Non-Qualified Stock Option Agreement - Qwest Communications International Inc. and Joseph P. Nacchio
NON-QUALIFIED STOCK OPTION AGREEMENT
This Option Agreement (the 'Agreement') is made as of the 13th day of August,
1999, between Qwest Communications International Inc., a Delaware corporation
(the 'Company'), and Joseph P. Nacchio (the 'Optionee').
WHEREAS, pursuant to the Qwest Communications International Inc. Equity
Incentive Plan, as amended and restated, effective June 1, 1998 (the 'Plan'),
the Company desires to afford the Optionee the opportunity to purchase shares
of Stock (the 'Common Shares').
NOW, THEREFORE, in connection with the mutual covenants hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: CONFLICTS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given thereto in the Plan. The terms and provisions of the Plan are
incorporated herein by reference. Except as specifically otherwise provided
herein, in the event of a conflict or inconsistency between the terms and
provisions of the Plan and the terms and provisions of this Agreement, the
terms and provisions of the Plan shall govern and control.
2. GRANT OF OPTIONS.
The Company hereby grants to the Optionee the right and option to purchase up
to (a) 8,500,000 Common Shares (the 'First Option'), on the terms and
conditions herein set forth, and (b) 500,000 Common Shares (the 'Second
Option'), on the terms and conditions set forth herein. The First Option and
the Second Option are collectively referred to as the 'Options.'
3. PURCHASE PRICE.
The purchase price of each Common Share covered by each Option shall be
$28.50 (the 'Purchase Price').
4. TERM OF OPTIONS.
The term of each Option shall be ten (10) years from the date hereof, subject
to earlier termination as provided in Section 6 hereof.
5. VESTING OF OPTIONS.
Each Option, subject to the terms, conditions and limitations contained
herein, shall vest and become fully exercisable with respect to all the
Common Shares on May 13, 2009, provided the Optionee has remained in
continuous employment with the Company from the date hereof through May 13,
2009. However, upon the closing of the merger contemplated by the Agreement
and Plan of Merger dated as of July 18, 1999, between the Company and U S
WEST, Inc. as amended as of the date hereof and as the same may be further
amended, restated or modified, between U S WEST, Inc., and the Company (the
'Transaction'), each Option shall vest and become exercisable in installments
as set forth in the table below, provided that (i) with respect to each such
installment, the Optionee has remained in continuous employment with the
Company from the date hereof through the date such installment is designated
to vest and (ii) the Second Option shall not vest and become exercisable, in
whole or in part, until the 30th consecutive trading day on which the
published closing price of the Common Shares shall be not less than $45 per
share for each of 30 consecutive trading days ending on or before the date
that is the second anniversary of the closing (the 'Closing') of the
Transaction (the 'Price Target') (it being understood that, effective on such
30th consecutive trading day on which the published closing price of the
Common Shares shall be not less than $45 per share (the 'Second Option
Effective Date') and subject to the other terms and conditions hereof, the
Second Option shall vest and become exercisable in accordance with the
vesting schedule below):
(a) with respect to the First Option:
Anniversary of Option Grant Cumulative Shares Vested
(b) with respect to the Second Option:
Anniversary of Option Grant Cumulative Shares Vested
If the Transaction closes and the Optionee's employment with the Company is
terminated by the Company after the closing of the Transaction for any reason
other than cause or if the Optionee terminates his employment for good reason
after the Closing, the Optionee shall vest in one-twelfth (1/12) of the
number of Common Shares covered by each Option that would otherwise vest on
the next anniversary of the date of the grant for each full month elapsed
from the immediately preceding anniversary date on which shares shall have
vested (or, if the date of termination shall occur before the first
from the date of the grant) to the date of termination, except that if Philip
F. Anschutz is not a director of the Company on the date of such termination
then the First Option shall vest in full and become immediately exercisable
on the date of such termination and the Second Option shall vest in full on
the Second Option Effective Date (if the same shall occur or have occurred on
or before the second anniversary of the date of the Closing). If, at any
time the number of Common Shares that are covered by the vested portion of
the Options includes a fractional share, the number of Common Shares as to
which the Options shall be actually vested shall be rounded down to the next
whole Common Share.
Notwithstanding the vesting schedule set forth above and the provisions of
the Plan governing the terms of the Options, (a) if the Optionee's employment
with the Company shall terminate before the Closing because of his death or
Disability, then the First Option shall vest in full and become exercisable
on the date of the Closing (if the Closing shall occur) and the Second Option
shall vest in full and become immediately exercisable on the Second Option
Effective Date (if the Second Option Effective Date shall occur or have
occurred on or before the second anniversary of the date of the Closing) and
(b) if the Optionee's employment with the Company shall terminate after the
Closing because of his death or Disability, the First Option shall vest in
full and become immediately exercisable on the date of his death or such
Disability termination and the Second Option shall vest in full and become
immediately exercisable on the later of the Second Option Effective Date (if
the Second Option Effective Date shall occur or have occurred on or before
the second anniversary of the date of the Closing) and his death or
Disability termination. For avoidance of doubt, if the Transaction does not
close, neither Option shall vest if the Optionee dies, is terminated as a
result of Disability or otherwise is terminated or ceases for any reason
whatsoever to be continuously employed by the Company prior to May 13, 2009.
6. TERMINATION OF EMPLOYMENT.
(a) Except as set forth in the Plan, in the event the Optionee's
employment with the Company is terminated for reasons other than due
to death, Disability or cause, each Option that shall be or become
exercisable shall be exercisable until the later of February 13, 2005
and the date that is 18 months after the date of termination. In the
event the Optionee's employment with the Company terminates by reason
of death or Disability before or after the Closing, each Option that
shall then be or become exercisable shall be exercisable until the
later of February 13, 2005 and the date that is 18 months after his
death or Disability termination. In the event the Optionee's
employment with the Company is terminated by the Company for cause,
each Option that shall then be exercisable shall be exercisable until
the date that is 6 months after the day following such termination.
Upon any cessation of the Optionee's employment with the Company for
any reason, including termination for cause, each Option shall lapse
as to any Common Shares for which it has yet to become exercisable as
of the date of cessation of employment, except to the extent (a) that
any Option shall become exercisable upon the death or Disability
termination of the Optionee as provided in this Agreement and (b)
expressly provided to the contrary in this Agreement.
(b) As used in this Agreement, the 'Company' shall include any Affiliated
Corporation of the Company.
(c) As used in this Agreement, 'cause,' 'good reason' and 'Disability
termination' shall have the same meanings as in the Optionee's
Employment Agreement dated December 21, 1996, as amended as of the
date hereof (the 'Employment Agreement').
7. CHANGE OF CONTROL.
(a) As used in this Agreement, 'change of control' shall have the meaning
set forth in the Plan. For avoidance of doubt, the Transaction shall
not constitute a change of control for purpose of the Options, and
only transactions consummated following the close of the Transaction
shall constitute a change of control for purposes of the Options.
(b) In the event there is both a change of control and a subsequent
termination of the Optionee's employment with the Company (i) by the
Company for reasons other than cause or (ii) by the Optionee for good
reason (provided that the occurrence of a change of control shall not
constitute good reason), in each case following a change of control,
the Options shall vest in full and become immediately exercisable on
the date of such termination, and shall remain vested and exercisable
during the remaining term thereof. The provisions of this Section 7
shall apply only if a change of control occurs following the closing
of the Transaction.
8. TRANSFERABILITY OF OPTION.
Except to the extent permitted by the Committee in accordance with the
provisions of the Plan, the Optionee may not voluntarily or involuntarily
pledge, hypothecate, assign, sell or otherwise transfer the Options except by
will or the laws of descent and distribution, and during the Optionee's
lifetime, the Options shall be exercisable only by the Optionee.
9. NO RIGHTS AS A STOCKHOLDER.
The Optionee shall have no rights as a stockholder with respect to any Common
Shares until the date of issuance to the Optionee of a certificate evidencing
such Common Shares. No adjustments, other than as provided in Article IV of
the Plan, shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions for which the record
date is prior to the date the certificate for such Common Shares is issued.
Subject to the foregoing, the terms of the Options (including the Price
Target of $45 per share for the Second Option) shall be adjusted in the event
of any stock split, stock dividend or other similar recapitalization.
10. REGISTRATION: GOVERNMENTAL APPROVAL.
Each Option granted hereunder is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing,
registration, or qualifications of Common Shares issuable upon exercise of
the Option is required by any securities exchange or under any state or
Federal law, rule or regulation, or the consent or approval of any
governmental regulatory body or other person is necessary or desirable as a
condition of, or in connection with, the issuance of Common Shares, no Common
Shares shall be issued, in whole or in part, unless such listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions or with such conditions as are acceptable to
11. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, each Option may be
exercised by written notice to the Company, Attention: Manager, Stock
Administration. Such notice shall state the election to exercise any Option
and the number of Common Shares in respect of which the Option is being
exercised, shall be signed by the person or persons so exercising the Option
and shall be accompanied by payment in full of the Purchase Price for such
Payment of such Purchase Price shall be made in United States dollars by
certified check or bank cashier's check payable to the order of the Company
or by wire transfer to such account as may be specified by the Company for
this purpose. Subject to such procedures and rules as may be adopted from
time to time by the Committee, the Optionee may also pay such Purchase Price
by (i) tendering to the Company Common Shares with an aggregate Fair Market
Value on the date of exercise equal to such Purchase Price provided that such
Common Shares must have been held by the Optionee for more than six (6)
months, (ii) delivery to the Company of a copy of irrevocable instructions to
a stockbroker to sell Common Shares or to authorize a loan from the
stockbroker to the Optionee and to deliver promptly to the Company an amount
sufficient to pay such Purchase Price, or (iii) any combination of the
methods of payment described in clauses (i) and (ii) and in the preceding
sentence. The certificate for Common Shares as to which the Option shall
have been so exercised shall be registered in the name of the person or
persons so exercising the Option. All Common Shares purchased upon the
exercise of any Option as provided herein shall be fully paid and
12. INCOME TAX WITHHOLDING.
The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all federal, state, local and
other taxes required by law to be withheld with respect to the exercise of
any Option and the issuance of the Common Shares, including, but not limited
to, deducting the amount of any such withholding taxes from any other amount
then or thereafter payable to the Optionee, or requiring the Optionee, or the
beneficiary or legal representative of the Optionee, to pay to the
Company the amount required to be withheld or to execute such documents as
the Company deems necessary or desirable to enable it to satisfy its
13. NON-QUALIFIED STOCK OPTION.
The Option granted hereunder is not intended to be an 'incentive stock
option' within the meaning of Section 422 of the Code.
14. BINDING EFFECT.
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
15. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the laws
of the State of Delaware.
Headings are for the convenience of the parties and are not deemed to be part
of this Agreement.
This Agreement is voidable by the Company if the Optionee does not execute
the Agreement within 30 days of execution by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first written above.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ Philip F. Anschutz
Philip F. Anschutz
Chairman of the Board
/s/ Joseph P. Nacchio
Joseph P. Nacchio