EXHIBIT 10-G.1
September 7, 1999
Solomon D. Trujillo
Chief Executive Officer and President
U S WEST, Inc.
1801 California Street, Suite 5200
Denver, CO 80202
Dear Sol:
In light of the expected merger (the "Merger") of U S WEST, Inc.("Company")
and Qwest Communications International Inc. ("Qwest"), the Human Resources
Committee (the "Committee") and the Board of Directors of the Company (the
"Board") have concluded that it is in the best interests of the Company and its
stockholders to modify the terms of your current change of control agreement,
dated as of June 22, 1998 (the "Control Agreement"). The Committee and the Board
intend the modifications in this agreement (the "Retention Agreement") to
provide incentives to you to remain with the Company through the completion of
the Merger and to assume a key executive position at the post-merger company
(the "Merger Successor"). The Committee and the Board further intend that this
Retention Agreement be part of the retention and stay bonus program to which the
Company and Qwest agreed in their Merger agreement.
The Committee and the Board believe that the employment market for
experienced senior executives in the telecommunications industry is extremely
strong and that the Company is at some risk that you may react to the uncertain
times by leaving for a competitor before the Merger.
In addition, the Committee and the Board recognize that the current Control
Agreement and your other compensation arrangements may provide you with
insufficient incentives to remain during the pre-Merger period and with the
Merger Successor, particularly since the Company's many competitors could
compensate you for leaving and foregoing the benefits under the Control
Agreement. This Retention Agreement is intended to improve the likelihood that
you will remain with the Company Group (as defined below) by providing
incentives to remain with the Company Group. In exchange for this new
arrangement, you are agreeing at this time to use arbitration to settle any
disputes under the Control Agreement or this agreement, rather than retain your
current ability under the Control Agreement to choose whether the parties will
use arbitration. You are also agreeing at this time to assume an obligation not
to compete as defined in this Retention Agreement with the Company Group for a
minimum period of eighteen (18) months following your separation from employment
for any reason. The Company and you are agreeing to modify your obligation not
to compete by shortening the period in certain situations where the parties
agree that 18 months of noncompetition provides satisfactory protection for the
Company's interests and by imposing a new 18 month obligation under what the
parties agree are important additional circumstances, with the result that you
will be subject to a noncompete for 18 months if your employment ends for any
reason, without regard to whether you receive any payments under this or the
Control Agreement. You also agree and understand that you will not receive the
benefits under this Retention Agreement if you voluntarily leave employment
before the Merger is completed or within two years following completion of the
Merger except as specifically set forth below.
This Retention Agreement is intended to address these issues for the
benefit of the Company and its stockholders. It does not supersede the Control
Agreement, except as specifically indicated below. Any undefined capitalized
terms take their definitions from the Control Agreement.
Term of Agreement
This Retention Agreement will begin as of August 31, 1999,
and continue in effect until August 31, 2003. It will cease
to apply if the Company and Qwest cease efforts to complete
the Merger but will again apply if those parties resume such
efforts before December 31, 2000. Termination or expiration
of this Retention Agreement does not affect any rights,
obligations, or liabilities of the Company or you that have
accrued on or before the date the Retention Agreement
terminates or expires.
Stock Options
Pursuant to the U S WEST, Inc. 1998 Stock Plan, as amended,
(the "Plan"), the Committee and the Board have approved the
grant to you of an option to purchase three million shares
of common stock, par value $.01, as a matter of separate
inducement in connection with your engagement with the
Company or the Merger Successor and as partial consideration
for the Retention Agreement, and not in lieu of salary or
other compensation for your services. The options shall not
be treated as an incentive stock option under the Internal
Revenue Code of 1986, as amended.
Timing of Stock
Option Grant
You will receive the options described above as follows: As
of August 6, 1999, you will receive an option to purchase
one million (1,000,000) shares of common stock, par value
$.01, pursuant to the terms of the Stock Option Agreement
substantially in the form of Attachment A hereto ("Initial
Grant"). As of January 3, 2000, you will receive an option
to purchase an additional two million (2,000,000) shares of
common stock, par value $.01, pursuant to the terms of the
Stock Option Agreement substantially in the form of
Attachment A hereto ("Subsequent Grant") (The Initial Grant
and the Subsequent Grant will be collectively referred to as
the "Stock Option Grant"). All options awarded pursuant to
this Retention Agreement shall become Vested (as defined in
the Plan) in one-quarter increments upon each of the first
four (4) anniversaries following the date of the Initial
Grant. The Stock Option Grant is not subject to forfeiture
as a result of or otherwise impacted by the completion of
the Merger. The exercise price of the Initial Grant shall be
the closing price of U S WEST stock as of August 6, 1999.
The exercise price of the Subsequent Grant shall be the
closing price of U S WEST stock on January 3, 2000.
Restricted Stock
Grant
The Company will award you three hundred thousand (300,000)
shares of common stock of the Company in the form of
restricted stock with a date of grant of August 6, 1999, but
conditioned on completion of the Merger ("Restricted Stock
Grant"). If, but only if, the Merger is completed, fifty
percent of the shares granted pursuant to the Restricted
Stock Grant will cease to be restricted and thus
nonforfeitable by you if you remain employed by the Merger
Successor or a Subsidiary on the second anniversary of the
date of grant. If, but only if, the Merger is completed, the
remaining fifty percent of the Restricted Stock Grant will
cease to be restricted and thus nonforfeitable in equal
increments on the third and fourth anniversaries of the date
of grant. The Restricted Stock Grant will be reflected in a
standard restricted stock agreement substantially in the
form of Attachment B hereto.
Loss of Payments
You agree that you will forfeit any right to any unvested
portion of this Restricted Stock Grant and any unvested
portion of this Stock Option Grant if (i) the Company or the
Merger Successor or another member of the Company Group, as
appropriate, terminates your employment for Cause (as
defined in Section I(h) of the Control Agreement), (ii) you
voluntarily resign with or without Good Reason before
completion of the Merger, (iii) or you resign for any reason
other than an Involuntary Termination (as defined below)
prior to the second anniversary of the date of completion of
the Merger.
Discharge without
Cause
If the Company or the Merger Successor provide you with
notice of termination of your employment without Cause (as
defined in Section I.(h) of the Control Agreement) following
completion of the Merger, all unvested stock options under
the Stock Option Grant will continue to vest and the
restrictions attached to the Restricted Stock Grant will
lapse over time pursuant to the terms of the Restricted
Stock Agreement as if your employment had continued for the
full restricted period. You will have five (5) years from
the date of termination to exercise all options described
herein, and any other outstanding options, once such options
have vested, but not to exceed the term of the option. If
you receive payments set forth in this Retention Agreement
as a result of a Discharge without Cause or an Involuntary
Termination, you will not receive any additional severance
payments under any other severance agreement.
Involuntary
Termination
You will be entitled to the following upon Involuntary
Termination of your employment: all unvested stock options
under the Stock Option Grant will continue to vest pursuant
to the terms of the Stock Option Agreement as if your
employment had continued for the full vesting period and the
restrictions attached to the Restricted Stock Grant will
lapse over time pursuant to the terms of the Restricted
Stock Agreement as if your employment had continued for the
full restricted period. You will have five (5) years from
the date of termination to exercise all options described
herein, and any other outstanding options once such options
have vested, but not to exceed the term of the option. You
will continue to receive the same level of use and access to
corporate aircraft as that currently provided. For purposes
of this Retention Agreement, Involuntary Termination means
your employment with the Company Group ends as a result of:
(1) your resignation after any reduction in the level of
your annual cash compensation, bonus opportunity, long term
incentive plan value, perquisites (including, but in no way
limited to, country club and health club memberships) and
benefits as of the date of execution of this Retention
Agreement (other than any benefits relating to the Change of
Control, such as the Control Agreement the Retention
Agreement or other severance agreement), including, but not
limited to, any reduction in your current level of use and
access to corporate aircraft (other than by your own choice)
in all respects similar to that currently provided; (2) your
resignation after the assignment to you of any duties
materially inconsistent with the status, title and duties
attributed to you in the Merger Agreement within two (2)
years following completion of the Merger; (3) following the
second anniversary of completion of the Merger, your
resignation for any reason unless you have obtained and then
hold the title and responsibilities of highest employee
executive position of the Merger Successor or termination of
your employment other than for Cause. Good Reason as defined
in Section I.(r.) of the Control Agreement is not applicable
for purposes of determining whether you have had an
Involuntary Termination under this Retention Agreement. In
the event that you elect to invoke your right to receive
benefits under this Retention Agreement as a result of an
Involuntary Termination, you agree to provide Notice of
Termination and to allow the Company or the Merger Successor
thirty (30) days to cure the conduct that would otherwise
give rise to such Involuntary Termination.
Gross-up Payments
At the time any portion of the Restricted Stock Grant shall
become unrestricted and nonforfeitable, the Company or the
Merger Successor shall pay you an additional amount such
that the net amount retained by you with respect to the
Restricted Stock Grant, after deduction of any federal,
state and local income and employment tax and any excise tax
imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any other federal, state or
local excise tax (any such excise or other tax, together
with any interest and penalties, are hereinafter
collectively referred to as the "Excise Tax") and any
interest, penalties or additions to tax payable by you with
respect thereto, shall be equal to the total present value
of the Restricted Stock Grant at the time the shares become
unrestricted and nonforfeitable (the "Gross-Up Payment(s)").
The intent of the parties is that you need not sell this
stock to satisfy any tax or other obligations. The Company
or the Merger Successor shall be responsible in full for,
and shall pay, any Gross-Up Payment(s) and any and all
income and employment taxes (including, without limitation,
penalties and interest) imposed on any Gross-Up Payment(s)
and shall bear any loss of deduction caused by or related to
the Gross-Up Payment(s). The amount of the Gross-Up
Payment(s) on the Restricted Stock and the lesser of the
value of 100,000 shares of the Restricted Stock Grant or the
vested portion of the Restricted Stock Grant will be
deducted from the amount of benefits to which you may
otherwise be entitled pursuant to under Sections IV(a) and
IV(b) of the Control Agreement or any other severance
agreement to which you may be a party and you specifically
agree that this waiver overrides any contrary language in
the No Mitigation provision of Section IV(g) of the Control
Agreement. Nothing in this Retention Agreement waives any
rights you may have under the Control Agreement to receive
Gross-Up Payment(s) under Section IV(e) of the Control
Agreement, provided that you shall not be entitled to
gross-up for taxes under both agreements with respect to the
same taxes or other obligations.
Legal Fees and
Expenses
The Company or the Merger Successor will pay your reasonable
legal fees and expenses with regard to this Retention
Agreement as though it were expressly described in Section
IV(f.) of the Control Agreement.
Non-compete
The Company and you agree that your non-compete obligation
under Section VII of the Control Agreement currently applies
only if you have a "Termination" as defined in Section
III(a) of the Control Agreement and thus does not apply if
you leave employment voluntarily without Good Reason more
than 90 days after a Change of Control or if you are
terminated for Cause. You further agree that this
Non-compete Agreement supercedes the non-compete provision
of Section VII of the Control Agreement unless this
Retention Agreement is terminated because the Company and
Qwest cease efforts to complete the Merger as set forth in
the Term of Agreement section of this Retention Agreement.
You agree that, for a period of 18 months following your
termination of employment with the Company or the Merger
Successor, for any reason, whether voluntary or involuntary,
you will not engage, directly or indirectly, whether as a
principal, agent, distributor, representative, consultant,
employee, partner, stockholder, limited partner, or other
investor (other than an investment of not more than (i) two
percent of the stock or equity of any corporation the
capital stock of which is publicly traded or (ii) two
percent of the ownership interest of any limited partnership
or other entity) or otherwise, within the United States of
America, in any business that is competitive (a "Competing
Business") with the "Company Group" (consisting of the
entities defined as the Controlled Group under the Control
Agreement, the Merger Successor, and any successors of any
of those entities) on the date of your termination or within
the following 18 months; solicit or entice or endeavor to
solicit or entice away from the Company Group, any person
who was an officer, employee, or sales representative of the
Company Group, whether or not such person would commit a
breach of his or her contract of employment by reason of
leaving service with those employers employ, directly or
indirectly, any person who was an officer, employee, or
sales representative of the Company Group or who by reason
of such position at any time is or may likely be in
possession of any confidential information or trade secrets
relating to the business or products of the Company Group;
or solicit or entice or endeavor to solicit or entice away
from the Company Group any customer or prospective customer
of the Company Group either for your own account or for any
individual, firm, corporation, or other entity.
You may submit a written request to the Board to reduce the
18 month term of this noncompetition obligation. The Board,
by majority vote, may grant the request, with or without
modification, or deny the request, in its sole and exclusive
discretion.
"Competing Business" includes but is not limited to
first-tier long distance companies (such as MCI WorldCom,
Inc., Sprint Communications Company, L.P., and AT&T), local
exchange companies (such as the traditional RBOCs, GTE, and
independent local phone companies), new age retail
communications companies (such as Level 3 Communications,
Inc., Qwest, Global Crossing Ltd.), and new age alternative
access (such as WinStar Communications, Inc., Covad
Communications Company, and Rhythms NetConnections Inc., and
other competitive local exchange providers and digital local
connections), and internet backbone providers, but
specifically excluding companies whose primary business is
manufacturing, including manufacturers and developers of
computers and computer equipment. Examples listed above
illustrate current competitors and are representative but do
not limit the scope of any of the terms.
Incorporation by
Reference
The following provisions of the Control Agreement will apply
to this Retention Agreement as though the provisions
specifically referred to this agreement: Sections VI
(Successors; Binding Agreement); VIII (Notice); and, except
as set forth below, Sections IX (Miscellaneous) and XI
(Arbitration). The last two sentences of Miscellaneous would
instead read as follows for this Retention Agreement: "The
obligations of the Company under the Retention Benefits
section survive the expiration of the term of this Retention
Agreement, as do your obligations to comply with the
Arbitration section and with the Non-Compete section for the
period it specifies."
Arbitration
You agree that the arbitration provisions of Section XI of
the Control Agreement will apply to all disputes referenced
in that section or that arise under or with respect to this
Retention Agreement. You further agree that this Retention
Agreement serves as your required written agreement to
arbitrate such matters. You therefore agree that Section XI
of the Control Agreement will apply without the need for any
further agreement by you.
If you accept the terms of this Agreement, please sign in the space
indicated below. We encourage you to consult with any advisors you choose.
U S WEST, INC.
/S/ FRANK POPOFF
-----------------------------------------
Chairman, Human Resources Committee of
the Board of Directors, for the Committee
and the Board
Accepted and agreed to:
/S/ SOLOMON D. TRUJILLO
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Solomon D. Trujillo
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Date