V. The Transaction

Pursuant to a July 18, 1999 Merger Agreement (Agreement), attached to the Application as Exhibit C, U S West, Inc. will be merged into Qwest Inc. Qwest Inc. will issue shares of its common stock having a value of $69.00 for each share of U S West, Inc. common stock subject to a "collar" on Qwest Inc.'s average stock price between $28.26 and $39.90 per share. The number of Qwest Inc. shares to be exchanged for each U S West, Inc. share will be determined by dividing $60.00 by a fifteen day weighted average of trading prices for Qwest Inc.'s common stock over a thirty day measurement period ending three days prior to closing. However, Qwest Inc. will not issue less than 1.72932 shares ⁴ or more than 2.44161 shares.⁵ The obligation under the collar may be satisfied in whole or part with cash if Qwest Inc.'s average stock price is below $38.70 per share.

Qwest Inc. will continue as the surviving corporation, and U S West, Inc. will cease to exist as a separate corporate entity. The direct and indirect wholly owned subsidiaries of Qwest Inc. and U S West, Inc. holding operating certificates or other authorizations will survive as direct or indirect wholly-owned subsidiaries of the post-merger Qwest Inc. No changes in the names of the subsidiaries, no transfers of CPCNs, and no assignment of assets of those subsidiaries are contemplated. The surviving parent corporation, Qwest, Inc. will be headquartered at 1801 California Street, Denver, Colorado.

Upon consummation of the merger, Philip F. Anschutz, the current chairman of the Board of Qwest Inc., will become the Non-Executive Chairman of Qwest Inc. Joseph P. Nacchio, currently the Chairman and Chief Executive Officer of Qwest Inc. will continue as Chairman and Chief Executive Officer of Qwest Inc. At the time this application was filed, Solomon D. Trujillo, Chairman, President and Chief Executive Officer of U S West, Inc. was expected to become a Chairman of Qwest Inc. and President of the Broadband Local and Wireless division of Qwest Inc. He was also expected that the Board of Directors of Qwest Inc would consist of fourteen members including Messrs. Anschutz, Nacchio and Trujillo, with a total of seven members to be designated by each of Qwest Inc. and U S West Inc.⁶

After the effective time of the merger, it was also expected that Qwest Inc. would establish an Office of the Chairman whose members would be Messrs. Anschutz, Nacchio and Trujillo. The Office of the Chairman will act by majority vote and will have the power and authority with respect to decisions relating to enumerated corporate actions. For a period of one year following closing, the twenty most senior policy-making executives of Qwest Inc. will be drawn in substantially equal numbers from among the officers of Qwest Inc. and U S West, Inc., and each company will be proportionally represented at each level of senior management.