UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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☐ | Soliciting Material under §240.14a-12 | |||
CENTURYLINK, INC. | ||||
(Name of registrant as specified in its charter) | ||||
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Preliminary Proxy Materials
dated March 25, 2019;
Subject to Completion
2019 Annual Report and 2019 Proxy Statement
All references in this proxy statement or related materials to we, us, our, the Company or CenturyLink refer to CenturyLink, Inc. In addition, each reference to (i) the Board refers to our Board of Directors, (ii) Voting Shares refers collectively to our shares of Common Stock (Common Shares) and shares of Series L Preferred Stock (Preferred Shares), (iii) our executives or executive officers refers to our four executive officers listed in the table on page 7 of this proxy statement, (iv) meeting refers to the 2019 annual meeting of our shareholders described further herein, (v) named executives, named officers, named executive officers or NEOs refers to the seven current or former executive officers listed in the Summary Compensation Table appearing on page 71 of this proxy statement, (vi) senior officers refers to our executive officers and a limited number of additional officers whose compensation is determined by the Human Resources and Compensation Committee of our Board, (vii) Embarq refers to Embarq Corporation, which we acquired on July 1, 2009, (viii) Qwest refers to Qwest Communications International Inc., which we acquired on April 1, 2011, (ix) Level 3 refers to Level 3 Communications, Inc., prior to the Level 3 Combination on November 1, 2017, and to its successor-in-interest Level 3 Parent, LLC thereafter, (x) Level 3 Combination refers to our business combination with Level 3, which was publicly announced on October 31, 2016 and consummated on November 1, 2017 (which we from time to time refer to as the Closing or Closing Date), and (xi) the SEC refers to the U.S. Securities and Exchange Commission. Unless otherwise provided, all information is presented as of the date of this proxy statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 22, 2019
This proxy statement and related materials are
available at www.proxyvote.com.
Forward-Looking Statements
Except for historical and factual information contained herein, matters set forth in our 2019 proxy materials identified by words such as expects, believes, will and similar expressions are forward-looking statements as defined by the federal securities laws, and are subject to the safe harbor protection thereunder. These forward-looking statements are not guarantees of future results and are based on current expectations only, and are subject to uncertainties. Actual events and results may differ materially from those anticipated by us in those statements due to several factors, including those disclosed in our other filings with the SEC. We may change our intentions or plans discussed in our forward-looking statements without notice at any time and for any reason.
Notice of 2019 Annual Meeting
of Shareholders
TIME AND DATE 10:00 a.m. local time May 22, 2019 |
PLACE CenturyLink Auditorium CenturyLink Headquarters 100 CenturyLink Drive Monroe, Louisiana |
ITEMS OF BUSINESS
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(1)
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Elect as directors the 13 nominees named in the accompanying proxy statement
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(2)
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Ratify the appointment of KPMG LLP as our independent auditor for 2019
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(3)
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Amend our Articles of Incorporation to increase our authorized shares of common stock
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(4)
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Ratify our NOL Rights Plan described herein
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(5)
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Conduct a non-binding advisory vote to approve our executive compensation
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(6)
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Act upon a shareholder proposal regarding our lobbying activities, if properly presented at the meeting
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(7)
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Transact such other business as may properly come before the meeting and any adjournment
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RECORD DATE You can vote if you were a shareholder of record at the close of business on March 28, 2019.
PROXY VOTING Shareholders are invited to attend the meeting in person. Even if you expect to attend, we urge you to vote in advance using any of the methods listed below.
Stacey W. Goff
Secretary
April 10, 2019
YOUR VOTE IS IMPORTANT TO US. WE URGE YOUR PARTICIPATION.
Using the voting instructions provided in your proxy materials, you may vote one of the following ways:
By Internet: visit www.proxyvote.com |
By Phone: call 1-800-690-6903 |
By Mail: mark, sign, date and return proxy card |
In Person: attend Annual Meeting |
(Item 1 on Proxy or Voting Instructions Card)
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.
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Director Qualifications
Director Skills and Experience |
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Executive Management/ Operational Management |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||
Industry Experience |
● | ● | ● | ● | ● | ● | ||||||||||||||||||||
Accounting/Finance |
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Risk Management |
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Global |
● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||
Cybersecurity |
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Government Relations/ Legal and Regulatory/Public Policy |
● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||
Strategic Planning/Transformation |
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Customer Experience/Sales |
● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||
Environmental, Sustainability and Corporate Responsibility |
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Human Resources/ Talent Management |
● | ● | ● | ● | ● | ● | ||||||||||||||||||||
Corporate Governance/ Other Board Experience |
● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
2019 Proxy Statement | 1 |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
Director Nominees
2 | 2019 Proxy Statement |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
2019 Proxy Statement | 3 |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
4 | 2019 Proxy Statement |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
2019 Proxy Statement | 5 |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
6 | 2019 Proxy Statement |
ELECTION OF DIRECTORS
(Item 1 on Proxy or Voting Instructions Card)
Executive Officers Who Are Not Directors
Listed below is information on each of our executive officers who are not directors. Unless otherwise indicated, each person has been engaged in the principal occupation shown for more than the past five years.
2019 Proxy Statement | 7 |
CORPORATE GOVERNANCE
Shareholder Engagement
Communicating with Your Board
If you would like to provide feedback to the Board, you may contact either our Chairman, lead independent director or any other director by writing a letter addressed specifically to them, c/o Post Office Box 5061, Monroe, Louisiana 71211, or by sending an email to boardinquiries@centurylink.com.
Boards Role in Setting Strategy
10 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Oversight of Risk Management
Role of the Committees. Each of our Board committees oversees the management of risks that fall within that committees areas of responsibility and assist the Board in fulfilling its oversight responsibilities with respect to certain recurring risks, as described below:
Committee Oversight Responsibilities
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Risk and Security Committee
◾ Assists the Board in fulfilling its oversight responsibilities with respect to, among others:
◾ risks posed by cyberattacks or other casualty events (Quarterly Topic)
◾ risks related to network reliability, privacy and regulations
◾ other key enterprise or operational risks as jointly determined by the Committee and management
◾ Oversees our classified activities and facilities through a subcommittee
◾ Oversees our corporate compliance and enterprise risk management programs and activities
◾ Receives periodic reports on various risk exposures, including quarterly reports on cybersecurity, which typically include reports on recent cyber intrusions, mitigation steps taken in response to those intrusions, and ongoing cybersecurity initiatives
◾ Coordinates risk oversight functions of other Board committees
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Audit Committee
◾ Responsible for reviewing and discussing with management, our internal auditors and our independent auditors our major financial risks, including matters potentially impacting financial reporting
◾ Assists the Board in fulfilling its oversight responsibilities relating to the adequacy and effectiveness of our (i) internal control over financial reporting, (ii) our internal controls regarding information technology security and (iii) our disclosure controls and procedures |
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Finance Committee
◾ Assists the Board in fulfilling its oversight responsibilities with respect to the management of our financial resources and capital structure, including our (i) capital requirements, (ii) capital allocation plans, (iii) benefit plan funding and (iv) hedging strategies
◾ Provides guidance, as needed, regarding capital markets transactions |
Human Resources and Compensation Committee
◾ Responsible for overseeing the assessment of whether our compensation policies and practices are likely to expose us to material risks
◾ Responsible, in consultation with management, for overseeing our compliance with regulations governing executive and director compensation
◾ Oversees our labor relations risks
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Nominating and Corporate Governance Committee
◾ Assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with the companys Board leadership structure and corporate governance matters. |
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For additional information on these committees, see Committees of the Board.
Role of Third Parties. From time to time, we retain third party firms to assist the Board in various capacities, including risk assessment. Over the past three years, we retained two different firms to conduct detailed reviews of our cybersecurity programs. These reviews were discussed with our directors and enabled us to further strengthen our cybersecurity programs. We also periodically retain consultants to assess with our Board the risks of our current or proposed business strategies.
12 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Committees of the Board
During 2018, we took a number of steps to reinvigorate our Board committee functions, including (i) refreshing committee composition to gain new perspectives, (ii) expanding or revising the duties of certain committees, particularly with respect to re-allocating various risk oversight responsibilities and (iii) renaming certain committees to reflect these changes. The table below lists the Boards standing committees and their membership as of the date of this proxy statement:
Director |
Audit Committee Member |
Human Resources and Compensation Committee Member |
Nominating and Corporate Governance Committee Member |
Risk and Security Committee(1) Member |
Finance Committee(2) Member | |||||
Martha H. Bejar |
ü | ü | ||||||||
Virginia Boulet |
ü | Chair | ||||||||
Peter C. Brown(3) |
ü | Chair | ||||||||
Kevin P. Chilton(4) |
ü | Chair | ||||||||
Steven T. Clontz(5) |
ü | ü | ||||||||
T. Michael Glenn(6) |
ü | ü | ||||||||
W. Bruce Hanks |
Chair | ü | ||||||||
Mary L. Landrieu |
ü | ü | ||||||||
Harvey P. Perry(7) |
ü | ü | ||||||||
Glen F. Post, III(8) |
ü | ü | ||||||||
Michael J. Roberts |
ü | ü | ||||||||
Laurie A. Siegel(9) |
Chair | ü | ||||||||
Jeffrey K. Storey(10) |
ü | |||||||||
(1) | Formerly named the Risk Evaluation Committee. |
(2) | Formerly named the Pricing Committee. |
(3) | Peter C. Brown became the chair of the Finance Committee on May 23, 2018. |
(4) | Kevin P. Chilton became the chair of the Risk and Security Committee on May 23, 2018. |
(5) | Steven T. Clontz joined the Human Resources and Compensation Committee on May 23, 2018. |
(6) | T. Michael Glenn joined the Audit Committee on May 23, 2018. |
(7) | Harvey P. Perry joined the Finance Committee on May 23, 2018. |
(8) | Glen F. Post, III joined the Risk and Security Committee on May 23, 2018. |
(9) | Laurie A. Siegel joined the Nominating and Corporate Governance Committee on May 23, 2018. |
(10) | Jeffrey K. Storey joined the Risk and Security Committee on May 23, 2018. |
14 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Committees of the Board
2019 Proxy Statement | 15 |
CORPORATE GOVERNANCE
Stock Ownership Guidelines
16 | 2019 Proxy Statement |
CORPORATE GOVERNANCE
Corporate Social Responsibility
Social and Environmental Highlights | ||
Diversity and Inclusion |
◾ Maintain a Diversity & Inclusion Steering Committee to shape and drive our overall diversity strategy ◾ Embrace diversity and create a culture of inclusion ◾ Implement proactive policies to encourage diversity in our recruiting and outreach initiatives ◾ Include supplier diversity as part of our overall program ◾ Pursue and evaluate diversity starting at the Board level; four of our 13 Directors are female, representing 31% of our Board | |
Community Involvement |
◾ Strengthen the communities we serve through philanthropy, volunteerism and support of local community initiatives ◾ Encourage employee volunteerism with added support through the Matching Time Grants program ◾ Provide employees with a method for continual giving to charities they support ◾ Offer teachers and technology grants to pre-K to 12th grade teachers within our service areas, in support of STEM education ◾ Unite around our annual food drive to fight hunger as an issue critical to our communities | |
Ethics and Compliance |
◾ Maintain a CenturyLink Code of Conduct that lays the foundation for our ethics and compliance program ◾ Create and maintain through training an ethical business culture based on our unifying principles ◾ Maintain a 24/7 Integrity Line with a firm no-retaliation policy ◾ Focus on human rights throughout our global locations ◾ Train and reinforce anti-bribery and fair competition principles; require all employees to adhere to all applicable anti-bribery and anti-corruption legislation worldwide | |
Environmental Sustainability |
◾ Strive to build and operate energy-efficient networks and data centers ◾ Pursue sustainability initiatives that reduce energy, waste and materials consumption ◾ Engage our employees and suppliers in our sustainability efforts ◾ Establish and maintain sustainability metrics to measure and report on the results of our efforts |
2019 Proxy Statement | 17 |
CORPORATE GOVERNANCE
Corporate Social Responsibility
18 | 2019 Proxy Statement |
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITOR
(Item 2 on Proxy or Voting Instruction Card)
The following table lists the aggregate fees and costs billed to us by KPMG and its affiliates for the 2017 and 2018 services identified below:
Amount Billed | ||||||||
2017 | 2018 | |||||||
Audit Fees(1) |
$ | 12,245,495 | $ | 15,229,014 | ||||
Audit-Related Fees(2) |
207,554 | 106,528 | ||||||
Tax Fees(3) |
2,121,869 | 1,318,798 | ||||||
Other |
| | ||||||
Total Fees |
$ | 14,574,918 | $ | 16,654,340 |
(1) | Includes the cost of services rendered in connection with (i) auditing our annual consolidated financial statements, (ii) auditing our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, (iii) reviewing our quarterly financial statements, (iv) auditing the financial statements of several of our subsidiaries, (v) reviewing our registration statements and issuing related comfort letters, (vi) statutory audits for certain of our foreign subsidiaries, and (vii) consultations regarding accounting standards. Additionally, the amounts billed in 2017 (i) include $702,000 for services rendered in connection with auditing separate carve-out financial statements related to divestiture-related transactions and (ii) exclude $3,515,000 of fees paid to KPMG by Level 3 prior to its acquisition by CenturyLink. |
(2) | Includes the cost of preparing agreed upon procedures reports and providing general accounting consulting services. Amounts billed in 2017 exclude $172,000 of fees paid to KPMG by Level 3 prior to its acquisition by CenturyLink. |
(3) | Includes costs associated with (i) general tax planning, consultation and compliance (which were approximately $900,000 in 2017 and $1,300,000 in 2018) and (ii) tax planning and consultation related to transactions and divestitures (which were approximately $1,200,000 in 2017). |
2019 Proxy Statement | 19 |
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITOR
(Item 2 on Proxy or Voting Instruction Card)
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
|
20 | 2019 Proxy Statement |
AUDIT COMMITTEE REPORT
Submitted by the Audit Committee of the Board of Directors.
W. Bruce Hanks (Chair)
Martha H. Bejar
Peter C. Brown
Kevin P. Chilton
T. Michael Glenn
22 | 2019 Proxy Statement |
PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
Effects
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
|
24 | 2019 Proxy Statement |
RATIFICATION OF THE NOL RIGHTS PLAN
Description of the NOL Rights Plan
26 | 2019 Proxy Statement |
RATIFICATION OF THE NOL RIGHTS PLAN
Description of the NOL Rights Plan
Certain Factors Shareholders Should Consider
2019 Proxy Statement | 27 |
RATIFICATION OF THE NOL RIGHTS PLAN
Certain Factors Shareholders Should Consider
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
|
28 | 2019 Proxy Statement |
The following table sets forth information regarding ownership of our Common Shares by the persons known to us to have beneficially owned more than 5% of the outstanding Common Shares on December 31, 2018 (the investors), unless otherwise noted.
Name and Address |
Amount and Nature of Beneficial Ownership of Common Shares(1) |
Percent of Outstanding Common Shares(1) | ||||
Temasek Holdings (Private) Limited 60B Orchard Road #06-18 Tower 2 Singapore 238891 |
107,201,207 | (2) | 9.9% | |||
The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
106,032,787 | (3) | 9.8% | |||
Blackrock, Inc. 55 East 52nd Street New York, New York 10055 |
86,713,858 | (4) | 8.0% | |||
Southeastern Asset Management, Inc. 6410 Poplar Avenue, Suite 900 Memphis, Tennessee 38119 |
67,403,179 | (5) | 6.2% |
(1) | The figures and percentages in the table above have been determined in accordance with Rule 13d-3 of the SEC based upon information furnished by the investors, except that we have calculated the percentages in the table based on the actual number of Common Shares outstanding on the dates as to which the investors have reported their holdings (as noted in notes 2 through 5), as opposed to the estimated percentages set forth in the reports of such investors referred to below in such notes. In addition to Common Shares, we have outstanding Preferred Shares that vote together with the Common Shares as a single class on all matters. One or more persons beneficially own more than 5% of the Preferred Shares; however, the percentage of total voting power held by such persons is immaterial. For additional information regarding the Preferred Shares, see Frequently Asked QuestionsHow many votes may I cast? |
(2) | Based on information contained in a Schedule 13D/A Report dated as of January 18, 2019 that this investor filed with the SEC. In this report, the investor indicated that, as of January 17, 2019, it shared with two of its subsidiaries voting power and dispositive power with respect to all of the above-listed shares. |
(3) | Based on information contained in a Schedule 13G/A Report dated as of February 11, 2019 that this investor filed with the SEC. In this report, the investor indicated that, as of December 31, 2018, it (i) held sole voting power with respect to 1,107,697 of these shares, (ii) shared voting power with respect to 207,398 of these shares, (iii) held sole dispositive power with respect to 104,739,697 of these shares and (iv) shared dispositive power with respect to 1,293,090 of the above-listed shares. |
(4) | Based on information contained in a Schedule 13G/A Report dated as of February 4, 2019 that this investor filed with the SEC. In this report, the investor indicated that, as of December 31, 2018, it held sole voting power with respect to 78,032,530 of these shares and sole dispositive power with respect to all of the above-listed shares. |
(5) | Based on information contained in a Schedule 13D Report dated as of February 19, 2019 that this investor filed with the SEC. In this report, the investor indicated that, as of February 14, 2019, it (i) shared voting power with respect to 40,347,155 shares, (ii) held sole voting power with respect to 23,527,706 of these shares, (iii) had no voting power with respect to 3,528,318 shares, (iv) shared dispositive power with respect to 34,532,370 shares and (v) held sole dispositive power with respect to 32,870,809 of the above-listed shares. |
30 | 2019 Proxy Statement |
OWNERSHIP OF OUR SECURITIES
Executive Officers and Directors
Executive Officers and Directors
The following table sets forth information, as of March 15, 2019, regarding the beneficial ownership of Common Shares by our executive officers and directors. Except as otherwise noted, all beneficially owned shares are held with sole voting and investment power and are not pledged to third parties.
|
Components of Total Shares Beneficially Owned |
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Name |
Unrestricted Beneficially Owned(1) |
Unvested Restricted Stock(2) |
Total Owned(3), (4) |
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Current Executive Officers: |
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Jeffrey K. Storey |
2,035,269 | 392,176 | 2,427,445 | |||||||||
Indraneel Dev |
135,888 | 304,836 | 440,724 | |||||||||
Stacey W. Goff |
172,664 | 404,725 | 577,389 | |||||||||
Scott A. Trezise |
22,045 | 208,470 | 230,515 | |||||||||
Outside Directors: |
||||||||||||
Martha H. Bejar |
25,991 | 8,744 | 34,735 | |||||||||
Virginia Boulet |
43,140 | 8,744 | 51,884 | |||||||||
Peter C. Brown(5) |
30,179 | 8,744 | 38,923 | |||||||||
Kevin P. Chilton |
42,732 | 8,744 | 51,476 | |||||||||
Steven T. Clontz(6) |
244,089 | 8,744 | 252,833 | |||||||||
T. Michael Glenn(7) |
75,617 | 8,744 | 84,361 | |||||||||
W. Bruce Hanks |
58,722 | 8,744 | 67,466 | |||||||||
Mary L. Landrieu |
10,741 | 8,744 | 19,485 | |||||||||
Harvey P. Perry(8) |
104,462 | 8,744 | 113,206 | |||||||||
Glen F. Post, III |
979,540 | 359,259 | 1,338,799 | |||||||||
Michael J. Roberts |
40,512 | 8,744 | 49,256 | |||||||||
Laurie A. Siegel |
37,920 | 9,804 | 47,724 | |||||||||
Former Executive Officers: |
||||||||||||
Aamir Hussain |
244,269 | 38,220 | 282,489 | |||||||||
Sunit S. Patel(9) |
682,842 | 0 | 682,842 | |||||||||
All current executive officers and directors as a group (16 persons)(10) |
4,059,511 | 1,766,710 | 5,826,221 |
(1) | This column includes the following number of shares allocated to the individuals account under one of our qualified 401(k) plans: Mr. Storey 5,538; Mr. Dev 5,200; Mr. Goff 7,819; Mr. Trezise 3,531; Mr. Post 202,853; and Mr. Patel 9,209. Participants in these plans are entitled to direct the voting of their plan shares, as described in greater detail elsewhere herein. |
(2) | Reflects (i) for all shares listed, unvested shares of restricted stock over which the person holds sole voting power but no investment power, and (ii) with respect to our performance-based restricted stock granted to our executive officers, the number of shares that will vest if we attain target levels of performance. |
(3) | Excludes (i) shares that might be issued under restricted stock units if our performance exceeds target levels and (ii) phantom units held by Mr. Roberts that are payable in cash upon the termination of his service as a director, as described further under Director Compensation Other Benefits. |
(4) | None of the persons named in the table beneficially owns more than 1% of the outstanding Common Shares. The shares beneficially owned by all directors and executive officers as a group constituted 0.5% of the outstanding Common Shares as of March 15, 2019. |
(5) | Includes 24,297 shares held by a tax-exempt charitable foundation, as to which Mr. Brown has voting and dispositive powers by virtue of his control of the foundation. |
2019 Proxy Statement | 31 |
OWNERSHIP OF OUR SECURITIES
Executive Officers and Directors
(6) | Includes 50,000 shares held by Mr. Clontzs wife and 500 shares held by his son, as to which Mr. Clontz disclaims beneficial ownership. |
(7) | Includes 32,143 shares held indirectly by Mr. Glenn in a trust. |
(8) | Includes 709 shares beneficially held by Mr. Perrys spouse, as to which Mr. Perry disclaims beneficial ownership, and 35,987 shares held by Mr. Perry through our dividend reinvestment plan (as of the most recent date practicable). |
(9) | Includes 1,428 shares indirectly held and beneficially owned by Mr. Patel in an individual retirement account. |
(10) | As described further in the notes above, includes (i) 24,297 shares held beneficially through a foundation, (ii) 32,143 shares held indirectly by trust, (iii) 50,709 shares held beneficially by spouses of these individuals, and 500 shares owned by the son of one of these individuals, in each case as to which beneficial ownership is disclaimed, and (iv) 53,634 shares held through our dividend reinvestment plan (as of the most recent date practicable), excluding 9,209 shares held through such plan by one of our executive officers who no longer participates in such plan. |
32 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
As we noted in last years proxy statement, our November 1, 2017 combination with Level 3 transformed our Company into the second largest domestic communications provider serving global enterprise customers. During 2018, as we moved into the integration phase of the Level 3 combination, we took critical steps to restructure our leadership team, network and workforce to pursue our vision of delivering the most technologically-advanced suite of communications products and services in the industry.
~$23B Annual revenue * Consumer revenue $5B * Enterprise revenue $17B Services in 60+ countries and counting 45,000 employees globally 150,000+ on-Net buildings Approx. 450,000 Route miles of fiber globally
As described in greater detail below, during 2018, our Board and its Human Resources and Compensation Committee (the Committee) spent considerable time and effort assembling the right senior leadership team and recalibrating our existing executive compensation programs to support the challenges and opportunities of the Company going forward.
As a result of that process, we had a few senior leadership changes during 2018, including a change in both our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) positions. Therefore, this 2018 Compensation Discussion and Analysis (the CD&A) addresses the compensation of both current and former executive officers. For 2018, we had seven named executive officers (NEOs), consisting of four current executives and three former executives:
Current Executives (or Current NEOs): | ||
◾ Jeffrey K. Storey |
CEO and President | |
◾ Indraneel Dev |
Executive Vice President and CFO | |
◾ Stacey W. Goff |
Executive Vice President, General Counsel and Secretary | |
◾ Scott A. Trezise |
Executive Vice President, Human Resources |
Former Executives (or Former NEOs): | ||
◾ Glen F. Post, III |
Former CEO, currently serving as a non-management director | |
◾ Sunit S. Patel |
Former CFO | |
◾ Aamir Hussain |
Former Executive Vice President |
2019 Proxy Statement | 33 |
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This CD&A section is organized onto four subsections:
34 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
I. Executive Summary
As described further below, the central goals of our executive compensation program are:
(1) | to incentivize our executives to attain objectives that we believe will create shareholder value, |
(2) | to reward performance that contributes to the execution of our business strategies, and |
(3) | to attract and retain the right executives for our business. |
Business Highlights. During 2018, we achieved and exceeded several significant financial and operational goals that the Committee had previously selected as short-term and equity compensation targets, including the following:
◾ | Raised guidance outlook in second quarter of 2018 for Adjusted Earnings Before Interest Taxes Depreciation and Amortization (Adjusted EBITDA) and Free Cash Flow and achieved full year results that met and exceeded the raised guidance. |
◾ | Generated Adjusted EBITDA of $9.040 billion. |
◾ | Expanded Adjusted EBITDA margin to 39.8% from 35.5% since the close of the Level 3 Combination. |
◾ | Generated Free Cash Flow of $4.215 billion. |
◾ | Achieved targeted $850 million of annualized run-rate Adjusted EBITDA synergies in approximately one year, rather than 80% in three years as initially projected. |
Executive Compensation Highlights. As described in greater detail below, given the transformative nature of the Level 3 Combination, our Board and the Committee spent considerable time and effort during 2018 ensuring that we have the right senior leadership team in place for the Company and that our executive compensation programs continue to appropriately incentivize, retain, and reward each key member of the team.
We believe that our 2018 compensation decisions are well aligned with driving long-term value and are in the best long-term interest of our shareholders. The following timeline provides an overview of the major executive transitions and compensation milestones that occurred during the year:
Nov. 1, 2017 The Closing Date (1) Nov. 1, 2017 - Feb. 22, 2018 The Committee recalibrated the Exec Comp programs (2) May 23, 2018 Mr. Post retires and Mr. Storey assumes role as CEO (3) Jun. 1, 2018 After the annual Meeting, the Board decides to award Mr. Patel a Retention Award (4) Sep. 28, 2018 Mr. Patel resigns as CFO for an external opportunity (5) Nov. 6, 2018 Mr. Dev is selected as CFO and Mr. Hussain exits after serving as the CTO (5) Dec. 31, 2018 Payouts for programs Ending 12/31/18: STI Plan - 107% PBRS of 2016 LTI Grant - 79.3% PBRS of Mr. Storeys initial LTI grant - 200% (6)
(1) | Immediately after the Closing, the new senior leadership team for the combined company included the following named executive officers: Mr. Post as CEO, Mr. Storey as COO, Mr. Patel as CFO, Mr. Goff as General Counsel and Mr. Hussain as CTO. See 2018 proxy statement for additional details. |
(2) | For a discussion of the modifications of the executive compensation programs, see the discussion below under the heading, Recalibrating Our Existing Executive Compensation Programs. |
2019 Proxy Statement | 35 |
COMPENSATION DISCUSSION AND ANALYSIS
I. Executive Summary
(3) | For details regarding Mr. Posts retirement package, which included amounts to which he was contractually entitled as well as the acceleration of (or waiver of continued service requirements for) certain outstanding restricted stock awards, see Section III Our Compensation Program Objectives and Components of Pay. For details regarding Mr. Storeys CEO compensation package, see the discussion below under the heading, Accelerated CEO Succession. |
(4) | For a discussion of the special long-term incentive (LTI) retention award for Mr. Patel, which, along with his other unvested equity awards, was forfeited upon his termination of employment, see the discussion below under the heading, Other Executive Leadership Changes. |
(5) | Mr. Dev was named CFO on November 6, 2018, having served in the role on an interim basis immediately following Mr. Patels departure. For details regarding Mr. Devs compensation package, see Section III Our Compensation Program Objectives and Components of Pay. For information regarding amounts paid to Mr. Hussain upon his termination of employment, which included amounts to which he was contractually entitled as well as the acceleration of (or waiver of continued service requirements for) certain outstanding restricted stock awards, please see the discussion below under the heading, Other Executive Leadership Changes. |
(6) | For details regarding the 2018 short-term incentive (STI) plan performance, see Section III Our Compensation Program Objectives and Components of Pay. For details regarding the payout on performance-based restricted stock (PBRS) from the 2016 annual LTI grants, see Section II Our Compensation Philosophy and Linkage to Pay for Performance. For details regarding the payout of Mr. Storeys initial PBRS grant, which was awarded to him at Closing in November 2017 (although it is reported in our 2018 compensation tables based on its accounting grant date), see the discussion below Link Between Operating Performance and Our Executive Compensation. |
36 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
I. Executive Summary
2019 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS
I. Executive Summary
38 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
I. Executive Summary
2019 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
Overview of Pay Elements and Linkage to Compensation Philosophy and Objectives
Given the ongoing integration of the two companies during 2018, the Committee recalibrated our incentive programs to align them with the size, market, operations and strategic imperatives of the combined company. The Committee believes the following core elements of our compensation program help us to realize our compensation philosophy and objectives and support our strategic and cultural priorities for 2018 as described below:
Characteristics |
Compensation Philosophy and Objectives |
Corporate Strategy | ||||||||||
Base Salary |
Annual fixed cash compensation | Provides a competitive and stable component of income to our executives | Attract and retain key talent | |||||||||
Short-Term Incentive Bonus |
Annual variable cash compensation based on the achievement of annual performance measures | Provides competitive short-term incentive opportunities for our executives to earn annual cash bonuses based on performance objectives that, if attained, can reasonably be expected to (i) promote our business and strategic objectives and (ii) correspond to those paid to similarly-situated and comparably skilled executives at peer companies | STI annual performance measures were selected to align to our corporate strategy for profitable growth:
Adjusted EBITDA (65% of STI plan) - enables us to, among other things, (i) fund strategic capital investments designed to expand our business opportunities, (ii) return cash to our shareholders through dividends or periodic share repurchases, (iii) meet our debt and pension commitments, and (iv) attain our Level 3 Combination synergies
Free Cash Flow (25% of STI plan) - critical measure that enable us to provide dividends to our shareholders and pay down our debt
Customer Experience (10% of STI plan) - critical to maintain and grow our revenue base. This performance measure includes operational goals and metrics that measure how well we are serving our customers as well as their perceptions of our service
Individual Performance - for each senior officer, the Committee has an opportunity to make a positive or negative adjustment based on line of sight to each senior officers performance regarding their specific areas of responsibility and individual objectives | |||||||||
Long-Term Incentive Awards |
Annual long-term variable equity awards that vest over three years from the date of grant with 60% based on the achievement measured against pre-established performance measures and 40% based on three years of service. | Fosters a culture of ownership, aligns the long-term interests of our executives with our shareholders and rewards or penalizes executives based on our performance of Adjusted EBITDA growth over two-year period and helps to retain executives through stock price growth and the creation of long-term value | Performance-Based Restricted Shares (60% of LTI grant value) - Adjusted EBITDA growth run rate based on achieving profitable growth over a two-year period
Time-Vested Restricted Shares (40% of LTI grant value) - amount of time-vested restricted share compensation that is ultimately realized depends on how well we successfully execute our strategic plans and overall our stock performance |
2019 Proxy Statement | 41 |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
The following chart illustrates the approximate allocation of the total target compensation opportunity for 2018 our current CEO and our current executive officers (shown as CEO and NEO, respectively, below) between elements that are fixed and variable or performance-based pay that is at risk:
CEO NEO
The percentages in the table below represent the actual payouts to our senior officers under our STI program for each of the past three years as a percentage of the target opportunity set for each of them by the Committee for that performance year.
Performance Year |
Actual Payout as a % of Target Opportunity |
|||
2016 |
80.2 | % | ||
2017 |
73.0 | % | ||
2018 |
107.0 | % | ||
3-year Average |
86.7 | % |
42 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
The payout percentages in the tables below represent the percentage of the target number of performance-based restricted stock granted to our senior officers that ultimately vested, with all remaining shares being forfeited. To further enhance the pay for performance linkage, any dividends paid on these shares of performance-based restricted stock (or dividend equivalents on performance-based RSUs) are not paid currently, but rather accumulate during the restricted period and vest or are forfeited in tandem with the related shares or units. The average target number of performance-based restricted stock that ultimately vested for LTI grants from 2014 through 2016 (most recently completed performance period) is 62.3%.
LTI Grant Year, Performance Period and Performance Metric |
Attainment Level for LTI Grant Year |
Total Payout Percentage(1) |
||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||
2014 LTI Grant (2014-2016) |
||||||||||||||||||||||||||||||||
Cumulative Core Revenue |
89.1% | 44.6 | % | |||||||||||||||||||||||||||||
Relative TSR |
50% | 25.0 | % | |||||||||||||||||||||||||||||
Total |
69.6 | % | ||||||||||||||||||||||||||||||
2015 LTI Grant (2015-2017) |
||||||||||||||||||||||||||||||||
Cumulative Core Revenue |
76.2% | 38.1 | % | |||||||||||||||||||||||||||||
Relative TSR |
0% | 0.0 | % | |||||||||||||||||||||||||||||
Total |
38.1 | % | ||||||||||||||||||||||||||||||
2016 LTI Grant (2016-2018) |
||||||||||||||||||||||||||||||||
Cumulative Core Revenue |
82.4%(2) | 41.2 | % | |||||||||||||||||||||||||||||
Relative TSR |
76.19%(3) | 38.1 | % | |||||||||||||||||||||||||||||
Total |
79.3 | % | ||||||||||||||||||||||||||||||
2017 LTI Grant (2017-2019) |
||||||||||||||||||||||||||||||||
Cumulative Core Revenue |
TBD | TBD | ||||||||||||||||||||||||||||||
Relative TSR |
TBD | TBD | ||||||||||||||||||||||||||||||
Total |
TBD | |||||||||||||||||||||||||||||||
2017 Special Grant for |
||||||||||||||||||||||||||||||||
Adjusted EBITDA Growth
Run |
200 | %(4) | 200 | % | ||||||||||||||||||||||||||||
2018 LTI Grant (2018-2019) |
||||||||||||||||||||||||||||||||
Adjusted EBITDA Growth
Run |
TBD | TBD |
2019 Proxy Statement | 43 |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
(1) | The payout percentages reflect the corresponding payout for each metric multiplied by their weighting. In grant years 2014 through 2017, the two performance metrics of cumulative core revenue and relative TSR were equally weighted. |
(2) | The three-year performance period was completed on December 31, 2018 for the cumulative core revenue performance-based restricted stock granted to our senior officers in 2016. The table below outlines the payout percentages that represent the percentage of the target number of that ultimately vested, with all remaining shares being forfeited. |
Cumulative Core Revenue |
Target | Companys Performance |
Actual Payout % |
|||||||||
Maximum |
$ | 54.9 billion | ||||||||||
Target |
$ | 53.0 billion | $ | 52.4 billion | 82.4 | % | ||||||
Threshold |
$ | 51.2 billion |
(3) | The three-year performance period was completed on December 31, 2018 for the Relative TSR performance-based restricted stock granted to our senior officers in 2016. The table below outlines the payout percentages that represent the percentage of the target number of that ultimately vested, with all remaining shares being forfeited. |
Relative TSR |
Target | CTL TSR | Actual Payout % |
|||||||||
Maximum |
75th Percentile Rank | |||||||||||
Target |
50th Percentile Rank | |
-14.24%; 38th Percentile Rank |
|
76.19 | % | ||||||
Threshold |
25th Percentile Rank |
(4) | The performance period was completed on December 31, 2018 for the Adjusted EBITDA growth run rate performance-based restricted stock granted to Mr. Storey in 2017. The table below outlines the payout percentages that represent the percentage of the target number of that ultimately vested. |
Adjusted EBITDA Growth Run Rate |
Target | Companys Performance |
Actual Payout % |
|||||||||
Maximum |
4.6 | % | ||||||||||
Target |
3.8 | % | 4.8 | % | 200 | % | ||||||
Threshold |
3.0 | % |
Stock Performance. As mentioned throughout this section, our LTI program is designed to align the interests of the executives with our shareholders and therefore reward and incent superior performance. Since these awards are grants of restricted stock or RSUs (representing the right to receive shares of stock in the future), the actual value of our LTI awards (both time-vested and performance-based) fluctuates with the change in stock price. In making LTI grants, our Committee typically approves a target LTI value and the actual number of shares or units in each grant is determined by dividing that target value by the volume-weighted average closing price of a share of our common stock over the 15-trading-day period ending five trading days prior to the grant date (VWAP), rounding to the nearest whole share. The chart below reflects the VWAP used to calculate each of our 2016, 2017, and 2018 LTI grants, the closing share price on any vesting dates that have occurred for each grant between the applicable grant date and the end of fiscal 2018, and the change in value of a share of our common stock from the grant date VWAP to the last trading day of fiscal 2018.
44 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
Stock performance through December 31, 2018
Grant Date |
Grant Date Value of a Share (VWAP)(1) |
Closing Share Price on First Vesting Date(2) |
Closing Share Price on Second Vesting Date(2) |
Closing Share Price on 12/31/18(3) |
Closing Share Price on 12/31/18 as a percentage of Grant Date Value (4) |
|||||||||||||||
02/23/16 |
$ | 26.09 | $ | 24.71 | $ | 18.21 | $ | 15.15 | -42 | % | ||||||||||
02/21/17 |
$ | 25.12 | $ | 17.90 | | $ | 15.15 | -40 | % | |||||||||||
02/21/18 |
$ | 17.29 | | | $ | 15.15 | -12 | % |
(1) | As noted above, we determine the number of restricted shares or RSUs in a given LTI grant by dividing the LTI target value by the applicable VWAP (the volume-weighted average closing price of our shares of common stock over a 15-trading day period ending five trading days prior to the grant date) and rounding to the nearest share. This valuation method is different from the equity grant valuation method we are required to disclose in our Summary Compensation Table under applicable accounting and SEC disclosure rules. |
(2) | The vesting dates for the first two tranches of the February 2016 LTI grants have already occurred, as has the vesting date for the first tranche of the February 2017 LTI grants. This column represents the closing stock price on each of vesting dates, if applicable. |
(3) | Represents the closing price on the last trading day of fiscal 2018. |
(4) | Represents the stock performance (based on the change in value, but disregarding dividends) of the 2016, 2017 and 2018 LTI grants from the grant date through the end of fiscal 2018, determined by dividing the $15.15 closing price on the last day of trading in 2018 by the grant date VWAP. |
Realizable Pay for our CEO. The chart below illustrates the realizable pay for our CEO, most of which was at risk variable compensation. We calculate realizable pay for a given year by adding together the (i) actual salary paid during the year, (ii) STI bonus that was ultimately paid out for performance during that year, (iii) the value of time- and performance-based LTI grants that vested during the year and (iv) the value of time- and performance-based LTI grants that are projected to vest based on actual performance through the end of the year. The value of the shares or units is based on the closing price of our common stock on the last business day of the year (all figures are in millions).
CEO Realizable Pay
Note: Light Shade - Normal Course Dark Shade - One Time Awards |
For 2018, Normal Course includes Mr. Storeys salary, STI bonus, and other compensation as shown in the Summary Compensation Table, time- and performance-based LTI granted as part of his annual grant. One-time awards include the assumed Level 3 integration bonus that paid out in 2018, as well as both his time- and performance-based LTI granted as part of his promotion to CEO on May 23, 2018.
2019 Proxy Statement | 45 |
COMPENSATION DISCUSSION AND ANALYSIS
II. Our Compensation Philosophy and Linkage to Pay for Performance
Normal Course 2018
Comp Component |
Target | Realizable | ||||||
Base |
$ | 1.68 | $ | 1.68 | ||||
STI |
$ | 3.22 | $ | 3.54 | ||||
Annual LTI (TBRS) |
$ | 5.04 | $ | 4.05 | ||||
Annual LTI (PBRS) |
$ | 7.56 | $ | 3.03 | ||||
Other Comp |
$ | 0.07 | $ | 0.07 | ||||
2018 Normal Course |
$ | 17.57 | $ | 12.37 |
One Time Items 2018
Comp Component |
Target | Realizable | ||||||
Final Installment Initial Signing Bonus |
$ | 3.30 | $ | 3.300 | ||||
Level 3 Retention Bonus |
$ | 2.54 | $ | 2.540 | ||||
5/24/18 CEO promotion grant (TBRS) |
$ | 2.96 | $ | 2.377 | ||||
5/24/18 CEO promotion grant (PBRS) |
$ | 4.44 | $ | 6.417 | ||||
2018 One -Time Items |
$ | 13.24 | $ | 14.64 |
Overall 2018 |
Target | Realizable | % of TGT | |||||||||
$ | 30.81 | $ | 27.01 | 88 | % |
46 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
III. Our Compensation Program Objectives and Components of Pay
To assist us in achieving our broad compensation goals, we apply the following practices (many of which are described further elsewhere in this CD&A):
ü What We Do... |
ü | Focus on performance-based compensation weighted heavily towards long-term incentive awards | ||||
ü | Benchmark generally against 50th percentile peer compensation levels | |||||
ü | Maintain robust stock ownership guidelines applicable to our executive officers and outside directors | |||||
ü | Annually review our compensation programs to avoid encouraging excessively risky behavior | |||||
ü | Conduct annual say-on-pay votes | |||||
ü | Seek input annually from shareholders on our executive compensation program | |||||
ü | Maintain a compensation clawback policy | |||||
ü | Impose compensation forfeiture covenants broader than those mandated by law | |||||
ü | Review the composition of our peer groups at least annually | |||||
ü | Conduct independent and intensive performance reviews of our senior officers | |||||
ü | Cap the number of relative TSR performance-based shares that may vest if our own TSR is negative | |||||
ü | Review realizable pay of our senior officers and total compensation tally sheets | |||||
ü | Require shareholders to approve any future severance agreements valued at more than 2.99 times the executives target cash compensation | |||||
× What We Dont Do... |
× | Maintain a supplemental executive retirement plan | ||||
× | Permit our directors or employees to hedge our stock, or our directors or senior officers to pledge our stock | |||||
× | Pay dividends on unvested restricted stock | |||||
× | Permit the Committees compensation consultant to provide other services to CenturyLink | |||||
× | Pay, provide or permit: | |||||
(i) excessive perquisites, | ||||||
(ii) excise tax gross-up payments, or | ||||||
(iii) single-trigger change of control equity acceleration benefits. | ||||||
2019 Proxy Statement | 47 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
As of December 31, 2018, the total target compensation for our named executive officers was as follows.
Total Target Compensation(1) |
||||||||||||||||||||||||
Named Officer |
Salary | STI Target Bonus Percentage |
STI Target Bonus Opportunity |
Total Target Cash |
LTI Target(2) |
Total Target Compensation |
||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||
Jeffrey K. Storey |
$ | 1,800,011 | 200 | % | $ | 3,600,022 | $ | 5,400,034 | $ | 12,600,000 | $ | 18,000,034 | (3) | |||||||||||
Indraneel Dev |
$ | 650,000 | 120 | % | $ | 780,000 | $ | 1,430,000 | $ | 2,700,000 | $ | 4,130,000 | (4) | |||||||||||
Stacey W. Goff |
$ | 600,018 | 120 | % | $ | 720,021 | $ | 1,320,039 | $ | 2,000,000 | $ | 3,320,039 | (5) | |||||||||||
Scott A. Trezise |
$ | 475,010 | 80 | % | $ | 380,008 | $ | 855,017 | $ | 700,000 | $ | 1,555,017 | (6) |
(1) | For more complete information presented in accordance with the SECs rules, see the Summary Compensation Table appearing elsewhere herein. |
(2) | The LTI target in this table represents the grant date fair value of the target levels of equity awards to be granted in 2019, which differ from amounts reported in the Summary Compensation Table, which are calculated in accordance with FASB ASC Topic 718. |
(3) | The Total Target Compensation for Mr. Storey is slightly above the 50th percentile of our compensation benchmarking data. |
(4) | The Total Target Compensation for Mr. Dev is between the 25th and 50th percentile of our compensation benchmarking data. |
(5) | The Total Target Compensation for Mr. Goff is near the 50th percentile of our compensation benchmarking data. |
(6) | The Total Target Compensation for Mr. Trezise is between the 25th and 50th percentile of our compensation benchmarking data. |
48 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
2019 Proxy Statement | 49 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
2018 STI Plan and Performance Results
Financial Performance Objectives (90% Weighting) |
Weighted Score Achieved 122.7%(1) | |||||||||||||||||
Financial Targets ($ in Millions) |
Threshold | Target | Maximum | Weighting | Achieved(1) | |||||||||||||
Adjusted EBITDA |
$7,924 | $ | 8,804 | $ | 9,684 | 65 | % | $ | 9,040 | |||||||||
111.8 | % | |||||||||||||||||
Free Cash Flow |
$2,891 | $ | 3,212 | $ | 3,533 | 25 | % | $ | 4,215 | |||||||||
200.0 | % | |||||||||||||||||
Customer Experience Performance (10% Weighting) |
Weighted Score Achieved 7.5%(1) | |||||||||||||||||
Goals |
Performance | Weighting | Achieved(2) | |||||||||||||||
Customer Experience |
- Our overall customer satisfaction is not at our desired level but the Committee concluded that we made positive progress in 2018. Based on these results, the Committee awarded 75% for the customer experience performance objective. |
|
10% | 75.0% |
2018 Company Performance Composite Score |
Achieved 130.2% (1) | |||||||||||
Committee Discretion on Performance |
- After an assessment of the Companys performance for 2018, the Committee determined it was appropriate to apply across-the-board discretion to reduce the 2018 company composite score by 23.2% for all senior officers, resulting in an adjusted company performance payout of 107% |
-23.2% (3) | ||||||||||
2018 Adjusted Company Performance |
Payout 107% (1) |
50 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
(1) | The achieved payout percentage is calculated for each financial performance objective based on a corresponding payout scale. If the threshold performance level with respect to any particular financial performance objective under our STI program is not attained, the bonus payable to the participating officer with respect to that portion of his or her targeted bonus opportunity will be calculated as zero. If threshold performance is met on any particular metric, each participating officer will earn a reduced portion of his or her target bonus amount for that portion of the award. If the maximum performance level with respect to any particular metric is met or exceeded, each participating officer will earn 200% of his or her target bonus amount. Measurement of the attainment of any particular metric will be interpolated if actual performance is between (i) the threshold and the target performance levels or (ii) the target and the maximum performance levels. |
(2) | The achieved payout percentage is determined based on the Committees qualitative review of certain criteria and performance metrics, as described under Customer Experience Performance below. |
(3) | The Committees decision to exercise this discretion was based on its review of other criteria as described under Committee Discretion on Performance below. |
2019 Proxy Statement | 51 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
Actual STI Bonus Amounts Authorized. The actual amounts of the named executive officers 2018 bonuses were calculated as follows:
2018 STI Bonus Amounts |
||||||||||||||||||||||||||||
Named Officer |
Target
Bonus Opportunity(1) |
X | Adjusted Company Performance %(2) |
X | Discretionary Adjustment for Individual Performance(3) |
= | STI Bonus Amount |
|||||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||||||
Jeffrey K. Storey |
$ | 3,220,707 | 107 | % | 110 | % | $ | 3,790,772 | ||||||||||||||||||||
Indraneel Dev |
356,300 | 107 | % | 115 | % | 438,427 | ||||||||||||||||||||||
Stacey W. Goff |
720,021 | 107 | % | 110 | % | 847,465 | ||||||||||||||||||||||
Scott A. Trezise |
380,008 | 107 | % | 115 | % | 467,600 | ||||||||||||||||||||||
Former Executives: |
||||||||||||||||||||||||||||
Glen F. Post, III |
857,021 | 107 | % | 100 | % | 917,012 | ||||||||||||||||||||||
Aamir Hussain |
611,525 | 107 | % | 100 | % | 654,332 | ||||||||||||||||||||||
Sunit S. Patel |
0 | | | 0 |
(1) | Determined based on earned salary and applicable STI target bonus percentage during 2018 and includes pro-rations for any changes to salary and/or STI target bonus percentage described below. |
a) | Target Bonus Opportunity for Mr. Storey reflects his salary earned during 2018 with a salary increase, from $1,500,013 to $1,800,011, effective on May 23, 2018, and an increase of STI target bonus percentage from 175% to 200%, also effective on May 23, 2018. |
b) | Target Bonus Opportunity for Mr. Dev reflects his salary earned during 2018 with a salary increase, from $430,019 to $650,000, effective on November 6, 2018, and an increase of STI target bonus percentage from 65% to 120%, also effective on November 6, 2018. |
c) | Target Bonus Opportunity for Mr. Goff reflects his salary earned during 2018 of $600,018 and an STI target bonus percentage of 120%. |
52 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
d) | Target Bonus Opportunity for Mr. Trezise reflects his salary earned during 2018 of $475,010 and an STI target bonus percentage of 80%. |
e) | Target Bonus Opportunity for Mr. Post is the portion of his annual salary of $489,726 that he earned through his retirement date of May 23, 2018 and an STI target bonus percentage of 175%. |
f) | Target Bonus Opportunity for Mr. Hussain is the portion of his annual salary of $509,604 that he earned through his termination date of November 6, 2018 and an STI target bonus percentage of 120%. |
g) | Mr. Patel resigned on September 28, 2018 and therefore did not receive a 2018 STI bonus. |
(2) | Calculated or determined as discussed above under 2018 Performance Results. |
(3) | Determined based on achievement of individual performance objectives as described further above in this Subsection. |
2019 Proxy Statement | 53 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
Performance Level |
Adjusted EBITDA Growth Run Rate(1) |
Payout as % of Target Award(2) |
||||||
Maximum |
³ 8.2 | % | 200 | % | ||||
Target |
6.8 | % | 100 | % | ||||
Threshold |
5.5 | % | 50 | % | ||||
Below Threshold |
< 5.5 | % | 0 | % |
(1) | Determined by dividing (i) the Adjusted EBITDA actually attained for the fourth quarter of 2019 minus the Adjusted EBITDA actually attained for the fourth quarter of 2017 by (ii) the Adjusted EBITDA actually attained for the fourth quarter of 2017. |
(2) | Linear interpolation is used when our Adjusted EBITDA growth run rate performance is between the threshold, target and maximum amounts to determine the corresponding percentage of target award earned. |
54 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
In 2018, the Committee granted our named executives the following number of (i) restricted shares or RSUs that will vest over a three-year period principally in exchange for continued service (time-vested restricted shares or RSUs), (ii) performance-based restricted shares or RSUs that will vest in two equal installments on February 21 of each of 2020 and 2021 based on attainment during the period beginning on January 1, 2018 and ending on December 31, 2019 (the Performance Period) of an Adjusted EBITDA growth run rate of 6.8% (the Performance-Vested Shares or RSUs), as described further above:
2018 Annual LTI Grants (Excluding Special Grants) |
||||||||||||||||||||
Named Officer |
Time-vested Restricted Shares or RSUs |
Performance-based Restricted Shares or RSUs |
||||||||||||||||||
No.
of Shares(1)(3) |
Fair Value(1) | No.
of Shares(2)(3) |
Fair Value(4) | Total
Fair Value(4) |
||||||||||||||||
Current Executives: |
||||||||||||||||||||
Jeffrey K. Storey(5) |
|
267,103 |
|
$ |
5,040,000 |
|
|
400,655 |
|
$ |
7,560,000 |
|
$ |
12,600,000 |
| |||||
Indraneel Dev(6) |
|
19,777 |
|
|
342,732 |
|
|
19,777 |
|
|
342,732 |
|
|
685,464 |
| |||||
Stacey W. Goff |
|
46,265 |
|
|
800,000 |
|
|
69,399 |
|
|
1,200,000 |
|
|
2,000,000 |
| |||||
Scott A. Trezise |
|
16,193 |
|
|
280,000 |
|
|
24,290 |
|
|
420,000 |
|
|
700,000 |
| |||||
Former Executives: |
||||||||||||||||||||
Glen F. Post, III(7) |
|
196,629 |
|
|
3,400,000 |
|
|
294,945 |
|
|
5,100,000 |
|
|
8,500,000 |
| |||||
Sunit. S. Patel(8) |
|
69,398 |
|
|
1,200,000 |
|
|
104,099 |
|
|
1,800,000 |
|
|
3,000,000 |
| |||||
Aamir Hussain(9) |
|
62,458 |
|
|
360,000 |
|
|
93,689 |
|
|
810,000 |
|
|
2,700,000 |
|
(1) | Represents the number of restricted shares or RSUs granted in 2018. |
(2) | As discussed further above, the actual number of shares that vest in the future may be lower or higher, depending on the level of performance achieved. |
(3) | Dividends on the shares of restricted stock (or, with respect to RSUs, dividend equivalents) will not be paid currently, but will accrue and vest or be forfeited in tandem with the related shares or RSUs. |
(4) | For purposes of these grants, we determined both the number of time-vested and performance-based restricted shares or RSUs by dividing the total fair value granted to the executive by the volume-weighted average closing price of a share of our common stock over the 15-trading-day period ending five trading days prior to the grant date (VWAP), rounding to the nearest whole share. However, as noted previously, for purposes of reporting these awards in the Summary Compensation Table, our shares of time-vested restricted stock or RSUs are valued based on the closing price of our common stock on the date of grant and our shares of performance-based restricted stock or RSUs are valued as of the grant date based on probable outcomes, as required by applicable accounting and SEC disclosure rules. See footnote 2 to the Summary Compensation Table for more information. |
(5) | Mr. Storeys annual grant was in the form of RSUs. |
(6) | Mr. Devs grant value based on his role prior to assuming CFO, and he received his fair value in 50% time-vested and 50% performance-based restricted shares, consistent with other participants at that executive level (compared to 40% and 60% respectively for our senior officers). |
(7) | Mr. Post forfeited one-half of these restricted shares upon his retirement in May 2018. |
(8) | Mr. Patel forfeited all of these restricted shares upon his resignation in September 2018. |
(9) | Mr. Hussain forfeited all of these restricted shares upon his termination in November 2018. |
2019 Proxy Statement | 55 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
56 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
Performance Achievement Level
|
Step 1: Absolute Cumulative |
Step 2: Relative TSR |
Payout as % of Target | |||
Maximum |
N/A |
75th Percentile |
200% | |||
Stretch |
N/A |
63rd Percentile |
152% | |||
Slightly Above Target |
N/A |
51st Percentile |
104% | |||
Target |
Target Amount(2) |
N/A |
100% | |||
Threshold |
Threshold Amount |
N/A |
50% | |||
Below Threshold |
< Threshold |
N/A |
0% | |||
(1) | Payouts interpolated between defined performance levels / minimum, target and maximum levels. |
(2) | To further align this grant with our shareholders best interests, we set the annual absolute Adjusted EBITDA targets at 99% of the mid-point of our publicly disclosed guidance range for each year. |
2019 Proxy Statement | 57 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
CEO Top Talent Award for Mr. Dev. In August of 2018, the Committee granted a limited number of performance-based equity awards to retain certain key employees (non-Senior Officers) who are essential to executing our long-term strategy. Prior to his appointment as an executive officer, Mr. Dev received one of these special performance-based equity awards. This award is divided into two equal tranches, with payout under each tranche ranging from 0 to 200% depending upon our achievement against a two-year Adjusted EBITDA run rate target. The first tranche is defined and calculated in the same manner as the performance-based portion of our 2018 annual grants and the performance period covers fiscal years 2018 and 2019, while the second tranche is defined in the same manner as the performance-based portion of our 2019 annual grants and covers fiscal years 2019 and 2020. In addition to the performance condition, the employee must be continuously employed with us through the applicable vesting date (February 28, 2020 for the first tranche and August 7, 2021 for the second tranche).
Special LTI Grants | ||||||||||||||||||||||||||||
Named Officer |
Award Date |
Accounting Grant Date |
Time-vested Restricted Shares |
Performance-based Restricted Shares |
||||||||||||||||||||||||
No.
of Shares(1)(2) |
Fair Value(3) |
No.
of Shares(4)(2) |
Fair Value(3) |
Total
Fair Value(3) |
||||||||||||||||||||||||
Current Executive: |
||||||||||||||||||||||||||||
Jeffrey K. Storey |
||||||||||||||||||||||||||||
Initial PBRS Grant(5) |
11/1/2017 | 2/21/2018 | | | 325,554 | $ | 6,281,400 | $ | 6,281,400 | |||||||||||||||||||
CEO Promotion Grant |
5/24/2018 | 5/24/2018 | 156,870 | $ | 2,960,000 | 235,306 | 4,440,000 | 7,400,000 | ||||||||||||||||||||
Indraneel Dev(6) |
8/7/2018 | 8/7/2018 | | | 45,063 | 860,038 | 860,038 | |||||||||||||||||||||
Former Executive: |
||||||||||||||||||||||||||||
Sunit. S. Patel |
||||||||||||||||||||||||||||
Initial PBRS Grant(5) |
11/1/2017 | 2/21/2018 | | | 38,871 | 750,000 | 750,000 | |||||||||||||||||||||
Special Retention Grant |
6/1/2018 | 6/1/2018 | | | 104,976 | 2,000,000 | 2,000,000 |
(1) | Represents the number of restricted shares granted in 2018 pursuant to special grants. |
(2) | Dividends on the shares of restricted stock will not be paid currently, but will accrue and vest or be forfeited in tandem with the related shares. |
(3) | For purposes of these grants, we determined both the number of time-vested and performance-based restricted shares by dividing the total fair value granted to the executive by the volume-weighted average closing price of a share of our common stock over the 15-trading-day period ending five trading days prior to the grant date (VWAP), rounding to the nearest whole share. However, as noted previously, for purposes of reporting these awards in the Summary Compensation Table, our shares of time-vested restricted stock are valued based on the closing price of our common stock on the date of grant and our shares of performance-based restricted stock are valued as of the grant date based on probable outcomes, as required by applicable accounting and SEC disclosure rules. See footnote 2 to the Summary Compensation Table for more information. Mr. Patel forfeited all of these restricted shares upon his resignation in September 2018. |
(4) | Represents the number of restricted shares granted in 2018 pursuant to special grants. As discussed further above, the actual number of shares that vest in the future may range between 0-200%, depending on the level of performance achieved. |
(5) | As disclosed above and in our 2018 proxy statement, these grants were part of the officers initial LTI grant at the Closing but were not reported as 2017 compensation given that the accounting grant date did not occur until early 2018. With respect to Mr. Patels award, all of these shares were forfeited upon his resignation in September 2018. |
(6) | As noted above, this equity award was granted to Mr. Dev prior to his appointment as an executive officer. |
58 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
2019 Proxy Statement | 59 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
The table below shows (i) the length of the protected period afforded to officers following a change of control and (ii) the multiple of salary and bonus payment and years of welfare benefits to which officers will be entitled if change of control benefits become payable under our agreements and related policies:
Protected Period |
Multiple of Annual Cash Compensation |
Years of Welfare Benefits |
||||||||||
CEO |
2 years | 3 times | 3 years | |||||||||
Other Executives |
1.5 years | 2 times | 2 years | |||||||||
Other Officers |
1 year | 1 time | 1 year |
60 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
2019 Proxy Statement | 61 |
COMPENSATION DISCUSSION AND ANALYSIS
III. Our Compensation Program Objectives and Components of Pay
62 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
Our Compensation Decision-Making Process
As described further below, the Committee, subject to the Boards oversight, establishes, evaluates and monitors our executive compensation programs. The compensation decision-making process includes input from the Committees independent consultant, our CEO and other members of management, and involves a careful balancing of a wide range of factors, including, but not limited to, the following:
Compensation Decision-Making Considerations |
Consultant | Input From CEO |
Management | |||||||||
Structure and Elements of Pay Programs |
||||||||||||
The competitive compensation practices of peer companies |
ü | |||||||||||
Performance of our Company in relation to our peers and our internal goals |
ü | |||||||||||
The financial impact and risk characteristics of our compensation programs |
ü | ü | ||||||||||
The strategic and financial imperatives of our business |
ü | |||||||||||
Setting Competitive Compensation Pay Levels |
||||||||||||
Market data regarding base salary, short-term incentive target, long-term incentive target and total target compensation paid to comparable executives at peer companies |
ü | |||||||||||
The officers scope of responsibility, industry experience, particular set of skills, vulnerability to job solicitations from competitors and anticipated degree of difficulty of replacing the officer with someone of comparable experience and skill |
ü | ü | ||||||||||
The officers pay and performance relative to other officers and employees |
ü | |||||||||||
The officers demonstrated leadership characteristics, ability to act as a growth agent within the company and ability to think strategically |
ü | |||||||||||
Internal equity issues that could impact cohesion, teamwork or the overall viability of the executive group |
ü | |||||||||||
The potential of these senior officers to assume different, additional or greater responsibilities in the future |
ü | |||||||||||
The officers realized and realizable compensation in recent years and, to a limited degree, his or her accumulated wealth under our programs |
ü | ü | ||||||||||
Pay for Performance |
||||||||||||
Performance of our Company in relation to our peers and our key performance objectives |
ü | ü | ü | |||||||||
The business performance under the officers leadership and scope of responsibility |
ü | |||||||||||
The officers overall performance is assessed based on individual results, the role the officer plays in maintaining a cohesive management team and improving the performance of others, and the officers relative strengths and weaknesses compared to the other senior officers |
ü | ü | ||||||||||
The role the officer may have played in any recent extraordinary corporate achievements |
ü | ü |
2019 Proxy Statement | 63 |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
64 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
2019 Proxy Statement | 65 |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
For our named executive officers, our compensation consultant compiled the compensation data publicly disclosed by the companies included within the peer companies identified below. As noted in our 2018 proxy statement, we constructed in mid-2017 a revised 16-company peer group that reflected the increased size and sophistication of our operations in anticipation of the pending closing of the Level 3 Combination. The Committee used that same peer group in connection with its 2018 executive compensation decisions. Once established, we believe that a well-selected peer group for compensation benchmarking should remain fairly stable for several years to help inform reliable and consistent market positioning, longer-term pay trends and market practices. Listed below are the 16 companies that make up our primary peer group:
Telecommunication 7 peers |
◾ AT&T Inc. | ◾ Telus Corporation | ||
◾ BCE Inc. | ◾ T-Mobile US Inc. | |||
◾ Frontier Communications Corp. | ◾ Verizon | |||
◾ Sprint Corporation | ||||
Cable & Satellite 4 peers |
◾ Charter Communications, Inc. | ◾ DISH Network Corporation | ||
◾ Comcast Corporation | ◾ Liberty Global PLC | |||
Various Technology Industries 5 peers |
◾ CISCO Systems Inc. | ◾ Motorola Solutions, Inc. | ||
◾ DXC Technology Company(1) | ◾ QUALCOMM Incorporated | |||
◾ HP, Inc. |
(1) | Computer Sciences Corporation was included in peer group for 2017 benchmarking. In early April 2017, CSC completed its merger with the Enterprise Services business of Hewlett Packard Enterprise and formed DXC Technology. |
In order to provide additional information in support of their compensation decisions, the Committee developed a secondary High Tech peer group. It includes companies representing a broad array of high-tech fields, including IT services, Software, Hardware, Consulting, Distributors and Semiconductors. This group serves as a supplement to the primary 16-company peer group and provides an additional perspective on pay levels and practices for the technology industry sector. Listed below are the 14 companies that make up our secondary high tech peer group:
Overlap with 2018 Peer Group (2) 5 peers |
◾ CISCO Systems Inc. | ◾ Motorola Solutions, Inc. | ||
◾ DXC Technology Company | ◾ QUALCOMM Incorporated | |||
◾ HP, Inc. | ||||
Various High-Tech Industries 9 peers |
◾ Accenture PLC | ◾ Oracle Corp. | ||
◾ Cognizant Tech Solutions | ◾ Seagate Technology PLC | |||
◾ Facebook Inc. | ◾ Tech Data Corp. | |||
◾ Flex LTD | ◾ Western Digital Corp | |||
◾ Netflix Inc. |
(2) | Also included in the Committees above-listed primary peer group. |
66 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
TSR Peer Group Performance Benchmarking. With the aid of its compensation consultant, the Committee set a TSR Peer Group for purposes of benchmarking our relative performance based upon our historical three-year TSR in performance determination of Mr. Storeys one-time promotion grant (see further discussion under Special Grants Promotion Grant for Mr. Storey and section III above). This peer group is focused principally on telecommunications, cable and other communications companies that are generally comparable to us in terms of size, markets and operations. Our 2018 peer groups for compensation benchmarking were somewhat constrained by the number of companies and revenue and market cap size. In contrast, the TSR peer group is comprised of a broader universe of companies we believe investors are considering when they decide whether to invest in us or our industry.
Telecommunication 7 peers |
◾ AT&T, Inc.
◾ Frontier Communications Corp.
◾ Telephone & Data Systems Inc.
◾ Telus Corporation |
◾ United States Cellular Corporation | ||
◾ Verizon Communications Inc. | ||||
◾ Windstream Holdings, Inc. | ||||
Communications Equipment 6 peers |
◾ CISCO Systems Inc. | ◾ Motorola Solutions, Inc. | ||
◾ EchoStar Corporation | ◾ Viasat, Inc. | |||
◾ Mitel Networks Corporation | ◾ Zayo Group Holdings, Inc | |||
Cable & Satellite 3 peers |
◾ Comcast Corporation | ◾ Liberty Global plc | ||
◾ DISH Network Corporation |
2019 Proxy Statement | 67 |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
Under our current stock ownership guidelines, our executive officers are required to beneficially own CenturyLink stock in market value equal to a multiple of their annual salary, as outlined in the table below, and each outside director must beneficially own CenturyLink stock equal in market value to five times the annual cash retainer payable to outside directors. Each executive officer and outside director has three and five years, respectively, to attain these targets.
Executive Officer |
Stock Ownership Guidelines |
Stock Ownership Guidelines | ||
CEO
|
6 times base salary | $10.8 million(1) | ||
All Other Executive Officers
|
3 times base salary | $1.7 million(2) | ||
Outside Directors
|
5 times annual cash retainer | $375,000 |
(1) | Based on annual salary as of December 31, 2018. |
(2) | Based on average annual salary for all other executive officers as of December 31, 2018. |
68 | 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
IV. Our Policies, Processes and Guidelines Related to Executive Compensation
2019 Proxy Statement | 69 |
The following table sets forth certain information regarding the compensation of (i) our current and former principal executive officers, (ii) our current and former principal financial officers, (iii) each of the two other executive officers who were serving as executive officers at the end of 2018, and (iv) a former executive officer. Following this table is additional information regarding incentive compensation, pension benefits, deferred compensation and potential termination payments pertaining to the named officers. For additional information on the compensation summarized below and other benefits, see Compensation Discussion and Analysis.
Summary Compensation Table
Name and Principal Position |
Year | Salary | Bonus(1) | Equity Awards(2) |
Non-Equity Incentive Plan Compensation(3) |
Change in Pension Value(4) |
All Other Compensation(5) |
Total | ||||||||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||||||||||
Jeffrey K. Storey(6) President and Chief Executive Officer |
2018 | $ | 1,683,299 | $ | 5,842,000 | $ | 24,262,040 | $ | 3,790,772 | $ | | $ | 77,535 | $ | 35,655,646 | |||||||||||||||||
2017 | 248,219 | 3,732,517 | 6,952,604 | | | 11,589 | 10,944,929 | |||||||||||||||||||||||||
Indraneel Dev(7) Executive Vice President and Chief Financial Officer |
2018 | $ | 463,770 | $ | 227,027 | $ | 1,588,732 | $ | 438,427 | $ | | $ | 11,000 | $ | 2,728,955 | |||||||||||||||||
Stacey W. Goff Executive Vice President, General Counsel and Secretary |
2018 | $ | 600,018 | $ | | $ | 2,070,386 | $ | 847,465 | $ | | $ | 57,586 | $ | 3,575,455 | |||||||||||||||||
2017 | 550,662 | 275,000 | 6,373,228 | 449,502 | 54,643 | 59,528 | 7,762,563 | |||||||||||||||||||||||||
2016 | 540,758 | | 1,559,195 | 477,057 | 161,857 | 36,146 | 2,775,013 | |||||||||||||||||||||||||
Scott A. Trezise Executive Vice President Human Resources |
2018 | $ | 475,010 | | $ | 724,646 | $ | 467,600 | | $ | 194,048 | $ | 1,861,304 | |||||||||||||||||||
Former Executives: |
||||||||||||||||||||||||||||||||
Glen F. Post, III(8) Current Director, Former |
2018 | $ | 489,726 | $ | | $ | 8,961,113 | $ | 917,012 | $ | 203,601 | $ | 172,762 | $ | 10,744,214 | |||||||||||||||||
2017 | 1,250,000 | 1,500,000 | 9,814,604 | 1,596,875 | 395,943 | 158,138 | 14,715,560 | |||||||||||||||||||||||||
2016 | 1,250,000 | | 10,518,344 | 1,754,375 | 333,816 | 109,679 | 13,966,214 | |||||||||||||||||||||||||
Sunit S. Patel(9) Former Executive Vice |
2018 | $ | 556,854 | $ | 1,214,500 | $ | 5,148,229 | | | $ | 13,895 | $ | 6,933,478 | |||||||||||||||||||
2017 | 124,521 | 1,447,475 | 3,383,274 | | | | 4,955,269 | |||||||||||||||||||||||||
Aamir Hussain(10) Former Executive Vice |
2018 | $ | 509,604 | $ | | $ | 2,795,192 | $ | 654,332 | $ | | $ | 1,331,039 | $ | 5,290,167 | |||||||||||||||||
2017 | 550,699 | 300,000 | 6,728,022 | 416,651 | | 13,302 | 8,008,674 | |||||||||||||||||||||||||
2016 | 496,049 | | 2,598,654 | 397,831 | | 13,548 | 3,506,082 |
(1) | For 2018, the amounts shown in this column reflect: |
◾ | the final installments of certain cash retention bonuses, originally granted by Level 3, that we assumed in the Level 3 Combination ($2,542,000 to Mr. Storey, $227,027 to Mr. Dev, and $1,214,500 to Mr. Patel), payout of which were contingent upon continued employment through the payment date; and |
◾ | the final installment of a cash signing bonus due to Mr. Storey under his original offer letter, payout of which was contingent upon his continued employment through the first anniversary of the Closing ($3,300,000). |
Due to his resignation effective September 28, 2018, Mr. Patel forfeited the right to receive a final payment of $214,500. For additional information about these cash bonuses, see Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayFinal Installments of Cash Bonuses Related to Level 3 Combination.
(2) | For 2018, the amounts shown in this column reflect: |
◾ | the fair value of annual grants of restricted stock or restricted stock unit awards made to our named executives under our long-term incentive compensation program (and the additional restricted grant that Mr. Post received for his service as an outside director, which was granted following his retirement from all employment positions with the Company); |
2019 Proxy Statement | 71 |
EXECUTIVE COMPENSATION
Overview
◾ | the fair value of initial performance-based restricted stock grants made to each of Messrs. Storey and Patel at the Closing but which were not granted for accounting purposes until February 21, 2018; |
◾ | the fair value of the promotion restricted stock awards made to Mr. Storey on May 24, 2018 in accordance with his amended and restated offer letter; |
◾ | the fair value of a special performance-based restricted stock award granted to Mr. Patel, which was subsequently forfeited upon his resignation from all positions with the Company effective September 28, 2018; |
◾ | the fair value of a special performance-based restricted stock award that was granted to Mr. Dev prior to his appointment as an executive officer; and |
For additional information about these equity grants, see Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayGrants of Long-Term Incentive Compensation and Special Grants.
The fair value of the awards presented in the table above has been determined in accordance with FASB ASC Topic 718. For purposes of this table, in accordance with SEC disclosure rules we determined the fair value of shares of:
◾ | time-vested restricted stock and restricted stock units including the time-vested portion of annual grants, the time-vested portion of Mr. Storeys promotion grant, and the director grant to Mr. Post based on the closing trading price of our Common Shares on the day of grant; and |
◾ | performance-based restricted stock and restricted stock units including the performance-based portion of annual grants, the initial performance-based restricted stock grants to Messrs. Storey and Patel, the performance-based portion of Mr. Storeys promotion grant, and the special grant to Mr. Patel, using Monte-Carlo simulations. |
The aggregate value of the equity awards granted to each named executive in 2018, based on the grant date closing trading price of our Common Shares and assuming maximum payout of his performance-based restricted shares, would be as follows: Mr. Storey, $43,062,809, Mr. Dev, $2,803,084, Mr. Goff, $3,312,628, Mr. Trezise, $1,159,437, Mr. Post, $14,078,690, Mr. Patel, $10,085,099, and Mr. Hussain, $4,472,387. See Note 11 titled Share-based Compensation of the notes to our audited financial statements included in Appendix A for an explanation of material assumptions that we used to calculate the fair value of these stock awards.
(3) | The amounts shown in this column reflect cash payments made under our short-term incentive program for actual performance in the respective years. For additional information, see Incentive Compensation and Other Awards2018 Awards. |
(4) | Reflects the net change during each of the years reflected in the present value of the named executives accumulated benefits under the defined benefit plans discussed below under the heading Pension Benefits. The present value of Mr. Goffs accumulated benefits actually decreased by $56,010 between fiscal 2017 and 2018; however, as required by SEC disclosure rules, we have reported a change of $0 in the table above. |
(5) | For fiscal 2018, the amounts shown in this column are comprised of (i) reimbursements for the cost of an annual physical examination; (ii) personal use of our aircraft; (iii) contributions or other allocations to our defined contribution plans; (iv) for Mr. Trezise, costs related to his relocation from Monroe, Louisiana to Boulder, Colorado, including temporary housing, closing costs on the purchase and sale of his primary residence, the costs of moving goods, and a related tax gross-up payment, all as provided under the terms of our broad-based employee relocation policy; (v) payments of life insurance premiums under a legacy reimbursement plan; and (vi) certain post-employment payments, specifically, for Mr. Post, cash fees paid to him as an outside director following his retirement from employment with the Company and, for Mr. Hussain, cash severance payments and other post-employment benefits pursuant to our executive severance plan, in each case for and on behalf of the named executives as follows: |
Name |
Year | Physical Exam |
Aircraft Use |
Contributions to Plans |
Relocation Costs |
Tax Gross- up on Relocation Costs |
Life Insurance Premiums |
Post Employment Payments |
Total | |||||||||||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||||||||||||||
Mr. Storey |
2018 | | $ | 66,535 | $ | 11,000 | | | | | $ | 77,535 | ||||||||||||||||||||||||
Mr. Dev |
2018 | | | $ | 11,000 | | | | | $ | 11,000 | |||||||||||||||||||||||||
Mr. Goff |
2018 | $ | 4,206 | $ | 21,690 | $ | 20,733 | | $ | 10,957 | | $ | 57,586 | |||||||||||||||||||||||
Mr. Trezise |
2018 | | $ | 17,640 | $ | 11,000 | $ | 123,495 | $ | 41,913 | | | $ | 194,048 | ||||||||||||||||||||||
Former Executives: |
||||||||||||||||||||||||||||||||||||
Mr. Post |
2018 | $ | 3,060 | $ | 16,500 | $ | 86,952 | | | | $ | 66,250 | $ | 172,762 | ||||||||||||||||||||||
Mr. Patel |
2018 | $ | 2,895 | | $ | 11,000 | | | | | $ | 13,895 | ||||||||||||||||||||||||
Mr. Hussain |
2018 | $ | | | $ | 11,000 | | | | $ | 1,320,039 | $ | 1,331,039 |
For additional information regarding perquisites, see Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayOther BenefitsPerquisites.
(6) | Mr. Storey was promoted to Chief Executive Officer on May 23, 2018. |
(7) | Mr. Dev was appointed as interim Chief Financial Officer effective September 28, 2018 and was promoted to Executive Vice President and Chief Financial Officer effective November 6, 2018. |
72 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Overview
(8) | Mr. Post retired from his role as CenturyLinks Chief Executive Officer immediately following the Companys 2018 annual meeting of shareholders on May 23, 2018 although he continues to serve as a non-employee director. For more information regarding the amounts paid to Mr. Post upon his retirement, see Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of Pay Retirement Compensation Paid to our Former CEO. |
(9) | Mr. Patel resigned from his roles as CenturyLinks Executive Vice President and Chief Financial Officer effective as of September 28, 2018. Upon his resignation, all of Mr. Patels unvested equity awards (including the awards reported as granted during 2018 under Stock Awards) and the balance of his Level 3 retention bonus ($214,500) were forfeited. For more information, see Compensation Discussion and Analysis Our Compensation Program Objectives and Components of Pay Compensation Forfeited by our Former CFO. |
(10) | Mr. Hussain was involuntarily terminated as our Executive Vice President and Chief Technology Officer effective as of November 6, 2018. For more information regarding the amounts paid to Mr. Hussain upon his termination of employment, see Compensation Discussion and Analysis Our Compensation Program Objectives and Components of Pay Compensation Paid to our Former CTO. |
2019 Proxy Statement | 73 |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
Incentive Compensation and Other Awards
2018 Awards. The table and discussion below summarize:
◾ | the range of potential cash payouts to each of our named executives under our short-term incentive program with respect to performance during 2018; and |
◾ | grants of long-term compensation awarded to each named officer on the dates indicated below, including the type of equity award and whether the award is time- or performance-based. |
Grants of Plan-Based Awards(1)
Name
|
Type of Award and Grant Date(2)
|
Range of Payouts Under |
Estimated Future Share Payouts |
All other
|
Grant of Stock
|
|||||||||||||||||||||||||||||||
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
|||||||||||||||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||||||||||||||
Jeffrey K. Storey |
Annual Bonus | $ | 1,610,354 | $ | 3,220,707 | $ | 6,441,414 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 267,103 | 4,946,748 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 200,328 | 400,655 | 801,310 | | 7,420,131 | ||||||||||||||||||||||||||||
Initial PBRS | | | | 162,777 | 325,554 | 651,108 | | 5,827,417 | ||||||||||||||||||||||||||||
Promotion TVRS | | | | | | | 156,870 | 2,905,232 | ||||||||||||||||||||||||||||
Promotion PBRS | | | | 117,653 | 235,306 | 470,612 | | 3,162,513 | ||||||||||||||||||||||||||||
Indraneel Dev |
Annual Bonus | $ | 178,150 | $ | 356,300 | $ | 712,600 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 19,777 | 374,379 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 9,889 | 19,777 | 39,554 | | 374,379 | ||||||||||||||||||||||||||||
Special PBRS | | | | 22,532 | 45,063 | 90,126 | | 839,947 | ||||||||||||||||||||||||||||
Stacey W. Goff |
Annual Bonus | $ | 360,011 | $ | 720,021 | $ | 1,440,042 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 46,265 | 828,144 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 34,700 | 69,399 | 138,798 | | 1,242,242 | ||||||||||||||||||||||||||||
Scott A. Trezise |
Annual Bonus | $ | 190,004 | $ | 380,008 | $ | 760,016 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 16,193 | 289,855 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 12,145 | 24,290 | 48,580 | | 434,791 | ||||||||||||||||||||||||||||
Former Executives: |
||||||||||||||||||||||||||||||||||||
Glen F. Post, III |
Annual Bonus | $ | 428,511 | $ | 857,021 | $ | 1,714,042 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 196,629 | 3,519,659 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 147,473 | 294,945 | 589,890 | | 5,279,516 | ||||||||||||||||||||||||||||
Director TVRS | | | | | | | 8,744 | 161,939 | ||||||||||||||||||||||||||||
Sunit S. Patel |
Annual Bonus | | | | | | | | $ | | ||||||||||||||||||||||||||
Annual TVRS | | | | | | | 69,398 | 1,242,224 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 52,050 | 104,099 | 208,198 | | 1,863,372 | ||||||||||||||||||||||||||||
Initial PBRS | | | | 19,436 | 38,871 | 77,742 | | 695,791 | ||||||||||||||||||||||||||||
Special PBRS | | | | 52,488 | 104,976 | 209,952 | | 1,346,842 | ||||||||||||||||||||||||||||
Aamir Hussain |
Annual Bonus | $ | 305,763 | $ | 611,525 | $ | 1,223,050 | | | | | $ | | |||||||||||||||||||||||
Annual TVRS | | | | | | | 62,458 | 1,117,998 | ||||||||||||||||||||||||||||
Annual PBRS | | | | 46,849 | 93,698 | 187,396 | | 1,677,194 | ||||||||||||||||||||||||||||
(1) | This chart includes only cash bonuses granted under incentive plans, and excludes cash payments reported in the Bonus column of the Summary Compensation Table. For more information on those non-incentive cash bonuses, see Note 1 to the Summary Compensation Table and Compensation Discussion and Analysis Our Compensation Program Objectives and Components of Pay Final Installments of Cash Bonuses Related to Level 3 Combination. |
74 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
(2) | For purposes of this column: |
◾ | Annual Bonus means the bonuses that our named executives were eligible to earn under the CenturyLink STI Program for 2018; |
◾ | Annual TVRS means our time-vested restricted stock or restricted stock units awarded under our annual long-term incentive program to certain named executives on February 21, 2018 (each named executive other than Mr. Storey) or on May 24, 2018 (Mr. Storey); |
◾ | Annual PBRS means our performance-based restricted stock or restricted stock units awarded under our annual long-term incentive program to certain named executives on February 21, 2018 (each named executive other than Mr. Storey) or on May 24, 2018 (Mr. Storey); |
◾ | Promotion TVRS means a grant of time-vested restricted stock granted to Mr. Storey on May 24, 2018 per his amended and restated offer letter; |
◾ | Promotion PBRS means a grant of performance-based restricted stock granted to Mr. Storey on May 24, 2018 per his amended and restated offer letter; |
◾ | Initial PBRS means the performance-based portion of initial restricted stock grants awarded to Messrs. Storey and Patel in connection with the Level 3 Combination, which was consummated on November 1, 2017, as provided in their original offer letters, but which were not granted for accounting purposes until February 2018 when the performance conditions were finalized; |
◾ | Director TVRS means a grant of time-vested restricted stock awarded to Mr. Post under our director compensation program once he became an outside director following his May 23, 2018 retirement; and |
◾ | Special PBRS means a grant of performance-based restricted stock awarded to Mr. Patel on June 1, 2018 and Mr. Dev on August 7, 2018. |
With respect to Mr. Patels awards, all of these were subsequently forfeited upon his resignation from all positions with the Company effective September 28, 2018. For more information on these awards, see Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayShort-Term Incentive Bonuses, Grants of Long-Term Incentive Compensation and Special Grants. |
(3) | These columns provide information on the potential payouts under the annual bonus program for 2018 for our legacy named executives (the CenturyLink STI Plan). The actual amounts paid for 2018 performance are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. Failure to meet the threshold level of performance would result in no payout to the executive. |
(4) | Calculated in accordance with FASB ASC Topic 718 in the manner described in Note 2 to the Summary Compensation Table above. |
2019 Proxy Statement | 75 |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
76 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
Outstanding Equity Awards at December 31, 2018(1)
Stock Awards |
Equity Incentive Awards(2) |
|||||||||||||||||||
Name
|
Grant
|
Number of Unvested Units (#)
|
Market Value of Unvested Shares or Units ($)
|
Number of Unvested Units (#)
|
Market Value Units ($)
|
|||||||||||||||
Current Executives: |
||||||||||||||||||||
Jeffrey K. Storey |
3/1/2017 | 108,921 | (3) | $ | 1,650,153 | | $ | | ||||||||||||
11/1/2017 | 217,036 | (4) | 3,288,095 | | | |||||||||||||||
2/21/2018 | | | 325,554 | (12) | 4,932,143 | |||||||||||||||
5/24/2018 | 267,103 | (5) | 4,046,610 | 400,655 | (13) | 6,069,923 | ||||||||||||||
5/24/2018 | 156,870 | (6) | 2,376,581 | 235,306 | (14) | 3,564,886 | ||||||||||||||
Indraneel Dev |
7/1/2015 | 4,505 | (3) | 68,251 | | | ||||||||||||||
4/1/2016 | 11,987 | (3) | 181,603 | | | |||||||||||||||
7/1/2016 | 7,988 | (3) | 121,018 | | | |||||||||||||||
3/1/2017 | 22,272 | (3) | 337,421 | | | |||||||||||||||
11/1/2017 | 34,552 | (7) | 523,463 | | | |||||||||||||||
2/19/2018 | 19,777 | (5) | 299,622 | 19,777 | (13) | 299,622 | ||||||||||||||
8/7/2018 | | | 45,063 | (15) | 682,704 | |||||||||||||||
Stacey W. Goff |
2/23/2016 | 6,440 | (8) | 97,566 | 28,979 | (16) | 439,032 | |||||||||||||
2/21/2017 | 13,377 | (9) | 202,662 | 30,098 | (17) | 455,985 | ||||||||||||||
6/1/2017 | 125,280 | (10) | 1,897,992 | | | |||||||||||||||
2/21/2018 | 46,265 | (5) | 700,915 | 69,399 | (13) | 1,051,395 | ||||||||||||||
Scott A. Trezise |
2/23/2016 | 3,067 | (8) | 46,465 | 13,800 | (16) | 209,070 | |||||||||||||
2/21/2017 | 6,901 | (9) | 104,550 | 15,527 | (17) | 235,234 | ||||||||||||||
6/1/2017 | 97,440 | (10) | 1,476,216 | | | |||||||||||||||
2/21/2018 | 16,193 | (5) | 245,324 | 24,290 | (13) | 367,994 | ||||||||||||||
Former Executives: |
||||||||||||||||||||
Glen F. Post, III |
2/23/2016 | | $ | | 195,491 | (16) | $ | 2,961,689 | ||||||||||||
2/21/2017 | | | 203,043 | (17) | 3,076,101 | |||||||||||||||
2/21/2018 | | | 294,945 | (13) | 4,468,417 | |||||||||||||||
5/24/2018 | 8,744 | (11) | 132,472 | | | |||||||||||||||
Aamir Hussain |
2/23/2016 | | | 48,298 | (16) | 731,715 | ||||||||||||||
2/21/2017 | | | 38,220 | (17) | 579,033 | |||||||||||||||
(1) | All information presented in this table is as of December 31, 2018, and does not reflect vesting of outstanding equity awards or issuance of additional awards since such date. |
(2) | Represents performance-based equity awards. The table above assumes that, as of December 31, 2018, we would perform at target levels, such that all performance-based shares granted to each named executive would vest at 100%. |
2019 Proxy Statement | 77 |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
(3) | Represents restricted stock units, originally granted to certain named executives by Level 3, which were converted to time-vested CenturyLink restricted stock units as a result of the Level 3 Combination. These awards will vest as follows, subject to the named executives continued employment on such date: |
Grant Date |
Vesting Date | |
July 1, 2015 |
July 1, 2019 | |
April 1, 2016 |
February 1, 2019 | |
July 1, 2016 |
two equal installments on July 1 of 2019 and 2020 | |
March 1, 2017 |
two equal installments on March 1 of 2019 and 2020 | |
(4) | Represents a grant of time-vested restricted stock that vested on February 1, 2019, subject to Mr. Storeys continued employment through such date. |
(5) | Represents an annual grant of time-vested restricted stock (for Messrs. Dev, Goff, and Trezise) or restricted stock units (for Mr. Storey) that will vest in three equal installments on the first three anniversaries of the grant date (February 19 for Mr. Dev; February 21, 2018 for Messrs. Goff and Trezise; May 24, 2018 for Mr. Storey), subject to the executives continued employment through the applicable vesting date. |
(6) | Represents a promotion grant of time-vested restricted stock that will vest in three equal installments on May 24 of 2019, 2020, and 2021, subject to the executives continued employment through the applicable vesting date. |
(7) | These shares of time-vested restricted stock will vest in two equal installments on November 1 of 2019 and 2020, subject to the executives continued employment through the applicable vesting date. |
(8) | These shares of time-vested restricted stock vested on February 23, 2019, subject to the executives continued employment through such date. |
(9) | These shares of time-vested restricted stock vested or will vest in two equal installments on February 21 of 2019 and 2020, subject to the executives continued employment through the applicable vesting date. |
(10) | Represents shares of restricted stock granted under a retention award program to certain legacy named executives. These awards will vest in two equal installments on June 1 of 2019 and 2020, subject to the executives continued employment through the applicable vesting date. |
(11) | These shares of time-based restricted stock, granted to Mr. Post as part of our outside director compensation program, will vest on May 24, 2019, subject to his continued service on our Board through such date. |
(12) | Represents the performance-based portion of an initial equity grant awarded to Mr. Storey on November 1, 2017 under his original offer letter. However, the performance-based portion of this initial grant was not granted for accounting purposes until February 2018, when the performance conditions were finalized. The number of shares earned could range between 0 to 200% of the number granted, depending on our achievement of an Adjusted EBITDA run rate target for fiscal 2018. Based on our fiscal 2018 performance, Mr. Storeys award vested at 200% in March of 2019. For more information, see Incentive Compensation and other Awards and Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PaySpecial Grants. |
(13) | Represents the performance-based portion of our 2018 annual restricted stock or restricted stock unit awards. These awards will vest in two equal installments on February 21 of 2020 and 2021, depending upon our achievement of a two-year Adjusted EBITDA run rate target. For more information on these grants, see Incentive Compensation and other Awards and Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayGrants of Long-Term Incentive Compensation. |
(14) | Represents the performance-based portion of a promotion grant to Mr. Storey. The number of shares earned will range between 0 to 200% of the number granted, with the number earned determined using a two-step process: (1) between 0 to 100% of target will be earned depending on the Companys cumulative Adjusted EBITDA results for the three-year period from 2018 to 2020 and (2) provided that target performance is met or exceeded under step (1), Mr. Storey may earn above target (up to a maximum 200% of target) based on the Companys relative total shareholder return over the same period against the performance of a peer group of companies in the telecommunications industry. For more information, see Incentive Compensation and other Awards and Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PaySpecial Grants. |
(15) | Represents a special performance-based award granted to Mr. Dev before he was appointed an executive officer. This award is divided into two equal tranches, with payout under each tranche ranging from 0 to 200% depending upon our achievement against a two-year Adjusted EBITDA run rate target. The first tranche is defined and calculated in the same manner as the performance-based portion of our 2018 annual grants and the performance period covers fiscal years 2018 and 2019 (vesting date of February 28, 2020), while the second tranche is defined in the same manner as the performance-based portion of our 2019 annual grants and covers fiscal years 2019 and 2020 (vesting date of August 7, 2021). |
(16) | Represents the performance-based portion of awards granted in 2016 as part of our annual LTI program. Based on our performance from 2016 to 2018, 79.11% of the TSR performance-based restricted stock and 82.4% of the absolute revenue performance-based restricted stock vested in February 2019 and the remaining shares were forfeited. |
(17) | Represents the performance-based portion of awards granted in 2017 as part of our annual LTI program. |
78 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
Vesting of Equity Awards During 2018. The following table provides details regarding the equity awards held by our named executives that vested during 2018. Restricted stock and restricted stock units were the only equity awards held by our named executives during 2018.
Stock Vested During 2018
Name |
Number of Shares Acquired on Vesting(1) |
Value Realized on Vesting(2) |
||||||
Current Executives: |
||||||||
Jeffrey K. Storey |
54,461 | $ | 947,630 | |||||
Indraneel Dev |
93,046 | 1,702,029 | ||||||
Stacey W. Goff |
101,320 | 1,796,848 | ||||||
Scott A. Trezise |
70,416 | 1,245,422 | ||||||
Former Executives: |
||||||||
Glen F. Post, III |
462,608 | $ | 8,645,815 | (3) | ||||
Sunit S. Patel |
48,756 | 848,354 | ||||||
Aamir Hussain |
260,472 | 5,197,774 | (3) | |||||
(1) | Represents both time- and performance-based equity awards that vested during 2018. For details on the payout of our performance-based equity awards, please see Compensation Discussion and AnalysisOur Compensation Philosophy and Linkage to Pay for PerformanceOverview of Pay Elements and Linkage to Compensation Philosophy and ObjectivesActual Payouts of Performance-Based Awards. |
(2) | Based on the closing trading price of the Common Shares on the applicable vesting date. |
(3) | Includes shares accelerated upon the retirement of Mr. Post on May 23, 2018, and the termination of Mr. Hussains employment on November 6, 2018. |
Amount of Benefits. The following table and discussion summarize pension benefits payable to the named officers under (i) the CenturyLink Component of the CenturyLink Combined Pension Plan, qualified under Internal Revenue Code Section 401(a), which permits eligible participants (including officers) who have completed at least five years of service to receive a pension benefit upon attaining early or normal retirement age, and (ii) our nonqualified supplemental defined benefit plan, which is designed to pay supplemental retirement benefits to certain officers in amounts equal to the benefits such officers would otherwise forego due to federal limitations on compensation and benefits under qualified plans. We refer to these particular defined benefit plans below as our Qualified Plan and our Supplemental Plan, respectively, and as our Pension Plans, collectively.
Name(1) |
Plan Name | Number of Years of Service |
Present Value of Accumulated Benefit(2) |
Payments During Last Fiscal Year |
||||||||||||
Current Executive: |
||||||||||||||||
Stacey W. Goff |
|
Qualified Plan |
|
|
20 |
|
$ |
670,391 |
|
|
|
| ||||
|
Supplemental Plan |
|
|
20 |
|
|
465,877 |
|
|
|
| |||||
Former Executive: |
||||||||||||||||
Glen F. Post, III(3) |
|
Qualified Plan |
|
|
20 |
|
$ |
|
|
$ |
2,381,686 |
| ||||
|
Supplemental Plan |
|
|
20 |
|
|
2,961,465 |
|
|
110,054 |
|
(1) | Each of Messrs. Storey, Dev and Trezise are, and Messrs. Patel and Hussain were, ineligible to participate in these plans since they joined us after both of our Pension Plans were closed to new participants. |
2019 Proxy Statement | 79 |
EXECUTIVE COMPENSATION
Incentive Compensation and Other Awards
(2) | These figures represent accumulated benefits as of December 31, 2018 based on several assumptions, including the assumption that the executive remains employed by us and begins receiving retirement benefits at the normal retirement age of 65, with such accumulated benefits being discounted from the normal retirement age to December 31, 2018 using discount rates ranging between 4.29% and 4.40%. No adjustments have been made to reflect reductions required under any qualified domestic relations orders. See Note 9 titled Employee Benefits of the notes to our audited financial statements included in Appendix A for additional information. |
(3) | As described elsewhere herein in greater detail, Mr. Post retired immediately following the 2018 annual meeting of our shareholders on May 23, 2018. Following his retirement, Mr. Post began receiving payouts under these plans in accordance with the terms of the applicable plan and his previous elections. |
80 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Deferred Compensation
The following table and discussion provides information on (i) our Supplemental Dollars & Sense Plan, under which certain named officers may elect to defer a portion of their salary in excess of the amounts that may be deferred under federal law governing qualified 401(k) plans, and (ii) the deferred compensation arrangements we have with each of Messrs. Storey and Patel, which are described in more detail in the text following the table below. For 2018, only Messrs. Goff and Post have elected to participate in our Supplemental Dollars & Sense Plan.
Non-Qualified Deferred Compensation
Name |
Aggregate Balance at December 31, 2017(1) |
Executive Contributions in 2018(2) |
CenturyLink Contributions in 2018(3) |
Aggregate Earnings |
Aggregate Withdrawals/ Distributions(5) |
Aggregate Balance at December 31, 2018 | ||||||||||||||||||||||||
Current Executives: |
||||||||||||||||||||||||||||||
Jeffrey K. Storey |
$ |
14,602,206 |
$ |
|
$ |
|
$ |
24,759 |
$ |
9,349,129 |
$ |
5,277,836 |
||||||||||||||||||
Stacey W. Goff |
|
2,126,398 |
|
37,989 |
|
10,143 |
|
(84,260 |
) |
|
|
|
2,090,270 |
|||||||||||||||||
Former Executives: |
||||||||||||||||||||||||||||||
Glen F. Post, III |
$ |
5,239,118 |
$ |
186,611 |
$ |
77,337 |
$ |
(2,947 |
) |
$ |
5,550,118 |
$ |
|
|||||||||||||||||
Sunit S. Patel |
|
6,915,750 |
|
|
|
|
|
|
|
5,002,605 |
|
1,913,145 |
||||||||||||||||||
(1) | For each of Messrs. Goff and Post, this figure represents the aggregate balance of his Supplemental Dollars & Sense Plan account. For Mr. Storey, this figure represents the value of RSUs that were converted to CenturyLink RSUs and accelerated immediately following the Level 3 Combination but which continue to pay out in Common Shares according to their original payout schedule (the Deferred RSUs), as of December 31, 2017. For Mr. Patel, this figure represents the balance, as of December 31, 2017, of the deferred cash award he received upon the acceleration and cash out of certain Level 3 RSUs that were converted to CenturyLink RSUs as result of the Level 3 Combination (the Deferred Cash Award). |
(2) | For participants in the Supplemental Dollars & Sense Plan, the amounts in this column reflect contributions under the Supplemental Dollars & Sense Plan by the officer of salary paid in 2018 and reported as 2018 salary compensation in the Summary Compensation Table. |
(3) | For participants in the Supplemental Dollars & Sense Plan, this column includes our partial match of the officers contribution under the terms of that plan, all of which were included as 2018 compensation in the column of the Summary Compensation Table labeled All Other Compensation. |
(4) | For participants in the Supplemental Dollars & Sense Plan, this column represents aggregate earnings in 2018 including interest, dividends and distributions earned with respect to deferred compensation invested by the officers in the manner described in the text below. For Mr. Storey, this figure represents the change in value of his Deferred RSUs during 2018 (realized gain or loss on Deferred RSUs paid out during 2018 and unrealized gain or loss on his remaining Deferred RSUs as of December 31, 2018). |
(5) | For Mr. Storey, this figure represents the value of Deferred RSUs paid out to him during 2018 (valued based on the closing price of a Common Share on the scheduled payout date). For Mr. Patel, this figure represents the amount of the Deferred Cash Award paid out to him during 2018. |
2019 Proxy Statement | 81 |
EXECUTIVE COMPENSATION
Potential Termination Payments
2019 Proxy Statement | 83 |
EXECUTIVE COMPENSATION
Potential Termination Payments
84 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Potential Termination Payments
Potential Termination Payments
Name |
Type of Termination |
Type of Termination of Employment(1) | ||||||||||||||||||
Involuntary Termination Without Cause(3) |
Retirement | Death or Disability |
Termination Upon a |
|||||||||||||||||
Jeffrey K. Storey |
Annual Bonus | $ | 3,790,772 | $ | 3,790,772 | $ | 3,790,722 | $ | 3,790,722 | |||||||||||
Equity Awards(5) | 25,928,392 | 9,870,392 | 25,928,392 | 25,928,392 | ||||||||||||||||
Pension and Welfare(6) | 58,500 | | | 84,000 | ||||||||||||||||
Cash Severance(7) | 10,800,067 | | | 16,200,101 | ||||||||||||||||
$ | 40,577,731 | $ | 13,661,164 | $ | 29,719,163 | $ | 46,003,265 | |||||||||||||
Indraneel Dev |
Annual Bonus | $ | 438,427 | n/a | $ | 438,427 | $ | 438,427 | ||||||||||||
Equity Awards(5) | 1,390,376 | n/a | 2,513,703 | 2,513,703 | ||||||||||||||||
|
Pension and Welfare(6) |
|
28,675 | n/a | | 28,675 | ||||||||||||||
Cash Severance(7) | 487,500 | n/a | | 487,500 | ||||||||||||||||
$ | 2,344,978 | n/a | $ | 2,952,130 | $ | 3,468,305 | ||||||||||||||
Stacey W. Goff |
Annual Bonus | $ | 847,465 | n/a | $ | 847,465 | $ | 591,341 | ||||||||||||
Equity Awards(5) | 1,897,992 | n/a | 4,845,546 | 4,845,546 | ||||||||||||||||
|
Pension and Welfare(6) |
|
33,800 | n/a | | 60,100 | ||||||||||||||
Cash Severance(7) | 1,320,039 | n/a | | 2,640,077 | ||||||||||||||||
$ | 4,099,296 | n/a | $ | 5,693,011 | $ | 8,137,064 | ||||||||||||||
Scott A. Trezise |
Annual Bonus | $ | 467,600 | n/a | $ | 467,600 | $ | 328,490 | ||||||||||||
Equity Awards(5) | 1,476,216 | n/a | 2,684,853 | 2,684,853 | ||||||||||||||||
|
Pension and Welfare(6) |
|
32,400 | n/a | | 57,300 | ||||||||||||||
Cash Severance(7) | 855,017 | n/a | | 1,710,035 | ||||||||||||||||
$ | 2,831,233 | n/a | $ | 3,152,453 | $ | 4,780,677 |
(1) | All data in the table reflects our estimates of the value of payments and benefits assuming the named officer was terminated on December 31, 2018. The closing price of the Common Shares on such date was $15.15. The table reflects only estimates of amounts earned or payable through or at such date based on various assumptions. Actual amounts can be determined only at the time of termination. If a named officer voluntarily resigns or is terminated with cause, he will not be entitled to any special or accelerated benefits, but will be entitled to receive various payments or benefits that vested before the termination date. The table reflects potential payments based upon a physical disability; additional benefits may be payable in the event of a mental disability. |
(2) | As further described above, upon termination of employment, the named officers may become entitled to receive certain special, accelerated or enhanced benefits, including, subject to certain exceptions, the right to receive payment of their annual cash incentive bonus, an acceleration under certain circumstances of the vesting of their outstanding equity awards, current or enhanced pension and welfare benefits, or cash severance payments. The table excludes (i) payments or benefits made under broad-based plans or arrangements generally available to all salaried full-time employees and (ii) benefits, awards or amounts that the officer was entitled to receive prior to termination of employment. |
(3) | The amounts listed in this column reflect payments to which the named officer would be entitled to under our executive severance plan if involuntarily terminated by us without cause (or, for Mr. Storey, by him with good reason, as provided in his amended and restated offer letter) prior to a change of control. The amounts listed in this column would not be payable if the officer voluntarily resigns (for Mr. Storey, without good reason) or is terminated for cause. |
(4) | The information in this column assumes each named officer became entitled at December 31, 2018 to the benefits under CenturyLinks agreements in existence on such date described above under Payments Made Upon a Change of Control upon an involuntary termination without cause or resignation with good reason. All amounts are based on several assumptions. |
2019 Proxy Statement | 85 |
EXECUTIVE COMPENSATION
Potential Termination Payments
(5) | The information in this row (i) reflects the benefit to the named officer arising out of the accelerated vesting of some or all of his restricted stock triggered by the termination of employment and (ii) assumes that the Compensation Committee would not approve the acceleration of the restricted stock of any named officer in the event of an involuntary termination. |
(6) | The information in this row reflects only the incremental benefits that accrue upon an event of termination, and excludes benefits that were vested on December 31, 2018. For information on the present value of the named officers accumulated benefits under our defined benefit pension plans, see Pension Benefits, and for information on the aggregate balances of the named officers non-qualified deferred compensation, see Deferred Compensation. As indicated above, the named officer would also be entitled to receive a distribution of his or her 401(k) benefits and various other broad-based benefits. |
(7) | The information in this row excludes, in the case of disability or death, payments made by insurance companies. |
In addition, Mr. Storeys 2018 annualized compensation, excluding special one-time events associated with the Level 3 combination, would have been $18,714,772 (as detailed in the final column of the table below), which would have yielded a ratio of CEO pay to median employee pay of approximately 273 to 1.
Compensation Components |
Amount Reported in Summary Compensation Table |
Annualized Amount Used for Pay Ratio Calculation |
Total Compensation Excluding One-time Items |
|||||||||
Salary |
$ | 1,683,299 | $ | 1,800,011 | (1) | $ | 1,800,011 | (1) | ||||
Bonus |
5,842,000 | 5,842,000 | | |||||||||
Equity Awards |
24,262,040 | 24,262,040 | 12,600,000 | (3) | ||||||||
Non-Equity Incentive Plan Compensation |
3,790,772 | 4,237,226 | (2) | 4,237,226 | (2) | |||||||
All Other Compensation |
77,535 | 77,535 | 77,535 | |||||||||
Total |
$ | 35,655,646 | $ | 36,218,812 | $ | 18,714,772 |
86 | 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Pay Ratio Disclosure
(1) | Represents Mr. Storeys CEO salary, as established upon his promotion to CEO, for a full twelve months. |
(2) | Represents the product of Mr. Storeys CEO target STI percentage (200%) and his annualized CEO salary (see footnote 1), multiplied by the product of the actual STI payout percentage and Mr. Storeys individual modifier as approved by the Committee (107% * 110%). |
(3) | Represents Mr. Storeys target annual LTI award for 2018. |
As the SEC rules permit companies to choose between different methodologies for median pay calculations, our ratio should not be used as a basis for comparison with other companies. Other public companies may calculate their pay ratio using a different methodology than what is used by CenturyLink.
2019 Proxy Statement | 87 |
2018 Compensation of Outside Directors
Name |
Fees Earned Paid in Cash |
Stock Awards(1),(2) |
All Other Compensation(3) |
Total | ||||||||||||
Martha H. Bejar
|
$
|
130,500
|
|
$
|
161,939
|
|
$
|
|
|
$
|
292,439
|
| ||||
Virginia Boulet
|
|
133,500
|
|
|
161,939
|
|
|
|
|
|
295,439
|
| ||||
Peter C. Brown
|
|
114,750
|
|
|
161,939
|
|
|
|
|
|
276,689
|
| ||||
Kevin P. Chilton
|
|
139,750
|
|
|
161,939
|
|
|
|
|
|
301,689
|
| ||||
Steven T. Clontz
|
|
104,500
|
|
|
161,939
|
|
|
|
|
|
266,439
|
| ||||
T. Michael Glenn
|
|
118,500
|
|
|
161,939
|
|
|
|
|
|
280,439
|
| ||||
W. Bruce Hanks
|
|
241,500
|
|
|
161,939
|
|
|
10,181
|
|
|
413,620
|
| ||||
Mary L. Landrieu
|
|
108,500
|
|
|
161,939
|
|
|
6,000
|
|
|
276,439
|
| ||||
Harvey P. Perry
|
|
302,500
|
|
|
161,939
|
|
|
11,468
|
|
|
475,907
|
| ||||
Michael J. Roberts
|
|
141,500
|
|
|
161,939
|
|
|
|
|
|
303,439
|
| ||||
Laurie A. Siegel
|
|
139,937
|
|
|
181,571
|
|
|
|
|
|
321,508
|
|
(1) | For purposes of determining the number of restricted shares to grant on May 24, 2018 to each outside director, the Compensation Committee valued each of these stock awards to equal $165,000, plus an additional grant valued at $20,000 to Ms. Siegel (as described in greater detail below), in each case, based upon the volume-weighted average closing price of our Common Shares over a 15-day trading period ending prior to the grant date. For purposes of reporting the fair value of these awards in the table above, however, we valued each grant based upon the closing stock price of our Common Shares on the grant date in accordance with FASB ASC Topic 718. These awards vest on May 24, 2019 (subject to accelerated vesting or forfeiture in certain limited circumstances). See Cash and Stock Payments. |
(2) | As of December 31, 2018, Ms. Siegel held 9,804 unvested shares of restricted stock and each of our other outside directors held 8,744 unvested shares of restricted stock, which constituted the only unvested equity-based awards held by our outside directors as of such date. For further information on our directors stock ownership, see Ownership of Our SecuritiesExecutive Officers and Directors, and for information on certain deferred fee arrangements pertaining to Mr. Roberts, see Other Benefits. |
(3) | Includes (i) reimbursements for the cost of annual physical examinations and related travel of $4,181 for Mr. Hanks and $5,000 for Mr. Perry, (ii) the value of personal use of our aircraft in the amount of $468 for Mr. Perry and (iii) payments related to the attendance of the NACD Global Board Leaders Summit of $6,000 for each of Ms. Landrieu and Messrs. Hanks and Perry. Except as otherwise noted |
88 | 2019 Proxy Statement |
DIRECTOR COMPENSATION
Overview
in the prior sentence, the table above does not reflect (i) reimbursements for travel expenses or (ii) any benefits associated with the directors or their family members participating in recreational activities scheduled during board retreats or meetings (as described further under the heading Compensation Discussion and AnalysisOur Compensation Program Objectives and Components of PayOther BenefitsPerquisites). |
2019 Proxy Statement | 89 |
The graph below compares the cumulative total shareholder return on the Common Shares with the cumulative total return of the S&P 500 Index and the S&P 500 Communication Services Sector Index for the period from December 31, 2013 to December 31, 2018, in each case assuming (i) the investment of $100 on January 1, 2014 at closing prices on December 31, 2013, and (ii) reinvestment of dividends.
December 31, | ||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||
CenturyLink
|
$
|
100.00
|
|
$
|
131.05
|
|
$
|
92.56
|
|
$
|
95.01
|
|
$
|
79.50
|
|
$
|
81.48
|
| ||||||
S&P 500 Index
|
|
100.00
|
|
|
113.56
|
|
|
115.13
|
|
|
128.20
|
|
|
154.45
|
|
|
148.34
|
| ||||||
S&P 500 Communication Services Sector Index(1)
|
|
100.00
|
|
|
109.64
|
|
|
113.09
|
|
|
136.74
|
|
|
135.22
|
|
|
118.08
|
|
(1) | As of December 31, 2018, the S&P 500 Communication Services Sector Index consisted of Activision Blizzard, Inc., Alphabet Inc., AT&T Inc., CBS Corporation, CenturyLink, Charter Communications, Inc., Comcast Corporation, Discovery, Inc., DISH Network Corporation, Electronic Arts Inc., Facebook, Inc., Netflix, Inc., News Corporation, Omnicom Group Inc., Take-Two Interactive Software, Inc., The Interpublic Group of Companies, Inc., The Walt Disney Company, TripAdvisor, Inc., Twenty-First Century Fox, Inc., Twitter, Inc., Verizon Communications Inc. and Viacom Inc. |
2019 Proxy Statement | 91 |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, our Compensation Committee included (i) Laurie A. Siegel, Virginia Boulet, T. Michael Glenn and Michael J. Roberts (for the entire year) and (ii) Steven T. Clontz (beginning on May 23, 2018). No member of the Compensation Committee served as an officer or employee of the Company or any of our subsidiaries prior to or while serving on the Compensation Committee.
92 | 2019 Proxy Statement |
TRANSACTIONS WITH RELATED PARTIES
During 2018, we paid Matthew J. Post, who served as DirectorBig Data Services, total gross compensation of approximately $212,384, consisting of approximately $76,943 in salary, $19,104 in annual incentive bonuses, $51,338 in equity grants, $61,922 in a patent bonus and $3,078 in matching contributions to his qualified 401(k) plan account. Matthew J. Post is the son of Glen F. Post, III, a member of our Board who previously served as our Chief Executive Officer from 1992 until May 2018. Matthew J. Post was an employee of ours from 2014 until August 2018.
During 2018, we paid H. Parnell Perry, Jr., who serves as ManagerTechnology Management, total gross compensation of approximately $139,332, consisting of approximately $115,752 in salary, $18,950 in annual incentive bonuses and $4,630 in matching contributions to his qualified 401(k) plan account. H. Parnell Perry, Jr. is the son of Harvey P. Perry, our Chairman of the Board, and has been an employee of ours since 1987.
During 2018, we paid Jonathan Perry, who serves as DirectorSales & Marketing, Century Marketing Solutions, total gross compensation of approximately $160,433, consisting of approximately $103,226 in salary, $26,549 in annual incentive bonuses, $26,786 in equity grants and $3,873 in matching contributions to his qualified 401(k) plan account. Jonathan Perry is the son of Harvey P. Perry, our Chairman of the Board, and has been an employee of ours since 2008.
We are one of the largest employers in Monroe, Louisiana and in several of our other markets, and, as such, employ personnel related by birth or marriage throughout our organization. Several of our directors have family members employed by us, although none of them (other than Matthew J. Post, H. Parnell Perry, Jr. and Jonathan Perry) earned 2018 compensation in excess of the $120,000 threshold that would require detailed disclosures under the federal proxy rules.
Early each year, our management distributes to the Audit Committee a written report listing our payments to vendors, including a list of transactions with our directors, officers or employees. This annual report permits the independent directors to assess and discuss our related party transactions. Although we have no formal written pre-approval procedure governing related party transactions, our CEO typically seeks approval of the Board before engaging in any new related party transaction involving significant sums or risks.
2019 Proxy Statement | 93 |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires our executive officers and directors, among others, to file certain beneficial ownership reports with the SEC. To our knowledge, based solely on our review of copies of reports received by us and written representations by certain reporting persons, we believe that all such reports were timely filed during fiscal year 2018, except for a Form 4 report for Steven T. Clontz, a director of the Company, to disclose one transaction that occurred on May 25, 2018, which was subsequently disclosed on a Form 5 report.
94 | 2019 Proxy Statement |
SHAREHOLDER PROPOSAL
(Item 6 on Proxy or Voting Instruction Card)
96 | 2019 Proxy Statement |
SHAREHOLDER PROPOSAL
(Item 6 on Proxy or Voting Instruction Card)
2019 Proxy Statement | 97 |
Why am I receiving these proxy materials?
Our Board of Directors is soliciting your proxy to vote at our 2019 annual meeting of shareholders because you owned shares of our stock at the close of business on March 28, 2019, the record date for the meeting, and are entitled to vote those shares at the meeting. Our proxy materials are being made available to you on the Internet beginning on or about April 10, 2019. This proxy statement summarizes information regarding matters to be considered at the meeting. For additional information on our proxy materials, see Other MattersProxy Materials appearing below.
When and where will the meeting be held?
The meeting will be held at 10:00 a.m. local time on Wednesday, May 22, 2019, in the CenturyLink Auditorium at our corporate headquarters, 100 CenturyLink Drive, Monroe, Louisiana. If you would like directions to the meeting, please see our website, www.proxyvote.com. You do not need to attend the meeting to vote your shares.
What matters will be considered at the meeting and what vote is required to approve such matters?
Item |
Board Voting Recommendation |
Vote Required for Approval |
Effect of Abstentions |
Effect of Broker Non-Votes |
Page Reference |
|||||||||||||
Management Proposals: |
||||||||||||||||||
Item 1 |
Election of the 13 director nominees named herein |
FOR
|
Affirmative vote of a majority of the votes cast
|
|
No effect |
|
|
No effect |
|
|
1 |
| ||||||
Item 2 |
Ratification of the appointment of KPMG LLP as our independent auditor for 2019
|
FOR |
Affirmative vote of a majority of the votes cast
|
|
No effect |
|
|
N/A |
|
|
19 |
| ||||||
Item 3 |
Proposal to amend our Articles of Incorporation to increase authorized shares of common stock
|
FOR |
Affirmative vote of a majority of the votes entitled to be cast
|
|
Counted the
|
|
|
Counted the
|
|
|
23 |
| ||||||
Item 4 |
Ratification of the NOL Rights Plan |
FOR |
Affirmative vote of a majority of the votes cast
|
|
No effect |
|
|
No effect |
|
|
25 |
| ||||||
Item 5 |
Non-binding advisory vote to approve our executive compensation
|
FOR |
Affirmative vote of a majority of the votes cast
|
|
No effect |
|
|
No effect |
|
|
29 |
| ||||||
Shareholder Proposals: |
||||||||||||||||||
Item 6 |
Shareholder proposal regarding our lobbying activities, if properly presented at the meeting
|
AGAINST | Affirmative vote of a majority of the votes cast
|
No effect | No effect | 95 |
How many votes may I cast?
You may cast one vote for every share of our common stock or Series L preferred stock that you owned on the record date. Our common stock and Series L preferred stock vote together as a single class on all matters. In this proxy statement, we refer to these shares as our Common Shares and Preferred Shares, respectively, and as our Voting Shares, collectively. As of the record date, we had [●] Common Shares and 7,018 Preferred Shares outstanding.
98 | 2019 Proxy Statement |
FREQUENTLY ASKED QUESTIONS
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
If shares are registered in your name with our transfer agent, Computershare Investor Services L.L.C., you are the shareholder of record of those shares and you may directly vote these shares, together with any shares credited to your account if you are a participant in our automatic dividend reinvestment and stock purchase service.
If your shares are held on your behalf in a stock brokerage account or by a bank or other nominee, you are the beneficial owner of shares held in street name. We have requested that our proxy materials be made available to you by your broker, bank or nominee, who is considered the shareholder of record of those shares.
If I am a shareholder of record, how do I vote?
If you are a shareholder of record, you may vote in person at the meeting or by proxy in any of the following three ways:
◾ | call 1-800-690-6903 and follow the instructions provided; |
◾ | log on to the Internet at www.proxyvote.com and follow the instructions at that site; or |
◾ | request a paper copy of our proxy materials and, following receipt thereof, mark, sign and date your proxy card and return it to Broadridge Financial Solutions, Inc. |
If you need additional help with this years proxy, control numbers or using ProxyVote.com, please call proxy support at 866-232-3037 (Toll-free) or 720-358-3640 (Intl Toll).
Please note that you may not vote by telephone or the Internet after 11:59 p.m. Eastern Time on May 21, 2019.
If I am a beneficial owner of shares held in street name, how do I vote?
As the beneficial owner, you have the right to instruct your broker, bank or nominee how to vote your shares by using any voting instruction card supplied by them or by following their instructions for voting by telephone, the Internet, or in person.
If I am a benefit plan participant, how do I vote?
If you beneficially own any of our Common Shares by virtue of participating in any retirement plan of CenturyLink, then you will receive a separate voting instruction card that will enable you to direct the voting of these shares. This voting instruction card entitles you, on a confidential basis, to instruct the trustees how to vote the shares allocated to your plan account. The plans require you to act as a named fiduciary, which requires you to exercise your voting rights prudently and in the interests of all plan participants. Plan participants who wish to vote should complete and return the voting instruction card in accordance with its instructions. If you elect not to vote the shares allocated to your accounts, your shares will be voted in the same proportion as voted shares regarding each of the items submitted to a vote at the meeting. Plan participants that wish to revoke their voting instructions must contact the trustee and follow its procedures.
If you beneficially own any of our Common Shares by virtue of previously participating in an employee stock purchase plan formerly maintained by us or a company that we have acquired, we have made arrangements for our proxy materials to be made available to you by the record owner of those shares. Consequently, you will be afforded the opportunity to vote those shares in the same manner as any other shares held in street name.
How do I register to attend the meeting in person?
If you would like to attend the meeting in person, you must register in advance at www.proxyvote.com and follow the instructions at that site.
How do I gain admission to the Annual Meeting?
For admission to the Annual Meeting, each shareholder will be asked to present (i) valid picture identification, such as a drivers license or passport, and (ii) proof of ownership of our common stock as of the record date, such as an admission ticket, a brokerage statement, proxy card or voting instruction form reflecting stock ownership. To request an admission ticket in advance of the Annual Meeting please visit www.proxyvote.com and follow the instructions provided. If you do not have internet access, you can register by calling 1-844-318-0137. You will need the 16-digit number included on your proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials.
What is the quorum requirement for the Meeting?
Our bylaws provide that the presence at the meeting, in person or by proxy, of a majority of the outstanding Voting Shares constitutes a quorum to organize the meeting.
2019 Proxy Statement | 99 |
FREQUENTLY ASKED QUESTIONS
Can I revoke or change my voting instructions after I deliver my proxy?
Shareholders of record may revoke their proxy or change their votes at any time before their proxy is voted at the meeting by giving a written revocation notice to our secretary, by timely delivering a proxy bearing a later date or by voting in person at the meeting. Beneficial shareholders may revoke or change their voting instructions by contacting the broker, bank or nominee that holds their shares.
Who pays the cost of soliciting proxies?
We will pay all expenses of soliciting proxies for the meeting. Proxies may be solicited personally, by mail, by telephone or by facsimile by our directors, officers and employees, who will not be additionally compensated therefor. We will also request persons holding Voting Shares in their names for others, such as brokers, banks and other nominees, to forward materials to their principals and request authority for the execution of proxies, and we will reimburse them for their expenses incurred in connection therewith. We have retained Innisfree M&A Incorporated, New York, New York, to assist in the solicitation of proxies, for which we will pay Innisfree fees anticipated to be $22,500 and will reimburse Innisfree for certain of its out-of-pocket expenses.
Could other matters be considered and voted upon at the Meeting?
Our Board does not expect to bring any other matter before the Meeting. Further, management has not timely received any notice that a shareholder desires to present any matter for action at the meeting in accordance with our bylaws (which are described below under Frequently Asked QuestionsWhat is the deadline to propose actions for consideration at the 2020 Annual Meeting of Shareholders or to nominate individuals to serve as directors?) other than the shareholder proposal described in this proxy statement, and is otherwise unaware of any matter to be considered by shareholders at the meeting other than those matters specified in the accompanying notice of the meeting. Our proxy and voting instruction cards, however, will confer discretionary voting authority with respect to any other matter that may properly come before the meeting. It is the intention of the persons named therein to vote in accordance with their best judgment on any such matter.
Who sets the rules regarding conduct at the Meeting?
The Chairman has broad responsibility and legal authority to conduct the meeting in an orderly and timely manner. This authority includes establishing rules for shareholders who wish to address the meeting. Copies of these rules will be available at the meeting. The Chairman may also exercise broad discretion in recognizing shareholders who wish to speak and in determining the extent of discussion on each item of business. In light of the need to conduct all necessary business and to conclude the meeting within a reasonable period of time, we cannot assure that every shareholder who wishes to speak on an item of business will be able to do so.
You will not be permitted to bring audio visual equipment, ampliphones or posters into the meeting. We reserve the right, to be exercised in our sole discretion, to admit guests, such as local politicians or the press, into the meeting.
What happens if the Meeting is postponed or adjourned?
The Chairman may postpone or adjourn the meeting. Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
What is the deadline to propose actions for consideration at the 2020 Annual Meeting of Shareholders or to nominate individuals to serve as directors?
You may submit proposals, including director nominations, for consideration at future annual meetings of shareholders.
Proxy Statement Proposals. To be eligible for inclusion in our 2020 proxy materials, any shareholder proposal to elect shareholder-nominated candidates as directors or to take any other action at such meeting must be received by December 14, 2019, and must comply with applicable federal proxy rules and our bylaws. See Frequently Asked Questions What information needs to be included in a shareholder notice nominating a director or proposing other action? These shareholder proposals must be in writing and received by the deadline described above at our principal executive offices at 100 CenturyLink Drive, Monroe, Louisiana 71203, Attention: Stacey W. Goff, Secretary. If we do not receive a shareholder proposal by the deadline described above, we may exclude the proposal from our proxy materials for our 2020 annual meeting.
100 | 2019 Proxy Statement |
FREQUENTLY ASKED QUESTIONS
Other Proposals and Nominations. In addition, our bylaws require shareholders to furnish timely advance written notice of their intent to nominate a director or bring any other matter before a shareholders meeting, whether or not they wish to include their candidate or proposal in our proxy materials. In general, notice must be received in writing by our Secretary, addressed in the manner specified in the immediately-preceding paragraph, between November 24, 2019 and February 22, 2020 and must contain various information specified in our bylaws. (If the date of the 2020 annual meeting is more than 30 days before or more than 60 days after May 22, 2020, notice must be delivered not earlier than the close of business on the 180th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, then 10th day following the day on which such public announcement of the date of such meeting is first made by the Company.) Notices that are not delivered in accordance with our bylaws may be disregarded by us. For additional information on these procedures, see Frequently Asked Questions What information needs to be included in a shareholder notice nominating a director or proposing other action?
Our above-described advance notice bylaw provisions are in addition to, and separate from, the requirements that a shareholder must meet in order to have a candidate or proposal included in our proxy materials.
Proxies granted by a shareholder will give discretionary authority to the proxy holders to vote on any matters introduced pursuant to the above-described advance notice bylaw provisions, subject to applicable rules of the SEC.
The summaries above are qualified in their entirety by reference to the full text of our bylaws. You may obtain a full copy of our bylaws by reviewing our reports filed with the SEC, by accessing our website at www.centurylink.com, or by contacting our Secretary in the manner specified below.
What information needs to be included in a shareholder notice nominating a director or proposing other action?
If timely notice is provided, our bylaws permit shareholders to nominate a director or bring other matters before a shareholders meeting. The written notice required to be sent by any shareholder nominating a director must include various information, including, as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is being made, (i) the name and address of such shareholder, any such beneficial owner, and any other parties affiliated, associated or acting in concert therewith, (ii) their beneficial ownership interests in our Voting Shares, including disclosure of arrangements that might cause such persons voting, investment or economic interests in our Voting Shares to differ from those of our other shareholders, (iii) certain additional information concerning such parties required under the federal proxy rules, (iv) a description of all agreements with respect to the nomination among the nominating shareholder, any beneficial owner, any person acting in concert with them, each proposed nominee and certain other persons, and (v) a representation whether any such person intends to solicit proxies or votes in support of their proposed nominees. With respect to each proposed nominee, the written notice must also, among other things, (i) set forth biographical and other data required under the federal proxy rules and a description of various compensation or other arrangements or relationships between each proposed nominee and the nominating shareholder and its affiliated parties and (ii) furnish both a completed and duly executed questionnaire and a duly executed agreement designed to disclose various aspects of the proposed nominees background, qualifications and certain specified arrangements with other persons, as well as to receive the proposed nominees commitment to abide by certain specified agreements and undertakings. We may require a proposed nominee to furnish other reasonable information or certifications. Shareholders interested in bringing before a shareholders meeting any matter other than a director nomination should consult our bylaws for additional procedures governing such requests. We may disregard any nomination or submission of any other matter that fails to comply with these bylaw procedures.
In addition, our bylaws provide that under certain circumstances a shareholder or group of shareholders may include director candidates that they have nominated in our annual meeting proxy materials. These proxy access provisions of our bylaws provide, among other things, that a shareholder or group of up to ten shareholders seeking to include director candidates in our annual meeting proxy materials must own 3% or more of our
2019 Proxy Statement | 101 |
FREQUENTLY ASKED QUESTIONS
outstanding Common Shares continuously for at least the previous three years. The number of shareholder-nominated candidates appearing in any of our annual meeting proxy materials cannot exceed 20% of the number of directors then serving on the Board. If 20% is not a whole number, the maximum number of shareholder-nominated candidates would be the closest whole number below 20%. Based on the current board size of 13, two is the maximum number of proxy access candidates that we would be required to include in our 2020 proxy materials for the 2020 annual meeting. The nominating shareholder or group of shareholders also must deliver the information required by our bylaws, and each nominee must meet the qualifications required by our bylaws.
Shareholder requests to nominate directors or to bring any other matter before our 2020 annual shareholders meeting, whether or not they wish to include their candidate or proposal in our proxy materials, must be received by our Secretary by the deadlines specified in the response to the preceding question.
The summaries above of the advance notification and proxy access provisions of our bylaws are qualified in their entirety by reference to the full text of Section 5 of Article IV of our bylaws. You may obtain a full copy of our bylaws by reviewing our reports filed with the SEC, by accessing our website at www.centurylink.com, or by contacting our Secretary in the manner specified below under Other Matters.
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to Proxy Statement
Proposed Amendment to Our Articles of Incorporation
If the proposal to amend our articles of incorporation is adopted, Section A of Article III of our restated articles of incorporation would be amended and restated as follows (language that would be removed and replaced is shown as a strikethrough; language that would be adopted in place of the removed text is shown in boldface text and is underscored):
ARTICLE III
Capital
A. Authorized Stock. The Corporation shall be authorized to issue an aggregate of 1.602 billion 2,202,000,000 shares of capital
stock, of which 1.6 billion 2,200,000,000 shares shall be Common Stock, $1.00 par value per share, and 2,000,000 shares shall be Preferred Stock, $25.00 par value per share.
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Section 382 Rights Agreement, dated as of February 13, 2019, between CenturyLink, Inc., a Louisiana corporation (the Company), and Computershare Trust Company, N.A., as rights agent (the Rights Agent).
The Company has generated net operating loss carryovers and tax credit carryovers for United States federal income tax purposes (NOLs), which are expected to provide valuable tax benefits to the Company. The ability to use the NOLs may be impaired or destroyed by an ownership change within the meaning of Section 382 (as such term is hereinafter defined). The Company desires to avoid such an ownership change and thereby preserve the ability to use the NOLs without limitation.
The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a Right) for each Common Share (as hereinafter defined) of the Company outstanding on February 25, 2019 (the Record Date), each Right representing the right to purchase one ten-thousandth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date, the Early Expiration Date and the Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
(a) Acquiring Person shall mean any Person (other than any Exempt Person) who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.9% or more of the Common Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan; provided, however, that, (i) any Person who or which would otherwise be an Acquiring Person as of the date of this Agreement will not be deemed to be an Acquiring Person for any purpose of this Agreement prior to or after the date of this Agreement unless and until such time as (A) such Person or any Affiliate or Associate of such Person thereafter becomes, individually or in the aggregate, by reason of a transaction or transactions after the date of this Agreement the Beneficial Owner of additional Common Shares representing one-half of one percent (0.5%) or more of the Common Shares outstanding at the time of such acquisition, other than (1) pursuant to any agreement or regular-way purchase order for Common Shares that is in effect on or prior to the date of this Agreement and consummated in accordance with its terms after the date of this Agreement, or (2) as a result of a stock dividend, rights dividend, stock split or similar transaction effected by the Company in which all holders of Common Shares are treated equally, or (B) any other Person who is the Beneficial Owner of Common Shares becomes an Affiliate or Associate of such Person after the date of this Agreement; provided, however, that the foregoing exclusion in this clause (i) shall cease to apply with respect to any Person at such time as such Person, together with all Affiliates and Associates of such Person, Beneficially Owns less than 4.9% of the then-outstanding Common Shares; (ii) a Person will not be deemed to have become an Acquiring Person solely as a result of a reduction in the number of Common Shares outstanding unless and until such time as (A) such Person or any Affiliate or Associate of such Person thereafter becomes the Beneficial Owner of any additional Common Shares, other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Shares are treated equally, or (B) any other Person who is the Beneficial Owner of Common Shares becomes an Affiliate or Associate of such Person after the date of this Agreement; and (iii) a Person will not be deemed to have become an Acquiring Person solely as a result of an Exempted Transaction, provided, however, that the foregoing exclusion in this clause (iii) shall cease to apply with respect to any Person at such time as such Person (or any Affiliates or Associates of such Person) acquires any additional Common Shares.
In addition, notwithstanding the foregoing, and notwithstanding anything to the contrary provided in this Agreement, a Person shall not be an Acquiring Person if the Independent Directors determine at any time prior to the Distribution Date that a Person who would otherwise be an Acquiring Person, has become such inadvertently or without intending to become an Acquiring Person, and such Person divests as promptly as practicable (or within such period of time as the Independent Directors determine is reasonable) a sufficient
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number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing.
(b) Affiliate shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement and, to the extent not included within the foregoing, will also include, with respect to any Person, any other Person (other than an Exempt Person) whose Common Shares would be deemed constructively owned by such first Person pursuant to the provisions of Section 382; provided, however, that a Person will not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors or officers of the Company; provided, that with respect to STT, Affiliate shall have the meaning set forth in the Stockholder Rights Agreement.
(d) Associate shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.
(e) A Person shall be deemed the Beneficial Owner of and shall be deemed to beneficially own any securities:
(i) which such Person or any of such Persons Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Persons Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or
(ii) which such Person or any of such Persons Affiliates or Associates has the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Persons Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(e)(ii) hereof) or disposing of any securities of the Company; or
(iv) which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such Person pursuant to Section 382.
Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase then outstanding, when used with reference to a Persons Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder.
(e) Business Day shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in New York are authorized or obligated by law or executive order to close.
(f) Close of Business on any given date shall mean 5:00 P.M., New York time, on such date; provided, however, that, if such date is not a Business Day, it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) Common Shares when used with reference to the Company shall mean the shares of common stock, par value $1.00 per share, of the Company. Common Shares when used with reference to any Person other than
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the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
(h) Common Share Equivalents shall have the meaning set forth in Section 11(a)(iii) hereof.
(i) Current Value shall have the meaning set forth in Section 11(a)(iii) hereof.
(j) Distribution Date shall have the meaning set forth in Section 3(a) hereof.
(k) Early Expiration Date shall have the meaning set forth in Section 7(a) hereof.
(l) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(m) Exchange Ratio shall have the meaning set forth in Section 24(a) hereof.
(n) Exempt Person shall mean (i) STT and its Affiliates and Associates unless and until STT (or any Affiliates of STT) acquires any Common Shares other than (x) in a transaction that is permitted under Section 4 of the Stockholder Rights Agreement or (y) any transfers of Common Shares or other Company equity interests between STT and its Affiliates, (ii) any Person to whom STT transfers any amount of Common Shares permitted by Section 4.2 of the Stockholder Rights Agreement unless and until such Person (or any Affiliates or Associates of such Person) acquires any additional Common Shares and (iii) any other Person whose Beneficial Ownership (together with all Affiliates and Associates of such Person) of 4.9% or more of the then-outstanding Common Shares (1) will not jeopardize or endanger the availability to the Company of any income tax benefit or (2) is otherwise in the best interests of the Company, in each case as determined by the Independent Directors in their sole discretion prior to the Distribution Date; provided, however, that such a Person will cease to be an Exempt Person if the Independent Directors make a contrary determination with respect to the effect of such Persons Beneficial Ownership (together with all Affiliates and Associates of such Person) regardless of the reason therefor.
(o) Exempted Transaction means any transaction that the Independent Directors, in their sole discretion, have declared exempt pursuant to Section 35, which determination shall be irrevocable with respect to such transaction.
(p) Final Expiration Date shall have the meaning set forth in Section 7(a) hereof.
(q) Independent Directors shall mean any director of the Company who is an independent director under the rules of the NYSE and also is not (a) a director, an officer or an employee of an Exempt Person or a Person excluded from definition of Acquiring Person in clause (i) of such definition, (b) a director, an officer or an employee of an Affiliate or Associate of an Exempt Person or a Person excluded from definition of Acquiring Person in clause (i) of such definition; (c) an Exempt Person or a Person excluded from definition of Acquiring Person in clause (i) of such definition; or (d) an Affiliate or an Associate of an Exempt Person or a Person excluded from definition of Acquiring Person in clause (i) of such definition.
(r) NOLs shall have the meaning set forth in recitals hereof.
(s) NYSE shall mean the New York Stock Exchange.
(t) Person shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust or other entity, or a group of Persons making a coordinated acquisition of shares or otherwise treated as an entity within the meaning of Section 1.382 -3(a)(1) of the Treasury Regulations, and shall include any successor (by merger or otherwise) of such individual or entity, but shall not include a Public Group (as such term is defined in Section 1.382 -2T(f)(13) of the Treasury Regulations).
(u) Preferred Shares shall mean shares of Series CC Junior Participating Preferred Shares, par value $28.00 per share, of the Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Agreement as Exhibit A.
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(v) Purchase Price shall have the meaning set forth in Section 4 hereof.
(w) Record Date shall have the meaning set forth in the second paragraph hereof.
(x) Redemption Date shall have the meaning set forth in Section 7(a) hereof.
(y) Redemption Price shall have the meaning set forth in Section 23(a) hereof.
(z) Right shall have the meaning set forth in the second paragraph hereof.
(aa) Right Certificate shall have the meaning set forth in Section 3(a) hereof.
(bb) Section 382 shall mean Section 382 of the Internal Revenue Code of 1986, as amended, and any successor provision or replacement provision.
(cc) Shares Acquisition Date shall mean the date of the first public announcement by the Company that an Acquiring Person has become such, which announcement shall follow a determination by the Board to such effect, which is made and reflected in a Board resolution prior to the earliest of the Redemption Date, the Early Expiration Date and the Final Expiration Date.
(dd) Spread shall have the meaning set forth in Section 11(a)(iii) hereof.
(ee) Stockholder Approval shall mean the approval of this Agreement by the affirmative vote of the holders of a majority of the votes cast the meeting of stockholders of the Company duly held in accordance with the Companys Articles of Incorporation (as amended) and applicable law.
(ff) Stockholder Approval shall mean the approval of this Agreement by the affirmative vote of a majority of the votes cast at the meeting of stockholders of the Company duly held in accordance with the Companys Articles of Incorporation (as amended) and applicable law.
(gg) STT shall mean STT Crossing Ltd.
(hh) Subsidiary of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.
(ii) Summary of Rights shall have the meaning set forth in Section 3(b) hereof.
(jj) Trading Day shall have the meaning set forth in Section 11(d) hereof.
(kk) Treasury Regulations shall mean final, temporary and proposed income tax regulations promulgated under the Internal Revenue Code of 1986, as amended, including any amendments thereto.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as rights agent for the Company in accordance with the express terms and conditions hereof (and no implied terms or conditions), and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable; provided that the Company shall notify the Rights Agent in writing ten (10) Business Days prior to such appointment. In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents under the provisions of this Agreement shall be as the Company reasonably determines, and the Company shall notify, in writing, the Rights Agent and any co-Rights Agents of such duties. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agents.
Section 3. Issue of Right Certificates. (a) Until the tenth Business Day after the Shares Acquisition Date (including any such Shares Acquisition Date which is after the date of this Agreement and prior to the issuance of the Rights) (or such later day, if any, as the Independent Directors determine in their discretion to be no longer than a 15 Business Day extension) (the Distribution Date), (i) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares of the Company or book entry
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Common Shares of the Company registered in the names of the holders thereof (which certificates or book entry shares shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (ii) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares of the Company. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested to do so by the Company and provided with all necessary information and documentation, in form and substance reasonably satisfactory to the Rights Agent, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a Right Certificate), evidencing one Right for each Common Share so held (other than with respect to Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof). As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates, and the Rights Certificates and the Rights shall be transferable separately from the transfer of Common Shares. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm the same in writing on or prior to the Business Day next following. Until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.
(b) On the Record Date, or as soon as practicable thereafter, the Company will send (directly or, at the expense of the Company, through the Rights Agent or its transfer agent if the Rights Agent or transfer agent is directed by the Company and provided with all necessary information and documents) a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the Summary of Rights), to each record holder of Common Shares as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company or transfer agent or register for Common Shares. With respect to certificates for Common Shares (or book-entry Common Shares) outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto and not by separate Rights Certificates. With respect to book-entry Common Shares outstanding as of the Record Date, until the Distribution Date (or the earliest of the Redemption Date, the Early Expiration Date or the Final Expiration Date), the Rights shall be evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Shares together with the Summary of Rights. Until the Distribution Date (or the earliest of the Redemption Date, the Early Expiration Date or the Final Expiration Date), the surrender for transfer of any Common Shares outstanding on the Record Date (whether represented by certificates or evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Shares, and, in either case, regardless of whether a copy of the Summary of Rights is submitted with the surrender or request for transfer), shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby.
(c) Certificates for Common Shares (or confirmation or account statements sent to holders of Common Shares in book-entry form) which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date, the Early Expiration Date or the Final Expiration Date shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Agreement between CenturyLink, Inc. (the Company) and Computershare Trust Company, N.A., or any successor rights agent, dated as of February 13, 2019, as it may be amended from time to time (the Agreement), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Agreement, such Rights (as defined in the Agreement) will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Agreement without charge after receipt of a written request therefor. As set forth in the Agreement, Rights beneficially owned by any Person (as defined in the Agreement) who becomes an Acquiring Person (as defined in the Agreement) become null and void.
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With respect to such certificates bearing the foregoing legend, until the earliest of the Distribution Date, the Redemption Date, the Early Expiration Date or the Final Expiration Date, the Rights associated with the Common Shares of the Company represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby. In the event that the Company purchases or acquires any Common Shares of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares of the Company which are no longer outstanding.
With respect to Common Shares in book entry form for which there has been sent a confirmation or account statement containing the foregoing legend in substantially similar form, until the earliest of the Distribution Date, the Redemption Date, the Early Expiration Date or the Final Expiration Date, the Rights associated with the Common Shares shall be evidenced by such Common Shares alone and registered holders of Common Shares shall also be the registered holders of the associated Rights, and the transfer of any such Common Shares shall also constitute the transfer of the Rights associated with such Common Shares.
Notwithstanding this paragraph (c), the omission of the legend or the failure to send, deliver or provide the registered owner of Common Shares a copy of the Summary of Rights shall not affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto, and may have such changes or marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties, liabilities, protections or responsibilities of the Rights Agent hereunder) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any applicable rule or regulation made pursuant thereto or with any applicable rule or regulation of any stock exchange or the Financial Industry Regulatory Authority, or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one ten-thousandths of a Preferred Share as shall be set forth therein at the price per one ten-thousandth of a Preferred Share set forth therein (the Purchase Price), but the number of such one ten-thousandths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chief Executive Officer, Chief Financial Officer, President, General Counsel, Corporate Secretary, any of its Senior Vice Presidents or its Treasurer, either manually or by facsimile or other electronic signature (e.g., PDF), shall have affixed thereto the Companys seal or a copy by facsimile or electronic means, if necessary, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile or other electronic signature. The Right Certificates shall be countersigned manually or by facsimile or other electronic means (e.g., PDF) by an authorized signatory of the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the individual who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such individual was not such an officer.
Following the Distribution Date, upon receipt by the Rights Agent of notice to that effect and all other relevant information and documents referred to in Section 3(a), the Rights Agent will keep or cause to be kept, at its office(s) designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates,
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the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earliest of the Redemption Date, the Early Expiration Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof, that have been redeemed pursuant to Section 23, or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates entitling the registered holder to purchase a like number of one ten-thousandths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender, together with any required form of assignment duly executed and properly completed, the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office(s) of the Rights Agent designated for such purpose, along with a signature guarantee (if required) and such other and further documentation as the Company or the Rights Agent may reasonably request.. The Rights Certificates are transferable only on the books and records of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder has properly completed and duly executed the certificate set forth in the form of assignment on the reverse side of such Rights Certificate and has provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate as the Company or the Rights Agent may reasonably request. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company or the Rights Agent may require payment by the holder of the Rights of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. If and to the extent the Company does require payment of any such taxes or governmental charges, the Company shall give the Rights Agent prompt written notice thereof and the Rights Agent shall not deliver any Rights Certificate unless and until it is satisfied that all such payments have been made, and the Rights Agent shall forward any such sum collected by it to the Company or to such Persons as the Company specifies by written notice. The Rights Agent shall have no duty or obligation to take any action under any Section of this Agreement which requires the payment of applicable taxes and/or governmental charges unless and until it is satisfied that all such taxes and/or governmental charges have been paid.
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, along with such other and further documentation as the Company or the Rights Agent may reasonably request and, at the Companys request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will execute and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Notwithstanding any other provision hereof, the Company and the Rights Agent may amend this Agreement to provide for uncertificated Rights in addition to or in lieu of Rights evidenced by Right Certificates, to the extent permitted by applicable law.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein), in whole or in part, at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed (with such signature duly guaranteed, if required), to the Rights Agent at the office or offices of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one ten-thousandth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) December 1, 2020 (the Final
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Expiration Date), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the Redemption Date), (iii) the time at which such Rights are exchanged as provided in Section 24 hereof, (iv) the time at which the Independent Directors determine that the NOLs are utilized in all material respects or that an ownership change under Section 382 would not adversely impact in any material respect the time period in which the Company could use the NOLs, or materially impair the amount of the NOLs that could be used by the Company in any particular time period, for applicable tax purposes, (v) the first anniversary of the execution of this Agreement if Stockholder Approval has not been obtained prior to such date, (vi) a determination by the Independent Directors, prior to the Distribution Date, that this Agreement and the Rights are no longer in the best interests of the Company and its stockholders (the earliest of the dates set forth in clauses (iv), (v)and (vi) the Early Expiration Date).
(b) The Purchase Price for each one ten-thousandth of a Preferred Share purchasable pursuant to the exercise of a Right shall initially be $28, and shall be subject to adjustment from time to time as provided in Section 11 hereof, and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase properly completed and duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashiers check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes any such transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one ten-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent of the Preferred Shares with such depositary agent) and the Company shall direct such depositary agent to comply with such request; (ii) when necessary to comply with this Rights Agreement, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof; (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder; and (iv) when necessary to comply with this Rights Agreement, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall properly exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to registered holder of such Right Certificate or to such holders duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement or any Right Certificate to the contrary, neither the Rights Agent nor the Company shall be obligated to take any action with respect to a registered holder upon the occurrence of any purported transfer or exercise as set forth in this Section 7 by such registered holder unless such registered holder has (i) properly completed and duly executed the certificate following the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate as the Company or the Rights Agent reasonably requests.
(g) Except for those provisions herein that expressly survive the termination of this Agreement, this Agreement shall terminate upon the earlier of the Redemption Date, Early Expiration Date or Final Expiration Date and such time as all outstanding Rights have been exercised, redeemed or exchanged hereunder.
Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly
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permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. Subject to applicable law and regulation, the Rights Agent shall maintain in a retrievable database electronic records of all cancelled or destroyed stock certificates which have been canceled or destroyed by the Rights Agent. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy or cause to be destroyed such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Companys reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer
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books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 hereof, in the event any Person becomes an Acquiring Person after the date of this agreement (including becoming such prior to the Record Date), each holder of a Right (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person) shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one ten-thousandths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one ten-thousandths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of the Company (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void, and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with subparagraph (ii) above, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall, to the extent permitted by applicable law and any agreements or instruments then in effect to which the Company is a party, (A) determine the excess of (1) the value of the Common Shares issuable upon the exercise of a Right (the Current Value) over (2) the Purchase Price (such excess being the Spread), and (B) with respect to each Right, make adequate provision to substitute, for each Common Share that would otherwise be issuable upon exercise of a Right, upon exercise of a Right and payment of the applicable Purchase Price, (1) cash; (2) Preferred Shares or fractions of Preferred Shares or other equity securities of the Company (including, without limitation, shares, or units of shares, of Preferred Shares which the Board has determined to have the same value as the Common Shares) (such shares of equity securities being herein called Common Share Equivalents); (3) debt securities of the Company; (4) other assets; or (5) any combination of the foregoing, in each case having an aggregate value equal to the Current Value, as determined by the Board based upon the advice of a financial advisor selected by the Board.
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (equivalent preferred shares)) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred
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Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and, in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then-current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such then-current per share market price of the Preferred Shares on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and, in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the current per share market price of any security (a Security for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days immediately prior to such date; provided, however, that, in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or Securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or, in case no such sale takes place on such day, the average of the bid and asked prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as reported on the national securities exchange with respect to securities listed or admitted to trading on the NYSE or NASDAQ or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or prior to 4:00 P.M. Eastern time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported as of 4:00 P.M. Eastern time by the OTC Bulletin Board or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term Trading
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Day shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business, or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the current per share market price of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the current per share market price of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, current per share market price shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one- millionth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and the provisions of Sections 7, 9 and 10 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one ten-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one ten-thousandths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (A) multiplying (x) the number of one ten-thousandths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (B) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one ten-thousandths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one ten-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement (with simultaneous written notice to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to
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be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein, and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or in the number of one ten-thousandths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one ten-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one ten-thousandth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent; and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that no such election has occurred) until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holders right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in Section 11(b) hereof, hereafter made by the Company to holders of the Preferred Shares shall not be taxable to such stockholders.
(n) In the event that, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then, in any such case, (A) the number of one ten-thousandths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one ten-thousandths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in
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this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares and the Securities and Exchange Commission a copy of such certificate and (c) if such adjustment occurs at any time after the Distribution Date, mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent is protected in relying on any such certificate and on any adjustments or statements therein contained and shall not be deemed to have knowledge of any such adjustment or event unless and until it shall have received such certificate.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported on the national securities exchange with respect to securities listed or admitted to trading on the NYSE or NASDAQ or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the OTC Bulletin Board or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one ten-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one ten-thousandth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of one of the events specified in Section 11 hereof giving rise to the right to receive Common Shares or other securities upon the exercise of a Right, the Company will not be required to issue fractions of Common Shares or other securities upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares or other securities. In lieu of fractional Common Shares or other securities, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of a Common Share or other securities. For purposes of this Section 14(c), the current market value of one share of
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a Common Shares is the Closing Price of one share of a Common Share for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right, by the acceptance of the Right, expressly waives such holders right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).
(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent under this Agreement, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and formulas utilized in calculating such payments; and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and has no duty with respect to, and will not be deemed to have knowledge of, any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent has received such a certificate and sufficient monies.
Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in such holders own behalf and for such holders own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holders right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement by the Company will be entitled to specific performance of the obligations hereunder, and injunctive relief against actual or threatened violations by the Company of the obligations of any Person (including, without limitation, the Company) subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be evidenced by the balances indicated in the book entry account system of the transfer agent for the Common Shares registered in the names of the holders of Common Shares (which Common Shares shall also be deemed to represent certificates for Rights) or, in the case of certificated shares, the certificates for the Common Shares registered in the names of the holders of the Common Shares (which certificates for Common Shares also constitute certificates for Rights) and each Right is transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office(s) of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates properly completed and duly executed, as determined in the sole discretion of the Rights Agent;
(c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated balance indicated in the book entry account system of the transfer agent for the Common Shares, or in the case of certificated shares, by the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated balance indicated in the book entry account system of the transfer agent for the Common Shares. or in the case of certificated shares, by the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent has any liability to any holder of a Right or any other Person as a result of the inability of the Company or the Rights
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Agent to perform any of its or their obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company shall use its commercially reasonable efforts to have any such injunction, order, decree, judgment or ruling lifted or otherwise overturned as promptly as practicable.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and from time to time, on demand of the Rights Agent, to reimburse the Rights Agent for all of its reasonable and documented expenses and counsel fees and other disbursements incurred in the preparation, negotiation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent and its affiliates, employees, officers, directors, representatives and advisors for, and to hold it harmless against, any loss, liability, damage, demand, judgment, fine, penalty, claim, settlement, cost or expense (including the reasonable and documented fees and expenses of legal counsel) for any action taken, suffered or omitted to be taken by the Rights Agent pursuant to or arising from this Agreement or in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including the reasonable and documented costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The reasonable costs and expenses incurred in enforcing this right of indemnification shall also be paid by the Company.
(b) The Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in connection with its acceptance and administration of this Agreement and the exercise and performance of its duties hereunder in reliance upon any Rights Certificate or book entry for Common Shares or other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statements or other paper or document believed by it to be genuine and to be signed, executed and shall not be obligated to verify the accuracy or completeness of such instrument, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statements or other paper or document and, where necessary, guaranteed, verified or acknowledged, by the proper Person or Persons, or upon any written instructions or statements from the Company with respect to any matter relating to its acting as Rights Agent hereunder without further inquiry or examination on its part, or otherwise upon the advice or opinion of counsel as set forth in Section 20(a) hereof. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith unless and until it has received such notice in writing.
(c) Notwithstanding anything in this Agreement to the contrary, in no case shall the Company be liable with respect to any action, proceeding, suit or claim against the Rights Agent unless the Rights Agent shall have notified the Company hereof of the assertion of such action, proceeding, suit or claim against the Rights Agent, promptly after the Rights Agent shall have notice of such assertion of an action, proceeding, suit or claim or have been served with the summons or other first legal process giving information as to the nature and basis of the action, proceeding, suit or claim; provided that the failure to provide such notice promptly shall not affect the
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rights of the Rights Agent hereunder and shall not relieve the Company of any liability to the Rights Agent, except to the extent that such failure actually prejudices the Company. The Company shall be entitled to participate at its own expense in the defense of any such action, proceeding, suit or claim, and, if the Company so elects, the Company shall assume the defense of any such action, proceeding, suit or claim, unless such action, proceeding, suit or claim is (a) brought by the Rights Agent or (b) the Rights Agent reasonably determines that there may be a conflict of interest between the Company and the Rights Agent in the defense of an action and the Rights Agent does in fact assume the defense. In the event that the Company assumes such defense, the Company shall not thereafter be liable for the fees and expenses of any counsel retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to defend such action, proceeding, suit or claim, and provided that the Rights Agent does not have defenses that are adverse to or different from any defenses of the Company. The Rights Agent agrees not to settle any litigation in connection with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior written consent of the Company, which shall not be unreasonably withheld.
(d) The provisions of this Section 18 and Section 20 hereof shall survive the termination or expiration of this Agreement, the resignation, replacement or removal of the Rights Agent and the exercise, termination or expiration of the Rights. Notwithstanding anything in this Agreement to the contrary, in no event shall the Rights Agent be liable for special, punitive, incidental, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action; and the Company agrees to indemnify the Rights Agent and its affiliates, directors, employees, representatives and advisors and hold them harmless to the fullest extent permitted by law against any loss, liability or expense incurred as a result of claims for special, punitive, incidental, indirect or consequential loss or damages of any kind whatsoever. Any liability of the Rights Agent under this Agreement shall be limited to the amount of annual fees paid by the Company to the Rights Agent during the 12 months immediately preceding the event for which recovery from the Rights Agent is being sought.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights Agent is merged or with which the Rights Agent or any successor Rights Agent is consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent is a party, or any Person succeeding to the corporate trust, stock transfer or other stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. The purchase of all or substantially all of the Rights Agents assets employed in the performance of transfer agent activities shall be deemed a merger or consolidation for purposes of this Section 19. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
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Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement (and no implied duties or obligations) upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Rights Agent or the Company or an employee of the Rights agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent will have no liability for or in respect of, any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief Executive Officer, Chief Financial Officer, the President, General Counsel, any Senior Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. The Rights Agent shall have no duty to act without such a certificate from an officer of the Company as set forth in the preceding sentence.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith, or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a court of competent jurisdiction in a final non-appealable order, judgment, decree or ruling). Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action; and the Company agrees to indemnify the Rights Agent and its affiliates, directors, employees, representatives and advisors and to hold them harmless to the fullest extent permitted by law against any loss, liability or expense incurred as a result of claims for special, punitive, incidental, indirect or consequential loss or damage of any kind whatsoever. Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent during the twelve (12) months immediately preceding the event for which recovery from the Rights Agent is being sought.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability nor be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
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(g) The Rights Agent is hereby authorized and directed to accept verbal or written instructions with respect to the performance of its duties hereunder from any one of the Chief Executive Officer, Chief Financial Officer, the President, General Counsel, any Senior Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such advice or instruction shall be full authorization and protection to the Rights Agent and the Rights Agent shall have no duty to independently verify the accuracy or completeness of such advice or such instructions and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. The Rights Agent will not be held to have notice of any change of authority of any person until its receipt of written notice thereof from the Company in accordance with this Agreement. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted to be taken by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall be fully authorized and protected in relying upon the most recent verbal or written instructions received from any such officer, and shall not be liable for any action taken, suffered or omitted to be taken by the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Company actually receives such application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken, suffered or omitted to be taken.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and/or employees) or by or through its attorneys or agents, and the Rights Agent shall not be liable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company, any holder of Rights or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if there are reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, either (i) the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, or (ii) any other actual or suspected irregularity exists, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company, and the Rights Agent shall not be liable for any delays arising from the duties under this Section 20(k).
(l) In the event that the Rights Agent reasonably believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Rights Agent hereunder, the Rights Agent shall, as soon as practicable, inform the Company or such Person seeking clarification and may, in its sole discretion, refrain from taking any action, and will be fully protected and will not be liable or responsible in any way to the Company or other Person or entity for refraining from taking such action, unless the Rights Agent receives written instructions signed by the Company which eliminates such ambiguity or uncertainty to the reasonable satisfaction of the Rights Agent.
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(m) The Rights Agent shall have no responsibility to the Company, any holders of Rights or any holders of Common Shares for interest or earnings on any moneys held by the Rights Agent pursuant to this Agreement.
(n) The Rights Agent shall not be required to take notice or be deemed to have notice of any event or condition hereunder, including any event or condition that may require action by the Rights Agent, unless the Rights Agent shall be specifically notified in writing of such event or condition by the Company, and all notices or other instruments required by this Agreement to be delivered to the Rights Agent must, in order to be effective, be received by the Rights Agent, and in the absence of such notice so delivered, the Rights Agent may conclusively assume no such event or condition exists.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon at least 30 days notice in writing to the Company in accordance with Section 26 hereof, and in the event that the Rights Agent or one of its Affiliates is not also the transfer agent for the Company, to each transfer agent of the Common Shares or Preferred Shares by first class mail or by recognized overnight delivery in which case the Company will give or cause to be given written notice to the holders of the Right Certificates by first-class mail. In the event the transfer agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination, and the Company shall be responsible for sending any required notice. The Company may remove the Rights Agent or any successor Rights Agent upon at least 30 days notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Right Certificates by first-class mail. If the Rights Agent resigns or is removed or otherwise becomes incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (which holder shall, with such notice, submit such holders Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or of the any State , in good standing, which is authorized under such laws to exercise corporate trust, stock transfer, or stockholder services powers and is subject to supervision or examination by federal or state authority and which at the time of its appointment as Rights Agent has, along with its Affiliates, a combined capital and surplus of at least $50 million, or (b) an affiliate of a Person described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent under this Agreement without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose, in each case at the sole expense of the Company. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors of the Company to reflect any adjustment or change made in accordance with the provisions of this Agreement in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date (other than upon exercise of a Right) and prior to the earlier of the Redemption Date, Early Expiration Date or Final Expiration Date, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise,
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conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate may be issued if, and to the extent that, the Company, in its sole discretion, determines that such issuance would jeopardize or endanger the value or availability to the Company of the NOLs or otherwise create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate may be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption. (a) The Independent Directors may, at their option, at any time prior to the Distribution Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0.0001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the Redemption Price). The redemption of the Rights by the Independent Directors may be made effective at such time, on such basis and with such conditions as the Independent Directors, in their sole discretion, may establish.
(b) Immediately upon the action of the Independent Directors ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give (i) written notice to the Rights Agent of any such redemption (and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that no such redemptions have occurred); and (ii) public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within ten (10) days after such action of the Independent Directors ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Independent Directors may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any adjustment in the number of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as the Exchange Ratio).
(b) Immediately upon the action of the Independent Directors ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give (i) written notice to the Rights Agent of any such exchange, and (ii) public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange (and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that no such exchange has occurred). The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected, and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
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(c) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall, at any time after the Distribution Date, propose (i) to pay any dividend payable in stock of any class to the holders of the Preferred Shares or to make any other distribution to the holders of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of the Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and, in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if by electronic transmission or sent by first-class or express United States mail, or recognized overnight delivery, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
CenturyLink, Inc.
100 CenturyLink Drive
Monroe, LA 7121039
Attention: Company Secretary
Email:stacey.goff@centurylink.com
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Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if by or sent by first-class mail or express United States mail, or recognized overnight delivery, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Attention: Client Services
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, to shorten or lengthen any time period hereunder, or to amend or make any other provisions with respect to the Rights which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that, from and after the Distribution Date, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, however, that the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agents own rights, duties, obligations or immunities under this Agreement.
Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement will remain in full force and effect and will in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, null and void or unenforceable and the Board determines in good faith judgment that severing the invalid language from this Agreement would materially and adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and will not expire until the close of business on the tenth (10th) Business Day following the date of such determination by the Board; provided, further, that if any such severed term, provision, covenant or restriction shall adversely affect the rights, immunities, duties or obligations of the Rights Agent, then the Rights Agent shall be entitled to resign immediately.
Section 31. Governing Law. This Agreement, each Right, and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state, except that the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts to be made and performed entirely within such State.
2019 Proxy Statement | C-23 |
Section 32. Counterparts. This Agreement may be executed in one or more counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Delivery of an executed signature page of Agreement by facsimile or other customary shall mean of electronic transmission (e.g., pdf) shall be effective as delivery of a manually executed counterpart hereof.
Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect in any way the meaning or construction of any of the provisions hereof.
Section 34. Determinations and Actions by the Independent Directors. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of which any Person is the Beneficial Owner, will be made in accordance with, as the Independent Directors deems to be applicable, the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act or the provisions of Section 382. The Independent Directors will have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Independent Directors or to the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation the right and power to (i) interpret the provisions of this Agreement (including without limitation Section 27, this Section 34 and other provisions hereof relating to its powers or authority hereunder) and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including without limitation any determination contemplated by Section 1(a) or any determination as to whether particular Rights shall have become void). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, any omission with respect to any of the foregoing) which are done or made by the Independent Directors in good faith will (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties and (y) not subject any member of the Board to any liability to any Person, including without limitation the Rights Agent and the holders of the Rights.
Section 35. Process to Seek Exemption. Any Person who desires to effect any acquisition of Common Shares that would, if consummated, result in such Person (together with its Affiliates and Associates) beneficially own 4.9% or more of the then outstanding Common Shares (or, in the case of a person excluded from the definition of Acquiring Person in clause (1) of such definition, such applicable percentage) (a Requesting Person) may, prior to the Shares Acquisition Date, and in accordance with this Section 35, request that the Independent Directors grant an exemption with respect to such acquisition under this Agreement (an Exemption Request). An Exemption Request shall be in proper form and shall be delivered by registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company. To be in proper form, an Exemption Request shall set forth (a) the name and address of the Requesting Person, (b) the number and percentage of Common Shares then Beneficially Owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, (c) a reasonably detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial Ownership of Common Shares aggregating 4.9% or more of the then outstanding Common Shares (or, in the case of a person excluded from the definition of Acquiring Person in clause (1) of such definition, such applicable percentage) and the maximum number and percentage of Common Shares that the Requesting Person proposes to acquire and (d) a reasonably detailed statement of the benefits such Requesting Person expects to be received the Company and the other stockholders of the Company were the exemption to be granted. The Independent Directors shall make a determination whether to grant an exemption in response to an Exemption Request as promptly as practicable (and, in any event, within ten Business Days) after receipt thereof; provided, that the failure of the Independent Directors to make a determination within such period shall be deemed to constitute the denial by the Independent Directors of the Exemption Request. The Independent Directors may deny an Exemption Request if the Independent Directors determine, in their sole discretion, that the acquisition of Beneficial Ownership of Common Shares by the Requesting Person could jeopardize or endanger the availability to the Company of the NOLs or for whatever other reason they deem reasonable, desirable or appropriate. Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the Requesting Person agree that it will not acquire
C-24 | 2019 Proxy Statement |
Beneficial Ownership of Common Shares in excess of the maximum number and percentage of shares approved by the Independent Directors or that it will not make another Exemption Request), in each case as and to the extent the Independent Directors shall determine necessary, desirable or appropriate.
Section 36. Tax Compliance and Withholding. The Company hereby authorizes the Rights Agent to deduct from all payments disbursed by the Rights Agent to the holders of the Rights, if applicable, the tax required to be withheld pursuant to Sections 1441, 1442, 1445, 1471 through 1474, and 3406 of the Internal Revenue Code of 1986, as amended, or by any federal or state statutes subsequently enacted, and to make the necessary returns and payments of such tax to the relevant taxing authority. The Company will provide withholding and reporting instructions to the Rights Agent from time to time as relevant, and upon request of the Rights Agent. The Rights Agent shall have no responsibilities with respect to tax withholding, reporting, or payment except as specifically instructed by the Company.
Section 37. Force Majeure. Notwithstanding anything to the contrary contained herein, the Rights Agent will not have any liability for not performing, or a delay in the performance of, any act, duty, obligation or responsibility by reason of any occurrence beyond the reasonable control of the Rights Agent (including, without limitation, any act or provision of any present or future law or regulation or governmental authority, any act of God, war, civil or military disobedience or disorder, riot, rebellion, terrorism, insurrection, fire, earthquake, storm, flood, strike, work stoppage, interruptions or malfunctions of computer facilities, loss of data due to power failures or mechanical difficulties with information, labor dispute, accident or failure or malfunction of any utilities, communication or computer (software or hardware) services or similar occurrence).
[Remainder of this page intentionally left blank.]
2019 Proxy Statement | C-25 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.
CenturyLink, Inc. | ||||
By | /s/ Stacey W. Goff | |||
Name: | Stacey W. Goff | |||
Title: | Executive Vice President, General Counsel and Secretary | |||
Computershare Trust Company, N.A. | ||||
By | /s/ Fred Papenmeier | |||
Name: | Fred Papenmeier | |||
Title: | Vice President |
[Signature Page to Section 382 Rights Agreement]
C-26 | 2019 Proxy Statement |
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
CENTURYLINK, INC.
(Pursuant to Sections 1--602, 1005(8) and 1006 of the
Louisiana Business Corporation Act)
These articles of amendment (Articles of Amendment) to the articles of incorporation (Articles of Incorporation) of CENTURYLINK, INC., a Louisiana business corporation (Corporation), have been prepared for filing with the Secretary of State of Louisiana pursuant to Sections 12:1-602, 1005(8) and 1006 of the Louisiana Business Corporation Act (the Act), R.S. 12:1-101 et seq., to set forth the following:
FIRST: At a meeting duly called and held on February 13, 2019, the Board of Directors of the Corporation unanimously approved and adopted the following amendment of the Articles of Incorporation of the Corporation, as set forth below. Shareholder approval was not required for this amendment.
SECOND: ARTICLE III of the Articles of Incorporation of the Corporation is hereby amended to add Section F, Series CC Junior Participating Preferred Shares. The text of this amendment is as follows:
F. Series CC Junior Participating Preferred Shares:
(1) Designation and Amount. The shares of such series shall be designated as Series CC Junior Participating Preferred Shares (the Series CC Shares) and the number of shares constituting the Series CC Shares shall be 150,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of Series CC Shares to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series CC Shares.
(2) Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series CC Shares with respect to dividends, the holders of Series CC Shares shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the dividend date declared on the Common Stock, par value $1.00 per share (the Common Stock) in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series CC Shares, in an amount per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate per share amount of all cash dividends, and 10,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, declared on the Common Stock of the Corporation since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series CC Shares, other than, in each case, a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise). In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of Series CC Shares were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
2019 Proxy Statement | C-27 |
(b) The Corporation shall declare a dividend or distribution on the Series CC Shares as provided in paragraph (a) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends, to the extent payable as provided in paragraphs (a) and (b) of this Section, shall begin to accrue and be cumulative on outstanding Series CC Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series CC Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the Series CC Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Series CC Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
(3) Voting Rights. The holders of Series CC Shares shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series CC Shares shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of Series CC Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other articles of amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of Series CC Shares and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law, holders of Series CC Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
(4) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series CC Shares as provided in Article III.F.(2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series CC Shares outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series CC Shares;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series CC Shares, except dividends paid ratably on the Series CC Shares and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series CC Shares, provided that
C-28 | 2019 Proxy Statement |
the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series CC Shares; or
(iv) redeem or purchase or otherwise acquire for consideration any Series CC Shares, or any shares of stock ranking on a parity with the Series CC Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Articles III.F.(4), purchase or otherwise acquire such shares at such time and in such manner.
(5) Reacquired Shares. Any Series CC Shares purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Articles of Amendment to the Articles of Incorporation creating a series of Preferred Stock or any similar stock or as otherwise required by law.
(6) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series CC Shares unless, prior thereto, the holders of Series CC Shares shall have received $10,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of Series CC Shares shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series CC Shares, except distributions made ratably on the Series CC Shares and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of Series CC Shares were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series CC Shares shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series CC Shares shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
2019 Proxy Statement | C-29 |
(8) No Redemption. The Series CC Shares shall not be redeemable.
(9) Rank. The Series CC Shares shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporations Preferred Stock.
(10) Amendment. The Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series CC Shares so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding Series CC Shares, voting together as a single class.
IN WITNESS WHEREOF, CenturyLink, Inc. has caused this Articles of Amendment of Articles of Incorporation relating to the establishment of rights and preferences of Series CC Junior Participating Preferred Stock to be duly executed by its President this 13th day of February, 2019.
CenturyLink, Inc. | ||
By: |
| |
Name: Jeffrey K. Storey | ||
Title: Chief Executive Officer and President |
C-30 | 2019 Proxy Statement |
Form of Right Certificate
Certificate No. R- | Rights |
NOT EXERCISABLE AFTER THE FINAL EXPIRATION DATE (AS DEFINED IN THE AGREEMENT) OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS OR AS OTHER-WISE SPECIFIED IN THE AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.0001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.
Right Certificate
CENTURYLINK, INC.
This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Section 382 Rights Agreement, dated as of February 13, 2019 (the Agreement), between CenturyLink, Inc., a Louisiana corporation (the Company), and Computershare Trust Company, N.A. (the Rights Agent), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Agreement) and prior to the Final Expiration Date (as such term is defined in the Agreement) or earlier as specified in the Agreement, at the office or offices of the Rights Agent designated for such purpose, or at the office of its successor as Rights Agent, one ten-thousandth of a fully paid non-assessable share of Series CC Junior Participating Preferred Stock, par value $25 per share, of the Company (the Preferred Shares), at a purchase price of $28 per one ten-thousandth of a Preferred Share (the Exercise Price), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one ten-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Exercise Price set forth above, are the number and Exercise Price as of February 13, 2019, based on the Preferred Shares as constituted at such date. As provided in the Agreement, the Exercise Price and the number of one ten-thousandths of a Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and conditions of the Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Agreement are on file at the principal executive offices of the Company and the offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at a redemption price of $0.0001 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or shares of the Companys Common Stock, par value $1.00 per share.
No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one ten-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but, in lieu thereof, a cash payment will be made, as provided in the Agreement.
2019 Proxy Statement | C-31 |
No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Agreement.
This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned manually or by facsimile by the Rights Agent.
WITNESS the signature of the proper officers of the Company. Dated as of , 20 .
ATTEST: | CENTURYLINK, INC. | |||||||||
By |
|
By |
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Name: | Name: | |||||||||
Title: | Title: | |||||||||
Countersigned: | ||||||||||
COMPUTERSHARE TRUST COMPANY, N.A. | ||||||||||
By |
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Name: | ||||||||||
Title: |
C-32 | 2019 Proxy Statement |
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers
unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.
Dated: |
| |
| ||
Signature |
Signature Medallion Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or broker) which is a participant in the Securities Transfer Agents Medallion Program (STAMP), the New York Stock Exchange, Inc. Medallion Signature Program (MSP), or the Stock Exchanges Medallion Program (SEMP) and must not be dated. Guarantees by a notary public are not acceptable.
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement).
Signature |
2019 Proxy Statement | C-33 |
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: CENTURYLINK, INC.
The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
(Print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Print name and address)
Dated: |
| |
| ||
Signature |
Signature Medallion Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or broker) which is a participant in the Securities Transfer Agents Medallion Program (STAMP), the New York Stock Exchange, Inc. Medallion Signature Program (MSP), or the Stock Exchanges Medallion Program (SEMP) and must not be dated. Guarantees by a notary public are not acceptable.
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement).
Signature |
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement) and such Assignment or Election to Purchase will not be honored.
C-34 | 2019 Proxy Statement |
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
Introduction
Our Company, CenturyLink, Inc., a Louisiana corporation, has entered into a Rights Agreement with Computershare Trust Company, N.A., as Rights Agent, dated as of February 13, 2019 (the Rights Agreement). Our Board of Directors (the Board) approved the Rights Agreement in an effort to deter acquisitions of our common stock that would potentially limit our ability to use our built in losses and any resulting net loss carryforwards to reduce potential future federal income tax obligations.
For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which has been filed with the Securities and Exchange Commission as an exhibit to our Current Report on Form 8-K, dated February 14, 2019. A copy of the agreement is available free of charge from our Company.
General. Under the Rights Agreement, from and after the record date of February 25, 2019, each share of our common stock will carry with it one preferred share purchase right (a Right), until the Distribution Date (as defined below) or earlier expiration of the Rights, as described below. In general, any person that, together with all Affiliates and Associates (each as defined in the Rights Agreement), acquires 4.9% or more of our outstanding common stock after February 13, 2019, or entry into the Rights Agreement, will be subject to significant potential dilution. Stockholders who own 4.9% or more of the outstanding common stock as of the close of business on February 13, 2019, will not trigger the Rights so long as they do not (i) acquire additional shares of common stock representing one-half of one percent (0.5%) or more of the shares of common stock outstanding at the time of such acquisition or (ii) fall under 4.9% ownership of common stock and then re-acquire shares that in the aggregate equal 4.9% or more of the common stock. A person will not trigger the Rights solely as a result of any transaction that the Board determines, in its sole discretion, is an exempt transaction for purposes of triggering the Rights. STT Crossing Ltd. and its Affiliates and Associates will be exempt stockholders for the purposes of the Rights Agreement, unless and until STT Crossing Ltd. (or any Affiliates of STT Crossing Ltd.) acquires any common stock other than (x) in a transaction that is permitted under Section 4 of the Stockholder Rights Agreement, dated as of October 31, 2016, by and among the Company and STT Crossing Ltd. (the Stockholder Rights Agreement) or (y) any transfers of common stock or other Company equity interests between STT Crossing Ltd. and its Affiliates. A person to whom STT Crossing Ltd. transfers any amount of common stock pursuant to and as permitted by Section 4.2 of the Stockholder Rights Agreement will be exempt for purposes of the Rights Agreement, unless and until such person (or any Affiliates or Associates of such person) acquires any additional common stock.
The Board may, in its sole discretion prior to the Distribution Date, exempt any person or group for purposes of the Rights Agreement if it determines the acquisition by such person or group will not jeopardize tax benefits or is otherwise in the Companys best interests. Any person that acquires shares of common stock in violation of these limitations is known as an Acquiring Person. Notwithstanding the foregoing, a Person shall not be an Acquiring Person if the Independent Directors determines at any time that a Person who would otherwise be an Acquiring Person, has become such without intending to become an Acquiring Person, and such Person divests as promptly as practicable (or within such period of time as the Independent Directors determine is reasonable) a sufficient number of shares of Common Stock of the Company so that such Person would no longer be an Acquiring Person, as defined pursuant to The Rights Agreement is not expected to interfere with any merger or other business combination approved by our Board.
The Rights. From the record date of February 25, 2019, until the Distribution Date or earlier expiration of the Rights, the Rights will trade with, and will be inseparable from, the common stock. New Rights will also accompany any new shares of common stock that we issue after February 13, 2019, until the Distribution Date or earlier expiration of the Rights.
2019 Proxy Statement | C-35 |
Exercise Price. Each Right will allow its holder to purchase from our Company one ten-thousandth of a share of Series CC Junior Participating Preferred Stock (Preferred Share) for $28, subject to adjustment (the Exercise Price), once the Rights become exercisable. This fraction of a Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights will not be exercisable until 10 business days (as may be extended in the discretion of the Independent Directors) after the public announcement that a person or group has become an Acquiring Person unless the Rights Agreement is theretofore terminated or the Rights are theretofore redeemed (as described below).
We refer to the date when the Rights become exercisable as the Distribution Date. Until that date or earlier expiration of the Rights, the common stock certificates will also evidence the Rights, and any transfer of shares of common stock will constitute a transfer of Rights. After that date, the Rights will separate from the common stock and be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of common stock. Any Rights held by an Acquiring Person, or any Affiliates or Associates of the Acquiring Person, are void and may not be exercised.
Consequences of a Person or Group Becoming an Acquiring Person. If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person, or any Affiliates or Associates of the Acquiring Person, may, upon payment of the Exercise Price, purchase shares of our common stock with a market value of twice the Exercise Price, based on the current per share market price of the common stock (as defined in the Rights Agreement) on the date of the acquisition that resulted in such person or group becoming an Acquiring Person.
Exchange. After a person or group becomes an Acquiring Person, our Independent Directors in their sole discretion may extinguish the Rights by exchanging one share of common stock or an equivalent security for each Right, other than Rights held by the Acquiring Person or any Affiliates or Associates of the Acquiring Person.
Preferred Share Provisions. Each one ten-thousandth of a Preferred Share, if issued:
◾ | will not be redeemable. |
◾ | will entitle holders to dividends equal to the dividends, if any, paid on one share of common stock. |
◾ | will entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of common stock, whichever is greater. |
◾ | will vote together with the common stock as one class on all matters submitted to a vote of stockholders of the Company and will have the same voting power as one share of common stock, except as otherwise provided by law. |
◾ | will entitle holders to a per share payment equal to the payment made on one share of common stock, if shares of our common stock are exchanged via merger, consolidation, or a similar transaction. |
The value of one ten-thousandth interest in a Preferred Share is expected to approximate the value of one share of common stock.
Expiration. The Rights will expire on the earliest of (i) December 1, 2020, (ii) the time at which the Rights are redeemed, (iii) the time at which the Rights are exchanged, (iv) the time at which the Board determines that the Net Operating Losses of the Company (the NOLs) are utilized in all material respects or that an ownership change under Section 382 of the Internal Revenue Code would not adversely impact in any material respect the time period in which the Company could use the NOLs, or materially impair the amount of the NOLs that could be used by the Company in any particular time period, for applicable tax purposes, (v) the first anniversary of the execution of the Rights Plan if approval of the Rights Plan by the affirmative vote of a majority of the votes cast at a duly called meeting has not been obtained prior to such date, or (vi) a determination by the Board, prior to the Distribution Date, that the Rights Agreement and the Rights are no longer in the best interests of the Company and its stockholders.
C-36 | 2019 Proxy Statement |
Redemption. Our Board may redeem the Rights for $0.0001 per Right at any time before the Distribution Date. If our Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $0.0001 per Right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.
Anti-Dilution Provisions. Our Board may adjust the Exercise Price, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Preferred Shares or common stock.
Amendments. The terms of the Rights Agreement may be amended by our Board without the consent of the holders of the Rights. After the Distribution Date, our Board may not amend the agreement in a way that adversely affects holders of the Rights (other than an Acquiring Person, or an Affiliate or Associate of an Acquiring Person).
2019 Proxy Statement | C-37 |
Corporate Headquarters
100 CenturyLink Drive
Monroe, Louisiana 71203
General Information: 318-388-9000
Transfer Agent
For address changes, stock transfers, name changes, registration changes, lost stock certificates and stock holdings, please contact:
Computershare Investor Services L.L.C.
Post Office Box 505000
Louisville, Kentucky 40233
1-800-969-6718
www.computershare.com/centurylink
Auditors
KPMG LLP
333 Texas Street, Suite 1900
Shreveport, Louisiana 71101
Investor Relations
Inquiries by securities analysts, investment professionals and shareholders about CenturyLink, Inc. common stock, including requests for any SEC or other shareholder reports should be directed to:
Investor.relations@centurylink.com
318-340-5627
http://ir.centurylink.com
Website
Additional corporate information including company history, current and historic financials, Annual Report, and press releases, can be found on the CenturyLink Investor Relations Web Site at http://ir.centurylink.com/ir-home.
Annual Report
After the close of each fiscal year, CenturyLink, Inc. submits an Annual Report on Form 10-K to the SEC containing certain additional information about its business. A copy of the 10-K report may be obtained without charge by addressing your request to Stacey W. Goff, Secretary, CenturyLink, Inc., 100 CenturyLink Drive, Monroe, Louisiana 71203, or by visiting our website at www.centurylink.com.
Common Stock
CenturyLink common stock is traded on the New York Stock Exchange under the symbol CTL.
As of the record date, we had [●] shares of common stock and [7,018] shares of Series L preferred stock issued and outstanding. There were [●] shareholders of record.
CenturyLink, CenturyLink, Inc. and the CenturyLink logos are either registered service marks or service marks of CenturyLink, Inc. and/or one of its Affiliates in the United States and/or other countries. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners.
Preliminary Proxy Materials
dated March 25, 2019;
Subject to Completion
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com E68739-P17214 CENTURYLINK, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Jeffrey K. Storey and Stacey W. Goff, or either of them, proxies for the undersigned, with full power of substitution, to represent the undersigned and to vote all of the shares of common stock and voting preferred stock (collectively, the Voting Shares) of CenturyLink, Inc. (the Company) that the undersigned is entitled to vote at the annual meeting of shareholders of the Company to be held on May 22, 2019, and at any and all adjournments thereof (the Meeting). In addition to serving as a Proxy, this card will also serve as instructions to Computershare Investor Services L.L.C. (the Agent) to vote in the manner designated on the reverse side hereof the shares of the Companys common stock held as of March 28, 2019 in the name of the Agent and credited to any plan account of the undersigned in accordance with the Companys dividend reinvestment plan. Upon the Companys timely receipt of this Proxy, properly executed, all of your Voting Shares, including any held in the name of the Agent, will be voted as specified. With respect to each matter listed on the reverse side, the Board of Directors recommends that you vote (i) FOR Items 1 through 5, and (ii) AGAINST Item 6, each of which is described more fully in the Companys proxy statement for the Meeting. If you properly execute and return this Proxy but fail to provide specific directions with respect to any of the matters listed on the reverse side, all of your votes will be voted in accordance with these recommendations with respect to such matters. (Please See Reverse Side)
SCAN TO VIEW MATERIALS & VOTE w CENTURYLINK, INC. VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above 100 CENTURYLINK DRIVE Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote MONROE, LA 71203 by 11:59 p.m. Eastern Time on May 21, 2019 for shares held directly. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 21, 2019 for shares held directly. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SHAREHOLDER MEETING REGISTRATION To vote and/or attend the meeting, go to the Register for Meeting link at www.proxyvote.com. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E68738-P17214 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY CENTURYLINK, INC. The Board of Directors recommends you vote FOR the following: For Against Abstain 1. Elect 13 directors. 1a. Martha H. Bejar 1b. Virginia Boulet The Board of Directors recommends you vote FOR proposals 2, For Against Abstain 3, 4 and 5. 1c. Peter C. Brown 2. Ratify the appointment of KPMG LLP as our independent auditor for 2019. 1d. Kevin P. Chilton 3. Amend our Articles of Incorporation to increase our authorized shares of common stock. 1e. Steven T. Clontz 4. Ratify our NOL Rights Plan. 1f. T. Michael Glenn 5. Advisory vote to approve our executive compensation. 1g. W. Bruce Hanks The Board of Directors recommends you vote AGAINST proposal 6. For Against Abstain 1h. Mary L. Landrieu 6. Shareholder proposal regarding our lobbying activities, if properly presented at the meeting. 1i. Harvey P. Perry FOR YOUR VOTE TO BE COUNTED UNDER THIS PROXY CARD, WE MUST RECEIVE THIS CARD, PROPERLY COMPLETED, BY 11:59 P.M. 1j. Glen F. Post, III EASTERN TIME ON MAY 21, 2019. NOTE: Such other business as may properly come before the meeting or 1k. Michael J. Roberts any adjournment thereof. If you plan to attend the meeting and would like directions, please visit our website, http://ir.centurylink.com. 1l. Laurie A. Siegel 1m. Jeffrey K. Storey Please sign exactly as name appears on the certificate or certificates representing shares to be voted by this proxy. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized persons. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com E68737-Z74760 CENTURYLINK DOLLARS & SENSE 401(k) PLAN CENTURYLINK UNION 401(k) PLAN VOTING INSTRUCTIONS The undersigned, acting as a participant and a named fiduciary in either of the above-referenced retirement plans (collectively, the Plans), hereby directs The Northern Trust Company (the Trustee), as directed trustee of the Plans trust (the Trust), to vote at the annual meeting of shareholders of CenturyLink, Inc. (the Company) to be held on May 22, 2019, and any and all adjournments thereof (the Meeting), in the manner designated herein, the number of shares of the Companys common stock credited to the account of the undersigned maintained under either of the Plans on the matters set forth on the reverse side hereof and more fully described in the Companys proxy statement for the Meeting. If no instructions are furnished by the undersigned, the Trustee will vote unvoted shares and unallocated shares, if any, held in the Trust (collectively, Undirected Shares) in the same proportion as voted shares regarding each of the matters set forth on the reverse side hereof, except as otherwise provided in accordance with applicable law. Under the Trust, plan participants are deemed to act as named fiduciaries to the extent of their authority to direct the voting of shares held in their accounts and their proportionate share of Undirected Shares. The undersigned hereby directs the Trustee to authorize the Companys proxies to vote in their discretion upon such other business as may properly come before the Meeting. With respect to each matter listed on the reverse side, the Board of Directors of the Company recommends that you vote (i) FOR Items 1 through 5, and (ii) AGAINST Item 6 listed on the reverse side, each of which is described more fully in the Companys proxy statement for the Meeting. Upon the Trustees timely receipt of these instructions, properly executed, the undersigneds shares will be voted in the manner directed. If the undersigned properly executes and returns these instructions but fails to provide specific directions with respect to any of the matters listed on the reverse side, the undersigneds shares will be voted in accordance with the Boards recommendations with respect to such matters.
SCAN TO VIEW MATERIALS & VOTE w CENTURYLINK, INC. VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above 100 CENTURYLINK DRIVE Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote MONROE, LA 71203 by 11:59 p.m. Eastern Time on May 19, 2019 for shares held in a Plan. Have your voting instruction card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, voting instruction cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 19, 2019 for shares held in a Plan. Have your voting instruction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your voting instruction card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SHAREHOLDER MEETING REGISTRATION To vote and/or attend the meeting, go to the Register for Meeting link at www.proxyvote.com. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E68736-Z74760 KEEP THIS PORTION FOR YOUR RECORDS THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY CENTURYLINK, INC. The Board of Directors recommends you vote FOR the following: 1. Elect 13 directors. For Against Abstain 1a. Martha H. Bejar 1b. Virginia Boulet The Board of Directors recommends you vote FOR proposals 2, For Against Abstain 3, 4 and 5. 1c. Peter C. Brown 2. Ratify the appointment of KPMG LLP as our independent auditor for 2019. 1d. Kevin P. Chilton 3. Amend our Articles of Incorporation to increase our authorized shares of common stock. 1e. Steven T. Clontz 4. Ratify our NOL Rights Plan. 1f. T. Michael Glenn 5. Advisory vote to approve our executive compensation. 1g. W. Bruce Hanks The Board of Directors recommends you vote AGAINST proposal 6. For Against Abstain 1h. Mary L. Landrieu 6. Shareholder proposal regarding our lobbying activities, if properly presented at the meeting. 1i. Harvey P. Perry NOTE: Such other business as may properly come before the meeting or any adjournment thereof. If you plan to attend the meeting and would like directions, please visit our website, http://ir.centurylink.com. 1j. Glen F. Post, III TO BE COUNTED, THE TRUSTEE MUST RECEIVE THIS CARD, 1k. Michael J. Roberts PROPERLY COMPLETED, BY 11:59 P.M. EASTERN TIME ON MAY 19, 2019. 1l. Laurie A. Siegel Please mark, sign, date and return these instructions promptly using the enclosed envelope. 1m. Jeffrey K. Storey Please sign exactly as name appears on the certificate or certificates representing shares to be voted by this proxy. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized persons. Signature of Participant Date