EXHIBIT 10(f)
[CHANGE OF CONTROL AGREEMENT FOR
PRESIDENT AND CHIEF EXECUTIVE OFFICER]
June 22, 1998
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer and President
U S WEST, Inc.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Dear Sol:
U S WEST, Inc., on behalf of itself, its subsidiaries and stockholders,
and any successor or surviving entity, wishes to encourage your continued
service and dedication in the performance of your duties, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in
Subsection I(i)) of the Company (as defined in Subsection I(k)). The Board of
Directors of the Company (the "Board") believes that the prospect of a pending
or threatened Change of Control inevitably creates distractions, personal risks
and uncertainties for its executives, and that it is in the best interests of U
S WEST, Inc. and its stockholders to minimize such distractions to certain
executives. The Board further believes that it is in the best interests of the
Company to encourage its executives' full attention and dedication to their
duties, both currently and in the event of any threatened or pending Change of
Control.
Accordingly, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued retention of certain members of
the Company's management, including yourself, and the attention and dedication
of management to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a Change of
Control.
In order to induce you ("Executive") to remain in the employ of the
Company, and in consideration of your continued service to the Company, the
Company agrees that you shall receive the benefits set forth in this letter
agreement (the "Agreement") in the event that your employment with the Company
is terminated subsequent to a Change of Control in the circumstances described
herein. For purposes of this Agreement, references to employment with the
Company shall include employment with a Subsidiary of the Company (as defined in
Subsection I(y)).
I. Definitions
The meaning of each defined term that is used in this Agreement is set
forth below.
(a) AAA. The American Arbitration Association.
(b) Additional Pay. The meaning of this term is set forth in Subsection
IV(b).
(c) Agreement. The meaning of this term is set forth in the third
paragraph of this Agreement.
(d) Agreement Payments. The meaning of this term is set forth in
Subsection IV(e)(i).
(e) Beneficiaries. The meaning of this term is set forth in Subsection
VI(c).
(f) Board. The meaning of this term is set forth in the first paragraph
of this Agreement.
(g) Business Combination. The meaning of this term is set forth in
Subsection I(i)(iii).
(h) Cause. For purposes of this Agreement, "Cause" shall mean
Executive's willful breach or failure to perform his employment duties. For
purposes of this Subsection I(h), no act, or failure to act, on the part of
Executive shall be deemed "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that such action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
Executive's employment shall not be deemed to have been terminated for Cause
unless and until the Company delivers to Executive a certificate of a resolution
duly adopted by the affirmative vote of not less than seventy-five percent (75%)
of the entire membership of the Board, at a meeting of the Board called and held
for such purpose (after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive has engaged in
such willful conduct and specifying the details of such willful conduct.
(i) Change of Control. For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if there is a change of control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided that, without limitation, such a
Change of Control shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and
14(d)(2), as currently in effect, of the Exchange Act) is or becomes a
"beneficial owner" (as determined for purposes of Regulation 13D-G, as
currently in effect, under the Exchange Act), directly or indirectly,
of securities representing twenty percent (20%) or more of the total
voting power of all of the Company's then outstanding voting
securities. For purposes of this Agreement, the term "person" shall not
include: (i) the Company or any of its Subsidiaries; (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any of its Subsidiaries; or (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities;
(ii) during any period of two (2) consecutive calendar years,
individuals who at the beginning of such period constitute the Board
and any new director(s) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office, who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board, but excluding for this
purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A, as currently in effect, of
the Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the Board;
(iii) the stockholders of the Company approve a merger,
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless following such Business Combination: (i) all or substantially
all of the individuals and entities who were the "beneficial owners"
(as determined for purposes of Regulation 13D-G, as currently in
effect, of the Exchange Act) of the outstanding voting securities of
the Company immediately prior to such Business Combination beneficially
own, directly or indirectly, securities representing more than seventy
percent (70%) of the total voting power of the then outstanding voting
securities of the corporation resulting from such Business Combination
or the parent of such corporation (the "Resulting Corporation"); (ii)
no "person" (as such term is used in Sections 13(d) and 14(d)(2), as
currently in effect, of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or the Resulting Corporation, is the "beneficial owner" (as
determined for purposes of Regulation 13D-G, as currently in effect, of
the Exchange Act), directly or indirectly, of voting securities
representing twenty percent (20%) or more of the total voting power of
the then outstanding voting securities of the Resulting Corporation;
and (iii) at least a majority of the members of the board of directors
of the Resulting Corporation were members of the Board at the time of
the execution of the initial agreement, or at the time of the action of
the Board, providing for such Business Combination;
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company;
(v) any other event that a simple majority of the Board, in
its sole discretion, shall determine constitutes a Change of Control;
(j) Code. The meaning of this term is set forth in Subsection IV(e)(i).
(k) Company. The meaning of this term is set forth in Subsection VI(a).
(l) Controlled Group. For purposes of this Agreement, "Controlled
Group" shall mean the Company and all of the Company's Subsidiaries.
(m) Disability. For purposes of this Agreement, "Disability" shall mean
an illness, injury or similar incapacity which, 52 weeks after its commencement,
continues to render Executive unable to perform the material and substantial
duties of Executive's position or any occupation or employment for which
Executive is qualified or may reasonably become qualified by training, education
or experience. Any dispute as to the existence of a Disability upon which
Executive and the Company cannot agree shall be resolved by a qualified
independent physician selected by Executive (or, if Executive is unable to make
such selection, by any adult member of Executive's immediate family or
Executive's legal representative), and approved by the Company, such approval
not to be unreasonably withheld. The decision of such physician made in writing
to both the Company and Executive shall be final and conclusive for all purposes
of this Agreement.
(n) Employer. For purposes of this Agreement, "Employer" shall mean the
Company or the Subsidiary, as the case may be, with which Executive has an
employment relationship.
(o) Exchange Act. This term shall have the meaning set forth in
Subsection I(i).
(p) Executive. This term shall have the meaning set forth in the third
paragraph of this Agreement.
(q) Excise Tax. This term shall have the meaning set forth in
Subsection IV(e)(i).
(r) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean the occurrence, without Executive's prior express written consent, of any
of the following circumstances:
(i) The assignment to Executive of any duties materially
inconsistent with Executive's status or responsibilities as in effect
immediately prior to a Change of Control, including imposition of
travel obligations which differ materially from required business
travel immediately prior to the Change of Control;
(ii) Any material diminution in the status or responsibilities
of Executive's position from that which existed immediately prior to
the Change of Control, whether by reason of the Company ceasing to be a
public company under the Exchange Act, becoming a subsidiary of a
successor public company, or otherwise;
(iii) (A) A reduction in Executive's annual base salary as in
effect immediately before the Change of Control; or (B) the failure to
pay a bonus award to which Executive otherwise is entitled under any
short-term incentive plan(s) or program(s) or any long-term incentive
plan(s) or program(s) in which Executive participates, or any
companion, amended, successor or other incentive compensation plan(s)
or program(s), at the time such awards are usually paid;
(iv) A change in the principal place of Executive's
employment, as in effect immediately prior to the Change of Control, to
a location more than thirty-five (35) miles distant from the location
of such principal place at such time;
(v) Except as required by law, the failure by the Company to
continue in effect any incentive compensation or stock or stock option
plan in which Executive participates immediately prior to the Change of
Control, unless participation in an equivalent alternative compensation
or stock or stock option arrangement (embodied in an ongoing substitute
or alternative plan) has been provided to Executive, or the failure by
the Company to continue Executive's participation in any such
compensation or stock or stock option plan on a substantially
equivalent or more beneficial basis, both in terms of the nature and
amount of benefits provided and the level of Executive's participation
relative to other participants, as existed immediately prior to the
time of the Change of Control;
(vi) (A) Except as required by law, the failure by the Company
to continue to provide to Executive benefits substantially equivalent
or more beneficial, in the aggregate, to those enjoyed by Executive
under the qualified and non-qualified employee benefit and welfare
plans of the Company, including, without limitation, any pension,
deferred compensation, life insurance, medical, dental, health and
accident, disability, retirement or savings plan(s) or program(s) in
which Executive was eligible to participate immediately prior to the
Change of Control; (B) the taking of any action by the Company that
would, directly or indirectly, materially reduce or deprive Executive
of any other perquisite or benefit enjoyed by Executive immediately
prior to the Change of Control (including, without limitation,
Company-paid and/or reimbursed club memberships, financial counseling
fees and the like); or (C) the failure by the Company to treat
Executive under the Company's vacation policy, past practice or special
agreement in the same manner and to the same extent as was in effect
immediately prior to the Change of Control;
(vii) The failure of the Company to obtain a satisfactory
written agreement from any successor prior to consummation of the
Change of Control to assume and agree to perform this Agreement, as
contemplated in Subsection VI(a); or
(viii) Any purported termination by the Company of Executive's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection III(b) or, if applicable,
Subsection I(h). For purposes of this Agreement, no such purported
termination shall be effective except as constituting Good Reason.
Executive's continued employment with the Company or any Subsidiary shall not
constitute a consent to, or a waiver of rights with respect to, any
circumstances constituting Good Reason hereunder.
(s) Gross-Up Payment. The meaning of this term is set forth in
Subsection IV(e)(i).
(t) Notice of Termination. The meaning of this term is set forth in
Subsection III(b).
(u) Other Payments. The meaning of this term is set forth in Subsection
IV(e)(i).
(v) Payments. The meaning of this term is set forth in Subsection
IV(e)(i).
(w) Resulting Corporation. The meaning of this term is set forth in
Subsection I(i)(iii).
(x) Retirement. For purposes of this Agreement, "Retirement" shall mean
Executive's voluntary termination of employment with the Company, other than for
Good Reason, and in accordance with the Company's retirement policy generally
applicable to its employees or in accordance with any prior or contemporaneous
retirement agreement or arrangement between Executive and the Company.
(y) Subsidiary. For purposes of this Agreement, "Subsidiary" shall mean
any corporation of which fifty percent (50%) or more of the voting stock is
owned, directly or indirectly, by the Company.
(z) Tax Consultant. The meaning of this term is set forth in Subsection
IV(e)(ii).
(aa) Terminate(d) or Termination. The meaning of this term is set forth
in Subsection III(a).
(bb) Termination Date. For purposes of this Agreement, "Termination
Date" shall mean:
(i) If Executive's employment is terminated for Disability,
thirty (30) calendar days after Notice of Termination is given
(provided that Executive shall not have returned to the full-time
performance of his duties during such thirty-day period); and
(ii) If Executive's employment is terminated for Cause or Good
Reason or for any reason other than death or Disability, the date
specified in the Notice of Termination (which in the case of a
termination for Cause shall not be less than thirty (30) calendar days
and in the case of a termination for Good Reason shall not be less than
thirty (30) calendar days nor more than sixty (60) calendar days,
respectively, from the date such Notice of Termination is given).
II. Term of Agreement
(a) General. Upon execution by Executive, this Agreement shall commence
as of June 22, 1998. This Agreement shall continue in effect through December
31, 2001; provided, however, that commencing on January 1, 2002, and every third
January 1 thereafter, the term of this Agreement shall automatically be extended
for three (3) additional years unless, not later than ninety (90) calendar days
prior to the January 1 on which this Agreement otherwise automatically would be
extended, the Company shall have given notice to Executive that it does not wish
to extend this Agreement; provided further, however, that if a Change of Control
of the Company shall have occurred during the original or any extended term of
this Agreement, this Agreement shall continue in effect for a period of
thirty-six (36) months beyond the month in which the Change of Control occurred.
The term of this Agreement automatically shall be extended for three (3)
additional years from the date of any public announcement of an event that would
constitute a Change of Control as defined in this Agreement; provided however,
that if any such announced event is not consummated within that three (3) year
period, the original renewal term thereafter shall apply.
(b) Disposition of Employer. In the event Executive is employed by a
Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold
or otherwise disposed of prior to the date on which a Change of Control occurs,
unless Executive continues in employment with the Controlled Group after such
sale or other disposition. If Executive's Employer is sold or disposed of on or
after the date on which a Change of Control occurs, this Agreement shall
continue through its original term or any extended term then in effect.
(c) Deemed Change of Control. If Executive's employment with Employer
is terminated prior to the date on which a Change of Control occurs, and such
termination was at the request of a third party who has taken steps to effect a
Change of Control, or otherwise was in connection with the Change of Control,
then for all purposes of this Agreement, a Change of Control shall be deemed to
have occurred prior to such termination.
(d) Expiration of Agreement. No termination or expiration of this
Agreement shall affect any rights, obligations or liabilities of either party
that shall have accrued on or prior to the date of such termination or
expiration.
III. Termination Following Change of Control
(a) Entitlement to Benefits. If a Change of Control shall have
occurred, Executive shall be entitled to the benefits provided in Section IV
hereof upon the subsequent termination of his employment with the Company for
any reason within ninety (90) days after the date of the Change of Control. If a
Change of Control shall have occurred, and more than ninety (90) days from the
date of the Change of Control has elapsed, Executive shall be entitled to the
benefits provided in Section IV hereof upon the subsequent termination of his
employment with the Company within three (3) years after the date of the Change
of Control unless such termination is (i) a result of Executive's death,
Disability or Retirement, (ii) for Cause or (iii) by Executive other than for
Good Reason. A termination of Executive's employment that entitles Executive to
the payment of benefits under Section IV hereof shall be referred to hereinafter
as a "Termination."
(b) Notice of Termination. Any purported termination of Executive's
employment by either the Company or Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section VIII.
For purposes of this Agreement, a "Notice of Termination" shall mean a written
notice that indicates the specific provision(s) of this Agreement relied upon
and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision(s)
so indicated. If Executive's employment shall be terminated by the Company for
Cause or by Executive for other than Good Reason, the Company shall pay
Executive his full base salary through the Termination Date at the salary level
in effect at the time Notice of Termination is given and shall pay any amounts
to be paid to Executive pursuant to any other compensation or stock or stock
option plan(s), program(s) or employment agreement(s) then in effect, and the
Company shall have no further obligations to Executive under this Agreement.
If, within thirty (30) calendar days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the grounds for termination, then,
notwithstanding the meaning of "Termination Date" set forth in Subsection I(bb),
the Termination Date shall be the date on which the dispute is finally resolved,
whether by mutual written agreement of the parties or by a decision rendered
pursuant to Section XI; provided that the Termination Date shall be extended by
a notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Company will
continue to pay Executive his full compensation including, without limitation,
base salary, bonus, incentive pay and equity grants, in effect when the notice
of the dispute was given, and continue Executive's participation in all benefits
plans or other perquisites in which Executive was participating, or which he was
enjoying, when the Notice of Termination giving rise to the dispute was given,
until the dispute is finally resolved. Amounts paid under this Subsection III(b)
are in addition to and not in lieu of all other amounts due to Executive under
this Agreement and shall not be offset against or reduce any other amounts due
to Executive under this Agreement.
IV. Compensation Upon a Termination
In accordance with Section III, following a Change of Control, upon
Executive's Termination, Executive shall be entitled to the following benefits,
provided that such Termination occurs during the three (3) year period
immediately following the date of the Change of Control:
(a) Standard Benefits. The Company shall pay to Executive, in cash, no
later than the second business day following the Termination Date:
(i) his full base salary through the Termination Date at the salary
level in effect on either (x) the day on which Notice of Termination is
given, or (y) the day immediately preceding the date of the Change of
Control, whichever is higher;
(ii) the full annual bonus payable to Executive under any past and
current year short-term incentive plan(s) or program(s) of the Company
in which Executive participates following a termination of employment
after a change of control, as defined in such plan(s) or program(s),
calculated on the basis of the extent to which the performance factors
targeted by the Human Resources Committee of the Board have been
achieved (for this purpose, the Company's performance through the
Termination Date shall be annualized based upon the actual number of
days elapsed from the beginning of the fiscal year in which the
Termination occurs through the Termination Date over a year of 360
days), which shall be deemed to be 100% unless the performance actually
achieved is greater than 100%, in which case the actual performance
levels shall be utilized. If a change of control has not occurred
within the meaning of such plan(s) or program(s), a change of control
shall be deemed to have occurred with respect to Executive for the
purpose of determining the bonus payable to Executive based on a Change
of Control occurring within the meaning of this Agreement; and
(iii) the annual grant value of any long-term incentive award payable
to Executive under any long-term incentive plan(s) or program(s) of the
Company in which Executive participates following a termination of
employment after a change of control, as defined in such plan(s) or
program(s). If the annual long term incentive award has not yet been
specified in any given year in which termination occurs, the annual
grant value will equal the immediate prior year's annual grant value.
If a change of control has not occurred within the meaning of such
plan(s) or program(s), a change of control shall be deemed to have
occurred with respect to Executive based on a Change of Control
occurring within the meaning of this Agreement.
The purpose of paragraphs (ii) and (iii) are to provide the value of
any past and current short term and long term incentive awards as if the
Executive had completed the entire year in which termination occurred. In
addition, the Company shall cause: (x) all unvested stock options held by
Executive on the Termination Date immediately to vest and be fully exercisable
as of the Termination Date; (y) any restrictions on all restricted stock held by
Executive on the Termination Date immediately to lapse and all shares of such
stock to fully vest as of the Termination Date; and (z) any accrued benefit or
deferred arrangement of the Company that Executive otherwise would become
entitled to if he continued employment with the Company immediately to vest as
of the Termination Date.
(b) Additional Benefits. The Company shall pay to Executive as
additional pay ("Additional Pay"), the product of (i) the lesser of (x) three
(3) or (y) the difference between sixty-five (65) and Executive's age as of the
date of the Notice of Termination (calculated to the nearest twelfth of a year),
multiplied by (ii) the sum of (x) Executive's annual base salary in effect
immediately prior to the Termination Date, (y) Executive's annual bonus amount
under any short-term incentive plan(s) or program(s) in which Executive
participates, such bonus amount to be calculated on the basis of the extent to
which the performance factors targeted by the Human Resources Committee of the
Board have been achieved (for this purpose, the Company's performance through
the Termination Date shall be annualized based upon the actual number of days
elapsed from the beginning of the fiscal year in which the Termination occurs
through the Termination Date over a year of 360 days), which shall be deemed to
be one hundred percent (100%) unless the performance actually achieved is
greater than one hundred percent (100%), in which case the actual performance
level shall be utilized, and (z) the dollar value of the most recent annual
grant to Executive prior to the Termination Date under any long-term incentive
plan(s), program(s) or grant(s) in which Executive participates, whether such
value is in the form of stock, stock options, Dividend Equivalent Units or any
other form of long term incentive compensation, such grant value to be
calculated as if the performance measures set forth in any such plan(s),
program(s) or grant(s) (e.g., Dividend Equivalent Units) for the applicable
performance period shall be deemed to be one hundred percent (100%). The Company
shall pay the Additional Pay to Executive in a lump sum, in cash, not later than
the fifteenth calendar day following the Termination Date. The Company also
shall provide Executive with office space and shared administrative support for
the three (3) year period immediately following the Termination Date, in the
county of Executive's residence, at a location to be designated by the Company,
which office space and support shall be similar to that currently provided by
the Company to retired senior officers. The Company shall maintain for Executive
for the three (3) year period immediately following the Termination Date, all
perquisites and benefits enjoyed by Executive immediately prior to the
Termination Date.
(c) Retirement Plan Benefits. If not already vested, Executive shall be
deemed fully vested as of the Termination Date in any Company retirement plan(s)
or other written agreement(s) between Executive and the Company relating to pay
or other benefits upon retirement in which Executive was a participant, party or
beneficiary immediately prior to the Change of Control, and any additional
plan(s) or agreement(s) in which such Executive became a participant, party or
beneficiary thereafter. In addition to the foregoing, for purposes of
determining the amounts to be paid to Executive under such plan(s) or
agreement(s), the years of service with the Company and the age of Executive
under all such plans and agreements shall be deemed increased by the lesser of
thirty-six (36) months or such shorter period of time as would render Executive
sixty-five (65) years of age. For purposes of this Subsection IV(c), the term
"plan(s)" includes, without limitation, the Company's qualified pension plan,
non-qualified and mid-career pension plans and any companion, successor or
amended plan(s), and the term "agreement(s)" encompasses, without limitation,
the terms of any offer letter(s) leading to Executive's employment with the
Company where Executive was a signatory thereto, any written amendment(s) to the
foregoing and any subsequent written agreement(s) on such matters. In the event
the terms of the plans referenced in this Subsection IV(c) do not for any reason
coincide with the provisions of this Subsection IV(c) (e.g., if plan amendments
would cause disqualification of qualified plans), Executive shall be entitled to
receive from the Company, under the terms of this Agreement, an amount equal to
all amounts he would have received, at the time he would have received such
amounts, had all such plans continued in existence as in effect on the date of
this Agreement after being amended to coincide with the terms of this Subsection
IV(c).
(d) Health and Other Benefits. Following the Termination Date, the
Company shall provide substantially the same level of health, vision and dental
benefits to Executive and Executive's eligible dependents that the Company would
provide to Executive and Executive's eligible dependents if Executive were first
eligible for retiree health, vision and dental benefits immediately prior to the
Change of Control. The eligibility of Executive's dependents shall be determined
by the terms of any retiree health, vision and dental benefit plan(s) or
program(s) in effect immediately prior to the Change of Control. Following the
Termination Date, (i) ownership of any Basic Executive Life Insurance held by
the Company for the benefit of Executive immediately shall be transferred to a
third party trustee and held in an irrevocable rabbi trust for the benefit of
Executive, and (ii) any collateral assignment by Executive to the Company under
any Supplemental Executive Life Insurance (SELI) owned by Executive shall be
subordinated to Executive's right to the maximum cash value under the SELI
measured against a death benefit equal to fifty percent (50%) of the SELI
coverage in effect immediately prior to the Change of Control, without the SELI
becoming a modified endowment contract.
(e) Gross-Up Payments.
(i) In the event any payment(s) or the value of any benefit(s)
received or to be received by Executive in connection with Executive's
Termination or contingent upon a Change of Control (whether received or
to be received pursuant to the terms of this Agreement (the "Agreement
Payments") or of any other plan, arrangement or agreement of the
Company, its successors, any person whose actions result in a Change of
Control or any person affiliated with any of them (or which, as a
result of the completion of the transaction(s) causing a Change of
Control, will become affiliated with any of them) ("Other Payments"
and, together with the Agreement Payments, the "Payments")), in the
opinion of the Tax Consultant (as defined below in Subsection
IV(e)(ii)), would be subject to an 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"), as determined as provided below, the
Company shall pay to Executive an additional amount such that the net
amount retained by Executive, after deduction of the Excise Tax on
Agreement Payments and Other Payments and any federal, state and local
income and employment tax and Excise Tax upon the Payment(s) provided
for by this Subsection IV(e)(i), and any interest, penalties or
additions to tax payable by Executive with respect thereto, shall be
equal to the total present value of the Agreement Payments and Other
Payments at the time such Payments are to be made (the "Gross-Up
Payment(s)"). The intent of the parties is that the Company shall be
responsible in full for, and shall pay, any and all Excise Tax on any
Payments and 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) as well as any loss of deduction caused by
or related to the Gross-Up Payment(s).
(ii) All determinations required to be made under this
Subsection IV(e), including, without limitation, whether and when a
Gross-Up Payment is required, and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determinations,
unless otherwise set forth in this Agreement, shall be made by tax
consultant(s) selected by the Company and reasonably acceptable to
Executive ("Tax Consultant"). For purposes of determining the amount of
any Gross-Up Payment, Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made, and state
and local income taxes at the highest marginal rate of taxation in the
state and locality of Executive's residence on the Termination Date,
net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. The Company
shall cause the Tax Consultant to provide detailed supporting
calculations to the Company and Executive within fifteen (15) business
days after notice is given by Executive to the Company that any or all
of the Payments have occurred, or such earlier time as is requested by
the Company. Within two (2) business days after such notice is given to
the Company, the Company shall instruct the Tax Consultant to timely
provide the data required by this Subsection IV(e) to Executive. All
fees and expenses of the Tax Consultant shall be paid in full by the
Company. Any Excise Tax as determined pursuant to this Subsection IV(e)
shall be paid by the Company to the Internal Revenue Service or any
other appropriate taxing authority on Executive's behalf within five
(5) business days after receipt of the Tax Consultant's determination.
If the Tax Consultant determines that there is substantial authority
(within the meaning of Section 6662 of the Code) that no Excise Tax is
payable by Executive, the Tax Consultant shall furnish Executive with a
written opinion that failure to disclose or report the Excise Tax on
Executive's federal income tax return will not constitute a substantial
understatement of tax or be reasonably likely to result in the
imposition of a negligence or any other penalty. Any determination by
the Tax Consultant shall be binding upon the Company and Executive in
the absence of material mathematical or legal error. As a result of the
uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Tax Consultant hereunder, it is
possible that Gross-Up Payments will not have been made by the Company
that should have been made or that Gross-Up Payments have been made
that should not have been made, in each case, consistent with the
calculations required to be made hereunder. In the event the Company
exhausts its remedies pursuant to Subsection IV(e)(iii) below, and
Executive is thereafter required to make a payment of any Excise Tax or
any interest, penalties or addition to tax, the Tax Consultant shall
determine the amount of underpayment of Excise Taxes that has occurred
and any such underpayment and any interest, penalties or addition to
tax shall promptly be paid by the Company to the Internal Revenue
Service or other appropriate taxing authority on Executive's behalf or,
if such underpayment has been previously paid by Executive to the
appropriate taxing authority, to Executive. In the event the Tax
Consultant determines that an overpayment of Gross-Up Payment(s) has
occurred, any such overpayment shall be treated for all purposes as a
loan to Executive with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code, due and payable within ninety
(90) calendar days after written demand to Executive by the Company;
provided, however, that Executive shall have no duty or obligation
whatsoever to repay such loan if Executive's receipt of the
overpayment, or any portion thereof, is includible in Executive's
income and Executive's repayment of the same is not deductible by
Executive for federal and state income tax purposes.
(iii) Executive shall notify the Company in writing of any
claim of which he is aware by the Internal Revenue Service or state or
local taxing authority, that, if successful, would result in any Excise
Tax or an underpayment of any Gross-Up Payment(s). Such notice shall be
given as soon as practicable but no later than fifteen (15) business
days after Executive is informed in writing of the claim by the taxing
authority, and Executive shall provide written notice to the Company of
the nature of the claim, the administrative or judicial appeal period,
and the date on which any payment of the claim must be paid. Executive
shall not pay any portion of the claim prior to the expiration of the
thirty (30) day period following the date on which Executive gives such
notice to the Company (or such shorter period ending on the date that
any amount under the claim is due). If the Company notifies Executive
in writing prior to the expiration of such thirty (30) day period that
it desires to contest the claim, Executive shall:
(A) give the Company any information reasonably
requested by the Company relating to the claim;
(B) take such action in connection with contesting
the claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation concerning the claim by an attorney
selected by the Company who is reasonably acceptable to
Executive; and
(C) cooperate with the Company in good faith in order
to effectively contest the claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including, without limitation, additional interest
and penalties and attorneys' fees) incurred in such contests and shall
indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including, without limitation, interest and
penalties thereon) imposed as a result of such representation. Without
limitation upon the foregoing provisions of this Subsection IV(e)(iii),
except as provided below, the Company shall control all proceedings
concerning such contest and, in its sole opinion, may pursue or forego
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority pertaining to the claim. At the
written request of the Company and upon payment to Executive of an
amount at least equal to the claim plus any additional amount necessary
to obtain the jurisdiction of the appropriate tribunal and/or court,
Executive shall pay the same to the appropriate taxing authority and
xxx for a refund. Executive agrees to prosecute in cooperation with the
Company any contest of a claim to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; provided,
however, that if the Company requests Executive to pay the claim and
xxx for a refund, the Company shall advance the full amount of such
payment to Executive, on an interest-free basis, and shall indemnify
and hold Executive harmless on an after-tax basis, from any Excise Tax
or income tax (including, without limitation, interest and penalties
thereon) imposed on such advance or for any imputed income on such
advance. Any extension of the statute of limitations relating to
assessment of any Excise Tax for the taxable year of Executive which is
the subject of the claim is to be limited solely to the claim.
Furthermore, the Company's control of the contest shall be limited to
issues for which a Gross-Up Payment would be payable hereunder.
Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other
taxing authority.
(iv) If, after the receipt by Executive of an amount advanced
by the Company pursuant to Subsection IV(e)(iii) above, Executive
receives from the taxing authority any refund of a claim or any
additional amount that was necessary to obtain jurisdiction, Executive
shall promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by Executive of an amount advanced by
the Company pursuant to Subsection IV(e)(iii) above, a determination is
made that Executive shall not be entitled to any refund of the claim,
and the Company does not notify Executive in writing of its intent to
contest such denial of refund of a claim prior to the expiration of
thirty (30) calendar days after such determination, then the portion of
such advance attributable to a claim shall be forgiven by the Company
and shall not be required to be repaid by Executive. The amount of such
advance attributable to a claim shall offset, to the extent thereof,
the amount of the underpayment required to be paid by the Company to
Executive.
(v) If, after the advance by the Company of an additional
amount necessary to obtain jurisdiction, there is a final determination
made by the taxing authority that Executive is not entitled to any
refund of such amount, or any portion thereof, then such advance shall
be repaid to the Company by Executive within thirty (30) calendar days
after Executive receives notice of such final determination. A final
determination shall occur when the period to contest or otherwise
appeal any decision by an administrative tribunal or court of initial
jurisdiction has been waived or the time for contesting or appealing
the same has expired.
(f) Legal Fees and Expenses. The Company shall pay to Executive all
reasonable legal fees and expenses as and when incurred by Executive in
connection with this Agreement, including all such fees and expenses, if any,
incurred in contesting or disputing any Termination or in seeking to obtain or
enforce any right, payment or benefit provided by this Agreement, regardless of
the outcome, unless, in the case of a legal action brought by or in the name of
Executive, a decision is rendered pursuant to Section XI, or in any other proper
legal proceeding, that such action was not brought by Executive in good faith.
(g) No Mitigation. Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Section IV by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section IV be reduced by any compensation earned by
Executive as the result of employment with another employer or by retirement or
other benefits received from whatever source after the Termination Date or
otherwise, except as specifically provided in this Section IV. The Company's
obligation to make payments to Executive provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action that
the Company or Employer may have against Executive or other parties.
V. Death and Disability Benefits
In the event of the death or Disability of Executive after a Change of
Control , Executive, or in the case of death, Executive's Beneficiaries (as
defined below in Subsection VI.(c)), shall receive the benefits to which
Executive or his Beneficiaries are entitled under this Agreement and any and all
retirement plans, pension plans, disability policies and other applicable plans,
programs, policies, agreements or arrangements of the Company.
VI. Successors; Binding Agreement
(a) Obligations of Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company is required to perform it. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled hereunder if Executive had terminated
employment for Good Reason following a Change of Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Termination Date. As used in this
Agreement, the term "Company" shall mean U S WEST, Inc., including any surviving
entity or successor to all or substantially all of its business and/or assets
and the parent of any such surviving entity or successor.
(b) Enforceable by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees (the "Beneficiaries"). In the event of the death of Executive while any
amount would still be payable hereunder if such death had not occurred, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's Beneficiaries.
(c) Employment. Except in the event of a Change of Control and,
thereafter, only as specifically set forth in this Agreement, nothing in this
Agreement shall be construed to: (i) limit in any way the right of the Company
or a Subsidiary to terminate Executive's employment at any time for any reason,
or for no reason; or (ii) be evidence of any agreement or understanding,
expressed or implied, that the Company or a Subsidiary will employ Executive in
any particular position, on any particular terms or at any particular rate of
remuneration.
VII. Confidential Information and Non-compete.
Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company, the Subsidiaries and their respective businesses, which shall have
been obtained during Executive's employment with the Employer and which shall
not be public knowledge (other than by acts by Executive or his representatives
in violation of this Agreement). After termination of Executive's employment
with the Company or any Employer within the Controlled Group, Executive shall
not, without prior written consent of the Company or the Employer, communicate
or divulge any such information, knowledge or data to anyone other than the
Company, the Employer or those designated by them. In no event shall an asserted
violation of this Section VII constitute a basis for deferring or withholding
any amounts otherwise payable to Executive under this Agreement.
Except as specifically set forth herein, the Executive agrees that for
a period of three years following the Termination date he will not (a) 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 (2%)
of the stock or equity of any corporation the capital stock of which is publicly
traded or (ii) two percent (2%) of the ownership interest of any limited
partnership or other entity) or otherwise, within the United States of America,
in any business which is competitive with the business of the Company, on the
Termination Date, or at any time during such three-year period, (b) solicit or
entice to endeavor to solicit or entice away from the Company or its
subsidiaries (or such successors) any person who was an officer, employee or
sales representative of the Company or its subsidiaries, either for his own
account or for any individual, firm or corporation, whether or not such person
would commit any breach of his or her contract of employment by reason of
leaving the service of the Company or its subsidiaries, and the Executive agrees
not to employ, directly or indirectly, any person who was an officer, employee
or sales representative of the Company or its subsidiaries or who by reason of
such position at any time is or may be likely to be in possession of any
confidential information or trade secrets relating to the business or products
of the Company or its subsidiaries, or (c) solicit or entice or endeavor to
solicit or entice away from the Company or its subsidiaries (or such successors)
any customer or prospective customer of the Company or its subsidiaries (or such
successors), either for his own account or for any individual, firm or
corporation. The Executive may submit a written request to the Board to reduce
the three year term of this non-competition obligation. The Board, by majority
vote, may grant the request, with or without modification, or deny the request,
in its sole and exclusive discretion.
VIII. Notice
All notices and communications, including, without limitation, any
Notice of Termination hereunder, shall be in writing and shall be given either
by hand delivery to the other party, by registered or certified mail, return
receipt requested, postage prepaid, or by overnight delivery service, addressed
as follows:
If to Executive:
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer and President
U S WEST, Inc.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
If to the Company:
U S WEST, Inc.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn.: Vice President - Law and Human Resources
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be deemed given
and effective when actually received by the addressee.
IX. Miscellaneous
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Executive and the Company's Chief Executive Officer or other authorized
officer designated by the Board or an appropriate committee of the Board. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any conditions or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware. All references to sections of the Code or the Exchange
Act shall be deemed also to refer to any successor provisions of such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of the
Company under Sections IV and V shall survive the expiration of the term of this
Agreement. The obligations of the Executive under Section VII shall survive the
expiration of the term of this agreement for their respective terms.
X. Validity
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
XI. Arbitration
Executive may agree in writing with the Company (in which case this
Article XI shall have effect but not otherwise) that any dispute that may arise
directly or indirectly in connection with this Agreement, Executive's employment
or the termination of Executive's employment, whether arising in contract,
statute, tort, fraud, misrepresentation, discrimination or other legal theory,
shall be resolved by arbitration in Denver, Colorado, under the applicable rules
and procedures of the AAA. The only legal claims between Executive and the
Company or any Subsidiary that would not be included in this agreement to
arbitration are claims by Executive for workers' compensation or unemployment
compensation benefits, claims for benefits under a Company or Subsidiary benefit
plan if the plan does not provide for arbitration of such disputes, and claims
by Executive that seek judicial relief in the form of specific performance of
the right to be paid until the Termination Date during the pendency of any
applicable dispute or controversy. If this Article XI is in effect, any claim
with respect to this Agreement, Executive's employment or the termination of
Executive's employment must be established by a preponderance of the evidence
submitted to an impartial arbitrator. A single arbitrator engaged in the
practice of law shall conduct any arbitration under the applicable rules and
procedures of the AAA. The arbitrator shall have the authority to order a
pre-hearing exchange of information by the parties including, without
limitation, production of requested documents, and examination by deposition of
parties and their authorized agents. If this Article XI is in effect, the
decision of the arbitrator: (i) shall be final and binding; (ii) shall be
rendered within ninety (90) days after the impanelment of the arbitrator; and
(iii) shall be kept confidential by the parties to such arbitration. The
arbitration award may be enforced in any court of competent jurisdiction. The
Federal Arbitration Act, 9 U.S.C. 1-15, not state law, shall govern the
arbitrability of all claims. Executive acknowledges that this Article XI shall
be applicable only in the event of a Change of Control and does not otherwise
supersede or modify any other agreement to arbitrate disputes in effect between
Executive and the Company.
If this Agreement sets forth the terms of our understanding on the
subject matter hereof, kindly sign both originals of this letter and return to
the Vice President - Law and Human Resources of the Company one of the fully
executed originals of this letter which will then constitute our Agreement on
this subject.
Sincerely,
U S WEST, Inc.
/s/ XXXXX XXXXXX
By:___________________________________
Xxxxx Xxxxxx
Chairman, Human Resources Committee of
the Board of Directors
/s/ XXXXXXX X. XXXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxxx
