<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
U.S. WEST, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
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(LOGO)
7800 East Orchard Road
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of U S WEST, Inc. ("U S WEST" or the
"Company") will be held at the Boise Centre in Boise, Idaho, on Friday, May 5,
1995, at 10:00 a.m., for the following purposes:
1. To elect four Directors in Class I (see page 4);
2. To ratify the appointment of auditors (see page 5);
3. To approve an amendment to the U S WEST 1994 Stock Plan (see page
5); and
4. To act upon such other matters as may properly come before the
Annual Meeting, including shareholder proposals (see page 7).
Shareholders of record at the close of business on March 16, 1995 will be
entitled to vote at the Annual Meeting or any postponements or adjournments
thereof.
By Order of the Board of Directors
/s/ CHARLES P. RUSS, III
CHARLES P. RUSS, III
Executive Vice President,
General Counsel and Secretary
March 16, 1995
EACH SHAREHOLDER'S VOTE IS IMPORTANT.
PLEASE DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY.
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<PAGE> 3
U S WEST
Executive Offices
7800 East Orchard Road
Englewood, Colorado 80111
PROXY STATEMENT
This Proxy Statement and the accompanying proxy/voting instruction card
("proxy card") are first being mailed on March 16, 1995 to holders of common
stock in connection with the solicitation of proxies by the Board of Directors
of U S WEST. Shares can be voted at the Annual Meeting only if the shareholder
is represented by proxy or is present in person.
EACH SHAREHOLDER'S VOTE IS IMPORTANT. ACCORDINGLY, SHAREHOLDERS ARE URGED
TO SIGN AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER THEY PLAN
TO ATTEND THE ANNUAL MEETING. If a shareholder attends and votes by ballot at
the Annual Meeting, that vote will cancel any proxy vote previously given.
Additionally, a shareholder giving a proxy may revoke it at any time before it
is voted at the Annual Meeting by giving a valid proxy bearing a later date.
When proxy cards are returned properly signed, the shares represented will
be voted in accordance with the shareholder's directions. Votes will be tallied
by Boston Financial Data Services, Inc., U S WEST's transfer agent. If a proxy
card is signed and returned without specifying choices, the shares will be voted
as recommended by the Board of Directors. No shareholder's vote will be
disclosed except to the extent necessary to meet legal requirements.
For participants in the U S WEST Shareowner Investment Plan, the proxy card
will cover the number of full shares in the plan account, as well as shares
registered in the participant's name. For participants in the U S WEST Payroll
Stock Ownership Plan ("PAYSOP") or the U S WEST Savings Plan/ESOP ("SP/E"), the
proxy card will also serve as a voting instruction card for the trustees of
those plans with respect to the shares held in the participants' accounts.
Shares held in the SP/E for which proxy cards are not returned (as well as
shares held in the suspense account under the plan) will be voted in the same
proportion as the shares for which signed proxy cards are returned. Shares held
in the PAYSOP cannot be voted unless a proxy card covering those shares is
signed and returned.
On December 31, 1994, there were 469,343,048 common shares outstanding and
approximately 816,099 record holders of such shares. Each common share is
entitled to one vote on all matters properly brought before the Annual Meeting.
Shareholders representing a majority of the common shares outstanding and
entitled to vote must be present or represented by proxy in order to constitute
a quorum to conduct business at the Annual Meeting. If a quorum is present, the
four nominees for the Board of Directors receiving the highest number of votes
will be elected. For all other matters to be considered by shareholders at the
Annual Meeting, the affirmative vote of a majority of shares present in person
or by proxy and voting on a matter is necessary for approval. Shares represented
by proxies that are marked "Abstain" on the proxy card with regard to such other
matters, and proxies that are marked to deny discretionary authority on other
matters, will not be included in the vote totals, and will therefore have no
effect on the outcome of the vote. Shares held of record by brokers who are
prohibited from exercising discretionary authority for beneficial owners who
have not provided voting instructions (commonly described as "broker non-votes")
shall likewise not be included in the vote totals, and will have no effect on
the outcome of the vote.
IF A SHAREHOLDER PLANS TO ATTEND THE ANNUAL MEETING, THE APPROPRIATE BOX ON
THE PROXY CARD SHOULD BE MARKED AND THE CARD RETURNED PROMPTLY. Shareholders of
record who do not have admission tickets will be admitted upon verification of
ownership at the shareholders' admission counter. Beneficial owners can obtain
tickets at the shareholders' admission counter by presenting evidence of
holdings such as a bank or brokerage firm account statement.
A shareholder receiving more than one copy of U S WEST's Annual Report to
Shareholders may stop mailing of the duplicate copies by marking the designated
box on the proxy card for the accounts selected. This helps reduce the expense
of printing and mailing duplicate materials but will not affect the mailing of
dividend checks, special notices, proxy materials and dividend reinvestment
statements.
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BOARD OF DIRECTORS
MEETINGS
Regular meetings of the Board of Directors are held six times during the
year and special meetings are scheduled when required. The Board held ten
meetings in 1994. No incumbent Director attended fewer than 75 percent of the
aggregate of the total number of meetings of the Board and all Committees of the
Board on which such Director served. Directors meet their responsibilities not
only by attending Board and Committee meetings but also through communication
with members of management on matters affecting U S WEST.
COMMITTEES
The Board has established the following standing Committees to assist it in
meeting its responsibilities.
AUDIT COMMITTEE
The Audit Committee, which held three meetings in 1994, consists of Messrs.
Ryland (Chairman), Gilmour, Grieve and Williams, and Ms. Diaz-Oliver. The Audit
Committee's purpose is to oversee U S WEST's accounting and financial reporting
policies and practices and to assist the Board of Directors in fulfilling its
fiduciary and corporate accountability responsibilities. U S WEST's internal
auditors and its independent certified public accountants periodically meet with
the Audit Committee and always have unrestricted access directly to the Audit
Committee members.
BOARD AFFAIRS COMMITTEE
The Board Affairs Committee serves as a nominating committee for the full
Board of Directors and in addition makes recommendations regarding the
compensation of Directors and the composition of Board committees. The Board
Affairs Committee held two meetings in 1994. This committee, which consists of
Messrs. Grieve (Chairman), Cheney, and Jacobson, Ms. Diaz-Oliver, Ms.
Hufstedler, and Ms. Nelson, will consider candidates for the Board of Directors
recommended by shareholders if the names and qualifications of such candidates
are submitted in writing to the Secretary of U S WEST, 7800 East Orchard Road,
Suite 200, Englewood, Colorado 80111.
CORPORATE DEVELOPMENT AND FINANCE COMMITTEE
The Corporate Development and Finance Committee held three meetings in
1994. This committee consists of Messrs. Jacobson (Chairman), Cheney, Gilmour,
Grieve, Williams and Yankelovich and Ms. Hufstedler. This committee is
responsible for receiving and evaluating Company growth strategies and financing
for the Company's operations.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee held four meetings in 1994. This committee
consists of Messrs. Dove (Chairman), Popoff and Ryland, Ms. Diaz-Oliver, and Ms.
Nelson. The purpose of the Human Resources Committee is to assure the
appropriateness of the compensation and benefits of the executive officers of U
S WEST and its subsidiaries and to provide for the orderly succession of
management.
PUBLIC POLICY COMMITTEE
The Public Policy Committee is responsible for reviewing public policy
issues generally. The Public Policy Committee held three meetings in 1994, and
consists of Ms. Hufstedler (Chairwoman), Ms. Nelson and Messrs. Cheney, Dove,
Jacobson, Popoff and Yankelovich.
TRUST INVESTMENT COMMITTEE
The Trust Investment Committee is responsible for overseeing the
administration of the Company's trust funds for the benefit of the fund
beneficiaries. This committee held three meetings in 1994, and consists of
Messrs. Yankelovich (Chairman), Dove, Gilmour, Popoff, Ryland and Williams.
COMPENSATION OF DIRECTORS
Directors who are not employees receive an annual retainer of $30,000 and a
fee of $1,200 for each Board or Committee meeting attended. In the case of
multi-day meetings, non-employee Directors receive a fee of $1,200 per day.
Committee chairs for the Audit, Human Resources and Corporate Development and
Finance
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Committees receive an additional annual retainer of $4,500. Committee chairs for
the Public Policy Committee and the Trust Investment Committee receive an annual
retainer of $3,500, and the Board Affairs Committee Chair receives an annual
retainer of $2,500. These amounts are paid in any combination of cash or Company
common stock that a Director may select. From time to time, Directors are asked
to counsel or otherwise assist the Company with regard to special projects or
other business matters with which they have expertise, and are compensated with
a cash payment of $1,200 per day.
Directors may elect to defer the receipt of all or a part of their
retainers and committee fees. Cash payments so deferred earn interest,
compounded quarterly, at a rate equal to the average interest rate for ten-year
United States Treasury notes for the previous quarter. Deferred amounts that
would otherwise be payable in common stock are credited to an account as
"phantom" stock units, the value of which rises and falls with the Company's
stock price. Additional stock units are credited to the account when and to the
extent that the Board declares a dividend on the Company's common stock.
Any Director who is an employee of U S WEST or one of its subsidiaries
receives no compensation for serving as a Director.
The U S WEST 1994 Stock Plan provides for the grant to each non-employee
Director of up to 2,000 shares of U S WEST common stock. Under the plan, each
Director receives 400 shares during each year of service on the Board up to a
maximum of five years. Messrs. Cheney, Gilmour and Grieve each received 400
shares in 1994.
Non-employee Directors who retire after serving a minimum of five credited
years on the Board are paid a sum equal to their final-year retainer multiplied
by the lesser of ten or their number of years of service on the Board. At the
Director's discretion, this amount is paid in ten equal annual installments or a
single installment equal to its discounted present value.
SECURITIES OWNED BY MANAGEMENT
The following table sets forth beneficial ownership of shares of U S WEST
common stock by each Director, each named Executive Officer, and all Directors
and Executive Officers as a group as of December 31, 1994. These shares
represent less than one percent of the outstanding shares of U S WEST common
stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------------
SHARES SUBJECT TO
TOTAL NUMBER OPTIONS*
OF SHARES (INCLUDED IN TOTAL)
------------ -------------------
<S> <C> <C>
A. Gary Ames..................................... 165,731 115,430
Richard J. Callahan.............................. 135,285 94,892
Richard B. Cheney................................ 800
Remedios Diaz-Oliver............................. 4,000
Grant A. Dove.................................... 2,600
Allan D. Gilmour................................. 2,400
Pierson M. Grieve................................ 1,600
Shirley M. Hufstedler............................ 6,131
Allen F. Jacobson................................ 5,462(1)
Charles M. Lillis................................ 80,022 40,000
Richard D. McCormick............................. 360,660(2) 186,959
Marilyn Carlson Nelson........................... 1,000
Frank Popoff..................................... 1,500
Charles P. Russ, III............................. 14,536
Glen L. Ryland................................... 6,000
Jerry O. Williams................................ 2,200
Daniel Yankelovich............................... 8,400
All Directors and Executive Officers (as a
group)......................................... 1,024,177 555,843
</TABLE>
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* shares subject to acquisition through exercise of stock options within 60
days.
(1) Includes 3,462 shares subject to shared voting and investment power.
(2) Includes 95,225 shares subject to shared voting and investment power.
3
<PAGE> 6
ELECTION OF DIRECTORS (ITEM A ON PROXY CARD)
Pursuant to the Articles of Incorporation of U S WEST, the Directors are
divided into three classes. Each class of Directors is subject to election by
shareholders every three years. Any Director appointed by the Board between
annual meetings is subject to election by shareholders at the following annual
meeting. The Board has adopted a policy that requires Directors to retire at the
annual meeting following the Director's 70th birthday.
Unless otherwise instructed, the proxies will be voted for the election of
the four nominees listed below under the heading "Nominees for Election as
Directors in Class I." If a shareholder returning a proxy does not wish shares
to be voted for particular nominees, the shareholder must so indicate in the
space provided on the proxy card.
If one or more of the nominees should become unavailable or unable to serve
at the time of the Annual Meeting, the shares to be voted for such nominee or
nominees which are represented by proxies will be voted for any substitute
nominee or nominees designated by the Board or, if none, the size of the Board
will be reduced. The Board knows of no reason why any of the nominees will be
unavailable or unable to serve at the time of the Annual Meeting.
Glen L. Ryland and Daniel Yankelovich will retire from the Board upon the
conclusion of the Annual Meeting.
A brief listing of the principal occupations, other major affiliations and
ages of the four nominees for election as Directors, and the Directors whose
terms of office do not expire at this Annual Meeting, follows.
NOMINEES FOR ELECTION AS DIRECTORS IN CLASS I
(TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 1998)
RICHARD B. CHENEY, Senior Fellow, American Enterprise Institute, since
January, 1993. Director of Union Pacific Corporation, IGI Incorporated, Morgan
Stanley Group, Inc., and Proctor and Gamble Co. United States Secretary of
Defense, March, 1989 to January, 1993; Member, United States House of
Representatives, 1979 to 1989. Director of U S WEST since 1993. Age 54.
REMEDIOS DIAZ-OLIVER, President and Chief Executive Officer of All American
Containers, Inc. since November 1991. Chief Executive Officer and President of
American International, from 1990 to October 1991; Chief Executive Officer and
Executive Vice President from 1977 to 1990. Director of Avon Products, Inc.,
Barnett Banks of South Florida, American Cancer Society, Greater Miami Chamber
of Commerce, Hamilton Foundation, Infants in Need, Jackson Memorial Foundation,
National Hispanic Leadership Agenda, and University of Miami. Director of U S
WEST since 1988. Age 56.
GRANT A. DOVE, Managing Partner of Technology Strategies and Alliances
since 1992. Executive Vice President of Texas Instruments from 1982 to 1987.
Director of Control Data Systems Incorporated, NetWorth, Inc., and Western
Company of North America. Director and Chairman of the Board of Microelectronics
and Computer Technology Corporation and Optek Technology, Inc. Director of U S
WEST since 1988. Age 66.
SHIRLEY M. HUFSTEDLER, Partner in the law firm of Hufstedler & Kaus since
1981. United States Secretary of Education from 1979 to 1981. Director of Harman
International Industries, Inc. and Hewlett-Packard Co. Director of U S WEST
since 1983. Age 69.
DIRECTORS IN CLASS II
(THE TERMS OF THESE DIRECTORS DO NOT EXPIRE UNTIL THE ANNUAL MEETING OF
SHAREHOLDERS IN 1996)
PIERSON M. GRIEVE, Chairman of the Board and Chief Executive Officer of
Ecolab, Inc. since 1983. Director of St. Paul Companies, Meredith Corporation,
Norwest Corporation and Waldorf Corporation. Director of U S WEST since 1990.
Age 67.
ALLEN F. JACOBSON, retired. Chairman and Chief Executive Officer of
Minnesota Mining & Manufacturing Company from 1986 to 1991. Director of Abbott
Laboratories, Deluxe Corporation, Minnesota Mining & Manufacturing Corporation,
Mobil Corporation, Northern States Power Company, Potlatch Corporation,
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<PAGE> 7
Prudential Insurance Company, Sara Lee Corporation, Silicon Graphics, Inc., and
Valmont Industries, Inc. Director of U S WEST since 1983. Age 68.
RICHARD D. MCCORMICK, Chairman of the Board since May 1992; President and
Chief Executive Officer since 1991; President and Chief Operating Officer from
1986 to 1991. Director of Financial Security Assurance Holdings Ltd., Norwest
Corporation, Super Valu Stores, Inc. and UAL, Inc. Director of U S WEST since
1986. Age 54.
MARILYN CARLSON NELSON, Vice Chair of Carlson Holdings, Inc. since 1991;
Senior Vice President, 1988 to 1991. Chair of Citizen's State Bank of
Montgomery, Minnesota since 1992 and Citizen's State Bank of Waterville,
Minnesota since 1975. Director of Exxon Corporation, First Bank System, Inc. and
the Carlson Companies, Inc. Director of U S WEST since 1993. Age 55.
DIRECTORS IN CLASS III
(THE TERMS OF THESE DIRECTORS DO NOT EXPIRE UNTIL THE ANNUAL MEETING OF
SHAREHOLDERS IN 1997)
ALLAN D. GILMOUR, retired. Vice Chairman of Ford Motor Co. from 1992 to
1994; Executive Vice President of Ford Motor Co. and President, Ford Automotive
Group, from 1990 to 1992; Executive Vice President, Corporate Staffs, from 1989
to 1990; Executive Vice President, International Automotive Operations, from
1987 to 1989. Director of Whirlpool Corporation. Director of U S WEST since
1992. Age 60.
FRANK POPOFF, Chairman and Chief Executive Officer of The Dow Chemical
Company since 1992; Chief Executive Officer since 1987. Director of American
Express Company, Chemical Financial Corporation, Dow Corning Corporation, and
Marion Merrell Dow Inc. Director of U S WEST since 1993. Age 59.
JERRY O. WILLIAMS, President of Grand Eagle Enterprises, Inc., a private
investment group, since May, 1992. Chairman of the Board of The Monotype
Corporation Plc. from December, 1990 to May, 1992; Managing Director from
January, 1990 to May, 1992. President and Chief Operating Officer of AM
International, Inc. from 1985 to 1988. Director of ECRM Inc. and Monotype
Typography, Inc. Director of U S WEST since 1988. Age 56.
------------------------------
RATIFICATION OF APPOINTMENT OF AUDITORS (ITEM B ON PROXY CARD)
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the firm of Coopers & Lybrand, Certified Public Accountants, as
independent auditors to make an examination of the accounts of U S WEST for
calendar year 1995. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RATIFICATION OF SUCH APPOINTMENT.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to questions.
PROPOSAL TO APPROVE AMENDMENT TO U S WEST 1994 STOCK PLAN
(ITEM C ON PROXY CARD)
On February 3, 1995, the Board of Directors adopted an amendment to the U S
WEST 1994 Stock Plan that (i) places a ceiling on the number of incentive stock
options (i.e., stock options that qualify for tax-advantaged treatment under
Section 422 of the Internal Revenue Code or any other provision of the Internal
Revenue Code that permits tax-advantaged treatment for such options) that will
be available for issuance over the life of the plan, (ii) allows for the
issuance of a fixed number of nonqualified stock options (i.e., stock options
that do not qualify as incentive stock options) to non-employee Directors, and
(iii) allows for the continued vesting and exercise of stock options held by
employees who leave the Company or any of its subsidiaries either because of
retirement or long-term disability. The Board directed that the amendment be
submitted to shareholders at the 1995 Annual Meeting. The purpose of the
amendment is to (i) ensure that incentive stock options granted under the plan
comply with the requirements of Section 422 of the Internal Revenue Code, which
requires that shareholders approve a limit on the number of incentive stock
options that
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may be issued under a plan, (ii) promote the long-term success of the Company by
affording non-employee Directors the opportunity to benefit from rising values
of the Company's common stock, and to aid efforts to attract and retain
individuals with outstanding abilities and skills for service on the Board of
Directors, and (iii) provide a more orderly transition for employees who retire
or experience a long-term disability by allowing them to retain and exercise
both vested and unvested stock options that have been issued by the Company.
Under the terms of the amendment, the total number of shares that will be
available for issuance in connection with incentive stock options or other
tax-advantaged options over the life of the plan will be limited to 10 million.
In addition, on the date that the amendment is first approved by shareholders
and on the first business day of each calendar year thereafter, each
non-employee Director will receive a nonqualified stock option to purchase three
thousand (3,000) shares of Company common stock. The option will (i) vest in
increments of 40 percent upon grant and 30 percent on the first and second
anniversaries following the date of grant or, if earlier, in full upon the
retirement of the Director from the Board, (ii) have an exercise price equal to
the fair market value of the common stock on the date of grant, (iii) remain
exercisable notwithstanding the retirement of a Director from the Board, and
(iv) expire ten years from the date of grant. Shares issued upon the exercise of
nonqualified stock options will be subject to the limitations on the number of
shares available for issuance under the U S WEST 1994 Stock Plan. Finally, the
amendment will permit certain employees who retire following its adoption, or
certain employees whose employment is terminated as a result of a long-term
disability following its adoption, to retain any stock options granted to them,
and to exercise such options at any time following the vesting of such options
pursuant to their original vesting schedule and before their expiration date.
The employees entitled to such treatment will be limited to those who, at the
time of retirement, are eligible to receive a service pension benefit under the
U S WEST Pension Plan or a pension benefit under any written agreement or
arrangement expressly authorized by U S WEST, and those employees whose
employment is terminated following the occurrence of a "long-term disability" as
determined under the provisions of the U S WEST disability plan maintained for
such employees. The amendment will govern options issued under the U S WEST 1994
Stock Plan as well as those issued under any predecessor plans.
If approved by shareholders, the amendment will become effective on May 5,
1995. Nonqualified stock options will first be issued to non-employee Directors
on that date, and certain employees who retire or become disabled on or after
that date will be able to retain their stock options pursuant to the amendment.
As of February 28, 1995, the closing price for U S WEST common stock on the New
York Stock Exchange was $38.75.
Tax counsel has advised the Company of the tax consequences of the
amendment for both the Company and individuals who are granted options.
According to tax counsel, an optionee will not realize taxable income upon the
granting of a stock option pursuant to the plan, nor would the Company be
entitled to a deduction at that time. There will be no realization of taxable
income by an optionee upon the exercise of an incentive stock option (if
exercised no later than three months after termination of employment in the case
of retirement, and one year in the case of disability, and to the extent that
the aggregate fair market value of common stock with respect to such incentive
stock options, when first exercised, does not exceed $100,000 during any
calendar year). If an optionee sells or otherwise disposes of common stock
received upon exercise of an incentive stock option after one year from the
exercise date and two years from the date of grant of the incentive stock
option, any gain or loss on the sale will be treated as long-term, and the
Company will not be entitled to any deduction on account of the issuance of
common stock or the grant of the incentive stock option. Upon exercise of a
nonqualified stock option, an optionee will realize compensation income in the
amount of the excess of the fair market value of the common stock on the day of
exercise over the stock option exercise price, and the Company will receive a
corresponding deduction. The tax basis of any nonqualified stock option shares
of common stock received will be the fair market value of such shares on the
date the stock option is exercised.
The foregoing summary of the amendment to the U S WEST 1994 Stock Plan is
qualified in its entirety by reference to the full text of the amendment as set
forth in Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THIS
AMENDMENT.
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<PAGE> 9
SHAREHOLDER PROPOSALS
Shareholder proponents have stated that they intend to have the following
proposals and supporting statements presented at the Annual Meeting. The
adoption of any of the proposals would not, in itself, cause the implementation
of the action or policy called for by the proposal, but would simply constitute
a recommendation to the Board of Directors.
SHAREHOLDER PROPOSAL NO. 1 (ITEM 1 ON THE PROXY CARD)
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue,
N.W., Suite 215, Washington, D.C. 20037, owning of record 120 shares of U S WEST
common stock, has given notice that she intends to present at the Annual Meeting
the following resolution:
"RESOLVED: "That the shareholders of U S WEST recommend that the
Board of Directors take the necessary steps to institute the election of
directors ANNUALLY, instead of the stagger system as is now provided."
"REASONS: "The great majority of New York Stock Exchange listed
corporations elect all their directors each year."
"This insures that ALL directors will be more accountable to ALL
shareholders each year and to a certain extent prevents the
self-perpetuation of the Board."
"Last year the owners of 95,413,844 shares, representing approximately
28.5% of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
THIS PROPOSAL WAS SUBMITTED AT THE LAST SIX ANNUAL MEETINGS AND WAS SOUNDLY
DEFEATED EACH TIME. THE BOARD OF DIRECTORS HAS AGAIN CONSIDERED THE PROPOSAL AND
AGAIN RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST IT.
The Board of Directors believes that the election of Directors by classes
enhances the likelihood of continuity and stability in the Board and its
policies. When directors are elected by classes, a change in the composition of
a majority of the Board normally requires at least two shareholder meetings,
instead of one. Board classification is also intended to encourage any person
seeking to acquire control of U S WEST to initiate such an action through arm's
length negotiations with management and the Board of Directors, who are in a
position to negotiate a transaction which is fair to all shareholders of U S
WEST. With a classified Board, it is more likely that a majority of the
Directors of U S WEST will have prior U S WEST Board experience, thereby
facilitating planning for the business of U S WEST.
SHAREHOLDER PROPOSAL NO. 2 (ITEM 2 ON THE PROXY CARD)
Mr. John J. Gilbert and Mrs. Margaret R. Gilbert, 29 East 64th Street, New
York, New York 10121-7043, co-trustees of family trusts owning of record
approximately 1,500 shares of U S WEST common stock and owning of record an
additional 291 shares; Mr. Gerald Armstrong, P.O. Box 18546, Capitol Hill
Station, Denver, Colorado 80218, owning of record 40 shares of U S WEST common
stock; Mr. John C. Henry, 5 East 93rd Street, New York, NY 10128, owning of
record 200 shares of U S WEST common stock; Mr. Allan Frank, 6882 Center Avenue,
Denver, Colorado 80224, owning of record 308 shares of U S WEST common stock;
Mr. Edward Rudy and Mrs. Edith Rudy, Box 7077, Yorkville Station, New York, New
York 10128, owning of record 312 shares of U S WEST common stock, have given
notice that they intend to present at the Annual Meeting the following
resolution:
"RESOLVED: That the stockholders of U S West Inc., assembled in
annual meeting in person and by proxy, hereby request the Board of
Directors to take the steps necessary to provide for cumulative voting in
the election of directors, which means each stockholder shall be entitled
to as many votes as shall equal the number of shares he or she owns
multiplied by the number of directors to be elected, and he or she may cast
all of such votes for a single candidate, or any two or more of them as he
or she may see fit."
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<PAGE> 10
"REASONS: Continued strong support along the lines we suggest were
[sic] shown at the last annual meeting when 21.2%, owners of 71,080,974
shares, were cast in favor of this proposal.
A law enacted in California provides that all state pension holdings
and state college funds, invested in shares must be voted in favor of
cumulative voting proposals, showing increasing recognition of the
importance of this democratic means of electing directors.
The National Bank Act has provided for cumulative voting.
Unfortunately, in many cases companies get around it by forming holding
companies without cumulative voting. Banking authorities have the right to
question the capability of directors to be on banking boards.
Unfortunately, in many cases authorities come in after and say the director
or directors were not qualified. We were delighted to see that the SEC has
finally taken action to prevent bad directors from being on the boards of
public companies.
We believe that cumulative voting would make the management of the
company more independent, and that a more independent management would be
able to avoid the operational problems that the company has experienced.
Also, U. S. West is unable to provide requested telephone service in
many areas thus losing income and good will.
Many successful corporations have cumulative voting. For example,
Pennzoil having cumulative voting defeated Texaco in that famous case.
Another example is Ingersoll-Rand, which has cumulative voting and won two
awards. In FORTUNE magazine it was ranked second in its industry as
"America's Most Admired Corporations" and the WALL STREET TRANSCRIPT noted
"on almost any criteria used to evaluate management, Ingersoll-Rand
excels." Also, in 1994 they raised their dividend. We believe U. S. West
should follow these examples.
If you agree, please mark your proxy for this resolution; otherwise it
is automatically cast against it, unless you have marked to abstain."
THIS PROPOSAL WAS SUBMITTED AT THE LAST THREE ANNUAL MEETINGS AND WAS
SOUNDLY DEFEATED EACH TIME. THE BOARD OF DIRECTORS HAS AGAIN CONSIDERED THE
PROPOSAL AND AGAIN RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST IT.
Currently, each Director of U S WEST is elected by the holders of a
majority of the U S WEST shares represented and voting at a meeting of
shareholders. This method reflects the widely held belief that Directors should
be elected for their willingness to serve all shareholders. The Board of
Directors believes that cumulative voting can result in the election of
Directors by a relatively small group of shareholders. Such Directors tend to
represent such group's special interest. This partisanship among Directors and
voting on behalf of special interests could interfere with the effectiveness of
the Board and could be contrary to the interests of U S WEST and its
shareholders as a whole.
------------------------------
SHAREHOLDER PROPOSAL NO. 3 (ITEM 3 ON PROXY CARD)
Mr. Bertram H. Behrens, 17300 Bismark Road, White Lake, Wisconsin 54491,
owning of record 40 shares of U S WEST common stock, has given notice that he
intends to present the following resolution at the Annual Meeting:
My stockholders proposal is a very simple -- but important -- one. It
is this: That beginning with the election (by the stockholders) of any new
non-employee directors to the Board of Directors no "retirement pay" or
"pension" be paid to them. This is not to apply to those presently on the
board or presently receiving "retirement pay" or "pension," but it is to
apply to any new non-employee director.
According to the 1994 proxy statement "Non-employee directors who
retire after serving a minimum of five credited years on the Board are paid
each year following retirement, up to their number of years of credited
service but in no event more than ten years, a sum equal to their
final-year retainer." The U S WEST non-employee directors receive an annual
retainer of $30,000. So if he's on the board for five years and then
"retires" he gets $30,000 "retirement pay" or "pension" for five years
following. If he's
8
<PAGE> 11
on the board for ten years he gets $30,000 a year for ten years following!
And this is $30,000 a year just for being on the board of this one company!
And usually a director is not only a director on one board; he's a
director on several boards. For example, in the 1994 U S WEST election of
directors the six non-employee directors were all on the boards of other
firms in addition to U S WEST. One of them was on four other boards
including American Express Company and Dow Corning Corporation. Think of
the kind of money some of the former directors are making just with
retirement pay. Most of us work a lifetime for that kind of "retirement
pay" or "pension"! We stockholders must put our foot down and put a stop to
this ridiculous retirement pay!
The non-employee directors receive $30,000 a year in "retainer," and
in this stockholder's opinion that is sufficient compensation for any
director. We stockholders must protect our own interests and vote "yes" to
this proposal.
THE BOARD OF DIRECTORS HAS CONSIDERED THIS PROPOSAL AND RECOMMENDS THAT
SHAREHOLDERS VOTE AGAINST IT.
The Board of Directors believes that it is in the best interests of U S
WEST and its shareholders to attract exceptional individuals who are recognized
for their knowledge, experience and ability to serve as Directors. To do this, U
S WEST must provide a fair and competitive total compensation package.
Compensation may be paid to a Director in a number of forms, and U S WEST has
elected to pay a portion of the Board's compensation in retirement benefits.
Today, the vast majority of large companies provide retirement benefits to their
non-employee directors. The Company believes that the retirement benefits it
provides to non-employee Directors are consistent with industry standards and
are fair and appropriate in light of the obligations and responsibilities of
non-employee Directors.
9
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- PAYOUTS
---------------------------------- RESTRICTED SECURITIES -------------------------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($)(4) ($)(5)
----------------------- ---- -------- -------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard D. McCormick 1994 $700,000 $560,000 $ 6,924 $ 0 100,000 $ 0 $ 35,612
President, CEO and 1993 $700,000 $575,000 $ 2,501 $ 0 45,000 $1,038,904 $ 65,092
Chairman of the Board 1992 $660,000 $495,000 $ 3,868 $ 0 35,000 $ 431,328 $ 59,609
A. Gary Ames 1994 $490,000 $250,000 $ 3,251 $ 0(2) 55,000 $ 0 $ 45,869
President and CEO of 1993 $467,083 $275,000 $ 1,186 $ 0 47,616 $ 742,081 $ 45,062
U S WEST 1992 $442,083 $250,000 $ 2,026 $ 23,984 52,274 $ 308,114 $ 40,285
Communications
Charles M. Lillis 1994 $453,333 $295,000 $ 3,069 $ 0 55,000 $ 0 $ 27,067
Executive Vice 1993 $408,750 $275,000 $ 160 $ 0 30,000 $ 742,081 $ 33,026
President, U S WEST & 1992 $372,917 $210,000 $ 273 $ 0 20,000 $ 308,114 $ 31,151
President and CEO, U
S WEST Diversified
Group
Richard J. Callahan 1994 $405,000 $260,000 $735,058(3) $ 0(2) 35,000 $ 0 $ 33,154
Executive Vice 1993 $398,750 $235,000 $214,446(3) $ 10,813 25,000 $ 742,081 $ 164,608
President, U S WEST & 1992 $390,000 $200,000 $ 4,061 $ 0 20,000 $ 308,114 $ 30,730
President, U S WEST
International and
Business Development
Group
Charles P. Russ, III(1) 1994 $361,667 $170,000 $ 1,493 $ 0(2) 25,000 $ 0 $ 29,381
Executive Vice 1993 $350,000 $155,000 $ 0 $ 21,625 15,000 $ 445,257 $ 19,867
President, General 1992 $197,534 $140,000 $ 0 $ 0 35,000 $ 103,994 $1,568,077
Counsel and Secretary
</TABLE>
- ------------------------------
(1) Mr. Russ was elected Executive Vice President, General Counsel and Secretary
in June, 1992.
(2) Mr. Ames received 625 shares of U S WEST stock in December, 1992. Messrs.
Callahan and Russ received 250 and 500 shares of U S WEST stock,
respectively, in June, 1993. These shares were subject to a one-year
restriction as to sale or transferability, and dividends were paid on these
shares during the restriction period.
(3) $141,909 and $139,200 of this amount represent payments that were made to
Mr. Callahan for his United Kingdom residence, in 1994 and 1993,
respectively, pursuant to his employment contracts. The 1994 amount also
includes $528,287 for gross-ups of income to compensate Mr. Callahan for
employment- and nonemployment-related income taxes incurred under the laws
of the United Kingdom.
(4) Shares issued in 1992 and 1993 were paid to participants pursuant to a
performance based program implemented by the Human Resources Committee in
1991 in connection with the restricted stock feature of the then effective
Stock Incentive Plan. Yearly payouts of restricted shares under this program
were determined by the total shareholder return achieved by the Company over
a six-year performance period. In May, 1994, shareholders approved the
Executive Long-Term Incentive Plan. The payout of restricted shares under
this plan is also determined by total shareholder return achieved by the
Company during the performance period that began in 1991. For 1992, Messrs.
McCormick, Ames, Lillis, Callahan and Russ, respectively, received 10,817,
7,727, 7,727, 7,727 and 2,608 shares, all of which were subject to a
one-year restriction period as to sale or transferability and on which
dividends were paid during the restriction period. For 1993, Messrs.
McCormick, Ames, Lillis, Callahan and Russ, respectively, received, 24,231,
17,308, 17,308, 17,308 and 10,385 shares, all of which are subject to a
two-year restriction period as to sale or transferability and on which any
declared dividends shall be paid during such restriction period. As a result
of the Company's negative total shareholder return in 1994, no additional
shares of restricted stock are to be paid to participants and the negative
return must be offset prior to any payout in 1995 or subsequent years. At
December 31, 1994, Messrs. McCormick, Ames, Lillis, Callahan and Russ held
24,231, 17,308, 17,308, 17,308 and 10,385 shares of restricted stock with a
market value of $863,229, $616,598, $616,598, $616,598, and $369,966,
respectively.
(5) These amounts are attributable to (1) the Company matching contribution
under the Deferred Compensation Plan, (2) the Company matching contribution
under the Savings Plan/ESOP, (3) the current dollar value of the remainder
of the premium paid under a split-dollar insurance arrangement, and (4) the
amount paid for the term insurance portion of the foregoing split-dollar
insurance arrangement. The separate components of these amounts are set
forth below. In 1993, Mr. Callahan received a $130,000 foreign
10
<PAGE> 13
assignment premium. In 1992, upon his employment, Mr. Russ received a lump
sum of $1,559,000 as compensation for amounts that would have otherwise been
due to him from his former employer.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------
DEFERRED
COMPENSATION SAVINGS PLAN SPLIT-DOLLAR TERM PORTION
COMPANY MATCH COMPANY MATCH PREMIUM VALUE PREMIUM
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
McCormick............................ $26,826 $ 7,500 $ -- $1,286
Ames................................. $17,000 $ 7,500 $20,765 $ 604
Lillis............................... $15,195 $ 7,188 $ 4,051 $ 633
Callahan............................. $12,749 $ 6,354 $13,418 $ 633
Russ................................. $10,583 $ 7,500 $10,814 $ 484
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------
DEFERRED
COMPENSATION SAVINGS PLAN SPLIT-DOLLAR TERM PORTION
COMPANY MATCH COMPANY MATCH PREMIUM VALUE PREMIUM
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
McCormick............................ $27,139 $ 7,861 $29,014 $1,078
Ames................................. $13,527 $ 9,827 $21,209 $ 499
Lillis............................... $ 8,646 $11,792 $12,073 $ 515
Callahan............................. $12,077 $ 7,861 $14,136 $ 534
Russ................................. $ -- $ 8,750 $10,667 $ 450
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
------------------------------------------------------------
DEFERRED
COMPENSATION SAVINGS PLAN SPLIT-DOLLAR TERM PORTION
COMPANY MATCH COMPANY MATCH PREMIUM VALUE PREMIUM
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
McCormick............................ $25,600 $ 7,629 $25,355 $1,025
Ames................................. $12,240 $ 9,536 $18,029 $ 480
Lillis............................... $ 9,057 $11,443 $10,165 $ 486
Callahan............................. $10,973 $ 7,629 $11,578 $ 550
Russ................................. $ -- $ -- $ 8,852 $ 225
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on stock options granted to the
named executive officers during 1994. The Company employed the Black-Scholes
option pricing model to develop the theoretical values set forth under the
"Grant Date Present Value" column. It should be noted that stock options granted
by the Company to its executives are based on competitive market practices and
individual performance, and not on theoretical option valuations.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE GRANT DATE
SARS GRANTED TO OR BASE PRESENT
GRANTED EMPLOYEES IN PRICE EXPIRATION VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
- ---------------------------------------- ------------ ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Richard D. McCormick.................... 100,000 4.1% $ 35.875 12/2/04 $494,000
A. Gary Ames............................ 55,000 2.3% $ 35.875 12/2/04 $271,700
Charles M. Lillis....................... 55,000 2.3% $ 35.875 12/2/04 $271,700
Richard J. Callahan..................... 35,000 1.4% $ 35.875 12/2/04 $172,900
Charles P. Russ, III.................... 25,000 1.0% $ 35.875 12/2/04 $123,500
</TABLE>
- ------------------------------
(1) These stock options become fully exercisable on the third anniversary of the
date of grant and include a reload feature. This feature gives the optionee
the right to receive a further option for a number of shares equal to the
number of shares of common stock surrendered by the optionee in payment of
the exercise price of the original option.
(2) The value reflects the standard application of the Black-Scholes option
pricing model, using the following assumptions: volatility, 15%; dividend
yield, 6%; and a risk-free rate of return of 7.9% based on the options being
outstanding for ten years.
11
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
SHARES ACQUIRED VALUE AT FY-END (#) OPTIONS/SARS
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. McCormick........ 0 0 186,959 180,000 $ 59,175 $ 0
A. Gary Ames................ 0 0 115,430 110,000 $ 95,165 $ 0
Charles M. Lillis........... 0 0 40,000 105,000 $ 15,625 $ 0
Richard J. Callahan......... 0 0 94,892 80,000 $ 490,705 $ 0
Charles P. Russ, III........ 0 0 0 75,000 $ 0 $ 0
</TABLE>
U S WEST PENSION PLANS
The following table illustrates the maximum estimated annual benefits
payable upon retirement pursuant to the U S WEST Pension Plans based upon the
pension plan formula for specified final average annual compensation and
specified years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ANNUAL --------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 45
- ------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000............... $112,500 $160,000 $187,500 $225,000 $262,500 $293,750 $325,000
600,000............... 135,000 180,000 225,000 270,000 315,000 352,500 390,000
700,000............... 157,500 210,000 262,500 315,000 367,500 411,250 455,000
800,000............... 180,000 240,000 300,000 360,000 420,000 470,000 520,000
900,000............... 202,500 270,000 337,500 405,000 472,500 528,750 585,000
1,000,000............... 225,000 300,000 375,000 450,000 525,000 587,500 650,000
1,100,000............... 247,500 330,000 412,500 495,000 577,500 646,250 715,000
1,200,000............... 270,000 360,000 450,000 540,000 630,000 705,000 780,000
1,300,000............... 292,500 390,000 487,500 585,000 682,500 763,750 845,000
1,400,000............... 315,000 420,000 525,000 630,000 735,000 822,500 910,000
</TABLE>
"Final average annual compensation," which is calculated as the highest average
compensation for 60 consecutive months of the 120 consecutive month period
preceding retirement, is based upon compensation that would appear under the
"Salary" and "Bonus" columns of the Summary Compensation Table. As of December
31, 1994, Messrs. McCormick, Ames, Lillis, Callahan and Russ had 33, 27, 9, 31,
and 2 actual years of service, respectively. Mr. Lillis is eligible to receive a
variable percentage of his final average annual compensation based upon his age
at the termination of his employment. The applicable percentage is 24% at age 53
(his present age), and then increases by varying increments from year to
year -- i.e., 2% per year through age 54, 9% through age 55, 5% per year through
age 58, and 1% per year thereafter. Mr. Russ is entitled to a supplemental
annual pension benefit of $14,000 for each of his first seven years of service
at U S WEST. This benefit becomes payable on the earlier of his separation from
service or his retirement, and is payable in a lump sum equal to the present
value of the benefit at the time of payment.
Benefits set forth in the preceding table are computed as a straight-life
annuity and are subject to deduction for Social Security.
EXECUTIVE AGREEMENTS
U S WEST has entered into change of control agreements with certain of its
officers, including the named executive officers. Such change of control
agreements provide compensation and/or termination benefits to such officers
under circumstances following a change of control of U S WEST. The purpose of
these agreements is to encourage the officers to continue to carry out their
duties in the event of a possible change of control. A "Change of Control" is
defined in these agreements as (i) a change of control that would have to be
reported under Item 6(e) of Schedule 14A of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), regardless of whether the Company is subject to
that reporting requirement, (ii) the acquisition by a party or certain related
parties, directly or indirectly, of twenty percent or more of the
12
<PAGE> 15
Company's voting securities, unless pursuant to a transaction approved by the
Board of Directors, (iii) any period of two consecutive calendar years during
which there shall cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period constitute the Board of
Directors and any new Director(s) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or nomination for
election was previously so approved, (iv) the Company becomes a party to a
transaction in which it will not be the surviving corporation or in which it
will be the surviving corporation but shares of its outstanding common stock
will be converted into shares of another company or other securities, cash or
property (other than a reincorporation or the establishment of a holding company
involving no change of ownership of the Company), (v) shareholders of the
Company approve a merger, plan of reorganization, consolidation or share
exchange, and immediately afterwards the holders of the Company's voting
securities prior thereto hold securities representing fifty percent or less of
the voting securities of the Company or other surviving entity and, also
immediately afterwards, members of the Company's Board of Directors prior to
such transaction constitute less than half of the Company's or other surviving
entity's Board of Directors, or (vi) any other event that a majority of the
Board of Directors, in its sole discretion, deems to be a change of control. The
agreements are effective and are automatically renewed for three-year periods,
and are subject to cancellation by the Board of Directors upon not less than 90
days' notice prior to a three-year renewal. These agreements provide that the
officers will receive certain benefits upon termination of their employment or
if their job duties or compensation and benefits are substantially reduced
following a Change of Control. In the case of the Chief Executive Officer, these
benefits will be paid if he voluntarily terminates employment following a Change
of Control.
Termination benefits will be payable immediately upon termination following
a Change of Control and will consist of a sum equal to (i) three times the
officer's annual base salary prior to termination, (ii) three times the
officer's annual bonus amount under the Executive Short-Term Incentive Plan
(such bonus amount to be calculated on the basis of the extent to which the
performance factors targeted by the Human Resources Committee have been
achieved, which shall be deemed to be 100% unless the percentage actually
achieved is greater than 100%, in which case the higher percentage shall apply),
and (iii) gross-ups of income sufficient to compensate the officer for any
excise taxes incurred in connection with the benefits paid upon termination. The
Change of Control agreements also provide for continued health care benefits on
terms substantially similar to those on which the Company provides such benefits
to retiring employees who are service pension-eligible at the time of the Change
of Control. Finally, upon termination, the Change of Control agreements will
modify the officer's pension benefits so that he will be immediately vested if
he is not already vested, and three years will be added to both the officer's
age and his years of service.
Effective October 1, 1993, the Company assigned Mr. Callahan to the United
Kingdom for purposes of keeping him in closer contact with its international
operations. In connection with this assignment, Mr. Callahan and the Company
have entered into certain employment agreements. These agreements include
provisions of the U S WEST Expatriate Personnel Policy, which is designed to
preclude undue financial hardship attributable to an international rotation.
Among other provisions, the agreements provide for (i) a minimum base salary of
$405,000, (ii) gross-ups of income to compensate for any employment-related
income taxes incurred under the laws of the United Kingdom, (iii) additional
gross-ups of income to compensate for any non-employment-related income taxes
incurred under the laws of the United Kingdom on up to $50,000 of taxable
income, (iv) a one-time foreign assignment premium of $130,000, (v) allowances
to compensate for cost differentials on goods and services as well as housing,
(vi) an indemnity against any loss on the sale of Mr. Callahan's United Kingdom
home at the conclusion of his assignment, and (vii) perquisites attributable to
Mr. Callahan's foreign assignment, including family travel expenses and
financial counseling. The Company has also agreed to make available to Mr.
Callahan and his family a U S WEST-leased residence in Denver, Colorado for
business and personal visits to the United States. Finally, the agreements
include a provision that requires the Company to return Mr. Callahan, upon his
repatriation, to a position similar to the one he had prior to his United
Kingdom assignment, as well as confidentiality and non-competition provisions
that apply in the event that Mr. Callahan's employment with the Company
terminates.
Upon his employment with U S WEST, Mr. Russ received a lump sum of
$1,559,000 as compensation for amounts that would have otherwise been due to him
from his former employer. In the event that Mr. Russ
13
<PAGE> 16
voluntarily resigns before December 31, 1996, other than in circumstances
involving a Change of Control or a diminution of his status or compensation, he
will be required to return to U S WEST a pro-rata portion of $1,449,000 of this
amount, based upon the time remaining between his resignation and December 31,
1996. Through 1995, Mr. Russ is also entitled to receive annual options to
purchase at least 15,000 shares of U S WEST common stock. Such options are
exercisable at the market price of such stock on the date of grant, and vest
upon three years of continuous employment or termination of employment. In the
event that U S WEST terminates Mr. Russ's employment prior to December 31, 1996,
Mr. Russ will be entitled to a severance amount equal to twice his annual base
salary at the time of termination.
REPORT OF HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
Human Resources Committee. The Human Resources Committee (the "Committee")
is composed entirely of independent outside directors who meet regularly to
oversee compensation levels and benefits plans to ensure that such levels and
plans are appropriately competitive with the marketplace and aligned with
shareholder interests. The Committee submits reports to the full Board of
Directors concerning its activities and decisions. None of these non-employee
directors have interlocking or other relationships with other boards or the
Company that would call into question their independence as Committee members.
Total Compensation. U S WEST has implemented a total compensation system
which includes a base salary structure, as well as various cash and equity-based
incentive plans. This system of total compensation is based upon the Company's
philosophy of pay-for-performance and is designed to attract and retain high
caliber senior executives essential to the Company's long-term prosperity and to
focus executive performance toward achievement of annual and long-term strategic
goals that the Board believes will enhance shareholder value. This system
recognizes the pressures for short-term as well as long-term performance, and
attempts to strike an appropriate balance.
As an executive's level of responsibility increases, greater portions of
his or her total compensation opportunity are based on performance incentives
and less on base salary, causing greater potential variability in the
individual's compensation level from year to year. In addition, the more
responsibility assigned to an executive, the greater the mix of compensation
shifts to reliance on the value of the Company's stock through equity-based
awards.
Base Salary. U S WEST has in place a market-based three-band salary
structure for its executive employees. Assignment to one of the three salary
bands is based on level of responsibility, scope and impact of decision making,
and internal and external comparability. For purposes of comparability and
competitive market pricing, the Company utilizes annual executive compensation
salary surveys prepared by nationally recognized independent compensation
consulting firms. The Company utilizes salary surveys which pertain specifically
to the telecommunications industry, as well as surveys of companies of similar
size in other industries, and, in general, seeks to set executive base salary
levels at approximately the mid-range of the survey data. The Committee believes
that its competitive market for executive talent is broader than the industry
peer group established to compare shareholder returns in the Performance Graph
set forth below. Accordingly, the population of companies the Company surveys
for compensation data is broader than the peer group index in the Performance
Graph.
Once senior managers are placed within a salary band and assigned a base
salary, salary reviews are generally conducted on an 18 to 24 month cycle. Base
salary adjustments may occur at the time of such reviews based upon individual
performance results, shifts in job responsibilities, or marketplace changes.
Salary bands may be adjusted, when necessary, to reflect shifting economic
conditions, executive pay trends and the overall financial condition of the
Company.
Consistent with the 18 to 24 month review cycles discussed above, Mr.
McCormick did not receive a base salary adjustment in 1994. Mr. McCormick's base
salary is under the median of the 1994 survey data.
Short-Term Incentive Plan. The U S WEST Executive Short-Term Incentive
Plan (the "ESTIP"), approved by shareholder vote on May 6, 1994, provides each
named executive officer the potential to earn annual cash awards based upon the
achievement of established performance goals. Participants (the Chief Executive
Officer and any individuals employed by the Company at the end of any calendar
year who appear in the Summary Compensation Table of this Annual Proxy Statement
to Shareholders) are eligible to receive
14
<PAGE> 17
equal shares of a cash bonus pool. The incentive pool of one quarter of one
percent (0.25%) of cash provided by operating activities is created. The
Committee may use negative discretion to decrease this pool based upon annual
corporate and subsidiary performance targets, which are set by the Board of
Directors, and performance against those targets. Any amount by which the pool
is reduced may, at the Committee's sole discretion, be added to the cash bonus
pool that is available for any subsequent year or years. In determining the
amount to be paid to a participant, the Committee will consider a number of
performance factors, including, but not limited to, the Company's net income,
net cash flow, quality indicators and other operating and strategic results. Any
such reduction of a participant's share will not result in an increase of
another participant's share.
Therefore, for 1994, an ESTIP pool of $8.1 million was created. This pool
was reduced by $5 million as a result of the year's shareholder return as well
as the Committee's assessment of the Company's net income, net cash flow and
quality indicators. The performance factors considered in determining the amount
to be paid to each participant included the following: contributions to net
income and net cash flow performance, specific Chairman's objectives in the
areas of customer satisfaction, product and service cycle time, perception of
executive leadership and individual performance. While the Committee has the
discretion to carry over the amount of the pool reduction into a future year, it
has elected not to do so in 1994.
Mr. McCormick's target award opportunity is 80% of base salary. This
increased from the previous year to bring his "at risk" compensation more in
line with market. Mr. McCormick's award opportunity is now at the median of the
market data.
In determining the amount to be paid to Mr. McCormick, the Committee
considered such factors as the Company's financial performance, customer and
sales growth, and customer service results. Mr. McCormick received an award of
$560,000, or 80% of his base salary, under the ESTIP for 1994.
Long-Term Incentive Compensation. The Company's long-term incentive
compensation takes the form of performance-based restricted stock, issued under
the U S WEST Executive Long-Term Incentive Plan, and stock options issued under
the U S WEST 1994 Stock Plan, both shareholder-approved plans. Consistent with
the 1994 Stock Plan, the number of stock options and the terms and conditions on
which they are granted are determined by the Committee.
The combination of stock options and performance-based restricted stock
grants provides a strategic mix of equity-based incentives that (i) focuses
performance on the attainment of long-term strategic objectives, (ii) provides
incentive to the executives for increasing total shareholder return, and (iii)
provides an important long-term retention device.
Restricted Stock. For the six-year performance period which commenced
January 1, 1991, a target number of restricted performance shares of U S
WEST stock was set for potential earnout by each executive officer. A
portion of such shares may be granted annually based upon total shareholder
return. Recipients of restricted stock grants have the rights and
privileges of a shareholder with respect to the shares, including the right
to vote such shares and receive dividends.
The original target number of performance shares granted was
determined by a market survey of 35 companies' (of similar size and/or in
the telecommunications industry) long-term incentive plans. The performance
grants were converted to an annual full market value as a percent of salary
and multiplied by six (years of duration of the performance period) to
establish the target award for executives.
For purposes of this plan, shareholder return over the six-year
performance period is calculated annually as share price appreciation, plus
dividends, divided by the share price at the beginning of the six-year
performance period. Share price appreciation is derived using the average
beginning and end-of-year closing prices of U S WEST stock for a
20-business-day period commencing 10 business days prior to the end of each
year. Because of the multi-year orientation of this plan, if total
shareholder return is negative during a plan year, no payout would occur
for that year, and the negative total shareholder return would need to be
offset in the following year(s) before further payouts could occur.
Under this formula, total shareholder return for 1994 was a negative
18.9%. This compares to the 1994 return of the Standard and Poor's 500
Stock Index of 1.3% and the 1993 U S WEST return of
15
<PAGE> 18
23.1%. There were no restricted shares paid out to the Chief Executive
Officer or other participants under this plan for 1994 performance.
Stock Options. The Committee has generally elected to grant stock
options annually. The Company's stock option grants are designed to deliver
a market-based percentage of salary, assuming the Company's stock price
increases steadily over time, and vary on the basis of each executive's
performance and anticipated future contributions. The Committee may take
prior grants into consideration. Stock options granted during 1994 have an
exercise price equal to the market price of the Company's stock on the date
of grant, vest 100% after three years, and expire ten years from the date
of grant. These options have value for the executives only if the price of
the Company's stock appreciates from the date the options were granted. The
exercise price is payable by the executive in cash, shares of Company
stock, or a combination of cash and shares.
Mr. McCormick received a stock option grant of 100,000 shares under
the 1994 Stock Plan during 1994. During 1993, Mr. McCormick received a
stock option grant of 45,000 shares. The Committee believes that the number
of option shares granted to Mr. McCormick recognizes not only the
successful implementation during the year of important long-term Company
strategies, but also provides additional incentive to assure the management
of these initiatives in the future.
Deductibility of Compensation. Effective January 1, 1994, the Internal
Revenue Service will generally deny the deduction for compensation paid to
certain senior executives to the extent such compensation exceeds $1 million,
subject to an exception for "performance-based compensation." One provision
required for compensation to be deductible is for the performance-based plan to
be approved by shareholders. All compensation paid to named executives in 1994
is expected to be deductible as shareholder approval was sought and obtained on
May 6, 1994 for the Executive Short-Term and Long-Term Incentive Plans, and
compensation not considered to be "company performance-based" (i.e., base
salary) is under $1 million, except in the case of Mr. Callahan. His
compensation includes certain contracted amounts, such as reimbursement for
foreign tax adjustments, which place his "non-company performance-based"
compensation slightly over $1 million. The lost deduction to the Company is de
minimis.
Stock Ownership Guidelines. To further encourage growth in shareholder
value, the Board has established stock ownership guidelines for the senior
executives of the Company. These goals were established because the Board
believes that a significant level of stock ownership is a powerful influence
which puts senior executives and their decision making in close contact with
shareholder interests and focuses their attention on managing the Company as
owners. The Committee reviews stock ownership annually and, at its discretion,
may consider such ownership in the granting of restricted shares and stock
options.
It is the opinion of the Committee that the aforementioned compensation
plan structures provide features which appropriately align the Company's
executive compensation with corporate performance and the interests of its
shareholders and which offer competitive opportunities in the executive
marketplace. We hope that this description and the accompanying tables and graph
help you understand further the Company's compensation philosophy and programs.
U S WEST, Inc. Board of Directors Human Resources Committee:
Remedios Diaz-Oliver Grant A. Dove
Marilyn Carlson Nelson Frank P. Popoff
Glen L. Ryland
16
<PAGE> 19
PERFORMANCE GRAPH
The following graph and chart compare the cumulative total shareholder
return on U S WEST common stock, over a five-year period commencing December 31,
1989, to that of Standard & Poor's 500 Stock Index and the "Regional Holding
Company Group," which consists of the regional holding companies, excluding U S
WEST, that were created upon the divestiture of American Telephone and Telegraph
Company of its local telephone operating companies (Ameritech Corporation, Bell
Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis
Group, and SBC Communications). In calculating cumulative total shareholder
return, reinvestment of dividends is assumed, and the returns of each member of
the Regional Holding Company Group are weighted for market capitalization.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) U S WEST S&P 500 RHCs*
<S> <C> <C> <C>
1989 100.0 100.0 100.0
1990 102.5 96.9 95.9
1991 105.5 126.3 101.0
1992 113.1 135.9 112.4
1993 141.9 149.5 131.1
1994 116.1 151.5 128.6
</TABLE>
* Six regional holding companies, excluding U S WEST
SOLICITATION OF PROXIES
The cost of soliciting proxies in the accompanying form will be borne by U
S WEST. U S WEST has retained Beacon Hill Associates, Inc. to aid in the
solicitation of proxies at a fee of approximately $17,500 plus out-of-pocket
expenses. Proxies may also be solicited in person or by telephone or telegram by
the Directors, executive officers, and employees of U S WEST, who will not
receive additional compensation for such activities.
Brokers, nominees and other similar record holders will be requested to
forward proxy solicitation material to beneficial owners and, upon request, will
be reimbursed by U S WEST for their out-of-pocket expenses.
------------------------------
17
<PAGE> 20
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals intended for inclusion in next year's Proxy Statement should be
sent to the Secretary of U S WEST at 7800 East Orchard Road, Suite 200,
Englewood, Colorado 80111, and must be received by November 17, 1995.
FINANCIAL STATEMENTS AVAILABLE
CONSOLIDATED FINANCIAL STATEMENTS FOR U S WEST AND ITS SUBSIDIARIES ARE
INCLUDED IN THE ANNUAL REPORT OF U S WEST FOR 1994. ADDITIONAL COPIES OF THESE
STATEMENTS AND THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1994 (EXCLUDING EXHIBITS, UNLESS SUCH EXHIBITS HAVE BEEN SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN), MAY BE OBTAINED WITHOUT CHARGE FROM THE
TREASURER OF U S WEST, 7800 EAST ORCHARD ROAD, SUITE 200, ENGLEWOOD, COLORADO
80111. THE ANNUAL REPORT ON FORM 10-K IS ALSO ON FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION, WASHINGTON, D.C. 20549, AND THE NEW YORK STOCK EXCHANGE.
Dated: March 16, 1995
18
<PAGE> 21
EXHIBIT A
The text to the U S WEST 1994 Stock Plan will be modified as follows by the
amendment described in this Proxy Statement. Except in cases where a new
provision is to be added to the plan, amending language is underscored.
Section II will read as follows:
The Plan is a successor plan to the U S WEST, Inc. Stock Incentive
Plan and the U S WEST 1991 Stock Incentive Plan (the "Predecessor Plans").
No further grants of options or restricted stock may be made under the
Predecessor Plans. Options outstanding under the Predecessor Plans and
restricted stock granted under the Predecessor Plans shall be administered
pursuant to the provisions of the Plan, to the extent not inconsistent with
the grant of such options and restricted stock under the Predecessor Plans.
Notwithstanding the foregoing, Subsections X(H)(ii) and X(H)(iii) of this
Plan, respectively, shall govern the vesting of options issued under
Predecessor Plans in cases of Disability and Retirement.
Subsection III(I) will read as follows:
I. "Director Compensation" shall mean all cash or stock remuneration
payable to an Outside Director for service to the Company as a director,
other than reimbursement for expenses or Common Stock received upon
exercise of an Option, and shall include retainer fees for service on, and
fees for attendance at meetings of, the Board and any committees thereof.
A new Subsection D shall be added to Section VIII and shall read as
follows:
D. Limitation on Incentive Options. The cumulative number of shares
of Common Stock that may be issued under this Plan in connection with the
exercise of Incentive Options shall not exceed 10 million.
Subsection X(H)(ii) will read as follows:
(ii) Disability. If the employment of any Optionee is terminated
because of Disability, all Options held by such Optionee on the date of his
or her termination shall be retained by such Optionee, and such Options
that are not yet Vested Options shall become Vested Options in accordance
with the vesting schedule established at the time such Options were issued.
The Optionee shall have the right to exercise Vested Options at any time
and from time to time, but not after the expiration date of the Option or,
in the case of Incentive Options where tax-advantaged treatment is desired,
one year from the date of termination of employment.
Subsection X(H)(iii) will read as follows:
(iii) Retirement. Upon an Optionee's Retirement, all Options held
by such Optionee on the date of his or her Retirement shall be retained by
such Optionee, and such Options that are not yet Vested Options shall
become Vested Options in accordance with the vesting schedule established
at the time such Options were issued, unless the Committee, in its sole
discretion, determines otherwise. The Optionee shall have the right to
exercise Vested Options at any time and from time to time, but not after
the expiration date of the Option or, in the case of Incentive Options
where tax-advantaged treatment is desired, three months from the date of
Retirement.
A new Subsection C shall be added to Section XVI and shall read as follows:
C. Director Stock Options. On the date that this Subsection C is
first approved by shareholders and on the first business day of each
calendar year thereafter, each Director shall be granted an Option to
purchase three thousand (3,000) shares of Common Stock, such Option (i) to
become a Vested Option in increments of 40 percent upon grant and 30
percent on the first and second anniversaries following the date of grant
or, if earlier, in full upon the retirement of the Director, (ii) to have
an Option Price equal to Fair Market Value on the date of grant, (iii) to
remain exercisable notwithstanding the retirement of the Director from the
Board (but in no event after the expiration date of the Option), and (iv)
to expire ten years from the date of grant. The terms pursuant to which
Awards are granted hereunder shall not be
A-1
<PAGE> 22
amended more than once every six months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
Section XVII will read as follows:
With respect to grants of Awards to Directors and Executive Officers,
the Company intends that the provisions of this Plan and all transactions
effected in accordance with the Plan shall comply with Rule 16b-3 under the
Exchange Act. Accordingly, the Committee shall administer and interpret the
Plan to the extent practicable to maintain compliance with such rule.
A-2
<PAGE> 23
US WEST (LOGO)
(LOGO)
RECYCLED PAPER
<PAGE> 24
(LOGO) PROXY CARD
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON MAY 5, 1995.
The undersigned hereby appoints Allan D. Gilmour, Frank Popoff and Jerry O.
Williams, and each of them, proxies, with the powers the undersigned would
possess if personally present, and with full power of substitution, to vote all
common shares of the undersigned in U S WEST, Inc. at the Annual Meeting to be
held at the Boise Centre in Boise, Idaho, beginning at 10:00 a.m., on May 5,
1995, and at any adjournments or postponements thereof, upon all subjects that
may properly come before the Annual Meeting including the matters described in
the Proxy Statement furnished herewith, subject to any directions indicated on
the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE
FOR THE ELECTION OF ALL LISTED NOMINEES, IN ACCORDANCE WITH THE DIRECTORS'
RECOMMENDATIONS ON THE OTHER SUBJECTS LISTED ON THE REVERSE SIDE OF THIS CARD
AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
Your vote for the election of Directors may be indicated on the reverse. The
nominees for Class I are Richard B. Cheney, Remedios Diaz-Oliver, Grant A. Dove,
and Shirley M. Hufstedler.
================================================================================
To vote your shares for all Director nominees, mark the "For" box on item "A."
To withhold voting for all nominees, mark the "Withhold" box. If you do not wish
your shares voted "For" a particular nominee, mark the "For All Except" box and
enter the name(s) of the exception(s) in the space provided; your shares will be
voted for the remaining nominees.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "FOR"
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
A. Election of Directors in Class I
*Exceptions:_____________________________________________ For / / Withhold / / For All Except* / /
B. Ratification of Auditors For / / Against / / Abstain / /
C. Approval of Amendment to U S WEST 1994 Stock Plan For / / Against / / Abstain / /
</TABLE>
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "AGAINST" THE SHAREHOLDER PROPOSAL REGARDING
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1. Elimination of Classified Board For / / Against / / Abstain / /
2. Initiation of Cumulative Voting For / / Against / / Abstain / /
3. Elimination of Director Retirement Benefits For / / Against / / Abstain / /
</TABLE>
Date__________________________, 1995
Sign here as name(s) appears
X___________________________________
X___________________________________
Please sign this proxy and return
promptly whether or not you plan to
attend the Annual Meeting.
