<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
QWEST COMMUNICATIONS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO]
April 3 , 1998
Dear Stockholder,
I am very pleased to invite you to the first Annual Meeting of Stockholders
of Qwest Communications International Inc. after becoming a public company
last year. The meeting will be held at the Hyatt Regency Denver, the Grand
Ballroom, 1750 Welton Street, Denver, Colorado on Wednesday, May 6, 1998,
starting at 10:00 a.m. local time. If you plan to attend the meeting, please
call 1-888-858-7914 by May 1, 1998.
Important information about the matters to be acted upon at the Annual
Meeting is set forth in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement.
The recently announced proposed merger of LCI International, Inc. into Qwest
will not be acted upon at the upcoming Annual Meeting, but matters related to
the proposed merger will be considered at a special meeting to be held at the
earliest practicable time after the Annual Meeting.
Your vote is important. On behalf of the Board of Directors, I urge you to
mark, sign and return the enclosed proxy card promptly, even if you plan to
attend the Annual Meeting. Mailing your completed proxy card will not prevent
you from voting in person at the meeting if you wish to do so.
Members of your Board of Directors and management look forward to greeting
personally those stockholders who attend.
Sincerely,
/s/ Joseph P. Nacchio
Joseph P. Nacchio President and
Chief Executive Officer
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
555 SEVENTEENTH STREET, 1000 QWEST TOWER
DENVER, COLORADO 80202
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1998
----------------
April 3, 1998
To the Stockholders of Qwest Communications International Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Qwest
Communications International Inc., a Delaware corporation, will be held at the
Hyatt Regency Denver, the Grand Ballroom, 1750 Welton Street, Denver, Colorado
on Wednesday, May 6, 1998, starting at 10:00 a.m. local time, for the
following purposes:
1. To elect all ten members of the Board of Directors to hold office
until the next annual meeting and until their successors are elected and
qualified;
2. To consider a proposal to approve the Qwest Communications
International Inc. Equity Incentive Plan (the "Equity Incentive Plan
Proposal");
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on March 27, 1998, are
entitled to notice of and to vote at this Annual Meeting and at any
adjournment or postponement thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE ENCOURAGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A POSTAGE
PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
ANY STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THAT
STOCKHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors
/s/ Joseph T. Garrity
Joseph T. Garrity
Corporate Secretary
Denver, Colorado
April 3, 1998
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
555 SEVENTEENTH STREET, 1000 QWEST TOWER
DENVER, COLORADO 80202
PROXY STATEMENT
GENERAL
This Proxy Statement is being furnished in connection with a solicitation by
the Board of Directors (the "Board") of Qwest Communications International
Inc., a Delaware corporation ("Qwest" or the "Company"), for use at the Annual
Meeting of Stockholders to be held at the Hyatt Regency Denver, the Grand
Ballroom, 1750 Welton Street, Denver, Colorado, on Wednesday, May 6, 1998
starting at 10:00 a.m., local time, and at any adjournment or postponement
thereof (the "Annual Meeting"). This Proxy Statement is being furnished to
holders of Qwest's common stock, par value $.01 per share (the "Common
Stock"). This Proxy Statement and accompanying proxy will be mailed on or
about April 3, 1998 to all Qwest stockholders entitled to vote at the meeting.
Unless the context otherwise requires, the term "Qwest" and the "Company"
includes Qwest, its principal operating subsidiary, Qwest Communications
Corporation ("QCC"), and Qwest's other consolidated subsidiaries.
PENDING MERGER
On March 8, 1998, Qwest and LCI International, Inc. ("LCI") entered into a
definitive Agreement and Plan of Merger with a wholly-owned subsidiary of
Qwest, providing for the merger of that Qwest subsidiary with and into LCI
that will result in LCI becoming a wholly-owned subsidiary of Qwest. The
merger is not a matter to be acted upon at the upcoming Annual Meeting of
Stockholders, and you are not being requested in any way in this Proxy
Statement to consider or vote on the merger. Matters related to the proposed
merger will be the subject of a special meeting of stockholders of Qwest, and
stockholders of record on a date yet to be determined will be provided at the
appropriate time with a definitive proxy statement concerning the merger.
VOTING RIGHTS; REVOCABILITY OF PROXY
Only stockholders of record at the close of business on March 27, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 206,677,742 shares of Common Stock outstanding,
after giving effect to the two for one stock split by way of a stock dividend
that occurred in February 1998 (the "Stock Split"). Each share of Common Stock
is entitled to one vote.
The holders of a majority of the shares entitled to vote at the Annual
Meeting, whether present in person or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. In the election
of directors, directors are elected by a plurality of the shares represented
in person or by proxy and entitled to vote. A vote withheld for a nominee in
the election of directors will be excluded entirely from the vote and will
have no effect. Approval of the Equity Incentive Plan Proposal requires the
affirmative vote of a majority of the outstanding shares of Common Stock as of
the Record Date represented in person or by proxy at the Annual Meeting and
entitled to vote.
Abstentions will have no effect on the election of directors. Abstentions on
the Equity Incentive Plan Proposal will be counted toward the tabulation of
votes cast on the proposal and will have the effect of a negative vote. Shares
registered in the names of brokers or other "street name" nominees for which
proxies are voted on some, but not all matters, will be considered to be voted
only as to those matters actually voted, and will not be considered for any
purpose as to the matters with respect to which a beneficial holder has not
provided voting instructions (commonly referred to as "broker non-votes").
Broker non-votes are not counted for any purpose in determining whether a
matter has been approved. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. All votes will be tabulated by the inspector of
election appointed for the meeting, who will separately tabulate affirmative
and negative votes, abstentions and broker non-votes. The Company's transfer
agent, Chase Mellon Shareholder Services, has been appointed by the Board of
Directors to act as the inspector of election for the meeting.
<PAGE>
As of the Record Date, Mr. Philip F. Anschutz beneficially owned 173,019,002
shares of Common Stock, representing approximately 83.7% of the voting power
of the Common Stock outstanding at that date. Mr. Anschutz has advised Qwest
that he intends to vote all of the shares beneficially owned by him in favor
of all director nominees and the Equity Incentive Plan Proposal, and
consequently, election of the nominees as directors and approval of the Equity
Incentive Plan Proposal are assured.
The shares of Common Stock will be voted according to the stockholders'
directions when executed properly. Unless otherwise directed, the shares
represented by proxies will be voted "For" all nominees and "For" the Equity
Incentive Plan Proposal.
Any stockholder giving a proxy has the power to revoke it any time before it
is exercised. It may be revoked by filing with the Secretary of Qwest at the
principal executive office of Qwest, 555 Seventeenth Street, 1000 Qwest Tower,
Denver, Colorado 80202, a written notice of revocation, or a duly executed
proxy bearing a later date. It may also be revoked by attending the meeting
and voting in person.
The cost of solicitation of the proxies will be paid by Qwest. Officers,
directors and regular employees of the Company, without additional
compensation, also may solicit proxies by further mailing, by telephone or
personal conversations. Qwest has no plans to retain any firms or otherwise
incur any extraordinary expense in connection with the solicitation. Copies of
solicitation material will be furnished to brokers, fiduciaries and custodians
to forward to beneficial owners of the Common Stock held in their names. Qwest
will reimburse brokers and other persons representing beneficial owners of
shares for their reasonable expenses in forwarding solicitation material to
such beneficial owners.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each person known by
Qwest to beneficially own more than five percent of the Qwest Common Stock;
(ii) each director and nominee for director of Qwest; (iii) each of the
current executive officers of Qwest named in the Summary Compensation Table
below; and (iv) all current directors and executive officers of Qwest as a
group.
<TABLE>
<CAPTION>
ADDRESS FOR AMOUNT AND NATURE OF PERCENT OF
NAME 5% OWNERS BENEFICIAL OWNERSHIP(1) OUTSTANDING SHARES(2)
---- ---------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Philip F. Anschutz...... 555 Seventeenth Street 173,019,002(3) 83.7%
Suite 1000
Denver, CO 80202
Joseph P. Nacchio....... 1,234,336(4) *
Robert S. Woodruff...... 358,710(5) *
Cannon Y. Harvey........ 6,000 *
Richard T. Liebhaber.... 30,000(6) *
Douglas L. Polson....... 68,008 *
Craig D. Slater......... 98,668(7) *
Jordan L. Haines........ 4,000 *
W. Thomas Stephens...... 4,000 *
Roy A. Wilkens.......... 42,080(8) *
A. Dean Wandry.......... 147,222 *
Stephen M. Jacobsen..... 90,000(6) *
Lewis O. Wilks.......... -- *
Brij Khandelwal......... -- *
Larry A. Seese.......... -- *
Directors and Executive
Officers as a Group (20
persons)............... 175,102,026 84.7%
</TABLE>
- --------
* Less than one percent.
(1) Except as otherwise indicated, Qwest believes that the persons listed in
the above table have sole investment and voting power with respect to all
shares beneficially owned by them, subject to applicable community
property laws. For purposes of this table, beneficial ownership is
determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended, and generally includes voting or investment power
with respect to securities. Under that Rule, securities relating to
options are deemed to be beneficially owned if they are currently
exercisable or exercisable within 60 days. The amounts shown in the table
do not include shares relating to options not currently exercisable or not
exercisable within 60 days.
(2) Based upon 206,677,742 shares of Common Stock issued and outstanding as of
the Record Date plus, as to the holder thereof only and no other person,
exercise of all derivative securities that are exercisable or convertible
currently or within 60 days of March 27, 1998.
(3) Includes 20,336 shares held as custodian for one of Mr. Anschutz's
children, as to which beneficial ownership is disclaimed. Does not include
8,600,000 shares issuable upon exercise of a warrant held by Anschutz
Family Investment Company LLC of which Anschutz Company, a corporation
wholly owned by Mr. Anschutz, is the manager and one percent equity owner.
(4) Includes 1,024,451 shares currently issuable upon exercise of options and
1,600 shares owned by or for the benefit of Mr. Nacchio's children.
(5) Includes 1,000 shares owned by Mr. Woodruff's spouse as to which
beneficial ownership is disclaimed.
(6) Represents shares issuable within 60 days upon exercise of options.
(7) Includes 37,500 shares currently issuable upon exercise of options.
(8) Includes 3,930 shares held by a limited liability company in which one of
Mr. Wilkens's children owns a 99% interest, as to which beneficial
ownership is disclaimed.
3
<PAGE>
PRINCIPAL STOCKHOLDER
As of the Record Date Mr. Anschutz was the beneficial owner of approximately
83.7% of the outstanding shares of Common Stock. Anschutz Company has granted
or expects to grant from time to time security interests in all or part of its
shares of the Common Stock in connection with transactions entered into by it
or its affiliates. Although not anticipated, under certain circumstances,
shares of Common Stock could be sold pursuant to such security interests,
which could result in a change of control of the Company for purposes of
Delaware law.
PROPOSAL 1--ELECTION OF DIRECTORS
NOMINEES
Each of the ten nominees for the ten positions on the Board of Directors is
currently a member of the Board of Directors. The nominees for directors of
Qwest, their ages and positions with Qwest and biographies are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Philip F. Anschutz.......... 58 Director and Chairman
Joseph P. Nacchio........... 48 Director, President and Chief Executive Officer
Robert S. Woodruff.......... 49 Director, Executive Vice President--Finance and
Chief Financial Officer and Treasurer
Jordan L. Haines............ 70 Director
Cannon Y. Harvey............ 57 Director
Richard T. Liebhaber........ 62 Director
Douglas L. Polson........... 55 Director
Craig D. Slater............. 40 Director
W. Thomas Stephens.......... 55 Director
Roy A. Wilkens.............. 55 Director
</TABLE>
Each person nominated has agreed to serve if elected, and management has no
reason to believe that any of the nominees will be unavailable for service.
Shares represented by executed proxies will be voted, if authority to do so is
not withheld, for the re-election of the ten nominees. In the event that any
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose.
Philip F. Anschutz has been a Director and the Chairman of the Board of
Qwest since February 1997. He was a Director and Chairman of the Board of QCC
from November 1993 until September 1997. He has been a Director and Chairman
of the Board of Anschutz Company, Qwest's majority stockholder, for more than
five years, and a Director and Chairman of the Board of The Anschutz
Corporation, a wholly owned subsidiary of Anschutz Company, for more than five
years. Since the merger of Southern Pacific Rail Corporation ("SPRC") and
Union Pacific Corporation ("UP") in September 1996, Mr. Anschutz has served as
Vice-Chairman of UP. Prior to the merger, Mr. Anschutz was a Director of SPRC
from June 1988 to September 1996, Chairman of SPRC from October 1988 to
September 1996, and President and Chief Executive Officer of SPRC from October
1988 to July 1993. He also has been a Director of Forest Oil Corporation since
1995. Mr. Anschutz serves as a member of the Compensation Committee.
Joseph P. Nacchio became Director, President and Chief Executive Officer of
Qwest in February 1997, having been appointed to the same positions at QCC in
January 1997. Prior to joining Qwest he was Executive Vice President of AT&T's
Consumer and Small Business Division since January 1996. In that capacity he
was responsible for AT&T's core consumer long distance business, and AT&T's
DirecTV, AT&T Alascom and
4
<PAGE>
Language Line businesses. He was also responsible for marketing and sales
targeted at all consumer and small businesses in the United States. In 1994
and 1995 Mr. Nacchio was President of AT&T's Consumer Communications Services
long distance, a winner of the Malcolm Baldrige National Quality Award for
Excellence. From November 1991 until August 1994, Mr. Nacchio was President of
AT&T's Business Communications Services unit focused on the long distance
communications needs of business customers. Since joining AT&T in June 1970 he
held assignments in network operations, engineering, marketing and sales. Mr.
Nacchio earned an M.S. degree in management from the Massachusetts Institute
of Technology in the Sloan Fellows Program. He also received an M.B.A. degree
and a B.S. degree in electrical engineering, both from New York University.
Robert S. Woodruff became a Director and Executive Vice President--Finance
and Chief Financial Officer of Qwest in February 1997. He served as interim
Chief Operating Officer of Qwest and QCC from November 1996 through April
1997. He has served as a Director of QCC since December 1996. He became
Executive Vice President--Finance, Chief Financial Officer and Treasurer of
QCC in August 1994. He serves as a Director of FSI Acquisition Corp.,
Government Communications Inc., Qwest Transmission Inc., Qwest Properties,
Inc., and U.S. TeleSource, Inc., all of which are wholly owned subsidiaries of
QCC. He is also Sole Administrator of QCC's Mexican subsidiaries, Opticom,
S.A. de C.V., Servicios Derecho de Via, S.A. de C.V., and S.P. Servicios
Mexico, S.A. de C.V. Prior to joining Qwest he had been a partner in the
accounting firm of Coopers & Lybrand since 1984, where his responsibilities
included providing services to communications companies. Mr. Woodruff received
a B.B.A. degree in accounting, with honors, from the University of Wisconsin.
Jordan L. Haines was appointed a Director of Qwest in June 1997. He was
Chairman of the Board of Fourth Financial Corporation, a Kansas-based bank
holding company, and its subsidiary, Bank IV Wichita, N.A., from 1983 until
his retirement in 1991. He has been a member of the Board of Directors of KN
Energy, Inc. since 1983 and a Director of Forest Oil Corporation since 1996.
Mr. Haines serves as a member of the Audit Committee and the Compensation
Committee.
Cannon Y. Harvey has been a Director of Qwest since February 1997, and was
Director of QCC from December 1996 until September 1997. He has been President
and Chief Operating Officer of both Anschutz Company and The Anschutz
Corporation since December 1996. From February 1995 until September 1996 he
served as Executive Vice President--Finance and Law of SPRC; from September
1993 to February 1995 he served as Senior Vice President and General Counsel
of SPRC; from May 1993 to September 1993 he served as Vice President--Finance
and Law and General Counsel of SPRC. Prior to joining SPRC, Mr. Harvey was a
Partner in the law firm of Holme Roberts & Owen LLP for more than five years.
Mr. Harvey serves on the Audit Committee.
Richard T. Liebhaber has been a Director of Qwest since February 1997. He
has been a Managing Director of Veronis, Suhler & Associates, Inc., the New
York media merchant banking firm, since June 1, 1995. Mr. Liebhaber has been a
member of the board of directors of Objective Communications, Inc. since
August 1994, the board of directors of Alcatel Network Systems, Inc. since
June 1995, the board of directors of Geotek Communications, Inc. since April
1995, the board of directors of Internet Communications Corporation since May
1997, and the board of directors of Scholz Master Builders since December
1985. From December 1985 to his retirement in May 1995, Mr. Liebhaber served
as Executive Vice President of MCI Communications Corporation and as a member
of its Management Committee. Mr. Liebhaber was a member of the board of
directors of MCI Communications Corporation from July 1992 until his
retirement in May 1995.
Douglas L. Polson has been a Director of Qwest since February 1997, and was
Director of QCC for more than five years until 1997. He has been a Director
and Vice President--Finance of both Anschutz Company and The Anschutz
Corporation for more than five years. He was a Director of SPRC from June 1988
to September 1996; Vice Chairman of SPRC from June 1988 to September 1996; and
a Vice President of SPRC from October 1988 to September 1996.
Craig D. Slater has been a Director of Qwest since February 1997 and a
Director of QCC since November 1996. He has been President of Anschutz
Investment Company since August 1997 and Vice President--
5
<PAGE>
Acquisitions and Investments of both Anschutz Company and The Anschutz
Corporation since August 1995. Mr. Slater served as Corporate Secretary of
Anschutz Company and The Anschutz Corporation from September 1991 to October
1996 and held various other positions with those companies from 1988 to 1995.
He has been a Director of Forest Oil Corporation since 1995 and Internet
Communications Corporation since 1996.
W. Thomas Stephens was appointed a Director of Qwest in June 1997. He is
President, Chief Executive Officer and a director of MacMillan Bloedel
Limited, Canada's largest forest products company. He served from 1986 until
his retirement in 1996 as President and Chief Executive Officer of Manville
Corporation, an international manufacturing and resources company. He also
served as a member of the Manville Corporation Board of Directors from 1986 to
1996, and served as Chairman of the Board from 1990 to 1996. Mr. Stephens is a
Director of The Putnam Funds and New Century Energies. He serves as a member
of the Audit Committee and the Compensation Committee.
Roy A. Wilkens was appointed a Director of Qwest in March 1998. He was
President of Williams Pipeline Company when he founded WilTel Network Services
as an operating unit of The Williams Companies, Inc. in 1985. He was
Founder/CEO of WilTel Network Services from 1985 to 1997. In 1995, WilTel
Network Services was acquired by LDDS Communications, which now operates under
the name WorldCom. In 1997, Mr. Wilkens retired from WorldCom as Vice
Chairman. In 1992, Mr. Wilkens was appointed by President George Bush to the
National Security Telecommunications Advisory Council. He has also served as
chairman of both the Competitive Telecommunications Association (CompTel) and
the National Telecommunications Network. Mr. Wilkens is a member of the board
of directors of Paging Network Inc., UniDial Inc. and Invensys Corporation
Inc.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board held 14 meetings during 1997, including both regularly scheduled
and special meetings and actions by unanimous written consent.
Audit Committee. The Board established an Audit Committee in May 1997 to:
(i) make recommendations concerning the engagement of independent public
accountants; (ii) review with Qwest management and the independent public
accountants the plans for, and scope of, the audit procedures to be utilized
and results of audits; (iii) approve the professional services provided by the
independent public accountants; (iv) review the adequacy and effectiveness of
Qwest's internal accounting controls; and (v) perform any other duties and
functions required by any organization under which Qwest's securities may be
listed. Cannon Y. Harvey, Jordan L. Haines and W. Thomas Stephens are the
members of the Audit Committee. The Audit Committee did not meet during 1997.
Compensation Committee. In December 1996, the Board of Qwest's predecessor
company created a Compensation Committee and appointed Philip F. Anschutz and
Cannon Y. Harvey to serve on the committee. In July 1997, Mr. Harvey resigned
from the committee. Since July 1997, Philip F. Anschutz, Jordan L. Haines and
W. Thomas Stephens have served on the committee. The Compensation Committee
determines the salaries, cash bonuses and fringe benefits of the executive
officers, reviews the salary administration and benefit policies of Qwest and
administers the Growth Share Plan and the Equity Incentive Plan. Effective as
of November 1997, Mr. Anschutz elected not to participate in the grant of
options and other awards under the Equity Incentive Plan. During 1997, the
Compensation Committee held one formal meeting in conjunction with a meeting
of the Board, took action by unanimous written consent four times and had
informal meetings preceding the actions taken by unanimous written consent.
Each Director attended more than 75% of the aggregate number of Board and/or
applicable committee meetings in 1997.
Recommendation of the Board
THE BOARD RECOMMENDS THAT THE QWEST STOCKHOLDERS VOTE "FOR" EACH NAMED
NOMINEE FOR DIRECTOR.
6
<PAGE>
EXECUTIVE OFFICERS AND MANAGEMENT
Qwest has no executive officers other than those who are also directors
(about whom information is set forth above). Senior management of QCC includes
the individuals set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gregory M. Casey.......... 39 Senior Vice President--Carrier Markets
Stephen M. Jacobsen....... 39 Senior Vice President--Consumer Markets
Executive Vice President and Chief Information
Brij Khandelwal........... 52 Officer
Managing Director and Senior Vice President--
Reynaldo U. Ortiz......... 51 International
Executive Vice President--Network Engineering and
Larry A. Seese............ 52 Operations
Nayel S. Shafei........... 38 Executive Vice President--Product Development
August B. Turturro........ 50 Senior Vice President--Network Construction
A. Dean Wandry............ 57 Senior Vice President--New Business Development
Marc B. Weisberg.......... 40 Senior Vice President--Corporate Development
Lewis O. Wilks............ 44 President--Business Markets
</TABLE>
Gregory M. Casey became Senior Vice President--Carrier Markets of QCC in
June 1997. In this capacity, he is responsible for all of Qwest's carrier
marketing and sales programs. Prior to joining QCC, Mr. Casey was, since 1996,
Vice President of Carrier Relations and Regulatory Affairs at LCI, with
responsibility for managing relationships with RBOCs and LECs and negotiating
interconnection arrangements and wholesale pricing for resale of local
service. From 1991 to 1996, he was employed by ONCOR Communications Inc.,
where he served as Senior Vice President of Regulatory Affairs and Telephone
Company Relations. Prior to joining ONCOR, he was Senior Vice President and
General Counsel for Telesphere International Inc. Mr. Casey holds a B.A.
degree in political science from the University of Connecticut and a J.D.
degree from DePaul University College of Law.
Stephen M. Jacobsen became Senior Vice President--Consumer Markets of QCC in
March 1997. In this capacity, he is responsible for all of QCC's consumer
marketing and sales programs. Prior to joining QCC, Mr. Jacobsen was Regional
Vice President--Consumer and Small Business for AT&T in Southern California
and Nevada since 1996, with responsibility for all marketing functions for
consumer and small business customers in those geographic areas. During his
nearly sixteen-year career at AT&T, Mr. Jacobsen held key managerial positions
in the network services division, including responsibility for AT&T's network
operations center in the western region as well as positions in sales,
marketing and product management. Mr. Jacobsen holds an M.S. degree in
management from the Massachusetts Institute of Technology in the Sloan Fellows
Program and a B.S.B.A. degree from the University of Arizona.
Brij Khandelwal became Executive Vice President and Chief Information
Officer of QCC in October 1997. Prior to joining Qwest he was Vice President
and Chief Information Officer at Lucent Technologies Network Systems from
November 1995 to October 1997. At Lucent from August 1994 to October 1997, he
was responsible for global delivery of enterprise information systems and
services aligned with corporate strategic and tactical goals. He is
experienced in a wide range of information technologies, systems and processes
affecting the business enterprise, including sales, marketing, financial,
operations, and R&D. From August 1990 through August 1994 he was Director,
Systems Development at GE Aerospace/Martin Marietta, where he was responsible
for architecture and delivery of enterprise information systems. Mr.
Khandelwal holds a B.S. from the University of Roorkee (Roorkee, India), an
M.S. from the University of Nebraska, and a Ph.D. from the University of
Wisconsin.
Reynaldo U. Ortiz became Managing Director and Senior Vice President--
International of QCC in December 1997. Before joining Qwest full time, Mr.
Ortiz was a consultant to QCC. In this capacity, he negotiated with the
government of Mexico and Bestel S.A. de C.V. to extend the Qwest network into
14 major cities in Mexico. Previously, Mr. Ortiz served as president and CEO
of US West International, Inc., where he
7
<PAGE>
developed and implemented a successful strategy for US West's entry into the
cable television-telephony and wireless communications markets in Asia, Europe
and Latin America. He also developed international distribution sales and
marketing agreements and product sourcing for International Business Machines,
Inc. Mr. Ortiz received an honorary doctorate degree in law from New Mexico
State University for his international achievements. He also holds an M.S. in
management from Stanford University.
Larry A. Seese became Executive Vice President--Network Engineering and
Operations of QCC in October 1997. From 1968 to October 1997, he was employed
by AT&T, most recently as Vice President of Network Operations. During Mr.
Seese's 29 year tenure at AT&T, he was responsible for managing the
operations, reliability and cost performance of AT&T's voice and data networks
and worked on the development of advanced switching systems and the
development of lightwave systems. He has experience in all aspects of network
planning, development, certification and deployment. Mr. Seese holds a B.S.
from the University of Kentucky and an M.S. from Columbia University, both in
electrical engineering. He also received an M.S. from the Sloan School of
Management at the Massachusetts Institute of Technology.
Nayel S. Shafei became Executive Vice President--Product Development of QCC
in August 1997. From August 1996 to August 1997 he was Senior Vice President
and General Manager of Arrowsmith Corporation's Telecommunications Division.
From July 1994 to August 1996, he was Vice President and General Manager for
Allied Signal. From April 1992 to July 1994, he was Vice President,
Development and General Manager for Computervision Corporation, and was
Principal Architect, Research and Development for Computervision from August
1986 to February 1991. Mr. Shafei serves as a computer/communications
consultant for the United Nations Development Program and is a member of the
IEEE Computer Society, Association of Computer Machinery, Society of Cable
Engineers and Product Data Exchange Standards. He holds an undergraduate
degree from Cairo University and an M.S. and a Ph.D. in computer science from
the school of engineering at the Massachusetts Institute of Technology.
August B. Turturro became Senior Vice President--Network Construction for
QCC in September 1997 and President and Chief Operating Officer of Qwest
Network Construction Services. From January 1996 to September 1997, Mr.
Turturro was President and Chief Operating Officer of Inliner American, a
specialty trenchless utility contractor. From January 1992 to January 1996 he
was President and Chief Executive Officer of Fishbach Corporation and its
Natkin Group, which is the second largest specialty contractor in the United
States. Mr. Turturro has over 27 years of construction experience as a
professional engineer and holds contractor licenses in several states. He
holds a B.S. degree in Mechanical Engineering from West Virginia University.
A. Dean Wandry became Senior Vice President--Cable & Access Services for QCC
in November 1994 and Senior Vice President--New Business Development for QCC
in December 1995. In 1981 Mr. Wandry formed Citation Cable Systems Limited,
which merged into Fanch Communications, Inc. in 1986. Following the merger, he
served as Vice President--Operations until he joined QCC. He joined Bayly
Corp., a multinational apparel manufacturer, in 1967 and served as President
of the Sales and Marketing Division from 1977 to 1981. He holds a B.S. degree
in economics from the University of Colorado.
Marc Weisberg became Senior Vice President--Corporate Development of QCC in
September 1997. Prior to joining QCC, he was the founder and owner of Weisberg
& Company, where he provided investment banking and advisory services to
clients in several industries, including telecommunications, multimedia and
emerging technologies. Mr. Weisberg holds a B.A. from Michigan State
University.
Lewis O. Wilks became President--Business Markets of QCC in October 1997.
Mr. Wilks, who previously was president of GTE Communications, has extensive
senior-level management experience in delivering communications services to
the corporate sector. While Mr. Wilks served as president of GTE
Communications, he oversaw national sales, service and marketing activities
for the competitive local exchange markets. The business unit, under his
leadership, was responsible for all consumer, business and strategic accounts
as well as long-distance, media ventures and Internet product distribution.
Before joining GTE, Mr. Wilks was a senior executive with MCI Corporation, and
held a variety of management positions with Wang Laboratories.
8
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Directors who are officers or employees of Qwest or any of its affiliates do
not receive compensation, except as officers or employees of Qwest or its
affiliates.
Directors who are neither officers nor employees of Qwest or any of its
affiliates, other than Mr. Liebhaber, are entitled to receive $24,000 per
annum for serving as directors of Qwest. Each director who is neither an
officer nor an employee of Qwest or any of its affiliates, other than Mr.
Liebhaber, is entitled to receive an attendance fee of $2,000 per meeting of
the Board and of a committee of which he is a member. The Board has adopted
the Qwest Communications International Inc. Equity Compensation Plan for Non-
Employee Directors (the "Director Equity Plan") pursuant to which each
director who is not an employee of Qwest or any of its affiliates may elect to
receive directors' fees in the form of Qwest Common Stock. Directors may elect
on a quarterly basis to receive their directors' fees either in Qwest Common
Stock or in cash.
Mr. Liebhaber has a consulting agreement with QCC. The consulting agreement
provides that he will be paid an annual retainer fee of $250,000 plus
reimbursement for out-of-pocket expenses not to exceed $10,000 without QCC's
prior approval. Mr. Liebhaber agreed to waive director's fees in consideration
for these payments. See "Certain Transactions."
Messrs. Slater, Polson and Liebhaber, directors of Qwest, have been granted
a total of 20,000, 7,500 and 10,000 growth shares, respectively, under the
Qwest Growth Share Plan. All of Mr. Polson's growth shares became 100% vested
and payable at the time of the Company's initial public offering in June 1997
(the "Initial Public Offering") and he received compensation attributable to
his growth shares in 1997 of $1,772,449. 7,500 of Mr. Slater's growth shares
became 100% vested and payable at the time of the Initial Public Offering and
he received compensation attributable to such growth shares in 1997 of
$1,772,449. The balance of Mr. Slater's growth shares and all of Mr.
Liebhaber's growth shares remain outstanding, but the value of such growth
shares has been capped at a value generally determined by the $11.00 per share
price (as adjusted to reflect the Stock Split) of the Company's Common Stock
in the Initial Public Offering and the performance cycle will end on a date in
2001 selected by Qwest in its sole discretion. Based upon the provisions of
the Growth Share Plan and their respective growth share agreements, as
amended, the maximum amount payable to Messrs. Slater and Liebhaber with
respect to the balance of their growth shares is $2.3 million and $1.8 million
respectively. Messrs. Slater and Liebhaber also received stock options at the
time of the Initial Public Offering to provide incentive compensation with
respect to appreciation in the Company's Common Stock subsequent to the
Initial Public Offering.
Messrs. Slater, Liebhaber and Harvey have each been granted stock options
pursuant to the Equity Incentive Plan. Mr. Slater has been granted stock
options covering a total of 650,000 shares of Qwest Common Stock with 250,000
options having an exercise price of $11.00 per share and vesting at the rate
of 20% per year beginning at the same time as Mr. Slater's growth shares and
400,000 options having an exercise price of $30.00 per share and vesting at
the rate of 20% per year beginning on December 1, 1998. Mr. Liebhaber has been
granted stock options covering a total of 300,000 shares of Qwest Common
Stock, with 200,000 options having an exercise price of $11.00 per share and
vesting at the rate of 20% per year beginning at the same time as Mr.
Liebhaber's growth shares and 100,000 shares having an exercise price of
$30.00 per share and vesting at the rate of 20% per year beginning on December
1, 1998. Mr. Harvey has been granted stock options covering a total of 200,000
shares of Qwest Common Stock with an exercise price of $30.00 per share and
vesting at the rate of 20% per year beginning on December 1, 1998.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued to Qwest's
chief executive officer and four other most highly compensated executive
officers of Qwest and its operating subsidiaries (the "named executives" or
"named executive officers") during the last three completed fiscal years,
together with the compensation paid or accrued to additional executive
officers of Qwest and its operating subsidiaries who joined the Company in
1997 whose annualized rate of salary would place them among the four most
highly compensated executive officers. The position identified in the table
for each person is that person's current position at Qwest unless otherwise
indicated. Mr. Nacchio joined Qwest as its Chief Executive Officer effective
9
<PAGE>
January 4, 1997. Mr. Woodruff served as interim Chief Operating Officer of QCC
from November 1996 to April 28, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -----------------------
AWARDS PAYOUTS
-----------------------
NUMBER OF
SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
NAME/PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
----------------------- ---- -------- -------- ------------ ----------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph P. Nacchio....... 1997 $593,461 $300,000 -- 6,000,000 -- $7,405,273(1)
President and Chief 1996 -- -- -- -- -- --
Executive
Officer 1995 -- -- -- -- -- --
Robert S. Woodruff...... 1997 $200,000 $ 70,000 $ 25,000(2) 400,000 $ 9,453,025 $ 7,750(3)
Executive Vice 1996 182,200 25,000 2,083 -- -- 5,466
President--Finance
and Chief Financial 1995 167,766 16,500 -- -- -- 1,671
Officer and Treasurer
A. Dean Wandry.......... 1997 $157,000 $ 47,100 -- 150,000 $ 8,271,383 $ 7,930(3)
Senior Vice President-- 1996 148,300 30,000 -- -- -- 7,725
New
Business Development of 1995 141,866 14,000 -- -- -- 2,310
QCC
Anthony Brodman......... 1997 $157,000 $ -- -- 50,000 $ 5,908,127 $ 7,930(3)
Senior Vice President-- 1996 152,333 30,000 -- -- -- 7,945
Fiber
Markets of QCC 1995 130,270 11,364 $ 15,752(4) -- -- 7,163
Stephen M. Jacobsen 1997 $143,020(5) -- $132,085(6) 600,000 -- --
Senior Vice President-- 1996 -- -- -- -- -- --
Consumer
Markets of QCC 1995 -- -- -- -- -- --
Lewis O. Wilks.......... 1997 $ 50,750(7) -- $200,000(6) 700,000 -- --
President--Business 1996 -- -- -- -- -- --
Markets of
QCC 1995 -- -- -- -- -- --
Brij Khandelwal......... 1997 $ 47,740(8) -- $150,000(6) 700,000 -- --
Executive Vice 1996 -- -- -- -- -- --
President and
Chief Information 1995 -- -- -- -- -- --
Officer of QCC
Larry A. Seese.......... 1997 $ 54,994(9) -- $200,000(6) 750,000 -- --
Executive Vice 1996 -- -- -- -- -- --
President--Network
Engineering and 1995 -- -- -- -- -- --
Operations of QCC
</TABLE>
- --------
(1) The amount shown represents the first installment of the "equalization
payment" (see "--Employment Contracts and Termination of Employment and
Change-in-Control Arrangements") paid to Mr. Nacchio in 1997 together with
interest of $173,273 that accrued with respect to the remaining portion of
the "equalization payment." That interest was paid to Mr. Nacchio in
January 1998.
(2) The amount shown represents QCC's forgiveness of a portion of a loan.
(3) The amount shown represents QCC's contribution to QCC's 401(k) plan.
(4) The amount shown represents commissions.
(5) Mr. Jacobsen began his employment with QCC in March 1997 and amounts
disclosed for Mr. Jacobsen for 1997 represent compensation paid after that
date. Mr. Jacobsen will receive an annual salary of $192,770 for 1998.
(6) The amount shown represents relocation payments.
(7) Mr. Wilks began his employment with QCC in October 1997 and amounts
disclosed for Mr. Wilks for 1997 represent compensation paid after that
date. Mr. Wilks will receive an annual salary of $273,000 for 1998.
(8) Mr. Khandelwal began his employment with QCC in October 1997 and amounts
disclosed for Mr. Khandelwal for 1997 represent compensation paid after
that date. Mr. Khandelwal will receive an annual salary of $225,000 for
1998.
(9) Mr. Seese began his employment with QCC in October 1997 and amounts
disclosed for Mr. Seese for 1997 represent compensation paid after that
date. Mr. Seese will receive an annual salary of $230,000 for 1998.
10
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information with respect to the named
executives concerning the grant of stock options in 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATE OF STOCK
INDIVIDUAL GRANTS AWARDS PRICE APPRECIATION FOR OPTION
- ------------------------------------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --------------- --------------- ----------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Nacchio....... 6,000,000(1) 43.18% $ 11.00 6/30/03 $ 22,617,341 $ 51,375,214
Robert S. Woodruff...... 400,000(2) 2.88% $ 30.00 12/1/07 7,546,736 19,124,910
Lewis O. Wilks.......... 700,000(3) 5.04% $ 23.75 10/3/07 10,455,373 26,495,968
Brij Khandelwal......... 700,000(4) 5.04% $22.875 9/27/07 10,070,175 25,519,801
Larry A. Seese.......... 750,000(5) 5.40% $22.875 9/26/07 10,789,473 27,342,644
A. Dean Wandry.......... 150,000(2) 1.08% $ 30.00 12/1/07 2,830,026 7,171,841
Stephen M. Jacobsen..... 600,000(6) 4.32% $ 11.00 9/24/03 2,299,861 5,248,074
Anthony J. Brodman...... 50,000(7) 0.36% $ 11.00 4/1/03 182,584 413,888
</TABLE>
- --------
(1) Granted on June 23, 1997 and exercisable in five annual increments of 20%
each commencing December 31, 1997.
(2) Granted on December 1, 1997 and exercisable in five annual increments of
20% each commencing December 1, 1998.
(3) Granted on October 3, 1997 and exercisable in increments of 140,000 shares
each year for four years beginning October 27, 1998 and in two additional
increments of 70,000 shares each on October 27, 2002 and October 27, 2003.
(4) Granted on September 27, 1997 and exercisable in five annual increments of
20% each commencing October 16, 1998.
(5) Granted on September 26, 1997 and exercisable in two annual increments of
200,000 shares each commencing October 6, 1998, three annual increments of
100,000 shares for each of three years beginning October 6, 2000 and a
final increment of 50,000 shares on October 6, 2003.
(6) Granted on June 23, 1997 and exercisable in 15% increments on each of
March 24, 1998 through March 24, 2001 and in an increment of 40% on March
24, 2002.
(7) Granted on June 23, 1997 and exercisable in 15% increments commencing
October 1, 1997 through October 1, 2000 and in an increment of 40% on
October 1, 2001.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executive officers concerning unexercised options held at the end of 1997.
None of the named executive officers exercised options during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
----------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Joseph P. Nacchio....... 1,200,000 4,800,000 $ 22,500,000 $ 90,000,000
Robert S. Woodruff...... -- 400,000 -- --
Lewis O. Wilks.......... -- 700,000 -- 4,200,000
Brij Khandelwal......... -- 700,000 -- 4,812,500
Larry A. Seese.......... -- 750,000 -- 5,156,250
A. Dean Wandry.......... -- 150,000 -- --
Stephen M. Jacobsen..... -- 600,000 -- 11,250,000
Anthony J. Brodman...... 7,500 42,500 140,625 796,875
</TABLE>
11
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information with respect to the named
executive officers concerning the grant of long-term incentive plan awards in
1997.
LONG-TERM INCENTIVE PLANS--AWARDS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
NAME NUMBER OF GROWTH SHARES PERFORMANCE PERIOD
---- ----------------------- -----------------------
<S> <C> <C>
Joseph P. Nacchio............... 300,000 January 1, 1997 to 2001
Stephen M. Jacobsen............. 30,000 January 1, 1997 to 2001
</TABLE>
Qwest's Growth Share Plan, as amended, provides for the grant of "growth
shares" to selected employees and directors of Qwest and certain affiliates
who can significantly affect the long-term financial success of Qwest. The
Growth Share Plan is unfunded and is a general, unsecured obligation of Qwest.
A growth share is a unit of value based on the increase in the value of Qwest
over a specified performance cycle or other specified measuring period. The
value of a growth share is generally equal to (i) the value Qwest at or near
the date of a "triggering event" (as defined below), minus (ii) the value of
Qwest as of a date determined by Qwest's Board of Directors in its sole
discretion at the time of grant of a growth share ("Beginning Company Value"),
minus (iii) the value of contributions to capital during the period beginning
with the date as of which Qwest's value for purposes of the growth share grant
is determined and ending with the date as of which the value of the growth
shares is determined (the "Measuring Period") together with an amount equal to
9% of each such contribution made by entities controlled by Philip F.
Anschutz, compounded annually, reduced for any return of capital, plus (iv)
dividends paid during the Measuring Period, divided by (v) 10,000,000 (the
total number of growth shares authorized). The value of Qwest for this purpose
will be based on the trading price of Qwest's equity securities over the 20
consecutive trading days ending on the last day of the Measuring Period if all
classes of Qwest's outstanding equity securities are publicly traded and Qwest
is subject to the reporting and disclosure rules of the Exchange Act,
otherwise the value will be determined by independent appraisal. Payment for
growth shares is generally made at the end of the performance cycle or upon
the occurrence of certain "triggering events", which consist of termination of
the Growth Share Plan and a "change in control" (see Employment Contracts and
Termination of Employment and Change-in-Control Arrangements). Qwest has
entered into amendments to the growth share arrangements with Messrs. Nacchio
and Jacobsen which provide that (i) following completion of the Initial Public
Offering, the value of the growth shares is capped at a value generally
determined by the $11 per share price (as adjusted to reflect the Qwest Stock
Split) of the Qwest Common Stock in the Initial Public Offering and (ii) the
performance cycle will end on a date in 2001 selected by Qwest in its sole
discretion. Based upon the provisions of the Growth Share Plan and their
respective growth share agreements, as amended, the maximum amount payable to
Messrs. Nacchio and Jacobsen with respect to their growth shares is $27.7
million and $2.8 million, respectively. The growth shares vest at the rate of
20% per year, beginning on January 1, 1998 for Mr. Nacchio and March 24, 1998
for Mr. Jacobsen. In addition, the growth shares will become fully vested in
the event of death, disability or retirement after age 65. See "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements"
for a more detailed description of Mr. Nacchio's growth share grant.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Nacchio. Qwest and Joseph P. Nacchio entered into an employment
agreement dated as of December 21, 1996, and amended as of January 3, 1997,
pursuant to which Mr. Nacchio joined Qwest as its President and Chief
Executive Officer effective January 4, 1997, for a term through the close of
business on December 31, 2001, unless terminated earlier by either party. The
agreement provides for an annual base salary of $600,000, a $300,000 bonus for
1997, and a $300,000 bonus for 1998. Mr. Nacchio may participate in the
employee benefit plans available to Qwest's senior executives according to the
plans' terms and conditions. Under the agreement, Mr. Nacchio has been granted
300,000 growth shares under Qwest's Growth Share Plan, with a five year
performance cycle commencing January 1, 1997 and a "beginning company value"
of $1 billion.
12
<PAGE>
The value of the growth shares is capped at a value generally determined by
the $11.00 per share price (as adjusted to reflect the Qwest Stock Split) of
the Qwest Common Stock in the Initial Public Offering. The growth shares will
vest in 20% increments on each January 1 beginning January 1, 1998, provided
that the final 20% increment will vest on the date in 2001 that ends the
performance cycle, as determined by Qwest in its sole discretion. The growth
share agreement between Qwest and Mr. Nacchio provides for terms that are
different from the general terms of the Growth Share Plan in certain respects.
Annually, Mr. Nacchio may elect to receive payment for up to 20% of his vested
growth shares in shares of Qwest Common Stock; the growth shares for which he
has received payment will be canceled. The number of growth shares granted to
Mr. Nacchio are subject to adjustment upon changes in Qwest's capital
structure in connection with mergers and other reorganizations. If Mr.
Nacchio's employment is terminated for good reason (generally, resignation
after a reduction in title or responsibility) or other than for cause (as
defined below), he will vest in one-twelfth of the 20% of growth shares
subject to annual vesting for the year of termination for each full month of
employment in such calendar year. A change in control (as defined in the
employment agreement) will not result in full vesting of, or payment for, the
growth shares unless Mr. Nacchio is terminated without cause or resigns for
good reason after the change in control. If his employment is terminated for
cause, he will be paid for his vested growth shares based on the value of
Qwest as of the end of the immediately preceding calendar year. Upon payment
of certain dividends, the growth shares will vest 100% and Mr. Nacchio will be
paid for a portion of the growth shares. Termination of the Plan will not be a
"triggering event,"as defined in the Growth Share Plan, with respect to Mr.
Nacchio's growth shares.
Qwest has granted Mr. Nacchio an option under Qwest's Equity Incentive Plan
to purchase six million shares of Qwest Common Stock. See "--Equity Incentive
Plan." The exercise price is $11.00 per share. The option will vest 20% per
year beginning on December 31, 1997 and will become fully vested upon Mr.
Nacchio's death, disability or retirement. If Mr. Nacchio resigns for good
reason (as defined in the growth share agreement) or if Qwest terminates his
employment other than for cause, he will vest in one-twelfth of the 20%
increment scheduled to vest for the year of termination for each full month of
employment with Qwest during such year. If Qwest terminates his employment
without cause or if he resigns for good reason (as defined in the employment
agreement, provided that for this purpose the occurrence of a change in
control by itself is not good reason), in each case following a change in
control, the option will become fully vested. If Mr. Nacchio's employment
terminates for any other reason, he will forfeit the unvested portion of his
option and retain the vested portion of his option, provided that if his
employment is terminated for cause, he can exercise the vested portion of the
option only until the first to occur of (1) the date that is six months after
the day after his termination or (2) June 30, 2003. He can exercise the vested
portion of the option at any time before the option expires. Generally, the
option will terminate and expire on June 30, 2003.
The employment agreement also provides that in order to compensate Mr.
Nacchio for certain benefits from his former employer, AT&T, that Mr. Nacchio
may lose or forfeit as a result of his termination of employment and
commencement of employment with Qwest, Qwest will pay him $10,735,861, as
adjusted (the "equalization payment"). The equalization payment is to be made
in three installments. The first installment of $7,232,000 was paid in 1997
and the second installment of $1,469,861, together with interest of $173,273,
was paid in January 1998. The remaining installment of $2,034,000 is scheduled
to be paid on January 1, 1999, with annual interest at the rate of 5% from
January 7, 1997, to the date of payment. If Mr. Nacchio's employment is
terminated for cause (including any willful misconduct materially detrimental
to Qwest, felony conviction, or nonfeasance with respect to duties set forth
in the employment agreement) on or before December 31, 1999, the agreement
provides that he will repay to Qwest a portion of the equalization payment
previously paid. If a termination for cause occurs after December 31, 1999,
the equalization payment will not be repaid. If Qwest terminates Mr. Nacchio's
employment other than for cause or if Mr. Nacchio resigns for good reason,
which for this purpose includes a change in control of Qwest or certain other
events, Qwest will be obligated to make certain payments to him, including an
amount equal to two times his base salary at the rate in effect on the date of
employment termination and any installments of the equalization payment that
have not yet been made, with interest. Mr. Nacchio will also be entitled to
continuation of certain benefits, including welfare benefits and participation
in the Qwest Growth Share Plan for a two-year period following termination.
For this purpose,
13
<PAGE>
change in control means the acquisition of 20% or more of Qwest by an
individual, entity (not controlled by Philip F. Anschutz) or group if the new
acquirors own a larger percentage of Qwest than entities controlled by Philip
F. Anschutz. The agreement provides that if Mr. Nacchio receives any payments
upon a change in control that are subject to the excise tax of Section 4999 of
the Internal Revenue Code, Qwest will pay Mr. Nacchio an amount that
reimburses him in full for the excise tax.
Mr. Woodruff. In November 1996 QCC extended Robert S. Woodruff an unsecured,
noninterest-bearing loan in the principal amount of $100,000. The principal
amount is forgiven in monthly increments of $2,083 beginning December 1, 1996.
As of December 1997 the outstanding principal balance of the loan was $72,921.
If Mr. Woodruff terminates employment voluntarily or if QCC terminates his
employment on account of willful misconduct, QCC may declare the unforgiven
outstanding principal amount due and payable within 45 days after the date he
terminates employment. If Mr. Woodruff's employment terminates for any other
reason, the outstanding principal balance will be forgiven. In December 1996,
QCC and Mr. Woodruff entered into a letter agreement to provide that if his
employment is terminated for reasons other than willful misconduct, he will
receive either a lump sum payment equal to one year's compensation at his then
current rate or payment in accordance with QCC's severance policy then in
effect, as he elects.
Mr. Wilks. Qwest and Lewis O. Wilks entered into an employment letter
agreement dated October 8, 1997 pursuant to which Mr. Wilks joined Qwest as
President-Business Markets. Under the agreement, Mr. Wilks is entitled to an
annual base salary of $273,000 and a minimum bonus at the end of his first
year of employment of $100,000. Mr. Wilks also received reimbursement for
relocation expenses in the amount of $200,000. The agreement also provides for
the grant to Mr. Wilks of a stock option pursuant to the Qwest's Equity
Incentive Plan covering 700,000 shares of Qwest Common Stock with an exercise
price per share of $23.75. The option becomes exercisable as to 140,000 shares
of Qwest Common Stock at the end of each of the first four years of employment
and an additional 70,000 shares at the end of each of the fifth and sixth
years of employment. Mr. Wilks will also receive a transition payment of
$200,000 in 1998, payable $50,000 during each calendar quarter beginning
January 1, 1998. If Mr. Wilks' employment with Qwest terminates for any reason
other than cause during his first year of employment, he will be entitled to a
lump sum payment of one year's base salary.
Mr. Khandelwal. Qwest and Brij Khandelwal entered into an employment letter
agreement dated September 26, 1997, pursuant to which Mr. Khandelwal joined
Qwest as its Executive Vice President and Chief Information Officer. Under the
agreement, Mr. Khandelwal is entitled to an annual base salary of $225,000 and
a minimum bonus at the end of the first year of employment of $112,500. Mr.
Khandelwal also received reimbursement for relocation expenses of $150,000.
The agreement also provides for the grant to Mr. Khandelwal of a stock option
pursuant to Qwest's Equity Incentive Plan covering 700,000 shares of Qwest
Common Stock with an exercise price of $22.875. The option becomes exercisable
as to 140,000 shares of Qwest Common Stock at the end of each of the first
five years of employment. If Mr. Khandelwal's employment with Qwest terminates
for any reason other than cause during his first year of employment, he will
be entitled to a lump sum payment of one year's base salary.
Mr. Seese. Qwest and Larry A. Seese entered into an employment letter
agreement dated September 19, 1997, pursuant to which Mr. Seese joined Qwest
as Executive Vice President- Network Engineering and Operations. Mr. Seese is
entitled to an annual base salary of $230,000 and a minimum bonus at the end
of his first year of employment of $92,000. Mr. Seese also received
reimbursement for relocation expenses of $200,000. The agreement also provides
for the grant to Mr. Seese of a stock option pursuant to Qwest's Equity
Incentive Plan covering 750,000 shares of Qwest Common Stock with an exercise
price per share of $22.875. The option becomes exercisable as to 200,000
shares of Qwest Common Stock at the end of each of the first two years of
employment, an additional 100,000 shares of Qwest Common Stock at the end of
each of the third through the fifth years of employment and an additional
50,000 shares of Qwest Common Stock at the end of the sixth year of
employment. If the value of Mr. Seese's options is less than $1,000,000 on the
sixth anniversary of his employment, the Company will pay him the difference.
If Mr. Seese's employment is terminated for any reason other than cause during
his first two years of employment, he will be entitled to a lump sum payment
of one year's base salary.
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Mr. Jacobsen. Qwest and Stephen M. Jacobsen entered into an employment
letter agreement dated March 7, 1997, pursuant to which Mr. Jacobsen joined
Qwest as its Senior Vice President--Consumer Markets. Under the agreement, Mr.
Jacobsen is entitled to an annual base salary of $185,000, which has been
increased to $192,770 for 1998. Mr. Jacobsen also received reimbursement for
relocation expenses in the amount of $132,085. The agreement provides for the
grant to Mr. Jacobsen of 30,000 growth shares pursuant to the Growth Share
Plan. If Mr. Jacobsen's employment with Qwest terminates for any reason other
than cause, he will be entitled to a lump sum payment of one year's base
salary.
Change in Control. The Qwest Growth Share Plan provides that upon a "change
of control" of Qwest or a termination of the Qwest Growth Share Plan, the
outstanding growth shares will become fully vested. For this purpose, "change
of control" is defined as either (A) the acquisition by an individual, entity
or group (as defined in the Exchange Act), other than Anschutz Company, The
Anschutz Corporation, or any entity controlled by Philip F. Anschutz
("Anschutz Entities"), of beneficial ownership of 20% or more of either (1)
the then-outstanding shares of Common Stock or (2) the combined voting power
of the then-outstanding voting securities of Qwest entitled to vote generally
in the election of directors and the beneficial ownership of the individual,
entity or group exceeds the beneficial ownership of the Anschutz Entities or
(B) the Anschutz Entities no longer have beneficial ownership of at least 20%
of Qwest's Common Stock or 20% of the combined voting power.
The Equity Incentive Plan provides that, upon a "change in control," all
awards granted under the Equity Incentive Plan will vest immediately. See
"Equity Incentive Plan Proposal" below for a description of the Plan and the
definition of change in control for purposes of the Plan.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Exchange Act, Qwest's directors and certain of
its officers and persons holding more than ten percent of Qwest's Common Stock
are required to file forms reporting their beneficial ownership of the Qwest
Common Stock. Such persons are also required to furnish Qwest copies of the
forms so filed. Based solely upon the review of the copies of such forms
provided to Qwest and written certifications from each such person, Qwest
believes that during the fiscal year ended December 31, 1997, all directors,
executive officers and persons holding more than ten percent of Qwest's Common
Stock were in compliance with their filing requirements.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The report of the Compensation Committee of the Board of Directors (the
"Compensation Committee") shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
General
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). Since July
1997, Philip F. Anschutz, Jordan L. Haines and W. Thomas Stephens have served
on the Committee. Effective November 1997, Mr. Anschutz removed himself from
participation in the grant of stock options and other awards under the
Company's Equity Incentive Plan and such awards are approved solely by Messrs.
Haines and Stephens. Prior to July 1997, the Committee was composed of Mr.
Anschutz and Cannon Y. Harvey. In July 1997, Mr. Harvey resigned from the
Committee. None of the Committee members are employees of the Company.
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The Company's overall compensation philosophy is to link executives' total
compensation to the short-term and long-term performance of the Company so as
to maximize long-term stockholder value. The policy is designed to provide a
competitive compensation program that will enable the Company to attract,
motivate, reward and retain executives and other employees who have the
skills, experience and talents required to promote the short and long-term
financial performance and growth of the Company.
The Company's executive compensation has three elements; base salary, annual
or short term incentive compensation and long-term incentive compensation in
the form of stock options. Generally, the Company's cash compensation policy
is designed to provide executive officers and other management personnel with
a base salary that is competitive relative to industry standards and to use
discretionary cash bonuses to yield total compensation that is equal to, less
than, or more than total cash compensation paid to management personnel of the
Company's competitors, depending upon the Company's results of operations
relative to annual performance goals and the performance of its competitors.
Awards of options under the Company's Equity Incentive Plan will be based on
criteria that reflect contributions to long-term stockholder value. The
Committee has used, and expects to continue to use, stock-based incentive
grants, including options, as a significant component of executive
compensation.
The Committee is endeavoring to maximize the deductibility of compensation
under section 162(m) of the Internal Revenue Code to the extent practicable
while maintaining competitive compensation. Section 162(m) of the Internal
Revenue Code denies a tax deduction to any publicly held corporation, such as
the Company, for compensation in excess of $1,000,000 paid to any named
executive officer unless such compensation is performance based under section
162(m). Compensation paid pursuant to agreements entered into prior to the
time that the Company became a publicly held corporation is not subject to the
deduction limitation for a transition period. The Company and the Committee
have taken all action required under section 162(m) so that compensation
attributable to the exercise of options under the Company's Equity Incentive
Plan will be deductible.
Base Salary
Mr. Nacchio's base salary for 1997 through 2001 was negotiated within the
context of the employment agreement executed between Mr. Nacchio and the
Company as of December 21, 1996 and amended as of January 3, 1997.
The base salaries of certain other officers also were negotiated within the
context of employment agreements between them and the Company. Except as
affected by those agreements, the base salaries of all executive officers and
other key management personnel are set at the discretion of the Committee,
based upon the recommendations of the Chief Executive Officer.
Cash Bonus
Under his employment agreement, Mr. Nacchio was entitled to receive a cash
bonus of $300,000 for 1997 and is entitled to receive a cash bonus of $300,000
for 1998. The Committee authorized bonuses for certain of the other named
executive officers for 1997 based upon the Company's operational and financial
results and the contributions of those individuals.
Growth Shares
Prior to the Company's initial public offering of its Common Stock in June
1997, the Company's Growth Share Plan provided the long term incentive
compensation element of executive compensation. Pursuant to his employment
agreement, Mr. Nacchio received a grant of 300,000 growth shares at the time
of his employment. Certain of the other named executive officers also received
growth share grants under the Growth Share Plan. All of the outstanding growth
shares, including those held by Mr. Nacchio and the other named executive
officers, were amended at the time of the initial public offering of the
Company's Common Stock to cap the value of the growth shares at a value
generally determined by the $11 per share price (as adjusted to reflect the
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Qwest Stock Split) of the Company's Common Stock in the Initial Public
Offering and to provide that the growth share grants will terminate and become
payable on a date in 2001 selected by the Company. The individuals who held
growth shares at the time of the Initial Public Offering also received stock
options pursuant to the Company's Equity Incentive Plan to provide incentive
compensation with respect to appreciation in the Company's Common Stock
subsequent to the Initial Public Offering. The Committee does not intend to
grant any additional growth shares under the Growth Share Plan.
Stock Options
The Committee believes that long-term incentive compensation in the form of
stock options is the most direct way of making executive compensation
dependent upon increases in stockholder value. The Company's Equity Incentive
Plan provides the means through which executive officers can build an
investment in Common Stock which will align such officers' economic interests
with the interests of stockholders. The value of stock options historically
has increased as a result of increase of the price of the Common Stock, and
such options are highly valued by employees. The Committee believes that the
grant of stock options has been and will continue to be a significant
component of its success in attracting and retaining talented management
employees in an extremely competitive environment.
The exercise price of each option has generally been the market price of the
Common Stock on the date of grant. The most recent option grants generally
provide for delayed vesting over a period of five years and have a term of ten
years. The Committee believes that stock options give the executive officers
greater incentive throughout the term of the options to strive to operate the
Company in a manner that directly affects the financial interests of the
stockholders both on the long term, as well as the short term, basis.
In determining the number of option shares to grant to executive officers,
the Committee considers on a subjective basis the same factors as it does in
determining the other components of compensation, with no single factor
accorded special weight. The recommendation of the Chief Executive Officer is
of paramount importance in determining awards to persons other than himself.
During 1997, the Committee granted an option to Mr. Nacchio exercisable for
an aggregate of 6,000,000 shares of Common Stock (as adjusted to reflect the
Qwest Stock Split), which will vest and become exercisable at the rate of 20%
per year, beginning on December 31, 1997 and will become fully vested upon Mr.
Nacchio's death or disability.
The Committee intends to continue its practice of basing executive
compensation on stock price and other financial performance criteria, and on
its qualitative evaluation of individual performance. The Committee believes
that its compensation policies promote the goals of attracting, motivating,
rewarding and retaining talented executives who will maximize value for the
Company's stockholders.
Compensation Committee
Philip F. Anschutz, Chairman
Jordan L. Haines
W. Thomas Stephens
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PERFORMANCE MEASUREMENT COMPARISON
The following chart shows the Center for Research in Security Prices
("CRSP") Total Returns Index from June 23, 1997 to December 31, 1997 for (i)
Qwest Common Stock, (ii) Nasdaq Stock Market (US Companies) and (iii) Nasdaq
Telecommunications Stocks. All values assume reinvestment of the full amount
of all dividends.
[PERFORMANCE GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG QWEST COMMUNICATIONS INTERNATIONAL, INC.,
MARKET INDEX AND PEER INDEX
Measurement period Company Market Peer
(Fiscal Year Covered) Index Index Index
- --------------------- --------- --------- ---------
FYE 12/31/96 $ 88.777 $ 86.261
FYE 01/31/97 $ 95.086 $ 88.350
FYE 02/28/97 $ 89.830 $ 85.908
FYE 03/31/97 $ 83.966 $ 80.201
FYE 04/30/97 $ 86.591 $ 83.250
FYE 05/30/97 $ 96.407 $ 93.566
FYE 06/24/97 $ 100.000 $ 100.000 $ 100.000
FYE 06/30/97 $ 97.321 $ 99.355 $ 100.675
FYE 07/31/97 $ 111.161 $ 109.844 $ 107.008
FYE 08/29/97 $ 145.536 $ 109.677 $ 103.411
FYE 09/30/97 $ 164.732 $ 116.164 $ 116.869
FYE 10/31/97 $ 220.536 $ 110.128 $ 120.288
FYE 11/28/97 $ 195.089 $ 110.672 $ 121.122
FYE 12/31/97 $ 212.500 $ 108.939 $ 127.457
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Anschutz, a member of the Compensation Committee, is a Director and
Chairman (not an executive officer position) of Qwest, a Director and Chairman
of Anschutz Company, Qwest's majority stockholder, and a Director and Chairman
of The Anschutz Corporation, a subsidiary of Anschutz Company. Mr. Harvey, who
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served on the Compensation Committee until July 1997, is a Director of Qwest
and President and Chief Operating Officer of Anschutz Company and The Anschutz
Corporation. Certain transactions and relationships between Qwest and Anschutz
Company or one of its affiliates are described directly below under "Certain
Transactions."
CERTAIN TRANSACTIONS
Certain affiliates of Anschutz Company indirectly provide facilities to
Qwest at prevailing market rates. Qwest rents its corporate office in Denver,
Colorado from a limited partnership in which Mr. Anschutz serves as a general
partner and indirectly holds limited partner interests and rents certain
telecommunications equipment used by Qwest at its corporate office from an
affiliate of Anschutz Company. Such expenses totaled $1.4 million for the year
ended December 31, 1997.
Affiliates of Anschutz Company incur certain costs on Qwest's behalf,
including primarily insurance and corporate transportation services, and
allocate such costs to Qwest based on actual usage. The cost to Qwest for such
services was approximately $4.3 million for the year ended December 31, 1997.
Qwest historically has received capital contributions and noninterest-
bearing advances from Anschutz Company and an affiliate of Anschutz Company to
fund operations. In May 1997, all outstanding advances, then totaling
approximately $28.0 million, were repaid, and no further advances are expected
to be made.
Effective May 23, 1997, Qwest sold to the Anschutz Family Investment Company
LLC, for $2.3 million in cash, a warrant to acquire 8,600,000 shares of Qwest
Common Stock at an exercise price of $14.00 per share, exercisable on May 23,
2000, with certain exceptions. The warrant is not transferable. Shares of
Qwest Common Stock issued upon exercise of the warrant would be subject to
restrictions on sale and transfer for two years after exercise. Anschutz
Company is the manager of, and owns a 1% equity interest in, the Anschutz
Family Investment Company LLC, and a trust, of which members of Mr. Anschutz's
immediate family are beneficiaries, owns the remainder of the equity
interests.
Qwest has a tax sharing agreement with Anschutz Company that provides for
the allocation of tax liabilities and benefits. In general, the agreement
requires Qwest to pay to Anschutz Company the applicable income taxes for
which Qwest would be liable if it filed a separate return and requires
Anschutz Company to pay Qwest for losses or credits which would have resulted
in a refund of taxes as if Qwest had filed a separate return. The payments
under the agreement may be made in the form of cash, setoffs, contributions to
capital, dividends, notes or any combination of the foregoing. The tax
benefits payable to Qwest under the existing agreement through December 31,
1996 of $11.1 million were forgiven. The tax sharing agreement was amended,
effective as of January 1, 1997 (the "Effective Date"), to provide that Qwest
will be responsible to Anschutz Company to the extent of income taxes for
which Qwest would have been liable if it had filed a separate return after
giving effect to any loss or credit carryover belonging to Qwest from taxable
periods after the Effective Date. Anschutz Company will be responsible to
Qwest to the extent an unused loss or credit can be carried back to an earlier
taxable period after the Effective Date.
Qwest had a $100.0 million three-year revolving credit facility with ABN
AMRO that was collateralized by shares owned and pledged by an affiliate of
Anschutz Company. In October 1997, Qwest repaid the then outstanding balance
and terminated this credit facility.
Anschutz Company guaranteed a QCC construction loan with an outstanding
balance at December 31, 1997, of approximately $10.9 million. The construction
loan, which was repaid in 1998, pertained to a network construction project
undertaken by QCC for an interexchange carrier. The guarantee was limited to
indemnification against defective construction, warranty or other claims of
the interchange carrier that would reduce or eliminate the interexchange
carrier's obligation to pay QCC. In addition, Anschutz Company has guaranteed
bonds totaling $175.0 million furnished by Qwest to support its construction
obligations under a
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contract for sale of dark fiber. Qwest has agreed to indemnify Anschutz
Company and its subsidiaries against any cost or losses incurred by any of
them as a result of their providing credit support to Qwest (in the form of
collateral pledges, guarantees, bonds or otherwise).
Richard T. Liebhaber, a Director of Qwest, entered into a consulting
agreement with an affiliate of Anschutz Company in December 1996 to provide
consulting services in 1997 and serve on the Board of Qwest and its
subsidiaries upon request. The agreement was assigned to Qwest in February
1997. Mr. Liebhaber was required under the contract to provide a minimum of 30
days of consulting services to QCC during 1997 and was paid $250,000 plus out-
of-pocket expenses during 1997. The agreement was renewed for 1998. Mr.
Liebhaber was granted 10,000 growth shares, effective December 1, 1996, with a
performance cycle ending in 2001 under the Qwest Growth Share Plan. Mr.
Liebhaber was also granted options to purchase 300,000 shares of Qwest Common
Stock. (See "Director Compensation" above).
No director or executive officer of Qwest and its operating subsidiaries was
indebted to Qwest or its subsidiaries at any time since the beginning of 1997
in excess of $60,000, except Mr. Woodruff as described above in the Proxy
Statement under the description of his employment contract.
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PROPOSAL 2--EQUITY INCENTIVE PLAN PROPOSAL
The Board recommends that the stockholders of Qwest approve the Qwest
Communications International Inc. Equity Incentive Plan (the "Equity Incentive
Plan"). Effective June 23, 1997, the Board adopted the Equity Incentive Plan
and the adoption of the Equity Incentive Plan was approved by Qwest's then
sole stockholder. The principal features of the Equity Incentive Plan are
summarized below.
The purposes of the Equity Incentive Plan are to provide those who are
selected for participation with added incentives to continue in the long-term
service of Qwest and to create in such persons a more direct interest in the
future success of the operations of Qwest by relating incentive compensation
to increases in shareholder value, so that the income of those participating
in the Equity Incentive Plan is more closely aligned with the income of
Qwest's shareholders. The Equity Incentive Plan is also designed to provide a
financial incentive that will help Qwest attract, retain and motivate the most
qualified employees and consultants.
The Equity Incentive Plan provides for the grant of non-qualified stock
options, incentive stock options, stock appreciation rights, restricted stock,
stock units and other stock grants to employees of Qwest and its affiliates
and consultants to Qwest. A maximum of 20,000,000 shares of Common Stock may
be subject to awards under the Equity Incentive Plan. The number of shares is
subject to adjustment on account of stock splits, stock dividends and other
dilutive 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 Equity Incentive Plan or that are used to pay withholding taxes or the
option exercise price, will again be available for option or grant under the
Equity Incentive Plan. The closing price of the Common Stock on March 31, 1998
on the Nasdaq National Market was $38.875 per share.
Participation. The Equity Incentive Plan provides that awards may be made to
employees and consultants who are responsible for Qwest's growth and
profitability. Directors who are not employees of Qwest and its affiliates or
consultants to Qwest are not eligible. Qwest currently considers all of its
employees and certain of its consultants to be eligible for grant of awards
under the Equity Incentive Plan. As of December 31, 1997, there were
approximately 1,600 eligible participants.
Administration. The Equity Incentive Plan is administered by the members of
Qwest's Compensation Committee other than Mr. Anschutz (the "Committee"). The
Committee must be structured at all times so that it satisfies the "non-
employee director" requirement of Rule 16b-3 under the Exchange Act. To the
extent practicable, Qwest intends to satisfy the similar requirement of
Section 162(m) of 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 and consultants to whom awards may
be granted under the Equity Incentive Plan and the manner in which such awards
will vest. Options, stock appreciation rights, restricted stock and stock
units are granted by the Committee to employees and consultants in such
numbers and at such times during the term of the Equity Incentive Plan as the
Committee shall determine, except that the maximum number of shares subject to
one or more options or stock appreciation rights that can be granted during
the term of the Equity Incentive Plan to any employee or consultant is
20,000,000 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 Equity Incentive
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 and
consultants, and their present and potential contributions to Qwest's success.
Exercise of Options. The Committee 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 (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 voting
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power). An option holder may exercise an option by written notice and payment
of the exercise price in (i) 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. Option
holders who are subject to the withholding of federal and state income tax as
a result of exercising an option may be provided with an election 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.
Option Term. The Committee determines the term of each Option, which shall
be no longer than ten years (five years in the case of an incentive stock
option granted to an employee who owns Common Stock having more than 10% of
the voting power). Unless the Committee provides otherwise, the following
provisions apply in the event of an employee's termination of employment. If
the option holder's services are terminated for cause, as determined by Qwest,
the option terminates immediately. If the option holder becomes disabled, the
option may be exercised for one year after the option holder terminates
employment on account of disability. If the option holder dies during
employment or in the one-year period referred to in the preceding sentence,
the option may be exercised for one year after the option holder's death. If
the option holder terminates employment for any reason other than cause,
disability, or death, the option may be exercised for three months after
termination of employment. In all cases, the option can be exercised only to
the extent it is vested at the time of termination of employment.
Restricted Stock. The Committee may grant a Participant a number of shares
of restricted stock as determined by the Committee in its sole discretion.
Grants of restricted stock may be subject to such restrictions, including for
example, continuous employment with Qwest for a stated period of time or the
attainment of performance goals and objectives, as determined by the Committee
in its sole discretion. The restrictions may vary among awards and
participants. If a participant dies or becomes disabled or retires pursuant to
Qwest's retirement policy, the restricted stock will become fully vested as to
a pro rata portion of each award based on the ratio of the number of months of
employment completed at termination of employment from the date of the award
to the total number of months of employment required for each award to become
fully vested. The remaining portion of the restricted stock will be forfeited.
If a participant terminates employment for any other reason, all unvested
shares of restricted stock will be forfeited.
Stock Units. The Committee may grant stock units to participants. The
Committee determines the number of stock units to be granted, the goals and
objectives to be satisfied, the time and manner of payment, and any other
terms and conditions applicable to the stock units.
Stock Appreciation Rights. The Committee may grant stock appreciation rights
to participants, either separately or in tandem with the grant of options. The
Committee determines the period during which a stock appreciation right may be
exercised and the other terms and conditions applicable to the stock
appreciation rights. Upon exercise of a stock appreciation right, a
participant is entitled to a payment equal to the number of shares of Common
Stock as to which the stock appreciation right is exercised times the excess
of the fair market value of a share of Common Stock on the date the stock
appreciation right is exercised over the fair market value of a share of
Common Stock on the date the stock appreciation right was granted. The amount
may be paid in shares of Common Stock, in cash, or in a combination of cash
and Common Stock as the Committee determines in its sole discretion. Upon
termination of employment, stock appreciation rights are exercisable in the
same manner as options. See, "--Option Term," above. If a stock appreciation
right is granted in tandem with an option, exercise of the stock appreciation
right or the option will result in an equal reduction in the number of shares
subject to the corresponding option or stock appreciation right.
Other Stock Grants. The Committee may award stock bonuses to such
participants, subject to such conditions and restrictions, as it determines in
its sole discretion. Stock bonuses may be outright grants or may be
conditioned on continued employment or attainment of performance goals as the
Committee determines in its sole discretion. The Board may, in its sole
discretion, establish other incentive compensation arrangements
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pursuant to which participants may acquire Common Stock or provide that other
incentive compensation will be paid in Common Stock under the Equity Incentive
Plan.
Nontransferability. Except as may be otherwise permitted by the Committee,
options, stock appreciation rights, stock units and restricted stock awards
granted under the Equity Incentive Plan are not transferable other than by
will or by the laws of descent and distribution.
Change in Control. All awards granted under the Equity Incentive Plan shall
immediately vest upon any "change in control" of Qwest unless otherwise
provided by the Committee at the time of grant. A "change in control" occurs
if (i) 20% or more of Qwest's voting stock or outstanding stock is acquired by
persons or entities (other than any entity controlled by Philip F. Anschutz
("Anschutz Entities")) and the beneficial ownership so acquired exceeds the
beneficial ownership of the Anschutz Entities or (ii) the Anschutz Entities no
longer have beneficial ownership of at least 20% of Qwest's voting stock or
outstanding stock.
Merger and Reorganization. Upon the occurrence of (i) the reorganization
(other than a bankruptcy reorganization), merger or consolidation of Qwest
(other than a reorganization, merger or consolidation in which Qwest is the
continuing company and that does not result in any change in the outstanding
shares of Common Stock), (ii) the sale of all or substantially all of the
assets of Qwest (other than a sale in which Qwest continues as a holding
company of an entity that conducts the business formerly conducted by Qwest),
or (iii) the dissolution or liquidation of Qwest, all outstanding options will
terminate automatically when the event occurs if Qwest gives the option
holders 30 days' prior written notice of the event. Notice is also given to
holders of other awards. Notice is not required for a merger or consolidation
or for a sale if Qwest, the successor, or the purchaser makes adequate
provision for the assumption of the outstanding options or the substitution of
new options or awards on terms comparable to the outstanding options or
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 Equity Incentive Plan in
any respect at any time provided shareholder approval is obtained when
necessary or 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 Equity Incentive Plan will terminate on June 22, 2007 unless sooner
terminated by the Board.
Federal Income Tax Consequences of Issuance and Exercise of Options Under
the Equity Incentive Plan. When a non-qualified stock option is granted, there
are no income tax consequences for the option holder or Qwest. When a non-
qualified stock option is exercised, in general, the option holder recognizes
compensation equal to the excess of the fair market value of the Common Stock
on the date of exercise over the exercise price. If, however, the sale of the
Common Stock at a profit would subject the option holder to liability under
Section 16(b) of the Exchange Act ("Section 16(b)"), the option holder will
recognize compensation income 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 option holder can sell the Common Stock
without Section 16(b) liability over (ii) the exercise price. The option
holder 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. The
compensation recognized by an employee is subject to income tax withholding.
Qwest is entitled to a deduction equal to the compensation recognized by the
option holder for Qwest's taxable year that ends with or within the taxable
year in which the option holder recognized the compensation, assuming that the
compensation amounts satisfy the ordinary and necessary and reasonable
compensation requirements for deductibility and that the deduction is not
limited by section 162(m) of the Code.
When an incentive stock option is granted, there are no income tax
consequences for the option holder or Qwest. When an incentive option is
exercised, the option holder does not recognize income and Qwest does not
receive a deduction. The option holder, however, must treat the excess of the
fair market value of the Common Stock on the date of exercise over the
exercise price as an item of adjustment for purposes of the alternative
minimum tax. If the option holder makes a "disqualifying disposition" of the
Common Stock (described below)
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in the same taxable year the incentive stock option was exercised, there are
no alternative minimum tax consequences.
If the option holder disposes of the Common Stock after the option holder
has held the Common Stock for at least two years after the incentive stock
option was granted and one year after the incentive stock option was
exercised, the amount the option holder receives upon the disposition over the
exercise price is treated as capital gain for the option holder. Qwest is not
entitled to a deduction. If the option holder makes a "disqualifying
disposition" of the Common Stock by disposing of the Common Stock before it
has been held for at least two years after the date the incentive option was
granted and one year after the date the incentive option was exercised, the
option holder recognizes compensation income equal to the excess of (i) the
fair market value of the Common Stock on the date the incentive option was
exercised or, if less, the amount received on the disposition over (ii) the
exercise price. At present, Qwest is not required to withhold income or other
taxes. Qwest is entitled to a deduction equal to the compensation recognized
by the option holder for Qwest's taxable year that ends with or within the
taxable year in which the option holder recognized the compensation, assuming
that the compensation amounts satisfy the ordinary and necessary and
reasonable compensation requirements for deductibility and that the deduction
is not limited by section 162(m) of the Code.
The Equity Incentive Plan provides that option holders are responsible for
making appropriate arrangements with Qwest to provide for any additional
withholding amounts. Furthermore, Qwest shall have no obligation to deliver
shares of Common Stock upon the exercise of any options, stock appreciation
rights, awards or units under the Equity Incentive Plan until all applicable
federal, state and local income and other tax withholding requirements have
been satisfied.
The following table sets forth the options granted from inception of the
Equity Incentive Plan to the specified individuals and groups and outstanding
as of March 27, 1998.
EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION OPTIONS GRANTED
- ----------------- ---------------
<S> <C>
Joseph P. Nacchio............................................. 5,824,451
Robert S. Woodruff............................................ 400,000
A. Dean Wandry................................................ 150,000
Anthony J. Brodman............................................ 50,000
Steven M. Jacobsen............................................ 600,000
Louis O. Wilks................................................ 700,000
Brij Khandelwal............................................... 700,000
Larry M. Seese................................................ 750,000
All Current Executive Officers as a Group..................... 11,174,000
All Current Directors who are not Executive Officers as a
Group........................................................ 1,150,000
All Employees as a Group other than Executive Officers........ 3,647,600
</TABLE>
- --------
Detailed information with respect to option grants under the Company's Equity
Incentive Plan with respect to the named executive officers is set forth above
(see "Stock Option Grants" above). The options reflected in the above table
were granted at exercise prices ranging between $7.50 and $36.25 per share.
The options generally provide for vesting at the rate of 20% per year
commencing on the first anniversary of the date of grant and expire either
five years or ten years from the date of grant, as determined by the Committee
at the time of grant. The market value of the shares of the Company's Common
Stock covered by all outstanding options under the Equity Incentive Plan as of
the Record Date was approximately $621 millon.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE QWEST STOCKHOLDERS VOTE "FOR" THE FOREGOING
PROPOSAL.
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QWEST CERTIFIED INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP has served as independent auditors for the
fiscal year ending December 31, 1997, and has been selected to serve for the
1998 fiscal year. A representative of KPMG Peat Marwick LLP is expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
he or she so desires and will be available to respond to appropriate
questions.
ANNUAL REPORT
A COPY OF QWEST'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER
31, 1997 IS ENCLOSED HEREWITH, BUT IS NOT A PART OF THIS PROXY STATEMENT. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY REQUESTING STOCKHOLDER A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE 1997 FISCAL YEAR, INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. WRITTEN REQUESTS SHOULD BE MADE
TO JOSEPH T. GARRITY, CORPORATE SECRETARY, ADDRESSED TO QWEST COMMUNICATIONS
INTERNATIONAL INC. AT 555 SEVENTEENTH STREET, 1000 QWEST TOWER, DENVER,
COLORADO 80202.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at Qwest's 1999
Annual Meeting of Stockholders must be received by the Corporate Secretary of
Qwest not later than December 31, 1998, in order to be included in the proxy
statement and proxy relating to the 1999 Annual Meeting.
OTHER MATTERS
The Board knows of no other business to be presented at the meeting, but if
other matters do properly come before the meeting, it is intended that the
persons named in the proxy will vote in respect thereof in accordance with
their judgement.
The Board encourages you to have your shares voted by signing and returning
the enclosed proxy. The fact that you will have returned your proxy in advance
will not affect your right to vote in person should you attend the meeting.
However, by signing and returning the proxy, you have assured your
representation at the Annual Meeting. Thank you for your cooperation.
By Order of the Board of Directors
/s/ Joseph T. Garrity
Joseph T. Garrity
Corporate Secretary
Denver, Colorado
April 3, 1998
25
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================================================================================
QWEST COMMUNICATIONS INTERNATIONAL INC.
EQUITY INCENTIVE PLAN
(EFFECTIVE JUNE 23, 1997)
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I INTRODUCTION....................................... 1
1.1 Establishment...................................... 1
1.2 Purposes........................................... 1
ARTICLE II DEFINITIONS........................................ 1
2.1 Definitions........................................ 1
2.2 Gender and Number.................................. 3
ARTICLE III PLAN ADMINISTRATION................................ 4
ARTICLE IV STOCK SUBJECT TO THE PLAN.......................... 4
4.1 Number of Shares................................... 4
4.2 Other Shares of Stock.............................. 5
4.3 Adjustments for Stock Split, Stock Dividend, Etc... 5
4.4 Other Distributions and Changes in the Stock....... 5
4.5 General Adjustment Rules........................... 5
4.6 Determination by the Committee, Etc................ 6
ARTICLE V CORPORATE REORGANIZATION; CHANGE IN CONTROL........ 6
5.1 Reorganization..................................... 6
5.2 Required Notice.................................... 6
5.3 Acceleration of Exercisability..................... 7
5.4 Change in Control.................................. 7
5.5 Limitation on Payments............................. 8
ARTICLE VI PARTICIPATION...................................... 8
ARTICLE VII OPTIONS............................................ 8
7.1 Grant of Options................................... 8
7.2 Stock Option Certificates.......................... 9
7.3 Restrictions on Incentive Options..................12
7.4 Shareholder Privileges.............................12
ARTICLE VIII RESTRICTED STOCK AWARDS............................13
8.1 Grant of Restricted Stock Awards...................13
8.2 Restrictions.......................................13
8.3 Privileges of a Stockholder, Transferability.......13
8.4 Enforcement of Restrictions........................13
ARTICLE IX STOCK UNITS........................................14
ARTICLE X STOCK APPRECIATION RIGHTS..........................14
10.1 Persons Eligible...................................14
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10.2 Terms of Grant.....................................14
10.3 Exercise...........................................14
10.4 Number of Shares or Amount of Cash.................14
10.5 Effect of Exercise.................................15
10.6 Termination of Services............................15
ARTICLE XI STOCK BONUSES......................................15
ARTICLE XII OTHER COMMON STOCK GRANTS..........................15
ARTICLE XIII RIGHTS OF PARTICIPANTS.............................16
13.1 Service............................................16
13.2 Nontransferability.................................16
13.3 No Plan Funding....................................16
ARTICLE XIV GENERAL RESTRICTIONS...............................16
14.1 Investment Representations.........................16
14.2 Compliance with Securities Laws....................17
14.3 Changes in Accounting Rules........................17
ARTICLE XV OTHER EMPLOYEE BENEFITS............................17
ARTICLE XVI PLAN AMENDMENT, MODIFICATION AND TERMINATION.......17
ARTICLE XVII WITHHOLDING........................................18
17.1 Withholding Requirement............................18
17.2 Withholding With Stock.............................18
ARTICLE XVIII REQUIREMENTS OF LAW................................19
18.1 Requirements of Law................................19
18.2 Federal Securities Law Requirements................19
18.3 Governing Law......................................19
ARTICLE XIX DURATION OF THE PLAN...............................19
ii
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
EQUITY INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1.1 ESTABLISHMENT. Qwest Communications International Inc., a Delaware
corporation, hereby establishes the Qwest Communications International Inc.
Equity Incentive Plan (the "Plan") for certain key employees of the Company (as
defined in subsection 2.1(f)) and certain consultants to the Company. The Plan
permits the grant of incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, non-qualified stock options,
restricted stock awards, stock appreciation rights, stock bonuses, stock units
and other stock grants to certain key employees of the Company and to certain
consultants to the Company.
1.2 PURPOSES. The purposes of the Plan are to provide those who are
selected for participation in the Plan with added incentives to continue in the
long-term service of the Company and to create in such persons a more direct
interest in the future success of the operations of the Company by relating
incentive compensation to increases in shareholder value, so that the income of
those participating in the Plan is more closely aligned with the income of the
Company's shareholders. The Plan is also designed to provide a financial
incentive that will help the Company attract, retain and motivate the most
qualified employees and consultants.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set forth
below:
(a) "AFFILIATED CORPORATION" means any corporation or other entity
that is affiliated with Qwest through stock ownership or otherwise and is
designated as an "Affiliated Corporation" by the Board, provided, however, that
for purposes of Incentive Options granted pursuant to the Plan, an "Affiliated
Corporation" means any parent or subsidiary of the Company as defined in Section
424 of the Code.
(b) "AWARD" means an Option, a Restricted Stock Award, a Stock
Appreciation Right, a Stock Unit, grants of Stock pursuant to Article XI or
other issuances of Stock hereunder.
(c) "BOARD" means the Board of Directors of Qwest.
(d) "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
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(e) "COMMITTEE" means a committee consisting of members of the Board
who are empowered hereunder to take actions in the administration of the Plan.
The Committee shall be so constituted at all times as to permit the Plan to
comply with Rule 16b-3 or any successor rule promulgated under the Securities
Exchange Act of 1934 (the "1934 Act"). Members of the Committee and any
subcommittee or special committee shall be appointed from time to time by the
Board, shall serve at the pleasure of the Board and may resign at any time upon
written notice to the Board. The Committee shall select Participants from
Eligible Employees and Eligible Consultants of the Company and shall determine
the awards to be made pursuant to the Plan and the terms and conditions thereof.
(f) "COMPANY" means Qwest and the Affiliated Corporations.
(g) "DISABLED" or "DISABILITY" shall have the meaning given to such
terms in Section 22(e)(3) of the Code.
(h) "EFFECTIVE DATE" means the effective date of the Plan, May 23,
1997.
(i) "ELIGIBLE EMPLOYEES" means those key employees (including, without
limitation, officers and directors who are also employees) of the Company or any
subsidiary or division thereof, upon whose judgment, initiative and efforts the
Company is, or will become, largely dependent for the successful conduct of its
business. For purposes of the Plan, an employee is an individual whose wages
are subject to the withholding of federal income tax under section 3401 of the
Code.
(j) "ELIGIBLE CONSULTANTS" means those consultants to the Company who
are determined, by the Committee, to be individuals whose services are important
to the Company and who are eligible to receive Awards, other than Incentive
Options, under the Plan.
(k) "FAIR MARKET VALUE" means the average of the mean between the bid
and the asked prices of the Stock or the closing price, as applicable, on the
NASDAQ National Market System, the principal stock exchange or other market on
which the Stock is traded, over the five consecutive trading days ending on a
particular date or by such other method as the Committee may specify at the time
an Award is granted. If the price of the Stock is not reported on any
securities exchange or national market system, the Fair Market Value of the
Stock on a particular date shall be as determined by the Committee. If, upon
exercise of an Option, the exercise price is paid by a broker's transaction as
provided in subsection 7.2(g)(ii)(D), Fair Market Value, for purposes of the
exercise, shall be the price at which the Stock is sold by the broker.
(l) "INCENTIVE OPTION" means an Option designated as such and granted
in accordance with Section 422 of the Code.
(m) "NON-QUALIFIED OPTION" means any Option other than an Incentive
Option.
(n) "OPTION" means a right to purchase Stock at a stated or formula
price for a specified period of time. Options granted under the Plan shall be
either Incentive Options or Non-Qualified Options.
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<PAGE>
(o) "OPTION CERTIFICATE" shall have the meaning given to such term in
Section 7.2 hereof.
(p) "OPTION HOLDER" means a Participant who has been granted one or
more Options under the Plan.
(q) "OPTION PRICE" means the price at which each share of Stock
subject to an Option may be purchased, determined in accordance with subsection
7.2(b).
(r) "PARTICIPANT" means an Eligible Employee or Eligible Consultant
designated by the Committee from time to time during the term of the Plan to
receive one or more of the Awards provided under the Plan.
(s) "QWEST" means Qwest Communications International Inc. and any
successor thereto.
(t) "RESTRICTED STOCK AWARD" means an award of Stock granted to a
Participant pursuant to Article VIII that is subject to certain restrictions
imposed in accordance with the provisions of such Section.
(u) "SHARE" means a share of Stock.
(v) "STOCK" means the $0.01 par value common stock of Qwest.
(w) "STOCK APPRECIATION RIGHT" means the right, granted by the
Committee pursuant to the Plan, to receive a payment equal to the increase in
the Fair Market Value of a Share of Stock subsequent to the grant of such Award.
(x) "STOCK BONUS" means either an outright grant of Stock or a grant
of Stock subject to and conditioned upon certain employment or performance
related goals.
(y) "STOCK UNIT" means a measurement component equal to the Fair
Market Value of one share of Stock on the date for which a determination is made
pursuant to the provisions of this Plan.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
ARTICLE III
PLAN ADMINISTRATION
The Plan shall be administered by the Committee. In accordance with the
provisions of the Plan, the Committee shall, in its sole discretion, select the
Participants from among the Eligible Employees and Eligible Consultants,
determine the Awards to be made pursuant to the Plan, the
3
<PAGE>
number of Stock Units, Stock Appreciation Rights or shares of Stock to be issued
thereunder and the time at which such Awards are to be made, fix the Option
Price, period and manner in which an Option becomes exercisable, establish the
duration and nature of Restricted Stock Award restrictions, establish the terms
and conditions applicable to Stock Bonuses and Stock Units, and establish such
other terms and requirements of the various compensation incentives under the
Plan as the Committee may deem necessary or desirable and consistent with the
terms of the Plan. The Committee shall determine the form or forms of the
agreements with Participants that shall evidence the particular provisions,
terms, conditions, rights and duties of Qwest and the Participants with respect
to Awards granted pursuant to the Plan, which provisions need not be identical
except as may be provided herein; provided, however, that Eligible Consultants
shall not be eligible to receive Incentive Options. The Committee may from time
to time adopt such rules and regulations for carrying out the purposes of the
Plan as it may deem proper and in the best interests of the Company. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any agreement entered into hereunder in the
manner and to the extent it shall deem expedient and it shall be the sole and
final judge of such expediency. No member of the Committee shall be liable for
any action or determination made in good faith. The determinations,
interpretations and other actions of the Committee pursuant to the provisions of
the Plan shall be binding and conclusive for all purposes and on all persons.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. The number of Shares that are authorized for
issuance under the Plan in accordance with the provisions of the Plan and
subject to such restrictions or other provisions as the Committee may from time
to time deem necessary shall not exceed 10,000,000, subject to the provisions
regarding changes in capital described below. The maximum number of Shares with
respect to which a Participant may receive Options and Stock Appreciation Rights
under the Plan in any calendar year is 10,000,000 Shares. The Shares may be
either authorized and unissued Shares or previously issued Shares acquired by
Qwest. This authorization may be increased from time to time by approval of the
Board and by the stockholders of Qwest if, in the opinion of counsel for Qwest,
stockholder approval is required. Shares of Stock that may be issued upon
exercise of Options or Stock Appreciation Rights, that are issued as Restricted
Stock Awards or Stock Bonuses, that are issued with respect to Stock Units, and
that are issued as incentive compensation or other Stock grants under the Plan
shall be applied to reduce the maximum number of Shares remaining available for
use under the Plan. Qwest shall at all times during the term of the Plan and
while any Options or Stock Units are outstanding retain as authorized and
unissued Stock at least the number of Shares from time to time required under
the provisions of the Plan, or otherwise assure itself of its ability to perform
its obligations hereunder.
4.2 OTHER SHARES OF STOCK. Any shares of Stock that are subject to an
Option that expires or for any reason is terminated unexercised, any shares of
Stock that are subject to an Award (other than an Option) and that are
forfeited, and any shares of Stock withheld for the payment of taxes or received
by Qwest as payment of the exercise price of an Option shall automatically
become available for use under the Plan, provided, however, that no more than
10,000,000 shares of Stock may be awarded pursuant to Incentive Options.
4
<PAGE>
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If Qwest shall at
any time increase or decrease the number of its outstanding Shares or change in
any way the rights and privileges of such Shares by means of the payment of a
stock dividend or any other distribution upon such shares payable in Stock, or
through a stock split, subdivision, consolidation, combination, reclassification
or recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and privileges
of the following shall be increased, decreased or changed in like manner as if
they had been issued and outstanding, fully paid and nonassessable at the time
of such occurrence: (i) the Shares as to which Awards may be granted under the
Plan and (ii) the Shares then included in each outstanding Award granted
hereunder.
4.4 OTHER DISTRIBUTIONS AND CHANGES IN THE STOCK. If
(a) Qwest shall at any time distribute with respect to the Stock
assets or securities of persons other than Qwest (excluding cash or
distributions referred to in Section 4.3), or
(b) Qwest shall at any time grant to the holders of its Stock rights
to subscribe pro rata for additional shares thereof or for any other securities
of Qwest, or
(c) there shall be any other change (except as described in Section
4.3) in the number or kind of outstanding Shares or of any stock or other
securities into which the Stock shall be changed or for which it shall have been
exchanged,
and if the Committee shall in its discretion determine that the event described
in subsection (a), (b), or (c) above equitably requires an adjustment in the
number or kind of Shares subject to an Option or other Award, an adjustment in
the Option Price or the taking of any other action by the Committee, including
without limitation, the setting aside of any property for delivery to the
Participant upon the exercise of an Option or the full vesting of an Award, then
such adjustments shall be made, or other action shall be taken, by the Committee
and shall be effective for all purposes of the Plan and on each outstanding
Option or Award that involves the particular type of stock for which a change
was effected. Notwithstanding the foregoing provisions of this Section 4.4,
pursuant to Section 8.3 below, a Participant holding Stock received as a
Restricted Stock Award shall have the right to receive all amounts, including
cash and property of any kind, distributed with respect to the Stock after such
Restricted Stock Award was granted upon the Participant's becoming a holder of
record of the Stock.
4.5 GENERAL ADJUSTMENT RULES. No adjustment or substitution provided for
in this Article IV shall require Qwest to sell a fractional share of Stock under
any Option, or otherwise issue a fractional share of Stock, and the total
substitution or adjustment with respect to each Option and other Award shall be
limited by deleting any fractional share. In the case of any such substitution
or adjustment, the aggregate Option Price for the total number of shares of
Stock then subject to an Option shall remain unchanged but the Option Price per
share under each such Option shall be equitably adjusted by the Committee to
reflect the greater or lesser number of shares of Stock or other securities into
which the Stock subject to the Option may have been changed, and appropriate
adjustments shall be made to other Awards to reflect any such substitution or
adjustment.
5
<PAGE>
4.6 DETERMINATION BY THE COMMITTEE, ETC. Adjustments under this Article
IV shall be made by the Committee, whose determinations with regard thereto
shall be final and binding upon all parties thereto.
ARTICLE V
CORPORATE REORGANIZATION; CHANGE IN CONTROL
5.1 REORGANIZATION OF QWEST. Except as provided otherwise by the
Committee at the time an Award is granted, upon the occurrence of any of the
following events, if the notice required by Section 5.2 shall have first been
given, the Plan and all Options then outstanding hereunder shall automatically
terminate and be of no further force and effect whatsoever, and other Awards
then outstanding shall be treated as described in Sections 5.2 and 5.3, without
the necessity for any additional notice or other action by the Board or Qwest:
(a) the merger or consolidation of Qwest with or into another corporation or
other reorganization (other than a reorganization under the United States
Bankruptcy Code) of Qwest (other than a consolidation, merger, or reorganization
in which Qwest is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Stock); or (b) the sale or
conveyance of the property of Qwest as an entirety or substantially as an
entirety (other than a sale or conveyance in which the Qwest continues as
holding company of an entity or entities that conduct the business or business
formerly conducted by Qwest); or (c) the dissolution or liquidation of Qwest.
5.2 REQUIRED NOTICE. At least 30 days' prior written notice of any event
described in Section 5.1 shall be given by Qwest to each Option Holder and
Participant unless (a) in the case of the events described in clauses (a) or (b)
of Section 5.1, Qwest, or the successor or purchaser, as the case may be, shall
make adequate provision for the assumption of the outstanding Options or the
substitution of new options for the outstanding Options on terms comparable to
the outstanding Options except that the Option Holder shall have the right
thereafter to purchase the kind and amount of securities or property or cash
receivable upon such merger, consolidation, other reorganization, sale or
conveyance by a holder of the number of Shares that would have been receivable
upon exercise of the Option immediately prior to such merger, consolidation,
sale or conveyance (assuming such holder of Stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
majority of the non-electing shares), or (b) Qwest, or the successor or
purchaser, as the case may be, shall make adequate provision for the adjustment
of outstanding Awards (other than Options) so that such Awards shall entitle the
Participant to receive the kind and amount of securities or property or cash
receivable upon such merger, consolidation, other reorganization, sale or
conveyance by a holder of the number of Shares that would have been receivable
with respect to such Award immediately prior to such merger, consolidation,
other reorganization, sale or conveyance (assuming such holder of Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a majority of the non-electing shares). The provisions of
this Article V shall similarly apply to successive mergers, consolidations,
reorganizations, sales or conveyances. Such notice shall be deemed to have been
given when delivered personally to a Participant or when mailed to a Participant
by registered or certified mail, postage prepaid, at such Participant's address
last known to the Company.
6
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5.3 ACCELERATION OF EXERCISABILITY. Participants notified in accordance
with Section 5.2 may exercise their Options at any time before the occurrence of
the event requiring the giving of notice (but subject to occurrence of such
event), regardless of whether all conditions of exercise relating to length of
service, attainment of financial performance goals or otherwise have been
satisfied. Upon the giving of notice in accordance with Section 5.2, all
restrictions with respect to Restricted Stock and other Awards shall lapse
immediately, all Stock Units shall become payable immediately and all Stock
Appreciation Rights shall become exercisable. Any Options, Stock Appreciation
Rights or Stock Units that are not assumed or substituted under clauses (a) or
(b) of Section 5.2 that have not been exercised prior to the event described in
Section 5.1 shall automatically terminate upon the occurrence of such event.
5.4 CHANGE IN CONTROL OF QWEST.
(a) IN GENERAL. Unless provided otherwise by the Committee at the
time of the grant of an Award, upon a change in control of Qwest as defined in
subsection 5.4(b), then (i) all Options shall become immediately exercisable in
full during the remaining term thereof, and shall remain so, whether or not the
Participants to whom such Options have been granted remain employees or
consultants of the Company; (ii) all restrictions with respect to outstanding
Restricted Stock Awards shall immediately lapse; (iii) all Stock Units shall
become immediately payable; and (iv) all other Awards shall become immediately
exercisable or shall vest, as the case may be, without any further action or
passage of time.
(b) DEFINITION. For purposes of this Plan, a "change in control"
shall be deemed to have occurred if either (i) any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than
Anschutz Company, The Anschutz Corporation, or any entity or organization
controlled by Philip F. Anschutz (collectively, the "Anschutz Entities"),
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty percent (20%) 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") and such beneficial
ownership (as so defined) by such individual, entity or group of twenty percent
(20%) or more of the Outstanding Shares or the Voting Power, as the case may be,
shall then exceed the beneficial ownership (as so defined) by the Anschutz
Entities of the Outstanding Shares or the Voting Power, respectively, or (ii)
the Anschutz Entities no longer have beneficial ownership (as so defined) of
twenty percent (20%) or more of either the Outstanding Shares or the Voting
Power.
5.5 REORGANIZATION OF AFFILIATED CORPORATIONS. If an Affiliated
Corporation is merged or consolidated with another corporation (other than a
merger or consolidation pursuant to which the Affiliated Corporation continues
to be, or the continuing corporation is, affiliated with Qwest through stock
ownership or control), or if all or substantially all of the assets or more than
50% of the stock of the Affiliated Corporation is acquired by any other
corporation, business entity or person (other than a transaction in which the
successor is affiliated with Qwest through stock ownership or control), or in
the case of a reorganization (other than a reorganization under the United
States Bankruptcy Code) including a divisive reorganization under Section 355 of
the Code, or liquidation of the Affiliated Corporation, the Committee may, as to
outstanding Awards, make appropriate provision for the protection of outstanding
Awards granted to Eligible Employees of, and Eligible Consultants to, the
affected Affiliated Corporation by (i) providing for the assumption of
outstanding
7
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Options or the substitution of new Options for outstanding Options by the
successor on terms comparable to the outstanding Options, (ii) providing for the
adjustment of outstanding Awards, or (iii) taking such other action with respect
to outstanding Awards as the Committee deems appropriate.
ARTICLE VI
PARTICIPATION
Participants in the Plan shall be those Eligible Employees who, in the
judgment of the Committee, are performing, or during the term of their incentive
arrangement will perform, vital services in the management, operation and
development of the Company, and significantly contribute, or are expected to
significantly contribute, to the achievement of long-term corporate economic
objectives. Eligible Consultants shall be selected from those non-employee
consultants to the Company who are performing services important to the
operation and growth of the Company. Participants may be granted from time to
time one or more Awards; provided, however, that the grant of each such Award
shall be separately approved by the Committee and receipt of one such Award
shall not result in automatic receipt of any other Award. Upon determination by
the Committee that an Award is to be granted to a Participant, written notice
shall be given to such person, specifying the terms, conditions, rights and
duties related thereto. Each Participant shall, if required by the Committee,
enter into an agreement with Qwest, in such form as the Committee shall
determine and which is consistent with the provisions of the Plan, specif
ying
such terms, conditions, rights and duties. Awards shall be deemed to be granted
as of the date specified in the grant resolution of the Committee, which date
shall be the date of any related agreement with the Participant. In the event
of any inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern.
ARTICLE VII
OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options.
The Committee in its sole discretion shall designate whether an Option is an
Incentive Option or a Non-Qualified Option; provided, however, that only Non-
Qualified Options may be granted to Eligible Consultants. The Committee may
grant both an Incentive Option and a Non-Qualified Option to an Eligible
Employee at the same time or at different times. Incentive Options and Non-
Qualified Options, whether granted at the same time or at different times, shall
be deemed to have been awarded in separate grants and shall be clearly
identified, and in no event shall the exercise of one Option affect the right to
exercise any other Option or affect the number of shares for which any other
Option may be exercised, except as provided in subsection 7.2(j). An Option
shall be considered as having been granted on the date specified in the grant
resolution of the Committee.
7.2 STOCK OPTION CERTIFICATES. Each Option granted under the Plan shall
be evidenced by a written stock option certificate or agreement (an "Option
Certificate"). An Option Certificate shall be issued by Qwest in the name of
the Participant to whom the Option is granted (the "Option
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Holder") and in such form as may be approved by the Committee. The Option
Certificate shall incorporate and conform to the conditions set forth in this
Section 7.2 as well as such other terms and conditions that are not inconsistent
as the Committee may consider appropriate in each case.
(a) NUMBER OF SHARES. Each Option Certificate shall state that it
covers a specified number of shares of Stock, as determined by the Committee.
(b) PRICE. The price at which each share of Stock covered by an
Option may be purchased shall be determined in each case by the Committee and
set forth in the Option Certificate, but in no event shall the price be less
than 100 percent of the Fair Market Value of the Stock on the date an Incentive
Option is granted.
(c) DURATION OF OPTIONS; RESTRICTIONS ON EXERCISE. Each Option
Certificate shall state the period of time, determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option Period").
The Option Period must end, in all cases, not more than ten years from the date
the Option is granted. The Option Certificate shall also set forth any
installment or other restrictions on Option exercise during such period, if any,
as may be determined by the Committee. Each Option shall become exercisable
(vest) over such period of time, if any, or upon such events, as determined by
the Committee.
(d) TERMINATION OF SERVICES, DEATH, DISABILITY, ETC. The Committee
may specify the period, if any, after which an Option may be exercised following
termination of the Option Holder's services. The effect of this subsection
7.2(d) shall be limited to determining the consequences of a termination and
nothing in this subsection 7.2(d) shall restrict or otherwise interfere with the
Company's discretion with respect to the termination of any individual's
services. If the Committee does not otherwise specify, the following shall
apply:
(i) If the services of the Option Holder are terminated within the
Option Period for "cause", as determined by the Company, the Option shall
thereafter be void for all purposes. As used in this subsection 7.2(d), "cause"
shall mean willful misconduct, a willful failure to perform the Option Holder's
duties, insubordination, theft, dishonesty, conviction of a felony or any other
willful conduct that is materially detrimental to the Company or such other
cause as the Board in good faith reasonably determines provides cause for the
discharge of an Option Holder.
(ii) If the Option Holder becomes Disabled, the Option may be
exercised by the Option Holder within one year following the Option Holder's
termination of services on account of Disability (provided that such exercise
must occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to the shares as to which the Option had become
exercisable on or before the date of the Option Holder's termination of services
because of Disability.
(iii) If the Option Holder dies during the Option Period while
still performing services for the Company or within the one year period referred
to in (ii) above or the three-month period referred to in (iv) below, the Option
may be exercised by those entitled to do so under the Option Holder's will or by
the laws of descent and distribution within one year following the Option
Holder's death, (provided that such exercise must occur within the Option
Period), but
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<PAGE>
not thereafter. In any such case, the Option may be exercised only as to the
shares as to which the Option had become exercisable on or before the date of
the Option Holder's death.
(iv) If the services of the Option Holder are terminated (which
for this purpose means that the Option Holder is no longer employed by the
Company or performing services for the Company) by the Company within the Option
Period for any reason other than cause, Disability or the Option Holder's death,
the Option may be exercised by the Option Holder within three months following
the date of such termination (provided that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on
or before the date of termination of services.
(e) TRANSFERABILITY. Each Option shall not be transferable by the
Option Holder except by will or pursuant to the laws of descent and
distribution. Each Option is exercisable during the Option Holder's lifetime
only by him or her, or in the event of Disability or incapacity, by his or her
guardian or legal representative. The Committee may, however, provide at the
time of grant or thereafter that the Option Holder may transfer a Non-Qualified
Option to a member of the Option Holder's immediate family, a trust of which
members of the Option Holder's immediate family are the only beneficiaries, or a
partnership of which members of the Option Holder's immediate family or trusts
for the sole benefit of the Option Holder's immediate family are the only
partners. Immediate family means the Option Holder's spouse, issue (by birth or
adoption), parents, grandparents, and siblings (including half brothers and
sisters and adopted siblings). During the Option Holder's lifetime the Option
Holder may not transfer an Incentive Option under any circumstances.
(f) CONSIDERATION FOR GRANT OF OPTION. Each Option Holder agrees to
remain in the employment of the Company or to continue providing consulting
services to the Company, as the case may be, at the pleasure of the Company, for
a continuous period of at least one year after the date the Option is granted,
at the rate of compensation in effect on the date of such agreement or at such
changed rate as may be fixed, from time to time, by the Company. Nothing in
this paragraph shall limit or impair the Company's right to terminate the
employment of any employee or to terminate the consulting services of any
consultant.
(g) EXERCISE, PAYMENTS, ETC.
(i) MANNER OF EXERCISE. The method for exercising each Option
granted hereunder shall be by delivery to Qwest of written notice specifying the
number of Shares with respect to which such Option is exercised. The purchase of
such Shares shall take place at the principal offices of Qwest within thirty
days following delivery of such notice, at which time the Option Price of the
Shares shall be paid in full by any of the methods set forth below or a
combination thereof. Except as set forth in the next sentence, the Option shall
be exercised when the Option Price for the number of shares as to which the
Option is exercised is paid to Qwest in full. If the Option Price is paid by
means of a broker's loan transaction described in subsection 7.2(g)(ii)(D), in
whole or in part, the closing of the purchase of the Stock under the Option
shall take place (and the Option shall be treated as exercised) on the date on
which, and only if, the sale of Stock upon which the broker's loan was based has
been closed and settled, unless the Option Holder makes an irrevocable written
election, at the time of exercise of the Option, to have the exercise
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<PAGE>
treated as fully effective for all purposes upon receipt of the Option Price by
Qwest regardless of whether or not the sale of the Stock by the broker is closed
and settled. A properly executed certificate or certificates representing the
Shares shall be delivered to or at the direction of the Option Holder upon
payment therefor. If Options on less than all shares evidenced by an Option
Certificate are exercised, Qwest shall deliver a new Option Certificate
evidencing the Option on the remaining shares upon delivery of the Option
Certificate for the Option being exercised.
(ii) The exercise price shall be paid by any of the following
methods or any combination of the following methods at the election of the
Option Holder, or by any other method approved by the Committee upon the request
of the Option Holder:
(A) in cash;
(B) by certified check, cashier's check or other check
acceptable to the Company, payable to the order of Qwest;
(C) by delivery to Qwest of certificates representing the
number of shares then owned by the Option Holder, the Fair Market Value of which
equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to Qwest; provided however, that no Option may be
exercised by delivery to Qwest of certificates representing Stock, unless such
Stock has been held by the Option Holder for more than six months; for purposes
of this Plan, the Fair Market Value of any shares of Stock delivered in payment
of the purchase price upon exercise of the Option shall be the Fair Market Value
as of the exercise date; the exercise date shall be the day of delivery of the
certificates for the Stock used as payment of the Option Price; or
(D) by delivery to Qwest of a properly executed notice of
exercise together with irrevocable instructions to a broker to deliver to Qwest
promptly the amount of the proceeds of the sale of all or a portion of the Stock
or of a loan from the broker to the Option Holder required to pay the Option
Price.
(h) DATE OF GRANT. An Option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(i) WITHHOLDING.
(i) Non-Qualified Options. Upon exercise of an Option, the
Option Holder shall make appropriate arrangements with the Company to provide
for the amount of additional withholding required by Sections 3102 and 3402 of
the Code and applicable state income tax laws, including payment of such taxes
through delivery of shares of Stock or by withholding Stock to be issued under
the Option, as provided in Article XVII.
(ii) Incentive Options. If an Option Holder makes a disposition
(as defined in Section 424(c) of the Code) of any Stock acquired pursuant to the
exercise of an Incentive Option prior to the expiration of two years from the
date on which the Incentive Option was granted or prior to the expiration of one
year from the date on which the Option was exercised, the Option Holder shall
send written notice to the Company at the Company's principal place of business
of the date of such disposition, the number of shares disposed of, the amount of
proceeds received from such
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disposition and any other information relating to such disposition as the
Company may reasonably request. The Option Holder shall, in the event of such a
disposition, make appropriate arrangements with the Company to provide for the
amount of additional withholding, if any, required by Sections 3102 and 3402 of
the Code and applicable state income tax laws.
7.3 RESTRICTIONS ON INCENTIVE OPTIONS.
(a) INITIAL EXERCISE. The aggregate Fair Market Value of the Shares
with respect to which Incentive Options are exercisable for the first time by an
Option Holder in any calendar year, under the Plan or otherwise, shall not
exceed $100,000. For this purpose, the Fair Market Value of the Shares shall be
determined as of the date of grant of the Option.
(b) TEN PERCENT STOCKHOLDERS. Incentive Options granted to an Option
Holder who is the holder of record of 10% or more of the outstanding Stock of
Qwest shall have an Option Price equal to 110% of the Fair Market Value of the
Shares on the date of grant of the Option and the Option Period for any such
Option shall not exceed five years.
7.4 SHAREHOLDER PRIVILEGES. No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to which
there is a record date preceding the date such Option Holder becomes the holder
of record of such Stock, except as provided in Article IV.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1 GRANT OF RESTRICTED STOCK AWARDS. Coincident with or following
designation for participation in the Plan, the Committee may grant a Participant
one or more Restricted Stock Awards consisting of Shares of Stock. The number
of Shares granted as a Restricted Stock Award shall be determined by the
Committee.
8.2 RESTRICTIONS. A Participant's right to retain a Restricted Stock
Award granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuous employment by or performance of
services for the Company for a restriction period specified by the Committee or
the attainment of specified performance goals and objectives, as may be
established by the Committee with respect to such Award. The Committee may in
its sole discretion require different periods of service or different
performance goals and objectives with respect to different Participants, to
different Restricted Stock Awards or to separate, designated portions of the
Shares constituting a Restricted Stock Award. In the event of the death or
Disability of a Participant, or the retirement of a Participant in accordance
with the Company's established retirement policy, all required periods of
service and other restrictions applicable to Restricted Stock Awards then held
by him shall lapse with respect to a pro rata part of each such Award based on
the ratio between the number of full months of employment or services completed
at the time of termination of services from the grant of each Award to the total
number of months of employment or continued services required for such Award to
be fully nonforfeitable, and such portion of each such Award shall
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<PAGE>
become fully nonforfeitable. The remaining portion of each such Award shall be
forfeited and shall be immediately returned to Qwest. If a Participant's
employment or consulting services terminate for any other reason, any Restricted
Stock Awards as to which the period for which services are required or other
restrictions have not been satisfied (or waived or accelerated as provided
herein) shall be forfeited, and all shares of Stock related thereto shall be
immediately returned to Qwest.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A Participant shall
have all voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under this
Article VIII upon his becoming the holder of record of such Stock; provided,
however, that the Participant's right to sell, encumber, or otherwise transfer
such Stock shall be subject to the limitations of Section 11.2.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock Award
referring to the restrictions provided by Sections 8.2 and 8.3 and, in addition,
may in its sole discretion require one or more of the following methods of
enforcing the restrictions referred to in Sections 8.2 and 8.3:
(a) Requiring the Participant to keep the Stock certificates, duly
endorsed, in the custody of Qwest while the restrictions remain in effect; or
(b) Requiring that the Stock certificates, duly endorsed, be held in
the custody of a third party while the restrictions remain in effect.
ARTICLE IX
STOCK UNITS
A Participant may be granted a number of Stock Units determined by the
Committee. The number of Stock Units, the goals and objectives to be satisfied
with respect to each grant of Stock Units, the time and manner of payment for
each Stock Unit, and the other terms and conditions applicable to a grant of
Stock Units shall be determined by the Committee.
ARTICLE X
STOCK APPRECIATION RIGHTS
10.1 PERSONS ELIGIBLE. The Committee, in its sole discretion, may
grant Stock Appreciation Rights to Eligible Employees or Eligible Consultants.
10.2 TERMS OF GRANT. The Committee shall determine at the time of the
grant of a Stock Appreciation Right the time period during which the Stock
Appreciation Right may be exercised and any other terms that shall apply to the
Stock Appreciation Right.
10.3 EXERCISE. A Stock Appreciation Right shall entitle a Participant
to receive a number of shares of Stock (without any payment to Qwest, except for
applicable withholding taxes), cash,
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or Stock and cash, as determined by the Committee in accordance with Section
10.4 below. If a Stock Appreciation Right is issued in tandem with an Option,
except as may otherwise be provided by the Committee, the Stock Appreciation
Right shall be exercisable during the period that its related Option is
exercisable. A Participant desiring to exercise a Stock Appreciation Right shall
give written notice of such exercise to Qwest, which notice shall state the
proportion of Stock and cash that the Participant desires to receive pursuant to
the Stock Appreciation Right exercised. Upon receipt of the notice from the
Participant, Qwest shall deliver to the person entitled thereto (i) a
certificate or certificates for Stock and/or (ii) a cash payment, in accordance
with Section 10.4 below. The date Qwest receives written notice of such exercise
hereunder is referred to in this Article X as the "exercise date". The delivery
of Stock or cash received pursuant to such exercise shall take place at the
principal offices of Qwest within 30 days following delivery of such notice.
10.4 NUMBER OF SHARES OR AMOUNT OF CASH. Subject to the discretion of
the Committee to substitute cash for Stock, or Stock for cash, the number of
Shares that may be issued pursuant to the exercise of a Stock Appreciation Right
shall be determined by dividing: (a) the total number of Shares of Stock as to
which the Stock Appreciation Right is exercised, multiplied by the amount by
which the Fair Market Value of one share of Stock on the exercise date exceeds
the Fair Market Value of one Share of Stock on the date of grant of one Share of
Stock Appreciation Right, by (b) the Fair Market Value of one Share of Stock on
the exercise date; provided, however, that fractional shares shall not be issued
and in lieu thereof, a cash adjustment shall be paid. In lieu of issuing Stock
upon the exercise of a Stock Appreciation Right, the Committee in its sole
discretion may elect to pay the cash equivalent of the Fair Market Value of the
Stock on the exercise date for any or all of the Shares of Stock that would
otherwise be issuable upon exercise of the Stock Appreciation Right.
10.5 EFFECT OF EXERCISE. If a Stock Appreciation Right is issued in
tandem with an Option, the exercise of the Stock Appreciation Right or the
related Option will result in an equal reduction in the number of corresponding
Options or Stock Appreciation Rights that were granted in tandem with such Stock
Appreciation Rights and Options.
10.6 TERMINATION OF SERVICES. Upon the termination of the services of
a Participant, any Stock Appreciation Rights then held by such Participant shall
be exercisable within the time periods, and upon the same conditions with
respect to the reasons for termination of services, as are specified in Section
7.2(d) with respect to Options.
ARTICLE XI
STOCK BONUSES
The Committee may award Stock Bonuses to such Participants, subject to such
conditions and restrictions, as it determines in its sole discretion. Stock
Bonuses may be either outright grants of Stock, or may be grants of Stock
subject to and conditioned upon certain employment or performance related goals.
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ARTICLE XII
OTHER COMMON STOCK GRANTS
From time to time during the duration of this Plan, the Board may, in its
sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire shares of Stock,
whether by purchase, outright grant, or otherwise. Any such arrangements shall
be subject to the general provisions of this Plan and all shares of Stock issued
pursuant to such arrangements shall be issued under this Plan.
ARTICLE XIII
RIGHTS OF PARTICIPANTS
13.1 SERVICE. Nothing contained in the Plan or in any Award, or other
Award granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his employment by, or consulting relationship
with, the Company, or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement or other contract to
the contrary, at any time to terminate such services or to increase or decrease
the compensation of the Participant from the rate in existence at the time of
the grant of an Award. Whether an authorized leave of absence, or absence in
military or government service, shall constitute a termination of service shall
be determined by the Committee at the time.
13.2 NONTRANSFERABILITY. Except as provided otherwise at the time of
grant, no right or interest of any Participant in an Option, a Stock
Appreciation Right, a Restricted Stock Award (prior to the completion of the
restriction period applicable thereto), a Stock Unit, or other Award granted
pursuant to the Plan, shall be assignable or transferable during the lifetime of
the Participant, either voluntarily or involuntarily, or subjected to any lien,
directly or indirectly, by operation of law, or otherwise, including execution,
levy, garnishment, attachment, pledge or bankruptcy. In the event of a
Participant's death, a Participant's rights and interests in Options, Stock
Appreciation Rights, Restricted Stock Awards, other Awards, and Stock Units
shall, to the extent provided in Articles VII, VIII, IX, X and XI, be
transferable by will or the laws of descent and distribution, and payment of any
amounts due under the Plan shall be made to, and exercise of any Options may be
made by, the Participant's legal representatives, heirs or legatees.
Notwithstanding the foregoing, the Option Holder may not transfer an Incentive
Option during the Option Holder's lifetime. If in the opinion of the Committee
a person entitled to payments or to exercise rights with respect to the Plan is
disabled from caring for his affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights shall
be exercised by, such person's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.
13.3 NO PLAN FUNDING. Obligations to Participants under the Plan will
not be funded, trusteed, insured or secured in any manner. The Participants
under the Plan shall have no security interest in any assets of the Company, and
shall be only general creditors of the Company.
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ARTICLE XIV
GENERAL RESTRICTIONS
14.1 INVESTMENT REPRESENTATIONS. Qwest may require any person to whom
an Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, or
Stock Bonus is granted, as a condition of exercising such Option or Stock
Appreciation Right, or receiving such Restricted Stock Award, Stock Unit, or
Stock Bonus, to give written assurances in substance and form satisfactory to
Qwest and its counsel to the effect that such person is acquiring the Stock for
his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as Qwest deems
necessary or appropriate in order to comply with Federal and applicable state
securities laws. Legends evidencing such restrictions may be placed on the
Stock certificates.
14.2 COMPLIANCE WITH SECURITIES LAWS. Each Option, Stock Appreciation
Right, Restricted Stock Award, Stock Unit, and Stock Bonus grant shall be
subject to the requirement that, if at any time counsel to Qwest shall determine
that the listing, registration or qualification of the shares subject to such
Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, or Stock
Bonus grant upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance or purchase of shares
thereunder, such Option, Stock Appreciation Right, Restricted Stock Award, Stock
Unit or Stock Bonus grant may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the Committee. Nothing
herein shall be deemed to require Qwest to apply for or to obtain such listing,
registration or qualification.
14.3 CHANGES IN ACCOUNTING RULES. Except as provided otherwise at the
time an Award is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to Options, Stock Appreciation Rights, Restricted
Stock Awards, Stock Units or other Awards shall occur which, in the sole
judgment of the Committee, may have a material adverse effect on the reported
earnings, assets or liabilities of Qwest, the Committee shall have the right and
power to modify as necessary, any then outstanding and unexercised Options,
Stock Appreciation Rights, outstanding Restricted Stock Awards, outstanding
Stock Units and other outstanding Awards as to which the applicable services or
other restrictions have not been satisfied.
ARTICLE XV
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option or Stock Appreciation Right, the sale of
shares received upon such exercise, the vesting of any Restricted Stock Award,
receipt of Stock Bonuses, distributions with respect to Stock Units, or the
grant of Stock shall not constitute "earnings" or "compensation" with respect to
which any other employee benefits of such employee are determined, including
without limitation benefits under any pension, profit sharing, 401(k), life
insurance or salary continuation plan.
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ARTICLE XVI
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if Qwest, on the advice of counsel,
determines that shareholder approval is otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options, Stock Appreciation Rights, Restricted Stock
Awards, Stock Units, Stock Bonuses or other Award theretofore granted under the
Plan, without the consent of the Participant holding such Options, Stock
Appreciation Rights, Restricted Stock Awards, Stock Units, Stock Bonuses or
other Awards.
ARTICLE XVII
WITHHOLDING
17.1 WITHHOLDING REQUIREMENT. Qwest's obligations to deliver shares
of Stock upon the exercise of any Option, or Stock Appreciation Right, the
vesting of any Restricted Stock Award, payment with respect to Stock Units, or
the grant of Stock shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements.
17.2 WITHHOLDING WITH STOCK. At the time the Committee grants an
Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit, Stock
Bonus, other Award, or Stock, it may, in its sole discretion, grant the
Participant an election to pay all such amounts of tax withholding, or any part
thereof, by electing to transfer to Qwest, or to have Qwest withhold from shares
otherwise issuable to the Participant, shares of Stock having a value equal to
the amount required to be withheld or such lesser amount as may be elected by
the Participant. All elections shall be subject to the approval or disapproval
of the Committee. The value of shares of Stock to be withheld shall be based on
the Fair Market Value of the Stock on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). Any such elections by
Participants to have shares of Stock withheld for this purpose will be subject
to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of Qwest within the
meaning of Section 16 of the 1934 Act ("Section 16"), the Participant must
satisfy the requirements of such Section 16 and any applicable Rules thereunder
with respect to the use of Stock to satisfy such tax withholding obligation.
17
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ARTICLE XVIII
REQUIREMENTS OF LAW
18.1 REQUIREMENTS OF LAW. The issuance of Stock and the payment of
cash pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
18.2 FEDERAL SECURITIES LAW REQUIREMENTS. If a Participant is an
officer or director of Qwest within the meaning of Section 16, Awards granted
hereunder shall be subject to all conditions required under Rule 16b-3, or any
successor rule promulgated under the 1934 Act, to qualify the Award for any
exception from the provisions of Section 16(b) of the 1934 Act available under
that Rule. Such conditions shall be set forth in the agreement with the
Participant which describes the Award or other document evidencing or
accompanying the Award.
18.3 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
ARTICLE XIX
DURATION OF THE PLAN
Unless sooner terminated by the Board of Directors, the Plan shall
terminate at the close of business on June 22, 2007, and no Option, Stock
Appreciation Right, Restricted Stock Award, Stock Unit, Stock Bonus, other Award
or Stock shall be granted, or offer to purchase Stock made, after such
termination. Options, Stock Appreciation Rights, Restricted Stock Awards, other
Awards, and Stock Units outstanding at the time of the Plan termination may
continue to be exercised, or become free of restrictions, or paid, in accordance
with their terms.
Dated: To be effective June 23, 1997.
QWEST COMMUNICATIONS
INTERNATIONAL INC., a
Delaware corporation
By: /s/
_____________________________
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PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 6, 1998
COMMON STOCK
QWEST COMMUNICATIONS INTERNATIONAL INC.
The undersigned hereby appoints Joseph P. Nacchio and Robert S. Woodruff, or
either of them, with full power of substitution, as a proxy or proxies to
represent the undersigned at the Annual Meeting of Stockholders (the "Annual
Meeting") of QWEST COMMUNICATIONS INTERNATIONAL INC. (the "Company") to be
held on May 6, 1998, at 10:00 a.m. at the Hyatt Regency Denver, the Grand
Ballroom, 1750 Welton Street, Denver, Colorado, and at any adjournments or
postponements thereof, and to vote thereat all the shares of Common Stock,
$.01 par value per share, held of record by the undersigned at the close of
business on March 27, 1998, with all the power that the undersigned would
possess if personally present, as designated on the reverse side.
Shares will be voted as specified. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH OF THE PROPOSALS. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF EACH OF THE PROPOSALS IN ACCORDANCE WITH THE BOARD OF
DIRECTORS RECOMMENDATIONS. The proxies or substitutes may vote in their
discretion upon any other business that may properly come before the Annual
Meeting or any adjournments thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
[X] Please mark
your votes
as indicated
FOR WITHHOLD AUTHORITY TO VOTE
FOR ALL NOMINEES LISTED
1. ELECTION OF DIRECTORS
Philip F. Anschutz Douglas L. Polson [_] [_]
Joseph P. Nacchio Craig D. Slater
Robert S. Woodruff Jordan L. Haines
Cannon Y. Harvey W. Thomas Stephens
Richard T. Liebhaber Roy A. Wilkens
To withhold authority to vote for any
individual nominees, write their names
on the line provided below:
______________________________________
2. APPROVAL OF THE EQUITY INCENTIVE PLAN FOR AGAINST ABSTAIN
PROPOSAL [_] [_] [_]
I WILL ATTEND THE ANNUAL MEETING: YES NO
[_] [_]
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
Signature(s) _______________________________________ Dated _______________, 1998
NOTE: Please sign this proxy as your name appears hereon, including the title
"Executor," "Trustee," etc. if such is indicated. If joint account, each joint
owner should sign. If stock is held by a corporation, this proxy should be
executed by a proper officer thereof.
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