EXHIBIT 10Z
[FORM OF CHANGE OF CONTROL AGREEMENT FOR CHIEF EXECUTIVE OFFICER]
February 12, 1996
[Name]
Chairman, President and
Chief Executive Officer
U S WEST, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Dear [Name]:
U S WEST, Inc. (the "Company"), on behalf of itself, its subsidiaries
and its shareholders, 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(h)) of the
Company. The Board of Directors of the Company (the "Board") believes that the
prospect of a pending or threatened Change of Control inevitably creates
distractions and personal risks and uncertainties for its executives, and that
it is in the best interests of the Company to minimize such distractions to
certain executives and the Company. 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 of the Company.
In order to induce you (the "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 for any reason subsequent to a Change of Control of the Company.
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(w)).
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(b).
(f) BOARD. The meaning of this term is set forth in the first
paragraph of this Agreement.
(g) CAUSE. For purposes of this Agreement, "Cause" shall mean the
Executive's willfully breaching or failing to perform his employment duties.
For purposes of this Subsection I(g), no act, or failure to act, on the part of
the Executive shall be deemed "willful" unless done, or omitted to be done, by
the 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, the Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the 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 the Executive
and an opportunity for the Executive, together with the Executive's counsel, to
be heard before the Board), finding that in the good faith opinion of the Board,
the Executive has engaged in the conduct set forth in this Subsection I(g) and
specifying the particulars thereof in detail.
(h) 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) of the Exchange Act) is or becomes a "beneficial owner" (as
determined for purposes of Regulation 13D-G under the Exchange Act as
currently in effect), 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, unless
through a transaction consummated with the prior approval of the
Board;
(ii) during any period of two 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 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, cease for any
reason to constitute a majority of the Board;
(iii) the Company becomes a party to a merger, plan of
reorganization, consolidation or share exchange in which either (x)
the Company will not be the surviving corporation or (y) the
2
Company will be the surviving corporation and any outstanding shares
of the Company's common stock will be converted into shares of any
other company (other than a reincorporation or the establishment of a
holding company involving no change of ownership of the Company) or
other securities or cash or other property (excluding payments made
solely for fractional shares);
(iv) the shareholders of the Company approve a merger, plan of
reorganization, consolidation or share exchange with any other
corporation, and immediately following such merger, plan of
reorganization, consolidation or share exchange the holders of the
voting securities of the Company outstanding immediately prior thereto
hold securities representing fifty percent (50%) or less of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger, plan of
reorganization, consolidation or share exchange; provided, however,
that notwithstanding the foregoing, no Change of Control for purposes
of this Subsection I(h)(iv) shall be deemed to have occurred if one-
half (1/2) or more of the members of the Board of the Company or such
surviving entity immediately after such merger, plan of reorganization,
consolidation or share exchange is comprised of persons who served as
directors of the Company immediately prior to such merger, plan of
reorganization, consolidation or share exchange or who are otherwise
designees of the Company;
(v) the Company: (A) redeems all of the outstanding shares of
the U S WEST Communications Group Common Stock or the U S WEST Media
Group Common Stock in exchange for shares of one or more wholly-owned
subsidiaries of the Company that hold all or substantially all of the
assets that are attributed to that Group; (B) distributes to the
shareholders of U S WEST Communications Group or U S WEST Media Group
the shares of one or more wholly-owned subsidiaries that hold all or
substantially all of the assets attributed to that Group; (C) converts
all of the outstanding shares of U S WEST Communications Group Common
Stock into the shares of U S WEST Media Group Common Stock, or vice
versa; or (D) distributes the stock of one or more wholly-owned
subsidiaries holding all or substantially all of the assets of the
Company, under applicable law, at a time when there are no classes of
Common Stock that separately track the performance of certain Company
businesses; or
(vi) any other event that a majority of the Board, in its sole
discretion, shall determine constitutes a Change of Control.
(i) CODE. The meaning of this term is set forth in Subsection
IV(e)(i).
(j) COMPANY. The meaning of this term is set forth in the first
paragraph of this Agreement and Subsection VI(a).
(k) CONTROLLED GROUP. For purposes of this Agreement, "Controlled
Group" shall mean the Company and all of the Company's Subsidiaries.
(l) DISABILITY. For purposes of this Agreement, "Disability" shall
mean an illness, injury or similar incapacity which 52 weeks after its
commencement continues to render the Executive unable to perform the material
and substantial duties of the Executive's position or any occupation or
employment for which the Executive is qualified or may reasonably become
qualified by training, education or experience. Any question as to the
existence of a Disability upon which the Executive and the Company cannot agree
shall be determined by a qualified independent physician selected by the
Executive (or, if the Executive is unable to make such selection, by any adult
member of the Executive's immediate family or the Executive's legal
representative), and approved by the Company, such approval not to be
unreasonably withheld. The
3
determination of such physician made in writing to the Company, and to the
Executive, shall be final and conclusive for all purposes of this Agreement.
(m) EMPLOYER. For purposes of this Agreement, "Employer" shall mean
the Company or the Subsidiary, as the case may be, with which the Executive has
an employment relationship.
(n) EXCHANGE ACT. This term shall have the meaning set forth in
Subsection I(g).
(o) EXECUTIVE. This term shall have the meaning set forth in the
third paragraph of this Agreement.
(p) EXCISE TAX. This term shall have the meaning set forth in
Subsection IV(e)(i).
(q) GOOD REASON. For purposes of this Agreement, "Good Reason" shall
mean the occurrence, without the Executive's express written consent, of any of
the following circumstances:
(i) The assignment to the Executive of any duties inconsistent
with, or any substantial diminution in, such Executive's status or
responsibilities as in effect immediately prior to a Change of Control
of the Company, including imposition of travel obligations which
differ materially from required business travel immediately prior to
the Change of Control;
(ii) Any diminution in the status or responsibilities of the
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 the 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 the Executive is otherwise entitled under
any short-term incentive plan in which the Executive participates, the
U S WEST Executive Long-Term Incentive Plan, or any successor
incentive compensation plans at the time such awards are usually paid;
(iv) A change in the principal place of the Executive's
employment, as in effect immediately prior to the Change of Control of
the Company, to a location more than thirty-five (35) miles distant
from the location of such principal place at such time;
(v) The failure by the Company to continue in effect any
incentive compensation plan or stock option plan in which the
Executive participates immediately prior to the Change of Control,
unless an equivalent alternative compensation arrangement (embodied in
an ongoing substitute or alternative plan) has been provided to the
Executive, or the failure by the Company to continue the Executive's
participation in any such incentive or stock option plan on
substantially the same basis, both in terms of the amount of benefits
provided and the level of the 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 the Executive benefits substantially
equivalent, in the aggregate, to those enjoyed by the Executive under
the qualified and non-qualified employee benefit and welfare plans of
the Company, including, without limitation, any pension, life
insurance, medical, dental, health and accident, disability,
retirement or savings plans in which the Executive was eligible to
participate immediately prior to the Change of Control; (B) the taking
of any action by the Company which
4
would directly or indirectly materially reduce or deprive the
Executive of any other perquisite enjoyed by the Executive immediately
prior to the Change of Control (including Company-paid and/or
reimbursed club memberships, financial counseling fees and the like);
or (C) the failure by the Company or its successor to treat the
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 or any successor to obtain a
satisfactory written agreement from any successor to assume and agree
to perform this Agreement, as contemplated in Subsection VI(a); or
(viii) Any purported termination of the 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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(r) GROSS-UP PAYMENT. The meaning of this term is set forth in
Subsection IV(e)(i).
(s) NOTICE OF TERMINATION. The meaning of this term is set forth in
Subsection III(b).
(t) OTHER PAYMENTS. The meaning of this term is set forth in
Subsection IV(e)(i).
(u) PAYMENTS. The meaning of this term is set forth in Subsection
IV(e)(i).
(v) RETIREMENT. For purposes of this Agreement, "Retirement" shall
mean the 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 arrangement established with the Executive's consent
with respect to the Executive.
(w) SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall
mean any corporation of which more than fifty percent (50%) of the voting stock
is owned directly or indirectly by the Company.
(x) TAX COUNSEL. The meaning of this term is set forth in Subsection
IV(e)(ii).
(y) TERMINATION. The meaning of this term is set forth in Subsection
III(a).
(z) TERMINATION DATE. For purposes of this Agreement, "Termination
Date" shall mean the date that is thirty (30) days following the date that a
Notice of Termination is given by either party to this Agreement, provided,
however, that following a Change of Control within the meaning of Subsection
I(h)(v), "Termination Date" shall mean:
(i) If the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the full-time performance of
his duties during such thirty-day period); and
5
(ii) If the 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) days and in
the case of a termination for Good Reason shall not be less than
thirty (30) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
II. TERM OF AGREEMENT
(a) GENERAL. Upon execution by the Executive, this Agreement shall
commence as of February 12, 1996. This Agreement shall continue in effect
through December 31, 1999; provided, however, that commencing on January 1,
2000, and every third January 1 thereafter, the term of this Agreement shall
automatically be extended for three additional years unless, not later than
ninety days prior to the January 1 on which this Agreement would otherwise
automatically be extended, the Company shall have given notice 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 months beyond the month in which the Change of Control occurred.
(b) DISPOSITION OF EMPLOYER. In the event the Executive is employed
by a Subsidiary, the terms of this Agreement shall expire if such Subsidiary is
sold or otherwise disposed of prior to a Change of Control unless the Executive
continues in employment with the Controlled Group after such sale or other
disposition. If the Executive's Employer is sold or disposed of following a
Change of Control, this Agreement shall continue through its original term or
any extended term then in effect.
(c) DEEMED CHANGE OF CONTROL. If the Executive's employment with the
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 was otherwise caused by 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 (other than a
Change of Control within the meaning of Subsection I(h)(v)) of the Company shall
have occurred, the 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 three years after the date of the Change of
Control. If a Change of Control within the meaning of Subsection I(h)(v) shall
have occurred, the Executive shall be entitled to the benefits provided in
Section IV hereof upon the subsequent termination of his employment with the
Company within three years after the date of the Change of Control unless such
termination is (i) a result of the Executive's death or Retirement, (ii) for
Cause, (iii) a result of the Executive's Disability, or (iv) by the Executive
other than for Good Reason. A termination of the Executive's employment that
entitles the Executive to the payment of benefits under Section IV hereof shall
be referred to hereinafter as a "Termination."
6
(b) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Company or by the 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 notice form a party to this Agreement that purports to terminate the
Executive's employment, unless such notice follows a Change of Control solely
within the meaning of Subsection I(h)(v), in which case a "Notice of
Termination" shall mean a notice that shall indicate the specific provision of
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
Once a Notice of Termination is given (other than following a Change
of Control solely within the meaning of Subsection I(h)(v)), the Company shall
pay the Executive his full base salary through the Termination Date at the rate
in effect at the time Notice of Termination is given and shall pay any amounts
to be paid to the Executive pursuant to any other compensation plans, programs
or employment agreements then in effect. If, following a Change of Control
solely within the meaning of Subsection I(h)(v), the Executive's employment
shall be terminated for Cause or by the Executive for other than Good Reason,
the Company shall pay the Executive his full base salary through the Termination
Date at the rate in effect at the time Notice of Termination is given and shall
pay any amounts to be paid to the Executive pursuant to any other compensation
plans, programs or employment agreements then in effect, and the Company shall
have no further obligations to the Executive under this Agreement.
If within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice 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(z), 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 the Executive his
full compensation in effect when the notice giving rise to the dispute was
given, and continue the Executive as a participant in all benefits plans or
perquisites in which the 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 all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
IV. COMPENSATION UPON A TERMINATION
Following a Change of Control of the Company, upon a Termination of
the Executive's employment, the Executive shall be entitled to the following
benefits, provided that the Termination occurs during the three-year period
immediately following the date of the Change of Control:
(a) STANDARD BENEFITS. The Company shall pay the Executive his full
base salary through the Termination Date at the rate in effect at the time the
Notice of Termination is given, no later than the second day following the
Termination Date, plus all other amounts to which the Executive is entitled
under any compensation plan of the Company applicable to the Executive at the
time such payments are due. Without limitation, amounts payable pursuant to
this Subsection IV(a) shall include, pursuant to the express terms of the
short-term incentive plan in which the Executive participates or otherwise, the
Executive's annual bonus under such short-term incentive plan, pro-rated to the
Termination Date.
7
(b) ADDITIONAL BENEFITS. The Company shall pay to the 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 the 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) the Executive's annual base salary rate
in effect immediately prior to the Termination Date and (y) the Executive's
annual bonus amount under the short-term incentive plan in which the 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 100% unless the performance actually achieved is greater than 100%, in which
case the actual performance levels shall be utilized. The Company shall pay to
the Executive the Additional Pay in a lump sum, in cash, not later than the
fifteenth day following the Termination Date.
(c) RETIREMENT PLAN BENEFITS. If not already vested, the Executive
shall be deemed fully vested in all Company retirement plans and/or other
written agreements relating to pay upon retirement in which the Executive was a
participant, party or beneficiary immediately preceding a Change of Control, and
any additional plans and/or agreements 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 the Executive under such plans
and/or agreements, the years of service with the Company and the age of the
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
the Executive sixty-five (65) years of age. For purposes of this Subsection
IV(c), "plans" include, without limitation, the Company's qualified pension
plan, non-qualified and mid-career retirement plans, and "agreements" encompass
the terms of any offer letters leading to the Executive's employment with the
Company where the Executive was a signatory thereto and any written amendments
to the foregoing. In the event that the terms of the plans referenced in this
Subsection IV(c) do not for any reason (e.g., if plan amendments would cause
disqualification of qualified plans) coincide with the provisions of this
Subsection IV(c), the Executive shall be entitled to receive from the Company
under the terms of this Agreement an amount equivalent to all amounts he would
have received 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 BENEFITS. Following the Termination Date, the Company
shall continue to provide health, vision and dental benefits to the Executive
and the Executive's eligible dependents on terms substantially equivalent to
those on which the Company provides such benefits to retired employees who were
service pension-eligible at the time of the Change of Control and whose
retirement date most closely approximates the date of the Change of Control.
The eligibility of the Executive's dependents shall be determined by the terms
of the health, vision and dental benefit plans in effect immediately prior to
the Change of Control.
(e) GROSS-UP PAYMENTS.
(i) In the event that any payment or the value of any benefit
received or to be received by the Executive in connection with the
Executive's Termination or contingent upon a Change of Control of the
Company (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 of the Company or any
person affiliated with any of them (or which, as a result of the
completion of the transactions causing a Change of Control, will
become affiliated with any of them) ("Other Payments" and,
8
together with the Agreement Payments, the "Payments")) would be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any comparable
federal, state or local excise tax (such excise 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 the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of
the Excise Tax on Agreement Payments and Other Payments and any
federal, state and local income tax and Excise Tax upon the payment
provided for by this Subsection IV(e)(i), and any interest, penalties
or additions to tax payable by the 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
intent of the parties is that the Company shall be solely responsible
for and shall pay, any Excise Tax on any Payments and Gross-Up Payment
and any income and employment taxes (including, without limitation,
penalties and interest) imposed on any Gross-Up Payments as well as
any loss of deduction caused by the Gross-Up Payment.
(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, shall
be made by tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"). The Company shall cause
the Tax Counsel to provide detailed supporting calculations to the
Company and the Executive within fifteen (15) business days after
notice is given by the 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 Counsel to timely
provide the data required by this Subsection IV(e) to the Executive.
All fees and expenses of the Tax Counsel shall be paid solely 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
and/or other appropriate taxing authority on the Executive's behalf
within five (5) days after receipt of the Tax Counsel's determination.
If the Tax Counsel determines that there is substantial authority
(within the meaning of Section 6662 of the Code) that no Excise Tax is
payable by the Executive, the Tax Counsel shall furnish the Executive
with a written opinion that failure to disclose or report the Excise
Tax on the 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 similar penalty. Any determination
by the Tax Counsel shall be binding upon the Company and the 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 the initial determination by the Tax Counsel hereunder, it is
possible that Gross-Up Payments will not have been made by the
Corporation 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 the Executive is thereafter required to make a payment of any
Excise Tax, the Tax Counsel shall determine the amount of underpayment
of Excise Taxes that has occurred and any such underpayment shall be
promptly paid by the Company to the Internal Revenue Service or other
appropriate taxing authority on the Executive's behalf or, if such
underpayment has been previously paid by the Executive, to the
Executive. In the event that the Tax Counsel determines that an
overpayment of Gross-Up Payments has occurred, any such overpayment
shall be treated for all purposes as a loan to the Executive with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code, due and payable within ninety (90) days after
written demand to the Executive by the Company; provided, however,
that the Executive shall have no duty or obligation whatsoever to
repay such loan unless the Executive's receipt of the overpayment, or
any portion
9
thereof, is includible in the Executive's income and the Executive's
repayment of the same is not deductible by the Executive for federal
and state income tax purposes.
(iii) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or state or local taxing
authority, that, if successful, would result in any Excise Tax or an
underpayment of Gross-Up Payments. Such notice shall be given as soon
as practicable but no later than fifteen (15) business days after the
Executive is informed in writing of the claim and shall inform 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. The Executive shall not pay any portion of the claim prior to
the expiration of the thirty (30) day period following the date on
which the 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 the Executive in writing prior to the expiration
of such thirty (30) day period that it desires to contest the claim,
the 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 the 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 the 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 appeal, proceedings, hearings and conferences with
the taxing authority pertaining to the claim. At the written
request of the Company and upon payment to the 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, the Executive shall pay the same and xxx for a
refund. The Executive agrees to prosecute 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 the Executive to pay the claim and xxx for a
refund, the Company shall advance the amount of such payment to
the Executive, on an interest-free basis, and shall indemnify and
hold the 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 the 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. The 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.
10
(iv) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Subsection IV(e)(iii) above, the Executive
receives any refund of a claim and/or any additional amount that was
necessary to obtain jurisdiction, the 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 the Executive of an amount advanced by the Company pursuant
to Subsection IV(e)(iii) above, a determination is made that the
Executive shall not be entitled to any refund of the claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund of a claim prior to the expiration of
thirty (30) days after such determination, then the portion of such
advance attributable to a claim shall be forgiven and shall not be
required to be repaid. 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 the 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 the Executive is not entitled to any
refund of such amount, or any portion thereof, then such nonrefundable
amount shall be repaid to the Company by the Executive within thirty
(30) days after the 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 the Executive
all legal fees and expenses as and when incurred by the 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 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 the Executive, a
decision is rendered pursuant to Section X that such action was not brought by
the Executive in good faith.
(g) NO MITIGATION. The Executive shall not be required to mitigate
the amount of any payment 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 the Executive as
the result of employment by another employer or by retirement or other benefits
received after the Termination Date or otherwise, except as specifically
provided in this Section IV. The Company's obligation to make payments 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 which the Company or Employer may have against the
Executive or other parties.
V. DEATH AND DISABILITY BENEFITS
In the event of the death or Disability of the Executive after a
Change of Control of the Company, the Executive, or in the case of death, the
Executive's beneficiaries, shall receive the benefits to which they are entitled
under the retirement plans, disability policies and other applicable plans or
agreements 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
11
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive had terminated his employment following a Change of
Control of the Company, 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 "Company" shall mean the
Company as hereinabove defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) ENFORCEABLE BY BENEFICIARIES. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees (the "Beneficiaries"). In the event of the death of the
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 the 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 the 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 the Executive
in any particular position, on any particular terms or at any particular rate of
remuneration.
VII. CONFIDENTIAL INFORMATION.
The Executive shall hold in 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 the Executive's employment by the Employer and which shall
not be public knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). After termination of the
Executive's employment with the Company or any Employer within the Controlled
Group, the 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 the Executive under
this Agreement.
VIII. NOTICE
All notices and communications hereunder shall be in writing and shall
be given by hand delivery to the other party, by registered or certified mail,
return receipt requested, postage prepaid, or by overnight mail, addressed as
follows:
If to the Executive:
[Name]
Chairman, President and Chief Executive Officer
U S WEST, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
12
If to the Company:
U S WEST, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, 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. Notice and communications shall be 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 the Executive and the Chairman of the Human Resources Committee of the Board
of Directors. 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 Colorado. 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.
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
The 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, the Executive's
employment or the termination of the Executive's employment, whether arising in
contract, statute, tort, fraud, misrepresentation, or other legal theory, shall
be determined solely by arbitration in Denver, Colorado under the rules of the
AAA. The only legal claims between the Executive, on the one hand, and the
Company or any Subsidiary, on the other, that would not be included in this
agreement to arbitration are claims by the 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 the 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 dispute or controversy arising under or Subsection III(b).
If this Article XI is in effect, any claim with respect to this Agreement, the
Executive's employment or the termination of the Executive's employment must be
established by a preponderance of the evidence submitted to the impartial
arbitrator. A single arbitrator engaged in the practice of law shall conduct
any arbitration under the then current procedures of the American Arbitration
Association (the "AAA") and under the AAA's then current Model Employment
Arbitration Rules. The arbitrator shall have the authority to order a
pre-hearing exchange of information by
13
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.
If this letter sets forth our agreement 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.
By:___________________________________
Chairman, Human Resources Committee of
the Board of Directors
______________________________________
[Name of Chief Executive Officer]
14
