for Common
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option. All Common Shares
purchased upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
D-3
13. INCOME TAX WITHHOLDING.
The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all federal, state, local and
other taxes required by law to be withheld with respect to the exercise of the
Option and the issuance of the Common Shares, including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, or requiring the Optionee, or the
beneficiary or legal representative of the Optionee, to pay to the Company the
amount required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations.
14. NON-QUALIFIED STOCK OPTION.
The Option granted hereunder is not intended to be an "incentive stock option"
within the meaning of Section 422 of the Code.
15. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
16. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws of
the State of Delaware.
17. HEADINGS.
Headings are for the convenience of the parties and are not deemed to be part of
this Agreement.
18. EXECUTION.
This Agreement is voidable by the Company if the Optionee does not execute the
Agreement within 30 days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: _____________________________________
OPTIONEE:
_________________________________________
D-4
ATTACHMENT E
SELECTED FINANCIAL DATA
Qwest Communications International Inc.
Summary Financial Data
(Dollars in millions, except per share amounts)
Nine Months Six Months
Ended Ended Year Ended December 31,
------------- ------------- ------------------------
September 30,
2001 June 30, 2001 2000 1999
------------- ------------- -------------------------
Gross revenue $15,039 $10,273 $16,610 $13,182
Gross profit $ 9,696 $ 6,627 $11,687 $ 9,192
(Loss) income from continuing operations ($ 3,429) ($ 3,287) ($81) $ 1,102
Net (loss) income ($ 3,494) ($ 3,352) ($81) $ 1,342
Basic earnings (loss) per common share:
(Loss) income before extraordinary item and cumulative
effect of change in accounting principle ($2.06) ($1.98) ($0.06) $ 1.26
Extraordinary item - early retirement of debt, net of tax (0.04) (0.04) 0.00 0.00
Cumulative effect of change in accounting principle, net
of tax 0.00 0.00 0.00 0.28
------- ------- ----------------------
Basic (loss) earnings per common share ($2.10) ($2.02) ($0.06) $ 1.54
======= ======= ======================
Diluted earnings per common share:
(Loss) income before extraordinary item and cumulative
effect of change in accounting principle ($2.06) ($1.98) ($0.06) $ 1.25
Extraordinary item - early retirement of debt, net of tax (0.04) (0.04) 0.00 0.00
Cumulative effect of change in accounting principle, net
of tax 0.00 0.00 0.00 0.27
------- ------- ----------------------
Diluted (loss) earnings per common share ($2.10) ($2.02) ($0.06) $ 1.52
======= ======= ======================
Current assets $ 6,052 $ 6,417 $ 5,199 $ 4,192
Noncurrent assets $68,648 $67,489 $68,302 $19,080
Current liabilities $ 9,685 $11,940 $ 9,893 $ 6,766
Noncurrent liabilities $27,817 $24,680 $22,304 $15,251
Book value per common share $ 22.35 $ 22.42 $ 24.70 $ 1.43
Ratios of earnings to fixed charges (1) ($123) ($150) 1.05 3.19
Note (1): For the nine months ended June 30, 2001 and the six months ended June
30, 2001, the ratio of earnings to fixed charges was calculated as a negative
ratio. As a result, disclosed above is the calculation of the coverage
deficiency. For the purposes of this calculation we have included the impact of
the $3.048 billion write-down of the investment on KPNQwest that occurred during
the second quarter of 2001, as an add-back of Qwest's share of losses in its
equity method affiliates.
E-1
EX-99.A.2
4
ex_a-2.txt
EXHIBIT 99(A)(2)
QWEST COMMUNICATIONS INTERNATIONAL INC.
OFFER TO EXCHANGE CERTAIN OUTSTANDING QWEST STOCK OPTIONS
ELECTION FORM AND RELEASE AGREEMENT
-----------------------------------
Instructions:
o Before you complete or return this form, you should read the
Exchange Offer Circular dated October 31, 2001, that accompanies
this form. You may obtain a copy of the Exchange Offer Circular on
the Qwest website. [LINK TO EXCHANGE OFFER CIRCULAR] The Exchange
Offer Circular contains important information about the terms and
risks of the Exchange Offer, and explains many of the terms used in
this form. For purposes of this form, "Eligible Options" mean all
outstanding options granted to you under the Qwest Equity Incentive
Plan with an exercise price equal to or greater than $35 per share,
and "Recent Options" means all outstanding options granted to you by
Qwest on or after May 29, 2001.
o After you have read the Exchange Offer Circular, please complete
this form and return it to Qwest. You may return the form by mail,
courier, hand delivery (during normal business hours) or fax to the
following address:
Qwest Communications International Inc.
555 17th Street, 7th Floor,
Denver, Colorado 80202
Attention: Qwest Stock Administration
Fax No.: 303-992-1174
For your convenience, a postage-paid pre-addressed envelope was
included with your package of Exchange Offer materials for you to
use to return this form to Qwest.
o We cannot accept election forms by e-mail or any other means of
delivery other than those means identified above. If you do not use
the enclosed pre-addressed envelope to return this form to Qwest,
you must pay all mailing or courier costs to deliver this form to
Qwest. The method by which you deliver the signed election form to
Qwest is at your option and risk, even if you use the pre-addressed
envelope, and delivery will be effective only when the form is
actually received by Qwest. In all cases, you should allow
sufficient time to ensure timely delivery.
o Qwest is not obligated to give you notice of any defects or
irregularities in your elections on this form, nor will anyone incur
any liability for failure to give any such notice. Qwest will
determine, in its discretion, all questions as to the form and
validity, including time of receipt, of elections. Qwest's
determination of these matters will be final and binding.
o If you need additional information, please read the Exchange Offer
Circular or contact Qwest Stock Administration at
StockAdmin2@Qwest.com, at the address given above or at 866-437-0007
(during normal business hours).
o DEADLINE: If you wish to accept the Exchange Offer, we must receive
this election form at our offices no later than 5:00 p.m., Mountain
Standard Time, on November 30, 2001, unless we extend the deadline
for the Exchange Offer. If we do not receive an election form from
you prior to this deadline, you will be deemed to have rejected the
Exchange Offer.
A. Exchange Offer Election. I hereby (check the applicable box - if no election
is checked, you will be deemed to have rejected the Exchange Offer):
[ ] Accept the Exchange Offer with respect to all of my Eligible Options and
all of my Recent Options. I further agree to be bound by the terms of the
release and other terms and conditions set forth in Section C of this
form. (Sign under Section B of this form and return this form to Qwest.)
[ ] Accept the Exchange Offer only with respect to the specific grants of my
Eligible Options identified below and with respect to all of my Recent
Options (whether or not identified below). I further agree to be bound by
the terms of the release and other terms and conditions set forth in
Section C of this form. (Fill in the following table to indicate the
Eligible Option grant(s) that you elect to exchange in the Exchange
Offer. If you elect to exchange any portion of a particular option grant,
you must exchange all of the unexercised
1
options (whether or not vested) that are a part of that grant. If you
elect to exchange any Eligible Option, you will be deemed to have elected
to exchange all of your Recent Options, whether or not you list the
Recent Options below. If you do not list all of your Eligible Options
that you wish to exchange, you will be deemed to have rejected the
Exchange Offer with respect to each of your Eligible Options (other than
Recent Options) that you do not list. After completing the table, sign
under Section B of this form and return this form to Qwest.)
Grant Number Number of Options Exercise Price Number of Options
(Optional) Date of Grant Originally Granted Per Option Currently Outstanding
------------ -------------- ------------------- --------------- --------------------
[ ] Reject the Exchange Offer and withdraw any previous elections. My
Eligible Options and Recent Options will remain outstanding as described
in the response to Question 25 in the Exchange Offer Circular. (Sign
under Section B and return this form to Qwest.)
B. Signature (All Persons). I hereby represent and confirm to Qwest that:
---------------------------
o I have full power and authority to sign and deliver this election
and release form and to tender any Eligible Options and/or Recent
Options pursuant to the terms of the Exchange Offer;
o I have received and read, and I understand, the Exchange Offer
Circular and its attachments and this election and release form
(collectively referred to in this form as the "Offer Documents");
o I have had adequate time and opportunity to ask questions of the
Company about the Exchange Offer and the Offer Documents, and to
seek advice from my independent legal, tax and/or financial advisors
concerning the Exchange Offer and the Offer Documents;
o I understand that the Offer Documents contain all of the terms of
the Exchange Offer in their entirety, and that I have not relied on
any other documents or oral representations from Qwest or any of its
officers, directors, employees, representatives, affiliates or
agents in deciding to accept or reject the Exchange Offer;
o I understand that if I elect to exchange any of my Eligible Options,
I must also exchange all of my Recent Options in the Exchange Offer;
o Qwest has not made any recommendation to me as to whether I should
accept or reject the Exchange Offer, and any election to accept the
Exchange Offer is wholly voluntary;
o the information set forth in my Statement of Employee Stock Option
Holdings is correct; and
o my election to accept or reject the Exchange Offer is correctly set
forth in Section A above.
I understand that the Exchange Offer will expire at 5:00 p.m., Mountain
Standard Time, on November 30, 2001 (the "Expiration Time"), unless Qwest
subsequently extends the Expiration Time. I understand that I may not revoke my
election to accept or reject the Exchange Offer after the Expiration Time. I
understand that I can withdraw or change my elections on this form at any time
prior to the Expiration Time only by completing and signing a new election form
and returning it to Qwest prior to
2
the Expiration Time. If I submit a new election form to Qwest prior to the
Expiration Time, I understand that my previous election(s) will be cancelled,
and that the elections marked on the new election form will be effective for all
purposes relating to the Exchange Offer.
I understand and agree that my employment with Qwest is and will continue
to be on an at-will basis, and that my employment status with Qwest is not
affected in any way by the Exchange Offer or by anything contained in the Offer
Documents.
I also understand that if I alter or modify this form in any way (other
than by checking the box corresponding to my election in Part A, completing the
table in Part A (if applicable) to identify the Eligible Options that I want to
exchange in the Exchange Offer, and completing the signature block below), my
alterations and/or modifications will not be effective and will not be binding
on Qwest.
This form will be deemed to have been executed and delivered within the
State of Delaware, United States of America, and the rights and obligations of
the parties hereunder, and the Offer Documents, will be construed and enforced
in accordance with the laws of the State of Delaware without regard to
principles of conflict of laws. The parties agree that the application of
Delaware law to this form, the Exchange Offer and the Offer Documents is fair
and equitable.
If I have accepted the Exchange Offer (as indicated in Section A of this
form) as to any of my Eligible Options or Recent Options, I agree to be bound by
the terms of, and acknowledge that I have read and understand, the release and
other terms and conditions set forth in Section C of this form, which are hereby
incorporated by reference.
This form must be completed and signed in the space below. If the
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or another person acting in a fiduciary or
representative capacity, the signer's full title must be specified, and proper
evidence of the authority of such person to act in such capacity must be
submitted with this form.
-------------------- ------------------- --------- ----------------------
Signature Print Name Date Social Security Number
C. Release and Other Terms and Conditions (For Persons Accepting the Exchange
Offer Only)
-----------------------------------------------------------------------------
By accepting the Exchange Offer (by marking such election in Section A of this
form), and by my signature in Section B of this form, I hereby agree with Qwest
as follows:
o Subject to all of the terms and conditions of the Exchange Offer, I
hereby tender all Eligible Options that I have elected to exchange,
and all Recent Options that I am required to exchange, pursuant to
the Exchange Offer (such exchanged options are referred to in this
form as "Cancelled Options"), and I agree that, subject to
acceptance by Qwest, all of my Cancelled Options will automatically
terminate effective as of the Expiration Time of the Exchange Offer;
o Upon acceptance of the Cancelled Options by Qwest, I, on my own
behalf and on behalf of my heirs, dependents, executors,
administrators and assigns, hereby release Qwest and its successors,
assigns, affiliates, representatives, directors, officers and
employees, past and present (collectively referred to in this form
as "Released Persons"), with respect to and from any and all claims,
damages, agreements, obligations, actions, suits, proceedings and
liabilities of whatever kind and nature, whether now known or
unknown, suspected or unsuspected (collectively referred to in this
form as "Claims"), which I now own or hold or at any time previously
owned or held against any of the Released Persons and that relate to
or are in any way connected with the Cancelled Options. I
acknowledge that I may later discover claims or facts that are in
addition to or are different from those which I now know or believe
to exist with respect to the Cancelled Options. Nevertheless, I
hereby waive any Claim relating to or connected with the Cancelled
Options that might arise as a result of such different or additional
claims or facts. I fully understand the significance and consequence
of this release.
3
o I have not previously assigned or transferred to any person (other
than Qwest) any interest in the Cancelled Options, and I agree to
defend, indemnify and hold harmless all Released Persons from and
against any claim based on or in connection with any purported
assignment or transfer.
o Qwest will be required to issue replacement options in exchange for
my Cancelled Options only if I am an eligible employee of Qwest on
the grant date for the replacement options, and otherwise only in
accordance with the terms set forth in the Exchange Offer Circular.
If I retire or my employment with Qwest otherwise terminates for any
reason (whether voluntary or involuntary, or at my election or
Qwest's election) before Qwest issues any replacement options
pursuant to the Exchange Offer, I understand and agree that I will
not be entitled to receive any replacement options, and that all of
my Cancelled Options will not be reinstated, and will remain
cancelled.
o If Qwest is involved in a merger, change of control or other
reorganization event prior to the date upon which Qwest proposes to
issue the replacement options pursuant to the Exchange Offer, it is
possible that I will not receive any replacement options, securities
of the surviving corporation or other consideration in exchange for
my Cancelled Options or in exchange for any replacement options that
Qwest otherwise would have granted to me pursuant to the Exchange
Offer.
o Any replacement options issued in exchange for my Cancelled Options
will be evidenced by a new instrument of grant to be issued by Qwest
under the Equity Incentive Plan.
o The Offer Documents comprise the entire agreement and final
understanding concerning the Exchange Offer and my Cancelled
Options, and the Offer Documents supersede and replace all prior
agreements, proposed or otherwise, whether written or oral, between
Qwest and me concerning the subject matter thereof. Qwest will not
be bound by any representation, promise or agreement that is not
specifically contained in the Offer Documents.
o Qwest reserves the right, under the circumstances set forth in the
Exchange Offer Circular, to terminate or amend the offer, or to
postpone its acceptance and cancellation of any Cancelled Options.
o If any provision of the Offer Documents or this election and release
form is found to be invalid, such finding will not affect the
validity and enforceability of the other provisions of such
documents, so long as the essential economic provisions of this form
and the Exchange Offer can still be given effect.
o I agree to cooperate fully and to execute any and all supplementary
documents and to take all additional actions that may be necessary
or appropriate to give full force to the basic terms and intent of
this form and the Exchange Offer and which are not inconsistent with
their respective terms.
--------------------------------------------------------------------------------
FOR COMPANY USE ONLY
Accepted and Agreed on Behalf of the Company: Qwest Communications International
Inc. (To be completed by Qwest after the Exchange to certify that the Exchange
has been completed.)
------------------------ ----------------------- ----------------
Signature Print Name Date
--------------------------------------------------------------------------------
(End of document.)
4
EX-99.A.3
5
ex_a-3.txt
EXHIBIT 99(A)(3)
[Form of Statement of Employee Stock Option Holdings]
Statement of Employee Stock Option Holdings
Qwest Communications International Inc.
Social Security Number:
[Name of Employee]
[Address of Employee]
Number of Options Exercise Number of Options
Originally Price per Currently
Grant Number Date of Grant Granted Option Vesting Type Outstanding
---------------------------------------------------------------------------------------------------------
Options Eligible for Exchange (Eligible Options)
Options that MUST be tendered if any options are tendered (Recent Options)
Options that constitute both Eligible Options and Recent Options (these may be
tendered, but MUST be tendered if any options are tendered)
IMPORTANT: This information is being provided in connection with the stock
option exchange offer announced by Qwest on October 31, 2001 (the "Exchange
Offer"). If you want to accept the Exchange Offer, use this information to
complete your Election Form and Release Agreement. However, before deciding to
accept the Exchange Offer, you should first read the Offer Circular. You may
print the Offer Circular on the Q at
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO EXCHANGE OFFER
CIRCULAR] or you may request a copy of the Offer Circular by contacting our
Stock Plan Administration department at StockAdmin2@Qwest.com or 866-437-0007.
If you tender any portion of an option grant in the Exchange Offer, you must
tender that entire grant. If you tender any option grant in the Exchange Offer,
you will be deemed to have tendered all of your Recent Options.
We have provided this document to you for informational purposes only. If any of
the information contained on this document concerning your grants is incorrect,
or if any grants that should be eligible are missing, please contact the Stock
Plan Administration department at:
Phone: 866-437-0007
Email: StockAdmin2@Qwest.com
Please have your Social Security Number and grant date for the grants in
question ready when you call.
Report Generated on 10/31/01
EX-99.A.4
6
exa-4.txt
EXHIBIT 99(A)(4)
[FORM OF CONFIRMATION CARD]
ride the light [GRAPHIC OMITTED] Confirmation of Receipt of Election
Form and Release Agreement
Qwest
To: __________________________________
This is not confirmation that your election form has been completed correctly.
This card is confirmation that your Election Form and Release Agreement for the
Qwest Communications International Inc. Offer to Exchange Certain Outstanding
Qwest Stock Options has been received by:
_____________________________________ on: ______________
Qwest Stock Administration Department Date Received
Qwest Communications International Inc.
Stock Administration Department
555 17th Street, 10th Floor
Denver, CO 80202
Employee Name
Address line 1
Address Line2
City, ST Zip
EX-99.A.5
7
ex_a-5.txt
EXHIBIT 99(A)(5)
[LOGO]
ride the light NEWS
qwest
[PRESS RELEASE ISSUED OCTOBER 31, 2001]
Qwest Communications Board of Directors extends employment
contract For Chairman & CEO Joseph P. Nacchio to 2005
Company Also Incents 15 Other Senior Executives
To Drive Shareowner Value
24,000 Employees Offered Stock Option Exchange Program
DENVER, October 31, 2001 -- The board of directors of Qwest Communications
International Inc. (NYSE:Q) has extended the employment contract of Chairman and
CEO Joseph P. Nacchio. The company also is providing additional equity
incentives to 15 other senior executives to drive long-term shareowner value.
The executive group includes the president and COO, the CFO, and the heads of
major business units.
Nacchio has extended his employment contract with Qwest from December 31, 2001
through December 31, 2005, and he has been granted 7.25 million additional stock
options. The stock options vest as follows: 2.5 million in August 2004; 500,000
in December 2004; 2.5 million in August 2005, and 1.75 million in December 2005.
Nacchio's current employment contract ends December 31, 2001.
Qwest also announced a voluntary stock option exchange offer for approximately
24,000 full-time, non-union employees, designed to increase equity-based
performance incentives across the company. Eligible employees have the
opportunity to exchange current stock options, with exercise prices of $35 or
more, for the same number of replacement options.
The new options are expected to be issued on June 3, 2002 and will have an
exercise price equal to the market price of Qwest shares at that time. The new
stock options will vest 25 percent annually over a four-year period from the new
option grant date. Approximately 38 million options, most issued in 2000, are
eligible to be exchanged. The employee stock option exchange program will not
require a charge to earnings, and will not increase the total number of
outstanding stock options.
"With these programs we better align the interests of our employees with those
of our shareowners," said Nacchio. "We also provide incentive and stability to
the Qwest senior management team. The programs strike an appropriate balance
with the Qwest philosophy of equity-based incentives, while minimizing the
dilutive effect of option programs."
Qwest is filing with the Securities and Exchange Commission today a tender offer
statement (Schedule TO) detailing the specifics of the exchange offer. The
deadline for employees to accept the offer is November 30, 2001, unless
extended.
Qwest has approximately 1.66 billion shares of common stock outstanding and an
additional approximately 132 million shares reserved for issuance upon the
exercise of outstanding stock options and other awards (including those being
granted to Nacchio and the senior team). Qwest is currently authorized to grant
stock options and other awards that cover 10% of the outstanding shares of Qwest
common stock, or approximately 166 million shares.
In addition to the 7.25 million new stock options, Nacchio has 4.6 million
options that were granted in June 1997 and expire in June 2003 with an exercise
price of $5.50 per share, and nine million stock options that were granted in
August 1999 and expire in August 2009 with an exercise price of $28.50 per
share. The June 1997 options will be fully vested in December 2001, and the
August 1999 options vest in four equal installments of 2.25 million options in
August 2000, 2001, 2002 and 2003, respectively. Nacchio also owns outright
approximately 471,000 Qwest shares.
# # #
This release may contain projections and other forward-looking statements that
involve risks and uncertainties. These statements may differ materially from
actual future events or results. Readers are referred to the documents filed by
Qwest with the Securities and Exchange Commission, specifically the most recent
reports which identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including
potential fluctuations in quarterly results, volatility of Qwest's stock price,
intense competition in the communications services market, changes in demand for
Qwest's products and services, dependence on new product development and
acceleration of the deployment of advanced new services, such as broadband data,
wireless and video services, which could require substantial expenditure of
financial and other resources in excess of contemplated levels, higher than
anticipated employee levels, capital expenditures and operating expenses, rapid
and significant changes in technology and markets, adverse changes in the
regulatory or legislative environment affecting Qwest's business, delays in
Qwest's ability to provide interLATA services within its 14-state local service
territory, adverse conditions in the economy nationally and within its
territory, failure to maintain rights of way, and failure to achieve the
projected synergies and financial results expected to result from the
acquisition of U S WEST timely or at all and difficulties in combining the
operations of Qwest and U S WEST. This release may include analysts' estimates
and other information prepared by third parties for which Qwest assumes no
responsibility. Qwest undertakes no obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The Qwest logo is a registered trademark of, and CyberCenter is a service mark
of, Qwest Communications International Inc. in the U.S. and certain other
countries.
Contacts: Media Contact: Investor Contact:
-------------- -----------------
Chris Hardman Lee Wolfe
303-992-2085 800-567-7296
chris.hardman@qwest.com IR@qwest.com
EX-99.A.6
8
ex_a-6.txt
EXHIBIT 99(A)(6)
[EMAIL MESSAGE TO EMPLOYEES ANNOUNCING EXCHANGE OFFER]
We are today announcing a voluntary stock option exchange offer for full-time,
non-union Qwest employees. You will be able to exchange all or a portion of the
stock options that you own that were granted by Qwest with an exercise price of
$35 or more, subject to certain conditions. Joe Nacchio will speak about this at
9 a.m. (MST) tomorrow, Nov. 1, in his all employee meeting. Click here for more
details http://theq.qwest.net/departments/hr/index.html [link to to HR Web
site].
EX-99.A.7
9
ex_a-7.txt
EXHIBIT 99(A)(7)
[Form of Cover Letter to Employees Accompanying Exchange Offer Documents and to
appear on the Qwest Communications International Inc. Human Resources Website]
October 31, 2001
Dear Fellow Qwest Employee:
I'm delighted to share good news with you today. As you know, it has been our
policy at Qwest to distribute stock options to our employees as an incentive to
return value to our shareholders for their investment. As our employees focus on
meeting the needs of our customers, our company prospers, our shareholders
benefit and so will our employees. Qwest is an entrepreneurial company and we
want you to have a stake in our future success.
Because of a weakening economy and a bear market for stocks, especially in the
telecom sector, many of the stock options held by our employees no longer
provide the incentive that we intended when we granted them. With this in mind,
our board of directors approved a voluntary stock option exchange offer. Under
this program, you can exchange all or a portion of the stock options that you
own that were granted by Qwest with an exercise price of $35 or more, subject to
certain conditions.
As summarized below and detailed in the linked plan documents, in exchange for
your eligible options, you will receive the same number of options based on our
share price next June. The new options cannot be issued now because accounting
rules would require us to take a charge against our earnings.
The last time you received options, we sent you all the option information you
need to complete the election form. For your convenience, we will also send to
you at the address we have for you an options statement showing the options that
you may tender in the offer.
You do not have to accept the exchange offer. The exchange offer involves risks.
Before you make any decisions, you should carefully review the risks and all the
terms and conditions of the exchange offer that are contained in the exchange
offer documents available on the Q at
http://theq.qwest.net/departments/hr/index.html. [LINK TO INDEX OF EXCHANGE
OFFER DOCUMENTS ON THE Q]
This stock option program is a legal matter that requires every eligible
employee to receive or have access to detailed information that will help you
make an informed decision. Please take the time to review the documents,
including the Questions and Answers and program summaries on the Q. If you still
have questions, you may call 866-437-0007.
If you want to take advantage of the exchange offer, you must complete and
return the election form by 5:00 P.M. (MST) Friday, November 30, 2001. The
election form, including instructions about how to return the form, is available
on the Q at http://theq.qwest.net/departments/hr/electformq.html. [LINK TO
QUESTION REGARDING ELECTION FORM IN EXCHANGE OFFER CIRCULAR] If you don't want
to exchange your options, you don't need to do anything.
I want to highlight some of the important elements of the exchange offer:
o The offer is available only to full-time active employees (however, it is
not available to occupational, union employees nor to the senior team).
o If you are an eligible employee and accept the exchange offer for any of
your eligible options, you must exchange all of the other eligible options
(whether or not vested) that are in the same option grant or grants after
May 29, 2001, whether or not those options qualify as eligible options
(your "recent options").
o Upon the exchange of the options, the options you have exchanged will
terminate and be cancelled. They will not be reinstated even if you later
change your mind.
o If you resign, quit, die or if your employment with the Company terminates
for any reason whatsoever before we grant you the new options, or if you
are on unpaid leave on that date, we will not grant you any new options and
you will not have a right to any of your cancelled options that you
exchanged.
o You cannot exchange options that you received as an employee of the former
U S WEST, LCI or Icon CMT companies. Only options that we granted under
Qwest's Equity Incentive Plan are eligible options.
We will grant new options to you on the "new option date" -which will be June 3,
2002 or, if we extend the exchange offer beyond November 30, 2001, a business
day that is no earlier than six months and one day after your options are
cancelled, as set by our board of directors. You must be an eligible employee
through the new option date to receive the new options.
The new options:
o Will be for a number of shares equal to the number of shares subject to the
eligible options and recent options that were cancelled in the exchange
offer.
o Will have a per share exercise price equal to the closing market price of a
share of our common stock on the new option date.
In addition, we expect that the new options:
o Will have a new 10-year term beginning on the new option date.
2
o Will be subject to a new four-year vesting schedule, with one-fourth of the
new options vesting on each of the first, second, third and fourth
anniversaries of the new option date (subject, in each case, to your
continued employment).
o Will have substantially the same other terms and conditions as the
corresponding cancelled options.
After reading the stock exchange offer documents, you may review the answers to
some commonly asked questions on the Q at
http://theq.qwest.net/departments/hr/electquestions.html [LINK TO ELECTION FORM
QUESTIONS AND ANSWERS], or you may contact us
by e-mail at stockadmin2@qwest.com.
Although our board of directors approved the exchange offer, the board is not
permitted to recommend whether or not you should accept the offer.
You are solely responsible for deciding whether to participate and for making
sure that you properly complete your election form and that we receive it before
5:00 P.M. (MST) Friday, November 30, 2001. Make sure that you allow enough time
before the deadline to ensure that we receive your election form. If we do not
receive your election form until after the deadline or you did not properly
complete the election form, your election form will be rejected and you will not
be able to exchange any of your options.
Please go to the following Web site to access the exchange offer documents on
the Q.
Offering Circular (this explains the terms of the program):
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO EXCHANGE OFFER
CIRCULAR]
Election Form and Release Agreement:
http://theq.qwest.net/departments/hr/electform.pdf [LINK TO ELECTION FORM]
We are pleased to offer you the opportunity to participate in this program. I
encourage you to learn all you can about it, consider it carefully, and make a
decision that is right for you.
Sincerely,
Joe Nacchio
3
EX-99.A.8
10
ex_a-8.txt
EXHIBIT 99(A)(8)
[FORM OF COVER LETTER TO EMPLOYEES INCLUDED
IN MAILING OF EXCHANGE OFFER DOCUMENTS]
October 31, 2001
Dear Fellow Qwest Employee:
Our board of directors has approved a voluntary stock option exchange offer.
Under this program, you can exchange all or a portion of the stock options that
you own that were granted by Qwest with an exercise price of $35 or more,
subject to certain conditions. Details about the offer are on the Q.
If you want to take advantage of the exchange offer, you must complete, sign,
date and return the enclosed Election Form and Release by 5:00 p.m. (MST)
Friday, November 30, 2001. Instructions about how to return the form are
available on the Q. If you don't want to exchange your options, you don't need
to do anything.
This stock option exchange program is a legal matter that requires every
eligible employee to receive or have access to detailed information that will
help you make an informed decision. Please take the time to review the
documents, including the Questions & Answers and program summaries on the Q. If
you still have questions, you may call 866-437-0007.
This package contains:
o An Offer Circular that describes the offer and gives you detailed
information to help you make an informed decision
o A Statement of Employee Stock Option Holdings showing the options that you
may exchange
o An Election Form and Release for you to complete, sign, date and return, if
you decide to exchange any of your eligible options
o A confirmation card for you to send to us so that the Qwest Stock
Administration Department can stamp and return it to you that it has
received your Election Form and Release
o A postage-paid, pre-addressed envelope for you to use in returning to us
your completed, signed and dated Election Form and Release and your
confirmation card
As summarized below and detailed in the offer documents, should you choose to
participate in the offer, in exchange for your eligible options, you will
receive the same number of options based on our share price next June.
I want to highlight some of the important elements of the exchange offer:
o The offer is available only to full-time active employees (however, it is
not available to occupational, union employees nor to the senior team).
o If you are an eligible employee and accept the exchange offer for any of
your eligible options, you must exchange all of the other eligible options
(whether or not vested) that are in the same option grant or grants after
May 29, 2001, whether or not those options qualify as eligible options
(your "recent options").
o Upon the exchange of the options, the options you have exchanged will
terminate and be cancelled. They will not be reinstated even if you later
change your mind.
o If you resign, quit, die or if your employment with the Company terminates
for any reason whatsoever before we grant you the new options, or if you
are on unpaid leave on that date, we will not grant you any new options and
you will not have a right to any of your cancelled options that you
exchanged.
o You cannot exchange options that you received as an employee of the former
U S WEST, LCI or Icon CMT companies. Only options that we granted under
Qwest's Equity Incentive Plan are eligible options.
We will grant new options to you on the "new option date" -which will be June 3,
2002 or, if we extend the exchange offer beyond November 30, 2001, a business
day that is no earlier than six months and one day after your options are
cancelled, as set by our board of directors. You must be an eligible employee
through the new option date to receive the new options.
The new options:
o Will be for a number of shares equal to the number of shares subject to the
eligible options and recent options that were cancelled in the exchange
offer.
o Will have a per share exercise price equal to the closing market price of a
share of our common stock on the new option date.
In addition, we expect that the new options:
o Will have a new 10-year term beginning on the new option date.
o Will be subject to a new four-year vesting schedule, with one-fourth of the
new options vesting on each of the first, second, third and fourth
anniversaries of the new option date (subject, in each case, to your
continued employment).
o Will have substantially the same other terms and conditions as the
corresponding cancelled options.
Although our board of directors approved the exchange offer, the board is not
permitted to recommend whether or not you should accept the offer.
You are solely responsible for deciding whether to participate and for making
sure that you properly complete your election form and that we receive it before
5:00 P.M. (MST) Friday, November 30, 2001. Make sure that you allow enough time
before the deadline to ensure that we receive your election form. If we do not
receive your election form until after the deadline or you did not properly
complete the election form, your election form will be rejected and you will not
be able to exchange any of your options.
Please go to the following Web site to access the exchange offer documents on
the Q.
Offering Circular (this explains the terms of the program):
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO EXCHANGE OFFER
CIRCULAR]
Election Form and Release Agreement:
http://theq.qwest.net/departments/hr/electform.pdf [LINK TO ELECTION FORM]
Thank you for your prompt attention to this offer. We hope that you will
carefully review and consider the enclosed materials and those on the Q, and
make an informed decision that's right for you.
Best regards,
Joe Nacchio
EX-99.A.9
11
ex_a-9.txt
EXHIBIT 99(A)(9)
QWEST COMMUNICATIONS INTERNATIONAL INC.
OFFER TO EXCHANGE CERTAIN
OUTSTANDING QWEST STOCK OPTIONS
OFFER CIRCULAR - ADDENDUM FOR NON-U.S. EMPLOYEES
To All Employees Eligible to Participate in the Qwest Communications
International Inc. Offer to Exchange Certain Outstanding Qwest Stock Options
(the "Exchange Offer") Employed Outside of the United States:
This Addendum supplements the tax information contained in the Exchange Offer
Circular if you are subject to taxation in Japan, Hong Kong, the Peoples
Republic of China, or the Netherlands. This Addendum also includes a condition
of the Exchange Offer that will apply to you if you are subject to taxation in
the Netherlands.
The Exchange Offer Circular and this Addendum do not discuss all of the tax
consequences that may be relevant to you in your particular circumstances. The
tax information in this Addendum is merely intended to alert you to some of the
tax information you may want to consider in making your decision to accept or
reject the Exchange Offer. You should note that we cannot and do not guarantee
any particular tax consequences. You should consult your own tax advisors with
respect to the tax consequences of accepting the Exchange Offer in your
particular situation.
If you are subject to taxation in Japan, Hong Kong, or the Peoples Republic of
China: If you accept the Exchange Offer, there should be no tax consequences in
these jurisdictions of your tendering stock options, the cancellation of those
options, or the eventual grant of new options to you in accordance with the
terms of the Exchange Offer. Any new stock option grants should be subject to
the normal stock option tax rules in these jurisdictions - that is, you would
typically realize taxable income only if and when you exercise the new options.
If you are subject to taxation in the Netherlands: Any tender of stock options
in the Exchange Offer may be viewed as a notional exercise of those options upon
cancellation which could trigger a tax liability if you are subject to taxation
in the Netherlands. This issue is uncertain, as is the amount and method of
calculation of the tax liability if there is a tax liability in these
circumstances. In addition, if you have not elected to defer taxation of your
options until they are exercised (applicable for options where the taxable event
occurs after December 28, 2000 and does not include a deferral of social
insurance), you may have already paid or may be required to pay tax in
connection with your stock options that have vested. The amount of any of these
taxes may not be recoverable and you may not be able to credit such taxes
against any future tax liability you may incur in connection with any new option
grants to you. Furthermore, the grant of new options to you may be a taxable
event in the Netherlands. The vesting of new options may also be a taxable
event, although you may be permitted to defer taxation (other than social
insurance) until the time you exercise the options. If you are subject to
taxation in the Netherlands and you accept the Exchange Offer, Qwest and its
affiliates will not pay or reimburse you for ANY tax and social insurance
liability that may result from your acceptance of the Offer (including, without
limitation, any such liability that may arise in connection with the
cancellation and exchange of your options, and any such liability that may arise
at the time of grant, vesting, and/or exercise of any new option grants),
notwithstanding any tax reimbursement, equalization or similar agreement, plan,
program or policy of Qwest or any of its affiliates under which you might
otherwise have been entitled to benefit. Your acceptance of the Exchange Offer
will constitute your agreement to the provisions of the foregoing sentence.
Please note that tax laws change frequently and vary with your individual
circumstances. You should consult with your own tax advisors for more
information relevant to your participation in the Offer.
-2-
EX-99.A.10
12
ex_a-10.txt
EXHIBIT 99(A)(10)
QWEST COMMUNICATIONS INTERNATIONAL INC.
OFFER TO EXCHANGE CERTAIN
OUTSTANDING QWEST STOCK OPTIONS
QUESTIONS AND ANSWERS REGARDING THE EXCHANGE OFFER
Qwest Communications International Inc. ("Qwest," "we" or "us") has announced
the Qwest Communications International Inc. Offer to Exchange Certain
Outstanding Qwest Stock Options (the "Offer").
We understand that the decision whether or not to participate in the Offer will
be a challenging one for many employees. The Offer does carry considerable risk,
and there are no guarantees as to our future stock performance. So, the decision
to participate in the Offer must be your personal decision, and it will depend
largely on your assumptions about the future overall economic environment, the
performance of the overall market and companies in our sector and our own
business, performance and stock price.
This document is intended to answer some of the most frequently asked questions
regarding the Offer. These questions and answers have generally been taken from
the Offer Circular that is being distributed in connection with the Offer.
However, these questions and answers do not reflect all of the information
contained in the Offer Circular or in the Election Form and Release Agreement
that is being distributed in connection with the Offer.
It is important that you read the entire Offer Circular and the Election Form
and Release Agreement.
If you need another copy of the Offer Circular or the Election Form and Release
Agreement, you may print one on the Q at the link given below or you may contact
our Stock Administration department at StockAdmin2@Qwest.com or at the address
or telephone number given below.
Offer Circular: http://theq.qwest.net/departments/hr/circular.pdf [LINK TO
EXCHANGE OFFER CIRCULAR]
Election Form and Release Agreement:
http://theq.qwest.net/departments/hr/electform.pdf [LINK TO ELECTION FORM]
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
A Qwest Stock Administration representative will generally be available at that
location (during normal business hours) or through that telephone number from
8:00 a.m. to 7:00 p.m., Mountain Standard Time, each business day until the
expiration time of the Offer.
For questions regarding: See:
------------------------ ----
The background and reasons for the Offer Questions 1 through 5
The benefits and risks of the Offer Questions 6 through 9
The Offer Questions 10 through 31
The terms and conditions of new options Questions 32 through 39
Other provisions and administration Questions 40 through 49
Federal income tax and social security consequences Questions 50 through 54
Our Board of Directors has approved the Offer. However, you must make your own
decision to accept or reject the Offer. None of our Board of Directors, our
management, or our affiliates makes any recommendation whether you should accept
or reject the Offer.
We have not authorized anyone to make any recommendation on our behalf as to
whether you should accept the Offer. You should rely only on the information
contained in the Offer Circular and the information contained in the documents
expressly referred to in the Offer Circular. If there is any inconsistency
between this document and the Offer Circular, the Offer Circular controls.
We have not authorized anyone to give you any information or to make any
representations in connection with the Offer other than the information and the
representations contained in the Offer Circular and in the documents expressly
referred to in the Offer Circular.
If anyone makes any recommendation or representation to you or gives you any
information that is not contained in the Offer Circular or in the documents
expressly referred to in the Offer Circular, even if that person is an employee
or other representative of Qwest or one of our affiliates, you must not rely
upon that recommendation, representation or other information as having been
authorized by us.
If you have any questions about the impact of the Offer on your financial
status, you should consult your financial advisor.
Background and Reasons for the Offer
This section generally describes why we are making the Offer and answers some
questions that you may have regarding the general structure of the Offer.
1. Why is Qwest making the Offer?
We are making the Offer because we believe that your stock
options no longer provide the incentives we had intended. Many
of our employees have stock options with exercise prices
significantly above our current and recent trading prices. We
are offering this program on a voluntary basis to allow our
employees to choose whether to keep their current stock
options at their current exercise prices, or to cancel certain
of those options for a conditional promise to be granted new
options in the Offer ("New Options") at a price not now known.
We are not required to make the Offer.
The Offer gives you a conditional opportunity to receive
options that over time may have a greater potential to
increase in value. We believe that, under the circumstances,
this is the most efficient way to incent employees to increase
shareowner value.
2. Why is Qwest making the Offer at this time?
Our Board of Directors determined that this was an appropriate
time to make the Offer. We believe that, under the
circumstances, this is the most effective way to incent our
employees to increase shareowner value.
3. How did you arrive at the $35 price for determining Eligible
Options?
In establishing the $35 price, our Board of Directors
considered, among other things, current and recent trading
prices of our common stock and that of other communications
2
companies, current economic conditions, prospects for a
recovery in the national and regional economy, and the levels
of intended incentives.
4. Why can't Qwest just reprice my options, as I have seen done
at other companies?
Simply amending a stock option grant to reduce its exercise
price potentially results in accounting charges for us that
would reduce our reported income. Also, repricing does not
impose any new requirements on optionholders, such as a new
vesting schedule, so many investors see repricings as a "one
way" street that benefits optionholders but not their company.
The new vesting terms of New Options are intended to ease
these concerns and balance the benefits of the Offer to the
Company. The term "Company" is used in this document to mean
Qwest and/or any other corporation or entity, or any
subsidiary or division thereof, that is affiliated with Qwest
though stock ownership and is designated as an "Affiliate
Corporation" by our Board of Directors.
5. Why can't I just be granted additional new options?
Granting additional options will result in the issuance of
additional shares that would "dilute" the current ownership of
shareowners. Our Board of Directors determined that, under the
circumstances, the Offer was the most effective way to incent
our employees without unduly diluting our shareowners.
Benefits and Risks of the Offer
This section generally describes some of the potential benefits and risks of the
Offer.
6. How does the Offer potentially benefit the Company?
We believe the Eligible Options (as defined in the response to
Question 13) held by our employees do not provide the
incentives we had intended. We believe that this program
provides the right incentives for our employees to increase
shareowner value. Also, the shares that were reserved for
issuance under the Plan with respect to any Eligible Options
and Recent Options (as defined in the response to Question 13)
that are cancelled in connection with the Offer will again
become part of the pool of shares that are available for award
grants under the Plan, including the grant of the New Options.
7. Are my New Options guaranteed to be more valuable?
No. Generally, your New Options will potentially be more
valuable than your Eligible Options and Recent Options that
are cancelled in connection with the Offer (if you accept the
Offer, the options that you tender and that are cancelled in
the Offer are referred to as your "Cancelled Options")
Cancelled Options only if they are granted at an exercise
price that is less than the exercise price of your Cancelled
Options. The exercise price of the New Options will be
determined as described in the response to Question 33 below.
There is no guarantee that your New Options will have an
exercise price that is less than the exercise price of your
Cancelled Options. Your New Options will increase in value if
the market price of our common stock increases. We cannot
guarantee stock price performance.
3
8. What are the risks of the Offer?
The Offer involves risks as described in the "Risk Factors"
section of the Offer Circular, which include, among others,
the risk that the New Options could be less valuable than the
Cancelled Options surrendered if the exercise price of the New
Options is greater than the exercise price of your Eligible
Options and Recent Options, and the risk that because the New
Options will vest over four years from the date that the New
Options are granted (the "New Option Grant Date" - see the
response to Question 20), you may not be employed by the
Company to receive any value on the New Option Grant Date or
on the dates on which the New Options vest. Therefore, it is
important that you read all of the details, terms and
conditions contained in the Offer Circular so that you can
make an informed decision as to whether to accept the Offer.
You should also be sure to read the entire "Risk Factors"
section of the Offer Circular.
9. What other companies have instituted a program like the Offer?
Many companies, including Nortel and Sprint Corp., have
adopted similar option exchange programs rather than amending
outstanding options to reprice them or granting additional
options. Other companies like Microsoft and Cisco have instead
granted more options to employees. We believe that is not
appropriate in our case for the reasons given above.
The Offer
This section generally describes the terms of the Offer, including the deadline
for accepting the Offer, eligibility rules, how to accept the Offer, which
options may be tendered in the Offer, and the other general terms and conditions
of the Offer.
10. What is the deadline for the Offer?
If you want to accept the Offer, the deadline for submitting
your Election Form and Release Agreement (your "Election
Form") that is being distributed to you in connection with the
Offer is 5:00 p.m., Mountain Standard Time, on November 30,
2001, unless we, in our sole discretion, extend the Offer. If
you do not return your Election Form before that deadline, you
will not be allowed to participate in the Offer.
11. Who is eligible to participate in the Offer?
You are eligible to participate in the Offer only if (1) you
are a full-time employee of the Company at the expiration time
of the Offer, (2) you are a non-union employee at that time,
and (3) you are not a selected senior officer of Qwest at that
time.
If you are employed by the Company in Japan or Hong Kong, or
if you are a Qwest employee expatriated to KPNQwest, you will
be eligible to participate in the Offer if you satisfy the
eligibility criteria described in the previous paragraph.
Otherwise, if you are employed outside of the United States,
you will not be eligible to participate in the Offer.
12. What are the conditions to the Offer?
The Offer is conditioned on your being employed with the
Company as described in the response to Question 11 above,
except that your employment is determined as of the New Option
4
Grant Date. In addition, the Offer is conditioned on your
satisfactorily completing and returning to us your election
form by 5:00 p.m., Mountain Standard Time, on November 30,
2001, as described in the response to Question 14 below. If
you resign, quit or die, or if your employment with the
Company terminates for any reason whatsoever before the New
Option Grant Date, or if you are on unpaid leave on the New
Option Grant Date, we will not grant you any New Options and
you will not have a right to any of your Cancelled Options.
You will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
13. What stock options may I tender/exchange in the Offer?
If you are eligible to participate in the Offer, you may
tender in the Offer any Qwest stock option that was originally
granted under our Equity Incentive Plan with a per share
exercise price of $35 or more (these are referred to as
"Eligible Options"). You cannot exchange options that you
received as an employee of U S WEST, LCI or Icon CMT. Only
options that were granted under our Equity Incentive Plan are
Eligible Options. In addition to any other options that may
qualify as Eligible Options, if you received an option grant
under our Equity Incentive Plan for 200 shares on September 7,
2000, those options will qualify as Eligible Options.
If you choose to participate in the Offer by tendering some or
all of your Eligible Options, you must also exchange all stock
options granted to you on or after May 29, 2001 whether or not
those options otherwise qualify as Eligible Options (these are
referred to as your "Recent Options"). Also, if you want to
tender any portion of a particular stock option grant, you
must tender all stock options outstanding under that grant
(whether or not vested).
14. How may I accept the Offer?
Read Offer Circular and Election Form. To accept the Offer,
you should first review the Offer Circular and the documents
referred to in the Offer Circular.
You should then obtain the Election Form. You may print an
Election Form from the Q or you may request one from Qwest
Stock Administration at StockAdmin2@Qwest.com or at the
following address or telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer.
Assemble Option Information. You should then assemble the
option information that you will need to complete the Election
Form. The last time you received options, we sent you all the
option information you need to complete the election form. For
your convenience, we are also sending to you at the address we
have for you an option statement showing the same information.
5
If you need another copy, please contact Qwest Stock
Administration at the email address, address or telephone
number given above.
Complete, Sign and Date Election Form. You should then
complete, sign and date the Election Form. If you want to
accept the Offer, you must indicate on the Election Form that
you accept the Offer and agree to the terms of the release set
forth in the Election Form. That is, you should indicate
whether you accept the Offer with respect to all of your
Eligible Options or indicate the grants of Eligible Options
that you want to exchange.
You must list on the Election Form all the Eligible Options
that you want to exchange, except that, if you want to
exchange all your Eligible Options, you may check the box on
the Election Form to indicate that you elect to exchange all
your Eligible Options. In either case, if you elect to
exchange any Eligible Option you will be deemed to have
elected to exchange all your Recent Options whether or not you
list them on the Election Form.
Return Election Form. You should then mail, hand deliver or
fax the completed, signed and dated Election Form to Qwest at
the following address for receipt prior before 5:00 p.m.,
Mountain Standard Time, on November 30, 2001, or any later
expiration time to which the Offer has been extended:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer.
We cannot accept Election Forms by e-mail or any other means
of delivery other than those means identified above. For your
convenience, a postage-paid pre-addressed envelope is included
with your package of Offer materials that is being sent to you
for you to use to return your Election Form to us. If you do
not use the enclosed pre-addressed envelope to return this
form to Qwest, you must pay all mailing or courier costs to
deliver this form to Qwest. The method by which you deliver
the signed Election Form to Qwest is at your option and risk,
even if you use the pre-addressed envelope, and delivery will
be effective only when the form is actually received by Qwest.
In all cases, you should allow sufficient time to ensure
timely delivery. If we do not receive a valid Election Form
from you prior to the deadline described in the response to
Question 10, you will be deemed to have rejected the Exchange
Offer.
If you do not receive an Election Form or need additional
information, please visit the Q or contact Qwest Stock
Administration. If you request an Election Form, be sure to
allow at least two business days for delivery to you.
Neither we nor any other person is obligated to give you
notice of any defects or irregularities in any election, nor
will anyone incur any liability for failure to give any such
notice. We will determine, in our discretion, all questions as
to the form and validity, including time of receipt, of
6
elections. Our determination of these matters will be final
and binding.
Qwest Stock Administration intends to return a confirmation of
receipt card to you by mail that you will fill out and send in
with your election form to confirm that your election form has
been received. This card only means that we have received
something from you. It does not mean that you completed the
Election Form correctly.
Other. If the Election Form is signed by trustees, executors,
administrators, guardians, attorneys-in-fact or others acting
in a fiduciary or representative capacity, such persons should
so indicate when signing, and unless we have waived this
requirement, submit evidence satisfactory to Qwest of their
authority to act in this capacity.
Your election to accept or reject the Offer will become
irrevocable upon the expiration time of the Offer. Be sure to
read your Election Form. The effectiveness of any election
that you may make to accept the Offer is subject to the
eligibility conditions described in the responses to Question
11 above.
Your election to participate in the Offer pursuant to the
terms and conditions described in the Offer Circular
constitutes your acceptance of the terms and conditions of the
Offer. Our acceptance for cancellation of the Eligible Options
that you elect to tender and any Recent Options will
constitute a binding agreement between you and us on the terms
and subject to the conditions of the Offer Circular.
The Offer does not apply with respect to any options that you
may own other than your Eligible Options and Recent Options.
You are responsible for the method of delivery of your
Election Form and ensuring that we receive your Election Form
before the expiration time of the Offer. You should allow
sufficient time to ensure timely delivery of your Election
Form. If you miss the deadline, you will not be allowed to
participate in the Offer.
15. Can I choose which options I want to tender?
If you have only one Eligible Option grant, you must either
accept or reject the Offer as to that entire grant. That is,
you cannot accept the Offer as to only a portion of your
option. For example, you cannot accept the Offer with respect
to the unvested portion of your option but reject the Offer
with respect to the vested portion of your option. If you
accept the Offer for your Eligible Option, you will be deemed
to have accepted the Offer for all your Recent Options,
whether or not you indicate that you intend to tender any or
all of your Recent Options.
If you have multiple Eligible Option grants, you may choose to
tender one or more of your Eligible Option grants in the
Offer. However, as to any particular Eligible Option grant,
you must either accept or reject the Offer as to that entire
grant. Although you can specify which of your Eligible Options
you want to tender, you cannot tender only a portion of any
particular grant.
For example, if you have one Eligible Option for 100 shares,
you cannot accept the Offer with respect to only 50 of those
shares but reject the Offer with respect to the other 50
shares, even if the Eligible Option has already vested as to
7
those 50 other shares. In any case, if you accept the Offer
for any of your Eligible Options, you must accept the Offer
for all your Recent Options.
If you own any Recent Options, some of your Recent Options may
also qualify as Eligible Options (in other words, they were
granted under our Equity Incentive Plan with an exercise price
of $35 or higher). Because your election to tender any of your
Eligible Options will require you to tender all of your Recent
Options, you will not have any choice as to whether to tender
any Eligible Options that are also Recent Options. For
example, assume that you have both an Eligible Option for 100
shares granted two years ago and an Eligible Option for 200
shares granted two months ago. The Eligible Option granted two
months ago would also be a Recent Option. Therefore, if you
choose to tender the Eligible Option for 100 shares granted
two years ago, you will also have to tender the Eligible
Option for 200 shares granted two months ago because that
option also constitutes a Recent Option. However, if you only
choose to tender the Eligible Option for 200 shares that was
granted two months ago, you will not have to tender the
Eligible Option for 100 shares granted two years ago because
that option does not qualify as a Recent Option.
As noted above, you may not partially tender any particular
Eligible Option grant. For example, if you have both a grant
of an Eligible Option for 100 shares and a grant of an
Eligible Option for 300 shares (neither of which are Recent
Options), you may elect to cancel both, either or neither of
these grants. However, you may not elect to tender just 50
shares of the 100 share grant or partially tender either
option grant. Likewise, if an option grant is partially vested
and partially unvested, you cannot choose to tender only the
unvested portion.
16. Can I tender options that I have already exercised?
No. The Offer applies only to the portions of your Eligible
Options that are unexercised and outstanding as of the
expiration time of the Offer. It does not apply in any way to
shares that you purchased by exercising options or to any
portion of an Eligible Option that you exercise before the
expiration time of the Offer.
If you have exercised an Eligible Option in its entirety, that
option is no longer outstanding and is therefore not included
in the Offer. However, if you have exercised an Eligible
Option grant in part, the remaining outstanding unexercised
portion of the option grant is included in the Offer and may
be tendered in the Offer.
For example, if you have an Eligible Option for 100 shares,
but you have already exercised it with respect to 50 shares,
you may tender the unexercised portion of the Eligible Option
relating to the 50 remaining shares.
17. Do I have to pay money or taxes if I accept the Offer?
No. Whether or not you accept the Offer, you will not have to
make any payments to us until you exercise your stock options.
If you accept the Offer, there will be no federal income taxes
consequences for the exchange (the "Exchange") of options for
the opportunity to be granted new options in the Offer. See
the responses to Questions 50-54 below.
8
18. What if I change my mind?
If you file an Election Form and want to change or withdraw
your election, you may do so by filing a new Election Form
indicating your new acceptance or rejection of the Offer in
accordance with the procedures described above so that we
receive your new Election Form before the expiration time of
the Offer. We will rely on the last Election Form that you
validly file and we receive before the expiration time of the
Offer.
If you want to change your election and you need a new
Election Form, you may print one from the Q or you may request
one from Qwest Stock Administration at StockAdmin2@Qwest.com
or at the following address or telephone or fax number:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
tel: 866-437-0007
fax: 303-992-1174
A Qwest Stock Administration representative will generally be
available at that location (during normal business hours) or
through that telephone number from 8:00 a.m. to 7:00 p.m.,
Mountain Standard Time, each business day until the expiration
time of the Offer. If you request an Election Form, be sure to
allow at least two business days for delivery to you.
19. What is the release that is included in the Election Form?
By signing your Election Form and indicating that you accept
the Offer, you agree to cancel the designated Eligible Options
and your Recent Options and agree to the provisions of a
release set forth in the Election Form. The release will
operate as an unconditional release by you and your trustees,
executors, administrators, guardians, attorneys-in-fact or
others acting in a fiduciary or representative capacity of all
rights and remedies relating to your Cancelled Options.
By agreeing to the release, you agree that your exchanged
Eligible Options and Recent Options, and all of your rights
with respect to your exchanged Eligible Options and Recent
Options, automatically terminate at the expiration time of the
Offer. You retain, of course, your conditional right to
receive New Options on the terms and conditions described in
the Offer Circular.
20. Can the Offer be modified?
Yes. Prior to the expiration time of the Offer, we may, in our
sole discretion, extend, modify or revoke the Offer. We will
notify you if the Offer is revoked. You will also be notified
(and given an opportunity to change any Election Form that you
may have previously filed) if we modify the Offer in any
material manner. The date that New Options will be granted is
referred to as the "New Option Grant Date." The New Option
Grant Date is scheduled to be June 3, 2002. If June 3, 2002 is
not a trading day, the New Option Grant date will be the first
trading day after June 3, 2002. If we extend the Offer, we
will adjust the New Option Grant Date to correspond to the new
expiration time of the Offer.
9
Subject to our right to modify or revoke the Offer, the only
condition to participating in the Offer is that you must be
eligible (as described in the responses to Question 11 above)
to participate in the Exchange as of the expiration time of
the Offer. See the response to Question 37 below for
conditions applicable to New Option grants.
We are not aware of any jurisdiction where the Exchange, the
Offer, or the grant of New Options would violate applicable
law. If we become aware of any jurisdiction where the Exchange
or the Offer would violate applicable law, we will revoke the
Offer in cases where applicable law cannot be satisfied. We
may, where necessary, make New Option grants conditional on
any required legal filings or approvals, modify the terms of
the New Options to the extent necessary to satisfy applicable
law, and we may delay the grant of New Options in cases where
filings or approvals are required and have not been obtained.
21. What happens if I accept the Offer but my employment
terminates before the expiration time of the Offer?
If you accept the Offer but you cease to be a full-time
employee of the Company before the expiration time of the
Offer or you are not otherwise eligible to participate (see
the responses to Questions 11 and 12 above), the release that
you gave in accepting the Offer will be void and your Eligible
Options and your Recent Options will be treated as if they had
not been tendered or cancelled.
22. What happens if I accept the Offer but my employment
terminates before the New Option Grant Date?
If your employment with the Company is terminated by you or by
the Company for any reason whatsoever after the expiration
time of the Offer and before the New Option Grant Date, or if
you are on unpaid leave on the New Option Grant Date, you will
not have a right to any Cancelled Options, and you will not
have a right to the New Options that would have otherwise been
granted to you on the New Option Grant Date. You should
carefully consider this issue, particularly if you are
thinking about retiring or resigning before the New Option
Grant Date.
Therefore, if you are not a full-time employee of the Company
at the expiration time of the Offer and on the New Option
Grant Date, you will not receive any New Options in exchange
for your Cancelled Options. You also will not receive any
other consideration for the Cancelled Options or with respect
to New Options that would have otherwise been granted to you.
This result is the same even if you are terminated by the
Company for no reason or are laid off or the subject of a
workforce reduction.
23. What happens if I accept the Offer but I go on leave before
the expiration time of the Offer?
If you take a leave of absence, you will be treated as being
employed by the Company for purposes of the Offer while on
leave for as long as your leave is a paid leave of absence.
Examples of paid leaves generally include workers compensation
leave, short term disability with pay (including approved
maternity or paternity leave), long term disability, military
leave, and birth/adoption/guardianship leave. If you are on an
unpaid leave of absence at the expiration time of the Offer,
then you will not be eligible to participate in the Offer
unless we are required by law to still treat you as an
employee for this purpose. Examples of unpaid leave generally
10
include surplus transition leave, personal unpaid leave,
family and medical leave (other than approved maternity and
paternity leave), and educational leave.
24. What happens if I accept the Offer but my employment
terminates before the New Option Grant Date?
If you die or if your employment with the Company terminates
for any reason whatsoever before the New Option Grant Date, or
you are on unpaid leave on the New Option Grant Date, we will
not grant you any New Options and you will not have a right to
any of your Cancelled Options. If you are on an unpaid leave
of absence on the New Option Grant Date, you will not be
granted New Options and you will not have a right to any of
your Cancelled Options unless we are required by law to still
treat you as an employee for this purpose. In either case, you
will not receive any other consideration for your Cancelled
Options or with respect to the New Options that you otherwise
would have received.
25. What will happen to my Eligible Options and Recent Options if
I do not accept the Offer?
Participation in the Offer is entirely voluntary. If you do
not accept the Offer (or if you do not accept the Offer with
respect to all of your Eligible Options), your Eligible
Options that you do not elect to tender in the Offer will
remain outstanding in accordance with their terms. However, if
you accept the Offer with respect to any of your Eligible
Options in any grant, you must also exchange all your other
Eligible Options that were included in the same grant and all
of your Recent Options.
If you do not accept the Offer, your Recent Options granted on
or after May 29, 2001 will also remain outstanding in
accordance with their terms.
26. Will I be eligible to receive future grants of options under
Qwest's benefit plans?
If you accept the Offer, you are ineligible to receive any
additional stock option grants until after the New Option
Grant Date. This is because it would result in potential
accounting charges that we wish to avoid.
If you do not accept the Offer, you continue to be eligible
for additional option grants. In other words, the six month
ineligibility period for grants will not apply to you.
However, we do not have any current intention to issue options
on a broad basis in 2002 (other than the New Options).
27. How does the Offer affect my overall compensation?
You might choose to think of your paycheck as your short-term
compensation, your potential quarterly bonus as your mid-term
compensation and your stock options as your long-term
compensation. Taken together, these components represent a
comprehensive compensation package. You should also consider
the employment and related compensation commitment described
in the response to Question 37 below.
11
28. Is there any tax consequence to my participation in the
Exchange?
If you exchange your Eligible Options and Recent Options (if
any) for New Options, you will not be required under current
law to recognize income for United States federal income tax
purposes at the time of the Exchange or at the date that the
New Options are granted. See the responses to Questions 50-54
below.
29. If I accept the Offer, will the grant and exercise of New
Options affect my benefits under Company-sponsored retirement
plans?
No. The New Options will not affect those benefits. Income
that you would have recognized if you had exercised your
Eligible Options or Recent Options in the ordinary course
would have been excluded from your compensation for purposes
of determining your benefits under other Company-sponsored
retirement plans. Similarly, income recognized in connection
with exercising your New Options will be excluded from your
compensation for purposes of determining your benefits under
Company-sponsored retirement plans. Any value associated with
an option grant is also excluded from your compensation for
these purposes.
30. What happens if Qwest is subject to a change in control, asset
sale, merger or other reorganization before the New Options
are granted?
If a change of control or certain other reorganization of
Qwest occurs before we grant the New Options, we expect that
the successor or purchaser would agree to assume or substitute
other outstanding options of Qwest and would agree to assume
the obligation to issue New Options. However, we cannot
guarantee that any successor or purchaser would agree to
assume existing options or any obligation to issue New
Options. Therefore, it is possible that you may not receive
any New Options, securities of the surviving company or other
consideration in exchange for your Cancelled Options if Qwest
is subject to a change of control, sells assets or otherwise
reorganizes before the New Options are granted. In addition,
the announcement of a change of control transaction regarding
Qwest before the New Option Grant Date could have a
substantial effect on our stock price, including substantial
stock price appreciation, which could reduce or eliminate
potential benefits provided by the Offer.
The preceding paragraph describes the general consequences of
a change of control or other reorganization of Qwest
generally. You may also be affected if Qwest or an affiliate
sells a subsidiary, a division or a part of the Company for
which you work. In those circumstances, if you were
transferred to the acquiring company, the acquiring company
would likely not have to agree to issue New Options under the
Offer. Consequently, if you are employed by the subsidiary or
in the division or business that is sold and you do not
continue to be employed by the Company following the sale,
then the sale will constitute the termination of your
employment with the Company for purposes of the Offer and the
New Options. In those circumstances, you would not be entitled
to receive options to purchase stock or securities of the
acquiring company or any other consideration in exchange for
your Cancelled Options.
We also reserve the right to take any action, including
entering into a merger, asset purchase or sale or similar
transaction, or shutting down a business unit, whether or not
it adversely affects the grant of the New Options under the
Offer or the likelihood that the New Options will be granted.
12
31. After the grant of my New Option, what happens if my options
again end up "underwater"?
There is no guarantee that your New Options will have an
exercise price that is less than the exercise price of your
Cancelled Options or that the market price of Qwest common
stock will ever exceed the exercise price of your New Options.
We cannot guarantee stock price performance. Furthermore, we
currently do not expect to make a similar stock option
exchange offer in the future.
Description of Terms and Conditions of New Options to be Granted in June 2002
This section generally describes the New Options to be granted as part of the
Offer. The information in this section is qualified in its entirety by the more
detailed information set forth in the form of Nonqualified Option Agreement that
will evidence each grant of New Options (the applicable "New Option Agreement"),
by the more detailed information set forth in our Equity Incentive Plan, and, as
with other sections of this document, by the information contained in the Offer
Circular. You may obtain a copy of our Equity Incentive Plan by request without
charge from Qwest and it is also available from the SEC (see the "Additional
Information; Incorporation of Documents by Reference" section of the Offer
Circular). Copies of the forms of New Option Agreements that may be used in
connection with the Exchange are attached as Attachments B, C and D to the Offer
Circular. As described below, the form of New Option Agreement that will be used
to evidence any particular New Option will depend on the change of control
provisions that applied to the corresponding Cancelled Option. You should read
all applicable attachments to the Offer Circular.
Our Equity Incentive Plan or the applicable New Option Agreement will control if
any discrepancy exists between the information presented in this document or the
Offer Circular with respect to the New Options and the terms of our Equity
Incentive Plan or the applicable New Option Agreement.
32. If I accept the Offer, how many New Options will I be granted?
If you timely accept the Offer, you are eligible to
participate in the Exchange and you are a full-time employee
of the Company on the New Option Grant Date, you will be
granted New Options with respect to the same number of shares
as the number of shares covered by your Cancelled Options. For
example, if you tender an Eligible Option that covered 100
shares, which had been exercised as to 20 shares prior to the
expiration time of the Offer, and was outstanding as to 80
shares at the time it terminated pursuant to the Exchange,
your New Option would cover 80 shares.
In general, if we increase or decrease the number, or change
the rights and privileges, of our outstanding shares of common
stock by payment of a stock dividend, stock split or other
distribution upon the shares payable in common stock, or
through a subdivision, combination, consolidation,
reclassification or recapitalization involving our outstanding
common stock, we will proportionately adjust the number,
rights and privileges of the securities to be subject to New
Options as if they had been outstanding on the date that any
of these events occur. The mere issuance of additional shares
by Qwest in an acquisition or other transaction, however,
typically would not result in any such adjustment.
We do not guarantee that you will receive any value if you
accept the Offer. The value you receive will depend on, among
other things, the exercise price of your Cancelled Options,
the exercise price of your New Options, whether or not you
13
remain employed by the Company or the New Options otherwise
vest, and the market price of our common stock when you sell
the shares that you acquire when you exercise your New
Options.
33. What will be the exercise price of the New Options?
The per share exercise price of the New Options will be the
closing market price of our common stock as reported by the
New York Stock Exchange on the New Option Grant Date. The New
Option Grant Date will be June 3, 2002 or, if that day is not
a trading day, the first trading day after June 3, 2002. If we
extend the Offer, we will adjust the New Option Grant Date to
correspond to the new expiration time of the Offer.
34. When will the New Options vest?
If you accept the Offer, the New Options that you are granted
will vest and become exercisable over four years as follows:
(1) one-fourth of the New Options will vest on the first
anniversary of the New Option Grant Date, (2) one-fourth of
the New Options will vest on the second anniversary of the New
Option Grant Date, (3) one-fourth of the New Options will vest
on the third anniversary of the New Option Grant Date and (4)
one-fourth of your New Options will vest on the fourth
anniversary of the New Option Grant Date, subject, in each
case, to your continued employment by the Company through the
applicable vesting date. All New Options will be subject to
this vesting schedule, regardless of the fact that all or a
portion of your Cancelled Options may have already vested.
For example, assume that you decide to tender the one Eligible
Option that you own for 200 shares. At the expiration time of
the Offer the option is 25% vested. Assuming that you are
still employed on the New Option Grant Date (assuming it is
June 3, 2002), we will grant you a New Option for 200 shares.
Your New Option will vest in four equal installments, with 25%
vesting on June 3, 2003, June 3, 2004, June 3, 2005 and June
3, 2006. The fact that your Eligible Option was already 25%
vested when it was cancelled does not affect the vesting
schedule of your New Option.
35. What are the termination provisions of the New Options?
New Options will each be subject to a new ten year option term
beginning on New Option Grant Date. The New Options will
remain subject to the same termination of employment
provisions as your Cancelled Options.
36. What will be the change of control provisions of my New
Option?
The New Options granted in exchange for your Cancelled Options
will be subject to the same change of control provisions as
your Cancelled Options. Your different Eligible Option grants
and Recent Option grants, if applicable, may now be subject to
different change of control provisions. If this is the case,
your New Option grants will be evidenced by different forms of
New Option Agreements to reflect these different provisions.
37. What will be the other terms and conditions of my New Options?
You must make an employment commitment to receive a New
Option. That is, Section 7.2(f) of our Equity Incentive Plan
requires that you reaffirm on the New Option Grant Date your
14
agreement to remain in the employ of the Company for a
continuous period of at least one year after that date at your
rate of compensation then in effect, even though the Company
may terminate your employment and change your compensation
before, during or after the one-year period. You were required
to make this reaffirmation when you received your other
options from the Company. If you do not make that
reaffirmation when you receive a New Option, you will not be
granted any New Options and you will not have a right to any
of your Cancelled Options. If we determine that we will not
require written affirmations, your acceptance of your New
Option will constitute your affirmation of the employment
agreement referred to above.
The New Options will be subject to a new ten year term,
starting on the New Option Grant Date. Other than the new
exercise price, new option term and new vesting schedule, we
expect that your New Options will otherwise be subject to
substantially the same terms and conditions as the
corresponding Cancelled Options. However, we reserve the
authority contemplated by our Equity Incentive Plan to make
adjustments relative to the New Options, before and after they
are granted, consistent with the authority that our Board of
Directors had with respect to the Cancelled Options. In the
period before the New Option Grant Date, such adjustments or
termination of rights would occur without prior notice to you.
Also see the response to Question 20 above.
You will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
38. What is a stock option?
A stock option is a right granted by a corporation to an
individual or entity to buy a specified number of shares of
the company's stock at a fixed price during a specified period
of time.
39. What is an "exercise price"?
An exercise price, also called the strike price or grant
price, is the fixed price that you pay to buy your shares when
you exercise your stock option.
Other Provisions; Administration
This section describes certain other aspects of the Offer, including the fact
that the Offer does not confer any employment rights, certain administrative
information regarding the Offer and, since Qwest is making the Offer, certain
information about Qwest.
40. Does the Offer give me any rights to continued employment by
the Company?
No. The Offer does not have any effect on your employment
status or give you any right to continued employment with the
Company or any of its affiliates. You will remain an at-will
employee regardless of whether you elect to participate in the
Exchange. That means that you are not guaranteed employment
for any period of time.
If you die or if your employment with the Company terminates
for any reason whatsoever before the New Option Grant Date, or
if you are on unpaid leave on the New Option Grant Date, we
will not grant you any New Options and you will not have a
right to any of your Cancelled Options. If you are on an
unpaid leave of absence on the New Option Grant Date, you will
not be granted New Options and you will not have a right to
any of your Cancelled Options unless we are required by law to
15
still treat you as an employee for this purpose. In either
case, you will not receive any other consideration for your
Cancelled Options or with respect to the New Options that you
otherwise would have received.
If we sell a subsidiary or any other event or transaction
occurs that results in a Qwest affiliate or subsidiary not
continuing as such an affiliate or subsidiary after the event
or transaction, and you are employed by the affected affiliate
or subsidiary, you will be deemed to have terminated
employment with the Company for purposes of the Exchange and
any of your New Options unless, after the event or
transaction, you are otherwise employed by Qwest or another
entity that is then a Qwest subsidiary or affiliate.
41. How do I make a claim for payment of other benefits I may be
owed?
If you accept the Offer, you generally will not have to take
any other action to receive the grant of New Options in
exchange for your Cancelled Options. If, however, you believe
that you are being denied a benefit to which you are entitled,
you should file a written request with Qwest Stock
Administration. The request should include the reasons for
your claim. Any written claim request should be sent to:
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 10th Floor
Denver, Colorado 80202
42. Who will administer and pay the costs of administering the
Exchange?
We will make all administrative decisions regarding the
Exchange. Without limiting that authority, we have the
authority, in our sole discretion, to determine all questions
as to form of documents and the validity, eligibility, and
acceptance of any election to participate in the Offer. Our
determination on these matters will be final and binding on
all persons. We reserve the right to waive any condition of
the Offer. We are not obligated to give any notice of any
defects or irregularities in Election Forms, nor will anyone
incur any liability if you fail to return a valid Election
Form.
We will pay the expenses of administering the Exchange and the
grant of New Options.
We will not retain, nor will we pay any fees or commissions
for, any broker, dealer, or other person to solicit elections
to accept the Offer. Any such solicitation is prohibited.
43. What is the price of our common stock?
Shares of our common stock are traded on the New York Stock
Exchange under the symbol "Q." On October 30, 2001, the
closing price of a share of our common stock was $16.00. The
following table presents the high and low sales prices per
share of Qwest common stock for the periods indicated, as
reported on the New York Stock Exchange:
16
Period High Low
------ ---- ---
Year Ending December 31, 2001:
First Quarter $47.5000 $33.2500
Second Quarter $40.9000 $29.8200
Third Quarter $31.1500 $16.5000
Fourth Quarter (to October 30, 2001) $18.9000 $15.6000
Year Ended December 31, 2000:
First Quarter $64.0000 $37.0000
Second Quarter $54.2500 $39.5000
Third Quarter $57.8750 $44.5000
Fourth Quarter $51.4375 $32.3750
Year Ended December 31, 1999:
First Quarter $37.4063 $25.6250
Second Quarter $48.0625 $32.5625
Third Quarter $35.9375 $26.1250
Fourth Quarter $44.0000 $29.8750
You should obtain current market quotations for our common
stock before you decide whether you should accept the Offer.
The value of our common stock will fluctuate in the future and
we cannot and do not predict any future values for our common
stock.
44. What information is available regarding Qwest?
Qwest is making the Offer. We are a leading broadband Internet
communications company that provides advanced communication
services, data, multimedia and Internet-based services on a
national and global basis; and wireless services, local
telecommunications and related services and directory services
in a 14-state local service area. A Fortune 100 company, we
principally serve large and mid-size business and government
customers on a national and international basis, as well as
residential and small business customers primarily in our
14-state local service area.
We are incorporated under the laws of the State of Delaware
and have our principal executive offices at 1801 California
Street, Denver, Colorado 80202, telephone number 303-992-1400.
Attachment E to the Offer Circular summarizes certain of our
consolidated financial data. Additional information about us,
including certain more detailed financial statements, is
available from the documents referred to and incorporated by
reference under "Additional Information: Incorporation of
Documents by Reference" in the Offer Circular.
45. How many Eligible Options are there?
The Offer is being made only with respect to your Eligible
Options and Recent Options that are outstanding as of the
expiration time of the Offer. As of September 30, 2001, there
were 1,664,535,549 shares of Qwest common stock outstanding
and we had granted stock options and other awards covering up
to an additional 121,190,582 shares of Qwest common stock
(note that the awards referred to in the response to Question
46 below are not included in this number because the awards
were not granted until October 24, 2001).
17
Of the shares subject to those stock options and other awards,
approximately 35.7 million shares (approximately 2.1% of the
outstanding shares) were subject to the Eligible Options and
approximately 1.8 million shares (approximately 0.1% of the
outstanding shares) were subject to the Recent Options
outstanding at that time. (None of the awards referred to in
the response to Question 46 below and granted on October 24,
2001 constitute Eligible Options or Recent Options that can be
exchanged in the Offer.)
46. How does the Offer relate to Qwest's directors and executive
officers?
Our directors and certain senior officers are not eligible to
participate in the Exchange.
Our directors and executive officers, and their positions and
offices, are as follows: Philip F. Anschutz (Chairman of the
Board), Joseph P. Nacchio (Chairman and Chief Executive
Officer, and Director), Linda G. Alvarado (Director), Craig R.
Barrett (Director), Hank Brown (Director), Thomas J. Donohue
(Director), Jordan L. Haines (Director), Cannon Y. Harvey
(Director), Peter S. Hellman (Director), Vinod Khosla
(Director), Marilyn Carlson Nelson (Director), Frank P. Popoff
(Director), Craig D. Slater (Director), W. Thomas Stephens
(Director), Joel M. Arnold (Executive Vice President - Global
Accounts), Clifford S. Holtz (Executive Vice President
National Business Accounts), Afshin Mohebbi (President and
Chief Operating Officer), James A. Smith (Executive Vice
President - National Consumer Markets), Robin R. Szeliga
(Executive Vice President and Chief Financial Officer), and
Drake S. Tempest (Executive Vice President, General Counsel,
Chief Administrative Officer and Secretary). The address of
each director and executive officer is c/o Qwest
Communications International Inc., 1801 California Street,
Denver, Colorado 80202.
Please see our proxy statement for our annual meeting of
shareholders held on May 2, 2001 for more information
regarding the compensation of directors and certain executive
officers and the amount of Qwest securities that our directors
and executive officers beneficially owned, for periods or as
of the dates set forth in that statement. This proxy statement
is available upon request as described under "Additional
Information; Incorporation of Documents by Reference" in the
Offer Circular.
There were no stock option or stock transactions involving our
directors and executive officers within the 60 days before the
commencement of the Offer, except for the grants of the stock
options and restricted stock described in the following
paragraph.
Our Board approved certain stock option and restricted stock
grants on October 24, 2001. Those grants were made to persons
who are not eligible to participate in the Offer. Messrs.
Nacchio, Mohebbi, Arnold, Holtz, Smith and Tempest and Ms.
Szeliga were granted new stock options covering 7,250,000
shares, 1,000,000 shares, 500,000 shares, 175,000 shares,
250,000 shares, 600,000 shares, and 600,000 shares of our
common stock, respectively, each with an exercise price of
$16.81 per share. Messrs. Arnold and Tempest and Ms. Szeliga
were each granted restricted stock awards covering 100,000,
200,000 and 100,000 shares, respectively. The stock option
grants have maximum ten-year terms and vest in four equal
annual installments of 25% on each of the first four
anniversaries of the date of grant beginning on October 24,
2002, except that Mr. Nacchio's stock options vest in four
installments as follows: 2,500,000 shares on August 1, 2004,
500,000 shares on December 1, 2004, 2,500,000 shares on August
1, 2005 and 1,750,000 shares on December 1, 2005; and Mr.
Mohebbi's stock options vest in two installments as follows:
500,000 shares on April 1, 2004 and 500,000 shares on April 1,
18
2005. The shares of restricted stock vest in four equal annual
installments of 25% on February 1, 2003, February 1, 2004,
February 1, 2005 and February 1, 2006. These option grants and
restricted stock awards are evidenced by award agreements in
the forms customarily used by us. These forms are attached as
exhibits to the Tender Offer Statement on Schedule TO that we
filed with the Securities and Exchange Commission and that is
referred to in the "Additional Information; Incorporation of
Documents by Reference" section of the Offer Circular.
In connection with the award grants identified in the
preceding paragraph, Mr. Nacchio's employment agreement with
us was extended through December 31, 2005 and each of Messrs.
Nacchio's and Mohebbi's annual base salary was adjusted
effective as of January 1, 2002 to $1,500,000 and $850,000,
respectively. Each of their annual bonus targets (expressed as
a percentage of base salary) for 2002 will be 250% and 200%,
respectively, of base salary. In addition, we loaned Mr.
Mohebbi $4,000,000, interest free, that will be forgiven over
five years, in 20% installments so long as he remains
satisfactorily employed.
47. What are the general accounting consequences to the Company of
the Exchange?
We believe that we will not incur any compensation expense
solely as a result of the transactions contemplated by the
Exchange because we will not grant any New Options until a
date that occurs more than six months and one day after the
expiration time of the Offer (the New Options are scheduled to
be granted on June 3, 2002 or later). Further, the exercise
price of all New Options will equal the closing market price
of our common stock on the New Option Grant Date.
If we were to grant any options before the scheduled New
Option Grant Date to any option holder electing to participate
in the Exchange, our grant of those options (assuming the
applicable per share exercise price is less than the exercise
price of the options tendered in the Exchange) would be
treated for financial reporting purposes as a variable award
to the extent that the number of shares subject to the
newly-granted options is equal to or less than the number of
the option holder's option shares tendered in the Exchange. In
this event, we would be required to record as compensation
expense the amount by which the market value of the shares
subject to the newly granted options exceeds the exercise
price of those shares. This compensation expense would accrue
as a variable accounting charge to our earnings over the
period that the newly granted options are outstanding. We
would have to adjust this compensation expense periodically
during the option term based on increases or decreases in the
market value of the shares subject to the newly granted
options.
Similar accounting rules will trigger a variable accounting
charge to our earnings if outstanding options are terminated
and, within the six-month period preceding the termination,
other stock options were granted at an exercise price that is
less than the exercise price of the terminated options. To
avoid this potential accounting charge, we are requiring that
you tender all of your Recent Options in the Exchange if you
want to tender any of your Eligible Options.
48. Is Qwest contemplating any other transactions?
We must disclose whether we are contemplating certain types of
transactions in connection with the Offer. Except as otherwise
disclosed below and elsewhere in the Offer Circular and in our
19
filings with the Securities and Exchange Commission (the
"SEC"), and while we reserve the right to contemplate and
effect any of these transactions from time to time, we
currently have no plans or proposals that relate to or would
result in:
o an extraordinary transaction, such as a merger,
reorganization or liquidation, involving us or any of our
subsidiaries;
o any purchase, sale or transfer of a material amount of
our assets or the assets of any of our subsidiaries;
o any material change in our present dividend rate or
policy, or our indebtedness or capitalization;
o any change in our present Board of Directors or executive
officers, including, but not limited to, any plans or
proposals to change the number or the term of directors
or to fill any existing vacancies on our Board or to
change any material term of the employment contract of
any executive officer;
o any other material change in our corporate structure or
business;
o our common stock being de-listed from a national
securities exchange;
o our common stock becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended;
o the suspension of our obligation to file reports under
Section 15(d) of the Securities Exchange Act of 1934, as
amended;
o the acquisition by any person of any of our securities or
the disposition of any of our securities (other than as a
result of the exercise of stock options or the payment of
other award granted under our incentive compensation
plans); or
o any changes in our articles of incorporation, bylaws of
other governing instruments or any actions that could
impede the acquisition of control of Qwest.
On October 18, 2001, we announced an agreement to purchase
approximately 14 million shares of KPNQwest common stock from
the other major shareholder in KPNQwest, Koninklijke KPN N.V.
("KPN"). The agreed upon purchase price was $4.58 per share.
After completion of the purchase, we will own approximately
47.5% of the voting power of the KPNQwest stock. As part of
the agreement, KPN granted an option to us to purchase some or
all of KPN's shares in KPNQwest in March of 2002. The
purchase, which is subject to several conditions including
antitrust pre-clearance in the United States of America and
several European jurisdictions, and KPNQwest shareholder
approval of certain amendments to the KPNQwest articles of
association, is expected to be completed before December 31,
2001. We will continue to account for our proportionate share
of KPNQwest's operations under the equity method of
accounting.
20
49. Are there any regulatory requirements or other approvals that
Qwest must comply with or obtain?
We are not aware of any license or regulatory permits that are
important to our business that might be adversely affected by
the exchange and cancellation of Eligible Options and Recent
Options or the issuance of New Options as contemplated by the
Offer. In addition, we are not aware of any approval that is
required from any government authority or agency for the
cancellation of Eligible Options and Recent Options and the
grant of New Options as contemplated by the Offer, other than
those that we have obtained or that we expect to obtain.
Federal Income Tax and Social Security Consequences
Questions 50 through 53 below discuss the material United States federal income
tax and Social Security considerations that relate to the Exchange. Question 54
below comments on state, local and foreign tax matters. We cannot and do not
guarantee any particular tax consequences. You should consult your own tax
advisors.
The Company may withhold any amounts required by law (including U.S. federal,
state or local, or foreign, income, employment or other taxes) to be withheld
with respect to the Exchange and the exercise of New Options. In the event that
the Company does not elect for any reason to withhold amounts necessary to
satisfy any applicable tax withholding obligations that arise, the Company may
withhold such amounts from compensation otherwise payable to you or you must pay
or provide for the payment of such amounts to the Company. The amount of tax
withheld by the Company may not be sufficient to pay the actual tax liability
due, and you will be responsible for any shortfall.
50. What is the tax effect of the Exchange?
If you accept the Offer, there will be no federal income tax
consequences with respect to the cancellation of your
exchanged Eligible Options and Recent Options or with respect
to the grant of your New Options.
51. What is the income tax effect of the New Option grants and
shares I receive when I exercise my vested New Options?
The New Options granted to you will not be taxed for income
tax purposes until the year in which you exercise the New
Options. The amount of income that you will recognize with
respect to the shares distributed will equal the excess of the
fair market value of a share of our common stock over the
exercise price paid for the shares (the "spread"). The income
that you recognize with respect to the exercise of New Options
will constitute ordinary income, not capital gain. You will
pay federal income tax based on the tax rates in effect for
the year in which you exercise your New Options, rather than
based on the tax rates in effect for the year 2001 or 2002.
We will be entitled to a business expense deduction equal to
the amount of ordinary income that you recognize with respect
to the exercised New Option. We will be allowed the deduction
in the year in which you recognize ordinary income.
The fair market value of our common stock that you receive
when you exercise your New Options will be the "tax basis" for
the stock. If you later sell the stock, any gain or loss that
you realize from the sale (determined based on your tax basis
in the stock) will be taxable to you either as short-term or
long-term capital gain or loss, depending on how long you own
21
the shares before you sell them. Generally, you must own the
shares for more than one year before you sell them in order to
qualify for long-term capital gain treatment.
52. What are the tax withholding requirements with respect to the
New Options?
The Federal Insurance Contributions Act ("FICA") imposes two
types of taxes - Social Security tax (at 6.2%) and Medicare
tax (at 1.45%) - on both employers and employees for wages
paid to employees. The Social Security tax is a percentage of
wages up to the Social Security wage base limitation, which is
$80,400 for the year 2001. The Social Security wage base is
adjusted annually. Once you have paid Social Security tax for
a given year on an amount of wages from a particular employer
equal to the wage base limitation, no further Social Security
tax is payable on that year's wages from that employer.
Currently, there is no wage base limitation for Medicare tax
purposes. Thus, all wages paid to you are subject to Medicare
tax.
Income tax withholding is also required on wages paid to
employees. The Company will withhold federal income taxes on
the "spread" upon the exercise of your options at the
supplemental wage withholding rate (currently 27.5%). State
and local income tax withholding also may be required,
depending on your state of employment. For purposes of the
following illustration, the state tax withholding rate is
assumed to be 6%. (The California supplemental wage
withholding rate is 6%.)
The "spread" on the New Options will be treated as wages
received for FICA and income tax purposes in the year(s) of
exercise. Income taxes and FICA taxes will be withheld at the
time(s) of exercise. The amount of income tax withholding may
not be sufficient to cover your actual income tax liability.
For Example: Assume that you accept the Offer and that you are
granted 300 New Options for your exchanged Eligible Options at
a per share exercise price of $15. Further assume that you
exercise 100 of your vested New Options when the fair market
value of a share is $20. You will recognize $500 of ordinary
income in that year. Required withholding would be as follows:
$38.25 for FICA (assuming the Social Security wage base had
not been met at the time of payment) (7.65% of $500 = $38.25);
$137.50 for federal income taxes (27.5% of $500 = $137.50);
and $30 for state income taxes (at an assumed state
withholding rate of 6%, 6% of $500 = $30). Thus, the total
withholding obligation would be $205.75 ($38.25 + 137.50 + $30
= $205.75).
We may make provisions and take whatever steps as we may deem
necessary or appropriate to withhold all federal, state, local
and other taxes required by law to be withheld with respect to
the exercise of any New Option. For example, we may deduct the
amount of any required withholding taxes from any other amount
then or thereafter payable to you or may require you to pay to
us in cash the amount required to be withheld.
53. Could a change in tax law affect my benefits?
Yes. Congress may change the relevant tax and Social Security
law at any time, and these changes may be retroactive to
before the date of enactment. These changes may have a
material effect on the benefit you expect to receive by
electing to participate in or by not electing to participate
in the Exchange.
22
54. What are the local and foreign income tax consequences of the
New Options?
We are unaware of any state and local income tax consequences
in the United States of the Exchange and the grant and
exercise of New Options that differ from the United States
federal income tax consequences described and cross-referenced
above.
Foreign taxes are beyond the scope of this discussion. If you
reside in a jurisdiction outside of the United States, you
should consult with your own tax advisors.
23
EX-99.A.11
13
ex_a-11.txt
EXHIBIT 99(A)(11)
[QWEST HUMAN RESOURCES WEBSITE FULL SCREEN MESSAGE]
Qwest is offering full-time, non-union employees the opportunity to participate
in a voluntary stock option exchange program. The deadline for participating in
this program is 5 p.m. (Mountain Standard Time) November 30, 2001. Details about
the program are available by clicking on the icons on this page.
[Link to Letter to Employees Announcing Exchange Offer]
[Link to Offering Circular]
[Link to Election Form]
[Link to Questions and Answers]
[Link to specific Question and Answer regarding returning Election Form]
EX-99.A.12
14
exa-12.txt
EXHIBIT 99(A)(12)
[REMINDER MESSAGE TO EMPLOYEES TO REVIEW OFFERING CIRCULAR
CONTAINED ON QWEST HUMAN RESOURCES WEBSITE]
Before you complete the Election Form and Release, you should carefully review
the Offer Circular. It contains important information that you should consider
before making your decision.
Click here for the Circular http://theq.qwest.net/departments/hr/circular.pdf
[LINK TO EXCHANGE OFFER CIRCULAR]
Click here for the Election Form
http://theq.qwest.net/departments/hr/electform.pdf [LINK TO ELECTION FORM]
EX-99.A.13
15
ex_a-13.txt
EXHIBIT 99(A)(13)
[This form of Reminder of Deadline may be distributed on one or more occasions
by Qwest Communications International Inc. to persons eligible to participate in
the Qwest Communications International Inc. Offer to Exchange Certain
Outstanding Stock Options.]
REMINDER OF DEADLINE
5:00 P.M. (MST) FRIDAY, NOVEMBER 30, 2001
To All Employees Eligible to Participate in the Stock Option Exchange Offer:
Friday, November 30, 2001, 5:00 p.m. MST, is presently the deadline for you to
tender any of your eligible stock options under the Qwest Communications
International Inc. Offer to Exchange Certain Outstanding Qwest Stock Options
(the "Exchange Offer").
If you need another copy of the Exchange Offer Circular or the Election Form and
Release Agreement, you may print one on the Q at the link given below or you may
contact our Stock Administration department at stockadmin2@qwest.com or
866-437-0007.
Exchange Offer Circular: http://theq.qwest.net/departments/hr/circular.pdf [LINK
TO EXCHANGE OFFER CIRCULAR]
Election Form: http://theq.qwest.net/departments/hr/electform.pdf [LINK TO
ELECTION FORM]
You must submit your Election Form and Release Agreement in accordance with the
instructions contained in those documents. We cannot accept late submissions,
and therefore we urge you to respond early to avoid any last minute problems.
If you do not want to exchange any options in the exchange offer, please
disregard this reminder. You don't need to do anything.
This reminder is being distributed to all employees. Therefore, you are
receiving this notice even if you have previously filed your Election Form and
Release Agreement.
EX-99.A.14
16
ex_a-14.txt
EXHIBIT 99(A)(14)
[Transcript of outgoing message on
Qwest Stock Administration Toll Free Phone Line]
Welcome to the Qwest Stock Option Exchange information line.
If you're a member of either the CWA or the IBEW union, this message does
not apply to you or the provisions covered by your collective bargaining
agreements.
If you are a Qwest full-time, non-union employee, this stock option
exchange program has been designed for you and requires your careful
consideration.
The program allows employees to exchange options [PAUSE] priced at $35 or
more [PAUSE] for new options...[PAUSE] with a new exercise price to be set in
June 2002.
Of course, whether you exchange your options or not is completely up to
you. We make no recommendation regarding the offer. You should consult with a
financial advisor or do your own analysis to decide whether the program is right
for you.
For convenience, we will be mailing eligible employees information about
the new stock option exchange program at their homes in the early days of
November. Eligible employees also are receiving an e-mail describing the
program, and all information is available on the Q. You cannot exchange options
that you received
as an employee of U S WEST, LCI, or Icon CMT. Only options that were granted
under the Qwest Equity Incentive Plan are eligible options.
Because of the size of the mailing, you may not receive the materials for
several days. If you have not received the mailing by Monday, November 12, you
may send an e-mail to stockadmin2@qwest.com. We will send to your company e-mail
a copy of your option statement. If you have any questions or need additional
copies of materials, please go to the Q.
If you have other questions, please review our FAQs on the Q Web site, or
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2
EX-99.D.1
17
exd-1.txt
EXHIBIT 99(D)(1)
================================================================================
QWEST COMMUNICATIONS INTERNATIONAL INC.
EQUITY INCENTIVE PLAN
(effective June 23, 1997)
(amended and restated, effective October 4, 2000)
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I INTRODUCTION..................................................... 1
1.1 Establishment..................................................... 1
1.2 Purposes.......................................................... 1
1.3 Effective Date; Amendment......................................... 1
ARTICLE II DEFINITIONS..................................................... 1
2.1 Definitions....................................................... 1
2.2 Gender and Number................................................. 4
ARTICLE III PLAN ADMINISTRATION............................................ 4
3.1 General........................................................... 4
3.2 Delegation by Committee........................................... 5
3.3 Grants to Non-Employee Directors.................................. 5
ARTICLE IV STOCK SUBJECT TO THE PLAN....................................... 5
4.1 Number of Shares.................................................. 5
4.2 Other Shares of Stock............................................. 6
4.3 Adjustments for Stock Split, Stock Dividend, Etc.................. 6
4.4 Other Distributions and Changes in the Stock...................... 6
4.5 General Adjustment Rules.......................................... 7
4.6 Determination by the Committee, Etc............................... 7
ARTICLE V CORPORATE REORGANIZATION; CHANGE IN CONTROL...................... 7
5.1 Reorganization of Qwest........................................... 7
5.2 Required Notice................................................... 7
5.3 Acceleration of Exercisability.................................... 8
5.4 Change in Control of Qwest........................................ 8
5.5 Reorganization of Affiliated Corporations......................... 9
ARTICLE VI PARTICIPATION................................................... 9
6.1 Eligible Employees; Eligible Consultants.......................... 9
6.2 Non-Employee Directors............................................ 10
ARTICLE VII OPTIONS........................................................ 10
7.1 Grant of Options.................................................. 10
7.2 Stock Option Certificates......................................... 10
7.3 Restrictions on Incentive Options................................. 14
7.4 Shareholder Privileges............................................ 14
ARTICLE VIII RESTRICTED STOCK AWARDS....................................... 14
8.1 Grant of Restricted Stock Awards.................................. 14
8.2 Restrictions...................................................... 14
8.3 Privileges of a Stockholder, Transferability...................... 15
8.4 Enforcement of Restrictions....................................... 15
ARTICLE IX STOCK UNITS..................................................... 15
i
ARTICLE X STOCK APPRECIATION RIGHTS........................................ 15
10.1 Persons Eligible.................................................. 15
10.2 Terms of Grant.................................................... 15
10.3 Exercise.......................................................... 15
10.4 Number of Shares or Amount of Cash................................ 16
10.5 Effect of Exercise................................................ 16
10.6 Termination of Services........................................... 16
ARTICLE XI STOCK BONUSES................................................... 16
ARTICLE XII OTHER COMMON STOCK GRANTS...................................... 17
ARTICLE XIII RIGHTS OF PARTICIPANTS........................................ 17
13.1 Service........................................................... 17
13.2 Nontransferability................................................ 17
13.3 No Plan Funding................................................... 17
ARTICLE XIV GENERAL RESTRICTIONS........................................... 18
14.1 Investment Representations........................................ 18
14.2 Compliance with Securities Laws................................... 18
14.3 Changes in Accounting Rules....................................... 18
ARTICLE XV OTHER EMPLOYEE BENEFITS......................................... 19
ARTICLE XVI PLAN AMENDMENT, MODIFICATION AND TERMINATION................... 19
ARTICLE XVII WITHHOLDING................................................... 19
17.1 Withholding Requirement........................................... 19
17.2 Withholding With Stock............................................ 19
ARTICLE XVIII REQUIREMENTS OF LAW.......................................... 20
18.1 Requirements of Law............................................... 20
18.2 Federal Securities Law Requirements............................... 20
18.3 Governing Law..................................................... 20
ARTICLE XIX DURATION OF THE PLAN........................................... 21
ii
QWEST COMMUNICATIONS INTERNATIONAL INC.
EQUITY INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1.1 Establishment. Qwest Communications International Inc., a
Delaware corporation, effective June 23, 1997, established the Qwest
Communications International Inc. Equity Incentive Plan (the "Plan") for certain
employees of the Company (as defined in subsection 2.1(f)) and certain
consultants to the Company. The Plan permits the grant of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, non-qualified stock options, restricted stock awards, stock
appreciation rights, stock bonuses, stock units and other stock grants to
certain key employees of the Company and to certain consultants to the Company.
1.2 Purposes. The purposes of the Plan are to provide those who are
selected for participation in the Plan with added incentives to continue in the
long-term service of the Company and to create in such persons a more direct
interest in the future success of the operations of the Company by relating
incentive compensation to increases in shareholder value, so that the income of
those participating in the Plan is more closely aligned with the income of the
Company's shareholders. The Plan is also designed to provide a financial
incentive that will help the Company attract, retain and motivate the most
qualified employees and consultants.
1.3 Effective Date; Amendment. The initial effective date of the
Plan was June 23, 1997. The Plan is hereby amended and restated, as of October
4, 2000, to provide that Non-Employee Directors (as defined below) are eligible
to receive grants of non-qualified stock options under the Plan. The provisions
of the Plan, as so amended and restated, shall apply to any Award (as defined in
subsection 2.1(b)) granted on or after October 4, 2000.
ARTICLE II
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set
forth below:
(a) "Affiliated Corporation" means any corporation or other
entity that is affiliated with Qwest through stock ownership or otherwise and is
designated as an "Affiliated Corporation" by the Board, provided, however, that
for purposes of Incentive Options granted pursuant to the Plan, an "Affiliated
Corporation" means any parent or subsidiary of the Company as defined in Section
424 of the Code.
(b) "Award" means an Option, a Restricted Stock Award, a
Stock Appreciation Right, a Stock Unit, grants of Stock pursuant to Article XI
or other issuances of Stock hereunder.
(c) "Board" means the Board of Directors of Qwest.
(d) "Code" means the Internal Revenue Code of 1986, as it may
be amended from time to time.
(e) "Committee" means a committee consisting of members of
the Board who are empowered hereunder to take actions in the administration of
the Plan. The Committee shall be so constituted at all times as to permit the
Plan to comply with Rule 16b-3 or any successor rule promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"). Except as provided in Section
3.2, the Committee shall select Participants from Eligible Employees and
Eligible Consultants of the Company and shall determine the awards to be made
pursuant to the Plan and the terms and conditions thereof.
(f) "Company" means Qwest and the Affiliated Corporations.
(g) "Disabled" or "Disability" shall have the meaning given
to such terms in Section 22(e)(3) of the Code.
(h) "Effective Date" means the original effective date of the
Plan, June 23, 1997.
(i) "Eligible Employees" means those employees (including,
without limitation, officers and directors who are also employees) of the
Company or any subsidiary or division thereof, upon whose judgment, initiative
and efforts the Company is, or will become, largely dependent for the successful
conduct of its business. For purposes of the Plan, an employee is any individual
who provides services to the Company or any subsidiary or division thereof as a
common law employee and whose remuneration is subject to the withholding of
federal income tax pursuant to section 3401 of the Code. Employee shall not
include any individual (A) who provides services to the Company or any
subsidiary or division thereof under an agreement, contract, or any other
arrangement pursuant to which the individual is initially classified as an
independent contractor or (B) whose remuneration for services has not been
treated initially as subject to the withholding of federal income tax pursuant
to section 3401 of the Code even if the individual is subsequently reclassified
as a common law employee as a result of a final decree of a court of competent
jurisdiction or the settlement of an administrative or judicial proceeding.
Leased employees within the meaning of section 414(n) of the Code shall not be
treated as employees under this Plan.
(j) "Eligible Consultants" means those consultants to the
Company who are determined, by the Committee, to be individuals whose services
are important to the Company and who are eligible to receive Awards, other than
Incentive Options, under the Plan.
2
(k) "Fair Market Value" means the average of the mean between
the bid and the asked prices of the Stock or the closing price, as applicable,
on the New York Stock Exchange, the principal stock exchange or other market on
which the Stock is traded, over the five consecutive trading days ending on a
particular date or by such other method as the Committee, or the individual or
individuals to whom the Committee has delegated authority to grant Awards, may
specify at the time an Award is granted. If the price of the Stock is not
reported on any securities exchange or national market system, the Fair Market
Value of the Stock on a particular date shall be as determined by the Committee.
If, upon exercise of an Option, the exercise price is paid by a broker's
transaction as provided in subsection 7.2(g)(ii)(D), Fair Market Value, for
purposes of the exercise, shall be the price at which the Stock is sold by the
broker.
(l) "Incentive Option" means an Option designated as such and
granted in accordance with Section 422 of the Code.
(m) "Non-Employee Director" means a member of the Board who
is not an employee (as defined in the second sentence of subsection 2.1(i)
above) of the Company.
(n) "Non-Qualified Option" means any Option other than an
Incentive Option.
(o) "Option" means a right to purchase Stock at a stated or
formula price for a specified period of time. Options granted under the Plan
shall be either Incentive Options or Non-Qualified Options.
(p) "Option Certificate" shall have the meaning given to such
term in Section 7.2 hereof.
(q) "Option Holder" means a Participant who has been granted
one or more Options under the Plan.
(r) "Option Price" means the price at which each share of
Stock subject to an Option may be purchased, determined in accordance with
subsection 7.2(b).
(s) "Participant" means an Eligible Employee or Eligible
Consultant designated by the Committee from time to time during the term of the
Plan to receive one or more of the Awards provided under the Plan and a
Non-Employee Director who has been granted an Option as provided in Section 6.2.
(t) "Qwest" means Qwest Communications International Inc. and
any successor thereto.
(u) "Restricted Stock Award" means an award of Stock granted
to a Participant pursuant to Article VIII that is subject to certain
restrictions imposed in accordance with the provisions of such Section.
3
(v) "Share" means a share of Stock.
(w) "Stock" means the $0.01 par value common stock of Qwest.
(x) "Stock Appreciation Right" means the right, granted by
the Committee pursuant to the Plan, to receive a payment equal to the increase
in the Fair Market Value of a Share of Stock subsequent to the grant of such
Award.
(y) "Stock Bonus" means either an outright grant of Stock or
a grant of Stock subject to and conditioned upon certain employment or
performance related goals.
(z) "Stock Unit" means a measurement component equal to the
Fair Market Value of one share of Stock on the date for which a determination is
made pursuant to the provisions of this Plan.
2.2 Gender and Number. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
ARTICLE III
PLAN ADMINISTRATION
3.1 General. The Plan shall be administered by the Committee. In
accordance with the provisions of the Plan, the Committee shall, in its sole
discretion, select the Participants from among the Eligible Employees and
Eligible Consultants, determine the Awards to be made pursuant to the Plan, the
number of Stock Units, Stock Appreciation Rights or shares of Stock to be issued
thereunder and the time at which such Awards are to be made, fix the Option
Price, period and manner in which an Option becomes exercisable, establish the
duration and nature of Restricted Stock Award restrictions, establish the terms
and conditions applicable to Stock Bonuses and Stock Units, and establish such
other terms and requirements of the various compensation incentives under the
Plan as the Committee may deem necessary or desirable and consistent with the
terms of the Plan. The Committee shall determine the form or forms of the
agreements with Participants that shall evidence the particular provisions,
terms, conditions, rights and duties of Qwest and the Participants with respect
to Awards granted pursuant to the Plan, which provisions need not be identical
except as may be provided herein; provided, however, that Eligible Consultants
shall not be eligible to receive Incentive Options. The Committee may from time
to time adopt such rules and regulations for carrying out the purposes of the
Plan as it may deem proper and in the best interests of the Company. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any agreement entered into hereunder in the
manner and to the extent it shall deem expedient and it shall be the sole and
final judge of such expediency. No member of the Committee shall be liable for
any action or determination made in good faith. The determinations,
interpretations and other actions of the Committee pursuant to the provisions of
the Plan shall be binding and conclusive for all purposes and on all persons.
4
3.2 Delegation by Committee. The Committee may, from time to time,
delegate, to specified officers of Qwest, the power and authority to grant
Awards under the Plan to specified groups of employees and consultants, subject
to such restrictions and conditions as the Committee, in its sole discretion,
may impose. The delegation shall be as broad or as narrow as the Committee shall
determine. To the extent that the Committee has delegated the authority to
determine certain terms and conditions of an Award, all references in the Plan
to the Committee's exercise of authority in determining such terms and
conditions shall be construed to include the Qwest officer or officers to whom
the Committee has delegated the power and authority to make such determination.
The power and authority to grant Awards to any employee or consultant who is
covered by Section 16(b) of the 1934 Act shall not be delegated by the
Committee.
3.3 Grants to Non-Employee Directors. The Committee may make grants
of Non-Qualified Options to Non-Employee Directors.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. The maximum aggregate number of Shares that
may be issued under the Plan at any time pursuant to Awards shall equal 10% of
the aggregate number of Shares that are issued and outstanding at such time
(determined as of the close of trading on the New York Stock Exchange on the
trading day immediately preceding such time), reduced by the number of Shares
that are subject to outstanding Awards granted under this Plan and outstanding
options granted under any other plan or arrangement of the Company or any
subsidiary of the Company (excluding the Company's Employee Stock Purchase Plan)
at such time. Upon exercise of an option (whether granted under this Plan or
otherwise), the Shares issued upon exercise of such option shall no longer be
considered to be subject to an outstanding Award or option for purposes of the
immediately preceding sentence. Notwithstanding anything to the contrary
contained herein, no Award granted hereunder shall become void or otherwise be
adversely affected solely because of a change in the number of Shares of the
Company that are issued and outstanding from time to time, provided that changes
to the issued and outstanding Shares may result in adjustments to outstanding
Awards in accordance with the provisions of this Article IV. The maximum number
of Shares with respect to which a Participant may receive Options and Stock
Appreciation Rights under the Plan in any calendar year is 40,000,000. The
maximum number of Shares as to which Incentive Options may be granted is
75,000,000. The Shares may be either authorized and unissued Shares or
previously issued Shares acquired by Qwest. Such maximum numbers may be
increased from time to time by approval of the Board and by the stockholders of
Qwest if, in the opinion of counsel for Qwest, stockholder approval is required.
Qwest shall at all times during the term of the Plan and while any Options or
Stock Units are outstanding retain as authorized and unissued Stock at least the
number of Shares from time to time required under the provisions of the Plan, or
otherwise assure itself of its ability to perform its obligations hereunder.
5
4.2 Other Shares of Stock. Any shares of Stock that are subject to
an Option that expires or for any reason is terminated unexercised, any shares
of Stock that are subject to an Award (other than an Option) and that are
forfeited, and any shares of Stock withheld for the payment of taxes or received
by Qwest as payment of the exercise price of an Option shall automatically
become available for use under the Plan, provided, however, that no more than
75,000,000 shares of Stock may be awarded pursuant to Incentive Options.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If Qwest shall
at any time increase or decrease the number of its outstanding Shares or change
in any way the rights and privileges of such Shares by means of the payment of a
stock dividend or any other distribution upon such shares payable in Stock, or
through a stock split, subdivision, consolidation, combination, reclassification
or recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and privileges
of the following shall be increased, decreased or changed in like manner as if
they had been issued and outstanding, fully paid and nonassessable at the time
of such occurrence: (i) the Shares as to which Awards may be granted under the
Plan, (ii) the Shares then included in each outstanding Award granted hereunder,
(iii) the maximum number of Shares available for grant to any one person in a
calendar year, (iv) the maximum number of Shares available for grant pursuant to
Incentive Options, and (v) the number of Shares subject to a delegation of
authority under Section 4.2 of this Plan.
4.4 Other Distributions and Changes in the Stock. If
(a) Qwest shall at any time distribute with respect to the
Stock assets or securities of persons other than Qwest (excluding cash or
distributions referred to in Section 4.3), or
(b) Qwest shall at any time grant to the holders of its Stock
rights to subscribe pro rata for additional shares thereof or for any other
securities of Qwest, or
(c) there shall be any other change (except as described in
Section 4.3) in the number or kind of outstanding Shares or of any stock or
other securities into which the Stock shall be changed or for which it shall
have been exchanged,
and if the Committee shall in its discretion determine that the event described
in subsection (a), (b), or (c) above equitably requires an adjustment in the
number or kind of Shares subject to an Option or other Award, an adjustment in
the Option Price or the taking of any other action by the Committee, including
without limitation, the setting aside of any property for delivery to the
Participant upon the exercise of an Option or the full vesting of an Award, then
such adjustments shall be made, or other action shall be taken, by the Committee
and shall be effective for all purposes of the Plan and on each outstanding
Option or Award that involves the particular type of stock for which a change
was effected. Notwithstanding the foregoing provisions of this Section 4.4,
pursuant to Section 8.3 below, a Participant holding Stock received as a
Restricted Stock Award shall have the right to receive all amounts, including
cash and property of any kind, distributed with respect to the Stock after such
Restricted Stock Award was granted upon the Participant's becoming a holder of
record of the Stock.
6
4.5 General Adjustment Rules. No adjustment or substitution provided
for in this Article IV shall require Qwest to sell a fractional share of Stock
under any Option, or otherwise issue a fractional share of Stock, and the total
substitution or adjustment with respect to each Option and other Award shall be
limited by deleting any fractional share. In the case of any such substitution
or adjustment, the aggregate Option Price for the total number of shares of
Stock then subject to an Option shall remain unchanged but the Option Price per
share under each such Option shall be equitably adjusted by the Committee to
reflect the greater or lesser number of shares of Stock or other securities into
which the Stock subject to the Option may have been changed, and appropriate
adjustments shall be made to other Awards to reflect any such substitution or
adjustment.
4.6 Determination by the Committee, Etc. Adjustments under this
Article IV shall be made by the Committee, whose determinations with regard
thereto shall be final and binding upon all parties thereto.
ARTICLE V
CORPORATE REORGANIZATION; CHANGE IN CONTROL
5.1 Reorganization of Qwest. Except as provided otherwise by the
Committee at the time an Award is granted, upon the occurrence of any of the
following events, if the notice required by Section 5.2 shall have first been
given, the Plan and all Options then outstanding hereunder shall automatically
terminate and be of no further force and effect whatsoever, and other Awards
then outstanding shall be treated as described in Sections 5.2 and 5.3, without
the necessity for any additional notice or other action by the Board or Qwest:
(a) the merger or consolidation of Qwest with or into another corporation or
other reorganization (other than a reorganization under the United States
Bankruptcy Code) of Qwest (other than a consolidation, merger, or reorganization
in which Qwest is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Stock); or (b) the sale or
conveyance of the property of Qwest as an entirety or substantially as an
entirety (other than a sale or conveyance in which Qwest continues as a holding
company of an entity or entities that conduct the business or businesses
formerly conducted by Qwest); or (c) the dissolution or liquidation of Qwest.
5.2 Required Notice. At least 30 days' prior written notice of any
event described in Section 5.1 shall be given by Qwest to each Option Holder and
Participant unless (a) in the case of the events described in clauses (a) or (b)
of Section 5.1, Qwest, or the successor or purchaser, as the case may be, shall
make adequate provision for the assumption of the outstanding Options or the
substitution of new options for the outstanding Options on terms comparable to
the outstanding Options except that the Option Holder shall have the right
thereafter to purchase the kind and amount of securities or property or cash
receivable upon such merger, consolidation, other reorganization, sale or
conveyance by a holder of the number of Shares that would have been receivable
upon exercise of the Option immediately prior to such merger, consolidation,
sale or conveyance (assuming such holder of Stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
7
majority of the non-electing shares), or (b) Qwest, or the successor or
purchaser, as the case may be, shall make adequate provision for the adjustment
of outstanding Awards (other than Options) so that such Awards shall entitle the
Participant to receive the kind and amount of securities or property or cash
receivable upon such merger, consolidation, other reorganization, sale or
conveyance by a holder of the number of Shares that would have been receivable
with respect to such Award immediately prior to such merger, consolidation,
other reorganization, sale or conveyance (assuming such holder of Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a majority of the non-electing shares). The provisions of
this Article V shall similarly apply to successive mergers, consolidations,
reorganizations, sales or conveyances. Such notice shall be deemed to have been
given when delivered personally to a Participant or when mailed to a Participant
by registered or certified mail, postage prepaid, at such Participant's address
last known to the Company.
5.3 Acceleration of Exercisability. Participants notified in
accordance with Section 5.2 may exercise their Options at any time before the
occurrence of the event requiring the giving of notice (but subject to
occurrence of such event), regardless of whether all conditions of exercise
relating to length of service, attainment of financial performance goals or
otherwise have been satisfied. Upon the giving of notice in accordance with
Section 5.2, all restrictions with respect to Restricted Stock and other Awards
shall lapse immediately, all Stock Units shall become payable immediately and
all Stock Appreciation Rights shall become exercisable. Any Options, Stock
Appreciation Rights or Stock Units that are not assumed or substituted under
clauses (a) or (b) of Section 5.2 that have not been exercised prior to the
event described in Section 5.1 shall automatically terminate upon the occurrence
of such event.
5.4 Change in Control of Qwest.
(a) In General. Unless provided otherwise by the Committee at
the time of the grant of an Award, upon a change in control of Qwest as defined
in subsection 5.4(b), then (i) all Options shall become immediately exercisable
in full during the remaining term thereof, and shall remain so, whether or not
the Participants to whom such Options have been granted remain employees,
consultants or directors of the Company; (ii) all restrictions with respect to
outstanding Restricted Stock Awards shall immediately lapse; (iii) all Stock
Units shall become immediately payable; and (iv) all other Awards shall become
immediately exercisable or shall vest, as the case may be, without any further
action or passage of time.
(b) Definition. For purposes of this Plan, a "change in
control" shall be deemed to have occurred if either (i) any individual, entity,
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act),
other than Anschutz Company, The Anschutz Corporation, any entity or
organization controlled by Philip F. Anschutz (collectively, the "Anschutz
Entities") or a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, acquires beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the 1934 Act) of fifty percent (50%) or more of
either (A) the then-outstanding shares of Stock ("Outstanding Shares") or (B)
the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors ("Voting Power")
or (ii) at any time during any period of three consecutive years (not including
8
any period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board (and any new director whose election by the
Board or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof.
5.5 Reorganization of Affiliated Corporations. If an Affiliated
Corporation is merged or consolidated with another corporation (other than a
merger or consolidation pursuant to which the Affiliated Corporation continues
to be, or the continuing corporation is, affiliated with Qwest through stock
ownership or control), or if all or substantially all of the assets or more than
fifty percent (50%) of the stock of the Affiliated Corporation is acquired by
any other corporation, business entity or person (other than a transaction in
which the successor is affiliated with Qwest through stock ownership or
control), or in the case of a reorganization (other than a reorganization under
the United States Bankruptcy Code) including a divisive reorganization under
Section 355 of the Code, or liquidation of the Affiliated Corporation, the
Committee may, as to outstanding Awards, make appropriate provision for the
protection of outstanding Awards granted to Eligible Employees of, and Eligible
Consultants to, the affected Affiliated Corporation by (i) providing for the
assumption of outstanding Options or the substitution of new Options for
outstanding Options by the successor on terms comparable to the outstanding
Options, (ii) providing for the adjustment of outstanding Awards, or (iii)
taking such other action with respect to outstanding Awards as the Committee
deems appropriate.
ARTICLE VI
PARTICIPATION
6.1 Eligible Employees; Eligible Consultants. Participants in the
Plan shall be those Eligible Employees who, in the judgment of the Committee,
are performing, or during the term of their incentive arrangement will perform,
vital services in the management, operation and development of the Company, and
significantly contribute, or are expected to significantly contribute, to the
achievement of long-term corporate economic objectives. Eligible Consultants
shall be selected from those non-employee consultants to the Company who are
performing services important to the operation and growth of the Company.
Participants may be granted from time to time one or more Awards; provided,
however, that the grant of each such Award shall be separately approved by the
Committee and receipt of one such Award shall not result in automatic receipt of
any other Award. Upon determination by the Committee that an Award is to be
granted to a Participant, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto. Each
Participant shall, if required by the Committee, enter into an agreement with
Qwest, in such form as the Committee shall determine and which is consistent
with the provisions of the Plan, specifying such terms, conditions, rights and
duties. Awards shall be deemed to be granted as of the date specified in the
grant resolution of the Committee, which date shall be the date of any related
agreement with the Participant. In the event of any inconsistency between the
provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
9
6.2 Non-Employee Directors. The Committee may, from time to time,
grant Non-Qualified Options to one or more Non-Employee Directors, who shall be
Participants in the Plan. Each Option shall include the terms and conditions
that are determined by the Committee and that are consistent with the terms of
the Plan. Each Participant shall, if required by the Committee, enter into an
agreement with Qwest, in such form as the Committee shall determine and that is
consistent with the terms of the Plan, specifying the terms and conditions of
the Option and the rights and duties of the Participant. An Option shall be
deemed granted as of the date specified in the grant resolution of the
Committee, which date shall be the date of any related Agreement with the
Participant. In the event of any inconsistency between the provisions of the
Plan and any such agreement entered into hereunder, the provisions of the Plan
shall govern.
ARTICLE VII
OPTIONS
7.1 Grant of Options. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options. The
Committee in its sole discretion shall designate whether an Option is an
Incentive Option or a Non-Qualified Option; provided, however, that only
Non-Qualified Options may be granted to Eligible Consultants. The Committee may
grant both an Incentive Option and a Non-Qualified Option to an Eligible
Employee at the same time or at different times. Incentive Options and
Non-Qualified Options, whether granted at the same time or at different times,
shall be deemed to have been awarded in separate grants and shall be clearly
identified, and in no event shall the exercise of one Option affect the right to
exercise any other Option or affect the number of shares for which any other
Option may be exercised. An Option shall be considered as having been granted on
the date specified in the grant resolution of the Committee.
7.2 Stock Option Certificates. Each Option granted under the Plan
shall be evidenced by a written stock option certificate or agreement (an
"Option Certificate"). An Option Certificate shall be issued by Qwest in the
name of the Participant to whom the Option is granted (the "Option Holder") and
in such form as may be approved by the Committee. The Option Certificate shall
incorporate and conform to the conditions set forth in this Section 7.2 as well
as such other terms and conditions that are not inconsistent as the Committee
may consider appropriate in each case.
(a) Number of Shares. Each Option Certificate shall state
that it covers a specified number of shares of Stock, as determined by the
Committee.
(b) Price. The price at which each share of Stock covered by
an Option may be purchased shall be determined in each case by the Committee and
set forth in the Option Certificate, but, in the case of an Incentive Option, in
no event shall the price be less than 100 percent of the Fair Market Value of
the Stock on the date the Incentive Option is granted.
10
(c) Duration of Options; Restrictions on Exercise. Each
Option Certificate shall state the period of time, determined by the Committee,
within which the Option may be exercised by the Option Holder (the "Option
Period"). The Option Period must end, in all cases, not more than ten years from
the date the Option is granted. The Option Certificate shall also set forth any
installment or other restrictions on exercise of the Option during such period,
if any, as may be determined by the Committee. Each Option shall become
exercisable (vest) over such period of time, if any, or upon such events, as
determined by the Committee.
(d) Termination of Services, Death, Disability, Etc. The
Committee may specify the period, if any, during which an Option may be
exercised following termination of the Option Holder's services. The effect of
this subsection 7.2(d) shall be limited to determining the consequences of a
termination and nothing in this subsection 7.2(d) shall restrict or otherwise
interfere with the Company's discretion with respect to the termination of any
individual's services. If the Committee does not otherwise specify, the
following shall apply:
(i) If the services of the Option Holder are
terminated within the Option Period for "cause", as determined by the Company,
the Option shall thereafter be void for all purposes. As used in this subsection
7.2(d), "cause" shall mean willful misconduct, a willful failure to perform the
Option Holder's duties, insubordination, theft, dishonesty, conviction of a
felony or any other willful conduct that is materially detrimental to the
Company or such other cause as the Board in good faith reasonably determines
provides cause for the discharge of an Option Holder.
(ii) If the Option Holder becomes Disabled, the Option
may be exercised by the Option Holder within one year following the Option
Holder's termination of services on account of Disability (provided that such
exercise must occur within the Option Period), but not thereafter. In any such
case, the Option may be exercised only as to the shares as to which the Option
had become exercisable on or before the date of the Option Holder's termination
of services because of Disability.
(iii) If the Option Holder dies during the Option Period
while still performing services for the Company or within the one year period
referred to in (ii) above or the three-month period referred to in (iv) below,
the Option may be exercised by those entitled to do so under the Option Holder's
will or by the laws of descent and distribution within one year following the
Option Holder's death, (provided that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be exercised only
as to the shares as to which the Option had become exercisable on or before the
date of the Option Holder's death.
(iv) If the services of the Option Holder are
terminated (which for this purpose means that the Option Holder is no longer
employed by the Company or performing services for the Company) by the Company
within the Option Period for any reason other than cause, Disability, or death,
the Option may be exercised by the Option Holder within three months following
the date of such termination (provided that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on
or before the date of termination of services.
11
(e) Transferability. Each Option shall not be transferable by
the Option Holder except by will or pursuant to the laws of descent and
distribution. Each Option is exercisable during the Option Holder's lifetime
only by him or her, or in the event of Disability or incapacity, by his or her
guardian or legal representative. The Committee may, however, provide at the
time of grant or thereafter that the Option Holder may transfer a Non-Qualified
Option to a member of the Option Holder's immediate family, a trust of which
members of the Option Holder's immediate family are the only beneficiaries, or a
partnership of which members of the Option Holder's immediate family or trusts
for the sole benefit of the Option Holder's immediate family are the only
partners. Immediate family means the Option Holder's spouse, issue (by birth or
adoption), parents, grandparents, and siblings (including half brothers and
sisters and adopted siblings). During the Option Holder's lifetime the Option
Holder may not transfer an Incentive Option under any circumstances.
(f) Consideration for Grant of Option. Each Option Holder
agrees to remain in the employment of the Company or to continue providing
consulting services to the Company, as the case may be, at the pleasure of the
Company, for a continuous period of at least one year after the date the Option
is granted, at the rate of compensation in effect on the date of such agreement
or at such changed rate as may be fixed, from time to time, by the Company.
Nothing in this paragraph shall limit or impair the Company's right to terminate
the employment of any employee or to terminate the consulting services of any
consultant.
(g) Exercise, Payments, Etc.
(i) Manner of Exercise. The method for exercising each
Option granted hereunder shall be by delivery to Qwest of written notice
specifying the number of Shares with respect to which such Option is exercised.
The purchase of such Shares shall take place at the principal offices of Qwest
within thirty days following delivery of such notice, at which time the Option
Price of the Shares shall be paid in full by any of the methods set forth below
or a combination thereof. Except as set forth in the next sentence, the Option
shall be exercised when the Option Price for the number of shares as to which
the Option is exercised is paid to Qwest in full. If the Option Price is paid by
means of a broker's loan transaction described in subsection 7.2(g)(ii)(D), in
whole or in part, the closing of the purchase of the Stock under the Option
shall take place (and the Option shall be treated as exercised) on the date on
which, and only if, the sale of Stock upon which the broker's loan was based has
been closed and settled, unless the Option Holder makes an irrevocable written
election, at the time of exercise of the Option, to have the exercise treated as
fully effective for all purposes upon receipt of the Option Price by Qwest
regardless of whether or not the sale of the Stock by the broker is closed and
settled. A properly executed certificate or certificates representing the Shares
shall be delivered to or at the direction of the Option Holder upon payment
therefor. If Options on less than all shares evidenced by an Option Certificate
are exercised, Qwest shall deliver a new Option Certificate evidencing the
Option on the remaining shares upon delivery of the Option Certificate for the
Option being exercised.
12
(ii) The exercise price shall be paid by any of the
following methods or any combination of the following methods at the election of
the Option Holder, or by any other method approved by the Committee upon the
request of the Option Holder:
(A) in cash;
(B) by certified check, cashier's check or
other check acceptable to the Company, payable to the order of Qwest;
(C) by delivery to Qwest of certificates
representing the number of shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock purchased pursuant
to the Option, properly endorsed for transfer to Qwest; provided however, that
no Option may be exercised by delivery to Qwest of certificates representing
Stock, unless such Stock has been held by the Option Holder for more than six
months; for purposes of this Plan, the Fair Market Value of any shares of Stock
delivered in payment of the purchase price upon exercise of the Option shall be
the Fair Market Value as of the exercise date; the exercise date shall be the
day of delivery of the certificates for the Stock used as payment of the Option
Price; or
(D) by delivery to Qwest of a properly executed
notice of exercise together with irrevocable instructions to a broker to deliver
to Qwest promptly the amount of the proceeds of the sale of all or a portion of
the Stock or of a loan from the broker to the Option Holder required to pay the
Option Price.
(h) Date of Grant. An Option shall be considered as having
been granted on the date specified in the grant resolution of the Committee.
(i) Withholding.
(i) Non-Qualified Options. Upon exercise of an Option,
the Option Holder shall make appropriate arrangements with the Company to
provide for the amount of additional withholding required by Sections 3102 and
3402 of the Code and applicable state income tax laws, including payment of such
taxes through delivery of shares of Stock or by withholding Stock to be issued
under the Option, as provided in Article XVII.
(ii) Incentive Options. If an Option Holder makes a
disposition (as defined in Section 424(c) of the Code) of any Stock acquired
pursuant to the exercise of an Incentive Option prior to the expiration of two
years from the date on which the Incentive Option was granted or prior to the
expiration of one year from the date on which the Option was exercised, the
Option Holder shall send written notice to the Company at the Company's
principal place of business of the date of such disposition, the number of
shares disposed of, the amount of proceeds received from such disposition and
any other information relating to such disposition as the Company may reasonably
request. The Option Holder shall, in the event of such a disposition, make
appropriate arrangements with the Company to provide for the amount of
additional withholding, if any, required by Sections 3102 and 3402 of the Code
and applicable state income tax laws.
13
7.3 Restrictions on Incentive Options.
(a) Initial Exercise. The aggregate Fair Market Value of the
Shares with respect to which Incentive Options are exercisable for the first
time by an Option Holder in any calendar year, under the Plan or otherwise,
shall not exceed $100,000. For this purpose, the Fair Market Value of the Shares
shall be determined as of the date of grant of the Option.
(b) Ten Percent Stockholders. Incentive Options granted to an
Option Holder who is the holder of record of 10% or more of the outstanding
Stock of Qwest shall have an Option Price equal to 110% of the Fair Market Value
of the Shares on the date of grant of the Option and the Option Period for any
such Option shall not exceed five years.
7.4 Shareholder Privileges. No Option Holder shall have any rights
as a shareholder with respect to any shares of Stock covered by an Option until
the Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to which
there is a record date preceding the date such Option Holder becomes the holder
of record of such Stock, except as provided in Article IV.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock Awards. Coincident with or following
designation for participation in the Plan, the Committee may grant a Participant
one or more Restricted Stock Awards consisting of Shares of Stock. The number of
Shares granted as a Restricted Stock Award shall be determined by the Committee.
8.2 Restrictions. A Participant's right to retain a Restricted
Stock Award granted to him under Section 8.1 shall be subject to such
restrictions, including but not limited to his continuous employment by or
performance of services for the Company for a restriction period specified by
the Committee or the attainment of specified performance goals and objectives,
as may be established by the Committee with respect to such Award. The Committee
may in its sole discretion require different periods of service or different
performance goals and objectives with respect to different Participants, to
different Restricted Stock Awards or to separate, designated portions of the
Shares constituting a Restricted Stock Award. In the event of the death or
Disability of a Participant, or the retirement of a Participant in accordance
with the Company's established retirement policy, all required periods of
service and other restrictions applicable to Restricted Stock Awards then held
by him shall lapse with respect to a pro rata part of each such Award based on
the ratio between the number of full months of employment or services completed
at the time of termination of services from the grant of each Award to the total
number of months of employment or continued services required for such Award to
be fully nonforfeitable, and such portion of each such Award shall become fully
nonforfeitable. The remaining portion of each such Award shall be forfeited and
shall be immediately returned to Qwest. If a Participant's employment or
consulting services terminate for any other reason, any Restricted Stock Awards
14
as to which the period for which services are required or other restrictions
have not been satisfied (or waived or accelerated as provided herein) shall be
forfeited, and all shares of Stock related thereto shall be immediately returned
to Qwest.
8.3 Privileges of a Stockholder, Transferability. A Participant
shall have all voting, dividend, liquidation and other rights with respect to
Stock in accordance with its terms received by him as a Restricted Stock Award
under this Article VIII upon his becoming the holder of record of such Stock;
provided, however, that the Participant's right to sell, encumber, or otherwise
transfer such Stock shall be subject to the limitations of Section 13.2.
8.4 Enforcement of Restrictions. The Committee shall cause a legend
to be placed on the Stock certificates issued pursuant to each Restricted Stock
Award referring to the restrictions provided by Sections 8.2 and 8.3 and, in
addition, may in its sole discretion require one or more of the following
methods of enforcing the restrictions referred to in Sections 8.2 and 8.3:
(a) Requiring the Participant to keep the Stock certificates,
duly endorsed, in the custody of Qwest while the restrictions remain in effect;
or
(b) Requiring that the Stock certificates, duly endorsed, be
held in the custody of a third party while the restrictions remain in effect.
ARTICLE IX
STOCK UNITS
A Participant may be granted a number of Stock Units determined by the
Committee. The number of Stock Units, the goals and objectives to be satisfied
with respect to each grant of Stock Units, the time and manner of payment for
each Stock Unit, and the other terms and conditions applicable to a grant of
Stock Units shall be determined by the Committee.
ARTICLE X
STOCK APPRECIATION RIGHTS
10.1 Persons Eligible. The Committee, in its sole discretion, may
grant Stock Appreciation Rights to Eligible Employees or Eligible Consultants.
10.2 Terms of Grant. The Committee shall determine at the time of the
grant of a Stock Appreciation Right the time period during which the Stock
Appreciation Right may be exercised and any other terms that shall apply to the
Stock Appreciation Right.
10.3 Exercise. A Stock Appreciation Right shall entitle a Participant
to receive a number of shares of Stock (without any payment to Qwest, except for
applicable withholding taxes), cash, or Stock and cash, as determined by the
15
Committee in accordance with Section 10.4 below. If a Stock Appreciation Right
is issued in tandem with an Option, except as may otherwise be provided by the
Committee, the Stock Appreciation Right shall be exercisable during the period
that its related Option is exercisable. A Participant desiring to exercise a
Stock Appreciation Right shall give written notice of such exercise to Qwest,
which notice shall state the proportion of Stock and cash that the Participant
desires to receive pursuant to the Stock Appreciation Right exercised. Upon
receipt of the notice from the Participant, Qwest shall deliver to the person
entitled thereto (i) a certificate or certificates for Stock and/or (ii) a cash
payment, in accordance with Section 10.4 below. The date Qwest receives written
notice of such exercise hereunder is referred to in this Article X as the
"exercise date". The delivery of Stock or cash received pursuant to such
exercise shall take place at the principal offices of Qwest within 30 days
following delivery of such notice.
10.4 Number of Shares or Amount of Cash. Subject to the discretion of
the Committee to substitute cash for Stock, or Stock for cash, the number of
Shares that may be issued pursuant to the exercise of a Stock Appreciation Right
shall be determined by dividing: (a) the total number of Shares of Stock as to
which the Stock Appreciation Right is exercised, multiplied by the amount by
which the Fair Market Value of one share of Stock on the exercise date exceeds
the Fair Market Value of one Share of Stock on the date of grant of one Share of
Stock Appreciation Right, by (b) the Fair Market Value of one Share of Stock on
the exercise date; provided, however, that fractional shares shall not be issued
and in lieu thereof, a cash adjustment shall be paid. In lieu of issuing Stock
upon the exercise of a Stock Appreciation Right, the Committee in its sole
discretion may elect to pay the cash equivalent of the Fair Market Value of the
Stock on the exercise date for any or all of the Shares of Stock that would
otherwise be issuable upon exercise of the Stock Appreciation Right.
10.5 Effect of Exercise. If a Stock Appreciation Right is issued in
tandem with an Option, the exercise of the Stock Appreciation Right or the
related Option will result in an equal reduction in the number of corresponding
Options or Stock Appreciation Rights that were granted in tandem with such Stock
Appreciation Rights and Options.
10.6 Termination of Services. Upon the termination of the services of
a Participant, any Stock Appreciation Rights then held by such Participant shall
be exercisable within the time periods, and upon the same conditions with
respect to the reasons for termination of services, as are specified in Section
7.2(d) with respect to Options.
ARTICLE XI
STOCK BONUSES
The Committee may award Stock Bonuses to such Participants, subject to
such conditions and restrictions, as it determines in its sole discretion. Stock
Bonuses may be either outright grants of Stock, or may be grants of Stock
subject to and conditioned upon certain employment or performance related goals.
16
ARTICLE XII
OTHER COMMON STOCK GRANTS
From time to time during the duration of this Plan, the Board may, in
its sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire shares of Stock,
whether by purchase, outright grant, or otherwise. Any such arrangements shall
be subject to the general provisions of this Plan and all shares of Stock issued
pursuant to such arrangements shall be issued under this Plan.
ARTICLE XIII
RIGHTS OF PARTICIPANTS
13.1 Service. Nothing contained in the Plan or in any Option, or
other Award granted under the Plan shall confer upon any Participant any right
with respect to the continuation of his employment by, or consulting
relationship with, the Company, or interfere in any way with the right of the
Company, subject to the terms of any separate employment agreement or other
contract to the contrary, at any time to terminate such services or to increase
or decrease the compensation of the Participant from the rate in existence at
the time of the grant of an Award. Whether an authorized leave of absence, or
absence in military or government service, shall constitute a termination of
service shall be determined by the Committee at the time.
13.2 Nontransferability. Except as provided otherwise at the time of
grant or thereafter, no right or interest of any Participant in an Option, a
Stock Appreciation Right, a Restricted Stock Award (prior to the completion of
the restriction period applicable thereto), a Stock Unit, or other Award granted
pursuant to the Plan, shall be assignable or transferable during the lifetime of
the Participant, either voluntarily or involuntarily, or subjected to any lien,
directly or indirectly, by operation of law, or otherwise, including execution,
levy, garnishment, attachment, pledge or bankruptcy. In the event of a
Participant's death, a Participant's rights and interests in Options, Stock
Appreciation Rights, Restricted Stock Awards, other Awards, and Stock Units
shall, to the extent provided in Articles VII, VIII, IX, X and XI, be
transferable by will or the laws of descent and distribution, and payment of any
amounts due under the Plan shall be made to, and exercise of any Options may be
made by, the Participant's legal representatives, heirs or legatees.
Notwithstanding the foregoing, the Option Holder may not transfer an Incentive
Option during the Option Holder's lifetime. If in the opinion of the Committee a
person entitled to payments or to exercise rights with respect to the Plan is
disabled from caring for his affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights shall
be exercised by, such person's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.
13.3 No Plan Funding. Obligations to Participants under the Plan will
not be funded, trusteed, insured or secured in any manner. The Participants
under the Plan shall have no security interest in any assets of the Company, and
shall be only general creditors of the Company.
17
ARTICLE XIV
GENERAL RESTRICTIONS
14.1 Investment Representations. Qwest may require any person to whom
an Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, or
Stock Bonus is granted, as a condition of exercising such Option or Stock
Appreciation Right, or receiving such Restricted Stock Award, Stock Unit, or
Stock Bonus, to give written assurances in substance and form satisfactory to
Qwest and its counsel to the effect that such person is acquiring the Stock for
his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as Qwest deems
necessary or appropriate in order to comply with Federal and applicable state
securities laws. Legends evidencing such restrictions may be placed on the Stock
certificates.
14.2 Compliance with Securities Laws. Each Option, Stock Appreciation
Right, Restricted Stock Award, Stock Unit, and Stock Bonus grant shall be
subject to the requirement that, if at any time counsel to Qwest shall determine
that the listing, registration or qualification of the shares subject to such
Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, or Stock
Bonus grant upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance or purchase of shares
thereunder, such Option, Stock Appreciation Right, Restricted Stock Award, Stock
Unit or Stock Bonus grant may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the Committee. Nothing
herein shall be deemed to require Qwest to apply for or to obtain such listing,
registration or qualification.
14.3 Changes in Accounting Rules. Except as provided otherwise at the
time an Award is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to Options, Stock Appreciation Rights, Restricted
Stock Awards, Stock Units or other Awards shall occur which, in the sole
judgment of the Committee, may have a material adverse effect on the reported
earnings, assets or liabilities of Qwest, the Committee shall have the right and
power to modify as necessary, any then outstanding and unexercised Options,
Stock Appreciation Rights, outstanding Restricted Stock Awards, outstanding
Stock Units and other outstanding Awards as to which the applicable services or
other restrictions have not been satisfied.
18
ARTICLE XV
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant
as a result of the exercise of an Option or Stock Appreciation Right, the sale
of shares received upon such exercise, the vesting of any Restricted Stock
Award, receipt of Stock Bonuses, distributions with respect to Stock Units, or
the grant of Stock shall not constitute "earnings" or "compensation" with
respect to which any other employee benefits of such employee are determined,
including without limitation benefits under any pension, profit sharing, 401(k),
life insurance or salary continuation plan.
ARTICLE XVI
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if Qwest, on the advice of counsel,
determines that shareholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any
manner adversely affect any Options, Stock Appreciation Rights, Restricted Stock
Awards, Stock Units, Stock Bonuses or other Award theretofore granted under the
Plan, without the consent of the Participant holding such Options, Stock
Appreciation Rights, Restricted Stock Awards, Stock Units, Stock Bonuses or
other Awards.
ARTICLE XVII
WITHHOLDING
17.1 Withholding Requirement. Qwest's obligations to deliver shares
of Stock upon the exercise of any Option, or Stock Appreciation Right, the
vesting of any Restricted Stock Award, payment with respect to Stock Units, or
the grant of Stock shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements.
17.2 Withholding With Stock. At the time the Committee grants an
Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, Stock
Bonus, other Award, or Stock or at any time thereafter, it may, in its sole
discretion, grant the Participant an election to pay all such amounts of tax
withholding, or any part thereof, by electing (a) to have Qwest withhold from
shares otherwise issuable to the Participant, shares of Stock having a value
equal to the amount required to be withheld or such lesser amount as may be
19
elected by the Participant; provided however, that the amount of Stock so
withheld shall not exceed the minimum amount required to be withheld under the
method of withholding that results in the smallest amount of withholding, or (b)
to transfer to Qwest a number of shares of Stock that were acquired by the
Participant more than six months prior to the transfer to Qwest and that have a
value equal to the amount required to be withheld or such lesser amount as may
be elected by the Participant. All elections shall be subject to the approval or
disapproval of the Committee. The value of shares of Stock to be withheld shall
be based on the Fair Market Value of the Stock on the date that the amount of
tax to be withheld is to be determined (the "Tax Date"). Any such elections by
Participants to have shares of Stock withheld for this purpose will be subject
to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of Qwest
within the meaning of Section 16 of the 1934 Act ("Section 16"), the Participant
must satisfy the requirements of such Section 16 and any applicable Rules
thereunder with respect to the use of Stock to satisfy such tax withholding
obligation.
ARTICLE XVIII
REQUIREMENTS OF LAW
18.1 Requirements of Law. The issuance of Stock and the payment of
cash pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
18.2 Federal Securities Law Requirements. If a Participant is an
officer or director of Qwest within the meaning of Section 16, Awards granted
hereunder shall be subject to all conditions required under Rule 16b-3, or any
successor rule promulgated under the 1934 Act, to qualify the Award for any
exception from the provisions of Section 16(b) of the 1934 Act available under
that Rule. Such conditions shall be set forth in the agreement with the
Participant which describes the Award or other document evidencing or
accompanying the Award.
18.3 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
20
ARTICLE XIX
DURATION OF THE PLAN
Unless sooner terminated by the Board of Directors, the Plan shall
terminate at the close of business on June 22, 2007, and no Option, Stock
Appreciation Right, Restricted Stock Award, Stock Unit, Stock Bonus, other Award
or Stock shall be granted, or offer to purchase Stock made, after such
termination. Options, Stock Appreciation Rights, Restricted Stock Awards, other
Awards, and Stock Units outstanding at the time of the Plan termination may
continue to be exercised, or become free of restrictions, or paid, in accordance
with their terms.
Dated: October 4, 2000
QWEST COMMUNICATIONS INTERNATIONAL INC.,
a Delaware corporation
By: /s/ DRAKE S. TEMPEST
----------------------------
Drake S. Tempest
EX-99.D.2
18
exd-2.txt
EXHIBIT 99(D)(2)
[This Form of Nonqualified Stock Option Agreement is being used to evidence the
stock option grants referred to in the response to Question 46 in the Offer
Circular. This form will not be used for any award grants pursuant to the
Exchange Offer.]
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
================================================================================
This Option Agreement (the "Agreement") is made as of the ______ day of October,
2001, between Qwest Communications International Inc., a Delaware Corporation
(the "Company"), ________________ (the "Optionee").
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan, the Company desires to afford the Optionee the opportunity to
purchase shares of Common Stock, par value $.01 per share (the "Common Shares"),
of the Company.
NOW, THEREFORE, in connection with the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the meanings
given thereto in the Plan. The terms and provisions of the Plan are incorporated
herein by reference. In the event of a conflict or inconsistency between the
terms and provisions of the Plan and the terms and provisions of this Agreement,
the terms and provisions of the Plan shall govern and control.
2. GRANT OF OPTIONS.
The Company hereby grants to the Optionee the right and option (the "Option" or
"Options") to purchase up to, but not exceeding in the aggregate, ___________
Common Shares, on the terms and conditions herein set forth.
3. PURCHASE PRICE.
The purchase price of each Common Share covered by the Option shall be
$__________ (the "Purchase Price").
4. TERM OF OPTIONS.
The term of the Option shall be ten (10) years from the date hereof, subject to
earlier termination as provided in Sections 6 and 8 hereof.
5. VESTING OF OPTIONS.
The Option, subject to the terms, conditions and limitations contained herein,
shall vest and become exercisable with respect to the Common Shares in the
following schedule: _____________________________________________; provided
that, with respect to each such installment, the Optionee has remained in
continuous employment with the Company from the date hereof through the date
such installment is designated to vest.
1
Notwithstanding the vesting schedule set forth above, the Options will vest and
become immediately exercisable in the event of the Optionee's death or
Disability and under the circumstances described in Section 7 below.
Notwithstanding anything to the contrary in any other agreement, plan or other
document, the Optionee agrees that no provision in any severance, separation,
change of control, retention, employment or other plan or agreement between the
Optionee and any of U S WEST, Inc. and its subsidiaries or of which the Optionee
was a beneficiary shall affect the terms of the Option granted hereunder.
6. TERMINATION OF EMPLOYMENT.
(a) Except as set forth in the Plan, in the event the Optionee's
employment with the Company is terminated for reasons other
than due to death, Disability, or cause, the Option shall
remain exercisable for a period of up to three months after
cessation of employment, to the extent exercisable at the time
of cessation of employment. In the event the Optionee's
employment with the Company terminates by reason of death or
Disability, the Option shall remain exercisable for a period
of up to twenty-four (24) months after cessation of
employment, to the extent exercisable at the time of cessation
of employment. In the event the Optionee's employment with the
Company is terminated by the Company for cause, the Option
shall immediately lapse as of the date of such termination
whether or not exercisable on such date. Upon any cessation of
the Optionee's employment with the Company, the Option shall
lapse as to any Common Shares for which it has yet to become
exercisable as of the date of cessation of employment.
(b) For purposes of this Agreement, "cause" shall mean willful
misconduct, a willful failure to perform the Optionee's
duties, insubordination, theft, dishonesty, conviction of a
felony or any other willful conduct that is materially
detrimental to the Company or such other cause as the Board of
Directors of the Company in good faith reasonably determines
provides cause for the discharge of the Optionee.
7. CHANGE OF CONTROL
(a) For purposes of this Agreement, "change in control" shall have
the meaning set forth in the Plan.
(b) In the event there is both a change in control and subsequent
termination by the Company of the Optionee's employment with
the Company for reasons other than cause, the Option shall
vest in full and become immediately exercisable on the date of
such termination, and shall remain vested and exercisable
during the remaining term thereof.
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8. FORFEITURE OF OPTION.
Notwithstanding any other provision of this Agreement, if the Optionee engages
in any activity in competition with any activity of the Company, or otherwise
contrary or harmful to the interests of the Company, including but not limited
to (i) conduct related to the Optionee's employment for which either criminal or
civil penalties against the Optionee may be sought, (ii) violation of Company
policies, including without limitation, the Company's insider trading policy,
(iii) accepting employment with or serving as a consultant, or advisor or in any
other capacity to an employer that is in competition with or acting against the
interests of the Company, including employing or recruiting any present, former
or future employee of the Company, (iv) disclosing or misusing any confidential
information or material concerning the Company, or (v) participating in a
hostile takeover attempt, then this Option shall become void, shall be forfeited
and shall terminate effective the date on which the Optionee enters into such
activity, unless the Option was terminated sooner by operation of another term
or condition of this Agreement or the Plan.
9. TRANSFERABILITY OF OPTION.
Except to the extent permitted by the Committee in accordance with the
provisions of the Plan, the Optionee may not voluntarily or involuntarily
pledge, hypothecate, assign, sell or otherwise transfer the Option except by
will or the laws of descent and distribution, and during the Optionee's
lifetime, the Option shall be exercisable only by the Optionee.
10. NO RIGHTS AS A SHAREHOLDER.
The Optionee shall have no rights as a shareholder with respect to any Common
Shares until the date of issuance to the Optionee of a certificate evidencing
such Common Shares. No adjustments, other than as provided in Article IV of the
Plan, shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions for which the record date is
prior to the date the certificate for such Common Shares is issued.
11. REGISTRATION: GOVERNMENTAL APPROVAL.
The Option granted hereunder is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration, or
qualifications of Common Shares issuable upon exercise of the Option is required
by any securities exchange or under any state or Federal law, rule or
regulation, or the consent or approval of any governmental regulatory body or
other person is necessary or desirable as a condition of, or in connection with,
the issuance of Common Shares, no Common Shares shall be issued, in whole or in
part, unless such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions or with such conditions as are
acceptable to the Committee.
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12. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice to the Company, Attention: Manager, Stock
Administration. Such notice shall state the election to exercise the Option and
the number of Common Shares in respect of which the Option is being exercised,
shall be signed by the person or persons so exercising the Option and shall be
accompanied by payment in full of the Purchase Price for such Common shares.
Payment of such Purchase Price shall be made in United States dollars by
certified check or bank cashier's check payable to the order of the Company or
by wire transfer to such account as may be specified by the Company for this
purpose. Subject to such procedures and rules as may be adopted from time to
time by the Committee, the Optionee may also pay such Purchase Price by (i)
tendering to the Company Common Shares with an aggregate Fair Market Value on
the date of exercise equal to such Purchase Price provided that such Common
Shares must have been held by the Optionee for more than six (6) months, (ii)
delivery to the Company of a copy of irrevocable instructions to a stockbroker
to sell Common Shares or to authorize a loan from the stockbroker to the
Optionee and to deliver promptly to the Company an amount sufficient to pay such
Purchase Price, or (iii) any combination of the methods of payment described in
clauses (i) and (ii) and in the preceding sentence. The certificate for Common
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option. All Common Shares
purchased upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
13. INCOME TAX WITHHOLDING.
The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all federal, state, local and
other taxes required by law to be withheld with respect to the exercise of the
Option and the issuance of the Common Shares, including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, or requiring the Optionee, or the
beneficiary or legal representative of the Optionee, to pay to the Company the
amount required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations.
14. NON-QUALIFIED STOCK OPTION.
The Option granted hereunder is not intended to be an "incentive stock option"
within the meaning of Section 422 of the Code.
15. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
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16. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws of
the State of Delaware.
17. HEADINGS.
Headings are for the convenience of the parties and are not deemed to be part of
this Agreement.
18. EXECUTION.
This Agreement is voidable by the Company if the Optionee does not execute the
Agreement within 30 days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By:
-------------------------------------
OPTIONEE:
-----------------------------------------
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EX-99.D.3
19
exd-3.txt
EXHIBIT 99(D)(3)
[This Form of Restricted Stock Agreement is being used to evidence the
restricted stock grants referred to in the response to Question 46. This form
will not be used for any award grants pursuant to the Exchange Offer.]
FORM OF RESTRICTED STOCK AGREEMENT
--------------------------------------------------------------------------------
This Restricted Stock Agreement ("Agreement") is made as of the ____ day of
October, 2001, between Qwest Communications International Inc., a Delaware
corporation (the "Company"), and ____________________ (the "Grantee").
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan (the "Plan"), the Company desires to grant shares of Common
Stock, par value $0.01 per share, of the Company to the Grantee subject to the
restrictions and on the terms and conditions specified below.
NOW THEREFORE, in connection with the mutual covenants hereinafter set forth and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the meanings
given thereto in the Plan. The terms and provisions of the Plan are incorporated
herein by reference. Except as specifically otherwise provided herein, in the
event of a conflict or inconsistency between the terms and provisions of the
Plan and the terms and provisions of this Agreement, the terms and provisions of
the Plan shall govern and control.
2. GRANT OF RESTRICTED STOCK.
The Company hereby grants to the Grantee __________ shares (the "Shares") of the
Common Stock (the "Restricted Stock"), effective as of ____________________,
2001 (the "Transfer Date"), with a value of $________ per Share on the Transfer
Date. After the Grantee becomes the holder of record with respect to the Stock,
the Grantee shall be treated as the beneficial owner of the Stock and shall have
the right to receive all amounts, including cash and property of any kind,
distributed with respect to the Stock.
2. RESTRICTIONS.
The Grantee shall not sell, assign, transfer by gift or otherwise, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise, any of
the Shares for the period commencing on the Transfer Date and ending on the
Expiration Date (as defined in Section 3 below), except as otherwise provided in
Section 3 or Section 4 or as otherwise permitted by this Agreement or the terms
of the Plan.
If any transfer of Shares is made or attempted to be made contrary to the terms
of this Agreement, the Company shall have the right to acquire for its own
account, without the payment of any consideration therefor, such Shares from the
owner thereof or his transferee, at any time before or after such prohibited
transfer. In addition to any other legal or equitable remedies it may have, the
1
Company may enforce its rights to specific performance to the extent permitted
by law and may exercise such other equitable remedies then available to it. The
Company may refuse for any purpose to recognize any transferee who receives
Shares contrary to the provisions of this Agreement as a stockholder of the
Company and may retain and/or recover all dividends on such Shares that were
paid or payable subsequent to the date on which the prohibited transfer was made
or attempted.
3. VESTING; LAPSE OF RESTRICTIONS.
Except as otherwise provided in this Agreement, the Shares of Restricted Stock
shall vest in installments if the Grantee has been employed continuously by the
Company from the Transfer Date through the dates specified in the following
schedule:
-------------------------------------------
Date Vested
Percentage
-------------------------------------------
-------------------------------------------
__________, 2003 25%
-------------------------------------------
__________, 2004 25%
-------------------------------------------
__________, 2005 25%
-------------------------------------------
__________, 2006 25%
-------------------------------------------
The Restricted Stock shall be fully vested and this Agreement shall terminate on
the last date set forth above (the "Expiration Date"). Shares that have become
vested and as to which the restrictions have lapsed shall be referred to as
Vested Shares. Shares that have not become vested and as to which the
restrictions have not lapsed shall be referred to as Unvested Shares.
Notwithstanding the vesting schedule set forth above, the Unvested Shares will
become Vested Shares in the event of the Grantee's death or Disability
After the restrictions have lapsed, the Grantee may sell, assign, transfer by
gift or otherwise, hypothecate, or otherwise dispose of, by operation of law or
otherwise, any of the Vested Shares at the Grantee's discretion.
4. CHANGE OF CONTROL.
(a) For purposes of this Agreement, "change in control" shall have
the meaning set forth in the Plan.
(b) In the event there is both a change in control and a subsequent
termination by the Company of the Grantee's employment with the Company for
reasons other than cause, all Unvested Shares shall vest in full and become
Vested Shares on the date of such termination.
(c) For purposes of this Agreement, "cause" shall mean willful
misconduct, a willful failure to perform the Grantee's duties, insubordination,
theft, dishonesty, conviction of a felony or any other willful conduct that is
materially detrimental to the Company or such other cause as the Board of
Directors of the Company in good faith reasonably determines provides cause for
the discharge of the Grantee.
2
5. TERMINATION OF EMPLOYMENT; FORFEITURE OF UNVESTED SHARES.
In the event the Grantee's employment with the Company is terminated for any
reason other than due to death or Disability, all Unvested Shares shall be
forfeited and the Grantee shall immediately transfer and assign to the Company,
without the requirement of consideration, all Unvested Shares, which shall
promptly be tendered to the Company by the delivery of certificates, if any, for
such Unvested Shares, duly endorsed in blank by the Grantee or the Grantee's
representative or with stock powers attached thereto duly endorsed, at the
Company's principal offices, all in form suitable for the transfer of such
Shares to the Company without the payment of any consideration therefor by the
Company. After the time at which any such Shares are required to be delivered to
the Company for transfer to the Company, the Company shall not pay any dividend
to the Grantee on account of such Shares or permit the Grantee to exercise any
of the privileges or rights of a stockholder with respect to such Shares, but
shall, in so far as permitted by law, treat the Company as the owner of such
Shares.
6. ADJUSTMENT OF THE SHARES.
Upon the occurrence of an event described in Article IV of the Plan, the Shares
shall be adjusted in accordance with Article IV.
7. FORFEITURE OF UNVESTED SHARES.
Notwithstanding any other provision of this Agreement, if the Grantee engages in
any activity in competition with any activity of the Company, or otherwise
contrary or harmful to the interests of the Company, including but not limited
to (i) conduct related to the Grantee's employment for which either criminal or
civil penalties against the Grantee may be sought, (ii) violation of Company
policies, including without limitation, the Company's insider trading policy,
(iii) accepting employment with or serving as a consultant, or advisor or in any
other capacity to an employer that is in competition with or acting against the
interests of the Company, including employing or recruiting any present, former
or future employee of the Company, (iv) disclosing or misusing any confidential
information or material concerning the Company, or (v) participating in a
hostile takeover attempt, then this Agreement and all outstanding Unvested
Shares shall become null and void and shall be forfeited and this Agreement and
all outstanding Unvested Shares shall terminate effective the date on which the
Grantee enters into such activity, unless the Agreement and outstanding Shares
were terminated sooner by operation of another term or condition of this
Agreement or the Plan.
8. ENFORCEMENT OF RESTRICTIONS.
If a certificate or certificates representing Shares is issued, it shall bear
the following legend:
"The Shares of stock represented by this Certificate are subject to all
of the terms of a Restricted Stock Agreement between Qwest
Communications International Inc. and the registered owner of this
3
Certificate (the "Agreement") and to the terms of the Qwest
Communications International Inc. Equity Incentive Plan. Copies of the
Agreement and the Plan are on file at the office of the Company. The
Agreement, among other things, limits the right of the Owner to
transfer the Shares represented hereby and provide in certain
circumstances that all or a portion of the Shares must be returned to
the Company."
The Company may, in its sole discretion, require the Grantee to keep the
certificate, if any, representing the Shares, duly endorsed, in the custody of
the Company while the Shares are subject to the restrictions contained in
Section 2. The Company may, in its sole discretion, require that the
certificate, if any, representing the Shares, duly endorsed, be held in the
custody of a third party while the Shares are subject to the restrictions
contained in Section 2.
9. TAX WITHHOLDING.
Upon the vesting of any portion of the Shares, the Grantee must make arrangement
satisfactory to the Company to make payment to the Company of the amount
required to be withheld under applicable federal, state and local income and
other tax laws (collectively, "Withholding Taxes"). The Grantee may elect to pay
such Withholding Taxes (a) in cash, (b) by selling a portion of the Vested
Shares, or (c) as permitted by Section 17.2 of the Plan by having the Company
withhold from the Vested Shares a number of shares having a value equal to the
amount of the minimum required Withholding Taxes, or such lesser amount as the
Grantee may elect. In such case, the value of the Shares to be withheld shall be
based on the Fair Market Value (as defined in the Plan) of the Shares on the
date the amount of the Withholding Taxes is determined (the "Tax Date"). The
Grantee must make an irrevocable election of the manner of payment of the
Withholding Taxes as provided in Section 17.2 of the Plan. If the Grantee has
not made arrangements satisfactory to the Company to pay the Withholding Taxes,
the Company shall withhold from the Vested Shares, a number of Shares having a
value equal to the amount required to pay the minimum required Withholding
Taxes. The value of the Shares to be withheld shall be calculated in the same
manner as noted above.
10. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
11. GOVERNING LAW.
This Agreement shall be governed and interpreted in accordance with the laws of
the State of Delaware.
12. HEADINGS.
Headings are for the convenience of the parties and are not deemed to be part of
this Agreement.
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13. EXECUTION.
This Agreement is voidable by the Company if the Grantee does not execute the
Agreement within thirty (30) days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates
set forth opposite their signatures to be effective as of the date and year
first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
Date: By:
--------------- --------------------------------------
GRANTEE:
Date:
--------------- --------------------------------------
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