0001019056-01-500506.txt : 20011112
0001019056-01-500506.hdr.sgml : 20011112
ACCESSION NUMBER: 0001019056-01-500506
CONFORMED SUBMISSION TYPE: SC TO-I/A
PUBLIC DOCUMENT COUNT: 18
FILED AS OF DATE: 20011105
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/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-53477
FILM NUMBER: 1774589
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/A
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/A
1
qwest_toa1.txt
SCHEDULE TO-1/A - AMENDMENT NO. 1
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
(Amendment No. 1)
----------------
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
------------------------------------------------
(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)
-------------------------------------------------------------
$227,260,440 $45,452
=============================================================
(1) Calculated solely for the purpose of determining the amount of the filing
fee. The transaction value assumes that options to purchase 40,863,079
shares of Qwest Communications International Inc. Common Stock, par value
$0.01 per share ("Common Stock"), having an aggregate value of $227,260,440
as of November 1, 2001, will be exchanged pursuant to this amended 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. $42,547.00 of the filing fee was previously paid on
October 31, 2001 in connection with the initial filing of this Schedule TO.
[ ] 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-party 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 [ ].
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule TO (the "Tender Offer Statement") filed by Qwest Communications
International Inc. (the "Company") with the Securities and Exchange Commission
on October 31, 2001 relating to the offer by the Company to certain eligible
employees to exchange certain outstanding options to purchase shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), for new
non-qualified stock options to be granted by the Company under the Company's
Equity Incentive Plan, all upon the terms and subject to the conditions set
forth in the original Offer Circular, dated October 31, 2001, and in the related
Election Form and Release Agreement, copies of which were attached as Exhibits
(a)(1) and (a)(2), respectively, to the Tender Offer Statement.
The filing of this Amendment No. 1 to the Tender Offer Statement shall not
be construed as an admission by the Company 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
Item 1 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
The information set forth under "Summary of Offer Expiring November
30, 2001" beginning on page 1 of the Amended and Restated Offer Circular,
dated November 2, 2001 (the "Amended and Restated Offer Circular"),
attached hereto as Exhibit (a)(19), is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION
Item 2 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(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 relates to an offer by the Company to
eligible employees of the Company (as described in the Amended and Restated
Offer Circular) to exchange Eligible Options (as defined in the Amended and
Restated Offer Circular) and Recent Options (as defined in the Amended and
Restated 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 Amended and Restated Offer
Circular and the related Election Form and Release Agreement attached
hereto as Exhibit (a)(20) (the "Election Form"), each of which is
incorporated herein by reference.
The information set forth in the response to Question 45 ("How many
Eligible Options are there?") in the Amended and Restated 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 Amended and Restated 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
Item 3 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(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 Amended
and Restated Offer Circular is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION
Item 4 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(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 Amended and
Restated 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
Amended and Restated Offer Circular is incorporated herein by reference.
2
ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
Item 5 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(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
Amended and Restated Offer Circular is incorporated herein by reference.
The Qwest Communications International Inc. Equity Incentive Plan, filed as
Exhibit (d)(1) hereto, the 1998 U S WEST Stock Plan, filed as Exhibit
(d)(4) hereto, the 1998 U S WEST Stock Plan, as amended June 22, 1998,
filed as Exhibit (d)(5) hereto, the 1998 U S WEST Stock Plan, as amended
August 6, 1999, filed as Exhibit (d)(6) hereto, the 1999 U S WEST Stock
Plan, filed as Exhibit (d)(7) hereto, the 1999 U S WEST Stock Plan, as
amended August 6, 1999, filed as Exhibit (d)(8) hereto, and the U S WEST
1998 Broad Based Stock Option Plan dated June 12, 1998, filed as Exhibit
(d)(9) hereto contain information regarding the Eligible Options and are
incorporated herein by reference. The Qwest Communications International
Inc. Equity Incentive Plan, filed as Exhibit (d)(1) hereto, contains
information regarding the Recent Options, and is incorporated herein by
reference.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Item 6 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(a) The following information from the Amended and Restated 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 Amended and
Restated 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."
3
(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 Amended and Restated Offer Circular is incorporated
herein by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 7 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(a) The following information set forth in the Amended and Restated
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 Amended and Restated Offer
Circular.
(d) Not applicable.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
Item 8 of the Tender Offer Statement is hereby amended and restated to read
in its entirety as follows:
(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
Amended and Restated 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
Amended and Restated Offer Circular is incorporated herein by reference.
ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
(a) Not applicable.
4
ITEM 10. FINANCIAL STATEMENTS
Item 10 of the Tender Offer Statement is hereby amended and restated to
read in its entirety as follows:
(a) the following information is incorporated herein by reference:
(1) the information set forth in the Amended and Restated Offer
Circular in the response to Question 44 ("What information is
available regarding Qwest?") and under "Additional Information;
Incorporation of Documents by Reference";
(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, as amended on Form 10-K/A, filed with the SEC
on August 20, 2001, and the ratios of earnings to fixed charges
included in Attachment E to the Amended and Restated Offer Circular;
and
(5) the book value per share data included in Attachment E to
the Amended and Restated Offer Circular.
(b) Not applicable.
ITEM 11. ADDITIONAL INFORMATION
Item 11 of the Tender Offer Statement is hereby amended and restated to
read in its entirety as follows:
(a) The following information set forth in the Amended and Restated
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 section encaptioned
"Additional Information; Incorporation of Documents by
Reference."
(b) Not applicable.
5
ITEM 12. EXHIBITS
Item 12 of the Tender Offer Statement is hereby amended and restated to
read in its entirety as follows:
*(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 through D, and (iii) Selected
Financial Data in Attachment E)
*(a)(2) Form of Original 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) Text of October 31, 2001 E-mail Message to Employees
Announcing Exchange Offer
*(a)(7) Form of October 31, 2001 Cover Letter Accompanying Exchange
Offer Documents and to appear on the Qwest Communications
International Inc. Human Resources Website
*(a)(8) Form of October 31, 2001 Cover Letter 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 (October 31,
2001)
*(a)(11) Qwest Human Resources Website Full Screen Message (October
31, 2001)
*(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 (October 31, 2001)
**(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)
6
**(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)
(a)(19) Amended and Restated Offer Circular dated November 2, 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 through D, and (iii)
Selected Financial Data in Attachment E)
(a)(20) Updated Election Form and Release Agreement (November 2,
2001)
(a)(21) November 2, 2001 Addendum to Exchange Offer Circular (Former
U S WEST Employees)
(a)(22) Text of November 2, 2001 E-mail Message to Employees
(a)(23) November 2, 2001 Letter to Employees regarding U S WEST
options to appear on Human Resources Website
(a)(24) Form of November 2, 2001 Cover Letter Accompanying Exchange
Offer Documents and to appear on the Qwest Communications
International Inc. Human Resources Website (November 2,
2001)
(a)(25) Form of November 2, 2001 Cover Letter Included in Mailing of
Exchange Offer Documents (Former U S WEST Employees)
7
(a)(26) Updated Frequently Asked Questions to appear on Qwest
Communications International Inc. Human Resources Website
(Former U S WEST Employees)
(a)(27) Updated Qwest Human Resources Website Full Screen Message
(November 2, 2001)
(a)(28) Transcription of Updated Recorded Message on Stock Plan
Administration Toll Free Phone Line (November 2, 2001)
(a)(29) Instructions on How to Accept Exchange Offer to appear on
Qwest Human Resources Website
(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
(d)(4) 1998 U S WEST Stock Plan
(d)(5) 1998 U S WEST Stock Plan, as amended June 22, 1998
(d)(6) 1998 U S WEST Stock Plan, as amended August 6, 1999
(d)(7) 1999 U S WEST Stock Plan
(d)(8) 1999 U S WEST Stock Plan as amended August 6, 1999
(d)(9) U S WEST 1998 Broad Based Stock Option Plan dated June 12,
1998
(g) Not applicable.
(h) Not applicable
-----------------------------------
* Previously filed as exhibit to Schedule TO
** Incorporated by reference
8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment No. 1 to Tender Offer Statement
is true, complete and correct.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ YASH RANA
-----------------------------------
Yash Rana
Associate General Counsel and
Assistant Secretary
Date: November 2, 2001
9
EXHIBIT INDEX
Exhibit
Number Description of Document
------- ----------------------------------------------------------------------
(a)(19) Amended and Restated Offer Circular dated November 2, 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 through D, and (iii) Selected Financial Data in
Attachment E)
(a)(20) Updated Election Form and Release Agreement (November 2, 2001)
(a)(21) November 2, 2001 Addendum to Exchange Offer Circular (Former U S WEST
Employees)
(a)(22) Text of November 2, 2001 E-mail Message to Employees
(a)(23) November 2, 2001 Letter to Employees regarding U S WEST options to
appear on Human Resources Website
(a)(24) Form of November 2, 2001 Cover Letter Accompanying Exchange Offer
Documents and to appear on the Qwest Communications International Inc.
Human Resources Website (Former U S WEST Employees)
(a)(25) Form of November 2, 2001 Cover Letter Included in Mailing of Exchange
Offer Documents (Former U S WEST Employees)
(a)(26) Updated Frequently Asked Questions to appear on Qwest Communications
International Inc. Human Resources Website (November 2, 2001)
(a)(27) Updated Qwest Human Resources Website Full Screen Message (November 2,
2001)
(a)(28) Transcription of Updated Recorded Message on Stock Plan Administration
Toll Free Phone Line (November 2, 2001)
(a)(29) Instructions on How to Accept Exchange Offer to appear on Qwest Human
Resources Website
(d)(4) 1998 U S WEST Stock Plan
(d)(5) U S WEST 1998 Stock Plan, as amended June 22, 1998
(d)(6) 1998 U S WEST Stock Plan, as amended August 6, 1999
(d)(7) 1999 U S WEST Stock Plan
(d)(8) 1999 U S WEST Stock Plan as amended August 6, 1999
(d)(9) U S WEST 1998 Broad Based Stock Option Plan dated June 12, 1998
10
EX-99.A.19
3
ex_a-19.txt
EXHIBIT 99(A)(19)
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
AMENDED AND RESTATED OFFER CIRCULAR
Qwest Communications International Inc. ("Qwest," "we" or "us") is
offering our employees the right to exchange certain outstanding stock options
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 Amended and
Restated Offer Circular (the "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 nonqualified stock options with an
exercise price equal to or greater than $35 per share that were granted either
(1) under our Equity Incentive Plan or (2) under one of U S WEST, Inc.'s stock
plans that was converted into a Qwest stock option in our merger with U S WEST,
Inc. ("U S WEST") on June 30, 2000. 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. 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. If you have options that were granted under one of the U S
WEST stock plans, you received a conversion notice in connection with the merger
regarding the conversion and assumption of your U S WEST options. For your
convenience, we are also sending to the address we have for you an option
statement showing the options that you can exchange.
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. The other terms and conditions of the new options are described in
more detail in this Offer Circular.
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 Amended and Restated Offer Circular is November 2, 2001.
TABLE OF CONTENTS
Summary of Offer Expiring November 30, 2001...................................1
Risk Factors..................................................................4
Terms of the Offer............................................................7
Background and Reasons for the Offer..................................7
Benefits and Risks of the Offer.......................................8
The Offer.............................................................9
Description of Terms and Conditions of New Options to be Granted
in June 2002.........................................................18
Other Provisions; Administration.....................................22
Federal Income Tax and Social Security Consequences..................27
Additional Information; Incorporation Of Documents By Reference.............30
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.........................................................................28
KPN..........................................................................27
New Option Agreement.........................................................18
New Option Grant Date.........................................................3
New Options...................................................................2
Offer................................................................Cover Page
Qwest................................................................Cover Page
Recent Options................................................................1
SEC..........................................................................27
U S WEST.............................................................Cover Page
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 or under one
of U S WEST's stock plans that were converted into Qwest stock options
in our merger with U S WEST by merger on June 30, 2000. 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 nonqualified stock options with an exercise price equal
to or greater than $35 per share that were granted under either (1) our
Equity Incentive Plan or (2) under one of U S WEST's stock plans that
were converted into Qwest stock options in our merger with U S WEST by
merger on June 30, 2000. 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.)
Stock options granted under our Equity Incentive Plan or the U S WEST
stock plans 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. If you have options that were granted under one of
the U S WEST stock plans, you received a conversion notice in
connection with the merger regarding the conversion and assumption of
your U S WEST options. For your convenience, we are also sending to the
address we have for you an option statement showing the options that
1
you can exchange. 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:
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
2
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. For the
Eligible Options that were granted under our Equity Incentive Plan,
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. However, there are differences between the customary terms of
the Eligible Options that were granted under the U S WEST stock plans
and the terms of the options that we now generally grant under the
Equity Incentive Plan. Therefore, the terms and conditions of the New
Options for the Eligible Options that were granted under the U S WEST
stock plans may be different from those of the corresponding Cancelled
Options because all of the New Options will be granted under our Equity
Incentive Plan. It is very important that you read this Offer Circular
and all of the documents referred to in this Offer Circular as
attachments in making your decision to participate in the Exchange.
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.
3
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.
4
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
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.
Each New Option will be evidenced by an option agreement in a form similar to
the applicable form attached to this Circular as Attachment B, C, or D. We will
use the form of option agreement attached as Exhibit B for New Options that are
issued in exchange for Cancelled Options that were granted under our Equity
Incentive Plan before February 1, 2000. We will use the form of option agreement
attached as Exhibit C for New Options that are issued in exchange for Cancelled
Options that were granted under our Equity Incentive Plan on or after February
1, 2000 but before June 30, 2000. We will use the form of option agreement
attached as Exhibit D for New Options that are issued in exchange for Cancelled
Options that were granted under our Equity Incentive Plan on or after June 30,
2000 and Cancelled Options that were granted under the U S WEST stock plans.
However, we reserve the authority to adjust the number of shares subject to, or
to be subject to, and the exercise price and other terms of the New Options,
before and after they are granted, consistent with the authority that our Board
of Directors has with respect to stock options granted under our Equity
Incentive Plan. In the period before the New Option Grant Date, we may make
these adjustments or terminate rights without prior notice to you. As
highlighted in the responses to Questions 35-37 below, New Options that are
issued in exchange for Cancelled Options that were granted under one of the U S
WEST stock plans will have different terms than the provisions of your Cancelled
Options. These terms may include materially less favorable change in control,
termination of employment, and other provisions.
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.
5
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.
6
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.
7
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.
8
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 nonqualified stock option with an
exercise price of $35 or more per share that was originally
granted either (1) under our Equity Incentive Plan or (2)
under one of the U S WEST stock plans that was converted into
9
a Qwest stock option in our merger with U S WEST on June 30,
2000. The stock options that may be tendered in the Exchange
are referred to as "Eligible Options". You cannot exchange
options that you received as an employee of LCI International
Inc. or Icon CMT Corp. because those stock options have a
post-conversion exercise price that is less than $35 per
share. 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).
To determine whether your U S WEST options have a
POST-conversion exercise price of $35 or more, you must first
apply the conversion ratio in the merger (which was
1.72932:1). As a result of the conversion ratio, U S WEST
options with a PRE-conversion exercise price of $60.53 would
be eligible for the exchange. That is, you can only exchange
your Qwest options that were originally granted by U S WEST if
the original exercise price of those options (before giving
effect to the merger) was $60.53 or higher.
14. How may I accept the Offer?
Read Offer Circular and Election Form. To accept the Offer,
you should first review this Offer 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. If
you have options that were granted under one of the U S WEST
stock plans, you received a conversion notice in connection
with the merger regarding the conversion and assumption of
your U S WEST options. For your convenience, we are also
sending to the address we have for you an option statement
showing the options that you can exchange. If you need another
copy, please contact Qwest Stock Administration at the email
address, mailing address or telephone number given above. You
are responsible for confirming that the options included in
10
your option statement satisfy the eligibility requirements
described in the response to Question 13 above and for
confirming that all of your Eligible Options and Recent
Options are reflected in your statement. Any discrepancies
should promptly be reported to Qwest Stock Administration at
the email address, mailing 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
11
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.
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.
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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 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.
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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
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)
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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
include surplus transition leave, personal unpaid leave,
family and medical leave (other than approved maternity and
paternity leave), and educational leave.
15
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.
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.
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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 in 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 in control, sells assets or otherwise
reorganizes before the New Options are granted. In addition,
the announcement of a change in 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 in 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.
17
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.
All of the New Options, including those that relate to Cancelled Options that
were originally granted under one of the U S WEST stock plans, will be granted
under and subject to the terms and conditions of our Equity Incentive Plan. You
may obtain a copy of our Equity Incentive Plan by request without charge from
Qwest. 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,
for Eligible Options that were originally granted under our Equity Incentive
Plan, the form of New Option Agreement that will be used to evidence any
particular New Option will depend on the change in control provisions that
applied to the corresponding Cancelled Option. For Eligible Options that were
originally granted under any of the U S WEST stock plans and assumed by us in
the merger, all New Options will be evidenced by the form of New Option
Agreement attached as Attachment D. You should read our Equity Incentive Plan
and 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
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 under our Equity
Incentive Plan 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.
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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.
For Eligible Options that were originally granted under our
Equity Incentive Plan, the New Options will remain subject to
the same provisions regarding early termination upon a
termination of employment as your Cancelled Options, subject
of course to the new vesting requirements.
For Eligible Options that were originally granted under one of
the U S WEST stock plans, the New Options will be subject to
the termination of employment provisions that are included in
the form of New Option Agreement attached as Attachment D. The
termination of employment provisions in that form generally
provide as follows:
o if your employment terminates other than because of
death, disability, or a termination by the Company
for "cause", the unvested portion of the New Options
will terminate and the vested portion will remain
exercisable for up to three months;
o if your employment terminates by reason of death or
disability, the unvested portion of the New Options
will terminate and the vested portion will remain
exercisable for a period of up to twenty-four months;
and
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o if your employment is terminated for cause, the new
Options will terminate immediately whether or not
they are vested.
In each case, these termination provisions are subject to
earlier expiration of the option. (See Section 6 of Exhibit D
for the specific provisions and also refer to the response to
Question 37 below).
These termination provisions (including, without limitation,
the definitions of "disability" and "cause" used for purposes
of the New Option grants) may be different from the provisions
that applied to the corresponding Cancelled Options. For
example, you may have been entitled to materially more
favorable vesting and/or exercise rights upon your retirement
or in case of your death or disability under your original U S
WEST stock plan options than under your New Options if you
accept the Offer.
36. What will be the change in control provisions of my New
Option?
For Eligible Options that were originally granted under our
Equity Incentive Plan, the New Options granted in exchange for
your Cancelled Options will be subject to the same change in
control provisions as your Cancelled Options. If your
Cancelled Options contain different change in control
provisions, your New Option Agreements will be different and
will reflect these different provisions.
For Eligible Options that were originally granted under the U
S WEST stock plans, the New Options granted in exchange for
your Cancelled Options will be subject to the change in
control provisions that are contained in Section 7 of the form
of New Option Agreement attached as Attachment D, regardless
of the change in control provisions in those Cancelled
Options. The New Options generally:
o will become fully vested if there is both a change in
control (as defined in the Equity Incentive Plan) and
we subsequently terminate your employment other than
for "cause";
o will also become fully vested on any of the following
events:
o a merger or consolidation of Qwest
with or into another corporation or
other reorganization, or
o the sale of all or substantially
all of Qwest's assets,
if, Qwest, or the successor or purchaser, as the case
may be, does not assume the outstanding options or
substitute new options for the outstanding options;
and
o will terminate subject to certain accelerated vesting
and notice provisions under our Equity Incentive Plan
if Qwest or the successor or purchaser does not
assume or substitute the options in the circumstances
above.
As a result of the terms of the New Options you may have been
entitled to materially more favorable terms (including
vesting) in the event of a merger, asset sale, or change in
control under your original U S WEST stock plans options than
will apply to New Options.
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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 made this
reaffirmation when you received your other options from the
Company granted under our Equity Incentive Plan. 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 separate 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, subject to earlier
termination provisions.
If you tender Eligible Options that were originally granted
under our Equity Incentive Plan, 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.
If you tender Eligible Options that were originally granted
under the U S WEST stock plans, the terms and conditions of
the New Options may be materially different from those that
applied to your corresponding Cancelled Options. For example,
and without limitation, all New Options:
o will immediately terminate (whether or not vested) if
you engage in certain activity in competition with
us, in activity that is contrary or harmful to the
interests of Qwest, in conduct related to your
employment that could lead to criminal or civil
penalties or in conduct in violation of our policies;
if you disclose or misuse any confidential
information or material concerning us; or if you
participate in a hostile takeover attempt;
o will generally be subject to amendments without your
consent unless the amendment adversely affects your
New Option; and
o require the exercise price to be paid only in United
States dollars by certified check or bank cashier's
check, or by wire transfer, unless we have in place
procedures allowing for a cashless exercise. Under a
cashless exercise, you may pay the exercise price of
a New Option by tendering shares of Qwest stock that
you have owned for more than six months or by
delivering to us a copy of irrevocable instructions
to a stockbroker to sell stock or to authorize a loan
from the stockbroker to you and to deliver promptly
to us an amount sufficient to pay the exercise price
of your option.
In addition to the terms and conditions described above in the
responses to Questions 35 and 36 above, there may be
additional differences in the terms of the New Options as
compared to the terms of your Cancelled Options that were
originally granted under one of the U S WEST stock plans. If
you own options that were granted under the U S WEST stock
plans, you should carefully read the stock option agreements
that evidence your U S WEST stock plan options and the U S
WEST stock plans and compare those provisions to the
provisions of our Equity Incentive Plan and the form of New
Option Agreement attached as Attachment D.
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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
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,
22
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 November 1, 2001, the
closing price of a share of our common stock was $12.00. 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 November 1, 2001) $ 18.9000 $ 11.5500
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.
23
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
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 there were outstanding 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
originally granted under our Equity Incentive Plan,
approximately 3.4 million shares (approximately 0.2% of the
outstanding shares) were subject to Eligible Options
originally granted under the U S WEST stock plans, 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
24
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,
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.
25
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 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;
26
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.
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.
27
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
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%.)
28
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.
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.
29
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.
We also incorporate by reference into this Offer Circular additional
documents that we may file with the SEC between the date of this Offer Circular
and the expiration time of the Offer. These include periodic reports, such as
quarterly reports on Form 10-Q and current reports on Form 8-K.
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
30
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.
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
31
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
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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
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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.
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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
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will be equal to the amount paid for the Common Stock plus 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 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
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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.)
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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.
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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.
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.
B-3
15. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws of
the State of Delaware.
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.
C-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.
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.
C-3
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:
-----------------------------------------
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,
-------------------------------------------------------------
Eligible Options that were granted under the U S WEST Plans,
------------------------------------------------------------
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.20
4
ex_a-20.txt
EXHIBIT 99(A)(20)
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
Amended and Restated Offer Circular dated November 2, 2001 (the
"Exchange Offer Circular"), that accompanies this form. You may
obtain a copy of the Exchange Offer Circular on the Qwest website.
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" means all outstanding options granted to you under the
Qwest Equity Incentive Plan or under the U S WEST stock plans with
a current 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 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
2
and returning it to Qwest prior to 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 Title Date
--------------------------------------------------------------------------------
(End of document.)
4
EX-99.A.21
5
ex_a-21.txt
EXHIBIT 99(A)(21)
QWEST COMMUNICATIONS INTERNATIONAL INC.
OFFER TO EXCHANGE CERTAIN
OUTSTANDING QWEST STOCK OPTIONS
ADDENDUM TO OFFER CIRCULAR
November 2, 2001
On November 2, 2001, we announced that we are extending the Qwest
Communications International Inc. Offer to Exchange Certain Qwest Stock Options
(the "Offer") to include outstanding stock options originally granted under U S
WEST, Inc.'s ("U S WEST") stock plans. The U S WEST stock options that are now
subject to the Offer were converted into Qwest stock options in our merger with
U S WEST and have a post-conversion exercise price of $35 or more. This Addendum
supplements and should be read in connection with the Offer Circular dated
October 31, 2001 (the "Offer Circular"). We have amended and restated the Offer
Circular to reflect the changes included in this Addendum. The amended and
restated Offer Circular is available on the Q at
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO AMENDED AND RESTATED
OFFERING CIRCULAR] or you may request a copy from our Stock Administration
department at StockAdmin2@Qwest.com or at the address or telephone number given
below.
Qwest Stock Administration
Qwest Communications International Inc.
555 17th Street, 7th Floor
Denver, Colorado 80202
Tel: 866-437-0007
Unless modified by this Addendum, terms that are capitalized in this
Addendum have the same meaning as in the Offer Circular.
Summary of Changes:
o Eligible Options now include outstanding nonqualified stock options
originally granted under the U S WEST stock plans with an exercise
price of $35 or more. Qwest assumed these options in the merger with
U S WEST.
o If you tender Eligible Options that were granted under the U S WEST
stock plans, the corresponding New Options will be subject to new terms
and conditions. All of the New Options will be granted under our Equity
Incentive Plan and those New Options that correspond to options granted
under the U S WEST stock plans will be evidenced by and subject to the
terms and conditions of the form of New Option Agreement attached to
the Offer Circular as Exhibit D.
Supplement to Offer Circular:
The following supplements the Offer Circular to explain the provisions
of the Offer as they relate to the options grated under the U S WEST stock
plans. The following discussion replaces any inconsistent provisions of the
Offer Circular relating to options originally granted under the U S WEST stock
plans.
1. Eligible Options.
If you are eligible to participate in the Offer, you may tender in the
Exchange any nonqualified stock option with an exercise price of $35 or
more per share that was originally granted either (1)
under our Equity Incentive Plan or (2) under one of the U S WEST stock
plans that was converted into a Qwest stock option in our acquisition
of U S WEST by merger on June 30, 2000. The stock options that may be
tendered in the Exchange are referred to 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).
To determine whether your U S WEST options have a POST-conversion
exercise price of $35 or more, you must first apply the conversion
ratio in the merger (which was 1.72932:1). As a result of the
conversion ratio, U S WEST options with a PRE-conversion exercise price
of $60.53 would be eligible for the exchange. That is, you can only
exchange your Qwest options that were originally granted by U S WEST if
the original exercise price of those options (before giving effect to
the merger) was $60.53 or higher.
The last time you received options, we sent you all the option
information you need to complete the election form. If you have options
that were granted under one of the U S WEST stock plans, you received a
conversion notice in connection with the merger regarding the
conversion and assumption of your U S WEST options. For your
convenience, we are also sending to the address we have for you an
option statement showing the options that you can exchange. If you need
another copy, please contact Qwest Stock Administration at the email
address, mailing address or telephone number given above. You are
responsible for confirming that the options included in your option
statement satisfy the eligibility requirements described in the first
sentence of the foregoing paragraph and for confirming that all of your
Eligible Options and Recent Options are reflected in your statement.
Any discrepancies should promptly be reported to Qwest Stock
Administration at the email address, mailing address or telephone
number given above.
2. Additional Risk Factor - New Options May Have Less Favorable Terms than
Options Granted under the U S WEST Stock Plans.
We will use the form of option agreement attached as Exhibit D to the
Offer Circular for New Options that are issued in exchange for
Cancelled Options that were previously granted under the U S WEST stock
plans. We reserve the authority to adjust the number of shares subject
to or to be subject to, and the exercise price and other terms of the
New Options, before and after they are granted, consistent with the
authority that our Board of Directors has under our Equity Incentive
Plan. In the period before the New Option Grant Date, we may make these
adjustments or terminate rights without prior notice to you. As
highlighted below in this Addendum, New Options that are issued in
exchange for Cancelled Options that were granted under one of the U S
WEST stock plans will have different terms than the provisions of your
Cancelled Options. These terms may include materially less favorable
change of control, termination of employment, and other provisions.
3. New Options That Correspond to U S WEST Options.
All of the New Options, including those that relate to Cancelled
Options that were originally granted under one of the U S WEST stock
plans, will be granted under and subject to the terms and conditions of
our Equity Incentive Plan. You may obtain a copy of our Equity
Incentive Plan by request without charge from Qwest. It is also
available from the SEC (see the "Additional Information; Incorporation
of Documents by Reference" section of the Circular). Copies of the
forms of New Option Agreements that may be used in connection with the
Exchange are attached
2
as Attachments B, C and D to the Offer Circular. For Eligible Options
that were originally granted under either of the U S WEST stock plans
and assumed by us in the merger, all New Options will be evidenced by
the form of New Option Agreement attached as Attachment D. You should
read our Equity Incentive Plan and all applicable attachments to the
Offer Circular.
4. New Option Termination Provisions.
New Options will each be subject to a new ten year option term
beginning on New Option Grant Date.
For Eligible Options that were originally granted under our Equity
Incentive Plan, the New Options will remain subject to the same
termination of employment provisions as your Cancelled Options, subject
of course to the new vesting requirements.
For Eligible Options that were originally granted under one of the U S
WEST stock plans, the New Options will be subject to the termination of
employment provisions that are included in the form of New Option
Agreement attached to the Offer Circular as Attachment D. The
termination of employment provisions in that form generally provide as
follows:
o if your employment terminates other than because of death,
disability, or a termination by the Company for "cause,"
the unvested portion of the New Options will terminate to
the extent that they are not vested and the vested portion
will remain exercisable for up to three months;
o if your employment terminates by reason of death or
disability, the unvested portion of the New Options will
terminate and the vested portion will remain exercisable
for a period of up to twenty-four months; and
o if your employment is terminated for cause, the new
Options will terminate immediately whether or not they are
vested.
In each case, these termination provisions are subject to earlier
expiration of the option. (See Section 6 of Exhibit D to the Offer
Circular for the specific provisions and also refer to the following
sections of this Addendum).
These termination provisions (including, without limitation, the
definitions of "disability" and "cause" used for purposes of the New
Option grants) may be different from the provisions that applied to the
corresponding Cancelled Options. For example, you may have been
entitled to materially more favorable vesting and/or exercise rights
upon your retirement or in case of your death or disability under your
original U S WEST plan options than under your New Options if you
accept the Offer.
5. New Option Change in Control Provisions.
For Eligible Options that were originally granted under our Equity
Incentive Plan, the New Options granted in exchange for your Cancelled
Options will be subject to the same change in control provisions as
your Cancelled Options. If your Cancelled Options contain different
change in control provisions, your New Option Agreements will be
different and will reflect these different provisions.
3
For Eligible Options that were originally granted under the U S WEST
stock plans, the New Options granted in exchange for your Cancelled
Options will be subject to the change of control provisions that are
contained in Section 7 of the form of New Option Agreement attached as
Attachment D to the Offer Circular, regardless of the change in control
provisions in those Cancelled Options. The New Options generally:
o will become fully vested if there is both a change in
control (as defined in the Equity Incentive Plan) and we
subsequently terminate your employment other than for
"cause;"
o will also become fully vested on any of the following
events:
o a merger or consolidation of Qwest with or into
another corporation or other reorganization, or
o the sale of all or substantially all of Qwest's
assets,
will terminate subject to certain accelerated vesting and
notice provisions under our Equity Incentive Plan if Qwest
or the successor or purchaser does not assume or
substitute the options in the circumstances above.
o if Qwest or the successor or purchaser does not assume or
substitute the options in those circumstances, Qwest may
terminate the options subject to certain accelerated
vesting and notice provisions under our Equity Incentive
Plan.
As a result of the terms of the New Options you may have been entitled
to materially more favorable terms (including vesting) in the event of
a merger, asset sale, or change in control under your original U S WEST
Plan options than will apply to New Options.
6. Other Terms and Conditions of New Options.
The New Options will be subject to a new ten year term, starting on the
New Option Grant Date, subject to earlier termination provisions.
If you tender Eligible Options that were originally granted under our
Equity Incentive Plan, 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.
If you tender Eligible Options that were originally granted under the
U S WEST stock plans, the terms and conditions of the New Options may
be materially different from those that applied to your corresponding
Cancelled Options. For example, and without limitation, all New
Options:
o will immediately terminate (whether or not vested) if you
engage in certain activity in competition with us, in
activity that is contrary or harmful to the interests of
Qwest, in conduct related to your employment that could
lead to criminal or civil penalties, or conduct in
violation of our policies; if you disclose or misuse any
confidential information or material concerning us; or if
you participate in a hostile takeover attempt;
o will be generally subject to amendments without your
consent unless the amendment adversely affects your New
Option; and
4
o require the exercise price to be paid only in United
States dollars by certified check or bank cashier's check,
or by wire transfer, unless we have in place procedures
allowing for a cashless exercise. Under a cashless
exercise, you may pay the exercise price of a New Option
by tendering shares of Qwest stock that you have owned for
more than six months or by delivering to us a copy of
irrevocable instructions to a stockbroker to sell stock or
to authorize a loan from the stockbroker to you and to
deliver promptly to us an amount sufficient to pay the
exercise price of your option.
In addition to the terms and conditions described above in this
Addendum, there may be additional differences in the terms of the New
Options as compared to the terms of your Cancelled Options that were
originally granted under one of the U S WEST stock plans. If you own
options that were granted under the U S WEST stock plans, you should
carefully read the stock option agreements that evidence your U S WEST
stock plan options and the U S WEST stock plans and compare those
provisions to the provisions of our Equity Incentive Plan and the form
of New Option Agreement attached as Attachment D to the Offer Circular.
You will not receive any other consideration for your Cancelled Options
or with respect to the New Options that you otherwise would have
received.
7. Stock Price; Total Number of Eligible Options.
On November 1, 2001, the closing price of a share of our common stock
was $12.00. The lowest trading price of our common stock in the current
calendar quarter (to November 1, 2001) is $11.55 per share.
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.
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 there were outstanding 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 originally
granted under our Equity Compensation Plan, approximately 3.4 million
shares (approximately 0.2% of the outstanding shares) were subject to
the Eligible Options originally granted under the U S WEST stock plans,
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.)
The date of this Addendum to Offer Circular is November 2, 2001.
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.
5
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 Amended and Restated Offer Circular and
the information contained in the documents expressly referred to in the
Amended and Restated 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 the Amended and
Restated Offer Circular and in the documents expressly referred to in
the Amended and Restated Offer Circular.
If anyone makes any recommendation or representation to you or gives
you any information that is not contained in the Amended and Restated
Offer Circular or in the documents expressly referred to in the Amended
and Restated 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.
6
EX-99.A.22
6
ex_a-22.txt
EXHIBIT 99(A)(22)
[Text of November 2, 2001 Email Message to Employees]
On October 31, 2001, Qwest announced the start of a voluntary stock option
exchange program for certain outstanding stock options issued under our Equity
Incentive Plan. As of today, we have extended the stock option exchange program
to include certain outstanding options that were previously issued by U S WEST.
Like the Qwest options that were originally covered by the exchange offer, you
may only exchange former U S WEST options if they have a post-conversion
exercise price of $35 or more.
Please click here to access a letter from Joe Nacchio that explains the change
and includes links to the Q, where you can find more information:
http://theq.qwest.net/departments/hr/newnacchioletter.pdf [LINK TO LETTER TO
EMPLOYEES]
Click here to access an amended and restated version of the Offer Circular:
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO AMENDED AND RESTATED
OFFER CIRCULAR]
Click here to access a revised form of the Election Form and Release:
http://theq.qwest.net/departments/hr/electform.pdf [LINK TO ELECTION FORM]
Click here to access an updated version of frequently asked questions (FAQ's)
about the exchange offer:
http://theq.qwest.net/departments/hr/electquestions.html [LINK TO EXCHANGE OFFER
QUESTIONS AND ANSWERS]
If you do not own any former U S WEST options, you do not have to read these
documents. The terms of the exchange offer have not been changed with respect to
your options issued under the Qwest Equity Incentive Plan.
EX-99.A.23
7
ex_a-23.txt
EXHIBIT 99(A)(23)
[NOVEMBER 2, 2001 LETTER TO EMPLOYEES REGARDING U S WEST
OPTIONS TO APPEAR ON HR WEBSITE]
November 2, 2001
To Qwest Employees Eligible to Participate in the Stock Option Exchange Offer:
On October 31, 2001, we announced the start of a voluntary stock option exchange
program for certain outstanding stock options issued under our Equity Incentive
Plan. As of today, we have extended the stock option exchange program to include
certain outstanding options that were previously issued by U S WEST. If you do
not have stock options that were originally issued by U S WEST, the terms of the
exchange program have not changed with respect to your options and the following
information does not apply to you.
If you have stock options that were originally issued by U S WEST and converted
to Qwest options with the acquisition on June 30, 2000, you may elect to
exchange the former U S WEST stock options in accordance with the terms and
conditions set forth in the exchange offer materials. You may exchange former U
S WEST options, however, only if they have a post-conversion exercise price of
$35 or more.
On the Q you will find the following documents that you should review before
making your decision:
o Amended and Restated Offer Circular
o Addendum to Offer Circular
o Election Form and Release Agreement
o Frequently Asked Questions
o Instructions for Returning the Election Form
You can access these documents by clicking on
http://theq.qwest.net/departments/hr/index.html. [LINK TO HR WEBSITE]
If you have already accessed and printed a copy of the Offer Circular on the Q
prior to today, and you simply want to update that information, you can access a
supplement to the original Offer Circular by clicking on
http://theq.qwest.net/departments/hr/supplement.pdf. [LINK TO EXCHANGE OFFER
ADDENDUM] You should read that supplement carefully in connection with the
original Offer Circular and related offer materials.
We have also prepared an updated version of the original Offer Circular, which
includes both the original information and the information contained in the
supplement. You can access the updated Offer Circular by clicking on
http://theq.qwest.net/departments/hr/circular.pdf. [LINK TO AMENDED AND RESTATED
OFFER CIRCULAR]
You can also access an updated version of frequently asked questions (FAQ's)
about the exchange offer by clicking on
http://theq.qwest.net/departments/hr/electquestions.html. [LINK TO EXCHANGE
0FFER QUESTIONS AND ANSWERS]
We have also updated the Election Form and Release Agreement used to accept the
offer. You can access the new form (which includes the former U S WEST options)
by clicking on http://theq.qwest.net/departments/hr/electform.pdf. [LINK TO
ELECTION FORM] You should access and print a new election form if you want to
accept the exchange offer with respect to any former U S WEST options.
If you have any former U S WEST options, we will also mail the amended and
restated Offer Circular, the new Election Form, and additional information to
your home. You should receive a package of these materials in the next couple of
weeks. I encourage you to read and consider these materials carefully to make
the decision that is right for you.
Joseph P. Nacchio
EX-99.A.24
8
ex_a-24.txt
EXHIBIT 99(A)(24)
[LOGO]
ride the light(SM)
Qwest(R)
[FORM OF NOVEMBER 2, 2001 COVER LETTER ACCOMPANYING EXCHANGE OFFER
DOCUMENTS AND TO APPEAR ON QWEST HR WEBSITE (FORMER U S WEST EMPLOYEES)]
November 2, 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 grant 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 Qwest stock options that
you own that were granted by Qwest or by U S WEST with an exercise price of $35
or more, subject to certain conditions.
The U S WEST options were assumed by us in connection with the merger on June
30, 2000. To determine whether your U S WEST options have a POST-conversion
exercise price of $35 or more you must first apply the conversion ratio in the
merger (which was 1.72932:1). As a result of the conversion ratio, U S WEST
options with a PRE-conversion exercise price of $60.53 would be eligible for the
exchange. That is, you can only exchange your Qwest options that were originally
granted by U S WEST if the original exercise price of those options (before
giving effect to the merger) was $60.53 or higher.
As summarized below and detailed in the linked plan documents, in exchange for
your eligible options, you will receive the same number of options (in the case
of the U S WEST options, on an as-converted basis) 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. If you have options granted under one of the
U S WEST plans, you received a conversion notice in connection with the merger
regarding the conversion and assumption of your U S WEST options. For your
convenience, we are also sending to you at the address we have for you an option
statement showing the options that you can exchange.
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 HR WEBSITE]
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] 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.
2
o You cannot exchange options that you received as an employee of LCI
International, Inc. or Icon CMT Corp. because those options have
post-conversion exercise prices of less than $35.
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).
If you tender options in the exchange that were originally granted by Qwest, the
corresponding new options will have substantially the same other terms and
conditions as the cancelled options. If you tender options that were originally
granted by U S WEST, there may be other differences between the terms of your U
S WEST options and the terms of the new options that you will receive. For more
information on these and other key points of the offer, you should carefully
read the Amended and Restated Offer Circular.
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
3
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.
Amended and Restated Offering Circular (this explains the terms of the program):
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO AMENDED AND RESTATED
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,
Joseph P. Nacchio
4
EX-99.A.25
9
ex_a-25.txt
EXHIBIT 99(A)(25)
[FORM OF SECOND LETTER DATED NOVEMBER 2, 2001
INCLUDED IN MAILING OF EXCHANGE OFFER DOCUMENTS (FORMER U S WEST EMPLOYEES)]
November 2, 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. You may also exchange all or a portion of your
stock options that were issued by U S WEST, which were converted to Qwest
options with the acquisition on June 30, 2000, if they have a post-conversion
exercise price of $35 or more. 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 Amended and Restated Offer Circular (dated November 2, 2001) 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
LCI or Icon CMT companies because those options have post conversion
exercise prices below $35.
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 (in the case of the U S WEST options, on an as converted basis).
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).
If you tender options granted by Qwest in the exchange, the corresponding new
options will have substantially the same other terms and conditions as the
cancelled options. If you tender options that were originally granted by U S
WEST and have been converted into Qwest options, there may be other differences
between the terms of your U S WEST options and the terms of the new options that
you will receive if you elect to exchange your former U S WEST options. For more
information on these and other key points of the offer, you should carefully
read the Amended and Restated Offer Circular.
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.
Amended and Restated Offering Circular (this explains the terms of the program):
http://theq.qwest.net/departments/hr/circular.pdf [LINK TO AMENDED AND RESTATED
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
3
EX-99.A.26
10
ex_a-26.txt
EXHIBIT 99(A)(26)
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"). The Offer also applies to certain
options that were granted by U S WEST, Inc. and that were converted into Qwest
stock options at the time of the merger.
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 more frequently asked questions
regarding the Offer. These questions and answers have generally been taken from
the Amended and Restated Offer Circular (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 AMENDED AND RESTATED 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:
------------------------ ----
Background and Reasons for the Offer Questions 1 through 5
Benefits and Risks of the Offer Questions 6 through 9
The Offer Questions 10 through 31
1
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.
2
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.
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 any nonqualified stock option with an exercise price of
$35 or more per share that was originally granted either (1)
under our Equity Incentive Plan or (2) under one of the U S
WEST stock plans and that was converted into a Qwest stock
option in our merger with of U S WEST on June 30, 2000. These
stock options that may be tendered in the Offer are referred
to as "Eligible Options." You cannot exchange options that you
received as an employee of LCI International Inc. or Icon CMT
Corp. because those stock options have a post-conversion
exercise price that is less than $35 per share. 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).
To determine whether your U S WEST options have a
post-conversion exercise price of $35 or more, you must first
apply the conversion ratio in the merger (which was
1.72932:1). As a result of the conversion ratio, U S WEST
options with a pre-conversion exercise price of $60.53 would
be eligible for the exchange. That is, you can only exchange
your Qwest options that were originally granted by U S WEST if
the original exercise price of those options (before giving
effect to the merger) was $60.53 or higher.
14. How may I accept the Offer?
Read Offer Circular. 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:
5
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. If
you have options that were granted under one of the U S WEST
stock plans, you received a conversion notice in connection
with the merger regarding the conversion and assumption of
your U S WEST options. For your convenience, we are also
sending to the address we have for you an option statement
showing the options that you can exchange. If you need another
copy, please contact Qwest Stock Administration at the email
address, mailing address or telephone number given above. You
are responsible for confirming that the options included in
your option statement satisfy the eligibility requirements
described in the response to Question 13 above and for
confirming that all of your Eligible Options and Recent
Options are reflected in your statement. Any discrepancies
should promptly be reported to Qwest Stock Administration at
the email address, mailing 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
6
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.
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
7
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
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.
8
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.
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.
9
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.
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.
10
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
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 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
11
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.
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
12
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 in 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.
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.
All of the New Options, including those that relate to Cancelled Options that
were originally granted under one of the U S WEST stock plans, will be granted
under and subject to the terms and conditions of our Equity Incentive Plan. You
may obtain a copy of our Equity Incentive Plan by request without charge from
Qwest. It is also available from the SEC (see "Additional Information;
Incorporation of Documents by Reference" section in 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, for Eligible Options that were originally granted under our
Equity Incentive Plan, the form of New Option Agreement that will be used to
13
evidence any particular New Option will depend on the change in control
provisions that applied to the corresponding Cancelled Option. For Eligible
Options that were originally granted under any of the U S WEST stock plans and
assumed by us in the merger, all New Options will be evidenced by the form of
New Option Agreement attached as Attachment D to the Offer Circular. You should
read our Equity Incentive Plan and 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 under our Equity
Incentive Plan 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
14
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.
For Eligible Options that were originally granted under our
Equity Incentive Plan, the New Options will remain subject to
the same provisions regarding early termination upon a
termination of employment as your Cancelled Options, subject
of course to the new vesting requirements.
For Eligible Options that were originally granted under one of
the U S WEST stock plans, the New Options will be subject to
the termination of employment provisions that are included in
the form of New Option Agreement attached as Attachment D to
the Offer Circular. The termination of employment provisions
in that form generally provide as follows:
o if your employment terminates other than because of
death, disability, or a termination by the Company
for "cause", the unvested portion of the New Options
will terminate and the vested portion will remain
exercisable fort up to three months;
o if your employment terminates by reason of death or
disability, the unvested portion of the New Options
will terminate and the vested portion will remain
exercisable for a period of up to twenty-four months;
and
o if your employment is terminated for cause, the new
Options will terminate immediately whether or not
they are vested.
In each case, these termination provisions are subject to
earlier expiration of the option. (See Section 6 of Attachment
D to the Offer Circular for the specific provisions and also
refer to the response to Question 37 below).
These termination provisions (including, without limitation,
the definitions of "disability" and "cause" used for purposes
of the New Option grants) may be different from the provisions
that applied to the corresponding Cancelled Options. For
example, you may have been entitled to materially more
favorable vesting and/or exercise rights upon your retirement
or in case of your death or disability under your original U S
WEST stock plan options than under your New Options if you
accept the Offer.
15
36. What will be the change of control provisions of my New
Option?
For Eligible Options that were originally granted under our
Equity Incentive Plan, the New Options granted in exchange for
your Cancelled Options will be subject to the same change in
control provisions as your Cancelled Options. If your
Cancelled Options contain different change in control
provisions, your New Option Agreements will be different and
will reflect these different provisions.
For Eligible Options that were originally granted under the U
S WEST stock plans, the New Options granted in exchange for
your Cancelled Options will be subject to the change in
control provisions that are contained in Section 7 of the form
of New Option Agreement attached as Attachment D to the Offer
Circular, regardless of the change in control provisions in
those Cancelled Options. The New Options generally:
o will become fully vested if there is both a change in
control (as defined in the Equity Incentive Plan) and
we subsequently terminate your employment other than
for "cause";
o will also become fully vested on any of the following
events:
o a merger or consolidation of Qwest
with or into another corporation or
other reorganization, or
o the sale of all or substantially
all of Qwest's assets,
if, Qwest, or the successor or purchaser, as the case
may be, does not assume the outstanding options or
substitute new options for the outstanding options;
and
o will terminate subject to certain accelerated vesting
and notice provisions under our Equity Incentive Plan
if Qwest or the successor or purchaser does not
assume or substitute the options in the circumstances
above.
As a result of the terms of the New Options, you may have been
entitled to materially more favorable terms (including
vesting) in the event of a merger, asset sale, or change in
control under your original U S WEST stock plans options than
will apply to New Options.
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 made this
reaffirmation when you received your other options from the
Company granted under our Equity Incentive Plan. 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 separate written affirmations, your
acceptance of your New Option will constitute your affirmation
of the employment agreement referred to above.
16
The New Options will be subject to a new ten year term,
starting on the New Option Grant Date, subject to earlier
termination provisions.
If you tender Eligible Options that were originally granted
under our Equity Incentive Plan, 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.
If you tender Eligible Options that were originally granted
under the U S WEST stock plans, the terms and conditions of
the New Options may be materially different from those that
applied to your corresponding Cancelled Options. For example,
and without limitation, all New Options:
o will immediately terminate (whether or not vested) if
you engage in certain activity in competition with
us, in activity that is contrary or harmful to the
interests of Qwest, in conduct related to your
employment that could lead to criminal or civil
penalties or in conduct in violation of our policies;
if you disclose or misuse any confidential
information or material concerning us; or if you
participate in a hostile takeover attempt;
o will generally be subject to amendments without your
consent unless the amendment adversely affects your
New Option; and
o require the exercise price to be paid only in United
States dollars by certified check or bank cashier's
check, or by wire transfer, unless we have in place
procedures allowing for a cashless exercise. Under a
cashless exercise, you may pay the exercise price of
a New Option by tendering shares of Qwest stock that
you have owned for more than six months or by
delivering to us a copy of irrevocable instructions
to a stockbroker to sell stock or to authorize a loan
from the stockbroker to you and to deliver promptly
to us an amount sufficient to pay the exercise price
of your option.
In addition to the terms and conditions described in the
responses to Questions 35 and 36 above, there may be
additional differences in the terms of the New Options as
compared to the terms of your Cancelled Options that were
originally granted under one of the U S WEST stock plans. If
you own options that were granted under the U S WEST stock
plans, you should carefully read the stock option agreements
that evidence your U S WEST stock plan options and the U S
WEST stock plans and compare those provisions to the
provisions of our Equity Incentive Plan and the form of New
Option Agreement attached as Attachment D to the Offer
Circular.
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.
17
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
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
18
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 November 1, 2001, the
closing price of a share of our common stock was $12.00. 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 $ 11.5500
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.
19
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 there were outstanding 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
originally granted under our Equity Incentive Plan,
approximately 3.4 million shares (approximately 0.2% of the
outstanding shares) were subject to Eligible Options
originally granted under the U S WEST stock plans, 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
20
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,
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.
21
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
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;
22
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.
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.
23
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
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%.)
24
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.
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.
25
EX-99.A.27
11
ex_a-27.txt
EXHIBIT 99.A.27
[UPDATED HR WEBSITE FULL SCREEN MESSAGE (November 2, 2001)]
Qwest is offering full-time, non-union employees the opportunity to participate
in a voluntary stock option exchange program. You cannot exchange options that
were granted to you as an employee of LCI International, Inc. or ICON CMT Corp.
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 NOVEMBER 2, 2001 COVER LETTER TO EMPLOYEES]
[LINK TO LETTER TO FORMER U S WEST OPTION HOLDERS]
[LINK TO AMENDED AND RESTATED OFFER CIRCULAR]
[LINK TO ADDENDUM TO OFFER CIRCULAR]
[LINK TO ELECTION FORM]
[LINK TO FREQUENTLY ASKED QUESTIONS]
[LINK TO INSTRUCTIONS FOR RETURNING THE ELECTION FORM]
EX-99.A.28
12
ex_a-28.txt
EXHIBIT 99(A)(28)
[Transcription of Updated Recorded Message on 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] currently
priced at $35 or more [PAUSE] for new options...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 early 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 were granted
to you as an employee of LCI International Inc. or ICON CMT Corp. Only options
that were granted under the Qwest Equity Incentive Plan, or under the former U S
WEST plans, are eligible options under the exchange program.
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 if you are calling between 8 a.m. and 7 p.m. mountain standard time, you may
stay on the line to speak to a representative.
Thanks for calling!
EX-99.A.29
13
ex_a-29.txt
EXHIBIT 99(A)(29)
[Instructions on How to Accept Exchange Offer to Appear on
Qwest Human Resources Website]
How may I accept the Qwest Exchange Offer?
We are frequently asked how an employee can accept the Qwest option exchange
offer. The following information is intended to answer only that question. This
document does not contain all of the information from the Amended and Restated
Offer Circular (the "Offer Circular"), the Election Form and Release Agreement
(the "Election Form"), and the other documents that are being distributed in
connection with the offer.
Before you decide whether to accept the exchange offer, it is important that you
carefully read and consider the entire Offer Circular, the Election Form and the
other documents that we have distributed to explain the offer.
If you need another copy of the Offer Circular or the Election Form, you may
print one from the Q at the links 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 AMENDED AND RESTATED 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
If you request an Election Form, be sure to allow at least two business days for
delivery to you.
The offer is a voluntary one. You must make your own decision to accept or
reject the offer. If you have any questions about the impact of the offer on
your financial status, you should consult your financial advisor.
Now, if after reading the Offer Circular and the Election Form, you decide you
want to accept the offer, you should:
o 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. If you have options that were
granted under one of the U S WEST stock plans, you received a
conversion notice in connection with the merger regarding the
conversion and assumption of your U S WEST options. For your
convenience, we are also sending to you at the address we have for you
an option statement showing the options that you can exchange. If you
need another copy, please contact Qwest Stock Administration at the
email address, address or telephone number given above. You are
responsible for confirming that the options included in your option
statement satisfy the eligibility requirements described in the
response to Question 13 in the Offer Circular and for confirming that
all of your Eligible
Options and Recent Options are reflected in your statement. Any
discrepancies should promptly be reported to Qwest Stock Administration
at the email address, address or telephone number given above.
o Complete, Sign and Date the Election Form. You should next 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. 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 as well,
whether or not you list them on the Election Form.
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.
o 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 to 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 has been 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,
you will be deemed to have rejected the exchange offer.
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.
2
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.
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 all of the terms and conditions of the offer as set forth in the Offer
Circular and the Election Form.
3
EX-99.D.4
14
ex_d-4.txt
EXHIBIT 99(D)(4)
1998 U S WEST STOCK PLAN
I. PURPOSE.
This 1998 U S WEST Stock Plan (the "Plan"), is intended to promote the
long term success of USW-C, Inc. (to be renamed "U S WEST, Inc.") (the
"Company") by affording certain eligible employees, executive officers,
non-employee directors of the Company and its Subsidiaries (as defined below)
and certain outside consultants or advisors to the Company and its affiliates
with an opportunity to acquire a proprietary interest in the Company, in order
to incentivize such persons and to align the financial interests of such persons
with the stockholders of the Company.
II. DEFINITIONS.
The following defined terms are used in the Plan:
A. "Agreement" shall mean the agreement or grant letter accepted by
the Participant as described in Section VIII of the Plan between the Company and
a Participant under which the Participant receives an Award pursuant to this
Plan.
B. "Award" shall mean individually, collectively or in tandem, an
incentive award granted under the Plan, whether in the form of Options, SARs,
Stock Awards or Phantom Units.
C. "Board" or "Board of Directors" shall mean the Board of Directors
of the Company.
D. "Change of Control" shall mean any of the following:
1. any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) who is or becomes a beneficial owner of (or otherwise has
the authority to vote), directly or indirectly, securities representing twenty
percent (20%) or more of the total voting power of all of the Company's then
outstanding voting securities, unless through a transaction arranged by, or
consummated with the prior approval of the Board of Directors; or
2. any period of two (2) consecutive calendar years during which
there shall cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds ( 2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3. the Company becomes a party to a merger or consolidation in which
either (i) the Company will not be the surviving corporation or (ii) the Company
will be the surviving corporation and any outstanding shares of Common Stock of
the Company will be converted into shares of any other company (other than a
reincorporation or the establishment of a holding company involving no change of
ownership of the Company) or other securities or cash or other property
(excluding payments made solely for fractional shares); or
4. any other event that a majority of the Board of Directors, in its
sole discretion, shall determine constitutes a Change of Control.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended.
F. "Committee" shall mean the Human Resources Committee or the
Employee Benefits Committee or their delegates, as applicable, pursuant to
provisions of Section III of the Plan.
G. "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
H. "Company" shall mean USW-C, Inc., a Delaware corporation to be
renamed "U S WEST, Inc.", and any successor thereof.
I. "Director Compensation" shall mean all cash or stock remuneration
payable to an Outside Director for service to the Company as a director, other
than reimbursement for expenses or Common Stock received upon exercise of an
Option, and shall include retainer fees for service on, and fees for attendance
at meetings of, the Board and any committees thereof.
J. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of eligible employees of the Company or any Related Entity,
provided, however, that in the case of an Incentive Option, "disability" shall
have the meaning specified in Section 22(e)(3) of the Code.
K. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) and its successor promulgated under the Exchange Act.
L. "Dividend Equivalent Rights" shall mean the right to receive the
amount of any dividends that are paid on an equivalent number of shares of
Common Stock underlying an Option or Phantom Unit, which shall be payable either
in cash or in the form of additional Phantom Units or Stock.
M. "Effective Date" shall mean , 1998, the date on which the Plan
was approved by the stockholders of the Company.
2
N. "Eligible Employee" shall mean any employee of the Company or any
Related Entity who is so employed on the date of the grant of an Award.
O. "Eligible Non-Employee" shall mean any consultant or advisor to
the Company or any Related Entity, including any member of the State Executive
Board(s) of the Company or any Related Entity that the Committee selects to
receive an Award.
P. "Employee Benefits Committee" shall mean a committee of the
Company consisting of employees of the Company or any Related Entity appointed
by the Human Resources Committee and which shall administer the Plan as provided
in Section III hereof.
Q. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
R. "Executive Officers" shall mean any Officer of the Company or any
Related Entity who, at the time of an Award, is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
S. "Fair Market Value" shall mean the closing price of a share of
Common Stock as reported on the New York Stock Exchange for the applicable date,
or if there were no sales on such date, on the last day on which there were
sales.
T. "Human Resources Committee" shall mean the human resources
committee of the Board or any other committee of the Board appointed by the
Board to administer the Plan in lieu of the Human Resources Committee, which
committee shall consist of no fewer than three (3) persons, each of whom shall
be a Disinterested Person.
U. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.
V. "Indexed" shall mean the periodic adjustment of an Option Price
based upon adjustment criteria determined by the Committee, but in no event
shall the Option Price be adjusted to an amount less than the original Option
Price.
W. "Nonqualified Option" shall mean an Option which does not qualify
under Section 422 of the Code.
X. "Officer" shall mean any executive of the Company or any Related
Entity who participates in the Company's executive compensation programs.
Y. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Plan, including Incentive
Options, Nonqualified Options and Reload Options.
3
Z. "Optionee" shall mean a Participant to whom one or more Options
have been granted.
AA. "Option Price" shall mean the price per share payable to the
Company for shares of Common Stock upon the exercise of an Option.
AB. "Outside Director" shall mean an individual not employed by the
Company or any Related Entity and who serves on the Board.
AC. "Parent Corporation" shall mean any corporation within the
meaning of Section 424(e) of the Code.
AD. "Participant" shall mean an Eligible Employee, Eligible
Non-Employee, Executive Officer or Outside Director who is granted an Award.
AE. "Phantom Unit" shall mean a notional account representing a value
equivalent to one share of Common Stock on the Award date.
AF. "Plan" shall mean the 1998 U S WEST, Inc. Stock Plan.
AG. "Related Entity" shall mean any Parent Corporation or Subsidiary
of the Company.
AH. "Reload Option" shall mean the right to receive a further Option
for a number of shares equal to the number of shares of Common Stock surrendered
by the Optionee upon exercise of the original Option as provided in Section IX.E
of the Plan.
AI. "Restricted Period" shall mean the period of time from the date
of grant of Restricted Stock until the lapse of restrictions attached thereto
under the terms of the Agreement granting such Restricted Stock, pursuant to the
provisions of the Plan or by action of the Committee.
AJ. "Restricted Stock" shall mean an Award made by the Committee
entitling the Participant to acquire, at no cost or for a purchase price
determined by the Committee at the time of grant, shares of Common Stock which
are subject to restrictions in accordance with the provisions of Section XII
hereof.
AK. "Retirement" shall mean with respect to any Eligible Employee,
that such person has terminated employment with the Company or any Related
Entity other than "for cause" (as defined in subsection IX.H.(v)) and (i) such
person is eligible to receive an immediate service pension benefit under the U S
WEST Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
4
effective January 1, 1993, had that plan not been amended and restated effective
January 1, 1997, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, custom, written
agreement or arrangement between the Company or any Related Entity and the
Eligible Employee. "Retirement" shall not apply to any Eligible Non-Employee.
AL. "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
AM. "Separation" shall mean the separation of U S WEST Communications
Group and U S WEST Media Group into two separate companies pursuant to the terms
of the Separation Agreement dated , 1998 between the Company and U S WEST, Inc.
(to be renamed "MediaOne Group, Inc.").
AN. "Stock Appreciation Right" or "SAR" shall mean a grant entitling
the Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the Committee shall so
determine at the time of a grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant (or over the Option Price, if the
Stock Appreciation Right was granted in tandem with an Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee having sole discretion to determine the form
or forms of payment at the time of grant of the SAR.
AO. "Stock Awards" shall mean any Award which is in the form of
Restricted Stock and any outright grants of Common Stock approved by the
Committee pursuant to the Plan.
AP. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture or partnership in which the
Company owns, directly or indirectly, (i) with respect to a corporation, stock
possessing twenty percent (20%) or more of the total combined voting power of
all classes of stock in the corporation or (ii) in the case of a joint venture
or partnership, the Company possesses a twenty percent (20%) interest in the
capital or profits of such joint venture or partnership. In the case of any
Incentive Option, Subsidiary shall mean any corporation within the meaning of
Section 424(f) of the Code.
AQ. "Vested" shall mean the status that results with respect to an
Option or other Award which may be immediately exercised under the terms of the
Agreement granting such Option or other Award, pursuant to the provisions of the
Plan or by action of the Committee.
5
III. ADMINISTRATION.
A. The Plan shall be administered by the Human Resources Committee
with respect to Officers, Executive Officers and Outside Directors and by the
Employee Benefits Committee with respect to all other Eligible Employees and
Eligible Non-Employees. The Human Resources Committee may adopt such rules,
regulations and guidelines as it determines necessary for the administration of
the Plan. Subject to any such rules, regulations and guidelines adopted by the
Human Resources Committee, the Employee Benefits Committee shall have the power
to adopt rules, regulations and guidelines to permit such Committee to
administer the Plan with respect to Eligible Employees (other than Officers and
Executive Officers) and with respect to Eligible Non-Employees.
B. The Committee may delegate to one or more of its members, or to
one or more agents, such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ such
legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company or such Related Entity whose employees have benefited from the Plan, as
determined by the Committee. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or a
Related Entity against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's gross
negligence or willful misconduct.
C. In furtherance of and not in limitation of the Committee's
discretionary authority, subject to the provisions of the Plan, the Committee
shall have the authority to:
1. determine the Participants to whom Awards shall be granted and
the number of and terms and conditions upon which Awards shall be granted (which
need not be the same for all Awards or types of Awards);
2. establish, in its sole discretion, annual or long-term financial
goals of the Company, Related Entity, or division, department, or group of the
Company or Related Entity, or individual goals which the Committee shall
consider in granting Awards, if any;
3. determine the satisfaction of performance goals established by
the Committee based upon periods of time or any combinations thereof;
4. determine the time when Awards shall be granted, the Option Price
of each Option, the period(s) during which Options shall be exercisable (whether
in whole or in part), the restrictions to be applicable to Awards, and the other
terms and provisions of Awards;
6
5. modify grants of Awards pursuant to Paragraph D. of this Section
III or rescind grants of Awards pursuant to Section IX.H(v), respectively;
6. provide the establishment of a procedure whereby a number of
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, the lapse of restrictions on Restricted Stock and the vesting of Phantom
Units (other than an Incentive Option) to meet the obligation of withholding for
income, social security and other taxes incurred by a Participant upon such
exercise or required to be withheld by the Company in connection with such
exercise;
7. adopt, modify and rescind rules and regulations and guidelines
relating to the Plan;
8. adopt modifications to the Plan and procedures, as may be
necessary to comply with provisions of the laws and applicable regulatory
rulings of countries in which the Company or a Related Entity operates in order
to assure the legality of Awards granted under the Plan to Participants who
reside in such countries;
9. obtain the approval of the stockholders of the Company with
respect to Awards consisting of Phantom Units or Restricted Stock; provided,
however, no action shall be proposed to stockholders without the approval of the
Board of Directors; and
10. make all determinations, perform all other acts, exercise all
other powers and establish any other procedures determined by the Committee to
be necessary, appropriate or advisable in administering the Plan and to maintain
compliance with any applicable law.
D. The Committee may at any time, in its sole discretion, accelerate
the exercisability of any Awards and waive or amend any and all restrictions and
conditions of any Awards.
E. Subject to and not inconsistent with the express provisions of
the Plan, the Code and Rule 16b-3 of the Exchange Act, the Committee shall have
the authority to require, as a condition to the granting of any Option, SAR or
other Award (to the extent applicable) to any Executive Officer of the Company
or any Related Entity that the Executive Officer receiving such Option, SAR or
other Award agree not to sell or otherwise dispose of such Option, SAR or other
Award or Common Stock acquired pursuant to such Option, SAR or other Award (to
the extent applicable) or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of six (6) months following the
7
later of (i) the date of the grant of such Option, SAR or other Award (to the
extent applicable) or (ii) the date when the other Option Price of such Option,
SAR or other Award is fixed, if such Option Price is not fixed at the date of
grant of such Option, SAR or other Award.
IV. DECISIONS FINAL.
Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
V. ARBITRATION.
Any agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the Committee, in its sole
discretion.
VI. DURATION OF THE PLAN.
The Plan shall remain in effect for a period of ten (10) years from the
Effective Date, unless terminated by the Board pursuant to Section XX.
VII. SHARES AVAILABLE; LIMITATIONS.
A. Up to 2,400,000 shares of Common Stock may be granted in calendar
year 1998 and the maximum aggregate number of shares of Common Stock that may be
granted in any other calendar year for all purposes under the Plan shall be
percent ( %), respectively, of the shares outstanding (excluding shares held in
the Company's treasury) on the first day of such calendar year, provided,
however, that in the event that fewer than the full aggregate number of shares
available for issuance in any calendar year are issued in such year, the shares
not issued shall be added to the shares available for issuance in any subsequent
year or years. If, for any reason, any shares of Common Stock as to which
Options, SARs, Restricted Stock, or Phantom Units have been granted cease to be
subject to exercise or purchase hereunder (other than the exercise of SARs for
cash), the underlying shares of Common Stock shall thereafter be available for
grants to Participants under the Plan during any calendar year. Awards granted
under the Plan may be fulfilled in accordance with the terms of the Plan with
(i) authorized and unissued shares of the Common Stock or (ii) issued shares of
Common Stock reacquired by the Company, in each situation, as the Board of
Directors or the Committee may determine from time to time at its sole
discretion.
8
B. The maximum number of shares of Common Stock that shall be
subject to the grant of an Award in any calendar year for Awards other than
Options or SARs shall not exceed one-third ( 1/3) of the total number of shares
of Common Stock subject to Awards granted under the Plan for such calendar year.
C. The maximum number of shares of Common Stock with respect to
which Awards may be granted to any individual Participant in any calendar year
may not exceed five hundred thousand (500,000).
D. The cumulative number of shares of Common Stock that may be
issued under this Plan in connection the exercise of Incentive Options shall not
exceed ten million (10,000,000).
VIII. GRANT OF AWARDS.
A. The Committee shall determine the type or types of Award(s) to be
made to each Participant. Awards may be granted singly, in combination or in
tandem subject to restrictions set forth in Section IX.C for Incentive Options.
The types of Awards that may be granted under the Plan are Options, with or
without Reload Options, SARs, Stock Awards and Phantom Units, and with respect
to Phantom Units and Restricted Stock, with or without Dividend Equivalent
Rights.
B. Each grant of an Award under this Plan shall be evidenced by an
Agreement dated as of the date of the grant of the Award, other than Stock
Awards consisting of an outright grant of shares of Common Stock. This Agreement
shall set forth the terms and conditions of the Award, as may be determined by
the Committee, and if the Agreement relates to the grant of an Option, shall
indicate whether the Option that it evidences, is intended to be an Incentive
Option or a Nonqualified Option. Each grant of an Award is conditioned upon the
acceptance by the Participant of the terms of the Agreement. Unless otherwise
extended by the Committee, a Participant shall have ninety (90) days from the
date of the Agreement to accept its terms.
IX. OPTIONS.
The Committee, in its sole discretion, may grant Incentive Options or
Nonqualified Options to Eligible Employees, Officers and Executive Officers and
Nonqualified Options to Eligible Non-Employees. Any Options granted to a
Participant under the Predecessor Plan which remain outstanding as of the
Effective Date shall be governed by the terms and conditions of the Plan, except
to the extent the provisions of the Plan are inconsistent with the terms of the
Options granted under the Predecessor Plans, in which event the applicable
provisions of the Predecessor Plans shall govern; provided, however, that in no
event shall there be a modification of the terms of any Incentive Option granted
under the Predecessor Plan. The terms and conditions of the Options granted
under this Section IX shall be determined from time to time by the Committee, as
set forth in the Agreement granting the Option, and subject to the following
conditions:
9
A. NONQUALIFIED OPTIONS. The Option Price for each share of Common
Stock issuable pursuant to a Nonqualified Option may be an amount at or above
the Fair Market Value on the date such Option is granted, may be Indexed from
the original Option Price and may be granted with or without Dividend Equivalent
Rights; provided, however, that with respect to Nonqualified Options granted to
any Executive Officer, no Dividend Equivalent Rights may be granted.
B. INCENTIVE OPTIONS. The Option Price for each share of Common
Stock issuable pursuant to an Incentive Option shall not be less than one
hundred percent (100%) of the Fair Market Value on the date such Option is
granted and may be Indexed from the original Option Price.
C. INCENTIVE OPTIONS; SPECIAL RULES. Options granted in the form of
Incentive Options shall be subject to the following provisions:
1. GRANT. No Incentive Option shall be granted pursuant to this Plan
more than ten (10) years after the Effective Date.
2. ANNUAL LIMIT. The aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Common Stock with respect to which
one or more Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan or under any other stock plan of the
Company or any Related Entity shall not exceed $100,000 or such other maximum
amount permitted under Section 422 of the Code. Any Option purporting to
constitute an Incentive Option in excess of such limitation shall constitute a
Nonqualified Option.
3. 10% STOCKHOLDER. If any Optionee to whom an Incentive Option is
to be granted pursuant to the provisions of the Plan is, on the date of grant,
an individual described in Section 422(b)(6) of the Code, then the following
special provisions shall be applicable to the Option granted to such individual:
(a) the Option Price of shares subject to such Incentive Option shall
not be less than 110% of the Fair Market Value of Common Stock on the date of
grant; and
(b) the Option shall not have a term in excess of (5) years from the
date of grant.
D. OTHER OPTIONS. The Committee may establish rules with respect to,
and may grant to Eligible Employees, Options to comply with any amendment to the
Code made after the Effective Date providing for special tax benefits for stock
options.
10
E. RELOAD OPTIONS. Without in any way limiting the authority of the
Committee to make Awards hereunder, the Committee shall have the authority to
grant Reload Options. Any such Reload Option shall be subject to such other
terms and conditions as the Committee may determine. Notwithstanding the above,
(i) the Committee shall have the right, in its sole discretion, to withdraw a
Reload Option to the extent that the grant thereof will result in any adverse
accounting consequences to the Company and (ii) no additional Reload Options
shall be granted upon the exercise of a Reload Option.
F. TERM OF OPTION. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option.
G. EXERCISE OF STOCK OPTION. Each Option shall be exercisable in one
or more installments as the Committee in its sole discretion may determine at
the time of the Award and as provided in the Agreement. The right to purchase
shares shall be cumulative so that when the right to purchase any shares has
accrued such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option, subject to rules on
sequential exercise for Incentive Options pursuant to Paragraph C.2. of this
Section IX. The Option Price shall be payable (i) in cash or by an equivalent
means acceptable to the Committee, (ii) by delivery (constructive or otherwise)
to the Company of shares of Common Stock owned by the Optionee or (iii) by any
combination of the above as provided in the Agreement. Shares delivered to the
Company in payment of the Option Price shall be valued at the Fair Market Value
on the date of the exercise of the Option.
H. VESTING. The Agreement shall specify the date or dates on which
the Optionee may begin to exercise all or a portion of his Option. Subsequent to
such date or dates, the Option shall be deemed vested and fully exercisable.
(i) DEATH. In the event of the death of any Optionee, all Options
held by such Optionee on the date of his death shall become Vested Options and
the estate of such Optionee, shall have the right, at any time and from time to
time within one year after the date of death, or such other period, if any, as
the Committee in its sole discretion may determine, to exercise the Options of
the Optionee (but not after the earlier of the expiration date of the Option or,
in the case of an Incentive Option, one (1) year from the date of death).
(ii) DISABILITY. If the employment of any Optionee is terminated
because of Disability, all Options held by such Optionee on the date of his or
her termination shall be retained by such Optionee, and such Options that are
not yet Vested Options shall become Vested Options in accordance with the
vesting schedule established at the time such Options were issued. The Optionee
shall have the right to exercise Vested Options at any time and from time to
time, but not after the expiration date of the Option or, in the case of
Incentive Options where tax-advantaged treatment is desired, one year from the
date of termination of employment.
11
(iii) RETIREMENT. Upon an Optionee's Retirement, all Options held by
such Optionee on the date of his or her Retirement shall be retained by such
Optionee, and such Options that are not yet Vested Options shall become Vested
Options in accordance with the vesting schedule established at the time such
Options were issued, unless the Committee, in its sole discretion, determines
otherwise. Unless the Committee, in its sole discretion, determines otherwise,
the Optionee shall have the right to exercise Vested Options at any time and
from time to time, but not after the expiration date of the Option. In the case
of Incentive Options where tax-advantaged treatment is desired, the Optionee
shall have the right to exercise Vested Options three months from the date of
Retirement.
(iv) OTHER TERMINATION. If the employment with the Company or a
Related Entity of an Optionee is terminated for any reason other than for death
or Disability and other than "for cause" as defined in subparagraph (v) below,
such Optionee shall have the right, in the case of a Vested Option, for a period
of three (3) months after the date of such termination or such longer period as
determined by the Committee, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.
(v) TERMINATION FOR CAUSE. Notwithstanding any other provision of the
Plan to the contrary, if the Optionee's employment is terminated by the Company
or any Related Entity "for cause" (as defined below), such Optionee shall
immediately forfeit all rights under his Options except as to the shares of
Common Stock already purchased prior to such termination. Termination "for
cause" shall mean (unless another definition is agreed to in writing by the
Company and the Optionee) termination by the Company because of: (a) the
Optionee's willful and continued failure to substantially perform his duties
(other than any such failure resulting from the Optionee's incapacity due to
physical or mental impairment) after a written demand for substantial
performance is delivered to the Optionee by the Company, which demand
specifically identifies the manner in which the Company believes the Optionee
has not substantially performed his duties, (b) the willful conduct of the
Optionee which is demonstrably and materially injurious to the Company or
Related Entity, monetarily or otherwise, or (c) the conviction of the Optionee
for a felony by a court of competent jurisdiction.
X. FOREIGN OPTIONS AND RIGHTS.
The Committee may make Awards of Options to Eligible Employees,
Officers, Executive Officers and Eligible Non-Employees who are subject to the
tax laws of nations other than the United States, which Awards may have terms
and conditions as determined by the Committee as necessary to comply with
applicable foreign laws. The Committee may take any action which it deems
advisable to obtain approval of such Option by the appropriate foreign
governmental entity; provided, however, that no such Award may be granted
pursuant to this Section X and no action may be taken which would result in a
violation of the Exchange Act, the Code or any other applicable law.
12
XI. STOCK APPRECIATION RIGHTS.
The Committee shall have the authority to grant SARs to Eligible
Employees, Officers, Executive Officers and Eligible Non-Employees either alone
or in connection with an Option. SARs granted in connection with an Option shall
be granted either at the time of grant of the Option or by amendment to the
Option. SARs granted in connection with an Option shall be subject to the same
terms and conditions as the related Option and shall be exercisable only at such
times and to such extent as the related Option is exercisable. A SAR granted in
connection with an Option may be exercised only when the Fair Market Value of
the Common Stock of the Company exceeds the Option Price of the related Option.
A SAR granted in connection with an Option shall entitle the Participant to
surrender to the Company unexercised the related Option, or any portion thereof
and to receive from the Company cash and/or shares of Common Stock equal to that
number of shares of Common Stock having an aggregate value equal to the excess
of (i) the Fair Market Value of one share of Common Stock on the day of the
surrender of such Option over (ii) the Option Price per share of Common Stock
multiplied by (iii) the number of shares of Common Stock that may be exercised
under the Option, or surrendered; provided, however, that no fractional shares
shall be issued. A SAR granted singly shall entitle the Participant to receive
the excess of (i) the Fair Market Value of a share of Common Stock on the date
of exercise over (ii) the Fair Market Value of a share of Common Stock on the
date of the grant of the SAR multiplied by (iii) the number of SARs exercised.
Payment of any fractional shares of Common Stock shall be made in cash. A SAR
shall become a Vested Award upon (i) a Participant becoming Disabled, or (ii)
the death of a Participant.
XII. RESTRICTED STOCK.
The Committee may, in its sole discretion, grant Restricted Stock to
Eligible Employees, Eligible Non-Employees, Officers or Executive Officers
subject to the provisions below.
A. RESTRICTIONS. A stock certificate representing the number of
shares of Restricted Stock granted shall be held in custody by the Company for
the Participant's account. The Participant shall have all rights and privileges
of a stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
13
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled or
the death of a Participant. If a Participant ceases to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the Committee, and all rights of the
Participant to such shares shall terminate without further obligation on the
part of the Company. Upon the forfeiture (in whole or in part) of shares of
Restricted Stock, such forfeited shares shall become shares of Common Stock held
in the Company's treasury without further action by the Participant.
B. TERMS AND CONDITIONS. The Committee shall establish the terms and
conditions for Restricted Stock pursuant to Section III of the Plan, including
whether any shares of Restricted Stock shall have voting rights or a right to
any dividends that are declared. Terms and conditions established by the
Committee need not be the same for all grants of Restricted Stock. The Committee
may provide for the restrictions to lapse with respect to a portion or portions
of the Restricted Stock at different times or upon the occurrence of different
events, and the Committee may waive, in whole or in part, any or all
restrictions applicable to a grant of Restricted Stock. Restricted Stock Awards
may be issued for no cash consideration or for such minimum consideration as may
be required by applicable law or such other consideration as may be determined
by the Committee.
C. DELIVERY OF RESTRICTED SHARES. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered (less any shares delivered pursuant to Section XIX.C in satisfaction
of any withholding tax obligation), free of all such restrictions, except
applicable securities law restrictions, to the Participant or the Participant's
estate, as the case may be. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay, in lieu thereof, the Fair Market
Value (measured as of the date the restrictions lapse) of such fractional share
to the Participant or the Participant's estate, as the case may be.
Notwithstanding the foregoing, the Committee may authorize the delivery of the
Restricted Stock to a Participant during the Restricted Period, in which event
any stock certificates in respect of shares of Restricted Stock thus delivered
to a Participant during the Restricted Period applicable to such shares shall
bear an appropriate legend referring to the terms and conditions, including the
restrictions, applicable thereto.
14
XIII. PHANTOM UNITS.
A. GENERAL. The Committee may, in its sole discretion, grant the
right to earn Phantom Units to Eligible Employees, Officers, Executive Officers
and Eligible Non-Employees. The Committee shall determine the criteria for the
earning of Phantom Units, pursuant to Section III of the Plan. Upon satisfaction
of such criteria, a Phantom Unit shall be deemed a Vested Award. A Phantom Unit
granted by the Committee shall provide for payment in shares of Common Stock. A
Phantom Unit shall become a Vested Award upon (i) a Participant becoming
Disabled, or (ii) the death of a Participant. Shares of Common Stock issued
pursuant to this Section XIII may be issued for no cash consideration or for
such minimum consideration as may be required by applicable law or such other
consideration as may be determined by the Committee. The Committee shall
determine whether a Participant granted a Phantom Unit shall be entitled to a
Dividend Equivalent Right.
B. UNFUNDED CLAIM. The establishment of Phantom Units under the Plan
are unfunded obligations of the Company. The interest of a Participant in any
such units shall be considered a general unsecured claim against the Company to
the extent that the conditions for the earning of the Phantom Units have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the Committee.
C. ISSUANCE OF COMMON STOCK. Upon a Phantom Unit becoming a Vested
Award, unless a Participant has elected to defer under Paragraph D. below,
shares of Common Stock representing the Phantom Units shall be distributed to
the Participant, unless the Committee, with the consent of the Participant,
provides for the payment of the Phantom Units in cash or partly in cash and
partly in shares of Common Stock equal to the value of the shares of Common
Stock which would otherwise be distributed to the Participant.
D. DEFERRAL OF PHANTOM UNITS. Prior to the year with respect to
which a Phantom Unit may become a Vested Award, the Participant may elect not to
receive Common Stock upon the vesting of such Phantom Unit and for the Company
to continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.
E. FINANCIAL HARDSHIP. Notwithstanding any other provision hereof,
at the written request of a Participant who has elected to defer pursuant to
Paragraph D. above, the Committee, in its sole direction, upon a finding that
continued deferral will result in financial hardship to the Participant, may
authorize the payment of all or a part of a Participant's Vested Phantom Units
in a single installment or the acceleration of payment of any multiple
installments thereof; provided, however, that distributions will not be made
under this paragraph if such distribution would result in liability of an
Executive Officer under Section 16 of the Exchange Act.
15
F. DISTRIBUTION UPON DEATH. The Committee shall pay the Fair Market
Value of the Phantom Units of a deceased Participant to the estate of the
Participant, as soon as practicable following the death of the Participant. The
value of the Phantom Units for the purpose of such distribution shall be based
upon the Fair Market Value of shares of Common Stock underlying the Phantom
Units on the date of the Participant's death.
XIV. STOCK AWARDS TO OUTSIDE DIRECTORS.
Each Outside Director shall be granted a Stock Award consisting of 400
shares of Common Stock, without restrictions, on the date of the Annual Meeting
of the Company's stockholders following the first anniversary date of such
Outside Director's initial election to the Board, and a like amount on each of
the next four Annual Meeting dates for a total maximum Stock Award of 2,000
shares of Common Stock.
XV. OUTSIDE DIRECTOR'S COMPENSATION.
A. PAYMENT IN COMMON STOCK. Each Outside Director may elect to
receive payment of all or any portion of Director Compensation comprised of
retainer fees for service on the Board and any committees thereof in Common
Stock. The amount of Common Stock then issuable shall be based on the Fair
Market Value of the Common Stock on the dates such retainer fees are otherwise
due and payable to the Outside Director. When any fees are paid in Common Stock
under this Section XV.A, any fractional shares of Common Stock shall be paid in
cash. Certificates evidencing such Common Stock shall be delivered promptly
following such date. If an Outside Director elects to receive payment of
retainer fees in Common Stock as described in this Section XV.A, the election
shall be (i) in writing, (ii) delivered to the Secretary of the Company at least
six months in advance of the payment date, and (iii) irrevocable.
B. DEFERRAL OF PAYMENT. Each Outside Director may elect to defer the
receipt of Common Stock payable pursuant to Section XV.A, in which event such
Outside Director shall receive an equivalent number of Phantom Units with
Dividend Equivalent Rights. Any such Phantom Units shall become Vested Awards at
such time as the Outside Director no longer serves as a member of the Board. If
an Outside Director elects to defer receipt of Common Stock and receive Phantom
Units pursuant to this Section XV.B, the election shall be (i) in writing, (ii)
delivered to the Secretary of the Company in the year preceding the year in
which the Director Compensation would otherwise be paid and at least six months
in advance of the date when Common Stock would otherwise be issued, and (iii)
irrevocable.
16
C. DIRECTOR STOCK OPTIONS. On , 1998 and on the first
business day of each calendar year thereafter, each Director shall be granted an
Option to purchase three thousand (3,000) shares Common Stock, such Options (i)
to become Vested Options in increments of 40 percent upon grant and 30 percent
on the first and second anniversaries following the date of grant or, if
earlier, in full upon the retirement of the Director, (ii) to remain exercisable
notwithstanding the retirement of the Director from the Board (but in no event
after the expiration date of the Option), and (iv) to expire ten years from the
date of grant.
XVI. FEDERAL SECURITIES LAW.
With respect to grants of Awards to Directors and Executive Officers,
the Company intends that the provisions of this Plan and all transactions
effected in accordance with Plan shall comply with Rule 16b-3 under the Exchange
Act. Accordingly, the Committee shall administer and interpret the Plan to the
extent practicable, to maintain compliance with such rule.
XVII. CHANGE OF CONTROL; ACCELERATION.
Upon the occurrence of a Change of Control:
A. in the case of all outstanding Options and SARs, each such Option
and SAR shall automatically become immediately fully exercisable by the
Participant;
B. restrictions applicable to Restricted Stock shall automatically
be deemed lapsed and conditions applicable to Phantom Units shall automatically
be deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and
C. the Human Resources Committee, in its discretion, shall have the
right to accelerate payment of any deferrals of Vested Phantom Units.
XVIII. ADJUSTMENT OF SHARES.
A. In the event there is any change in the Common Stock by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number or kind of shares or interests subject to an Award and the
per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each Participant's economic
position with respect to the Award shall not, as a result of such adjustment, be
worse than it had been immediately prior to such event. Any fractional shares or
interests resulting from such adjustment shall be rounded up to the next whole
share of Common Stock. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option shall comply with the rules of Section
424(a) of the Code, and (ii) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an "incentive
stock option" for purposes of Section 422 of the Code.
17
B. In the event of an acquisition by the Company of another
corporation where the Company assumes outstanding stock options or similar
obligations of such corporation, the number of Awards available under the Plan
shall be appropriately increased to reflect the number of such options or other
obligations assumed.
XIX. SUBSTITUTE OPTIONS.
Options, shares of Restricted Stock and Phantom Units issued in
substitution of outstanding options for U S WEST Communications Group Stock,
restricted shares of U S WEST Communications Group Stock and phantom units with
respect to U S WEST Communications Group Stock pursuant to the terms of the
Employee Matters Agreement to be entered into by the Company and U S WEST, Inc.
(to be renamed "MediaOne Group, Inc.") in connection with the Separation shall
be administered pursuant to the provisions of the Plan to the extent not
inconsistent with the terms of the grant of such options, restricted stock and
phantom units and such Employee Matters Agreement.
XX. MISCELLANEOUS PROVISIONS.
A. ASSIGNMENT OR TRANSFER. Except as otherwise permitted by this
Section XIX.A, no grant of any "derivative security" (as defined in the rules
issued under Section 16 of the Exchange Act) made under the Plan or any rights
or interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferrable pursuant to a domestic
relations order. An Optionee who is an Officer or an Outside Director may assign
or transfer an Option (other than an Incentive Option) as a gift to one or more
members of his or her immediate family or to trusts maintained for the benefit
of such immediate family members if such assignment or transfer is not pursuant
to a domestic relations order and (i) such assignment or transfer is expressly
approved in advance by the Committee or its delegate(s) or (ii) such Option was
granted to the Optionee on or after , 199 , and the Agreement pertaining to such
Option expressly permits the assignment or transfer of the Option.
B. INVESTMENT REPRESENTATION; LEGENDS. The Committee may require
each Participant acquiring shares of Common Stock pursuant to an Award to
represent to and agree with the Company in writing that such Participant is
acquiring the shares without a view to distribution thereof. No shares of Common
Stock shall be issued pursuant to an Award until all applicable securities law
and other legal and stock exchange requirements have been satisfied. The
Committee may require the placing of stop-orders and restrictive legends on
certificates for Common Stock as it deems appropriate.
18
C. WITHHOLDING TAXES. In the case of distributions of Common Stock
or other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.
D. COSTS AND EXPENSES. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Award
nor to any Participant receiving an Award.
E. OTHER INCENTIVE PLANS. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. EFFECT ON EMPLOYMENT. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall impose, or be construed as
imposing, an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.
G. NONCOMPETITION. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the Committee, in its sole
discretion.
H. GOVERNING LAW. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
XXI. AMENDMENT OR TERMINATION OF PLAN.
The Board shall have the right to amend, modify, suspend or terminate
the Plan at any time, provided that, with respect to Incentive Options, no
amendment shall be made that (i) decreases the minimum Option Price in the case
of any Incentive Option, or (ii) modifies the provisions of the Plan with
respect to Incentive Options, unless such amendment is made by or with the
approval of the stockholders or unless the Board receives an opinion of counsel
to the Company that stockholder approval is not necessary with respect to any
modifications relating to Incentive Options; and provided further that no
amendment shall be made that (i) increases the number of shares of Common Stock
that may be issued under the Plan, or (ii) permits the Option Price for any
Option to be less than Fair Market Value on the date such Option is granted,
19
unless such amendment is made by or with the approval of stockholders. No
amendment, modification, suspension or termination of the Plan shall alter or
impair any Awards previously granted under the Plan, without the consent of the
holder thereof.
20
EX-99.D.5
15
ex_d-5.txt
EXHIBIT 99(D)(5)
1998 U S WEST STOCK PLAN
as amended June 22, 1998
I. Purpose.
This 1998 U S WEST Stock Plan (the "Plan"), is intended to promote the
long term success of U S WEST, Inc. (the "Company") by affording certain
eligible employees, executive officers, non-employee directors of the Company
and its Subsidiaries (as defined below) and certain outside consultants or
advisors to the Company and its affiliates with an opportunity to acquire a
proprietary interest in the Company, in order to incentivize such persons and to
align the financial interests of such persons with the stockholders of the
Company. This Plan became effective upon consummation of the Separation (defined
below).
II. Definitions.
The following defined terms are used in the Plan:
A. "Agreement" shall mean the agreement or grant letter accepted by
the Participant as described in Section VIII of the Plan between the Company and
a Participant under which the Participant receives an Award pursuant to this
Plan.
B. "Award" shall mean individually, collectively or in tandem, an
incentive award granted under the Plan, whether in the form of Options, SARs,
Stock Awards or Phantom Units.
C. "Board" or "Board of Directors" shall mean the Board of Directors
of the Company.
D. "Change of Control" shall mean any of the following:
1. any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) who is or becomes a beneficial owner of (or otherwise has
the authority to vote), directly or indirectly, securities representing twenty
percent (20%) or more of the total voting power of all of the Company's then
outstanding voting securities, unless through a transaction arranged by, or
consummated with the prior approval of the Board of Directors; or
2. any period of two (2) consecutive calendar years during which
there shall cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3. the Company becomes a party to a merger or consolidation in which
either (i) the Company will not be the surviving corporation or (ii) the Company
will be the surviving corporation and any outstanding shares of Common Stock of
the Company will be converted into shares of any other company (other than a
reincorporation or the establishment of a holding company involving no change of
ownership of the Company) or other securities or cash or other property
(excluding payments made solely for fractional shares); or
4. any other event that a majority of the Board of Directors, in its
sole discretion, shall determine constitutes a Change of Control.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended.
F. "Committee" shall mean the Human Resources Committee or the
Employee Benefits Committee or their delegates, as applicable, pursuant to
provisions of Section III of the Plan.
G. "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
H. "Company" shall mean U S WEST, Inc., a Delaware corporation
(previously known as "USW-C, Inc."), and any successor thereof.
I. "Director Compensation" shall mean all cash or stock remuneration
payable to an Outside Director for service to the Company as a director, other
than reimbursement for expenses or Common Stock received upon exercise of an
Option, and shall include retainer fees for service on, and fees for attendance
at meetings of, the Board and any committees thereof.
J. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of eligible employees of the Company or any Related Entity,
provided, however, that in the case of an Incentive Option, "disability" shall
have the meaning specified in Section 22(e)(3) of the Code.
K. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) and its successor promulgated under the Exchange Act.
L. "Dividend Equivalent Rights" shall mean the right to receive the
amount of any dividends that are paid on an equivalent number of shares of
Common Stock underlying an Option or Phantom Unit, which shall be payable either
in cash or in the form of additional Phantom Units or Stock.
M. "Effective Date" shall mean the later of the date of the
Separation or the date on which the Plan was approved by the stockholders of the
Company.
2
N. "Eligible Employee" shall mean any employee of the Company or any
Related Entity who is so employed on the date of the grant of an Award.
O. "Eligible Non-Employee" shall mean any consultant or advisor to
the Company or any Related Entity, including any member of the State Executive
Board(s) of the Company or any Related Entity that the Committee selects to
receive an Award.
P. "Employee Benefits Committee" shall mean a committee of the
Company consisting of employees of the Company or any Related Entity appointed
by the Human Resources Committee and which shall administer the Plan as provided
in Section III hereof.
Q. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
R. "Executive Officers" shall mean any Officer of the Company or any
Related Entity who, at the time of an Award, is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
S. "Fair Market Value" shall mean the closing price of a share of
Common Stock as reported on the New York Stock Exchange for the applicable date,
or if there were no sales on such date, on the last day on which there were
sales.
T. "Human Resources Committee" shall mean the human resources
committee of the Board or any other committee of the Board appointed by the
Board to administer the Plan in lieu of the Human Resources Committee, which
committee shall consist of no fewer than three (3) persons, each of whom shall
be a Disinterested Person.
U. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.
V.(1) "Indexed" shall mean the periodic adjustment of an Option Price
based upon adjustment criteria determined by the Committee, but in no event
shall the Option Price be adjusted to an amount less than the original Option
Price.
V.(2) "Initial Grant Date" shall mean the later of (i) June 22, 1998,
or (ii) the date on which a new Outside Director is elected to the Board.
W. "Nonqualified Option" shall mean an Option which does not qualify
under Section 422 of the Code.
3
X. "Officer" shall mean any executive of the Company or any Related
Entity who participates in the Company's executive compensation programs.
Y. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Plan, including Incentive
Options, Nonqualified Options and Reload Options.
Z. "Optionee" shall mean a Participant to whom one or more Options
have been granted.
AA. "Option Price" shall mean the price per share payable to the
Company for shares of Common Stock upon the exercise of an Option.
AB. "Outside Director" shall mean an individual not employed by the
Company or any Related Entity and who serves on the Board.
AC. "Parent Corporation" shall mean any corporation within the
meaning of Section 424(e) of the Code.
AD. "Participant" shall mean an Eligible Employee, Eligible Non-
Employee, Executive Officer or Outside Director who is granted an Award.
AE. "Phantom Unit" shall mean a notional account representing a value
equivalent to one share of Common Stock on the Award date.
AF. "Plan" shall mean the 1998 U S WEST Stock Plan.
AG. "Related Entity" shall mean any Parent Corporation or Subsidiary
of the Company.
AH. "Reload Option" shall mean the right to receive a further Option
for a number of shares equal to the number of shares of Common Stock surrendered
by the Optionee upon exercise of the original Option as provided in Section IX.E
of the Plan.
AI. "Restricted Period" shall mean the period of time from the date
of grant of Restricted Stock until the lapse of restrictions attached thereto
under the terms of the Agreement granting such Restricted Stock, pursuant to the
provisions of the Plan or by action of the Committee.
AJ. "Restricted Stock" shall mean an Award made by the Committee
entitling the Participant to acquire, at no cost or for a purchase price
determined by the Committee at the time of grant, shares of Common Stock which
are subject to restrictions in accordance with the provisions of Section XII
hereof.
4
AK. "Retirement" shall mean with respect to any Eligible Employee,
that such person has terminated employment with the Company or any Related
Entity other than "for cause" (as defined in subsection IX.H.(v)) and (i) such
person is eligible to receive an immediate service pension benefit under the U S
WEST Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
January 1, 1997, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, custom, written
agreement or arrangement between the Company or any Related Entity and the
Eligible Employee. "Retirement" shall not apply to any Eligible Non-Employee.
AL. "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
AM. "Separation" shall mean the separation of U S WEST Communications
Group and U S WEST Media Group into two separate companies pursuant to the terms
of the Separation Agreement between the Company and MediaOne Group, Inc.
(previously known as "U S WEST, Inc.").
AN. "Stock Appreciation Right" or "SAR" shall mean a grant entitling
the Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the Committee shall so
determine at the time of a grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant (or over the Option Price, if the
Stock Appreciation Right was granted in tandem with an Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee having sole discretion to determine the form
or forms of payment at the time of grant of the SAR.
AO. "Stock Awards" shall mean any Award which is in the form of
Restricted Stock and any outright grants of Common Stock approved by the
Committee pursuant to the Plan.
AP. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture or partnership in which the
Company owns, directly or indirectly, (i) with respect to a corporation, stock
possessing twenty percent (20%) or more of the total combined voting power of
all classes of stock in the corporation or (ii) in the case of a joint venture
or partnership, the Company possesses a twenty percent (20%) interest in the
capital or profits of such joint venture or partnership. In the case of any
Incentive Option, Subsidiary shall mean any corporation within the meaning of
Section 424(f) of the Code.
5
AQ. "Vested" shall mean the status that results with respect to an
Option or other Award which may be immediately exercised under the terms of the
Agreement granting such Option or other Award, pursuant to the provisions of the
Plan or by action of the Committee.
III. Administration.
A. The Plan shall be administered by the Human Resources Committee
with respect to Officers, Executive Officers and Outside Directors and by the
Employee Benefits Committee with respect to all other Eligible Employees and
Eligible Non-Employees. The Human Resources Committee may adopt such rules,
regulations and guidelines as it determines necessary for the administration of
the Plan. Subject to any such rules, regulations and guidelines adopted by the
Human Resources Committee, the Employee Benefits Committee shall have the power
to adopt rules, regulations and guidelines to permit such Committee to
administer the Plan with respect to Eligible Employees (other than Officers and
Executive Officers) and with respect to Eligible Non-Employees.
B. The Committee may delegate to one or more of its members, or to
one or more agents, such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ such
legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company or such Related Entity whose employees have benefited from the Plan, as
determined by the Committee. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or a
Related Entity against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's gross
negligence or willful misconduct.
C. In furtherance of and not in limitation of the Committee's
discretionary authority, subject to the provisions of the Plan, the Committee
shall have the authority to:
1. determine the Participants to whom Awards shall be granted and
the number of and terms and conditions upon which Awards shall be granted (which
need not be the same for all Awards or types of Awards);
2. establish, in its sole discretion, annual or long-term financial
goals of the Company, Related Entity, or division, department, or group of the
Company or Related Entity, or individual goals which the Committee shall
consider in granting Awards, if any;
6
3. determine the satisfaction of performance goals established by
the Committee based upon periods of time or any combinations thereof;
4. determine the time when Awards shall be granted, the Option Price
of each Option, the period(s) during which Options shall be exercisable (whether
in whole or in part), the restrictions to be applicable to Awards, and the other
terms and provisions of Awards;
5. modify grants of Awards pursuant to Paragraph D. of this Section
III or rescind grants of Awards pursuant to Section IX.H(v), respectively;
6. provide the establishment of a procedure whereby a number of
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, the lapse of restrictions on Restricted Stock and the vesting of Phantom
Units (other than an Incentive Option) to meet the obligation of withholding for
income, social security and other taxes incurred by a Participant upon such
exercise or required to be withheld by the Company in connection with such
exercise;
7. adopt, modify and rescind rules and regulations and guidelines
relating to the Plan;
8. adopt modifications to the Plan and procedures, as may be
necessary to comply with provisions of the laws and applicable regulatory
rulings of countries in which the Company or a Related Entity operates in order
to assure the legality of Awards granted under the Plan to Participants who
reside in such countries;
9. obtain the approval of the stockholders of the Company with
respect to Awards consisting of Phantom Units or Restricted Stock; provided,
however, no action shall be proposed to stockholders without the approval of the
Board of Directors; and
10. make all determinations, perform all other acts, exercise all
other powers and establish any other procedures determined by the Committee to
be necessary, appropriate or advisable in administering the Plan and to maintain
compliance with any applicable law.
D. The Committee may at any time, in its sole discretion, accelerate
the exercisability of any Awards and waive or amend any and all restrictions and
conditions of any Awards.
7
E. Subject to and not inconsistent with the express provisions of
the Plan, the Code and Rule 16b-3 of the Exchange Act, the Committee shall have
the authority to require, as a condition to the granting of any Option, SAR or
other Award (to the extent applicable) to any Executive Officer of the Company
or any Related Entity that the Executive Officer receiving such Option, SAR or
other Award agree not to sell or otherwise dispose of such Option, SAR or other
Award or Common Stock acquired pursuant to such Option, SAR or other Award (to
the extent applicable) or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of six (6) months following the
later of (i) the date of the grant of such Option, SAR or other Award (to the
extent applicable) or (ii) the date when the other Option Price of such Option,
SAR or other Award is fixed, if such Option Price is not fixed at the date of
grant of such Option, SAR or other Award.
IV. Decisions Final.
Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
V. Arbitration.
Any agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the Committee, in its sole
discretion.
VI. Duration of the Plan.
The Plan shall remain in effect for a period of five (5) years from the
Effective Date, unless terminated by the Board pursuant to Section XX.
VII. Shares Available; Limitations.
A. Up to 4,800,000 shares of Common Stock may be granted in calendar
year 1998 and the maximum aggregate number of shares of Common Stock that may be
granted in any other calendar year for all purposes under the Plan shall be one
percent (1.0%) of the shares outstanding (excluding shares held in the Company's
treasury) on the first day of such calendar year, provided, however, that in the
event that fewer than the full aggregate number of shares available for issuance
in any calendar year are issued in such year, the shares not issued shall be
added to the shares available for issuance in any subsequent year or years. If,
for any reason, any shares of Common Stock as to which Options, SARs, Restricted
Stock, or Phantom Units have been granted cease to be subject to exercise or
purchase hereunder (other than the exercise of SARs for cash), the underlying
shares of Common Stock shall thereafter be available for grants to Participants
8
under the Plan during any calendar year. Awards granted under the Plan may be
fulfilled in accordance with the terms of the Plan with (i) authorized and
unissued shares of the Common Stock or (ii) issued shares of Common Stock
reacquired by the Company, in each situation, as the Board of Directors or the
Committee may determine from time to time at its sole discretion.
B. The maximum number of shares of Common Stock that shall be
subject to the grant of an Award in any calendar year for Awards other than
Options or SARs shall not exceed one-third (1/3) of the total number of shares
of Common Stock subject to Awards granted under the Plan for such calendar year.
C. The maximum number of shares of Common Stock with respect to
which Awards may be granted to any individual Participant in any calendar year
may not exceed eight hundred thousand (800,000).
D. The cumulative number of shares of Common Stock that may be
issued under this Plan in connection the exercise of Incentive Options shall not
exceed ten million (10,000,000).
VIII. Grant of Awards.
A. The Committee shall determine the type or types of Award(s) to be
made to each Participant. Awards may be granted singly, in combination or in
tandem subject to restrictions set forth in Section IX.C for Incentive Options.
The types of Awards that may be granted under the Plan are Options, with or
without Reload Options, SARs, Stock Awards and Phantom Units, and with respect
to Phantom Units and Restricted Stock, with or without Dividend Equivalent
Rights.
B. Each grant of an Award under this Plan shall be evidenced by an
Agreement dated as of the date of the grant of the Award, other than Stock
Awards consisting of an outright grant of shares of Common Stock. This Agreement
shall set forth the terms and conditions of the Award, as may be determined by
the Committee, and if the Agreement relates to the grant of an Option, shall
indicate whether the Option that it evidences, is intended to be an Incentive
Option or a Nonqualified Option. Each grant of an Award is conditioned upon the
acceptance by the Participant of the terms of the Agreement. Unless otherwise
extended by the Committee, a Participant shall have ninety (90) days from the
date of the Agreement to accept its terms.
IX. Options.
The Committee, in its sole discretion, may grant Incentive Options or
Nonqualified Options to Eligible Employees, Officers and Executive Officers and
Nonqualified Options to Eligible Non-Employees. Any Options granted to a
Participant under the Predecessor Plan which remain outstanding as of the
9
Effective Date shall be governed by the terms and conditions of the Plan, except
to the extent the provisions of the Plan are inconsistent with the terms of the
Options granted under the Predecessor Plans, in which event the applicable
provisions of the Predecessor Plans shall govern; provided, however, that in no
event shall there be a modification of the terms of any Incentive Option granted
under the Predecessor Plan. The terms and conditions of the Options granted
under this Section IX shall be determined from time to time by the Committee, as
set forth in the Agreement granting the Option, and subject to the following
conditions:
A. Nonqualified Options. The Option Price for each share of Common
Stock issuable pursuant to a Nonqualified Option may be an amount at or above
the Fair Market Value on the date such Option is granted, may be Indexed from
the original Option Price and may be granted with or without Dividend Equivalent
Rights; provided, however, that with respect to Nonqualified Options granted to
any Executive Officer, no Dividend Equivalent Rights may be granted.
B. Incentive Options. The Option Price for each share of Common
Stock issuable pursuant to an Incentive Option shall not be less than one
hundred percent (100%) of the Fair Market Value on the date such Option is
granted and may be Indexed from the original Option Price.
C. Incentive Options; Special Rules. Options granted in the form of
Incentive Options shall be subject to the following provisions:
1. Grant. No Incentive Option shall be granted pursuant to this Plan
more than ten (10) years after the Effective Date.
2. Annual Limit. The aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Common Stock with respect to which
one or more Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan or under any other stock plan of the
Company or any Related Entity shall not exceed $100,000 or such other maximum
amount permitted under Section 422 of the Code. Any Option purporting to
constitute an Incentive Option in excess of such limitation shall constitute a
Nonqualified Option.
3. 10% Stockholder. If any Optionee to whom an Incentive Option is
to be granted pursuant to the provisions of the Plan is, on the date of grant,
an individual described in Section 422(b)(6) of the Code, then the following
special provisions shall be applicable to the Option granted to such individual:
(a) the Option Price of shares subject to such Incentive Option shall
not be less than 110% of the Fair Market Value of Common Stock on the date of
grant; and
10
(b) the Option shall not have a term in excess of (5) years from the
date of grant.
D. Other Options. The Committee may establish rules with respect to,
and may grant to Eligible Employees, Options to comply with any amendment to the
Code made after the Effective Date providing for special tax benefits for stock
options.
E. Reload Options. Without in any way limiting the authority of the
Committee to make Awards hereunder, the Committee shall have the authority to
grant Reload Options. Any such Reload Option shall be subject to such other
terms and conditions as the Committee may determine. Notwithstanding the above,
(i) the Committee shall have the right, in its sole discretion, to withdraw a
Reload Option to the extent that the grant thereof will result in any adverse
accounting consequences to the Company and (ii) no additional Reload Options
shall be granted upon the exercise of a Reload Option.
F. Term of Option. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option.
G. Exercise of Stock Option. Each Option shall be exercisable in one
or more installments as the Committee in its sole discretion may determine at
the time of the Award and as provided in the Agreement. The right to purchase
shares shall be cumulative so that when the right to purchase any shares has
accrued such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option, subject to rules on
sequential exercise for Incentive Options pursuant to Paragraph C.2. of this
Section IX. The Option Price shall be payable (i) in cash or by an equivalent
means acceptable to the Committee, (ii) by delivery (constructive or otherwise)
to the Company of shares of Common Stock owned by the Optionee or (iii) by any
combination of the above as provided in the Agreement. Shares delivered to the
Company in payment of the Option Price shall be valued at the Fair Market Value
on the date of the exercise of the Option.
H. Vesting. The Agreement shall specify the date or dates on which
the Optionee may begin to exercise all or a portion of his Option. Subsequent to
such date or dates, the Option shall be deemed vested and fully exercisable.
(i) Death. In the event of the death of any Optionee, all Options
held by such Optionee on the date of his death shall become Vested Options and
the estate of such Optionee, shall have the right, at any time and from time to
time within one year after the date of death, or such other period, if any, as
the Committee in its sole discretion may determine, to exercise the Options of
the Optionee (but not after the earlier of the expiration date of the Option or,
in the case of an Incentive Option, one (1) year from the date of death).
11
(ii) Disability. If the employment of any Optionee is terminated
because of Disability, all Options held by such Optionee on the date of his or
her termination shall be retained by such Optionee, and such Options that are
not yet Vested Options shall become Vested Options in accordance with the
vesting schedule established at the time such Options were issued. The Optionee
shall have the right to exercise Vested Options at any time and from time to
time, but not after the expiration date of the Option or, in the case of
Incentive Options where tax-advantaged treatment is desired, one year from the
date of termination of employment.
(iii) Retirement. Upon an Optionee's Retirement, all Options held by
such Optionee on the date of his or her Retirement shall be retained by such
Optionee, and such Options that are not yet Vested Options shall become Vested
Options in accordance with the vesting schedule established at the time such
Options were issued, unless the Committee, in its sole discretion, determines
otherwise. Unless the Committee, in its sole discretion, determines otherwise,
the Optionee shall have the right to exercise Vested Options at any time and
from time to time, but not after the expiration date of the Option. In the case
of Incentive Options where tax-advantaged treatment is desired, the Optionee
shall have the right to exercise Vested Options three months from the date of
Retirement.
(iv) Other Termination. If the employment with the Company or a
Related Entity of an Optionee is terminated for any reason other than for death
or Disability and other than "for cause" as defined in subparagraph (v) below,
such Optionee shall have the right, in the case of a Vested Option, for a period
of three (3) months after the date of such termination or such longer period as
determined by the Committee, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.
(v) Termination For Cause. Notwithstanding any other provision of the
Plan to the contrary, if the Optionee's employment is terminated by the Company
or any Related Entity "for cause" (as defined below), such Optionee shall
immediately forfeit all rights under his Options except as to the shares of
Common Stock already purchased prior to such termination. Termination "for
cause" shall mean (unless another definition is agreed to in writing by the
Company and the Optionee) termination by the Company because of: (a) the
Optionee's willful and continued failure to substantially perform his duties
(other than any such failure resulting from the Optionee's incapacity due to
physical or mental impairment) after a written demand for substantial
performance is delivered to the Optionee by the Company, which demand
specifically identifies the manner in which the Company believes the Optionee
has not substantially performed his duties, (b) the willful conduct of the
Optionee which is demonstrably and materially injurious to the Company or
Related Entity, monetarily or otherwise, or (c) the conviction of the Optionee
for a felony by a court of competent jurisdiction.
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X. Foreign Options and Rights.
The Committee may make Awards of Options to Eligible Employees,
Officers, Executive Officers and Eligible Non-Employees who are subject to the
tax laws of nations other than the United States, which Awards may have terms
and conditions as determined by the Committee as necessary to comply with
applicable foreign laws. The Committee may take any action which it deems
advisable to obtain approval of such Option by the appropriate foreign
governmental entity; provided, however, that no such Award may be granted
pursuant to this Section X and no action may be taken which would result in a
violation of the Exchange Act, the Code or any other applicable law.
XI. Stock Appreciation Rights.
The Committee shall have the authority to grant SARs to Eligible
Employees, Officers, Executive Officers and Eligible Non-Employees either alone
or in connection with an Option. SARs granted in connection with an Option shall
be granted either at the time of grant of the Option or by amendment to the
Option. SARs granted in connection with an Option shall be subject to the same
terms and conditions as the related Option and shall be exercisable only at such
times and to such extent as the related Option is exercisable. A SAR granted in
connection with an Option may be exercised only when the Fair Market Value of
the Common Stock of the Company exceeds the Option Price of the related Option.
A SAR granted in connection with an Option shall entitle the Participant to
surrender to the Company unexercised the related Option, or any portion thereof
and to receive from the Company cash and/or shares of Common Stock equal to that
number of shares of Common Stock having an aggregate value equal to the excess
of (i) the Fair Market Value of one share of Common Stock on the day of the
surrender of such Option over (ii) the Option Price per share of Common Stock
multiplied by (iii) the number of shares of Common Stock that may be exercised
under the Option, or surrendered; provided, however, that no fractional shares
shall be issued. A SAR granted singly shall entitle the Participant to receive
the excess of (i) the Fair Market Value of a share of Common Stock on the date
of exercise over (ii) the Fair Market Value of a share of Common Stock on the
date of the grant of the SAR multiplied by (iii) the number of SARs exercised.
Payment of any fractional shares of Common Stock shall be made in cash. A SAR
shall become a Vested Award upon (i) a Participant becoming Disabled, or (ii)
the death of a Participant.
XII. Restricted Stock.
The Committee may, in its sole discretion, grant Restricted Stock to
Eligible Employees, Eligible Non-Employees, Officers or Executive Officers
subject to the provisions below.
13
A. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be held in custody by the Company for
the Participant's account. The Participant shall have all rights and privileges
of a stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled or
the death of a Participant. If a Participant ceases to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the Committee, and all rights of the
Participant to such shares shall terminate without further obligation on the
part of the Company. Upon the forfeiture (in whole or in part) of shares of
Restricted Stock, such forfeited shares shall become shares of Common Stock held
in the Company's treasury without further action by the Participant.
B. Terms and Conditions. The Committee shall establish the terms and
conditions for Restricted Stock pursuant to Section III of the Plan, including
whether any shares of Restricted Stock shall have voting rights or a right to
any dividends that are declared. Terms and conditions established by the
Committee need not be the same for all grants of Restricted Stock. The Committee
may provide for the restrictions to lapse with respect to a portion or portions
of the Restricted Stock at different times or upon the occurrence of different
events, and the Committee may waive, in whole or in part, any or all
restrictions applicable to a grant of Restricted Stock. Restricted Stock Awards
may be issued for no cash consideration or for such minimum consideration as may
be required by applicable law or such other consideration as may be determined
by the Committee.
C. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered (less any shares delivered pursuant to Section XIX.C in satisfaction
of any withholding tax obligation), free of all such restrictions, except
applicable securities law restrictions, to the Participant or the Participant's
estate, as the case may be. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay, in lieu thereof, the Fair Market
Value (measured as of the date the restrictions lapse) of such fractional share
to the Participant or the Participant's estate, as the case may be.
Notwithstanding the foregoing, the Committee may authorize the delivery of the
Restricted Stock to a Participant during the Restricted Period, in which event
any stock certificates in respect of shares of Restricted Stock thus delivered
14
to a Participant during the Restricted Period applicable to such shares shall
bear an appropriate legend referring to the terms and conditions, including the
restrictions, applicable thereto.
XIII. Phantom Units.
A. General. The Committee may, in its sole discretion, grant the
right to earn Phantom Units to Eligible Employees, Officers, Executive Officers
and Eligible Non-Employees. The Committee shall determine the criteria for the
earning of Phantom Units, pursuant to Section III of the Plan. Upon satisfaction
of such criteria, a Phantom Unit shall be deemed a Vested Award. A Phantom Unit
granted by the Committee shall provide for payment in shares of Common Stock. A
Phantom Unit shall become a Vested Award upon (i) a Participant becoming
Disabled, or (ii) the death of a Participant. Shares of Common Stock issued
pursuant to this Section XIII may be issued for no cash consideration or for
such minimum consideration as may be required by applicable law or such other
consideration as may be determined by the Committee. The Committee shall
determine whether a Participant granted a Phantom Unit shall be entitled to a
Dividend Equivalent Right.
B. Unfunded Claim. The establishment of Phantom Units under the Plan
are unfunded obligations of the Company. The interest of a Participant in any
such units shall be considered a general unsecured claim against the Company to
the extent that the conditions for the earning of the Phantom Units have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the Committee.
C. Issuance of Common Stock. Upon a Phantom Unit becoming a Vested
Award, unless a Participant has elected to defer under Paragraph D. below,
shares of Common Stock representing the Phantom Units shall be distributed to
the Participant, unless the Committee, with the consent of the Participant,
provides for the payment of the Phantom Units in cash or partly in cash and
partly in shares of Common Stock equal to the value of the shares of Common
Stock which would otherwise be distributed to the Participant.
D. Deferral of Phantom Units. Prior to the year with respect to
which a Phantom Unit may become a Vested Award, the Participant may elect not to
receive Common Stock upon the vesting of such Phantom Unit and for the Company
to continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.
E. Financial Hardship. Notwithstanding any other provision hereof,
at the written request of a Participant who has elected to defer pursuant to
Paragraph D. above, the Committee, in its sole direction, upon a finding that
continued deferral will result in financial hardship to the Participant, may
15
authorize the payment of all or a part of a Participant's Vested Phantom Units
in a single installment or the acceleration of payment of any multiple
installments thereof; provided, however, that distributions will not be made
under this paragraph if such distribution would result in liability of an
Executive Officer under Section 16 of the Exchange Act.
F. Distribution upon Death. The Committee shall pay the Fair Market
Value of the Phantom Units of a deceased Participant to the estate of the
Participant, as soon as practicable following the death of the Participant. The
value of the Phantom Units for the purpose of such distribution shall be based
upon the Fair Market Value of shares of Common Stock underlying the Phantom
Units on the date of the Participant's death.
XIV. Stock Awards to Outside Directors.
Each Outside Director shall be granted a Stock Award on his or her
Initial Grant Date consisting of 3,000 shares of Restricted Stock, which shall
vest in 20% increments, with the first 600 shares vesting six months after the
Initial Grant Date, the next 600 shares vesting one year after the Initial Grant
Date, and the remaining shares vesting at a rate of 600 shares per year
thereafter for the next three years.
XV. Outside Director's Compensation.
A. Payment in Common Stock. Each Outside Director may elect to
receive payment of all or any portion of Director Compensation comprised of
retainer fees for service on the Board and any committees thereof in Common
Stock. The amount of Common Stock then issuable shall be based on the Fair
Market Value of the Common Stock on the dates such retainer fees are otherwise
due and payable to the Outside Director. When any fees are paid in Common Stock
under this Section XV.A, any fractional shares of Common Stock shall be paid in
cash. Certificates evidencing such Common Stock shall be delivered promptly
following such date. If an Outside Director elects to receive payment of
retainer fees in Common Stock as described in this Section XV.A, the election
shall be (i) in writing, (ii) delivered to the Secretary of the Company at least
six months in advance of the payment date, and (iii) irrevocable.
B. Deferral of Payment. Each Outside Director may elect to defer the
receipt of Common Stock payable pursuant to Section XV.A, in which event such
Outside Director shall receive an equivalent number of Phantom Units with
Dividend Equivalent Rights. Any such Phantom Units shall become Vested Awards at
such time as the Outside Director no longer serves as a member of the Board. If
an Outside Director elects to defer receipt of Common Stock and receive Phantom
Units pursuant to this Section XV.B, the election shall be (i) in writing, (ii)
delivered to the Secretary of the Company in the year preceding the year in
16
which the Director Compensation would otherwise be paid and at least six months
in advance of the date when Common Stock would otherwise be issued, and (iii)
irrevocable.
C. Director Stock Options. On his or her Initial Grant Date, each
Outside Director shall be granted an Option to purchase thirty thousand (30,000)
shares Common Stock, such Options to become Vested Options in 1/3 increments
over three years, beginning one year after the Initial Grant Date. On the third
anniversary of the Initial Grant Date, and each year thereafter, Outside
Directors shall receive an annual grant of an Option to purchase ten thousand
(10,000) shares of Common Stock, which Options shall become Vested Options one
year after the date of each respective grant. Upon retirement of an Outside
Director from the Board, all unvested Options shall become immediately vested
and shall remain exercisable notwithstanding the retirement of the Director from
the Board, until the expiration date of the Option, which shall occur ten years
from the date of grant.
D. Pension Replacement. After the Effective Date, no new pension
benefits will be granted to Outside Directors; however, the Company will
grandfather vested pension benefits accrued by Directors as of the Effective
Date relating to service on the Board of U S WEST, Inc. prior to the Separation.
In lieu thereof, Outside Directors shall receive a Stock Award consisting of the
number of shares of Restricted Stock determined by dividing (a) the dollar
amount equal to ten (10) times the amount of the annual retainer paid to Board
members, by (b) the closing price on recipient's Initial Grant Date for Common
Stock listed on the New York Stock Exchange as reported in the Wall Street
Journal, which Stock Award shall be subject to the following vesting schedule:
(i) 50% of the Stock Award shall vest five years after the recipient's Initial
Grant Date, and (ii) the remainder shall vest at a rate of 10% per year
thereafter for the next five years.
XVI. Federal Securities Law.
With respect to grants of Awards to Directors and Executive Officers,
the Company intends that the provisions of this Plan and all transactions
effected in accordance with Plan shall comply with Rule 16b-3 under the Exchange
Act. Accordingly, the Committee shall administer and interpret the Plan to the
extent practicable, to maintain compliance with such rule.
XVII. Change of Control; Acceleration.
Upon the occurrence of a Change of Control:
A. in the case of all outstanding Options and SARs, each such Option
and SAR shall automatically become immediately fully exercisable by the
Participant;
17
B. restrictions applicable to Restricted Stock shall automatically
be deemed lapsed and conditions applicable to Phantom Units shall automatically
be deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and
C. the Human Resources Committee, in its discretion, shall have the
right to accelerate payment of any deferrals of Vested Phantom Units.
XVIII. Adjustment of Shares.
A. In the event there is any change in the Common Stock by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number or kind of shares or interests subject to an Award and the
per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each Participant's economic
position with respect to the Award shall not, as a result of such adjustment, be
worse than it had been immediately prior to such event. Any fractional shares or
interests resulting from such adjustment shall be rounded up to the next whole
share of Common Stock. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option shall comply with the rules of Section
424(a) of the Code, and (ii) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an "incentive
stock option" for purposes of Section 422 of the Code.
B. In the event of an acquisition by the Company of another
corporation where the Company assumes outstanding stock options or similar
obligations of such corporation, the number of Awards available under the Plan
shall be appropriately increased to reflect the number of such options or other
obligations assumed.
XIX. Substitute Options.
Options, shares of Restricted Stock and Phantom Units issued in
substitution of outstanding options for U S WEST Communications Group Stock,
restricted shares of U S WEST Communications Group Stock and phantom units with
respect to U S WEST Communications Group Stock pursuant to the terms of the
Employee Matters Agreement entered into by the Company and MediaOne Group, Inc.
(previously known as "U S WEST, Inc.") shall be administered pursuant to the
provisions of the Plan to the extent not inconsistent with the terms of the
grant of such options, restricted stock and phantom units and such Employee
Matters Agreement.
18
XX. Miscellaneous Provisions.
A. Assignment or Transfer. Except as otherwise permitted by this
Section, no grant of any "derivative security" (as defined in the rules issued
under Section 16 of the Exchange Act) made under the Plan or any rights or
interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferable pursuant to a domestic
relations order. An Optionee who is an Officer or an Outside Director may assign
or transfer an Option (other than an Incentive Option) as a gift to one or more
members of his or her immediate family or to trusts maintained for the benefit
of such immediate family members if such assignment or transfer is not pursuant
to a domestic relations order and (i) such assignment or transfer is expressly
approved in advance by the Committee or its delegate(s) or (ii) such Option was
granted to the Optionee on or after August 15, 1996, and the Agreement
pertaining to such Option expressly permits the assignment or transfer of the
Option.
B. Investment Representation; Legends. The Committee may require
each Participant acquiring shares of Common Stock pursuant to an Award to
represent to and agree with the Company in writing that such Participant is
acquiring the shares without a view to distribution thereof. No shares of Common
Stock shall be issued pursuant to an Award until all applicable securities law
and other legal and stock exchange requirements have been satisfied. The
Committee may require the placing of stop-orders and restrictive legends on
certificates for Common Stock as it deems appropriate.
C. Withholding Taxes. In the case of distributions of Common Stock
or other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.
D. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Award
nor to any Participant receiving an Award.
E. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. Effect on Employment. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall impose, or be construed as
19
imposing, an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.
G. Noncompetition. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the Committee, in its sole
discretion.
H. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
XXI. Amendment or Termination of Plan.
The Board shall have the right to amend, modify, suspend or terminate
the Plan at any time, provided that, with respect to Incentive Options, no
amendment shall be made that (i) decreases the minimum Option Price in the case
of any Incentive Option, or (ii) modifies the provisions of the Plan with
respect to Incentive Options, unless such amendment is made by or with the
approval of the stockholders or unless the Board receives an opinion of counsel
to the Company that stockholder approval is not necessary with respect to any
modifications relating to Incentive Options; and provided further that no
amendment shall be made that (i) increases the number of shares of Common Stock
that may be issued under the Plan, (ii) permits the Option Price for any Option
to be less than Fair Market Value on the date such Option is granted, or (iii)
extends the period during which awards may be granted under the Plan beyond five
(5) years from the Effective Date, unless such amendment is made by or with the
approval of stockholders. No amendment, modification, suspension or termination
of the Plan shall alter or impair any Awards previously granted under the Plan,
without the consent of the holder thereof.
20
EX-99.D.6
16
ex_d-6.txt
EXHIBIT 99(D)(6)
1998 U S WEST STOCK PLAN
I. Purpose.
This 1998 U S WEST Stock Plan, as amended (the "Plan"), is intended to
promote the long term success of U S WEST, Inc. by affording certain eligible
employees, executive officers, non-employee directors of the Company (as defined
below) and its Subsidiaries (as defined below) and certain outside consultants
or advisors to the Company and its affiliates with an opportunity to acquire a
proprietary interest in the Company, in order to incentivize such persons and to
align the financial interests of such persons with the stockholders of the
Company. This Plan became effective upon consummation of the Separation (defined
below).
II. Definitions.
The following defined terms are used in the Plan:
A. "Agreement" shall mean the agreement or grant letter accepted by
the Participant as described in Section VIII of the Plan between the Company and
a Participant which is a condition subsequent to the grant of an Award to a
Participant pursuant to this Plan.
B. "Award" shall mean individually, collectively or in tandem, an
incentive award granted under the Plan, whether in the form of Options, SARs,
Stock Awards or Phantom Units.
C. "Board" or "Board of Directors" shall mean the Board of Directors
of the Company.
D. Except as excluded below, "Change of Control" shall mean any of
the following:
1. any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) who is or becomes a beneficial owner of
(or otherwise has the authority to vote), directly or indirectly,
securities representing twenty percent (20%) or more of the total
voting power of all of the Company's then outstanding voting
securities, unless through a transaction arranged by, or consummated
with the prior approval of the Board of Directors; or
2. any period of two (2) consecutive calendar years during
which there shall cease to be a majority of the Board of Directors
comprised as follows: individuals who at the beginning of such period
constitute the Board of Directors and any new director(s) whose
election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for
election was previously so approved; or
3. the Company becomes a party to a merger or consolidation in
which either (i) the Company will not be the surviving corporation or
(ii) the Company will be the surviving corporation and any outstanding
shares of Common Stock of the Company will be converted into shares of
any other company (other than a reincorporation or the establishment of
a holding company involving no change of ownership of the Company) or
other securities or cash or other property (excluding payments made
solely for fractional shares); or
4. any other event that a majority of the Board of Directors
shall determine constitutes a Change of Control;
provided, however, that, except as the Board of Directors otherwise determines,
a Change of Control for purposes of the Plan does not include the Merger
contemplated in the Agreement and Plan of Merger (the "Qwest Merger"), dated as
of July 18, 1999, or as later amended, between the Company and Qwest
Communications International Inc. ("Qwest").
E. "Code" shall mean the Internal Revenue Code of 1986, as amended.
F. Reserved.
G. "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
H. "Company" shall mean U S WEST, Inc, a Delaware corporation
(previously known as "USW-C, Inc."), and any successor thereof.
I. "Director Compensation" shall mean all cash or stock remuneration
payable to an Outside Director for service to the Company as a director, other
than reimbursement for expenses, the Stock Award granted pursuant to Section
XIV, the Stock Award granted pursuant to Section XV.D, or Common Stock received
upon exercise of an Option, and shall include retainer fees for service on, and
fees for attendance at meetings of, the Board and any committees thereof.
2
J. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of eligible employees of the Company or any Related Entity,
provided, however, that in the case of an Incentive Option, "disability" shall
have the meaning specified in Section 22(e)(3) of the Code.
K. Reserved.
L. "Dividend Equivalent Rights" shall mean the right to receive the
amount of any dividends that are paid on an equivalent number of shares of
Common Stock underlying an Option or Phantom Unit, which shall be payable either
in cash or in the form of additional Phantom Units or Stock.
M. "Effective Date" shall mean the later of the date of the
Separation or the date on which the Plan was approved by the stockholders of the
Company.
N. "Eligible Employee" shall mean any employee of the Company or any
Related Entity who is so employed on the date of the grant of an Award.
O. "Eligible Non-Employee" shall mean any consultant or advisor who
has provided bona fide services to the Company or any Related Entity and is
selected by the HRC or EBC to receive an Award; provided that services rendered
by such consultant or advisor were not in connection with the offer or sale of
securities in a capital raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities.
P. "Employee Benefits Committee" or "EBC" shall mean a committee of
the Company consisting of employee(s) of the Company or any Related Entity
appointed by the Board at the recommendation of the Human Resources Committee
and which shall administer the Plan with respect to Eligible Employees and
Eligible Non-Employees other than Officers, Executive Officers and Outside
Directors as provided in Section III hereof.
Q. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
R. "Executive Officers" shall mean any Officer of the Company or any
Related Entity who, at the time of an Award, is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
S. "Fair Market Value" shall mean the closing price of a share of
Common Stock as reported on the New York Stock Exchange for the applicable date,
or if there were no sales on such date, on the last day prior to the applicable
date on which there were sales.
3
T. "Human Resources Committee" or "HRC" shall mean the human
resources committee of the Board or any other committee of the Board appointed
by the Board to administer the Plan in lieu of the HRC, which committee shall
consist of no fewer than three (3) persons, each of whom shall be a Non-Employee
Director.
U. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.
V.(1) "Indexed" shall mean the periodic adjustment of an Option Price
based upon adjustment criteria determined by the HRC or EBC, but in no event
shall the Option Price be adjusted to an amount less than the original Option
Price.
V.(2) "Initial Grant Date" shall mean, with respect to an Outside
Director, the later of (i) June 22, 1998, or (ii) the date on which a new
Outside Director is elected to the Board.
V.(3) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3) or any successor rule issued under the Exchange Act.
W. "Nonqualified Option" shall mean an Option which does not qualify
under Section 422 of the Code.
X. "Officer" shall mean any executive of the Company or any Related
Entity who participates in the Company's executive compensation programs.
Y. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Plan, including Incentive
Options, Nonqualified Options and Reload Options.
Z. "Optionee" shall mean a Participant to whom one or more Options
have been granted.
AA. "Option Price" shall mean the price per share payable to the
Company for shares of Common Stock upon the exercise of an Option.
AB. "Outside Director" shall mean an individual not employed by the
Company or any Related Entity and who serves on the Board.
AC. "Parent Corporation" shall mean any corporation within the
meaning of Section 424(e) of the Code.
AD. "Participant" shall mean an Eligible Employee, Eligible
Non-Employee, Executive Officer or Outside Director to whom an Award is granted.
4
AE. "Phantom Units" shall mean units held in a notional account in
which each unit represents a value equivalent to one share of Common Stock on
the Award date.
AF. "Plan" shall mean the 1998 U S WEST Stock Plan, as amended.
AG. "Related Entity" shall mean any Parent Corporation or Subsidiary
of the Company.
AH. "Reload Option" shall mean the right to receive a further Option
for a number of shares equal to the number of shares of Common Stock surrendered
by the Optionee upon exercise of the original Option as provided in Section IX.E
of the Plan.
AI. "Restricted Period" shall mean the period of time from the date
of grant of Restricted Stock until the lapse of restrictions attached thereto
under the terms of the Agreement granting such Restricted Stock, pursuant to the
provisions of the Plan or by action of the EBC or HRC, as appropriate.
AJ. "Restricted Stock" shall mean an Award made by the HRC or EBC
entitling the Participant to acquire, at no cost or for a purchase price
determined by the HRC or EBC at the time of grant, shares of Common Stock which
are subject to restrictions in accordance with the provisions of Section XII
hereof.
AK. "Retirement" shall mean with respect to any Eligible Employee,
that such person has terminated employment with the Company or any Related
Entity other than "for cause" (as defined in subsection IX.H.(v)) and (i) such
person is eligible to receive an immediate service pension benefit under the U S
WEST Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
January 1, 1997, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, written agreement or
arrangement between the Company or any Related Entity and the Eligible Employee.
"Retirement" shall not apply to any Eligible Non-Employee.
AL. "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
AM. "Separation" shall mean the separation of U S WEST Communications
Group and U S WEST Media Group into two separate companies pursuant to the terms
of the Separation Agreement between the Company and MediaOne Group, Inc.
(previously known as "U S WEST, Inc.").
5
AN. "Stock Appreciation Right" or "SAR" shall mean a grant entitling
the Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the HRC or the EBC, as the
case may be, shall so determine at the time of a grant, less than) the excess of
the Fair Market Value of a share of Common Stock on the date of exercise over
the Fair Market Value of a share of Common Stock on the date of grant (or over
the Option Price, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of shares with respect to which the Stock
Appreciation Right shall have been exercised, with the HRC or the EBC, as the
case may be, to determine the form or forms of payment at the time of grant of
the SAR.
AO. "Stock Awards" shall mean any Award which is in the form of
Restricted Stock and any outright grants of Common Stock approved by the HRC or
the EBC, as the case may be, pursuant to the Plan.
AP. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture, limited liability company
("LLC") or partnership in which the Company owns, directly or indirectly, (i)
with respect to a corporation, stock possessing twenty percent (20%) or more of
the total combined voting power of all classes of stock in the corporation, (ii)
in the case of a joint venture or partnership, the Company possesses a twenty
percent (20%) interest in the capital or profits of such joint venture or
partnership, or (iii) in the case of an LLC, a twenty percent (20%) or greater
interest in units in the LLC. In the case of any Incentive Option, Subsidiary
shall mean any corporation within the meaning of Section 424(f) of the Code.
AQ. "Vested" shall mean the status of that portion of an Option or
other Award that may be immediately exercised under the terms of the Agreement
granting such Option or other Award, pursuant to the provisions of the Plan, or
by action of the HRC for Officers, Executive Officers and Outside Directors or
EBC for all other Eligible Employees and Eligible Non-Employees.
III. Administration.
A. The HRC, with respect to Officers, Executive Officers and Outside
Directors and the EBC through the power delegated it by the Board, with respect
to other Eligible Employees and Eligible Non-Employees, shall have sole and
exclusive discretion to interpret and administer the Plan. The HRC may adopt
such rules, regulations, procedures and guidelines as it determines necessary
for the administration of the Plan. Subject to any such rules, regulations,
procedures and guidelines adopted by the HRC, the EBC shall have the power to
adopt rules, regulations, procedures and guidelines to administer the Plan with
respect to Eligible Employees (other than Officers and Executive Officers) and
with respect to Eligible Non-Employees.
6
B. The HRC and the EBC may delegate to one or more of their members,
or to one or more agents, such administrative duties as they may deem advisable,
and the HRC and the EBC, or any person to whom they have delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the HRC and the EBC or such person may have under the Plan. The
HRC and the EBC, as the case may be, may employ such legal or other counsel,
consultants and agents as they may deem desirable for the administration of the
Plan and may rely upon any opinion or computation received from any such
counsel, consultant or agent. Expenses incurred by the HRC or the EBC in the
engagement of such counsel, consultant or agent shall be paid by the Company or
such Related Entity whose employees have benefited from the Plan, as determined
by the HRC or the EBC, as the case may be. The Company shall indemnify members
of the HRC and the EBC and any of their respective agents who are employees of
the Company or a Related Entity against any and all liabilities or expenses to
which they may be subjected by reason of any act or failure to act with respect
to their duties on behalf of the Plan, except in circumstances involving such
person's gross negligence or willful misconduct.
C. In furtherance of and not in limitation of the discretionary
authority granted to the HRC and the EBC, subject to the provisions of the Plan,
the HRC and the EBC shall have the authority to:
1. determine the Participants to whom Awards shall be granted
and the number of and terms and conditions upon which Awards shall be
granted (which need not be the same for all Awards or types of Awards);
2. establish annual or long-term financial goals of the
Company, any Related Entity, or division, department, or group of the
Company or any Related Entity, or individual goals which the HRC and
the EBC, as the case may be, shall consider in granting Awards, if any;
3. determine the satisfaction of performance goals based upon
periods of time or any combinations thereof;
4. determine the time when Awards shall be granted, the Option
Price of each Option, the period(s) during which Options shall be
exercisable (whether in whole or in part), the restrictions to be
applicable to Awards, and the other terms and provisions of Awards;
5. modify grants of Awards pursuant to Paragraph D. of this
Section III;
6. provide the establishment of a procedure whereby a number
of shares of Common Stock or other securities may be withheld from the
total number of shares of Common Stock or other securities to be issued
upon exercise of an Option, the lapse of restrictions on Restricted
Stock and the vesting of Phantom Units (other than an Incentive Option)
7
to meet the obligation of withholding for income, social security and
other taxes incurred by a Participant upon such exercise or required to
be withheld by the Company in connection with such exercise;
7. adopt, modify and rescind their respective rules,
regulations, procedures and guidelines relating to the Plan;
8. adopt modifications to the Plan and procedures, as may be
necessary to comply with provisions of the laws and applicable
regulatory rulings of countries in which the Company or a Related
Entity operates in order to assure the legality of Awards granted under
the Plan to Participants who reside in such countries;
9. obtain the approval of the stockholders of the Company with
respect to Awards consisting of Phantom Units or Restricted Stock;
provided, however, no action shall be proposed to stockholders without
the approval of the Board of Directors; and
10. make all determinations, perform all other acts, exercise
all other powers and establish any other rules, regulations,
procedures, and guidelines determined by the HRC and the EBC,
respectively, to be necessary, appropriate or advisable in
administering the Plan and to maintain compliance with any applicable
law.
D. The HRC or the EBC, as the case may be, may at any time
accelerate the exercisability or define any other aspect of the grant of or
conditions of grants of any Awards and waive or amend any and all restrictions
and conditions of any Awards.
E. Subject to and not inconsistent with the express provisions of
the Plan, the Code and Rule 16b-3 of the Exchange Act, the HRC shall have the
authority to require, as a condition to the granting of any Option, SAR or other
Award (to the extent applicable) to any Executive Officer of the Company or any
Related Entity that the Executive Officer receiving such Option, SAR or other
Award agree not to sell or otherwise dispose of such Option, SAR or other Award
or Common Stock acquired pursuant to such Option, SAR or other Award (to the
extent applicable) or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of six (6) months following the
later of (i) the date of the grant of such Option, SAR or other Award (to the
extent applicable) or (ii) the date when the other Option Price of such Option,
SAR or other Award is fixed, if such Option Price is not fixed at the date of
grant of such Option, SAR or other Award.
8
IV. Decisions Final.
Any decision, interpretation or other action made or taken in good
faith by the HRC, with respect to Officers, Executive Officers and Outside
Directors, and the EBC, with respect to all other Eligible Employees and
Eligible Non-Employees, arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
V. Arbitration.
Any Agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the HRC, with respect to
Officers, Executive Officers and Outside Directors, and the EBC, with respect to
all other Eligible Employees and Eligible Non-Employees.
VI. Duration of the Plan.
The Plan shall remain in effect for a period of five (5) years from the
Effective Date, unless terminated by the Board pursuant to Section XXI, but
shall continue to govern any Awards outstanding as of the end of that period.
VII. Shares Available; Limitations.
A. Up to 4,800,000 shares of Common Stock may be granted in calendar
year 1998 and the maximum aggregate number of shares of Common Stock that may be
granted in any other calendar year for all purposes under the Plan shall be one
percent (1.0%) of the shares outstanding (excluding shares held in the Company's
treasury) on the first day of such calendar year, provided, however, that in the
event that fewer than the full aggregate number of shares available for issuance
in any calendar year are issued in such year, the shares not issued shall be
added to the shares available for issuance in any subsequent year or years. If,
for any reason, any shares of Common Stock as to which Options, SARs, Restricted
Stock, or Phantom Units have been granted cease to be subject to exercise or
purchase hereunder (other than the exercise of SARs for cash), the underlying
shares of Common Stock shall thereafter be available for grants to Participants
under the Plan during any calendar year. Awards granted under the Plan may be
fulfilled in accordance with the terms of the Plan with (i) authorized and
unissued shares of the Common Stock or (ii) issued shares of Common Stock
reacquired by the Company, in each situation, as the Board of Directors or the
HRC may determine from time to time.
B. The maximum number of shares of Common Stock that shall be
subject to the grant of an Award in any calendar year for Awards other than
Options or SARs shall not exceed one-third (1/3) of the total number of shares
of Common Stock subject to Awards granted under the Plan for such calendar year.
9
C. The maximum number of shares of Common Stock with respect to
which Awards may be granted to any individual Participant in any calendar year
may not exceed 2,500,000.
D. The cumulative number of shares of Common Stock that may be
issued under this Plan in connection with the exercise of Incentive Options
shall not exceed ten million (10,000,000).
VIII. Grant of Awards.
A. The HRC shall determine the type or types of Award(s) to be made
to Officers, Executive Officers and Non-Employee Directors, and the EBC shall
determine the type or types of Award(s) to be made to all other Eligible
Employees and Eligible Non-Employees. Awards may be granted singly, in
combination or in tandem subject to restrictions set forth in Section IX.C for
Incentive Options. The types of Awards that may be granted under the Plan are
Options, with or without Reload Options, SARs, Stock Awards and Phantom Units,
and with respect to Phantom Units and Restricted Stock, with or without Dividend
Equivalent Rights.
B. Each grant of an Award under this Plan shall be conditioned upon
the acceptance of an Agreement dated as of the date of the grant of the Award,
other than Stock Awards consisting of an outright grant of shares of Common
Stock. This Agreement shall set forth the terms and conditions of the Award, as
may be determined by the HRC, with respect to Officers, Executive Officers and
Non-Employee Directors, and the EBC, with respect to all other Eligible
Employees and Eligible Non-Employees. If the Agreement relates to the grant of
an Option, it shall indicate whether the Option that it evidences, is intended
to be an Incentive Option or a Nonqualified Option. Each grant of an Award is
conditioned upon the subsequent acceptance by the Participant of the terms of
the Agreement. Unless otherwise extended by the HRC, with respect to Officers,
Executive Officers and Non-Employee Directors, or the EBC, with respect to all
other Eligible Employees and Eligible Non-Employees, a Participant shall have
ninety (90) days from the date of the Agreement to accept its terms.
IX. Options.
The HRC may grant Incentive Options or Nonqualified Options to Officers
and Executive Officers, and the EBC may grant Incentive Options or Nonqualified
Options to all other Eligible Employees and Nonqualified Options to Eligible
Non-Employees. Any Options granted to a Participant under the predecessor plan
which remain outstanding as of the Effective Date shall be governed by the terms
and conditions of the Plan, except to the extent that the provisions of the Plan
are inconsistent with the terms of, and have a materially adverse effect on the
economic value of the Options granted under the predecessor plans, in which
event the applicable provisions of the predecessor plans shall govern, unless
10
otherwise agreed to by the Optionee; provided, however, that in no event shall
there be a modification of the terms of any Incentive Option granted under the
predecessor plan. The terms and conditions of the Options granted under this
Section IX shall be determined from time to time by the HRC, with respect to
Officers, Executive Officers and Non-Employee Directors, and the EBC, with
respect to all other Eligible Employees and Eligible Non-Employees, as set forth
in the Agreement granting the Option, and subject to the following conditions:
A. Nonqualified Options. The Option Price for each share of Common
Stock issuable pursuant to a Nonqualified Option may be an amount at or above
the Fair Market Value on the date such Option is granted, may be Indexed from
the original Option Price and may be granted with or without Dividend Equivalent
Rights; provided, however, that with respect to Nonqualified Options granted to
any Executive Officer, no Dividend Equivalent Rights may be granted.
B. Incentive Options. The Option Price for each share of Common
Stock issuable pursuant to an Incentive Option shall not be less than one
hundred percent (100%) of the Fair Market Value on the date such Option is
granted and may be Indexed from the original Option Price.
C. Incentive Options; Special Rules. Options granted in the form of
Incentive Options shall be subject to the following provisions:
1. Grant. No Incentive Option shall be granted pursuant to
this Plan more than ten (10) years after the Effective Date.
2. Annual Limit. The aggregate Fair Market Value (determined
at the time the Option is granted) of the shares of Common Stock with
respect to which one or more Incentive Options are exercisable for the
first time by any Optionee during any calendar year under the Plan or
under any other stock plan of the Company or any Related Entity shall
not exceed $100,000 or such other maximum amount permitted under
Section 422 of the Code. Any portion of an Option purporting to
constitute an Incentive Option in excess of such limitation shall
constitute a Nonqualified Option.
3. 10% Stockholder. If any Optionee to whom an Incentive
Option is to be granted pursuant to the provisions of the Plan is, on
the date of grant, an individual described in Section 422(b)(6) of the
Code, then the following special provisions shall be applicable to the
Option granted to such individual:
(a) the Option Price of shares subject to such Incentive
Option shall not be less than 110% of the Fair Market Value of
Common Stock on the date of grant; and
(b) the Option shall not have a term in excess of (5)
years from the date of grant.
11
D. Other Options. The HRC may grant, with respect to Officers and
Executive Officers, and Directors, and the EBC may grant, with respect to all
other Eligible Employees and Eligible Non-Employees, and establish rules with
respect to Options to comply with any amendment to the Code made after the
Effective Date providing for special tax benefits for stock options.
E. Reload Options. Without in any way limiting the authority of the
HRC or the EBC to make Awards hereunder, both the HRC and the EBC shall have the
authority to grant Reload Options. Any such Reload Option shall be subject to
such other terms and conditions as the HRC or the EBC, as the case may be, may
determine. Notwithstanding the above, (i) the HRC and the EBC shall have the
right to withdraw a Reload Option to the extent that the grant thereof will
result in any adverse accounting consequences to the Company and (ii) no
additional Reload Options shall be granted upon the exercise of a Reload Option.
F. Term of Option. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option.
G. Exercise of Stock Option. Each Option shall be exercisable in one
or more installments as the HRC or the EBC, as the case may be, may determine at
the time of the Award and as provided in the Agreement. The right to purchase
shares shall be cumulative so that when the right to purchase any shares has
accrued such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. The Option Price shall be
payable (i) in cash or by an equivalent means acceptable to the HRC or the EBC,
as the case may be (ii) by delivery (constructive or otherwise) to the Company
of shares of Common Stock owned by the Optionee or (iii) by any combination of
the above as provided in the Agreement. Shares delivered to the Company in
payment of the Option Price shall be valued at the Fair Market Value on the date
of the exercise of the Option.
H. Vesting. The HBC and the EBC, as the case may be, shall establish
the vesting schedules for Awards. The Agreement shall specify the date or dates
on which the Optionee may begin to exercise all or a portion of his Option.
Subsequent to such date or dates, the applicable portion of the Option shall be
deemed Vested and fully exercisable.
(i) Death. In the event of the death of any Optionee, all
Options held by such Optionee on the date of his death shall become
Vested Options and the estate of such Optionee, shall have the right,
at any time and from time to time within one year after the date of
death, or such other period, if any, as the HRC or the EBC, as the case
may be, may determine, to exercise the Options of the Optionee (but not
after the earlier of the expiration date of the Option or, in the case
of an Incentive Option, one (1) year from the date of death).
12
(ii) Disability. If the employment of any Optionee is
terminated because of Disability, all Options held by such Optionee on
the date of his or her termination shall be retained by such Optionee,
and such Options that are not yet Vested Options shall become Vested
Options over time in accordance with the vesting schedule established
at the time such Options were issued. The Optionee shall have the right
to exercise Vested Options at any time and from time to time, but not
after the expiration date of the Option.
(iii) Retirement. Upon an Optionee's Retirement, all Options
held by such Optionee on the date of his or her Retirement shall be
retained by such Optionee, and such Options that are not yet Vested
Options shall become Vested Options over time in accordance with the
vesting schedule established at the time such Options were issued,
unless the HRC or the EBC, as the case may be, determines otherwise.
Unless the HRC or the EBC, as the case may be, , determines otherwise,
the Optionee shall have the right to exercise Vested Options at any
time and from time to time, but not after the expiration date of the
Option. In the case of Incentive Options where tax-advantaged treatment
is desired, the Optionee shall have the right to exercise Vested
Options three months from the date of Retirement.
(iv) Other Termination. If the employment with the Company or
a Related Entity of an Optionee is terminated for any reason other than
for death or Disability and other than "for cause" as defined in
subparagraph (v) below, such Optionee shall have the right, in the case
of a Vested Option, for a period of three (3) months after the date of
such termination or such longer period as determined by the HRC or the
EBC, as the case may be, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.
(v) Termination For Cause. Notwithstanding any other provision
of the Plan to the contrary, if the Optionee's employment is terminated
by the Company or any Related Entity "for cause" (as defined below),
such Optionee shall immediately forfeit all rights under his Options
except as to the shares of Common Stock already purchased prior to such
termination. Termination "for cause" shall mean (unless another
definition is agreed to in writing by the Company and the Optionee)
termination by the Company because of: (a) the Optionee's willful and
continued failure to substantially perform his duties (other than any
such failure resulting from the Optionee's incapacity due to physical
or mental impairment) after a written demand for substantial
performance is delivered to the Optionee by the Company, which demand
specifically identifies the manner in which the Company believes the
Optionee has not substantially performed his duties, (b) the willful
conduct of the Optionee which is demonstrably and materially injurious
to the Company or Related Entity, monetarily or otherwise, or (c) the
conviction of the Optionee for a felony by a court of competent
jurisdiction.
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X. Foreign Options and Rights.
The HRC or the EBC, as the case may be, may make Awards of Options to
Eligible Employees, Officers, Executive Officers and Eligible Non-Employees who
are subject to the tax laws of nations other than the United States, which
Awards may have terms and conditions as determined by the HRC or the EBC, as the
case may be, as necessary to comply with applicable foreign laws. The HRC or the
EBC, as the case may be, may take any action which it deems advisable to obtain
approval of such Option by the appropriate foreign governmental entity;
provided, however, that no such Award may be granted pursuant to this Section X
and no action may be taken which would result in a violation of the Exchange
Act, the Code or any other applicable law.
XI. Stock Appreciation Rights.
The HRC or the EBC, as the case may be, shall have the authority to
grant SARs to Eligible Employees, Officers, Executive Officers and Eligible
Non-Employees either alone or in connection with an Option. SARs granted in
connection with an Option shall be granted either at the time of grant of the
Option or by amendment to the Option. SARs granted in connection with an Option
shall be subject to the same terms and conditions as the related Option and
shall be exercisable only at such times and to such extent as the related Option
is exercisable. A SAR granted in connection with an Option may be exercised only
when the Fair Market Value of the Common Stock of the Company exceeds the Option
Price of the related Option. A SAR granted in connection with an Option shall
entitle the Participant to surrender to the Company unexercised the related
Option, or any portion thereof and to receive from the Company cash and/or
shares of Common Stock equal to that number of shares of Common Stock having an
aggregate value equal to the excess of (i) the Fair Market Value of one share of
Common Stock on the day of the surrender of such Option over (ii) the Option
Price per share of Common Stock multiplied by (iii) the number of shares of
Common Stock that may be exercised under the Option, or surrendered; provided,
however, that no fractional shares shall be issued. A SAR granted singly shall
entitle the Participant to receive the excess of (i) the Fair Market Value of a
share of Common Stock on the date of exercise over (ii) the Fair Market Value of
a share of Common Stock on the date of the grant of the SAR multiplied by (iii)
the number of SARs exercised. Payment of any fractional shares of Common Stock
shall be made in cash. A SAR shall become a Vested Award upon (i) a Participant
becoming Disabled, or (ii) the death of a Participant.
XII. Restricted Stock.
The HRC or the EBC, as the case may be, may grant Restricted Stock to
Eligible Employees, Eligible Non-Employees, Officers or Executive Officers
subject to the provisions below.
14
A. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be held in custody by the Company for
the Participant's account. The Participant shall have all rights and privileges
of a stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled or
the death of a Participant. If a Participant ceases to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the HRC or the EBC, as the case may be,
and all rights of the Participant to such shares shall terminate without further
obligation on the part of the Company. Upon the forfeiture (in whole or in part)
of shares of Restricted Stock, such forfeited shares shall become shares of
Common Stock held in the Company's treasury without further action by the
Participant.
B. Terms and Conditions. The HRC or the EBC, as the case shall be,
shall establish the terms and conditions for Restricted Stock pursuant to
Section III of the Plan, including whether any shares of Restricted Stock shall
have voting rights or a right to any dividends that are declared. Terms and
conditions established by the HRC or the EBC, as the case may be, need not be
the same for all grants of Restricted Stock. The HRC or the EBC, as the case may
be, may provide for the restrictions to lapse with respect to a portion or
portions of the Restricted Stock at different times or upon the occurrence of
different events, and the HRC or the EBC, as the case may be, may waive, in
whole or in part, any or all restrictions applicable to a grant of Restricted
Stock. Restricted Stock Awards may be issued for no cash consideration or for
such minimum consideration as may be required by applicable law or such other
consideration as may be determined by the HRC or the EBC.
C. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered (less any shares delivered pursuant to Section XIX.C in satisfaction
of any withholding tax obligation), free of all such restrictions, except
applicable securities law restrictions, to the Participant or the Participant's
estate, as the case may be. The Company shall not be required to deliver any
15
fractional share of Common Stock but shall pay, in lieu thereof, the Fair Market
Value (measured as of the date the restrictions lapse) of such fractional share
to the Participant or the Participant's estate, as the case may be.
Notwithstanding the foregoing, the HRC or the EBC, as the case may be, may
authorize the delivery of the Restricted Stock to a Participant during the
Restricted Period, in which event any stock certificates in respect of shares of
Restricted Stock thus delivered to a Participant during the Restricted Period
applicable to such shares shall bear an appropriate legend referring to the
terms and conditions, including the restrictions, applicable thereto.
XIII. Phantom Units.
A. General. The HRC or the EBC, as the case may be, may grant the
right to earn Phantom Units to Eligible Employees, Officers, Executive Officers
and Eligible Non-Employees. The HRC or the EBC, as the case may be, shall
determine the criteria for the earning of Phantom Units, pursuant to Section III
of the Plan. Upon satisfaction of such criteria, a Phantom Unit shall be deemed
a Vested Award. A Phantom Unit granted by the HRC or the EBC, as the case may
be, shall provide for payment in shares of Common Stock. A Phantom Unit shall
become a Vested Award upon (i) a Participant becoming Disabled, or (ii) the
death of a Participant. Shares of Common Stock issued pursuant to this Section
XIII may be issued for no cash consideration or for such minimum consideration
as may be required by applicable law or such other consideration as may be
determined by the HRC or the EBC, as the case may be. The HRC or the EBC, as the
case may be, shall determine whether a Participant granted a Phantom Unit shall
be entitled to a Dividend Equivalent Right.
B. Unfunded Claim. The establishment of Phantom Units under the Plan
are unfunded obligations of the Company. The interest of a Participant in any
such units shall be considered a general unsecured claim against the Company to
the extent that the conditions for the earning of the Phantom Units have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the HRC or the
EBC, as the case may be.
C. Issuance of Common Stock. Upon a Phantom Unit becoming a Vested
Award, unless a Participant has elected to defer under Paragraph D. below,
shares of Common Stock representing the Phantom Units shall be distributed to
the Participant, unless the HRC or the EBC, as the case may be, with the consent
of the Participant, provides for the payment of the Phantom Units in cash or
partly in cash and partly in shares of Common Stock equal to the value of the
shares of Common Stock which would otherwise be distributed to the Participant.
D. Deferral of Phantom Units. Prior to the year with respect to
which a Phantom Unit may become a Vested Award, the Participant may elect not to
receive Common Stock upon the vesting of such Phantom Unit and for the Company
16
to continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.
E. Financial Hardship. Notwithstanding any other provision hereof,
at the written request of a Participant who has elected to defer pursuant to
Paragraph D. above, the HRC or the EBC, as the case may be, in its sole
direction, upon a finding that continued deferral will result in financial
hardship to the Participant, may authorize the payment of all or a part of a
Participant's Vested Phantom Units in a single installment or the acceleration
of payment of any multiple installments thereof; provided, however, that
distributions will not be made under this paragraph if such distribution would
result in liability of an Executive Officer under Section 16 of the Exchange
Act.
F. Distribution upon Death. The HRC or the EBC, as the case may be,
shall pay the Fair Market Value of the Phantom Units of a deceased Participant
to the estate of the Participant, as soon as practicable following the death of
the Participant. The value of the Phantom Units for the purpose of such
distribution shall be based upon the Fair Market Value of shares of Common Stock
underlying the Phantom Units on the date of the Participant's death.
XIV. Stock Awards to Outside Directors.
Each Outside Director shall be granted a Stock Award on his or her
Initial Grant Date consisting of 3,000 shares of Restricted Stock, which shall
vest in 20% increments, with the first 600 shares vesting six months after the
Initial Grant Date, the next 600 shares vesting one year after the Initial Grant
Date, and the remaining shares vesting at a rate of 600 shares per year
thereafter for the next three years.
XV. Compensation for Outside Directors.
A. Payment in Common Stock. In lieu of cash, each Outside Director
may elect to receive payment of all or any portion of Director Compensation
comprised of retainer fees for service on, and fees for attendance at meetings
of, the Board and any committees thereof in Common Stock. The amount of Common
Stock then issuable shall be based on the Fair Market Value of the Common Stock
on the dates such retainer fees are otherwise due and payable to the Outside
Director. When any fees are paid in Common Stock under this Section XV.A, any
fractional shares of Common Stock shall be paid in cash. Certificates evidencing
such Common Stock shall be delivered promptly following such date. If an Outside
Director elects to receive payment of Director Compensation in Common Stock as
described in this Section XV.A, the election shall be (i) in writing, (ii)
delivered to the Secretary of the Company at least six months in advance of the
payment date, and (iii) irrevocable.
17
B. Deferral of Payment. Each Outside Director may elect to defer the
receipt of vested shares of Restricted Stock granted pursuant to Section XIV
and/or the Common Stock payable pursuant to Section XV.A, in which event such
Outside Director shall receive an equivalent number of Phantom Units with
Dividend Equivalent Rights. Any such Phantom Units shall become Vested Awards at
such time as the Outside Director no longer serves as a member of the Board. If
an Outside Director elects to defer receipt of vested shares of Restricted Stock
and/or Common Stock and receive Phantom Units pursuant to this Section XV.B, the
election shall be made in accordance with the deferral election procedures
specified in the U S WEST, Inc. Deferred Compensation Plan for Nonemployee
Directors. Outside Directors who elect to defer the receipt of Director
Compensation (excluding the Stock Awards granted pursuant to Sections XIV and
XV.D) shall receive additional Phantom Units equal to 5% of the portion of
Director Compensation deferred pursuant to this Section.
C. Director Stock Options. On his or her Initial Grant Date, each
Outside Director shall be granted an Option to purchase thirty thousand (30,000)
shares Common Stock, such Options to become Vested Options in 1/3 increments
over three years, beginning one year after the Initial Grant Date. On the third
anniversary of the Initial Grant Date, and each year thereafter, Outside
Directors shall receive an annual grant of an Option to purchase ten thousand
(10,000) shares of Common Stock, which Options shall become Vested Options one
year after the date of each respective grant. Upon retirement of an Outside
Director from the Board, all unvested Options shall become immediately vested
and shall remain exercisable notwithstanding the retirement of the Director from
the Board, until the expiration date of the Option, which shall occur ten years
from the date of grant.
D. Pension Replacement. After the Effective Date, no new pension
benefits will be granted to Outside Directors; however, the Company will
grandfather vested pension benefits accrued by Directors as of the Effective
Date relating to service on the Board of U S WEST, Inc. prior to the Separation.
In lieu thereof, Outside Directors shall receive a Stock Award consisting of the
number of shares of Restricted Stock determined by dividing (a) the dollar
amount equal to ten (10) times the amount of the annual retainer paid to Board
members, by (b) the closing price on recipient's Initial Grant Date for Common
Stock listed on the New York Stock Exchange as reported in the Wall Street
Journal, which Stock Award shall be subject to the following vesting schedule:
(i) 50% of the Stock Award shall vest five years after the recipient's Initial
Grant Date, and (ii) the remainder shall vest at a rate of 10% per year
thereafter for the next five years.
XVI. Federal Securities Law.
With respect to grants of Awards to Directors and Executive Officers,
the Company intends that the provisions of this Plan and all transactions
effected in accordance with Plan shall comply with Rule 16b-3 under the Exchange
18
Act. Accordingly, the HRC shall administer and interpret the Plan with respect
to Directors and Executive Officers to the extent practicable, to maintain
compliance with such rule.
XVII. Change of Control; Acceleration.
Upon the occurrence of a Change of Control or, within one year after
the closing of the Qwest Merger, involuntary termination of a Participant, other
than a termination "for cause" as defined in Paragraph IX.H.(v), , then:
A. in the case of all outstanding Options and SARs, each such Option
and SAR shall automatically become immediately fully exercisable by the
Participant;
B. restrictions applicable to Restricted Stock shall automatically
be deemed lapsed and conditions applicable to Phantom Units shall automatically
be deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and
C. the HRC shall have the right to accelerate payment of any
deferrals of Vested Phantom Units.
XVIII. Adjustment of Shares.
A. In the event there is any change in the Common Stock by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number or kind of shares or interests subject to an Award and the
per share price or value thereof shall be appropriately adjusted by the HRC or
the EBC, as the case may be, at the time of such event, provided that each
Participant's economic position with respect to the Award shall not, as a result
of such adjustment, be worse than it had been immediately prior to such event.
Any fractional shares or interests resulting from such adjustment shall be
rounded up to the next whole share of Common Stock. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Option shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall
any adjustment be made which would render any Incentive Option granted hereunder
other than an "incentive stock option" for purposes of Section 422 of the Code.
B. In the event of an acquisition by the Company of another
corporation where the Company assumes outstanding stock options or similar
obligations of such corporation, the number of Awards available under the Plan
shall be appropriately increased to reflect the number of such options or other
obligations assumed.
19
XIX. Substitute Options.
Options, shares of Restricted Stock and Phantom Units issued in
substitution of outstanding options for U S WEST Communications Group Stock,
restricted shares of U S WEST Communications Group Stock and phantom units with
respect to U S WEST Communications Group Stock pursuant to the terms of the
Employee Matters Agreement entered into by the Company and MediaOne Group, Inc.
(previously known as "U S WEST, Inc.") shall be administered pursuant to the
provisions of the Plan to the extent not inconsistent with the terms of the
grant of such options, restricted stock and phantom units and such Employee
Matters Agreement.
XX. Miscellaneous Provisions.
A. Assignment or Transfer. Except as otherwise permitted by this
Section, no grant of any "derivative security" (as defined in the rules issued
under Section 16 of the Exchange Act) made under the Plan or any rights or
interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferable pursuant to a domestic
relations order. An Optionee who is an Officer or an Outside Director may assign
or transfer an Option (other than an Incentive Option) as a gift to one or more
members of his or her immediate family or to trusts maintained for the benefit
of such immediate family members if such assignment or transfer is not pursuant
to a domestic relations order and (i) such assignment or transfer is expressly
approved in advance by the HRC or its delegate(s) or (ii) such Option was
granted to the Optionee on or after August 15, 1996, and the Agreement
pertaining to such Option expressly permits the assignment or transfer of the
Option.
B. Investment Representation; Legends. The HRC may require each
Participant acquiring shares of Common Stock pursuant to an Award to represent
to and agree with the Company in writing that such Participant is acquiring the
shares without a view to distribution thereof. No shares of Common Stock shall
be issued pursuant to an Award until all applicable securities law and other
legal and stock exchange requirements have been satisfied. The HRC may require
the placing of stop-orders and restrictive legends on certificates for Common
Stock as it deems appropriate.
C. Withholding Taxes. In the case of distributions of Common Stock
or other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.
20
D. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Award
nor to any Participant receiving an Award.
E. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. Effect on Employment. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall impose, or be construed as
imposing, an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.
G. Noncompetition. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the HRC or the EBC, as the case
may be.
H. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
XXI. Amendment or Termination of Plan.
The Board shall have the right to amend, modify, suspend or terminate
the Plan at any time, provided that, with respect to Incentive Options, no
amendment shall be made that (i) decreases the minimum Option Price in the case
of any Incentive Option, or (ii) modifies the provisions of the Plan with
respect to Incentive Options, unless such amendment is made by or with the
approval of the stockholders or unless the Board receives an opinion of counsel
to the Company that stockholder approval is not necessary with respect to any
modifications relating to Incentive Options; and provided further that no
amendment shall be made that (i) increases the number of shares of Common Stock
that may be issued under the Plan, (ii) permits the Option Price for any Option
to be less than Fair Market Value on the date such Option is granted, or (iii)
extends the period during which awards may be granted under the Plan beyond five
(5) years from the Effective Date, unless such amendment is made by or with the
approval of stockholders. No amendment, modification, suspension or termination
of the Plan shall reduce the economic value of, alter or impair any Awards
previously granted under the Plan, without the consent of the holder thereof.
21
DESCRIPTION OF SEPARATION
This Plan became effective upon consummation of the separation of old U
S WEST, Inc. ("Old U S WEST") into two, independent, publicly traded companies
(the "Separation"). Prior to the Separation, Old U S WEST conducted its business
through two groups, the U S WEST Communications Group and the U S WEST Media
Group. Upon consummation of the Separation, USW-C, Inc. (which was renamed "U S
WEST, Inc." at Separation and referred to in this Prospectus as "U S WEST" or
the "Company") became a separately-traded company which engages in the business
formerly conducted by the U S WEST Communications Group and the domestic
directories business of the U S WEST Media Group. The Separation occurred in
June of 1998.
ADDITIONAL INFORMATION
U S WEST is subject to certain informational requirements under the
Exchange Act and has incorporated herein by reference the following documents
filed by U S WEST into this Prospectus: (i) U S WEST's Annual Report on Form
10-K for the year ended December 31, 1998, as amended by Form 10-K/A filed March
24, 1999; (ii) U S WEST's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999; (iii) U S WEST's Current Reports on Form 8-K
filed January 13, 1999, January 15, 1999, January 22, 1999, February 23, 1999,
February 25, 1999, February 26, 1999, April 7, 1999, April 22, 1999, May 12,
1999, May 18, 1999, May 21, 1999, May 26, 1999, June 18, 1999, June 22, 1999,
July 7, 1999, July 21, 1999 and July 26, 1999, as amended by Form 8-K/A filed
July 27, 1999; (iv) U S WEST's Proxy Statement on Schedule 14A filed March 24,
1999; and (v) the description of Common Stock and preferred stock purchase
rights of U S WEST contained in U S WEST's Registration Statement on Form 8-A
filed on May 1, 1998 (as amended by Form 8-A/A filed May 12, 1998).
All documents filed by U S WEST pursuant to Section 13(a), 13(c), 14 or
15(d) of the Act after the date of this Prospectus shall be deemed to be
incorporated in this Prospectus from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
subsequently filed documents which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statements. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
U S WEST shall provide, without charge, to any Participant to whom a
Prospectus is delivered, upon written or oral request, a copy of the Annual
Report on Form 10-K for its latest fiscal year (or for fiscal year ended
December 31, 1998), an updated version of this prospectus and any or all of the
documents that are incorporated by reference herein. Requests should be directed
to the Corporate Secretary, U S WEST, 1801 California Street, Denver, Colorado
80202, Telephone (303) 672-2700.
22
CERTAIN FEDERAL INCOME TAX EFFECTS
It is the opinion of the Company that the following are certain income
tax consequences of participation in the Plan. This section is only a summary,
does not purport to be complete and, among other things, does not cover state
and local tax treatment. Furthermore, differences in financial situation may
cause Federal, state and local tax consequences to vary. Therefore, consultation
with an accountant, legal counsel or other financial advisor regarding tax
consequences is urged.
1. Incentive Options. An employee who receives an Incentive Option
pursuant to the Plan does not recognize any taxable income upon the grant of
such option. Similarly, the exercise of an Incentive Option generally does not
give rise to federal income tax to the employee, provided that (i) the federal
"alternative minimum tax," which depends on the employee's particular tax
situation, does not apply and (ii) the employee is employed by U S WEST from the
date of grant of the option until three months prior to the exercise thereof,
except where such employment terminates by reason of disability (where the three
month period is extended to one year) or death (where this requirement does not
apply). If an employee exercises an Incentive Option after these requisite
periods, the Incentive Option will be treated as a Nonqualified Option and will
be subject to the rules described below under "Non-Qualified Options, Stock
Appreciation Rights and Phantom Units."
If, after exercising an Incentive Option, an employee disposes of the
shares so acquired more than two years from the date of grant and more than one
year from the date of transfer of the shares pursuant to the exercise of such
Incentive Option (the "applicable holding period"), the employee generally will
recognize a capital gain or loss equal to the difference, if any, between the
amount received for the shares and the exercise price. If, however, an employee
does not hold the shares so acquired for the applicable holding period, thereby
making a "disqualifying disposition," the employee would recognize ordinary
income equal to the excess of the fair market value of the shares at the time
the Incentive Option was exercised over the exercise price; the balance of any
income received at the time of such disqualifying disposition would be capital
gain (provided the employee held such shares as a capital asset at such time).
If the disqualifying disposition is a sale or exchange that would permit a loss
to be recognized under the Code (were a loss in fact to be realized), and the
sales proceeds are less than the fair market value of the shares on the date of
exercise, the employee's ordinary income therefrom would be limited to the gain
(if any) realized on the sale.
An employee who exercises an Incentive Option by delivering shares
previously acquired pursuant to the exercise of another Incentive Option before
the expiration of their applicable holding period is treated as making a
23
"disqualifying disposition" of such shares. Upon the exercise of an Incentive
Option with previously acquired shares after the applicable holding period, it
appears, despite some uncertainty, that the employee would not recognize gain or
loss with respect to such previously acquired shares.
2. Nonqualified Options, Stock Appreciation Rights and Phantom
Units. An individual who receives a grant of a Nonqualified Option, a SAR, or a
phantom unit will not recognize any taxable income upon such grant. However, the
individual generally will recognize ordinary income upon exercise of a
Nonqualified Option in an amount equal to the excess of the fair market value of
the shares at the time of exercise over the exercise price. Similarly, upon the
receipt of cash or shares pursuant to the exercise of a SAR, the individual
generally will recognize ordinary income in an amount equal to the sum of the
cash and the fair market value of the shares received; likewise, upon the
vesting of a phantom unit, the individual generally will recognize ordinary
income in an amount equal to the fair market value of the shares, plus cash, if
any, received.
As a result of Section 16(b) of the Exchange Act, under certain
circumstances, the timing of income recognition may be deferred (i.e., the
"Deferral Period") for any individual who is an officer or director of U S WEST
or a beneficial owner of more than ten percent (10%) of any class of equity
securities of U S WEST. Absent a Section 83(b) election (as described below),
recognition of income by the individual will be deferred until the expiration of
the Deferral Period, if any.
An individual who exercises a Nonqualified Option by delivering U S
WEST Common Stock to U S WEST, other than U S WEST Common Stock previously
acquired pursuant to the exercise of an Incentive Option which is treated as a
"disqualifying disposition" as described above, will not recognize gain or loss
with respect to the exchange of such U S WEST Common Stock, even if the fair
market value of the shares so delivered is different from the individual's tax
basis. The individual, however, will be taxed as described above with respect to
the exercise of the Nonqualified Option as if he or she had paid the exercise
price in cash.
3. Restricted Stock. Absent a written election pursuant to Section
83(b) of the Code filed with the IRS within 30 days after the date of transfer
of such shares (a "Section 83(b) election"), an individual who receives
restricted stock under the Plan generally will recognize ordinary income at the
earlier of the time at which (i) the shares become transferable or (ii) the
restrictions that impose a substantial risk of forfeiture of such shares lapse,
in an amount equal to the excess of the fair market value (on such date) of such
shares over the consideration paid for such restricted stock, if any. If a
Section 83(b) election is made, the individual will recognize ordinary income,
as of the transfer date, in an amount equal to the excess of the fair market
value of the shares as of that date over the price paid for such award, if any.
24
4. Consequences to Company. U S WEST will not be allowed a federal
income tax deduction upon the grant or exercise of an Incentive Option or the
disposition, after the applicable holding period, of the shares acquired upon
exercise of an Incentive Option. In the event of a disqualifying disposition of
shares acquired upon exercise of an Incentive Option, U S WEST generally will be
entitled to a deduction in an amount equal to the ordinary income included by
the employee, provided that such amount constitutes an ordinary and necessary
business expense to U S WEST and is reasonable and the limitations of Sections
280G and 162(m) of the Code (discussed below) do not apply.
A federal income tax deduction generally will be allowed to U S WEST in
an amount equal to the ordinary income included by the employee with respect to
his or her Nonqualified Option, SAR, phantom unit, or restricted stock, provided
that such amount constitutes an ordinary and necessary business expense to U S
WEST and is reasonable and the limitations of Sections 280G and 162(m) of the
Code do not apply.
5. Change of Control. In general, if the total amount of payments to
an individual that are contingent upon a "change of control" of U S WEST (as
defined in Section 280G of the Code), including payments under the Plan that
vest upon a "change of control," equals or exceeds three times the individual's
"base amount" (generally, such individual's average annual compensation for the
five calendar years preceding the change of control), then, subject to certain
exceptions, the payments may be treated as "parachute payments" under the Code,
in which case a portion of such payments would be non-deductible to U S WEST and
the individual would be subject to a 20% excise tax on such portion of the
payments.
6. Certain Limitations on Deductibility of Executive Compensation.
With certain exceptions, Section 162(m) of the Code denies a deduction to
publicly held corporations for compensation paid to certain executive officers
in excess of $1 million per executive per taxable year. One such exception
applies to certain performance-based compensation provided that such
compensation has been approved by stockholders in a separate vote and certain
other requirements are met. U S WEST believes that certain awards granted under
the Plan should qualify for the performance-based compensation exception to
Section 162(m).
RESALE RESTRICTIONS
Resale restrictions imposed by federal and/or state securities laws may
restrict certain Participants from transferring securities received under the
Plan. For example, Participants who hold "restricted securities" or are deemed
"affiliates," as those terms are defined in Rule 144 under the Securities Act,
may not sell securities issued by U S WEST to the public except pursuant to (a)
25
an effective resistration statement filed by U S WEST with the SEC under the
Securities Act; or (b) an exemption from the registration requirements of the
Securities Act. Rule 144 provides an exemption for resale, subject to certain
conditions, such as a holding period, availability of public information,
limitation on amount of securities sold, manner of sale, and notice of sale.
This prospectus is not available for any resale.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The Plan is administered by the HRC with respect
to Officers, Executive Officers and Outside Directors and by the EBC with
respect to all other Eligible Employees an Eligible Non-Employees. The HRC
consists of non-employee Board members appointed by the Board. The EBC consists
of the Vice President-Law and Corporate Human Resources of U S WEST and other
officers of U S WEST designated by the Vice President-Law and Corporate Human
Resources.
EXPERTS
The financial statements and schedules incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accounts, as indicated in their reports with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
26
EX-99.D.7
17
ex_d-7.txt
EXHIBIT 99(D)(7)
USWEST [logo]
1999 U S WEST STOCK PLAN
I. Purpose.
This 1999 U S WEST Stock Plan, as amended (the "Plan"), is intended to
promote the long term success of U S WEST, Inc. or its successor (the "Company")
by affording certain eligible employees of the Company and its Subsidiaries (as
defined below) and certain outside consultants or advisors to the Company and
its affiliates with an opportunity to acquire a proprietary interest in the
Company, in order to incentivize such persons and to align the financial
interests of such persons with the stockholders of the Company. This Plan became
effective upon approval by the Board of Directors (defined below).
II. Definitions.
The following defined terms are used in the Plan:
A. "Agreement" shall mean the agreement or grant letter accepted by
the Participants as described in Section VIII of the Plan between the Company
and a Participant which is a condition subsequent to the grant of an Award to a
Participant pursuant to this Plan.
B. "Award" shall mean individually, collectively or in tandem, an
incentive award granted under the Plan, whether in the form or Options, SARs,
Stock Awards or Phantom Units.
C. "Board" or "Board of Directors" shall mean the Board of Directors
of the Company.
D. Except as excluded below, "Change of Control" shall mean any of
the following:
1. any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) who is or becomes a beneficial owner of (or
otherwise has the authority to vote), directly or indirectly, securities
representing twenty percent (20%) or more of the total voting power of all of
the Company's than outstanding voting securities, unless through a transaction
arranged by, or consummated with the prior approval of the Board of Directors;
or
2. any period of two (2) consecutive calendar years during
which there shall cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or
3. the Company becomes a party to a merger or consolidation in
which either (i) the Company will not be the surviving corporation or (ii) the
Company will be the surviving corporation and any outstanding shares of Common
Stock of the Company will be converted into shares of any other company (other
than a reincorporation or the establishment of a holding company involving no
change of ownership of the Company) or other securities or cash or other
property (excluding payments made solely for fractional shares); or
4. any other event that a majority of the Board of Directors
shall determine constitutes a Change of Control;
provided, however, that except as the Board of Directors otherwise determines, a
Change of Control for purposes of the Plan does not include the merger
contemplated in the Agreement and Plan of Merger (the "Qwest Merger"), dated as
of July 18, 1999, or as later amended, between the Company and Qwest
Communications International Inc., a Delaware corporation ("Qwest").
E. "Code" shall mean the Internal Revenue Code of 1986, as amended.
F. "Committee" shall mean the Employee Benefits Committee of the
Company consisting of employee(s) of the Company or any Related Entity appointed
by the Board at the recommendation of the Human Resources Committee or its
delegate(s), as applicable, to exercise the delegated authority of the Human
Resources Committee, as set forth under Section III of the Plan.
G. "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
H. "Company" shall mean U S WEST, Inc., a Delaware corporation
(previously known as "USW-C, Inc."), and any successor thereof.
I. "Director" shall mean any member of the Board of Directors of the
Company.
J. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of eligible employees of the Company or any Related Entity.
K. "Dividend Equivalent Rights" shall mean the right to receive the
amount of any dividends that are paid on an equivalent number of shares of
Common Stock underlying an Option or Phantom Unit, which shall be payable either
in cash or in the form of additional Phantom Units or Stock.
L. "Effective Date" shall mean the date on which the Plan was
approved by the Board of Directors.
M. "Eligible Employee" shall mean any employee of the Company or any
Related Entity who is not a Director or an Executive Officer (defined below) and
who is so employed on the date of the grant of an Award.
N. "Eligible Non-Employee" shall mean any consultant or advisor who
is not a Director and who has provided bona fide services to the Company or any
Related Entity and is selected by the Committee to receive an Award; provided
that services rendered by such consultant or advisor were not in connection with
the offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company's securities
as those terms are used in the Form S-8 issued under the Securities Act.
O. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
P. "Executive Officer" shall mean any officer of the Company or any
Related Entity who, at the time of an Award, is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
Q. "Fair Market Value" shall mean the closing price of a share of
Common Stock as reported on the New York Stock Exchange for the applicable date,
or if there were no sales on such date, on the last day prior to the applicable
date on which there were sales.
R. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.
2
S. "Indexed" shall mean the periodic adjustment of an Option Price
based upon adjustment criteria determined by the Committee, but in no event
shall the Option Price be adjusted to an amount less than the original Option
Price.
T. "Nonqualified Option" shall mean an Option which does not qualify
under Section 422 of the Code.
U. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Plan, including Incentive
Options, Nonqualified Options and Reload Options.
V. "Optionee" shall mean a Participant to whom one or more Options
have been granted.
W. "Option Price" shall mean the price per share payable to the
Company for shares of Common Stock upon the exercise of an Option.
X. "Parent Corporation" shall mean any corporation within the
meaning of Section 424(e) of the Code.
Y. "Participant" shall mean an Eligible Employee or Eligible
Non-Employee to whom an Award is granted.
Z. "Phantom Unit" shall mean a national account representing a value
equivalent to one share of Common Stock on the Award date.
AA. "Plan" shall mean the 1999 U S WEST Stock Plan, as amended.
AB. "Related Entity" shall mean any Parent Corporation or Subsidiary
of the Company.
AC. "Reload Option" shall mean the right to receive a further Option
for a number of shares equal to the number of shares of Common Stock surrendered
by the Optionee upon exercise of the original Option as provided in Section
IX.E. of the Plan.
AD. "Restricted Period" shall mean the period of time from the date
of grant of Restricted Stock until the issue of restrictions matched thereto
under the terms of the Agreement granting such Restricted Stock pursuant to the
provisions of the Plan or by action of the Committee.
AE. "Restricted Stock" shall mean an Award made by the Committee
entitling the Participant to acquire, at no cost or for a purchase price
determined by the Committee at the time of grant, shares of Common Stock which
are subject to restrictions in accordance with the provisions of Section XII
hereof.
AF. "Retirement" shall mean with respect to any Eligible Employee,
that such person has terminated employment with the Company or any Related
Entity other than "for cause" (as defined in subsection IX.H.(v)) and (i) such
person is eligible to receive an immediate service pension benefit under the U S
WEST Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
January 1, 197, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, written agreement or
arrangement between the Company or any Related Entity and the Eligible Employee.
"Retirement" shall not apply to any Eligible Non-Employee.
AG. "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
3
AH. "Stock Appreciation Right" or "SAR" shall mean a grant entitling
the Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the Committee shall so
determine at the time of a grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant (or over the Option Price, if the
Stock Appreciation Right was granted in tandem with an Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee to determine the form or forms of payment at
the time of grant of the SAR.
AI. "Stock Awards" shall mean any Award which is in the form of
Restricted Stock and any outright grants of Common Stock approved by the
Committee pursuant to the Plan.
AJ. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture, limited liability company
("LLC"), or partnership in which the Company owns, directly or indirectly, (i)
with respect to a corporation, stock possessing twenty percent (20%) or more of
the total combined voting power of all classes of stock in the corporation, (ii)
in the case of a joint venture or partnership, the Company possesses a twenty
percent (20%) interest in the capital or profits of such joint venture or
partnership, or (iii) in the case of an LLC, a twenty percent (20%) or more
interest in units in the LLC. In the case of any Incentive Option, Subsidiary
shall mean any corporation within the meaning of Section 424(f) of the Code.
AK. "Vested" shall mean the states of that portion of an Option or
other Award that may be immediately exercised under the terms of the Agreement
granting such Option or other Award, pursuant to the provisions of the Plan, or
by action of the Committee.
III. Administration
A. The Committee shall have sale and exclusive discretion to
interpret and administer the Plan. The Committee shall have the power to adopt
rules, regulations and guidelines relating to the administration of the Plan.
B. The Committee may delegate to one or more of its members, or to
one or more agents, such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ such
legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company or such Related Entity whose employees have benefited from the Plan, as
determined by the Committee. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or a
Related Entity against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's gross
negligence or willful misconduct.
C. In furtherance of and not in limitation of the Committee's
discretionary authority, subject to the provisions of the Plan, the Committee
shall have the authority to:
1. determine the Participants to whom Awards shall be granted
and the number of and terms and conditions upon which Awards shall be granted
(which need not be the same for all Awards or types of Awards);
2. establish annual or long-term financial goals of the
Company, any Related Entity, or division, department, or group of the Company or
Related Entity, or individual goals which the Committee shall consider in
granting Awards, if any;
4
3. determine the satisfaction of performance goals established
by the Committee based upon periods of time or any combinations thereof.
4. determine the time when Awards shall be granted, the Option
Price of each Option, the period(s) during which Options shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Awards, and
the other terms and provisions of Awards;
5. modify grants of Awards pursuant to Paragraph D. of this
Section III;
6. provide the establishment of a procedure whereby a number
of shares of Common Stock or other securities may be withheld from the total
number of shares of Common Stock or other securities to be issued upon exercise
of an Option, the lapse of restrictions on Restricted Stock and the vesting of
Phantom Units (other than an Incentive Option) to meet the obligation of
withholding for income, social security and other taxes incurred by a
Participant upon such exercise or required to be withheld by the Company in
connection with such exercise;
7. adopt, modify and rescind rules, regulations, procedures,
and guidelines relating to the Plan;
8. adopt modifications to the Plan and procedures, as may be
necessary to comply with provisions of the laws and applicable regulatory
rulings of countries in which the Company or a Related Entity operates in order
to assure the legality of Awards granted under the Plan to Participants who
reside in such countries; and
9. make all determinations, perform all other acts, exercise
all other powers and establish any other rules, regulations, procedures, and
guidelines determined by the Committee to be necessary, appropriate or advisable
in administering the Plan and to maintain compliance with any applicable law.
D. The Committee may at any time accelerate the exercisability or
define any other aspect of the grant of or the conditions of the grant of any
Awards and waive or amend any and all restrictions and conditions of any Awards.
IV. Decisions Final.
Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
V. Arbitration.
Any Agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the Committee.
VI. Duration of the Plan.
The Plan shall remain in effect for a period of five (5) years from the
Effective Date, unless terminated by the Board pursuant to Section XVII but
shall continue to govern any Awards outstanding as of the end of that period.
5
VII. Shares Available; Limitations.
Up to 12,000,000 shares of Common Stock may be granted under this Plan.
If, for any reason, any shares of Common Stock as to which Options, SARs,
Restricted Stock, or Phantom Units have been granted cease to be subject to
exercise or purchase hereunder (other than the exercise of SARs for cash), the
underlying shares of Common Stock shall thereafter be available for grants to
Participants under the Plan. Absent an amendment of this provision by the
Committee, no Incentive Options shall be granted under this Plan and no shares
of Common Stock may be issued under this Plan in connection with the exercise of
Incentive Options. Awards granted under the Plan may be fulfilled in accordance
with the terms of the Plan with (i) authorized and unissued shares of the Common
Stock or (ii) issued shares of Common Stock reacquired by the Company, in each
situation, as the Board of Directors of the Committee may determine from time to
time.
VIII. Grant of Awards.
A. The Committee shall determine the type of Award(s) to be made to
each Participant. Awards may be granted singly, in combination or in tandem
subject to restrictions set forth in Section IX.C. for Incentive Options. The
types of Awards that may be granted under the Plan are Options, with or without
Reload Options, SARs, Stock Awards and Phantom Units, and with respect to
Phantom Units and Restricted Stock, with or without Dividend Equivalent Rights.
B. Each grant of an Award under this Plan shall be conditioned upon
the acceptance of an Agreement dated as of the date of the grant of the Award,
other than Stock Awards consisting of an outright grant of shares of Common
Stock. This Agreement shall set forth the terms and conditions of the Award, as
may be determined by the Committee, and will be subject to amendments,
modification or alteration by the Committee pursuant to Section III.D. of this
Plan and without the Participant's execution of such amendment, modification or
alteration. If the Agreement relates to the grant of an Option, it shall
indicate whether the Option that it evidences, is intended to be an Incentive
Option or a Nonqualified Option. Each grant of an Award is conditioned upon the
subsequent acceptance by the Participant of the terms of the Agreement. Unless
otherwise extended by the Committee, a Participant shall have ninety (90) days
from the date of the Agreement to accept its terms.
IX. Options.
The Committee may grant Incentive Options or Nonqualified Options to
Eligible Employees and Nonqualified Options to Eligible Non-Employees. The terms
and conditions of the Options granted under this Section IX shall be determined
from time to time by the Committee, as set forth in the Agreement granting the
Option, and subject to the following conditions:
A. Nonqualified Options. The Option Price for each share of Common
Stock issuable pursuant to a Nonqualified Option may be an amount at or above
the Fair Market Value on the date such Option is granted, may be indexed from
the original Option Price and may be granted with or without Dividend Equivalent
Rights. All agreements granting options under Section IX.A. shall state that the
Options issued pursuant to the Agreement are not intended to qualify for tax
benefits under Section 422 of the Code.
B. Incentive Options. The Option Price for each share of Common
Stock issuable pursuant to an Incentive Option shall not be less than one
hundred percent (100%) of the Fair Market Value on the date such Option is
granted and may be Indexed from the original Option Price.
C. Incentive Options; Special Rules. Options granted in the form of
Incentive Options shall be subject to the following provisions.
1. Grant. No Incentive Option shall be granted pursuant to
this Plan more than ten (10) years after the Effective Date.
6
2. Annual Limits. The aggregate Fair Market Value (determined
at the time the Option is granted) of the shares of Common Stock with respect to
which one or more Incentive Options are exercisable for the first time by any
Optionee during any calendar year under the Plan or under any other stock plan
of the Company or any Related Entity shall not exceed $100,000 or such other
maximum amount permitted under Section 422 of the Code. Any portion of an Option
purporting to constitute an Incentive Option in excess of such limitation shall
constitute a Nonqualified Option.
3. 10% Stockholder. If any Optionee to whom an Incentive
Option is to be granted pursuant to the provisions of the Plan is, on the date
of grant, an individual described in Section 422(b)(6) of the Code, then the
following special provisions shall be applicable to the Option granted to such
individual.
(a) the Option Price of shares subject to such Incentive
Option shall not be less than 110% of the Fair Market Value of Common Stock on
the date of grant; and
(b) the Option shall not have a term in excess of (5)
years from the date of grant.
4. Shareholder Approval. If required by law to issue Incentive
Options, shareholder approval of the Plan shall be obtained within twelve (12)
months before or after adoption of the Plan.
D. Other Options - Special Tax Benefits. The Committee may establish
rules with respect to, and may grant to Eligible Employees, Options to comply
with any amendment to the Code made after the Effective Date providing for
special tax benefits for stock options.
E. Reload Options. Without in any way limiting the authority of the
Committee to make Awards hereunder, the Committee shall have the authority to
grant Reload Options. Any such Reload Option shall be subject to such other
terms and conditions as the Committee may determine. Notwithstanding the above,
(i) the Committee shall have the right to withdraw a Reload Option to the extent
that the grant thereof will result in any adverse accounting consequences to the
Company and (ii) no additional Reload Options shall be granted upon the exercise
of a Reload Option.
F. Term of Option. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option.
G. Exercise of Stock Option. Each Option shall be exercisable in one
or more installments as the Committee may determine at the time of the Award and
as provided in the Agreement. The right to purchase shares shall be cumulative
so that when the right to purchase any shares has accrued such shares or any
part thereof may be purchased at any time thereafter until the expiration or
termination of the Option. The Option Price shall be payable (i) in cash or by
an equivalent means acceptable to the Committee, (ii) by delivery (constructive
or otherwise) to the Company of shares of Common Stock owned by the Optionee or
(iii) by any combination of the above as provided in the Agreement. Shares
delivered to the Company in payment of the Option Price shall be valued at the
Fair Market Value on the date of the exercise of the Option.
H. Vesting. The Committee shall establish the vesting schedules for
awards. The Agreement shall specify the date or dates on which the Optionee may
begin to exercise all or a portion of his Option. Subsequent to such date or
dates, the applicable portion of the Option shall be deemed Vested and fully
exercisable.
(i) Death. In the event of the death of any Optionee, all
Options held by such Optionee on the date of his death shall become Vested
Options and the estate of such Optionee shall have the right, at any time and
from time to time within one year after the date of death, or such other period,
if any, as the Committee may determine, to exercise the Options of the Optionee
(but not after the earlier of the expiration date of the Option or, in the case
of an Incentive Option, one (1) year from the date of death).
7
(ii) Disability. If the employment of any Optionee is terminated
because of Disability, all Options held by such Optionee on the date of his or
her termination shall be retained by such Optionee, and such Options that are
not yet Vested Options shall become Vested Options over time in accordance with
the vesting schedule established at the time such Options were issued. The
Optionee shall have the right to exercise Vested Options at any time and from
time to time, but not after the expiration date of the Option.
(iii) Retirement. Upon an Optionee's Retirement, all Options held
by such Optionee on the date of his or her Retirement shall be retained by such
Optionee, and such Options that are not yet Vested Options shall become Vested
Options over time in accordance with the vesting schedule established at the
time such Options were issued, unless the Committee determines otherwise. Unless
the Committee determines otherwise, the Optionee shall have the right to
exercise Vested Options at any time and from time to time, but not after the
expiration date of the Option. In the case of Incentive Options where
tax-advantaged treatment is desired, the Optionee shall have the right to
exercise Vested Options three months from the date of Retirement.
(iv) Other Termination. If the employment with the Company or a
Related Entity of an Optionee is terminated for any reason other than for death
or Disability and other than "for cause" as defined in subparagraph (v) below,
such Optionee shall have the right, in the case of a Vested Option, for a period
of three (3) months after the date of such termination or such longer period as
determined by the Committee, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.
(v) Termination For Cause. Notwithstanding any other provision
of the Plan to the contrary, if the Optionee's employment is terminated by the
Company or any Related Entity "for cause" (as defined below), such Optionee
shall immediately forfeit all rights under his Options except as to the shares
of Common Stock already purchased prior to such termination. Termination "for
cause" shall mean (unless another definition is agreed to in writing by the
Company and the Optionee) termination by the Company because of: (a) the
Optionee's willful and continued failure to substantially perform his duties
(other than any such failure resulting from the Optionee's incapacity due to
physical or mental impairment) after a written demand for substantial
performance is delivered to the Optionee by the Company, which demand
specifically identifies the manner in which the Company believes the Optionee
has not substantially performed his duties, (b) the willful conduct of the
Optionee which is demonstrably and materially injurious to the Company or
Related Entity, monetarily or otherwise, or (c) the conviction of the Optionee
for a felony by a court of competent jurisdiction.
X. Foreign Options and Rights.
The Committee may make Awards of Options to Eligible Employees and
Eligible Non-Employees who are subject to the tax laws of nations other than the
United States, which Awards may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action it deems advisable to obtain approval of such Option by the
appropriate foreign governmental entity; provided, however, that no such Award
may be granted pursuant to this Section X and no action may be taken that would
result in a violation of the Exchange Act, the Code or any other applicable law.
XI. Stock Appreciation Rights.
The Committee shall have the authority to grant SARs to Eligible
Employees and Eligible Non-Employees either alone or in connection with an
Option. SARs granted in connection with an Option shall be granted either at the
time of grant of the Option or by amendment to the Option. SARs granted in
connection with an Option shall be subject to the same terms and conditions as
the related Option and shall be exercisable only at such times and to such
extent as the related Option is exercisable. A SAR granted in connection with an
Option may be exercised only when the Fair Market Value of the Common Stock of
the Company exceeds the Option Price of the related Option. A SAR granted in
connection with an Option shall entitle the Participant to surrender to the
Company unexercised the related Option, or any portion thereof and to receive
from the Company cash and/or shares of Common Stock equal to that number of
8
shares of Common Stock having an aggregate value equal to the excess of (i) the
Fair Market Value of one share of Common Stock on the day of the surrender of
such Option over (ii) the Option Price per share of Common Stock multiplied by
(iii) the number of shares of Common Stock that may be exercised under the
Option, or surrendered; provided, however, that no fractional shares shall be
issued. A SAR granted singly shall entitle the Participant to receive the excess
of (i) the Fair Market Value of a share of Common Stock on the date of exercise
over (ii) the Fair Market Value of a share of Common Stock on the date of the
grant of the SAR multiplied by (iii) the number of SARs exercised. Payment of
any fractional shares of Common Stock shall be made in cash. A SAR shall become
a Vested Award upon (i) a Participant becoming Disabled, or (ii) the death of a
Participant.
XII. Restricted Stock.
The Committee may grant Restricted Stock to Eligible Employees and
Eligible Non-Employees subject to the provisions below.
A. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be held in custody by the Company for
the Participant's account. The Participant shall have all rights and privileges
of a stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled or
the death of a Participant. If a Participant ceased to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the Committee, and all rights of the
Participant to such shares shall terminate without further obligation on the
part of the Company. Upon the forfeiture (in whole or in part) of shares of
Restricted Stock, such forfeited shares shall become shares of Common Stock held
in the Company's treasury without further action by the Participant.
B. Terms and Conditions. The Committee shall establish the terms and
conditions for Restricted Stock pursuant to Section III of the Plan. Terms and
conditions established by the Committee need not be the same for all grants of
Restricted Stock. The Committee may provide for the restrictions to lapse with
respect to a portion or portions of the Restricted Stock at different times or
upon the occurrence of different events, and the Committee may waive, in whole
or in part, any or all restrictions applicable to a grant of Restricted Stock.
Restricted Stock Awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law or such other
consideration as may be determined by the Committee.
C. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered (less any shares delivered pursuant to Section XVLC in satisfaction of
any withholding tax obligation), free of all such restrictions, except
applicable securities law restrictions, to the Participant or the Participant's
estate, as the case may be. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay, in lieu thereof, the Fair Market
Value (measured as of the date the restrictions lapse) of such factional share
to the Participant or the Participant's estate, as the case may be.
Notwithstanding the foregoing, the Committee may authorize the delivery of the
Restricted Stock to a Participant during the Restricted Period, in which event
any stock certificates in respect of shares of Restricted Stock thus delivered
to a Participant during the Restricted Period applicable to such shares shall
bear an appropriate legend referring to the terms and conditions, including the
restrictions, applicable thereto.
9
XIII. Phantom Units.
A. General. The Committee may grant the right to earn Phantom Units
to Eligible Employees and Eligible Non-Employees. The Committee shall determine
the criteria for the earning of Phantom Units, pursuant to Section III of the
Plan. Upon satisfaction of such criteria, a Phantom Unit shall be deemed a
Vested Award. A Phantom Unit granted by the Committee shall provide for payment
in shares of Common Stock. A Phantom Unit shall become a Vested Award upon (i) a
Participant becoming Disabled, or (ii) the death of a Participant. Shares of
Common Stock issued pursuant to this Section XIII may be issued for no cash
consideration or for such minimum consideration as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a Participant granted a Phantom Unit shall be
entitled to a Dividend Equivalent Right.
B. Unfunded Claim. The establishment of Phantom Units under the Plan
are unfunded obligations of the Company. The interest of a Participant in any
such units shall be considered a general unsecured claim against the Company to
the extent that the conditions for the earning of the Phantom unit have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the Committee.
C. Issuance of Common Stock. Upon a Phantom Unit becoming a Vested
Award, unless a Participant has elected to defer under Paragraph D. below,
shares of Common Stock representing the Phantom Units shall be distributed to
the Participant, unless the Committee, with the consent of the Participant,
provides for the payment of the Phantom Units in cash or partly in cash and
partly in shares of Common Stock equal to the value of the shares of Common
Stock which would otherwise be distributed to the Participant.
D. Deferral of Phantom Units. Prior to the year with respect to
which a Phantom Unit may become a Vested Award, the Participant may elect not to
receive Common Stock upon the vesting of such Phantom Unit and for the Company
to continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.
E. Financial Hardship. Notwithstanding any other provision hereof,
at the written request of a Participant who has elected to defer pursuant to
Paragraph D. above, the Committee, in its sole discretion, upon a finding that
continued deferral will result in financial hardship to the Participant, may
authorize the payment of all or a part of a Participant's Vested Phantom Units
in a single installment or the acceleration of payment of any multiple
installments thereof; provided, however, that distributions will not be made
under this paragraph if such distribution would result in liability of an
Executive Officer under Section 16 of the Exchange Act.
F. Distribution upon Death. The Committee shall pay the Fair Market
Value of the Phantom Units of a deceased Participant to the estate of the
Participant, as soon as practicable following the death of the Participant. The
value of the Phantom Units for the purpose of such distribution shall be based
upon the Fair Market Value of shares of Common Stock underlying the Phantom
Units on the date of the Participant's death.
XIV. Change of Control; Acceleration.
Upon the occurrence of a Change of Control or, within one year after
the closing of the Qwest Merger, the involuntary termination of a Participant,
other than a termination "for cause" as defined in Section DCH.(v) of this Plan,
then:
A. in the case of all outstanding Options and SARs, each such Option
and SAR shall automatically become immediately fully exercisable by the
Participant;
B. restrictions applicable to Restricted Stock shall automatically
be deemed lapsed and conditions applicable to Phantom Units shall automatically
be deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and
10
C. the Employee Benefits Committee, in its discretion, shall have
the right to accelerate payment of any deferrals of Vested Phantom Units.
XV. Adjustment of Shares.
A. In the event there is any change in the Common Stock by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number or kind of shares or interests subject to an Award and the
per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each Participant's economic
position with respect to the Award shall not, as a result of such adjustment, be
worse than it had been immediately prior to such event. Any fractional shares or
interests resulting from such adjustment shall be rounded up to the next whole
share of Common Stock. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option shall comply with the rules of Section
424(a) of the Code, and (ii) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an "incentive
stock option" for purposes of Section 422 of the Code.
B. In the event of an acquisition by the Company of another
corporation where the Company assumes outstanding stock options or similar
obligations of such corporation, the number of Awards available under the Plan
shall be appropriately increased to reflect the number of such options or other
obligations assumed.
XVI. Miscellaneous Provisions.
A. Assignment or Transfer. Except as otherwise permitted by this
Section, no grant of any "derivative security" (as defined in the rules issued
under Section 16 of the Exchange Act) made under the Plan, or any rights or
interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferable pursuant to any domestic
relations order.
B. Investment Representation; Legends. The Committee may require
each Participant acquiring shares of Common Stock pursuant to an Award to
represent to and agree with the Company in writing that such Participant is
acquiring the shares without a view to distribution thereof. No shares of Common
Stock shall be issued pursuant to an Award until all applicable securities law
and other legal and stock exchange requirements have been satisfied. The
Committee may require the placing of stop-orders and restrictive legends on
certificates for Common Stock as it deems appropriate.
C. Withholding Taxes. In the case of distributions of Common Stock
or other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.
D. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Award
nor to any Participant receiving an Award.
E. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. Effect on Employment. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
11
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related herein or referred to herein shall impose, or be construed as
imposing, an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.
G. Noncompetition. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the Committee.
H. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
XVII. Amendment or Termination of Plan.
The Committee shall have the right to amend, modify, suspend or
terminate the Plan or any Awards at any time.
12
EX-99.D.8
18
ex_d-8.txt
EXHIBIT 99(D)(8)
1999 U S WEST STOCK PLAN
I. Purpose.
This 1999 U S WEST Stock Plan, as amended (the "Plan"), is intended to
promote the long term success of U S WEST, Inc. or its successor (the "Company")
by affording certain eligible employees of the Company and its Subsidiaries (as
defined below) and certain outside consultants or advisors to the Company and
its affiliates with an opportunity to acquire a proprietary interest in the
Company, in order to incentivize such persons and to align the financial
interests of such persons with the stockholders of the Company. This Plan became
effective upon approval by the Board of Directors (defined below).
II. Definitions.
The following defined terms are used in the Plan:
A. "Agreement" shall mean the agreement or grant letter accepted by the
Participant as described in Section VIII of the Plan between the Company and a
Participant which is a condition subsequent to the grant of an Award to a
Participant pursuant to this Plan.
B. "Award" shall mean individually, collectively or in tandem, an
incentive award granted under the Plan, whether in the form of Options, SARs,
Stock Awards or Phantom Units.
C. "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.
D. Except as excluded below, "Change of Control" shall mean any of the
following:
1. any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) who is or becomes a beneficial owner of (or otherwise
has the authority to vote), directly or indirectly, securities representing
twenty percent (20%) or more of the total voting power of all of the
Company's then outstanding voting securities, unless through a transaction
arranged by, or consummated with the prior approval of the Board of
Directors; or
2. any period of two (2) consecutive calendar years during which there
shall cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the
Board of Directors and any new director(s) whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved; or
3. the Company becomes a party to a merger or consolidation in which
either (i) the Company will not be the surviving corporation or (ii) the
Company will be the surviving corporation and any outstanding shares of
Common Stock of the Company will be converted into shares of any other
company (other than a reincorporation or the establishment of a holding
company involving no change of ownership of the Company) or other
securities or cash or other property (excluding payments made solely for
fractional shares); or
4. any other event that a majority of the Board of Directors shall
determine constitutes a Change of Control;
provided, however, that, except as the Board of Directors otherwise determines,
a Change of Control for purposes of the Plan does not include the merger
contemplated in the Agreement and Plan of Merger (the "Qwest Merger"), dated as
of July 18, 1999, or as later amended, between the Company and Qwest
Communications International Inc., a Delaware corporation ("Qwest").
E. "Code" shall mean the Internal Revenue Code of 1986, as amended.
F. "Committee" shall mean the Employee Benefits Committee of the
Company consisting of employee(s) of the Company or any Related Entity appointed
by the Board at the recommendation of the Human Resources Committee or its
delegate(s), as applicable, to exercise the delegated authority of the Human
Resources Committee, as set forth under Section III of the Plan.
G. "Common Stock" shall mean the common stock, $.01 par value, of the
Company.
H. "Company" shall mean U S WEST, Inc., a Delaware corporation
(previously known as "USW-C, Inc."), and any successor thereof.
I. "Director" shall mean any member of the Board of Directors of the
Company.
J. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of eligible employees of the Company or any Related Entity.
2
K. "Dividend Equivalent Rights" shall mean the right to receive the
amount of any dividends that are paid on an equivalent number of shares of
Common Stock underlying an Option or Phantom Unit, which shall be payable either
in cash or in the form of additional Phantom Units or Stock.
L. "Effective Date" shall mean the date on which the Plan was approved
by the Board of Directors.
M. "Eligible Employee" shall mean any employee of the Company or any
Related Entity who is not a Director or an Executive Officer (defined below) and
who is so employed on the date of the grant of an Award.
N. "Eligible Non-Employee" shall mean any consultant or advisor who is
not a Director and who has provided bona fide services to the Company or any
Related Entity and is selected by the Committee to receive an Award; provided
that services rendered by such consultant or advisor were not in connection with
the offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company's securities
as those terms are used in the Form S-8 issued under the Securities Act.
O. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
P. "Executive Officer" shall mean any officer of the Company or any
Related Entity who, at the time of an Award, is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
Q. "Fair Market Value" shall mean the closing price of a share of
Common Stock as reported on the New York Stock Exchange for the applicable date,
or if there were no sales on such date, on the last day prior to the applicable
date on which there were sales.
R. "Incentive Option" shall mean an incentive stock option under the
provisions of Section 422 of the Code.
S. "Indexed" shall mean the periodic adjustment of an Option Price
based upon adjustment criteria determined by the Committee, but in no event
shall the Option Price be adjusted to an amount less than the original Option
Price.
T. "Nonqualified Option" shall mean an Option which does not qualify
under Section 422 of the Code.
U. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Plan, including Incentive
Options, Nonqualified Options and Reload Options.
3
V. "Optionee" shall mean a Participant to whom one or more Options have
been granted.
W. "Option Price" shall mean the price per share payable to the Company
for shares of Common Stock upon the exercise of an Option.
X. "Parent Corporation" shall mean any corporation within the meaning
of Section 424(e) of the Code.
Y. "Participant" shall mean an Eligible Employee or Eligible
Non-Employee to whom an Award is granted.
Z. "Phantom Unit" shall mean a notional account representing a value
equivalent to one share of Common Stock on the Award date.
AA. "Plan" shall mean the 1999 U S WEST Stock Plan, as amended.
AB. "Related Entity" shall mean any Parent Corporation or Subsidiary of
the Company.
AC. "Reload Option" shall mean the right to receive a further Option
for a number of shares equal to the number of shares of Common Stock surrendered
by the Optionee upon exercise of the original Option as provided in Section IX.E
of the Plan.
AD. "Restricted Period" shall mean the period of time from the date of
grant of Restricted Stock until the lapse of restrictions attached thereto under
the terms of the Agreement granting such Restricted Stock, pursuant to the
provisions of the Plan or by action of the Committee.
AE. "Restricted Stock" shall mean an Award made by the Committee
entitling the Participant to acquire, at no cost or for a purchase price
determined by the Committee at the time of grant, shares of Common Stock which
are subject to restrictions in accordance with the provisions of Section XII
hereof.
AF. "Retirement" shall mean with respect to any Eligible Employee, that
such person has terminated employment with the Company or any Related Entity
other than "for cause" (as defined in subsection IX.H.(v)) and (i) such person
is eligible to receive an immediate service pension benefit under the U S WEST
Pension Plan, or (ii) such person would be eligible to receive an immediate
service pension under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
4
January 1, 1997, or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, written agreement or
arrangement between the Company or any Related Entity and the Eligible Employee.
"Retirement" shall not apply to any Eligible Non-Employee.
AG. "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
AH. "Stock Appreciation Right" or "SAR" shall mean a grant entitling
the Participant to receive an amount in cash or shares of Common Stock or a
combination thereof having a value equal to (or if the Committee shall so
determine at the time of a grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant (or over the Option Price, if the
Stock Appreciation Right was granted in tandem with an Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee to determine the form or forms of payment at
the time of grant of the SAR.
AI. "Stock Awards" shall mean any Award which is in the form of
Restricted Stock and any outright grants of Common Stock approved by the
Committee pursuant to the Plan.
AJ. "Subsidiary" shall mean with respect to any Award other than an
Incentive Option, any corporation, joint venture, limited liability company
("LLC"), or partnership in which the Company owns, directly or indirectly, (i)
with respect to a corporation, stock possessing twenty percent (20%) or more of
the total combined voting power of all classes of stock in the corporation, (ii)
in the case of a joint venture or partnership, the Company possesses a twenty
percent (20%) interest in the capital or profits of such joint venture or
partnership, or (iii) in the case of an LLC, a twenty percent (20%) or more
interest in units in the LLC. In the case of any Incentive Option, Subsidiary
shall mean any corporation within the meaning of Section 424(f) of the Code.
AK. "Vested" shall mean the status of that portion of an Option or
other Award that may be immediately exercised under the terms of the Agreement
granting such Option or other Award, pursuant to the provisions of the Plan, or
by action of the Committee.
III. Administration.
A. The Committee shall have sole and exclusive discretion to interpret
and administer the Plan. The Committee shall have the power to adopt rules,
regulations and guidelines relating to the administration of the Plan.
B. The Committee may delegate to one or more of its members, or to one
or more agents, such administrative duties as it may deem advisable, and the
5
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ such
legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company or such Related Entity whose employees have benefited from the Plan, as
determined by the Committee. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or a
Related Entity against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's gross
negligence or willful misconduct.
C. In furtherance of and not in limitation of the Committee's
discretionary authority, subject to the provisions of the Plan, the Committee
shall have the authority to:
1. determine the Participants to whom Awards shall be granted and the
number of and terms and conditions upon which Awards shall be granted
(which need not be the same for all Awards or types of Awards);
2. establish annual or long-term financial goals of the Company, any
Related Entity, or division, department, or group of the Company or Related
Entity, or individual goals which the Committee shall consider in granting
Awards, if any;
3. determine the satisfaction of performance goals established by the
Committee based upon periods of time or any combinations thereof;
4. determine the time when Awards shall be granted, the Option Price
of each Option, the period(s) during which Options shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Awards,
and the other terms and provisions of Awards;
5. modify grants of Awards pursuant to Paragraph D. of this Section
III;
6. provide the establishment of a procedure whereby a number of shares
of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of
an Option, the lapse of restrictions on Restricted Stock and the vesting of
Phantom Units (other than an Incentive Option) to meet the obligation of
withholding for income, social security and other taxes incurred by a
Participant upon such exercise or required to be withheld by the Company in
connection with such exercise;
6
7. adopt, modify and rescind rules, regulations, procedures, and
guidelines relating to the Plan;
8. adopt modifications to the Plan and procedures, as may be necessary
to comply with provisions of the laws and applicable regulatory rulings of
countries in which the Company or a Related Entity operates in order to
assure the legality of Awards granted under the Plan to Participants who
reside in such countries; and
9. make all determinations, perform all other acts, exercise all other
powers and establish any other rules, regulations, procedures, and
guidelines determined by the Committee to be necessary, appropriate or
advisable in administering the Plan and to maintain compliance with any
applicable law.
D. The Committee may at any time accelerate the exercisability or
define any other aspect of the grant of or the conditions of the grant of any
Awards and waive or amend any and all restrictions and conditions of any Awards.
IV. Decisions Final.
Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
V. Arbitration.
Any Agreement may contain, among other things, provisions that require
arbitration of any and all disputes between a Participant and the Company or any
Related Entity, in a form or forms acceptable to the Committee.
VI. Duration of the Plan.
The Plan shall remain in effect for a period of five (5) years from the
Effective Date, unless terminated by the Board pursuant to Section XVII but
shall continue to govern any Awards outstanding as of the end of that period.
VII. Shares Available; Limitations.
Up to 12,000,000 shares of Common Stock may be granted under this Plan.
If, for any reason, any shares of Common Stock as to which Options, SARs,
Restricted Stock, or Phantom Units have been granted cease to be subject to
exercise or purchase hereunder (other than the exercise of SARs for cash), the
underlying shares of Common Stock shall thereafter be available for grants to
7
Participants under the Plan. Absent an amendment of this provision by the
Committee, no Incentive Options shall be granted under this Plan and no shares
of Common Stock may be issued under this Plan in connection with the exercise of
Incentive Options. Awards granted under the Plan may be fulfilled in accordance
with the terms of the Plan with (i) authorized and unissued shares of the Common
Stock or (ii) issued shares of Common Stock reacquired by the Company, in each
situation, as the Board of Directors or the Committee may determine from time to
time.
VIII. Grant of Awards.
A. The Committee shall determine the type or types of Award(s) to be
made to each Participant. Awards may be granted singly, in combination or in
tandem subject to restrictions set forth in Section IX.C for Incentive Options.
The types of Awards that may be granted under the Plan are Options, with or
without Reload Options, SARs, Stock Awards and Phantom Units, and with respect
to Phantom Units and Restricted Stock, with or without Dividend Equivalent
Rights.
B. Each grant of an Award under this Plan shall be conditioned upon the
acceptance of an Agreement dated as of the date of the grant of the Award, other
than Stock Awards consisting of an outright grant of shares of Common Stock.
This Agreement shall set forth the terms and conditions of the Award, as may be
determined by the Committee, and will be subject to amendment, modification or
alteration by the Committee pursuant to Section III.D of this Plan and without
the Participant's execution of such amendment, modification or alteration. If
the Agreement relates to the grant of an Option, it shall indicate whether the
Option that it evidences, is intended to be an Incentive Option or a
Nonqualified Option. Each grant of an Award is conditioned upon the subsequent
acceptance by the Participant of the terms of the Agreement. Unless otherwise
extended by the Committee, a Participant shall have ninety (90) days from the
date of the Agreement to accept its terms.
IX. Options.
The Committee may grant Incentive Options or Nonqualified Options to
Eligible Employees and Nonqualified Options to Eligible Non-Employees. The terms
and conditions of the Options granted under this Section IX shall be determined
from time to time by the Committee, as set forth in the Agreement granting the
Option, and subject to the following conditions:
A. Nonqualified Options. The Option Price for each share of Common
Stock issuable pursuant to a Nonqualified Option may be an amount at or above
the Fair Market Value on the date such Option is granted, may be Indexed from
the original Option Price and may be granted with or without Dividend Equivalent
Rights. All agreements granting options under Section IX.A shall state that the
Options issued pursuant to the Agreement are not intended to qualify for tax
benefits under Section 422 of the Code.
8
B. Incentive Options. The Option Price for each share of Common Stock
issuable pursuant to an Incentive Option shall not be less than one hundred
percent (100%) of the Fair Market Value on the date such Option is granted and
may be Indexed from the original Option Price.
C. Incentive Options; Special Rules. Options granted in the form of
Incentive Options shall be subject to the following provisions:
1. Grant. No Incentive Option shall be granted pursuant to this Plan
more than ten (10) years after the Effective Date.
2. Annual Limit. The aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Common Stock with respect to
which one or more Incentive Options are exercisable for the first time by
any Optionee during any calendar year under the Plan or under any other
stock plan of the Company or any Related Entity shall not exceed $100,000
or such other maximum amount permitted under Section 422 of the Code. Any
portion of an Option purporting to constitute an Incentive Option in excess
of such limitation shall constitute a Nonqualified Option.
3. 10% Stockholder. If any Optionee to whom an Incentive Option is to
be granted pursuant to the provisions of the Plan is, on the date of grant,
an individual described in Section 422(b)(6) of the Code, then the
following special provisions shall be applicable to the Option granted to
such individual:
(a) the Option Price of shares subject to such Incentive Option
shall not be less than 110% of the Fair Market Value of Common Stock
on the date of grant; and
(b) the Option shall not have a term in excess of (5) years from
the date of grant.
4. Shareholder Approval. If required by law to issue Incentive
Options, shareholder approval of the Plan shall be obtained within twelve
(12) months before or after adoption of the Plan.
D. Other Options - Special Tax Benefits. The Committee may establish
rules with respect to, and may grant to Eligible Employees, Options to comply
with any amendment to the Code made after the Effective Date providing for
special tax benefits for stock options.
E. Reload Options. Without in any way limiting the authority of the
Committee to make Awards hereunder, the Committee shall have the authority to
9
grant Reload Options. Any such Reload Option shall be subject to such other
terms and conditions as the Committee may determine. Notwithstanding the above,
(i) the Committee shall have the right to withdraw a Reload Option to the extent
that the grant thereof will result in any adverse accounting consequences to the
Company and (ii) no additional Reload Options shall be granted upon the exercise
of a Reload Option.
F. Term of Option. No Option shall be exercisable after the expiration
of ten (10) years from the date of grant of the Option.
G. Exercise of Stock Option. Each Option shall be exercisable in one or
more installments as the Committee may determine at the time of the Award and as
provided in the Agreement. The right to purchase shares shall be cumulative so
that when the right to purchase any shares has accrued such shares or any part
thereof may be purchased at any time thereafter until the expiration or
termination of the Option. The Option Price shall be payable (i) in cash or by
an equivalent means acceptable to the Committee, (ii) by delivery (constructive
or otherwise) to the Company of shares of Common Stock owned by the Optionee or
(iii) by any combination of the above as provided in the Agreement. Shares
delivered to the Company in payment of the Option Price shall be valued at the
Fair Market Value on the date of the exercise of the Option.
H. Vesting. The Committee shall establish the vesting schedules for
awards. The Agreement shall specify the date or dates on which the Optionee may
begin to exercise all or a portion of his Option. Subsequent to such date or
dates, the applicable portion of the Option shall be deemed Vested and fully
exercisable.
(i) Death. In the event of the death of any Optionee, all Options held
by such Optionee on the date of his death shall become Vested Options and
the estate of such Optionee shall have the right, at any time and from time
to time within one year after the date of death, or such other period, if
any, as the Committee may determine, to exercise the Options of the
Optionee (but not after the earlier of the expiration date of the Option
or, in the case of an Incentive Option, one (1) year from the date of
death).
(ii) Disability. If the employment of any Optionee is terminated
because of Disability, all Options held by such Optionee on the date of his
or her termination shall be retained by such Optionee, and such Options
that are not yet Vested Options shall become Vested Options over time in
accordance with the vesting schedule established at the time such Options
were issued. The Optionee shall have the right to exercise Vested Options
at any time and from time to time, but not after the expiration date of the
Option.
(iii) Retirement. Upon an Optionee's Retirement, all Options held by
such Optionee on the date of his or her Retirement shall be retained by
10
such Optionee, and such Options that are not yet Vested Options shall
become Vested Options over time in accordance with the vesting schedule
established at the time such Options were issued, unless the Committee
determines otherwise. Unless the Committee determines otherwise, the
Optionee shall have the right to exercise Vested Options at any time and
from time to time, but not after the expiration date of the Option. In the
case of Incentive Options where tax-advantaged treatment is desired, the
Optionee shall have the right to exercise Vested Options three months from
the date of Retirement.
(iv) Other Termination. If the employment with the Company or a
Related Entity of an Optionee is terminated for any reason other than for
death or Disability and other than "for cause" as defined in subparagraph
(v) below, such Optionee shall have the right, in the case of a Vested
Option, for a period of three (3) months after the date of such termination
or such longer period as determined by the Committee, to exercise any such
Vested Option, but in any event not after the expiration date of any such
Option.
(v) Termination For Cause. Notwithstanding any other provision of the
Plan to the contrary, if the Optionee's employment is terminated by the
Company or any Related Entity "for cause" (as defined below), such Optionee
shall immediately forfeit all rights under his Options except as to the
shares of Common Stock already purchased prior to such termination.
Termination "for cause" shall mean (unless another definition is agreed to
in writing by the Company and the Optionee) termination by the Company
because of: (a) the Optionee's willful and continued failure to
substantially perform his duties (other than any such failure resulting
from the Optionee's incapacity due to physical or mental impairment) after
a written demand for substantial performance is delivered to the Optionee
by the Company, which demand specifically identifies the manner in which
the Company believes the Optionee has not substantially performed his
duties, (b) the willful conduct of the Optionee which is demonstrably and
materially injurious to the Company or Related Entity, monetarily or
otherwise, or (c) the conviction of the Optionee for a felony by a court of
competent jurisdiction.
X. Foreign Options and Rights.
The Committee may make Awards of Options to Eligible Employees and
Eligible Non-Employees who are subject to the tax laws of nations other than the
United States, which Awards may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action it deems advisable to obtain approval of such Option by the
appropriate foreign governmental entity; provided, however, that no such Award
11
may be granted pursuant to this Section X and no action may be taken that would
result in a violation of the Exchange Act, the Code or any other applicable law.
XI. Stock Appreciation Rights.
The Committee shall have the authority to grant SARs to Eligible
Employees and Eligible Non-Employees either alone or in connection with an
Option. SARs granted in connection with an Option shall be granted either at the
time of grant of the Option or by amendment to the Option. SARs granted in
connection with an Option shall be subject to the same terms and conditions as
the related Option and shall be exercisable only at such times and to such
extent as the related Option is exercisable. A SAR granted in connection with an
Option may be exercised only when the Fair Market Value of the Common Stock of
the Company exceeds the Option Price of the related Option. A SAR granted in
connection with an Option shall entitle the Participant to surrender to the
Company unexercised the related Option, or any portion thereof and to receive
from the Company cash and/or shares of Common Stock equal to that number of
shares of Common Stock having an aggregate value equal to the excess of (i) the
Fair Market Value of one share of Common Stock on the day of the surrender of
such Option over (ii) the Option Price per share of Common Stock multiplied by
(iii) the number of shares of Common Stock that may be exercised under the
Option, or surrendered; provided, however, that no fractional shares shall be
issued. A SAR granted singly shall entitle the Participant to receive the excess
of (i) the Fair Market Value of a share of Common Stock on the date of exercise
over (ii) the Fair Market Value of a share of Common Stock on the date of the
grant of the SAR multiplied by (iii) the number of SARs exercised. Payment of
any fractional shares of Common Stock shall be made in cash. A SAR shall become
a Vested Award upon (i) a Participant becoming Disabled, or (ii) the death of a
Participant.
XII. Restricted Stock.
The Committee may grant Restricted Stock to Eligible Employees and
Eligible Non-Employees subject to the provisions below.
A. Restrictions. A stock certificate representing the number of shares
of Restricted Stock granted shall be held in custody by the Company for the
Participant's account. The Participant shall have all rights and privileges of a
stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Paragraph B. below, the following restrictions shall apply: (i)
the Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted Stock
may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period; (iii) the Participant shall, if requested by
the Company, execute and deliver to the Company, a stock power endorsed in
blank. The Restricted Period shall lapse upon a Participant becoming Disabled or
12
the death of a Participant. If a Participant ceases to be an employee of the
Company or a Related Entity prior to the expiration of the Restricted Period
applicable to such shares, except as a result of the death or Disability of the
Participant, shares of Restricted Stock still subject to restrictions shall be
forfeited unless otherwise determined by the Committee, and all rights of the
Participant to such shares shall terminate without further obligation on the
part of the Company. Upon the forfeiture (in whole or in part) of shares of
Restricted Stock, such forfeited shares shall become shares of Common Stock held
in the Company's treasury without further action by the Participant.
B. Terms and Conditions. The Committee shall establish the terms and
conditions for Restricted Stock pursuant to Section III of the Plan. Terms and
conditions established by the Committee need not be the same for all grants of
Restricted Stock. The Committee may provide for the restrictions to lapse with
respect to a portion or portions of the Restricted Stock at different times or
upon the occurrence of different events, and the Committee may waive, in whole
or in part, any or all restrictions applicable to a grant of Restricted Stock.
Restricted Stock Awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law or such other
consideration as may be determined by the Committee.
C. Delivery of Restricted Shares. At the end of the Restricted Period
as herein provided, a stock certificate for the number of shares of Restricted
Stock with respect to which the restrictions have lapsed shall be delivered
(less any shares delivered pursuant to Section XVI.C in satisfaction of any
withholding tax obligation), free of all such restrictions, except applicable
securities law restrictions, to the Participant or the Participant's estate, as
the case may be. The Company shall not be required to deliver any fractional
share of Common Stock but shall pay, in lieu thereof, the Fair Market Value
(measured as of the date the restrictions lapse) of such fractional share to the
Participant or the Participant's estate, as the case may be. Notwithstanding the
foregoing, the Committee may authorize the delivery of the Restricted Stock to a
Participant during the Restricted Period, in which event any stock certificates
in respect of shares of Restricted Stock thus delivered to a Participant during
the Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.
XIII. Phantom Units.
A. General. The Committee may grant the right to earn Phantom Units to
Eligible Employees and Eligible Non-Employees. The Committee shall determine the
criteria for the earning of Phantom Units, pursuant to Section III of the Plan.
Upon satisfaction of such criteria, a Phantom Unit shall be deemed a Vested
Award. A Phantom Unit granted by the Committee shall provide for payment in
shares of Common Stock. A Phantom Unit shall become a Vested Award upon (i) a
13
Participant becoming Disabled, or (ii) the death of a Participant. Shares of
Common Stock issued pursuant to this Section XIII may be issued for no cash
consideration or for such minimum consideration as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a Participant granted a Phantom Unit shall be
entitled to a Dividend Equivalent Right.
B. Unfunded Claim. The establishment of Phantom Units under the Plan
are unfunded obligations of the Company. The interest of a Participant in any
such units shall be considered a general unsecured claim against the Company to
the extent that the conditions for the earning of the Phantom Units have been
satisfied. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participant, the Company or the Committee.
C. Issuance of Common Stock. Upon a Phantom Unit becoming a Vested
Award, unless a Participant has elected to defer under Paragraph D. below,
shares of Common Stock representing the Phantom Units shall be distributed to
the Participant, unless the Committee, with the consent of the Participant,
provides for the payment of the Phantom Units in cash or partly in cash and
partly in shares of Common Stock equal to the value of the shares of Common
Stock which would otherwise be distributed to the Participant.
D. Deferral of Phantom Units. Prior to the year with respect to which a
Phantom Unit may become a Vested Award, the Participant may elect not to receive
Common Stock upon the vesting of such Phantom Unit and for the Company to
continue to maintain the Phantom Unit on its books of account. In such event,
the value of a Phantom Unit shall be payable in shares of Common Stock pursuant
to the agreement of deferral.
E. Financial Hardship. Notwithstanding any other provision hereof, at
the written request of a Participant who has elected to defer pursuant to
Paragraph D. above, the Committee, in its sole direction, upon a finding that
continued deferral will result in financial hardship to the Participant, may
authorize the payment of all or a part of a Participant's Vested Phantom Units
in a single installment or the acceleration of payment of any multiple
installments thereof; provided, however, that distributions will not be made
under this paragraph if such distribution would result in liability of an
Executive Officer under Section 16 of the Exchange Act.
F. Distribution upon Death. The Committee shall pay the Fair Market
Value of the Phantom Units of a deceased Participant to the estate of the
Participant, as soon as practicable following the death of the Participant. The
value of the Phantom Units for the purpose of such distribution shall be based
upon the Fair Market Value of shares of Common Stock underlying the Phantom
Units on the date of the Participant's death.
14
XIV. Change of Control; Acceleration.
Upon the occurrence of a Change of Control or, within one year after
the closing of the Qwest Merger, the involuntary termination of a Participant,
other than a termination "for cause" as defined in Section IX.H.(v) of this
Plan, then:
A. in the case of all outstanding Options and SARs, each such Option
and SAR shall automatically become immediately fully exercisable by the
Participant;
B. restrictions applicable to Restricted Stock shall automatically be
deemed lapsed and conditions applicable to Phantom Units shall automatically be
deemed waived, and the Participants who receive such grants shall become
immediately entitled to receipt of the Common Stock subject to such grants; and
C. the Employee Benefits Committee, in its discretion, shall have the
right to accelerate payment of any deferrals of Vested Phantom Units.
XV. Adjustment of Shares.
A. In the event there is any change in the Common Stock by reason of
any consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company, the number or kind of shares or interests subject to an Award and the
per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each Participant's economic
position with respect to the Award shall not, as a result of such adjustment, be
worse than it had been immediately prior to such event. Any fractional shares or
interests resulting from such adjustment shall be rounded up to the next whole
share of Common Stock. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option shall comply with the rules of Section
424(a) of the Code, and (ii) in no event shall any adjustment be made which
would render any Incentive Option granted hereunder other than an "incentive
stock option" for purposes of Section 422 of the Code.
B. In the event of an acquisition by the Company of another corporation
where the Company assumes outstanding stock options or similar obligations of
such corporation, the number of Awards available under the Plan shall be
appropriately increased to reflect the number of such options or other
obligations assumed.
XVI. Miscellaneous Provisions.
A. Assignment or Transfer. Except as otherwise permitted by this
Section, no grant of any "derivative security" (as defined in the rules issued
under Section 16 of the Exchange Act) made under the Plan or any rights or
15
interests therein shall be assignable or transferable except by last will and
testament or the laws of descent and distribution. No grant of any such
derivative security shall be assignable or transferable pursuant to a domestic
relations order.
B. Investment Representation; Legends. The Committee may require each
Participant acquiring shares of Common Stock pursuant to an Award to represent
to and agree with the Company in writing that such Participant is acquiring the
shares without a view to distribution thereof. No shares of Common Stock shall
be issued pursuant to an Award until all applicable securities law and other
legal and stock exchange requirements have been satisfied. The Committee may
require the placing of stop-orders and restrictive legends on certificates for
Common Stock as it deems appropriate.
C. Withholding Taxes. In the case of distributions of Common Stock or
other securities hereunder, the Company, as a condition of such distribution,
may require the payment (through withholding from the Participant's salary,
payment of cash by the Participant, reduction of the number of shares of Common
Stock or other securities to be issued (except in the case of an Incentive
Option), or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld with respect to such distribution.
D. Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Award nor to
any Participant receiving an Award.
E. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. Effect on Employment. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall affect, or be construed as affecting,
the terms of employment of any Participant except to the extent specifically
provided herein or therein. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall impose, or be construed as imposing,
an obligation on (i) the Company or any Related Entity to continue the
employment of any Participant and (ii) any Participant to remain in the employ
of the Company or any Related Entity.
G. Noncompetition. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
Related Entity in a form or forms acceptable to the Committee.
H. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
16
XVII. Amendment or Termination of Plan.
The Committee shall have the right to amend, modify, suspend or terminate
the Plan or any Awards at any time.
ADDITIONAL INFORMATION
U S WEST is subject to certain informational requirements under the
Exchange Act and has incorporated herein by reference the following documents
filed by U S WEST into this Prospectus: (i) U S WEST's Annual Report on Form
10-K for the year ended December 31, 1998, as amended by Form 10-K/A filed March
24, 1999; (ii) U S WEST's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999; (iii) U S WEST's Current Reports on Form 8-K
filed January 13, 1999, January 15, 1999, January 22, 1999, February 23, 1999,
February 25, 1999, February 26, 1999, April 7, 1999, April 22, 1999, May 12,
1999, May 18, 1999, May 21, 1999, May 26, 1999, June 18, 1999, June 22, 1999,
July 7, 1999, July 21, 1999 and July 26, 1999, as amended by Form 8-K/A filed
July 27, 1999; (iv) U S WEST's Proxy Statement on Schedule 14A filed March 24,
1999; and (v) the description of Common Stock and preferred stock purchase
rights of U S WEST contained in U S WEST's Registration Statement on Form 8-A
filed on May 1, 1998 (as amended by Form 8-A/A filed May 12, 1998).
All documents filed by U S WEST pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus shall be deemed to
be incorporated in this Prospectus from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
subsequently filed documents which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statements. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
U S WEST shall provide, without charge, to any Participant to whom a
Prospectus is delivered, upon written or oral request, a copy of an updated
version of this prospectus and any or all of the documents that are incorporated
by reference herein. Requests for such documents or for additional information
about the Plan or its administrators should be directed to the Corporate
Secretary, U S WEST, 1801 California Street, Denver, Colorado 80202, Telephone
(303) 672-2700.
CERTAIN FEDERAL INCOME TAX EFFECTS
It is the opinion of the Company that the following are certain income
tax consequences of participation in the Plan. This section is only a summary,
does not purport to be complete and, among other things, does not cover state
and local tax treatment. Furthermore, differences in financial situation may
cause Federal, state and local tax consequences to vary. Therefore, consultation
with an accountant, legal counsel or other financial advisor regarding tax
consequences is urged.
17
1. Nonqualified Options, Stock Appreciation Rights and Phantom Units.
An individual who receives a grant of a Nonqualified Option, a SAR, or a phantom
unit will not recognize any taxable income upon such grant. However, the
individual generally will recognize ordinary income upon exercise of a
Nonqualified Option in an amount equal to the excess of the fair market value of
the shares at the time of exercise over the exercise price. Similarly, upon the
receipt of cash or shares pursuant to the exercise of a SAR, the individual
generally will recognize ordinary income in an amount equal to the sum of the
cash and the fair market value of the shares received; likewise, upon the
vesting of a phantom unit, the individual generally will recognize ordinary
income in an amount equal to the fair market value of the shares, plus cash, if
any, received.
An individual who exercises a Nonqualified Option by delivering U S
WEST Common Stock to U S WEST will not recognize gain or loss with respect to
the exchange of such U S WEST Common Stock, even if the fair market value of the
shares so delivered is different from the individual's tax basis. The
individual, however, will be taxed as described above with respect to the
exercise of the Nonqualified Option as if he or she had paid the exercise price
in cash.
2. Restricted Stock. Absent a written election pursuant to Section
83(b) of the Code filed with the IRS within 30 days after the date of transfer
of such shares (a "Section 83(b) election"), an individual who receives
restricted stock under the Plan generally will recognize ordinary income at the
earlier of the time at which (i) the shares become transferable or (ii) the
restrictions that impose a substantial risk of forfeiture of such shares lapse,
in an amount equal to the excess of the fair market value (on such date) of such
shares over the consideration paid for such restricted stock, if any. If a
Section 83(b) election is made, the individual will recognize ordinary income,
as of the transfer date, in an amount equal to the excess of the fair market
value of the shares as of that date over the price paid for such award, if any.
3. Consequences to Company. A federal income tax deduction generally
will be allowed to U S WEST in an amount equal to the ordinary income included
by the employee with respect to his or her Nonqualified Option, SAR, phantom
unit, or restricted stock, provided that such amount constitutes an ordinary and
necessary business expense to U S WEST and is reasonable and the limitations of
Sections 280G and 162(m) of the Code do not apply.
4. Change of Control. In general, if the total amount of payments to an
individual that are contingent upon a "change of control" of U S WEST (as
18
defined in Section 280G of the Code), including payments under the Plan that
vest upon a "change of control," equals or exceeds three times the individual's
"base amount" (generally, such individual's average annual compensation for the
five calendar years preceding the change of control), then, subject to certain
exceptions, the payments may be treated as "parachute payments" under the Code,
in which case a portion of such payments would be non-deductible to U S WEST and
the individual would be subject to a 20% excise tax on such portion of the
payments.
RESALE RESTRICTIONS
Resale restrictions imposed by federal and/or state securities laws may
restrict certain Participants from transferring securities received under the
Plan. For example, Participants who hold "restricted securities" or are deemed
"affiliates," as those terms are defined in Rule 144 under the Securities Act,
may not sell securities issued by U S WEST to the public except pursuant to (a)
an effective registration statement filed by U S WEST with the SEC under the
Securities Act; or (b) an exemption from the registration requirements of the
Securities Act. Rule 144 provides an exemption for resale, subject to certain
conditions, such as a holding period, availability of public information,
limitation on amount of securities sold, manner of sale, and notice of sale.
This prospectus is not available for any resale.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The Plan is administered by the Employee Benefits
Committee. The Employee Benefits Committee consists of the Senior Vice
President-Law and Corporate Human Resources of U S WEST and other officers of U
S WEST designated by the Senior Vice President-Law and Corporate Human
Resources.
EXPERTS
The financial statements and schedules incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accounts, as indicated in their reports with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
19
EX-99.D.1
19
ex_d-9.txt
EXHIBIT 99(D)(1)
U S WEST 1998 BROAD BASED STOCK OPTION PLAN
I. Purpose.
The U S WEST 1998 Broad Based Stock Option Plan (the "Plan"), is
intended to promote the long term success of U S WEST, Inc. (the "Company"), by
affording certain Eligible Employees of the Company with an opportunity to
acquire a proprietary interest in the Company, in order to provide incentives to
employees and to align the financial interests of these employees with the
shareholders of the Company. This Plan is a successor plan of the U S WEST
Communications Group 1997 Stock Option Plan (the "Predecessor Plan"). This Plan
is effective only upon consummation of the Separation (as defined herein).
II. Separate Plan.
The Plan is separate and distinct from the U S WEST 1998 Stock Plan.
III. Definitions.
The following defined terms are used in this Plan:
A. "Agreement" shall mean the agreement accepted by the Participant
as described in Section VIII of this Prospectus between the Company and a
Participant, under which the Participant receives an Option pursuant to the
Plan.
B. "Board" or "Board of Directors" shall mean the Board of Directors
of the Company.
C. "Change of Control" shall mean any of the following:
1. any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) who is or becomes a
beneficial owner of (or otherwise has the authority to vote),
directly or indirectly, securities representing twenty percent
(20%) or more of the total voting power of all of the
Company's then outstanding voting securities, unless through a
transaction arranged by, or consummated with the prior
approval of the Board of Directors;
2. any period of two (2) consecutive calendar years
during which there shall cease to be a majority of the Board
of Directors comprised as follows: individuals who at the
beginning of such period constitute the Board of Directors and
any new director(s) whose election by the Board of Directors
or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved; or
3. the Company becomes a party to a merger or
consolidation in which either (i) the Company will not be the
surviving corporation or (ii) the Company will be the
surviving corporation and any outstanding shares of Common
Stock of the Company will be converted into shares of any
other company (other than a reincorporation or the
establishment of a holding company involving no change of
ownership of the Company) or other securities or cash or other
property (excluding payments made solely for fractional
shares); or
4. any other event that a majority of the Board of
Directors, in its sole discretion, shall determine constitutes
a Change of Control.
D. "Code" shall mean the Internal Revenue Code of 1986, as amended.
E. "Committee" shall mean the Employee Benefits Committee or its
delegates, as applicable, pursuant to provisions of Section IV of this
Prospectus.
F. "Common Stock" shall mean the common stock, $.01 par value, issued
by the Company.
G. "Company" shall mean U S WEST, Inc., a Delaware corporation
(previously known as "USW-C, Inc."), and any successor thereof.
H. "Disabled" or "Disability" shall mean long-term disability as
determined under the provisions of any U S WEST disability plan maintained for
the benefit of Eligible Employees of the Company or any Related Entity.
I. "Eligible Employee" shall mean any employee of the Company or any
Related Entity, excluding Officers, who the Committee selects to receive an
Option and who is so employed on the date of the grant of an Option.
J. "Employee Benefits Committee" shall mean a committee of the
Company which shall administer the Plan as provided in Section IV hereof, and
consisting of employees of the Company or any Related Entity who are appointed
by the Human Resources Committee.
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K. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
L. "Fair Market Value" shall mean the closing price of a share of
stock as reported on the New York Stock Exchange for the applicable date, or if
there were no sales on such date, on the last day on which there were sales.
M. "Human Resources Committee" shall mean the Human Resources
Committee of the Board.
N. "Nonqualified Option" shall mean an Option that does not qualify
as an incentive stock option under Section 422 of the Code.
O. "Officer" shall mean any executive of the Company or any Related
Entity who is eligible to participate in the Company's executive compensation
programs.
P. "Option" shall mean an option granted by the Company to purchase
Common Stock pursuant to the provisions of this Prospectus.
Q. "Optionee" shall mean a Participant to whom one or more Options
have been granted.
R. "Option Price" shall mean the price per share payable to the
Company for shares of Common Stock upon the exercise of an Option.
S. "Parent Corporation" shall mean any corporation within the meaning
of Section 424(e) of the Code.
T. "Participant" shall mean an Eligible Employee.
U. "Plan" shall mean the U S WEST 1998 Broad Based Stock Option Plan,
as described in this Prospectus.
V. "Related Entity" shall mean any Parent Corporation or Subsidiary
of the Company.
W. "Retirement" shall mean, with respect to any Eligible Employee,
that such person has terminated employment with the Company or any Related
Entity other than "for cause" (as defined in subsection IX.C.(v)) and (i) such
person is eligible to receive an immediate service pension benefit under the U S
WEST Pension Plan or (ii) such person would be eligible to receive an immediate
service pension benefit under the U S WEST Pension Plan, as amended and restated
effective January 1, 1993, had that plan not been amended and restated effective
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January 1, 1997 or (iii) such person specifically is treated as "retired" for
purposes of the Plan under any individually negotiated, custom, written
agreement or arrangement between the Company or any Related Entity and the
Eligible Employee. "Retirement" shall not apply to any Eligible Non-Employee.
X. "Securities Act" shall mean the Securities Act of 1933 as amended.
Y. "Subsidiary" shall mean any corporation, joint venture or
partnership in which the Company owns, directly or indirectly, (i) with respect
to a corporation, stock possessing twenty percent (20%) or more of the total
combined voting power of all classes of stock in the corporation or (ii) in the
case of a joint venture or partnership, the Company possesses a twenty percent
(20%) interest in the capital or profits of such joint venture or partnership.
Z. "Vested" shall mean the status that results with respect to an
Option that may be exercised immediately under the terms of the Agreement
granting such Option pursuant to the provisions of the Plan or by action of the
Committee.
IV. Administration.
A. The Plan shall be administered by the Committee. The Committee may
adopt such rules, regulations and guidelines as it determines necessary for the
administration of the Plan.
B. The Committee may delegate to one or more of its members, or to
one or more agents, such duties as it may deem advisable, and may itself or
through its delegate employ an advisor to render advice with respect to any
responsibility it may have under the Plan. The Committee may employ such legal
or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred in the engagement
of such counsel, consultant or agent shall be paid by the Company or such
Related Entity whose employees have benefited from the Plan, as determined by
the Committee. The Company shall indemnify members of the Committee and any
agent of the Committee who is an employee of the Company or a Related Entity
against any and all liabilities or expenses to which they may be subjected by
reason of any act or failure to act with respect to their duties on behalf of
the Plan, except in circumstances involving such person's gross negligence or
willful misconduct.
C. In furtherance of and not in limitation of the Committee's
discretionary authority, the Committee shall have the authority to:
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1. determine the Participants to whom Options shall be granted
and the number of and terms and conditions upon which Options shall be
granted (which need not be the same for all Options);
2. determine the time when Options shall be granted, the
Option Price of each Option, the period(s) during which Options shall
be exercisable (whether in whole or in part), the restrictions to be
applicable to Options, and the other terms and provisions of Options;
3. modify grants of Options pursuant to Paragraph D of this
Section IV or rescind grants of Options pursuant to Section IX(C)(v),
respectively;
4. provide the establishment of a procedure whereby a number
of shares of Common Stock or other securities may be withheld from the
total number of shares of Common Stock to be issued upon exercise of an
Option, to meet the obligation of withholding for income tax, social
security and other taxes incurred by a Participant upon such exercise
or required to be withheld by the Company in connection with such
exercise;
5. adopt, modify and rescind rules, regulations and guidelines
relating to the Plan;
6. adopt modifications to the Plan and procedures as may be
necessary to comply with provisions of the laws and applicable
regulatory rulings of countries in which the Company or a Related
Entity operates to assure the legality of Options granted under the
Plan to Participants who reside in such countries;
7. make all determinations, perform all other acts, exercise
all other powers and establish any other procedures determined by the
Committee to be necessary, appropriate or advisable in administering
the Plan and to maintain compliance with any applicable law.
D. The Committee may at any time, in its sole discretion, accelerate
the exercisability of any Options and waive or amend any and all restrictions
and conditions of any Options.
V. Decisions Final.
Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be
final, binding and conclusive on the Company and all Participants and their
respective heirs, executors, administrators, successors and assigns.
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VI. Arbitration.
Any agreement may contain, among other things, provisions that require
binding arbitration of any and all disputes between a Participant and the
Company or any Related Entity, in a form or forms acceptable to the Committee,
in its sole discretion.
VII. Shares Available Limitations.
A. Up to 6,000,000 shares of Common Stock may be granted under the
Plan.
VIII. Stock Option Agreements.
Each grant of an Option under this Plan shall be evidenced by an
Agreement dated as of the date of the grant of the Option. Agreements under the
Predecessor Plan are hereby assumed by the Company and shall be deemed
Agreements under this Plan. Such Agreement shall set forth the terms and
conditions of the Option, as may be determined by the Committee. Each grant of
an Option is conditioned upon the acceptance by the Participant of the terms of
the Agreement. Unless otherwise extended by the Committee, a Participant shall
have ninety (90) days from the date of the Agreement to accept its terms.
IX. Option Terms.
A. Term of Option. No Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option.
B. Exercise of Stock Option. Each Option shall be exercisable in one
or more installments as the Committee in its sole discretion may determine at
the time of the Option grant and as provided in the Agreement. The right to
purchase shares shall be cumulative so that when the right to purchase any
shares has accrued such shares or any part thereof may be purchased at any time
thereafter until the expiration or termination of the Option. The Option Price
shall be payable (i) in cash or by an equivalent means acceptable to the
Committee, (ii) by delivery (constructive or otherwise) to the Company of shares
of Common Stock owned by the Optionee or (iii) by any combination of the above
as provided in the Agreement. Shares delivered to the Company in payment of the
Option Price shall be valued at the Fair Market Value on the date of the
exercise of the Option.
C. Vesting. The Agreement shall specify the date or dates on which
6
the Optionee may begin to exercise all or a portion of his Option. Subsequent to
such date or dates, the Option shall be deemed Vested and fully exercisable.
(i) Death. In the event of the death of any Optionee,
all Options held by such Optionee on the date of his or her
death shall become Vested Options and the estate of such
Optionee, shall have the right, at any time and from time to
time within one year after the date of death, or such other
period, if any, as the Committee in its sole discretion may
determine, to exercise the Options of the Optionee (but not
after the expiration date of the Option).
(i) Disability. If the employment of any Optionee is
terminated because of Disability, all Options held by such
Optionee on the date of his or her termination shall be
retained by such Optionee, and such Options that are not yet
Vested Options shall become Vested Options in accordance with
the vesting schedule established at the time such Options were
issued. The Optionee shall have the right to exercise Vested
Options at any time and from time to time, but not after the
expiration date of the Option.
(iii) Retirement. Upon an Optionee's Retirement, all
Options held by such Optionee on the date of his or her
Retirement shall be retained by such Optionee, and such
Options that are not yet Vested Options shall become Vested
Options in accordance with the vesting schedule established at
the time such Options were issued, unless the Committee, in
its sole discretion, determines otherwise. The Optionee shall
have the right to exercise Vested Options at any time and from
time to time, but not after the expiration date of the Option.
(iv) Other Termination. If the employment with the
Company or a Related Entity of an Optionee is terminated for
any reason other than for death, Disability or Retirement and
other than "for cause" as defined in subparagraph (v) below,
such Optionee shall have the right, in the case of a Vested
Option, for a period of three (3) months after the date of
such termination or such longer period as determined by the
Committee, to exercise any such Vested Option, but in any
event not after the expiration date of any such Option.
(v) Termination For Cause. Notwithstanding any other
provision of the Plan to the contrary, if the Optionee's
employment is terminated by the Company or any Related Entity
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"for cause" (as defined below), such Optionee immediately
shall forfeit all rights under his or her Options except as to
the shares of Common Stock already purchased prior to such
termination. Termination "for cause" shall mean (unless
another definition is agreed to in writing by the Company and
the Optionee) termination by the Company because of: (a) the
Optionee's willful and continued failure substantially to
perform his or her duties (other than any such failure
resulting from the Optionee's incapacity due to physical or
mental impairment) after a written demand for substantial
performance is delivered to the Optionee by the Company, which
demand specifically identifies the manner in which the Company
believes the Optionee has not substantially performed his or
her duties, (b) the willful conduct of the Optionee that is
demonstrably and materially injurious to the Company or
Related Entity, monetarily or otherwise, or (c) the conviction
of the Optionee for a felony by a court of competent
jurisdiction.
X. Foreign Options and Rights.
The Committee may grant Options to Eligible Employees who are subject
to the tax laws of nations other than the United States, which Options may have
terms and conditions as determined by the Committee as necessary and appropriate
to comply with applicable foreign laws. The Committee may take any action which
it deems advisable to obtain approval of such Option by the appropriate foreign
governmental entity; provided, however, that no such Option may be granted
pursuant to this Section X and no action may be taken that would result in a
violation of the Exchange Act, the Code or any other applicable law.
XI. Change of Control Acceleration.
Upon the occurrence of a Change of Control each outstanding Option
automatically and immediately shall become fully exercisable by the Participant.
XII. Adjustment of Shares.
In the event there is any change in the Common Stock by reason of any
consolidation, combination, liquidation, reorganization, recapitalization, stock
dividend, stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares or other like change in capital structure of the Company, the
number or kind of shares or interests subject to an Option and the per share
price or value thereof shall be adjusted by the Committee appropriately at the
time of such event, provided that each Participant's economic position with
respect to the Option shall not, as a result of such adjustment, be worse than
it had been immediately prior to such event. Any fractional shares or interests
resulting from such adjustment shall be rounded up to the next whole share of
Common Stock.
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XIII. Miscellaneous Provisions.
A. Assignment or Transfer. No grant of any "derivative security" (as
defined by Rule 16a-1(c) under the Exchange Act) made under the Plan or any
rights or interests therein shall be assignable or transferable by a Participant
except by last will and testament or the laws of descent and distribution and
except to the extent it is otherwise permissible under the Exchange Act. No
grant of any "derivative security" shall be assignable or transferable pursuant
to a domestic relations order. During the lifetime of a Participant, Options
granted hereunder shall be exercisable only by the Participant, the
Participant's guardian or his or her legal representative.
B. Investment Representation; Legends. No shares of Common Stock
shall be issued pursuant to an Option until all applicable securities law and
other legal and stock exchange requirements have been satisfied. The Committee
may require the placing of stop-orders and restrictive legends on certificates
for Common Stock as it deems appropriate.
C. Withholding Taxes. The Company, as a condition of the distribution
of Common Stock hereunder, may require the payment (through withholding from the
Participant's salary, payment of cash by the Participant, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any federal, state, local or foreign taxes required by law to be withheld
with respect to such distribution.
D. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Option
or against any Participant receiving an Option.
E. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees.
F. Effect on Employment. Nothing contained in this Plan or any
related agreement or referred to in the Plan shall affect, or be construed as
affecting, the terms of employment of any Participant except to the extent
specifically provided. Nothing contained in the Plan or any agreement related
hereto or referred to herein shall impose, or be construed as imposing, an
obligation on (i) the Company or any Related Entity to continue the employment
of any Participant or (ii) any Participant to remain in the employ of the
Company or any Related Entity.
G. Noncompetition. Any Agreement may contain, among other things,
provisions prohibiting Participants from competing with the Company or any
9
Related Entity in a form or forms acceptable to the Committee, in its sole
discretion.
H. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Colorado.
XIV. Amendment or Termination of Plan.
The Committee shall have the right to amend, modify, suspend or
terminate the Plan at any time.
DESCRIPTION OF SEPARATION
This Plan is effective only upon consummation of the separation of U S
WEST, Inc. ("Old U S WEST") into two independent companies (the "Separation").
Old U S WEST currently conducts its business through two groups, the U S WEST
Communications Group and the U S WEST Media Group. Upon consummation of the
Separation, USW-C, Inc. (to be renamed "U S WEST, Inc." at Separation and
referred to in this Prospectus as "U S WEST" or the Company) will become a
separately-traded company and will conduct the business of the U S WEST
Communications Group and the domestic directories business of the U S WEST Media
Group. The Separation is expected to occur in June of 1998.
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