UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
-----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ----------------------------------- ------------------------------------------
Preferred Stock, without par value
First series, $7.50 stated value New York Stock Exchange
Second series, $6.25 stated value New York Stock Exchange
Common stock, $2.50 par value, and Rights New York Stock Exchange
(shares outstanding at February 28, Chicago Stock Exchange
1997, 344,594,632) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for these shorter period that the registrant was
required to file these reports), and (2) has been subject to these filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates at February 28,
1997 is $15,637,309,097.
Documents incorporated by reference.
Registrant's definitive proxy statement filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934 is incorporated by reference in Part III hereof.
<PAGE>
SPRINT CORPORATION
SECURITIES AND EXCHANGE COMMISSION
ANNUAL REPORT ON FORM 10-K
Part I
Item 1. Business
The Corporation
Sprint Corporation, incorporated in 1938 under the laws of Kansas, is
mainly a holding company. The principal activities of Sprint and its
subsidiaries (Sprint) include domestic and international long distance and local
exchange telecommunications services. Other activities include emerging
businesses and product distribution and directory publishing as discussed below.
In March 1996, Sprint spun off its cellular and wireless communications services
division (Cellular) to holders of Sprint's common stock.
Telecommunications Law
The Telecommunications Act of 1996 (the Act), which was signed into law in
February 1996, promotes competition in all aspects of telecommunications. Of
particular relevance to Sprint, the Act eliminates legal and regulatory barriers
to entry into local telephone markets and requires incumbent local exchange
carriers (LECs), among other things, to allow local resale at wholesale rates,
negotiate interconnection agreements, provide nondiscriminatory access to
unbundled network elements and allow collocation of interconnection equipment by
competitors. The Act also allows Bell Operating Companies (BOCs) to provide
in-region long distance service once they obtain state certification of
compliance with a competitive "checklist," have a facilities-based competitor,
and obtain a Federal Communications Commission (FCC) ruling that the provision
of in-region long distance service is in the public interest. As part of its
public interest inquiry, the FCC must solicit the views of the Department of
Justice and give those views substantial weight.
The FCC adopted detailed rules in August 1996 to govern interconnection to
incumbent local networks by new market entrants. Some LECs and state public
service commissions (PSC) appealed these rules to the U.S. Court of Appeals,
which stayed some of the pricing rules pending full review by the court. A court
decision is expected in mid-1997.
The FCC is also expected to issue decisions in 1997 on two related matters
critical to local competition -- universal service reform and access reform.
Currently, local rates are subsidized through implicit subsidies, such as
above-cost access charges imposed on long distance companies for connections to
local customers. The purpose of universal service reform is to establish an
explicit subsidy mechanism to replace the current implicit subsidies. Access
reform will change the structure and level of access charges and will determine
the degree of regulatory oversight for those charges.
The impact of the Act on Sprint cannot be determined because the rules for
local competition are still being decided by regulators and the courts. Sprint
intends to provide competitive local exchange carrier (CLEC) service and has
filed for certification in most states in anticipation of the opening of local
markets to competition. This CLEC activity is important to Sprint both from
offensive and defensive perspectives because it will allow customers to look to
Sprint for all their telecommunications needs. Because of high development
costs, however, CLEC activities are unlikely to be profitable for the first few
years.
In those areas where Sprint is the incumbent LEC, local competition is
expected to eventually result in some loss of market share. However, because
Sprint's LEC operations are geographically dispersed and largely in rural
markets, local competition is expected to occur more gradually. Entry is most
likely to be through the resale of Sprint LEC services or through the purchase
of Sprint LEC unbundled network elements. This will allow Sprint to retain
revenue for customers lost to CLEC competition.
1
<PAGE>
The impact of local competition is also dependent on the outcome of the
universal service reform and access reform dockets at the FCC. While Sprint has
presented a proposal to the FCC that fairly balances the conflicting interests
of industry participants, Sprint cannot predict what the FCC will do. If
regulators were to require an immediate reduction in access subsidies flowing to
local service without offsetting universal service support or giving LECs an
opportunity to re-balance local rates, Sprint's local division would be
adversely impacted. On the other hand, a reduction in access charges would
benefit Sprint's long distance division (and other long distance companies)
because access charges are the largest single cost of providing long distance
service. Long distance companies should benefit from lower access charges even
if these lower rates are flowed through to customers because lower long distance
prices will likely stimulate additional demand.
Several BOCs claim that they meet the competitive checklist and will seek
FCC approval to offer in-region long distance service in 1997. Given the absence
of local competition ground rules and the absence of any meaningful local
competition, Sprint believes these applications are premature. However, even if
BOCs were to get authority to offer in-region long distance services, it is
likely that any loss of Sprint customers at the retail level would be offset,
since Sprint is the underlying network provider to at least three of the seven
regional Bell operating companies.
Strategic Alliances
Sprint is a 40% partner in Sprint Spectrum L.P. (Sprint PCS), a partnership
with Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc.
Sprint PCS is building the nation's first single technology, 100% digital,
state-of-the-art, wireless network to provide personal communication services
(PCS) across the United States.
During December 1996, Sprint PCS launched service in the first of 65
metropolitan markets. Sprint PCS expects to complete this first phase in 1997
and have service in markets covering nearly 100 million people by early 1998.
Sprint PCS, through its affiliate, American Personal Communications (APC),
launched the nation's first PCS system in the Washington, D.C., and Baltimore,
Maryland, areas in November 1995.
Sprint is a partner in Global One, a joint venture with Deutsche Telekom AG
(DT) and France Telecom (FT) to provide seamless global telecommunications
services to business, residential and carrier markets worldwide. Sprint is a
one-third partner in Global One's operating group serving Europe (excluding
France and Germany), and is a 50% partner in Global One's operating group for
the worldwide activities outside the United States and Europe.
In connection with the formation of the Global One joint venture on January
31, 1996, the long distance division contributed certain assets and related
operations of its international business unit to Global One.
2
<PAGE>
Long Distance Communications Services
The long distance communications services division is the nation's
third-largest long distance telephone company. It operates a nationwide
all-digital long distance communications network that uses state-of-the-art
fiber-optic and electronic technology. The division primarily provides domestic
and international voice, video and data communications services. The division
offers its services to the public subject to different levels of state and
federal regulation, but rates are not subject to rate-base regulation except
nominally in some states. The division's net operating revenues were $8.3, $7.3
and $6.8 billion in 1996, 1995 and 1994, respectively.
AT&T dominates the long distance communications market and is expected to
continue to dominate the market for some years into the future. MCI
Communications Corporation (MCI) is the nation's second largest long distance
telephone company. Sprint's long distance division competes with AT&T, MCI and
other telecommunications providers in all segments of the long distance
communications market. Competition is based on price and pricing plans, the
types of services offered, customer service, and communications quality,
reliability and availability.
As competition has developed in long distance markets in recent years, the
FCC has streamlined regulation of interstate interexchange carriers, including
AT&T. Nondominant competitive long distance carriers (like Sprint) have been
subject to considerably less regulation, because market forces served as a more
effective regulator of prices. As AT&T lost domestic market share, it sought to
be relieved of regulation as well. The FCC ended rate-of-return regulation of
AT&T in 1989, and removed some competitive services from price cap regulation in
1991. In 1995, the FCC reclassified AT&T as a nondominant domestic carrier, in
exchange for commitments to protect rates charged to low income, low volume and
reseller customers. The FCC did not find that the long distance market was
completely competitive and some interstate regulation continues to apply. AT&T
was also subsequently declared to be a nondominant international
telecommunications carrier.
See "Telecommunications Law" for a discussion of the new telecommunications
legislation and its potential impact on the long distance division.
3
<PAGE>
Local Communications Services
The local communications services division consists of regulated LECs that
serve more than seven million access lines in 19 states. The division provides
local exchange services, access by telephone customers and other carriers to
Sprint's local exchange facilities, sales of telecommunications equipment, and
long distance services within specified geographical areas.
<TABLE>
<CAPTION>
The division's net operating revenues were $5.2, $4.7 and $4.4 billion in
1996, 1995 and 1994, respectively. The following table reflects major revenue
categories as a percentage of the division's total net operating revenues:
1996 1995 1994
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
<S> <C> <C> <C>
Local service 40.3% 39.8% 39.7%
Network access 36.2 36.1 36.2
Toll service 8.2 10.3 12.0
Other 15.3 13.8 12.1
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
100.0% 100.0% 100.0%
-- ------------- --- ------------- -- -------------
</TABLE>
AT&T is the division's largest customer for network access services. In
1996, 13.3% of the division's net operating revenues was derived from services
(mainly network access services) provided to AT&T, compared with 15.2% in 1995
and 16.6% in 1994. On a consolidated basis, revenues from AT&T were 5.2% of
Sprint's revenues in 1996, 6.0% in 1995 and 6.3% in 1994. While AT&T is a
significant customer, Sprint does not believe the division's revenues are
dependent upon AT&T, as customers' demand for interLATA long distance telephone
service is not tied to any one long distance carrier. Historically, as the
market share of AT&T's long distance competitors increases, the percentage of
revenues derived from network access services provided to AT&T decreases.
The division's LECs are subject to FCC jurisdiction, as well as state PSC
jurisdiction in each state in which the LECs operate. In each state in which the
PSCs exercise authority to grant certificates of public convenience and
necessity, the LECs have been granted certificates of indefinite duration to
provide local exchange telephone service in their current service areas.
In 1991, the FCC adopted a price cap regulatory format for the BOCs and the
GTE LECs. Other LECs could voluntarily become subject to price cap regulation.
The division's LECs elected to be subject to price cap regulation. Under price
caps, prices for network access service must be adjusted each year to reflect
industry average productivity gains (as specified by the FCC), inflation and
certain allowed cost changes. During 1995, the FCC adopted modifications to the
price cap plan to reset productivity elections, change certain rate adjustment
methods, address new service offerings and generally reduce regulatory
requirements. Under these changes, the division's LECs adopted a rate formula
based on the maximum productivity factors that effectively removes the earnings
cap on the division's interstate access revenues. Interstate access revenues
currently comprise approximately 60 percent of the division's network access
revenues.
See "Telecommunications Law" for a discussion of the new telecommunications
legislation and its potential impact on the local communications division.
4
<PAGE>
Product Distribution and Directory Publishing
The product distribution and directory publishing businesses (PDDP) consist
of North Supply Company (North Supply) and Sprint Publishing & Advertising
(SPA).
North Supply is a wholesale distributor of telecommunications products.
Products range from basics, such as wire and cable, telephones and repair parts,
to complete PBX systems, transmission systems and security and alarm equipment.
The nature of competition in North Supply's markets demands a high level of
customer service to succeed, as a number of competitors, including other
national wholesale distributors, sell the same products and services.
SPA publishes and markets white and yellow page telephone directories in
certain of Sprint's local exchange territories, as well as in the greater
metropolitan areas of Milwaukee, Wisconsin and Chicago, Illinois. SPA's revenues
are principally derived from selling directory advertisements. The company
competes with publishers of telephone directories and others for advertising
revenues.
Emerging Businesses
Emerging businesses consists of consumer Internet access services, CLEC
services, international development activities (outside the scope of Global
One), and PCS controlled by Sprint.
In December 1996, Sprint launched its consumer Internet access service,
Sprint Internet Passport(SM), to the general public. Sprint has substantially
completed the buildout of its Internet access platform, which now contains more
than 230 points of presence and can be reached by 85% of the nation's population
through a local call.
To take advantage of newly competitive markets, Sprint has initiated
efforts to enter local markets across the United States by filing for CLEC
status. Through January 1997, Sprint had filed in 47 states and the District of
Columbia, and gained regulatory approval to provide competitive local telephone
service in 25 states and the District of Columbia. In January 1997, Sprint
launched its initial competitive local service offering in Southern California.
The timing of entry, means of access to the customer and product offering will
be influenced by a number of factors, including buy versus build economic
trade-offs, competitive positioning, customer needs and the regulatory
environment. Sprint, to the extent possible, will employ existing sales channels
and marketing resources to market its CLEC services.
Sprint has undertaken efforts to pursue selected business opportunities in
key countries and markets around the world. Projects will be selected based on
their ability to provide significant growth and financial return, the impact on
Global One's position in world markets, and the volume of traffic terminated on
Sprint's U.S.
networks.
As part of an overall strategy to achieve nationwide PCS coverage, Sprint
directly acquired PCS licenses in the FCC's recent auction. These licenses cover
139 markets across the United States reaching a total population of 70 million
people. Sprint plans to affiliate these licenses with the licenses previously
acquired by Sprint PCS. With the affiliation of Sprint's licenses, licensed
coverage for Sprint-branded PCS will include nearly 260 million people across
the United States, Puerto Rico and the U.S. Virgin Islands.
5
<PAGE>
Spin-off of Cellular
In March 1996, Sprint completed the tax-free spin-off of Cellular to Sprint
common shareholders. The spin-off was effected by distributing all shares of
Cellular common stock to all of Sprint's common shareholders at a rate of one
Cellular common share for every three Sprint common shares held. In connection
with the spin-off, Cellular repaid $1.4 billion of intercompany debt owed to
Sprint. In addition, Sprint contributed to the equity capital of Cellular $185
million of debt owed by Cellular in excess of the amount repaid. This equity
contribution, together with Sprint's previous investment in Cellular, resulted
in Sprint's net investment in Cellular totaling $260 million at the date of the
spin-off.
Environment
Sprint's environmental compliance and remediation expenditures are mainly
due to the operation of standby power generators for its telecommunications
equipment. The expenditures arise in connection with permits, standards
compliance, or occasional remediation, which are usually related to generators,
batteries or fuel storage. Sprint has been designated a potentially responsible
party at sites relating to either landfill contamination or discontinued power
generation operations. Sprint's environmental compliance and remediation
expenditures have not been material to its financial statements or to its
operations and are not expected to have any future material effects.
Patents, Trademarks and Licenses
Sprint owns numerous patents, patent applications and trademarks in the
United States and other countries. Sprint is also licensed under domestic and
foreign patents and trademarks owned by others. In total, these patents, patent
applications, trademarks and licenses are of material importance to Sprint's
business. Generally, Sprint's trademarks and trademark licenses have no
limitation on duration; Sprint's patents and licensed patents have lives
generally ranging from one to 17 years.
Sprint's PCS licenses have an initial duration of 10 years. Sprint expects
to renew these licenses for additional 10 year terms under FCC rules.
Employee Relations
As of year-end 1996, Sprint had approximately 48,000 employees, of whom 24%
are represented by unions. During 1996, Sprint had no material work stoppages
caused by labor controversies.
Information as to Industry Segments
For information required by this section, refer to the "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Segmental Results of Operations" and Note 13 of the "Notes to Consolidated
Financial Statements" sections of the Financial Statements and Financial
Statement Schedule filed as part of this report.
6
<PAGE>
Item 2. Properties
Sprint's property, plant and equipment totaled $21.4 billion at year-end
1996, of which $13.4 billion relates to local communications services and $7.4
billion relates to long distance communications services. These properties
mainly consist of land, buildings, digital fiber-optic network, switching
equipment, microwave radio and cable and wire facilities. Sprint leases certain
switching equipment and several general office facilities. The long distance
division has been granted easements, rights-of-way and rights-of-occupancy,
mainly by railroads and other private landowners, for its fiber-optic network.
PDDP's properties mainly consist of office and warehouse facilities to
support the business units in the distribution of telecommunications products
and publication of telephone directories.
Sprint owns its corporate headquarters building and other property located
in the greater Kansas City metropolitan area.
Property, plant and equipment totaling $12.4 billion is either pledged as
security for first mortgage bonds and certain notes or is restricted for use as
mortgaged property.
Item 3. Legal Proceedings
Following the announcement of the Sprint/Centel merger agreement in May
1992, class action suits were filed against Centel and certain of its officers
and directors in federal and state courts. The federal actions were consolidated
in the United States District Court for the Northern District of Illinois. An
amended complaint was filed against the Company and two officers/directors. The
amended complaint alleged violations of federal securities laws by failing to
disclose pertinent information regarding the value of Centel common stock. In
June 1996, the defendants were granted summary judgment on the plaintiffs'
claims, and the plaintiffs have appealed. In January 1995, a purported class
action suit was filed against Centel's financial advisors in state court in New
York in connection with the Sprint/Centel merger. In October 1995, the New York
trial court granted a motion to dismiss that suit, and the order dismissing the
claims was affirmed on appeal by the intermediate appellate court in New York.
Sprint may have indemnification obligations to the financial advisors in
connection with this suit.
Various other suits arising in the ordinary course of business are pending
against Sprint. Management cannot predict the ultimate outcome of these actions
or the above-described litigation, but believes they will not result in a
material effect on Sprint's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of 1996.
7
<PAGE>
<TABLE>
<CAPTION>
Item 10(b). Executive Officers of the Registrant
Office Name Age
- -------------------------------------------------------------- --------------------------------- ------
<S> <C> <C> <C>
Chairman and Chief Executive Officer William T. Esrey (1) 57
President and Chief Operating Officer Ronald T. LeMay (2) 51
President and Chief Operating Officer - Local
Telecommunications Division Michael B. Fuller (3) 52
President and Chief Operating Officer - Long Distance
Division Gary D. Forsee (4) 46
President and Chief Operating Officer - National Integrated
Services D. Wayne Peterson (5) 61
Executive Vice President - Law and External Affairs J. Richard Devlin (6) 46
Executive Vice President - Chief Financial Officer Arthur B. Krause (7) 55
Senior Vice President - Corporate Finance Gene M. Betts (8) 44
Senior Vice President - External Affairs John R. Hoffman (9) 51
Senior Vice President - Controller John P. Meyer (10) 46
Senior Vice President - Strategic Planning and Corporate
Development Theodore H. Schell (11) 52
Senior Vice President - Quality Development and Public
Relations Richard C. Smith, Jr. (12) 55
Senior Vice President - Treasurer M. Jeannine Strandjord (13) 51
Senior Vice President - Human Resources I. Benjamin Watson (14) 48
Vice President - Secretary Don A. Jensen (15) 61
<FN>
(1) Mr. Esrey was elected Chairman in 1990. He was elected Chief Executive
Officer and a member of the Board of Directors in 1985.
(2) Mr. LeMay was elected President and Chief Operating Officer in February
1996. He had served as Vice Chairman since April 1995. From 1989 to 1995,
he had served as President and Chief Operating Officer Long Distance
Division. He was elected to the Board of Directors of Sprint in 1993.
(3) Mr. Fuller was elected President - Local Telecommunications Division in
October 1996. From 1990 to 1996, he served as President of United
Telephone - Midwest Group, an operating group of subsidiaries of Sprint.
(4) Mr. Forsee was elected President - Long Distance Division in March 1995.
He also serves as President and Chief Operating Officer of Sprint
Communications Company L.P. (the Limited Partnership), a subsidiary of
Sprint. Mr. Forsee had served as Senior Vice President - Staff Operations
of the Limited Partnership since 1993. From 1991 to 1993, he was
President of the Limited Partnership's Business Service Group.
(5) Mr. Peterson was elected President - National Integrated Services in
October 1996. He had served as President - Local Telecommunications
Division since 1993. From 1980 to 1993, he served as President of Carolina
Telephone and Telegraph Company, a subsidiary of Sprint.
(6) Mr. Devlin was elected Executive Vice President - Law and External Affairs
in 1989.
(7) Mr. Krause was elected Executive Vice President - Chief Financial Officer
in 1988.
(8) Mr. Betts was elected Senior Vice President in 1990.
(9) Mr. Hoffman was elected Senior Vice President - External Affairs in 1990.
8
<PAGE>
(10) Mr. Meyer was elected Senior Vice President and Controller in 1993. He
had served as Vice President and Controller of Centel since 1989.
(11) Mr. Schell was elected Senior Vice President - Strategic Planning and
Corporate Development in 1990.
(12) Mr. Smith was elected Senior Vice President - Quality Development and
Public Relations in 1991.
(13) Ms. Strandjord was elected Senior Vice President and Treasurer in 1990.
(14) Mr. Watson was elected Senior Vice President - Human Resources in 1993. He
had served as Vice President Finance and Administration of United
Telephone - Eastern Group, an operating group of subsidiaries of Sprint,
since 1990.
(15) Mr. Jensen was elected Vice President and Secretary in 1975.
There are no known family relationships between any of the persons named
above or between any of these persons and any outside directors of Sprint.
Officers are elected annually.
</FN>
</TABLE>
9
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
<TABLE>
<CAPTION>
Market Price Per Share
- --------------------- -----------------------------------------------------------------------------------------------
---------------------------------------------- ---------------------------------------------
1996 1995*
---------------------------------------------- ---------------------------------------------
-- ----------- --- ------------ --- ---------- --- ----------- -- ----------- -- -----------
End of End of
High Low Period High Low Period
-- ----------- --- ------------ --- ---------- --- ----------- -- ----------- -- -----------
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 38 5/8* $ 31 15/16* $ 38 $ 26 5/16 $ 21 5/16 $ 24 15/16
Second quarter 44 3/8 37 1/2 42 29 9/16 25 1/16 27 3/4
Third quarter 42 7/8 34 1/2 38 7/8 30 3/8 26 7/8 28 7/8
Fourth quarter 44 37 1/2 39 7/8 33 15/16 27 7/16 32 11/16
- --------------------- -- ----------- --- ------------ --- ---------- -- --- ----------- -- ----------- -- -----------
<FN>
* Adjusted to reflect the spin-off of Cellular.
</FN>
</TABLE>
As of February 28, 1997, Sprint had approximately 100,000 common stock
record holders and 2 Class A common stock record holders. The principal trading
market for Sprint's common stock is the New York Stock Exchange. The common
stock is also listed and traded on the Chicago and Pacific Stock Exchanges. The
Class A common stock is not publicly traded. Sprint declared common stock
dividends of $0.25 per share during each quarter of 1996 and 1995. During the
last three quarters of 1996, Sprint declared dividends of $0.25 per share on its
Class A common stock.
Item 6. Selected Financial Data
For information required by Item 6, refer to the "Selected Financial Data"
section of the Financial Statements and Financial Statement Schedule filed as
part of this report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
For information required by Item 7, refer to the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section of the
Financial Statements and Financial Statement Schedule filed as part of this
report.
Item 8. Financial Statements and Supplementary Data
For information required by Item 8, refer to the "Consolidated Financial
Statements and Schedule" section of the Financial Statements and Financial
Statement Schedule filed as part of this report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
10
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G(3) to Form 10-K, the information relating to
Directors of Sprint required by Item 10 is incorporated by reference from
Sprint's definitive proxy statement filed pursuant to Regulation 14A.
For information pertaining to Executive Officers of Sprint, as required by
Instruction 3 of Paragraph (b) of Item 401 of Regulation S-K, refer to the
"Executive Officers of the Registrant" section of Part I of this report.
Pursuant to Instruction G(3) to Form 10-K, the information relating to
compliance with Section 16(a) required by Item 10 is incorporated by reference
from Sprint's definitive proxy statement filed pursuant to Regulation 14A.
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information required by Item
11 is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Pursuant to Instruction G(3) to Form 10-K, the information required by Item
12 is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G(3) to Form 10-K, the information required by Item
13 is incorporated by reference from Sprint's definitive proxy statement filed
pursuant to Regulation 14A.
11
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) 1. The consolidated financial statements of Sprint filed as part of
this report are listed in the Index to Financial Statements and
Financial Statement Schedule.
2. The consolidated financial statement schedule of Sprint filed as part
of this report is listed in the Index to Financial Statements and
Financial Statement Schedule.
3. The following exhibits are filed as part of this report:
EXHIBITS
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed as Exhibit
3(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 and
incorporated herein by reference).
(b) Bylaws, as amended (filed as Exhibit 3(a) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721), and incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
12
<PAGE>
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) 1985 Stock Option Plan, as amended (Appendix to Stock
Option Plans filed as Exhibit (10)(h) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by
reference).
(i) 1990 Stock Option Plan, as amended. See Exhibit (10)
(h) for Appendix to Stock Option Plans.
(j) 1990 Restricted Stock Plan, as amended.
(k) Executive Deferred Compensation Plan, as amended.
(l) Management Incentive Stock Option Plan, as amended.
See Exhibit (10)(h) for Appendix to Stock Option Plans.
(m) Long-Term Stock Incentive Program, as amended (filed as
Exhibit (10)(f) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).
13
<PAGE>
(n) Sprint Supplemental Executive Retirement Plan (filed as
Exhibit (10)(i) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(o) Amended and Restated Centel Directors Deferred
Compensation Plan (filed as Exhibit (10)(j) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated
herein by reference).
(p) Restated Memorandum Agreements Respecting Supplemental
Pension Benefits between Sprint Corporation (formerly
United Telecommunications, Inc.) and two of its current
and former executive officers (filed as Exhibit 10(i)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(q) Executive Long-Term Incentive Plan (filed as Exhibit
10(j) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(r) Executive Management Incentive Plan (filed as Exhibit
10(k) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(s) Long-Term Incentive Compensation Plan, as amended
(filed as Exhibit 10(i) to Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996, and incorporated herein by reference).
(t) Short-Term Incentive Compensation Plan (filed as
Exhibit 10(k) to United Telecommunications, Inc. Annual
Report on Form 10-K for the year ended December 31,
1989, and incorporated herein by reference).
(u) Retirement Plan for Directors, as amended.
(v) Key Management Benefit Plan, as amended (filed as
Exhibit 10(g) to Sprint Corporation Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 and
incorporated herein by reference).
(w) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and certain of its Executive Officers
(filed as Exhibit 10(x) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, Exhibit 10(d) to Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30,
1994 and Exhibit 10 (h) of Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended March 31,
1996 and incorporated herein by reference). Agreement
Regarding Special Compensation and Post Employment
Restrictive Covenants between Sprint Corporation and
one of its Executive Officers, as amended.
(x) Director's Deferred Fee Plan, as amended.
(y) Form of Contingency Employment Agreements between
Sprint Corporation and certain of its executive
officers (filed as Exhibit 10(b) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, and incorporated herein by reference).
(z) Form of Indemnification Agreements between Sprint
Corporation (formerly United Telecommunications, Inc.)
and its Directors and Officers (filed as Exhibit 10(s)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991, and incorporated
herein by reference).
14
<PAGE>
(aa) Summary of Executive Officer and Board of Directors
Benefits (filed as Exhibit (10)(k) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
(bb) Description of agreement regarding Supplemental Pension
Benefits between Sprint Corporation and one of its
executive officers (filed as Exhibit 10(e) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, and incorporated
herein by reference).
(cc) Amended and Restated Centel Director Stock Option Plan
(filed as Exhibit 10(aa) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference).
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedules:
(a) December 31, 1996 Financial Data Schedule.
(b) December 31, 1995 Restated Financial Data Schedule.
Sprint will furnish to the Securities and Exchange Commission, upon request, a
copy of the instruments defining the rights of holders of its long-term debt.
The total amount of securities authorized under any of said instruments does not
exceed 10% of the total assets of Sprint.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1996.
(c) Exhibits are listed in Item 14(a).
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SPRINT CORPORATION
(Registrant)
By /s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
Date: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 11th day of March, 1997.
/s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and
Chief Financial Officer
/s/ John P. Meyer
John P. Meyer
Senior Vice President and Controller
Principal Accounting Officer
16
<PAGE>
SIGNATURES
SPRINT CORPORATION
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 11th day of March, 1997.
/s/ DuBose Ausley
DuBose Ausley, Director
/s/ Warren L. Batts
Warren L. Batts, Director
/s/ Michel Bon
Michel Bon, Director
/s/ Ruth M. Davis
Ruth M. Davis, Director
/s/ W. T. Esrey
William T. Esrey, Director
/s/ Donald J. Hall
Donald J. Hall, Director
/s/ Harold S. Hook
Harold S. Hook, Director
/s/ Ronald T. LeMay
Ronald T. LeMay, Director
/s/ Linda Koch Lorimer
Linda Koch Lorimer, Director
/s/ Charles E. Rice
Charles E. Rice, Director
/s/ Ron Sommer
Ron Sommer, Director
/s/ Stewart Turley
Stewart Turley, Director
17
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Sprint Corporation
Page Reference
---------------------
<S> <C>
Selected Financial Data F-2
Management's Discussion and Analysis of Financial Condition and Results of Operations F-3
Consolidated Financial Statements and Schedule:
Management Report F-16
Report of Independent Auditors - Ernst & Young LLP F-17
Consolidated Statements of Income for each of the three years ended December 31, 1996 F-18
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-19
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1996 F-20
Consolidated Statements of Common Stock and Other Shareholders' Equity for each of
the three years ended December 31, 1996 F-21
Notes to Consolidated Financial Statements F-22
Financial Statement Schedule for each of the three years ended December 31,
1996:
II - Consolidated Valuation and Qualifying Accounts F-44
Certain financial statement schedules have been omitted because the
required information is not present, or has been included in the
consolidated financial statements and notes thereto.
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA Sprint Corporation
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
(in millions, except per share data)
Results of Operations
<S> <C> <C> <C> <C> <C>
Net operating revenues $ 14,044.7 $ 12,765.1 $ 11,986.6 $ 10,914.7 $ 10,105.7
Operating income (1) 2,267.2 1,834.3 1,690.7 1,214.1 1,199.8
Income from continuing
operations (1), (2) 1,190.9 946.1 899.2 517.1 550.6
Earnings per common share from continuing
operations (1), (2) 2.79 2.69 2.57 1.50 1.62
Dividends per common share 1.00 1.00 1.00 1.00 1.00
Financial Position
Total assets $ 16,953.0 $ 15,195.9 $ 14,547.5 $ 13,898.1 $ 13,431.7
Property, plant and equipment, net 10,464.1 9,715.8 10,258.8 9,883.1 9,895.6
Total debt (including short-term
borrowings) 3,280.6 5,677.4 4,937.2 5,094.4 5,442.7
Redeemable preferred stock 11.8 32.5 37.1 38.6 40.2
Common stock and other shareholders'
equity 8,519.9 4,642.6 4,524.8 3,918.3 3,971.6
Cash Flow Data
Cash from operating activities -
continuing operations(3) $ 2,403.6 $ 2,609.6 $ 2,339.6 $ 2,007.8 $ 2,397.3
Capital expenditures 2,433.6 1,857.3 1,751.6 1,429.8 1,342.4
<FN>
(1) During 1996, Sprint recorded a nonrecurring charge of $60 million related
to litigation within the long distance division. This charge reduced income
from continuing operations by $36 million ($0.08 per share).
During 1995, Sprint recorded a nonrecurring charge of $88 million related
to a restructuring within the local division. This charge reduced income
from continuing operations by $55 million ($0.16 per share).
During 1993, Sprint recorded nonrecurring charges of $293 million related
to (a) transaction costs associated with the merger with Centel Corporation
and the expenses of integrating and restructuring the operations of the two
companies and (b) a realignment and restructuring within the long distance
division. These charges reduced income from continuing operations by $193
million ($0.56 per share).
(2) During 1994, Sprint sold an investment in equity securities, realizing a
gain of $35 million, which increased income from continuing operations by
$22 million ($0.06 per share).
During 1993, due to the enactment of the Revenue Reconciliation Act of
1993, Sprint adjusted its deferred income tax assets and liabilities to
reflect the increased tax rate. This adjustment reduced income from
continuing operations by $11 million ($0.03 per share).
During 1992, Sprint recognized gains related to sales of certain local
telephone properties, which increased income from continuing operations by
$44 million ($0.13 per share).
(3) The 1996 amount was reduced by $600 million for cash required to terminate
an accounts receivable sales agreement. The 1992 amount includes $300
million of cash proceeds from the sale of accounts receivable.
</FN>
</TABLE>
F-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Corporation and its subsidiaries (Sprint) include certain estimates,
projections and other forward-looking statements in its reports, presentations
to analysts and others, and other material disseminated to the public. There can
be no assurances of future performance and actual results may differ materially
from those in the forward-looking statements. Factors that could cause actual
results to differ materially from estimates or projections contained in
forward-looking statements include:
- the effects of vigorous competition in the markets in which Sprint
operates;
- the cost of entering new markets necessary to provide seamless
services;
- the risks associated with Sprint's investments in Sprint Spectrum L.P.
(Sprint PCS) and Global One, which are presently in the early stages
of development;
- the impacts of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
- requirements imposed on Sprint and its competitors by the Federal
Communications Commission (FCC) and state regulatory commissions
under the Telecommunications Act of 1996;
- unexpected results of litigation filed against Sprint; and
- the possibility of one or more of the markets in which Sprint competes
being affected by variations in political, economic or other
factors such as monetary policy, legal and regulatory changes or
other external factors over which Sprint has no control.
Sprint's principal activities consist of the following:
Long Distance Communications Services
The long distance communications services division is the nation's
third-largest long distance telephone company. It operates a nationwide,
all-digital long distance communications network that uses state-of-the-art
fiber-optic and electronic technology. The division primarily provides domestic
and international voice, video and data communications services. The division
offers its services to the public subject to different levels of state and
federal regulation, but rates are not subject to rate-base regulation except
nominally in some states.
Local Communications Services
The local communications services division consists of regulated local
exchange carriers (LECs) that serve more than seven million access lines in 19
states. The division provides local exchange services, access by telephone
customers and other carriers to Sprint's local exchange facilities, sales of
telecommunications equipment, and long distance services within specified
geographical areas.
Emerging Businesses
Emerging businesses consists of consumer Internet access services,
competitive local exchange carrier (CLEC) services, international development
activities (outside the scope of Global One), and personal communication
services (PCS) controlled by Sprint.
Product Distribution and Directory Publishing
The product distribution and directory publishing businesses include the
wholesale distribution of telecommunications products and the publishing and
marketing of white and yellow page telephone directories.
F-3
<PAGE>
Strategic Alliances
Global One
Sprint is a partner in Global One, a joint venture with Deutsche Telekom AG
(DT) and France Telecom (FT) to provide seamless global telecommunications
services to business, residential and carrier markets worldwide. Sprint is a
one-third partner in Global One's operating group serving Europe (excluding
France and Germany), and is a 50% partner in Global One's operating group for
the worldwide activities outside the United States and Europe.
In connection with the formation of the Global One joint venture on January
31, 1996, the long distance division contributed certain assets and related
operations of its international business unit to Global One.
On January 31, 1996, DT and FT acquired shares of a new class of Sprint
convertible preference stock for a total of $3.0 billion. This resulted in DT
and FT each holding 7.5% of Sprint's voting power. In April 1996, following the
March 1996 spin-off of Sprint's cellular and wireless communications services
division (Cellular), the preference stock was converted into Sprint Class A
common stock, and DT and FT each acquired additional shares of Class A common
stock. Following their total investment of $3.7 billion, DT and FT each own
shares of Class A common stock with 10% of Sprint's voting power. See Note 7 of
Notes to Consolidated Financial Statements for further information.
Sprint PCS
Sprint is a 40% partner in Sprint PCS, a partnership with
Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc.
Sprint PCS is building the nation's first single technology, all digital,
state-of-the-art, wireless network to provide PCS across the United States. PCS
uses digital technology, which has sound quality superior to existing cellular
technology and is less susceptible to interference and eavesdropping. In
addition, PCS offers additional features, such as paging, voice mail, Caller ID
and data transmission.
Through 1996, the four partners had invested more than $3.2 billion in
Sprint PCS to fund the acquisition of licenses and the related network buildout.
During December 1996, Sprint PCS launched service in the first of 65
metropolitan markets. Sprint PCS expects to complete this first phase in 1997
and have service in markets covering nearly 100 million people by early 1998.
Sprint PCS, through its affiliate, American Personal Communications (APC),
launched the nation's first PCS system in the Washington, D.C., and Baltimore,
Maryland, areas in November 1995.
As part of an overall strategy to increase PCS coverage, Sprint directly
acquired the rights to PCS licenses in the FCC's most recent auction. The
licenses cover 139 markets across the United States reaching a total population
of 70 million people. Sprint expects to affiliate these licenses with Sprint
PCS. With this affiliation, licensed coverage for Sprint-branded PCS will
include nearly 260 million people across the United States, Puerto Rico and the
U.S. Virgin Islands.
Beginning in 1996, discussions have taken place among the partners
concerning the possible restructuring of their interests in Sprint PCS. Although
discussions have continued, there is no certainty these discussions will result
in any change to the partnership structure.
F-4
<PAGE>
Telecommunications Law
The Telecommunications Act of 1996 (the Act), which was signed into law in
February 1996, promotes competition in all aspects of telecommunications. Of
particular relevance to Sprint, the Act eliminates legal and regulatory barriers
to entry into local telephone markets and requires incumbent LECs, among other
things, to allow local resale at wholesale rates, negotiate interconnection
agreements, provide nondiscriminatory access to unbundled network elements and
allow collocation of interconnection equipment by competitors. The Act also
allows Bell Operating Companies (BOCs) to provide in-region long distance
service once they obtain state certification of compliance with a competitive
"checklist," have a facilities-based competitor, and obtain an FCC ruling that
the provision of in-region long distance service is in the public interest. As
part of its public interest inquiry, the FCC must solicit the views of the
Department of Justice and give those views substantial weight.
The FCC adopted detailed rules in August 1996 to govern interconnection to
incumbent local networks by new market entrants. Some LECs and state public
service commissions appealed these rules to the U.S. Court of Appeals, which
stayed some of the pricing rules pending full review by the court. A court
decision is expected in mid-1997.
The FCC is also expected to issue decisions in 1997 on two related matters
critical to local competition -- universal service reform and access reform.
Currently, local rates are subsidized through implicit subsidies, such as
above-cost access charges imposed on long distance companies for connections to
local customers. The purpose of universal service reform is to establish an
explicit subsidy mechanism to replace the current implicit subsidies. Access
reform will change the structure and level of access charges and will determine
the degree of regulatory oversight for those charges.
The impact of the Act on Sprint cannot be determined because the rules for
local competition are still being decided by regulators and the courts. Sprint
intends to provide CLEC service and has filed for certification in most states
in anticipation of the opening of local markets to competition. This CLEC
activity is important to Sprint both from offensive and defensive perspectives
because it will allow customers to look to Sprint for all their
telecommunications needs. Because of high development costs, however, CLEC
activities are unlikely to be profitable for the first few years.
In those areas where Sprint is the incumbent LEC, local competition is
expected to eventually result in some loss of market share. However, because
Sprint's LEC operations are geographically dispersed and largely in rural
markets, local competition is expected to occur more gradually. Entry is most
likely to be through the resale of Sprint LEC services or through the purchase
of Sprint LEC unbundled network elements. This will allow Sprint to retain
revenue for customers lost to CLEC competition.
The impact of local competition is also dependent on the outcome of the
universal service reform and access reform dockets at the FCC. While Sprint has
presented a proposal to the FCC that fairly balances the conflicting interests
of industry participants, Sprint cannot predict what the FCC will do. If
regulators were to require an immediate reduction in access subsidies flowing to
local service without offsetting universal service support or giving LECs an
opportunity to re-balance local rates, Sprint's local division would be
adversely impacted. On the other hand, a reduction in access charges would
benefit Sprint's long distance division (and other long distance companies)
because access charges are the largest single cost of providing long distance
service. Long distance companies should benefit from lower access charges even
if these lower rates are flowed through to customers because lower long distance
prices will likely stimulate additional demand.
Several BOCs claim that they meet the competitive checklist and will seek
FCC approval to offer in-region long distance service in 1997. Given the absence
of local competition ground rules and the absence of any meaningful local
competition, Sprint believes these applications are premature. However, even if
BOCs were to get authority to offer in-region long distance services, it is
likely that any loss of Sprint customers at the retail level would be offset
since Sprint is the underlying network provider to at least three of the seven
regional Bell operating companies.
F-5
<PAGE>
Spin-off of Cellular Division
In March 1996, Sprint completed the tax-free spin-off of Cellular
(Spin-off) to Sprint common shareholders. The Spin-off was effected by
distributing all shares of Cellular common stock to all of Sprint's common
shareholders at a rate of one Cellular common share for every three Sprint
common shares held. In connection with the Spin-off, Cellular repaid $1.4
billion of intercompany debt owed to Sprint. In addition, Sprint contributed to
the equity capital of Cellular $185 million of debt owed by Cellular in excess
of the amount repaid. This equity contribution, together with Sprint's previous
investment in Cellular, resulted in Sprint's net investment in Cellular totaling
$260 million at the date of the Spin-off.
Results of Operations
Consolidated
Sprint's two primary divisions -- long distance and local -- generated
record levels of net operating revenues and improved operating results in 1996.
The long distance division generated a 20% growth in traffic volumes in 1996,
and the number of access lines served by the local division grew 5.6%.
Total net operating revenues for 1996 were $14.0 billion, a 10% increase
from $12.8 billion in 1995. Total net operating revenues for 1994 were $12.0
billion. Income from continuing operations was $1.2 billion ($2.79 per share)
for 1996 compared with $946 million ($2.69 per share) for 1995 and $899 million
($2.57 per share) for 1994. Income from continuing operations for 1996 includes
a charge related to litigation in the long distance division ($0.08 per share),
while 1995 includes a charge for restructuring within the local division ($0.16
per share). Income from continuing operations for 1994 includes a gain on the
sale of an investment in equity securities ($0.06 per share).
Segmental Results of Operations
Long Distance Communications Services
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1996 1995 1994
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
<S> <C> <C> <C>
Net operating revenues $ 8,302.1 $ 7,277.4 $ 6,805.1
Operating expenses
Interconnection 3,722.7 3,102.7 2,994.5
Operations 1,051.8 1,046.6 925.4
Selling, general and administrative 1,970.3 1,839.7 1,737.0
Depreciation and amortization 633.3 581.6 550.5
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 7,378.1 6,570.6 6,207.4
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 924.0 (1) $ 706.8 $ 597.7
-- ------------- --- ------------- -- -------------
Operating margin 11.1% (1) 9.7% 8.8%
-- ------------- --- ------------- -- -------------
Capital expenditures $ 1,133.7 $ 861.7 $ 774.1
-- ------------- --- ------------- -- -------------
Identifiable assets $ 6,040.6 $ 4,912.2 $ 4,546.0
-- ------------- --- ------------- -- -------------
<FN>
(1) Excluding the $60 million charge related to litigation, operating income and margin for 1996 would have been
$984 million and 11.9%, respectively.
</FN>
</TABLE>
On January 31, 1996, the long distance division contributed certain
international assets and related operations to Global One (the Contribution to
Global One). Accordingly, the operating results of the contributed operations
have been reflected in the division's operating results only through the date of
contribution. The contribution had two significant effects on the division's
operating results. First, revenue was reduced because customers of Sprint's
F-6
<PAGE>
international operations became Global One customers. Because Global One traffic
carried by the division is priced on a wholesale, rather than retail basis, the
division's revenue yield related to these international customers declined.
Second, operating expenses were reduced to the extent they related to
contributed operations. Had the Contribution to Global One occurred on January
1, 1994, year-over-year operating income growth would have been an estimated 29%
in 1996 (excluding the nonrecurring charge) versus 21% in 1995. The related
operating margins would have been an estimated 12.0% in 1996 (excluding the
nonrecurring charge), 10.9% in 1995 and 9.5% in 1994.
Net operating revenues increased 14% in 1996 and 7% in 1995. Traffic
volumes increased 20% and 7% in the same periods. Revenue growth was mainly
driven by strong volume growth in the residential, business and wholesale
markets and continued growth in the data services markets. Growth in the
residential market reflects the continuing success of Sprint Sense(R), a
flat-rate calling plan. The small-to-medium business market, which experienced
declining revenue during 1995, produced increased revenue in 1996. This
improvement generally reflects the success of the Fridays Free calling plan,
which experienced strong domestic and international volume growth. Growth in the
data services market, which includes sales of capacity on Sprint's network to
Internet service providers, reflects continued growth in demand and expanded
service offerings. The wholesale market experienced strong growth in both the
international and domestic markets. Growth in the wholesale international market
was due, in part, to Global One traffic. These increases in 1996 revenues were
partly offset by reduced long distance rates. Average long distance rates have
declined due to increased competition both domestically and internationally, and
due to Global One traffic being priced on a wholesale, rather than retail,
basis. Had the Contribution to Global One occurred as of January 1, 1994, the
division's year-over-year growth in net operating revenues would have been an
estimated 17% in 1996 and 6% in 1995.
Interconnection costs consist of amounts paid to LECs, other domestic
service providers, and foreign telephone companies to complete calls made by the
division's domestic customers. Interconnection costs increased during 1996 and
1995 mainly due to strong growth in both international outbound and domestic
traffic volumes. Interconnection costs were 44.8% of net operating revenues in
1996 versus 42.6% in 1995 and 44.0% in 1994. The 1996 increase in
interconnection costs as a percentage of net operating revenues reflects changes
in revenue mix, particularly the growth in international traffic. These factors
were partly offset by reduced rates charged by other domestic and international
carriers for connecting to their networks. In addition, this percentage
relationship was affected in 1996 by reduced long distance rates and reduced
revenue due to the Contribution to Global One. Had the contribution occurred as
of January 1, 1994, interconnection costs as a percentage of net operating
revenues would have been an estimated 45.0% in 1996, 43.9% in 1995 and 45.0% in
1994.
Operations expense consists of costs related to operating and maintaining
the long distance network; costs of providing various services such as operator
services, public payphones, telecommunications services for the hearing
impaired, and video teleconferencing; and costs of data system sales. Operations
expense increased less than 1% in 1996 and 13% in 1995. These increases were
mainly due to overall revenue growth. The 1996 increase was offset by the
Contribution to Global One. Had the contribution occurred as of January 1, 1994,
operations expense would have increased an estimated 17% in 1996 and 6% in 1995.
As a percentage of net operating revenues, operations expense would have been an
estimated 12.5% in 1996, 12.4% in 1995 and 12.5% in 1994.
Selling, general and administrative (SG&A) expense increased 7% in 1996 and
6% in 1995. The 1996 increase reflects a $60 million nonrecurring charge related
to litigation (see Note 9 of Notes to Consolidated Financial Statements), partly
offset by the Contribution to Global One. Excluding these items, the increases
reflect the overall growth in the division's operating activities as well as
increased advertising and marketing efforts due to the intensely competitive
long distance marketplace. Had the Contribution to Global One occurred as of
January 1, 1994, SG&A expense would have increased 8% in 1996 (excluding the
nonrecurring charge) and 6% in 1995. As a percentage of net operating revenues,
SG&A expense would have been an estimated 23.0% in 1996 (excluding the
nonrecurring charge), 24.8% in 1995 and 24.9% in 1994.
F-7
<PAGE>
Depreciation and amortization expense increased $52 million in 1996 and $31
million in 1995, generally due to an increased asset base. The increased asset
base supports data services revenue growth and expanded service capabilities.
Local Communications Services
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1996 1995 1994
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
Net operating revenues
<S> <C> <C> <C>
Local service $ 2,083.7 $ 1,875.7 $ 1,752.3
Network access 1,870.8 1,705.8 1,598.4
Toll service 421.5 485.4 529.3
Other 790.1 652.5 532.8
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total net operating revenues 5,166.1 4,719.4 4,412.8
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating expenses
Plant operations 1,379.6 1,360.6 1,298.3
Depreciation and amortization 909.1 835.6 794.6
Customer operations 676.6 601.0 549.3
Other 863.8 793.8 752.4
Restructuring costs -- 87.6 --
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 3,829.1 3,678.6 3,394.6
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 1,337.0 $ 1,040.8 (1)$ 1,018.2
-- ------------- --- ------------- -- -------------
Operating margin 25.9% 22.1% (1) 23.1%
-- ------------- --- ------------- -- -------------
Capital expenditures $ 1,142.6 $ 950.8 $ 914.2
-- ------------- --- ------------- -- -------------
Identifiable assets $ 7,512.8 $ 6,970.4 $ 7,821.3
-- ------------- --- ------------- -- -------------
<FN>
(1) Excluding the $87.6 million restructuring charge, operating income and margin for 1995 would have been
$1,128.4 million and 23.9%, respectively.
</FN>
</TABLE>
At year-end 1995, Sprint adopted accounting principles for a competitive
marketplace and discontinued applying Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation," to its local division (see Note 11 of Notes to Consolidated
Financial Statements). This resulted in a 1995 after-tax, noncash, extraordinary
charge of $565 million. Beginning in 1996, the local division's business
transactions have been recorded based on their economic substance, and
regulatory assets and liabilities based on SFAS 71 have not been recognized. The
primary effects of Sprint's discontinued use of SFAS 71 were that certain
accumulated depreciation balances were increased; plant asset lives were
shortened to reflect their economic lives; and switch software costs, which were
previously expensed as incurred, are now capitalized and amortized over their
estimated economic lives.
Local service revenues, derived from local exchange services, increased 11%
in 1996 and 7% in 1995 reflecting increases in customer access lines of 5.6% in
1996 and 4.7% in 1995. The growth in access lines reflects strong economic
growth in the division's service areas and second-line service to existing
business and residential customers to meet lifestyle and data access needs.
Local service revenues also increased due to extended area calling plans and
increased demand for advanced intelligent network services, including caller ID,
voice dialing and return call.
Network access revenues, derived from interexchange long distance carriers'
use of the local network to complete calls, increased 10% in 1996 and 7% in
1995. The increases are largely due to increased traffic volumes of 10% in 1996
and 9% in 1995, and the impact of the FCC's interim interstate price cap plan.
F-8
<PAGE>
Traffic volumes increased due to strong economic conditions in many of the
division's service areas, the migration of traffic related to toll service
revenues as described below, and the harsh 1996 winter season experienced on the
East Coast. The impact of the FCC's interim interstate price cap plan, which
became effective in 1995, increased network access revenues for 1996 and had a
nominal effect on 1995. Under the new plan, the local division adopted a rate
formula based on the maximum productivity factors that effectively removes the
earnings cap on the division's interstate access revenues. Interstate access
revenues currently comprise approximately 60% of the division's network access
revenues.
Toll service revenues, related to the provision of long distance services
within specified geographical areas and the reselling of interexchange long
distance services, decreased 13% in 1996 and 8% in 1995. The decreases primarily
reflect increased competition in the intrastate long distance market since
interexchange long distance carriers are now offering intraLATA long distance
service in certain states. In addition, toll service revenues have declined due
to the expansion of extended local area calling plans. Reductions in toll
service revenues were partly offset by increased local service and network
access revenues.
Other revenues, including revenues from telecommunications equipment sales,
directory publishing fees, and billing and collection services, increased 21% in
1996 and 22% in 1995. The increases were mainly due to business and residential
equipment sales growth. A major factor in the 1996 growth was the introduction
of several leading-edge telephone instruments, such as Caller ID.
Plant operations expense mainly includes network operations, and repair and
maintenance costs related to property, plant and equipment. Plant operations
expense increased 1% in 1996 and 5% in 1995. These increases mainly reflect
increased service costs due to customer access line growth. In addition, the
increases reflect repair and maintenance expenses in the division's Florida and
Mid-Atlantic regions due to bad weather conditions, including severe storms and
hurricanes. The 1996 increase was largely offset by the change in accounting for
switch software costs.
Depreciation and amortization expense increased $74 million in 1996 and $41
million in 1995 mainly due to plant additions. The 1996 increase also reflects
amortization of capitalized switch software costs, which largely offset the
related decrease in plant operations expense discussed above.
Customer operations expense includes costs related to business office
operations, billing services, marketing, and customer services, including
operator and directory assistance. Customer operations expense increased 13% in
1996 and 9% in 1995. The increases were mainly due to increased marketing costs
to promote new products and services, and increased customer service costs due
to access line growth.
Other operating expenses increased $70 million in 1996 and $41 million in
1995 mainly due to the growth in equipment sales.
In 1995, Sprint initiated a restructuring within its local division in an
effort to streamline certain processes and reduce costs in an increasingly
competitive marketplace. These actions resulted in the planned elimination over
several years of approximately 1,600 positions, mainly in the network and
finance functions. As a result, the local division recorded an $88 million
nonrecurring charge in 1995. The accrued liability related to this charge
specifically relates to the benefits that affected employees will receive upon
termination. Through 1996, approximately 400 positions have been eliminated
resulting in termination benefit payments of $10 million, with an additional $10
million to be paid in 1997. Substantially all of the remaining positions are
expected to be eliminated during 1997, with the related costs expected to be
paid during 1997 and 1998.
F-9
<PAGE>
Emerging Businesses
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1996
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
<S> <C>
Net operating revenues $ 0.5
-- -------------
Operating loss $ (63.8)
-- -------------
Capital expenditures $ 49.9
-- -------------
Identifiable assets $ 138.3
-- -------------
</TABLE>
During 1996, Sprint established a new emerging businesses segment
consisting of consumer Internet access services, CLEC services, international
development activities (outside the scope of Global One), and PCS controlled by
Sprint.
The 1996 operating results largely reflect activities related to Sprint
Internet Passport(SM), Sprint's consumer Internet offering, which was launched
in the 1996 fourth quarter. Sprint has substantially completed the buildout of
its Internet access platform, which now contains more than 230 points of
presence and can be reached by 85% of the nation's population through a local
call.
In addition, the operating results reflect Sprint's efforts in entering
newly competitive markets. Sprint has initiated efforts to enter local markets
across the United States by filing for CLEC status. Through January 1997, Sprint
had filed in 47 states and the District of Columbia, and gained regulatory
approval to provide competitive local telephone service in 25 states and the
District of Columbia. In January 1997, Sprint launched its initial competitive
local service offering in Southern California.
As part of an overall strategy to achieve nationwide PCS coverage, Sprint
directly acquired licenses in the FCC's recent auction for a total cost of $544
million. The licenses cover 139 markets across the United States reaching a
total population of 70 million people. Sprint expects to spend approximately
$1.5 billion over the next three years for the network buildout related to these
licenses. Sprint plans to affiliate these licenses with the licenses previously
acquired by Sprint PCS. With the affiliation of Sprint's licenses, licensed
coverage for Sprint-branded PCS will include nearly 260 million people across
the United States, Puerto Rico and the U.S. Virgin Islands.
Product Distribution and Directory Publishing
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
1996 1995 1994
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
<S> <C> <C> <C>
Net operating revenues $ 1,225.9 $ 1,148.0 $ 1,108.7
Operating expenses
Costs of services and products 1,025.7 965.8 938.2
Selling, general and administrative 91.4 88.1 88.8
Depreciation and amortization 7.2 7.4 6.9
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total operating expenses 1,124.3 1,061.3 1,033.9
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Operating income $ 101.6 $ 86.7 $ 74.8
-- ------------- --- ------------- -- -------------
Operating margin 8.3% 7.6% 6.7%
-- ------------- --- ------------- -- -------------
Capital expenditures $ 9.4 $ 7.8 $ 6.7
-- ------------- --- ------------- -- -------------
Identifiable assets $ 446.1 $ 395.4 $ 376.2
-- ------------- --- ------------- -- -------------
</TABLE>
F-10
<PAGE>
Product distribution and directory publishing's net operating revenues
increased $78 million in 1996 and $39 million in 1995 mainly due to increased
sales to customers not affiliated with Sprint. The 1995 increase also reflects
overall price increases.
Nonoperating Items
Interest Expense
Interest costs consist of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Interest expense from continuing operations $ 196.7 $ 260.7 $ 300.7
Interest expense related to Cellular (1) 21.5 124.0 97.3
Capitalized interest costs 104.0 57.0 7.5
- -------------------------------------------------------------------------------------------------------------------
Total interest costs $ 322.2 $ 441.7 $ 405.5
----------------------------------------------------
Average debt outstanding $ 3,604.9 $ 5,505.2 $ 4,900.7
----------------------------------------------------
Effective interest rate 8.9% 8.0% 8.3%
----------------------------------------------------
<FN>
(1) Interest expense related to Cellular is included in "Discontinued
operations, net" on the Consolidated Statements of Income.
</FN>
</TABLE>
Sprint's average debt outstanding decreased $1.9 billion in 1996, generally
due to repayments funded by a portion of the cash received from DT and FT for
their equity investments in Sprint and from Cellular's repayment of intercompany
debt in connection with the Spin-off. In 1995, Sprint's average debt outstanding
increased by $605 million, mainly due to short-term borrowings incurred to fund
investments in Sprint PCS.
Sprint capitalizes interest costs on borrowings related to its investment
in Sprint PCS. Capitalized interest costs increased in 1996 and 1995 due to
Sprint's increased investment in Sprint PCS. Sprint will continue to capitalize
these interest costs until Sprint PCS is no longer in the development stage.
Sprint does not expect that Sprint PCS will meet the criteria of a development
stage company beyond mid-1997.
Beginning in 1997, Sprint expects to capitalize interest costs related to
the investment in PCS licenses directly acquired by Sprint and the related
network buildout.
Sprint's effective interest rate increased to 8.9% in 1996 from 8.0% in
1995 mainly due to the decrease in short-term borrowings as a percentage of
total borrowings.
F-11
<PAGE>
Other Expense, Net
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Equity in loss of Sprint PCS $ (191.8) $ (31.4) $ (1.3)
Equity in loss of Global One and related venture costs (82.1) (22.9) (6.1)
Dividend and interest income 99.7 12.6 14.4
Gains on sales of assets 15.9 -- 34.7
Loss on sales of accounts receivable (4.2) (38.6) (28.7)
Other, net 3.9 (12.9) (15.1)
- -------------------------------------------------------------------------------------------------------------------
Total other expense, net $ (158.6) $ (93.2) $ (2.1)
----------------------------------------------------
</TABLE>
Income Tax Provision
Sprint's income tax provisions for 1996, 1995 and 1994 resulted in
effective tax rates of 37.7%, 36.1% and 35.2%, respectively. See Note 4 of Notes
to Consolidated Financial Statements for information regarding the differences
that cause the effective income tax rates to vary from the statutory federal
income tax rate.
Discontinued Operations
During 1996, 1995 and 1994, Sprint recognized income (losses) of $(3), $15,
and $(16) million, respectively, associated with its investment in Cellular,
which was spun off to Sprint common shareholders in March 1996 (see Note 12 of
Notes to Consolidated Financial Statements). During 1994, Sprint also recognized
income of $7 million for the settlement of matters related to another
discontinued operation.
Extraordinary Items
During 1996, Sprint redeemed, prior to maturity, $190 million of debt with
interest rates ranging from 6.0% to 9.5%. These early redemptions resulted in a
$5 million ($0.01 per share) after-tax loss.
At year-end 1995, Sprint adopted accounting principles for a competitive
marketplace and discontinued applying SFAS 71 to its local division (see Note 11
of Notes to Consolidated Financial Statements). SFAS 71 requires the accounting
recognition of regulators' rate actions where appropriate. Sprint determined
that the local division no longer met the criteria for applying SFAS 71 due to
changes in the regulatory framework and the evolving competitive environment. As
a result, Sprint recorded an after-tax, noncash, extraordinary charge of $565
million ($1.61 per share).
F-12
<PAGE>
Financial Condition
Sprint's financial condition at year-end 1996 compared with year-end 1995
mainly reflects the completion of strategic initiatives during the first half of
1996. A portion of the cash received from DT's and FT's investments in Sprint
and from Cellular's repayment of intercompany debt was used to reduce short- and
long-term debt. In addition, Sprint used a portion of the cash to terminate a
$600 million accounts receivable sales agreement and to meet its commitments
related to Sprint PCS. The remaining proceeds were invested on a temporary
basis.
Sprint's accounts receivable increased $940 million in 1996, reflecting the
termination of the accounts receivable sales agreement as well as the 10%
increase in consolidated net operating revenues. The allowance for doubtful
accounts as a percentage of gross accounts receivable decreased to 5% at
year-end 1996 from 8% at year-end 1995 generally because the termination of the
accounts receivable sales agreement did not require a related increase in the
allowance for doubtful accounts. Property, plant and equipment, net of
accumulated depreciation, increased $748 million in 1996. This increase was
mainly due to increased capital expenditures to enhance and upgrade Sprint's
networks, expand service capabilities and increase productivity.
At year-end 1996, Sprint's total capitalization was $11.8 billion,
consisting of short-term borrowings, long-term debt (including current
maturities), redeemable preferred stock, and common stock and other
shareholders' equity. Short-term borrowings and long-term debt (including
current maturities) declined to 27.8% of total capitalization at year-end 1996
from 54.8% at year-end 1995.
Liquidity and Capital Resources
Operating Activities - Continuing Operations
Cash flows from operating activities, which are Sprint's primary source of
liquidity, were $2.4, $2.6 and $2.3 billion in 1996, 1995 and 1994,
respectively. Excluding the effect of terminating the $600 million accounts
receivable sales agreement, cash flows increased $394 million in 1996. This
increase generally reflects improved operating results in all divisions. The
1995 increase reflects improved operating results and reduced working capital
requirements.
Investing Activities - Continuing Operations
Sprint's investing activities used cash of $3.1, $2.9 and $1.8 billion in
1996, 1995 and 1994, respectively. Capital expenditures, which are Sprint's most
significant investing activity, were $2.4, $1.9 and $1.8 billion in 1996, 1995
and 1994, respectively.
Long distance capital expenditures were incurred each year mainly to meet
increased demand for data related services, to enhance network reliability and
to upgrade capabilities for providing new products and services. Capital
expenditures for the local division were made to accommodate access line growth
and expand the division's capabilities for providing enhanced telecommunications
services. Local division 1996 capital expenditures also include $76 million of
switch software costs. In previous years, these costs were expensed as incurred.
Investments in and advances to affiliates consists mainly of contributions
to Sprint PCS. During 1996, 1995 and 1994, Sprint contributed $298, $911 and $52
million, respectively. Also in 1996, Sprint loaned $67 million to Sprint PCS.
The 1996 amounts were used to fund Sprint's portion of Sprint PCS' capital and
operating requirements. In 1995, $840 million of the contribution was used to
fund Sprint's share of payments for PCS licenses. The remainder was used to fund
Sprint's share of Sprint PCS' acquisition of a limited partnership interest in
APC, and for capital and operating requirements.
During 1996, Sprint purchased $183 million (face value) of Sprint PCS
Senior Discount bonds for $100 million.
During 1996, Sprint made an $84 million deposit to directly acquire PCS
licenses. See "Segmental Results of Operations -- Emerging Businesses" for
further discussion.
F-13
<PAGE>
Financing Activities
Sprint's financing activities provided cash of $479 million in 1996 and
$423 million in 1995, and used cash of $457 million in 1994. During 1996, DT and
FT acquired shares of a new class of Sprint stock for a total of $3.7 billion. A
portion of these proceeds, together with proceeds from Cellular's repayment of
intercompany debt, were used to reduce outstanding debt. During 1995, Sprint
issued $261 million of long-term debt and increased short-term borrowings by
$1.1 billion to fund commitments related to Sprint PCS and repay long-term debt.
During 1996, Sprint purchased 10 million treasury shares for $407 million.
Sprint's Board of Directors has authorized, through 1998, the repurchase of
shares on the open market to meet share issuance requirements of employee
benefit plans and for the conversion of preferred stock.
Sprint paid dividends to common, preference and preferred shareholders of
$420, $352 and $349 million in 1996, 1995 and 1994, respectively. Sprint's
indicated annual dividend rate on common stock is currently $1.00 per share.
Discontinued Operations
In connection with the March 1996 Spin-off, Cellular repaid $1.4 billion of
intercompany debt owed to Sprint.
Prior to the Spin-off, Cellular's 1996 investing activities required net
cash of $141 million, mainly for the acquisition of additional cellular
properties and capital expenditures.
During 1995 and 1994, Cellular's cash flows from operating activities were
$163 and $180 million, respectively. Cellular's investing activities used cash
of $325 and $272 million in 1995 and 1994, respectively, mainly for capital
expenditures.
Capital Requirements
Sprint expects its 1997 investing activities, consisting of capital
expenditures and investments in affiliates, to require cash of $4.5 to $5.0
billion. In addition, Sprint expects to pay dividends totaling $430 million.
Sprint intends to fund these 1997 cash requirements with cash from operating
activities, cash on hand, and from external sources.
Capital expenditures of $4.1 to $4.4 billion are anticipated in 1997.
Capital expenditures for the long distance and local divisions are expected to
total $2.5 billion. In early 1997, Sprint will pay $460 million for the balance
due on the PCS licenses directly acquired in the recent FCC auction. The balance
of anticipated capital expenditures will primarily be used to build out the
network for these new PCS markets and the emerging CLEC markets.
Sprint expects to invest $400 to $600 million in its affiliates during
1997. Sprint PCS will require $350 to $500 million in 1997 to continue its
network buildout and for operating cash requirements. Sprint also expects that
Global One will require partner contributions for ongoing development
activities.
In addition to these investing activities, international development
opportunities apart from Global One may create further cash requirements during
1997.
Sprint expects to borrow $1.0 to $1.5 billion during 1997, excluding any
borrowings that may be required to take advantage of any new international
opportunities. A combination of long- and short-term borrowings will be used
depending on capital market conditions during the year.
F-14
<PAGE>
Liquidity
At year-end 1996, Sprint had the ability to borrow $1.3 billion under a
revolving credit agreement with a syndicate of domestic and international banks
and other bank commitments. Other available financing sources include a
Medium-Term Note program, under which Sprint may offer for sale up to $175
million of unsecured senior debt securities. In addition, as of year-end 1996,
Sprint could offer for sale $900 million of debt securities pursuant to shelf
registration statements filed with the Securities and Exchange Commission.
Additional borrowings that may be incurred are ultimately limited by
certain covenants contained in existing debt agreements. At year-end 1996,
Sprint had borrowing capacity of $13.2 billion under the most restrictive of its
debt covenants.
The most restrictive covenant related to dividends results from Sprint's
revolving credit agreement. Among other restrictions, the agreement requires
Sprint to maintain specified levels of net worth. Due to this requirement, $2.5
billion of Sprint's $3.2 billion retained earnings were effectively restricted
from the payment of dividends at the end of 1996.
General Hedging Policies
Sprint uses certain derivative instruments in an effort to manage exposure
to interest rate risk and foreign exchange risk. Sprint's use of these
derivative instruments related to hedging activities is limited to interest rate
swap agreements, interest rate caps and forward contracts and options in foreign
currencies. As is customary for these types of derivative instruments, Sprint
does not require collateral or other security from the counterparties to the
agreements. However, since Sprint controls its exposure to credit risk through
credit approvals, credit limits, and internal monitoring procedures, Sprint
believes its credit risk exposure is limited.
Sprint will in no circumstance take speculative positions and create an
exposure to benefit from market fluctuations. All hedging activity is in
accordance with Board-approved policies. Any exposure from Sprint's use of
derivative instruments is immaterial to its overall operations, financial
condition and liquidity. See Note 10 of Notes to Consolidated Financial
Statements for more information related to Sprint's portfolio of derivative
instruments.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on minimizing
exposure to interest rate movements, setting an optimal mixture of floating-rate
and fixed-rate debt in the liability portfolio and preventing liquidity risk.
Sprint primarily employs a gap methodology to measure interest rate exposure and
uses simulation analysis to manage interest rate risk. Sprint takes an active
stance in modifying hedge positions to benefit from the value of timing
flexibility and fixed-rate/floating-rate adjustments.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on optimizing
consolidated cash flows and stabilizing accounting results. Sprint does not
hedge translation exposure because it believes optimizing consolidated cash
flows will, over time, maintain shareholder value. Sprint's primary transaction
exposure in foreign currencies results from changes in foreign exchange rates
between the dates Sprint incurs and settles liabilities (payable in a foreign
currency). These liabilities consist of charges from overseas telephone
companies for terminating international calls made by Sprint's domestic
customers.
F-15
<PAGE>
MANAGEMENT REPORT
The management of Sprint Corporation has the responsibility for the
integrity and objectivity of the information contained in this Annual Report.
Management is responsible for the consistency of reporting such information and
for ensuring that generally accepted accounting principles are used.
In discharging this responsibility, management maintains a comprehensive
system of internal controls and supports an extensive program of internal
audits, has made organizational arrangements providing appropriate divisions of
responsibility and has established communication programs aimed at assuring that
its policies, procedures and codes of conduct are understood and practiced by
its employees.
The consolidated financial statements included in this Annual Report have
been audited by Ernst & Young LLP, independent auditors. Their audit was
conducted in accordance with generally accepted auditing standards and their
report is included herein.
The responsibility of the Board of Directors for these financial statements
is pursued mainly through its Audit Committee. The Audit Committee, composed
entirely of directors who are not officers or employees of Sprint, meets
periodically with the internal auditors and independent auditors, both with and
without management present, to assure that their respective responsibilities are
being fulfilled. The internal and independent auditors have full access to the
Audit Committee to discuss auditing and financial reporting matters.
/s/ W. T. Esrey
William T. Esrey
Chairman and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and Chief Financial Officer
F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Sprint Corporation
We have audited the accompanying consolidated balance sheets of Sprint
Corporation (Sprint) as of December 31, 1996 and 1995, and the related
consolidated statements of income, cash flows, and common stock and other
shareholders' equity for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index to Financial Statements and Financial Statement Schedule. These
financial statements and the schedule are the responsibility of the management
of Sprint. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Sprint at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, Sprint
discontinued accounting for the operations of its local telecommunications
division in accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," in 1995.
ERNST & YOUNG LLP
Kansas City, Missouri
February 4, 1997
F-17
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation
- -------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions, except per share data)
<S> <C> <C> <C>
Net Operating Revenues $ 14,044.7 $ 12,765.1 $ 11,986.6
Operating Expenses
Costs of services and products 7,028.7 6,504.9 6,154.5
Selling, general and administrative 3,157.8 2,871.9 2,755.4
Depreciation and amortization 1,591.0 1,466.4 1,386.0
Restructuring costs -- 87.6 --
-------------------------------------------------------------------------------------------------------------
Total operating expenses 11,777.5 10,930.8 10,295.9
-------------------------------------------------------------------------------------------------------------
Operating Income 2,267.2 1,834.3 1,690.7
Interest expense (196.7) (260.7) (300.7)
Other expense, net (158.6) (93.2) (2.1)
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 1,911.9 1,480.4 1,387.9
Income tax provision (721.0) (534.3) (488.7)
- -------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 1,190.9 946.1 899.2
Discontinued operations, net (2.6) 14.5 (8.5)
Extraordinary items, net (4.5) (565.3) --
- -------------------------------------------------------------------------------------------------------------------
Net income 1,183.8 395.3 890.7
Preferred stock dividends (1.3) (2.6) (2.7)
- -------------------------------------------------------------------------------------------------------------------
Earnings applicable to common stock $ 1,182.5 $ 392.7 $ 888.0
-----------------------------------------------
Earnings per Common Share
Continuing operations $ 2.79 $ 2.69 $ 2.57
Discontinued operations -- 0.04 (0.02)
Extraordinary items (0.01) (1.61) --
- -------------------------------------------------------------------------------------------------------------------
Total $ 2.78 $ 1.12 $ 2.55
-----------------------------------------------
Weighted average number of common shares 426.0 350.1 348.7
-----------------------------------------------
Dividends per common share $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Sprint Corporation
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
(in millions, except per share data)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 1,150.6 $ 124.2
Accounts receivable, net of allowance for doubtful accounts of $117.4 and
$125.8 2,463.5 1,523.7
Receivable from cellular division -- 1,400.0
Other 738.7 571.5
------------------------------------------------------------------------------------------------------------------
Total current assets 4,352.8 3,619.4
Investments in equity securities 254.5 262.9
Property, plant and equipment
Long distance communications services 7,390.8 6,773.7
Local communications services 13,368.7 12,603.1
Other 651.3 539.1
------------------------------------------------------------------------------------------------------------------
21,410.8 19,915.9
Less accumulated depreciation 10,946.7 10,200.1
------------------------------------------------------------------------------------------------------------------
10,464.1 9,715.8
Investments in and advances to affiliates 1,527.1 1,195.7
Net investment in cellular division -- 106.9
Other assets 354.5 295.2
--------------------------------------------------------------------------------------------------------------------
$ 16,953.0 $ 15,195.9
------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 99.1 $ 280.4
Short-term borrowings 200.0 2,144.0
Accounts payable 1,026.7 938.9
Accrued interconnection costs 828.9 617.7
Accrued taxes 189.2 235.5
Advance billings 199.7 202.9
Other 770.6 722.7
-----------------------------------------------------------------------------------------------------------------
Total current liabilities 3,314.2 5,142.1
Long-term debt 2,981.5 3,253.0
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 846.9 843.4
Postretirement and other benefit obligations 919.7 889.3
Other 359.0 393.0
-----------------------------------------------------------------------------------------------------------------
2,125.6 2,125.7
Redeemable preferred stock 11.8 32.5
Common stock and other shareholders' equity
Common stock, par value $2.50 per share, authorized 1,000.0 shares,
issued 350.3 and 349.2 shares, and outstanding 343.9 and 349.2 shares 875.7 872.9
Class A common stock, par value $2.50 per share, authorized 500.0 shares,
issued and outstanding 86.2 shares 215.6 --
Capital in excess of par or stated value 4,425.9 960.0
Retained earnings 3,211.8 2,763.0
Treasury stock, at cost, 6.4 shares (262.2) --
Other 53.1 46.7
-----------------------------------------------------------------------------------------------------------------
8,519.9 4,642.6
-----------------------------------------------------------------------------------------------------------------
$ 16,953.0 $ 15,195.9
----------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation
- ----------------------------------------------------------------- ----------------- ---------------- -----------------
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------- ----------------- ---------------- -----------------
(in millions)
Operating Activities
<S> <C> <C> <C>
Net income $ 1,183.8 $ 395.3 $ 890.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Discontinued operations, net 2.6 (14.5) 8.5
Extraordinary items, net 4.9 565.3 --
Equity in net losses of affiliates 273.7 39.1 3.8
Depreciation and amortization 1,591.0 1,466.4 1,386.0
Deferred income taxes and investment tax credits (10.3) 5.8 53.2
Changes in operating assets and liabilities
Accounts receivable, net (988.8) (135.8) (226.5)
Inventories and other current assets 15.7 (38.6) (56.1)
Accounts payable and other current liabilities 368.7 178.5 120.2
Noncurrent assets and liabilities, net (23.7) 124.0 128.5
Other, net (14.0) 24.1 31.3
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by continuing operations 2,403.6 2,609.6 2,339.6
Net cash provided (used) by cellular division (0.1) 162.5 179.9
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by operating activities 2,403.5 2,772.1 2,519.5
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Investing Activities
Capital expenditures (2,433.6) (1,857.3) (1,751.6)
Proceeds from sale of investment in equity securities -- -- 117.7
Investments in and advances to affiliates (446.1) (948.7) (74.1)
Investment in affiliate debt securities (100.0) -- --
Deposit for PCS licenses (84.0) -- --
Other, net (51.8) (53.6) (45.0)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by continuing operations (3,115.5) (2,859.6) (1,753.0)
Repayment by cellular division of intercompany advances 1,400.0 -- --
Net cash used by cellular division (140.7) (324.6) (272.4)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by investing activities (1,856.2) (3,184.2) (2,025.4)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Financing Activities
Proceeds from long-term debt 9.4 260.7 107.9
Retirements of long-term debt (433.1) (630.0) (597.0)
Net increase (decrease) in short-term borrowings (1,986.8) 1,109.5 321.5
Proceeds from common stock issued 20.5 16.9 42.7
Proceeds from Class A common stock issued 3,661.3 -- --
Proceeds from employee stock purchase installments 38.1 38.8 33.1
Dividends paid (419.6) (351.5) (349.4)
Purchase of treasury stock (407.2) -- (9.8)
Other, net (3.5) (21.8) (5.9)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided (used) by financing activities 479.1 422.6 (456.9)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Increase in cash and equivalents 1,026.4 10.5 37.2
Cash and equivalents at beginning of year 124.2 113.7 76.5
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Cash and equivalents at end of year $ 1,150.6 $ 124.2 $ 113.7
--- ------------- -- ------------- --- -------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY Sprint Corporation
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
(in millions)
Common Stock
<S> <C> <C> <C>
Balance beginning of year $ 872.9 $ 871.4 $ 858.5
Common stock issued 2.5 1.4 12.8
Other, net 0.3 0.1 0.1
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 875.7 872.9 871.4
- -----------------------------------------------------------------------------------------------------------------------
Class A Common Stock
Balance beginning of year -- -- --
Class A common stock issued (86.2 shares) 215.6 -- --
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 215.6 -- --
- -----------------------------------------------------------------------------------------------------------------------
Capital in Excess of Par or Stated Value
Balance beginning of year 960.0 942.9 827.4
Common stock issued 17.5 13.5 111.9
Class A common stock issued 3,436.3 -- --
Other, net 12.1 3.6 3.6
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 4,425.9 960.0 942.9
- -----------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance beginning of year 2,763.0 2,730.9 2,184.2
Net income 1,183.8 395.3 890.7
Common stock dividends (346.1) (348.9) (346.7)
Class A common stock and preference stock dividends (74.9) -- --
Preferred stock dividends (1.3) (2.6) (2.7)
Spin-off of cellular division (260.2) -- --
Treasury stock issued (52.9) (3.5) --
Other, net 0.4 (8.2) 5.4
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 3,211.8 2,763.0 2,730.9
- -----------------------------------------------------------------------------------------------------------------------
Treasury Stock
Balance beginning of year -- (9.6) (0.3)
Treasury stock purchased (407.2) -- (9.8)
Treasury stock issued 145.0 9.6 0.5
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year (262.2) -- (9.6)
- -----------------------------------------------------------------------------------------------------------------------
Other
Balance beginning of year 46.7 (10.8) 48.5
Change in unrealized holding gains on investments, net 2.9 54.6 (20.5)
Other, net 3.5 2.9 (38.8)
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 53.1 46.7 (10.8)
- -----------------------------------------------------------------------------------------------------------------------
$ 8,519.9 $ 4,642.6 $ 4,524.8
-----------------------------------------------------
Shares of Common Stock Outstanding
Balance beginning of year 349.2 348.3 343.4
Common stock issued (including Class A common stock) 87.3 0.6 5.2
Treasury stock purchased (10.1) -- (0.3)
Treasury stock issued 3.7 0.3 --
- -----------------------------------------------------------------------------------------------------------------------
Balance end of year 430.1 349.2 348.3
-----------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation
1. Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
The consolidated financial statements include the accounts of Sprint
Corporation and its wholly-owned and majority-owned subsidiaries (Sprint).
Investments in entities in which Sprint exercises significant influence, but
does not control, are accounted for using the equity method (see Note 2).
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities. Those estimates and assumptions also affect the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain amounts previously reported have been reclassified to conform to
the current year presentation in the consolidated financial statements. These
reclassifications had no effect on the results of operations or shareholders'
equity as previously reported.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation," revenues and
related net income resulting from transactions between Sprint's nonregulated
operations and its regulated local exchange carriers were not eliminated in the
consolidated financial statements before 1996. Revenues related to these
intercompany transactions were $262 and $285 million in 1995 and 1994,
respectively. All other significant intercompany transactions have been
eliminated.
Classification of Operations
The long distance communications services division provides domestic and
international voice, video and data communications services. The division offers
its services to the public subject to different levels of state and federal
regulation, but rates are generally not subject to rate-base regulation.
The local communications services division consists of regulated telephone
companies. These operations provide local exchange services, access by telephone
customers and other carriers to local exchange facilities, sales of
telecommunications equipment and long distance services within specified
geographical areas.
Emerging businesses consists of activities related to consumer Internet
access services, competitive local exchange carrier (CLEC) services, personal
communication services (PCS) controlled by Sprint and international development
activities outside the scope of the Global One joint venture.
The product distribution and directory publishing businesses include the
wholesale distribution of telecommunications products and the publishing and
marketing of white and yellow page telephone directories.
Revenue Recognition
Sprint recognizes operating revenues as services are rendered or as
products are delivered to customers. The long distance division records
operating revenues net of an estimate for uncollectible accounts.
F-22
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Cash and Equivalents
Cash equivalents generally include highly liquid investments with original
maturities of three months or less and are stated at cost, which approximates
market value. As part of its cash management program, Sprint uses controlled
disbursement banking arrangements. At year-end 1996 and 1995, outstanding checks
in excess of cash balances of $127 and $131 million, respectively, were included
in accounts payable. Sprint had sufficient funds available to fund these
outstanding checks when they were presented for payment.
Investments in Debt and Equity Securities
Investments in debt and equity securities are classified as available for
sale and reported at fair value (estimated based on quoted market prices). Gross
unrealized holding gains and losses are reflected as adjustments to "Common
stock and other shareholders' equity - Other," net of related income taxes.
Inventories
Inventories, consisting principally of those related to Sprint's product
distribution business, are stated at the lower of cost (principally first-in,
first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Generally, ordinary
asset retirements and disposals are charged against accumulated depreciation
with no gain or loss recognized. Repairs and maintenance costs are expensed as
incurred.
Depreciation
The cost of property, plant and equipment is generally depreciated on a
straight-line basis over estimated economic useful lives. Prior to the
discontinued use of SFAS 71 as of year-end 1995, the cost of property, plant and
equipment for Sprint's local division had been generally depreciated on a
straight-line basis over the lives prescribed by regulatory commissions.
Income Taxes
Deferred income taxes are provided for certain temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes.
Investment tax credits related to regulated telephone property, plant and
equipment have been deferred and are being amortized over the estimated useful
lives of the related assets.
Capitalized Interest
Sprint capitalizes interest costs related to the construction of capital
assets and to its investment in Sprint Spectrum L.P. (Sprint PCS). Capitalized
interest totaled $104, $57 and $8 million in 1996, 1995 and 1994, respectively.
F-23
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Earnings Per Share (EPS)
EPS is based on the weighted average of both outstanding and issuable
shares assuming all dilutive options are exercised, as applicable.
Had the Class A common stock discussed in Note 7 been issued as of January
1, 1996, and the related proceeds been used to repay debt or invested on a
temporary basis at that time, Sprint's 1996 EPS from continuing operations would
have decreased from $2.79 per share to an estimated $2.76 per share.
2. Investments
Investment in Affiliate Debt Securities
In August 1996, Sprint purchased $183 million (face value) of Sprint PCS
Senior Discount bonds for $100 million. The bonds mature in 2006. At year-end
1996, the accreted cost of the bonds was $104 million and gross unrealized
holding gains totaled $18 million. This investment has been included in "Current
assets - Other" on the 1996 Consolidated Balance Sheet.
Investments in Equity Securities
The cost of equity securities was $105 and $109 million at year-end 1996
and 1995, respectively. Gross unrealized holding gains were $149 million in 1996
and $154 million in 1995.
Investments in and Advances to Affiliates
Investments accounted for using the equity method mainly consist of
Sprint's investments in Sprint PCS and Global One.
Sprint is a 40% partner in Sprint PCS, a partnership with
Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc.
Sprint PCS is building a wireless network to provide PCS on a broad geographic
basis within the United States.
In 1996, Sprint became a partner in Global One, a joint venture with
Deutsche Telekom AG (DT) and France Telecom (FT). Global One was formed to
provide seamless global telecommunications services to business, residential and
carrier markets worldwide. Sprint is a one-third partner in Global One's
operating group serving Europe (excluding France and Germany), and is a 50%
partner in Global One's operating group for the worldwide activities outside the
United States and Europe. At year-end 1996, Sprint's share of underlying equity
in Global One's net assets exceeded the carrying value of Sprint's investment in
Global One by $186 million. This difference is being amortized through January
2001.
F-24
<PAGE>
2. Investments (continued)
Combined, summarized financial information (100% basis) of all entities
accounted for using the equity method is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
Results of operations
<S> <C> <C> <C>
Net operating revenues $ 1,727.9 $ 779.5 $ 520.5
-- ------------- --- ------------- -- -------------
Operating loss $ (794.0) $ (58.3) $ (22.3)
-- ------------- --- ------------- -- -------------
Net loss $ (844.3) $ (90.6) $ (23.3)
-- ------------- --- ------------- -- -------------
Financial position
Current assets $ 1,360.7 $ 384.4
Noncurrent assets 6,779.3 2,613.4
- -------------------------------------------------------------- -- ------------- --- -------------
$ 8,140.0 $ 2,997.8
-- ------------- --- -------------
Current liabilities $ 1,185.5 $ 223.7
Noncurrent liabilities 2,042.1 135.4
Owners' equity 4,912.4 2,638.7
- -------------------------------------------------------------- -- ------------- --- -------------
$ 8,140.0 $ 2,997.8
-- ------------- --- -------------
</TABLE>
During 1996, 1995 and 1994, Sprint recorded net income (losses) in
affiliates accounted for using the equity method of $(264), $(23) and $3
million, respectively. These amounts are included in "Other expense, net" on the
Consolidated Statements of Income.
As of year-end 1996, Sprint had loaned Sprint PCS $67 million.
3. Employee Benefit Plans
Defined Benefit Pension Plan
Substantially all Sprint employees are covered by a noncontributory defined
benefit pension plan. Benefits for plan participants represented by collective
bargaining units are based on negotiated schedules of defined amounts. For
participants not covered by collective bargaining agreements, the plan provides
pension benefits based on years of service and participants' compensation.
Sprint's policy is to make annual plan contributions equal to an
actuarially determined amount consistent with applicable federal tax
regulations. The funding objective is to accumulate funds at a relatively stable
rate over the participants' working lives so that benefits are fully funded at
retirement. At year-end 1996, the plan's assets consisted mainly of investments
in corporate equity securities and U.S. government and corporate debt
securities.
F-25
<PAGE>
3. Employee Benefit Plans (continued)
The net pension cost (credit) and related weighted average assumptions
consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 65.4 $ 51.8 $ 61.6
Interest cost on projected benefit obligation 138.5 129.7 121.6
Actual return on plan assets (353.0) (472.1) (1.1)
Net amortization and deferral 159.4 287.9 (176.6)
- -------------------------------------------------------------------------------------------------------------------
Net pension cost (credit) $ 10.3 $ (2.7) $ 5.5
----------------------------------------------------
Discount rate 7.25% 8.50% 7.50%
Expected long-term rate of return on plan assets 9.50% 9.50% 9.50%
Anticipated composite rate of future increases in compensation 4.25% 5.00% 4.50%
</TABLE>
The funded status and amounts recognized in the Consolidated Balance Sheets
for the plan, at year-end, are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
(in millions)
Actuarial present value of benefit obligations
<S> <C> <C>
Vested benefit obligation $ (1,713.6) $ (1,705.1)
-----------------------------------
Accumulated benefit obligation $ (1,864.1) $ (1,866.0)
-----------------------------------
Projected benefit obligation $ (1,967.0) $ (1,962.7)
Plan assets at fair value 2,584.2 2,331.3
- -------------------------------------------------------------------------------------------------------------------
Plan assets in excess of the projected benefit obligation 617.2 368.6
Unrecognized net gains (481.8) (199.2)
Unrecognized prior service cost 100.4 101.3
Unamortized transition asset (147.1) (170.9)
- -------------------------------------------------------------------------------------------------------------------
Prepaid pension cost $ 88.7 $ 99.8
-----------------------------------
Discount rate 7.75% 7.25%
Anticipated composite rate of future increases in compensation 4.75% 4.25%
</TABLE>
Defined Contribution Plans
Sprint sponsors defined contribution employee savings plans covering
substantially all employees. Participants may contribute portions of their
compensation to the plans. Contributions of participants represented by
collective bargaining units are matched by Sprint based on defined amounts as
negotiated by the respective parties. Contributions of participants not covered
by collective bargaining agreements are also matched by Sprint. For these
participants, Sprint provides matching contributions in Sprint common stock
equal to 50% of participants' contributions up to 6% of their compensation. In
addition, Sprint may, at the discretion of the Board of Directors, provide
matching contributions based on the performance of Sprint common stock compared
with other telecommunications companies. Sprint's matching contributions were
$56, $51 and $47 million in 1996, 1995 and 1994, respectively. At year-end 1996,
the plans held 22 million shares of Sprint common stock.
F-26
<PAGE>
3. Employee Benefit Plans (continued)
Postretirement Benefits
Sprint provides postretirement benefits (principally medical benefits) to
substantially all employees. Employees retiring before specified dates are
eligible for benefits at no cost, or a reduced cost. Employees retiring after
specified dates are eligible for benefits on a shared-cost basis. Sprint funds
the accrued costs as benefits are paid.
The net postretirement benefits cost consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 21.7 $ 22.2 $ 23.2
Interest on accumulated postretirement benefit obligation
49.9 58.7 53.2
Net amortization and deferral (13.7) (9.4) (1.9)
- -------------------------------------------------------------------------------------------------------------------
Net postretirement benefits cost $ 57.9 $ 71.5 $ 74.5
----------------------------------------------------
</TABLE>
For measurement purposes, a weighted average annual health care cost trend
rate of 9.6% was assumed for 1996, gradually decreasing to an ultimate level of
5% by 2001. The effect of a 1% increase in the assumed trend rates would have
increased the 1996 net postretirement benefits cost by an estimated $12 million.
The discount rates for 1996, 1995 and 1994 were 7.25%, 8.50% and 7.50%,
respectively.
The amounts recognized in the Consolidated Balance Sheets, at year-end, are as
follows:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in millions)
Accumulated postretirement benefit obligation
<S> <C> <C>
Retirees $ 277.9 $ 312.4
Active plan participants -- fully eligible 127.6 118.3
Active plan participants -- other 320.7 328.6
- ------------------------------------------------------------------------------- --- ------------- -- -------------
726.2 759.3
Unrecognized prior service benefit 5.7 5.6
Unrecognized net gains 178.7 115.3
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Accrued postretirement benefits cost $ 910.6 $ 880.2
--- ------------- -- -------------
</TABLE>
The year-end 1996 and 1995 accumulated benefit obligations were based on
discount rates of 7.75% and 7.25%, respectively. The assumed 1997 annual health
care cost trend rate was 9%, gradually decreasing to an ultimate level of 5% by
2005. The effect of a 1% annual increase in the assumed health care cost trend
rates would have increased the year-end 1996 accumulated postretirement benefit
obligation by an estimated $96 million.
F-27
<PAGE>
4. Income Taxes
The income tax provisions allocated to continuing operations consist of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
(in millions)
Current income tax provision
<S> <C> <C> <C>
Federal $ 655.4 $ 437.4 $ 355.7
State 75.9 91.1 79.8
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
731.3 528.5 435.5
Deferred income tax provision (benefit)
Federal (22.2) 45.9 81.6
State 23.5 (23.6) (6.4)
Amortization of deferred investment tax credits (11.6) (16.5) (22.0)
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
(10.3) 5.8 53.2
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
Total income tax provision $ 721.0 $ 534.3 $ 488.7
-- -------------- -- ------------- --- -------------
</TABLE>
The differences that cause the effective income tax rate to vary from the
statutory federal income tax rate of 35% are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Income tax provision at the statutory rate $ 669.2 $ 518.1 $ 485.8
Less investment tax credits included in income 11.6 16.5 22.0
- -------------------------------------------------------------------------------------------------------------------
Expected federal income tax provision after investment tax
credits 657.6 501.6 463.8
Effect of
State income taxes, net of federal income tax effect 64.6 43.9 47.7
Equity in losses of foreign joint venture 8.6 -- --
Other, net (9.8) (11.2) (22.8)
- -------------------------------------------------------------------------------------------------------------------
Income tax provision, including investment tax credits $ 721.0 $ 534.3 $ 488.7
-----------------------------------------------------
Effective income tax rate 37.7% 36.1% 35.2%
-----------------------------------------------------
</TABLE>
The income tax provisions (benefits) allocated to other items are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
(in millions)
<S> <C> <C> <C>
Discontinued operations $ 7.0 $ 31.2 $ 0.7
Extraordinary items (2.9) (437.4) --
Unrealized holding gains on investments (1) 1.7 30.7 (11.6)
Stock ownership, purchase and options arrangements (1) (14.1) (7.5) (8.1)
- ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
<FN>
(1) These amounts have been recorded directly to "Common stock and other shareholders' equity - Other."
</FN>
</TABLE>
F-28
<PAGE>
4. Income Taxes (continued)
Deferred income taxes are provided for the temporary differences between
the carrying amounts of Sprint's assets and liabilities for financial statement
purposes and their tax bases. The sources of the differences that give rise to
the deferred income tax assets and liabilities at year-end 1996 and 1995, along
with the income tax effect of each, are as follows:
<TABLE>
<CAPTION>
1996 Deferred Income Tax 1995 Deferred Income Tax
------------- -- ------------- --- ------------- -- -------------
Assets Liabilities Assets Liabilities
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in millions)
<S> <C> <C> <C> <C>
Property, plant and equipment $ -- $ 1,304.3 $ -- $ 1,276.7
Postretirement and other benefits 360.3 -- 347.0 --
Reserves and allowances 115.6 -- 94.9 --
Unrealized holding gains on securities -- 57.3 -- 55.6
Other, net 106.8 -- 132.0 --
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
582.7 1,361.6 573.9 1,332.3
Less valuation allowance 13.7 -- 17.4 --
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total $ 569.0 $ 1,361.6 $ 556.5 $ 1,332.3
--- ------------- -- ------------- --- ------------- -- -------------
</TABLE>
During 1996, 1995 and 1994, the valuation allowance related to deferred
income tax assets decreased $4, $4 and $1 million, respectively.
Sprint's management believes it is more likely than not that these deferred
income tax assets, net of the valuation allowance, will be realized based on
current income tax laws and expectations of future taxable income stemming from
the reversal of existing deferred tax liabilities or ordinary operations.
Uncertainties surrounding income tax law changes, shifts in operations between
state taxing jurisdictions, and future operating income levels may, however,
affect the ultimate realization of all or some portion of these deferred income
tax assets.
At year-end 1996, Sprint had available, for income tax purposes, $3 million
of state alternative minimum tax credit carryforwards to offset state income tax
payable in future years, and tax benefits of $18 million related to state
operating loss carryforwards. The loss carryforwards expire in varying amounts
per year from 1997 through 2011.
F-29
<PAGE>
5. Borrowings
Long-term Debt
Long-term debt, at year-end, is as follows:
<TABLE>
<CAPTION>
Maturing 1996 1995
- --------------------------------------------------------------------------------------------------------------------
(in millions)
Corporate
Senior notes
<S> <C> <C> <C>
10.45% 1996 $ -- $ 100.0
9.2% to 9.8% 1997 to 2001 325.3 325.3
8.1% to 9.5% 2002 to 2006 350.0 350.0
Debentures
9.25% 2022 200.0 200.0
Other
8.25% (1) 2000 146.4 138.4
Long Distance Division
Vendor financing agreements
7.4% to 10.2% 1997 to 1999 67.9 177.6
Local Division
First mortgage bonds
5.3% to 6.3% 1996 -- 31.6
2.0% to 9.4% 1997 to 2001 291.7 311.3
4.0% to 7.8% 2002 to 2006 507.1 510.9
6.9% to 9.8% 2007 to 2011 151.7 151.7
6.9% to 7.5% 2012 to 2016 90.0 90.0
8.8% to 9.9% 2017 to 2021 325.5 297.7
7.1% to 8.4% 2022 to 2026 145.0 173.8
Debentures and notes
5.0% to 9.6% 1997 to 2016 275.3 415.6
Notes payable and commercial paper 1996 -- 42.8
Other
2.0% to 19.5% 1997 to 2009 6.2 9.8
Other
Debentures
9.00% 2019 150.0 150.0
Other
5.4% to 12.5% 1997 to 2003 48.5 56.9
- --------------------------------------------------------------------------------------------------------------------
3,080.6 3,533.4
Less current maturities 99.1 280.4
- --------------------------------------------------------------------------------------------------------------------
Long-term debt $ 2,981.5 $ 3,253.0
-----------------------------------
<FN>
(1) Notes may be exchanged at maturity for shares of Southern New England
Telecommunications Corporation (SNET) common stock owned by Sprint, or
cash. Based on SNET's closing market prices, had the notes matured at
year-end 1996 or 1995, they could have been exchanged for 3.8 million
shares of SNET stock. At year-end 1996 and 1995, Sprint held 4.2 and 4.4
million shares, respectively, of SNET stock, which have been included in
"Investments in equity securities" on the Consolidated Balance Sheets.
</FN>
</TABLE>
F-30
<PAGE>
5. Borrowings (continued)
Long-term debt maturities during each of the next five years are as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C>
1997 $ 99.1
1998 128.3
1999 30.9
2000 648.4
2001 37.8
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Property, plant and equipment with a total cost of $12.4 billion is either
pledged as security for first mortgage bonds and certain notes or is restricted
for use as mortgaged property.
During 1996, Sprint redeemed, prior to scheduled maturities, $190 million
of debt with interest rates ranging from 6.0% to 9.5%. These early redemptions
resulted in a $5 million after-tax extraordinary loss.
Short-term Borrowings
Notes payable and commercial paper outstanding and related weighted average
interest rates, at year-end, are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
Bank notes, 5.9% $ 200.0 $ 1,551.8
Commercial paper, 6.3% -- 635.0
- -------------------------------------------------------------------------------------------------------------------
Total notes payable and commercial paper $ 200.0 $ 2,186.8
-----------------------------------
</TABLE>
At year-end 1995, $43 million of notes payable and commercial paper were
classified as long-term debt based on Sprint's ability and intent to refinance
the borrowings on a long-term basis.
The bank notes are renewable at various dates throughout the year. Sprint
pays a fee to certain commercial banks to support current and future credit
requirements based on loan commitments. Lines of credit could be withdrawn by
the banks if there were a material adverse change in Sprint's financial
condition. At year-end 1996, Sprint's unused bank lines of credit totaled $1.3
billion.
Other
Sprint is in compliance with all restrictive or financial covenants
relating to its debt arrangements at year-end 1996.
F-31
<PAGE>
6. Redeemable Preferred Stock
Sprint has approximately 25 million authorized shares of preferred stock,
including nonredeemable preferred stock. The redeemable preferred stock
outstanding, at year-end, is as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------------------------
(in millions, except per
share and share data)
<S> <C> <C>
Third series -- stated value $100 per share, shares - 184,000,
nonparticipating, nonvoting, cumulative 7.75% annual dividend rate $ -- $ 18.4
Fifth series -- stated value $100,000 per share, shares - 95, voting,
cumulative 6% annual dividend rate 9.5 9.5
Other -- stated values ranging from $25 to $100 per share, shares - 22,800 and
110,675, annual dividend rates ranging from 4.7% to 5.0% 2.3 4.6
- -------------------------------------------------------------------------------------------------------------------
Total redeemable preferred stock $ 11.8 $ 32.5
-----------------------------------
</TABLE>
In 1996, 24,000 shares of Sprint's third series preferred stock were
redeemed at $100.00 per share and 160,000 shares were redeemed at $101.77 per
share.
Sprint's fifth series preferred stock must be redeemed in full in 2003. If
less than full dividends have been paid for four consecutive dividend periods,
or if the total amount of dividends in arrears exceeds the dividend payment for
six dividend periods, the holders of the fifth series preferred stock may elect
a majority of directors standing for election until all arrears in dividend
payments have been paid.
7. Common Stock
Common Stock
At year-end 1996, common stock reserved for future grants under stock
option plans or for future issuances under various arrangements was as follows:
<TABLE>
<CAPTION>
Number of Shares
- ----------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C>
Employees Stock Purchase Plan (ESPP) 6.2
Employee savings plans 3.4
Automatic Dividend Reinvestment Plan 1.2
Officer and key employees' and directors' stock options 13.8
Conversion of preferred stock and other 1.5
- ----------------------------------------------------------------------------------------------------------------
Total 26.1
------------------
</TABLE>
Under a Shareholder Rights plan, one-half of a Preferred Stock Purchase
Right is attached to each share of Sprint common stock and Class A common stock.
Each Right is exercisable and detachable only if certain takeover events occur.
The Rights entitle shareholders to buy units consisting of one one-hundredth of
a newly issued Preferred Stock-Fourth Series, Junior Participating share at
$235.00 per unit or, in certain circumstances, common stock. Under certain
circumstances, Rights beneficially owned by an acquiring person become null and
void. Sprint's Preferred Stock-Fourth Series is without par value. It is voting,
cumulative and accrues dividends generally equal to the greater of $10.00 per
share or 200 times the aggregate per share amount of all common stock dividends.
No shares of Preferred Stock-Fourth Series were issued or outstanding at
year-end 1996. The Rights may be redeemed by Sprint at $0.01 per Right and will
expire in September 1999.
F-32
<PAGE>
7. Common Stock (continued)
During 1996, 1995 and 1994, Sprint declared and paid annual common stock
dividends of $1.00 per share. The most restrictive covenant related to common
stock dividends results from Sprint's $1.5 billion revolving credit agreement.
Among other restrictions, this agreement requires Sprint to maintain specified
levels of consolidated net worth, as defined. Due to this requirement, $2.5
billion of Sprint's $3.2 billion consolidated retained earnings were effectively
restricted from the payment of dividends at year-end 1996. The indentures and
financing agreements of certain of Sprint's subsidiaries contain various
provisions restricting the payment of cash dividends on subsidiary common stock
held by Sprint. In connection with these restrictions, $145 million of the
related subsidiaries' $1.2 billion total retained earnings were restricted at
year-end 1996. The flow of cash in the form of advances from the subsidiaries to
Sprint is generally not restricted.
During 1990, the Savings Plan Trust, an employee savings plan, acquired
common stock from Sprint in exchange for a $75 million promissory note payable
to Sprint. The note bears interest at 9% and is to be repaid from the common
stock dividends received by the plan and the contributions made to the plan by
Sprint according to plan provisions. The remaining $51.2 million note receivable
balance at year-end 1996 is reflected as a reduction to "Common stock and other
shareholders' equity - Other."
Class A Common Stock
On January 31, 1996, DT and FT acquired shares of a new class of
convertible preference stock for a total of $3.0 billion. This resulted in DT
and FT each holding 7.5% of Sprint's voting power. In April 1996, following the
spin-off of Sprint's cellular and wireless communications services division
(Cellular) (see Note 12), the preference stock was converted into Class A common
stock, and DT and FT each acquired additional shares of Class A common stock.
Following their total investment of $3.7 billion, DT and FT each own shares of
Class A common stock with 10% of Sprint's voting power. During 1996, Sprint
declared and paid dividends of $0.16 per share for the preference stock and
$0.75 per share for the Class A common stock.
DT and FT, as the holders of the Class A common stock, have the right in
most circumstances to proportionate representation on Sprint's Board of
Directors and to purchase additional shares of Class A common stock from Sprint
to maintain their total ownership level at 20%. In addition, the holders of
Class A common stock have disapproval rights with respect to Sprint's
undertaking certain types of transactions. DT and FT have entered into a
standstill agreement with Sprint that contains restrictions on their ability to
acquire voting securities of Sprint other than as contemplated by their
investment agreement with Sprint and related agreements. The standstill
agreement also contains customary provisions restricting DT and FT from
initiating or participating in any proposal with respect to the control of
Sprint.
F-33
<PAGE>
8. Stock-based Compensation
Sprint's Management Incentive Stock Option Plan (MISOP) provides for the
granting of stock options to employees who are eligible to receive annual
incentive compensation. Eligible employees are entitled to receive stock options
in lieu of a portion of the target incentive under Sprint's management incentive
plans. The options generally become exercisable on December 31 of the year
granted and have a maximum term of 10 years. MISOP options are granted with
exercise prices equal to the market price of Sprint's common stock on the grant
date. At year-end 1996, authorized shares under this plan approximated eight
million. This amount increased by approximately three million shares on January
1, 1997.
The Sprint Corporation Stock Option Plans (SOP) provide for the granting of
stock options to officers and key employees. The options generally become
exercisable at the rate of 25% per year, beginning one year from the grant date,
and have a maximum term of 10 years. SOP options are granted with exercise
prices equal to the market price of Sprint's common stock on the grant date. At
year-end 1996, authorized shares under these plans approximated 18 million. This
amount increased by approximately two million shares on January 1, 1997.
Every two years, the ESPP offers all employees the election to purchase
Sprint common stock at a price equal to 85% of the market value on the grant or
exercise date, whichever is less. At year-end 1996, authorized shares under this
plan approximated 18 million.
In 1996, Sprint adopted the pro forma disclosure requirements under SFAS
No. 123, "Accounting for Stock-based Compensation," and continued to apply
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," to its stock option and employee stock purchase plans. Under APB
25, Sprint has recognized no compensation expense related to these plans.
Pro forma net income and EPS have been determined as if Sprint had used the
fair value method of accounting for its stock option grants and ESPP share
elections after 1994. Under this method, these pro forma amounts have been
reduced for compensation expense. Compensation expense is recognized over the
applicable vesting periods and is based on the number of shares under option and
their related fair values on the grant date.
The following pro forma information will not likely represent the
information reported in future years because options granted and ESPP shares
elected after 1994 will continue to vest over the next several years. In
addition, compensation expense resulting from the spin-off of Cellular will
decline over the next several years.
Sprint's pro forma net income and EPS for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 (1) 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in millions, except per share data)
<S> <C> <C>
Pro forma net income $ 1,158 $ 388
--- ------------- -- -------------
Pro forma EPS $ 2.72 $ 1.10
--- ------------- -- -------------
<FN>
(1) Pro forma net income was reduced by $6 million ($0.01 per share) in 1996
due to additional compensation resulting from modifications to terms of
options and ESPP share elections made in connection with the spin-off of
Cellular.
</FN>
</TABLE>
During 1996, Sprint employees elected to purchase 2.8 million ESPP shares
with a weighted average fair value (using the Black-Scholes pricing model) of
$10.06 per share. No ESPP shares were offered in 1995.
F-34
<PAGE>
8. Stock-based Compensation (continued)
The following tables reflect the weighted average fair value per option
granted during the year, as well as the significant weighted average assumptions
used in determining those fair values using the Black-Scholes pricing model:
<TABLE>
<CAPTION>
1996 MISOP SOP
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fair value on grant date $ 9.17 $ 10.96
Risk-free interest rate 5.2% 5.2%
Expected volatility 23.3% 23.3%
Expected dividend yield 2.5% 2.5%
Expected life (years) 4 6
- -------------------------------------------------------------------------------------------------------------------
1995 MISOP SOP
- -------------------------------------------------------------------------------------------------------------------
Fair value on grant date $ 6.67 $ 8.73
Risk-free interest rate 6.9% 7.2%
Expected volatility 23.3% 23.3%
Expected dividend yield 2.5% 2.5%
Expected life (years) 4 6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
A summary of stock option plan activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average per
Share
Number of Exercise
Shares (1) Price (1)
- --------------------------------------------------- ------------- --- ----------- ------------- --- --------------
(in millions, except per share data)
<S> <C> <C>
Outstanding January 1, 1994 7.8 $ 21.38
Granted 3.3 30.02
Exercised 1.2 17.25
Forfeited / Expired 0.6 26.46
-------------
Outstanding December 31, 1994 9.3 24.67
Granted 4.3 24.69
Exercised 0.8 19.81
Forfeited / Expired 0.5 27.06
-------------
Outstanding December 31, 1995 12.3 24.88
Granted 4.9 36.94
Exercised 2.6 22.28
Forfeited / Expired 1.0 29.22
-------------
Outstanding December 31, 1996 13.6 $ 29.42
------------- -- -----------
<FN>
(1) Due to the spin-off of Cellular, the number of shares and the related
exercise prices have been adjusted to maintain both the total fair market
value of common stock underlying the options, and the relationship between
the market value of Sprint's common stock and the option's exercise price.
Outstanding options held by Cellular employees were converted into options
and grants to purchase Cellular common stock and are not included in the
above table.
</FN>
</TABLE>
F-35
<PAGE>
8. Stock-based Compensation (continued)
After adjustment for the spin-off of Cellular, options exercisable, at
year-end 1995 and 1994 were 6.4 and 4.5 million, respectively. The following
table summarizes outstanding and exercisable options at year-end 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ --------------------------------
Weighted
Average Weighted
Remaining Weighted Average
Number Contractual Average Number Exercise
Range of Outstanding Life Exercise Exercisable Price
Exercise Prices (in millions) (in years) Price (in millions)
- ---------------------------- --------------- --------------- -- ------------- --- --------------- -- -------------
<S> <C> <C> <C> <C> <C>
$11.56 - $14.96 0.3 2.3 $ 13.14 0.3 $ 13.14
$15.18 - $19.24 0.3 4.3 17.69 0.3 17.69
$20.08 - $24.50 3.9 6.8 23.48 2.2 22.79
$25.07 - $29.96 2.6 5.4 27.32 2.0 26.62
$30.12 - $34.80 2.0 7.2 30.60 1.8 30.27
$35.32 - $39.88 4.4 9.1 36.84 1.8 36.82
$40.19 - $44.06 0.1 5.9 42.12 -- --
- ---------------------------- --------------- --------------- -- ------------- --- --------------- -- -------------
</TABLE>
9. Commitments and Contingencies
Litigation, Claims and Assessments
In December 1996, an arbitration panel entered a $61 million award in favor
of Network 2000 Communications Corporation (Network 2000) on its breach of
contract claim against Sprint. The arbitrators directed Sprint to pay one-half
of this award to Network 2000, and the remaining amount to the Missouri state
court in which a proposed class action by Network 2000's independent marketing
representatives (IMRs) against Network 2000 and Sprint is pending. The
arbitrators denied all other claims by Network 2000, including claims of fraud
and deceit.
In December 1996, Sprint filed an action in federal district court in
Kansas City, Missouri, naming as defendants Network 2000, Network 2000's
attorneys, and representatives of a proposed class of IMRs. Sprint seeks to have
the arbitration panel's award vacated, modified, or corrected, and has asked the
court to enter an order regarding the distribution of the award among the
defendants.
In the proposed class action, the IMRs seek to certify a class to pursue
breach of contract and tort claims against Network 2000 and Sprint. Sprint
believes the IMRs' contract claims have been or will be addressed by the
arbitration panel's award and the related federal court action filed by Sprint.
Further, Sprint believes the IMRs' tort claims are not appropriate for class
action treatment.
In 1996, Sprint accrued $60 million based on its ongoing assessment of the
potential liability related to actions by Network 2000 and its IMRs. This charge
reduced income from continuing operations by $36 million ($0.08 per share).
F-36
<PAGE>
9. Commitments and Contingencies (continued)
Following the announcement in 1992 of Sprint's merger agreement with Centel
Corporation (Centel), class action suits were filed against Centel and certain
of its officers and directors in federal and state courts. The state suits were
dismissed. In June 1996, Centel and the other defendants were granted summary
judgment in the federal action. The plaintiffs have appealed the court's order.
In October 1995, the New York trial court granted the motion of Centel's
financial advisors to dismiss a purported class action suit filed against them
in connection with their representation of Centel in the merger. The order
dismissing the claims was affirmed on appeal by the intermediate appellate court
in New York. Sprint may have indemnification obligations to the financial
advisors in connection with this suit.
Various other suits arising in the ordinary course of business are pending
against Sprint. Management cannot predict the ultimate outcome of these actions
but believes they will not result in a material effect on Sprint's consolidated
financial statements.
Commitments
Sprint expects to invest $400 to $600 million in its affiliates during
1997. Sprint PCS will require $350 to $500 million in 1997 to continue its
network buildout and for operating cash requirements. Sprint also expects Global
One will require partner contributions for ongoing development activities.
In the FCC's recently completed PCS license auctions, Sprint directly
acquired licenses for a total of $544 million. Sprint will pay the $460 million
balance due on these licenses in early 1997.
Operating Leases
Minimum rental commitments at year-end 1996 for all noncancelable operating
leases, consisting mainly of leases for data processing equipment and real
estate, are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C>
1997 $ 207.6
1998 203.7
1999 177.7
2000 127.2
2001 92.0
Thereafter 252.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross rental expense totaled $401, $402 and $379 million in 1996, 1995 and
1994, respectively. Rental commitments for subleases, contingent rentals and
executory costs are not significant.
F-37
<PAGE>
10. Financial Instruments
Fair Value of Financial Instruments
Sprint estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies.
Accordingly, the following estimates are not necessarily indicative of the
values Sprint could realize in a current market exchange. Although management is
not aware of any factors that would affect the estimated fair values presented
at year-end 1996, those amounts have not been comprehensively revalued for
purposes of these financial statements since that date. Therefore, estimates of
fair value after year-end 1996 may differ significantly from the amounts
presented below. The carrying amounts and estimated fair values of Sprint's
financial instruments, at year-end, are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in millions)
Financial assets
<S> <C> <C> <C> <C>
Cash and equivalents $ 1,150.6 $ 1,150.6 $ 124.2 $ 124.2
Investment in affiliate debt securities 122.5 122.5 -- --
Investments in equity securities 254.5 254.5 262.9 262.9
Financial liabilities
Short-term borrowings 200.0 200.0 2,144.0 2,144.0
Long-term debt
Corporate 1,021.7 1,142.1 1,113.7 1,282.9
Long distance division 67.9 69.0 177.6 184.5
Local division 1,792.5 1,855.8 2,035.2 2,237.5
Other 198.5 206.8 206.9 242.8
Other financial instruments
Interest rate swap agreements -- 0.2 -- (3.4)
Foreign currency contracts (0.5) (0.5) 0.5 0.4
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
</TABLE>
The carrying values of Sprint's cash and equivalents approximate fair value
at year-end 1996 and 1995. The fair value of Sprint's investments in debt and
equity securities is estimated based on quoted market prices. The fair value of
Sprint's long-term debt is estimated based on quoted market prices for publicly
traded issues. The fair value of all other issues is estimated based on the
present value of estimated future cash flows using a discount rate based on the
risks involved. The fair value of interest rate swap agreements is estimated as
the amount Sprint would receive (pay) to terminate the swap agreements at
year-end 1996 and 1995, taking into account the then-current interest rates. The
fair value of foreign currency contracts is estimated as the replacement cost of
the contracts at year-end 1996 and 1995, taking into account the then-current
foreign currency exchange rates.
Concentrations of Credit Risk
Sprint's accounts receivable are not subject to any concentration of credit
risk. Interest rate swap agreements and foreign currency contracts involve the
risk of dealing with counterparties and their ability to meet the contract
terms. Notional principal amounts are often used to express the volume of these
transactions, but the amounts subject to credit risk are significantly smaller.
In the event of nonperformance by the counterparties, Sprint's accounting loss
would be limited to the net amount it would be entitled to receive under the
terms of the applicable interest rate swap agreement or foreign currency
contract. However, Sprint does not anticipate nonperformance by any of the
counterparties associated with these agreements. Sprint controls credit risk and
the concentration of credit risk of its interest rate swap agreements and
foreign currency contracts through credit approvals, dollar exposure limits and
internal monitoring procedures.
F-38
<PAGE>
10. Financial Instruments (continued)
Interest Rate Swap Agreements
Sprint uses interest rate swap agreements as part of its interest rate
risk management program. Net interest paid or received related to these
agreements is recorded using the accrual method and is recorded as an adjustment
to interest expense. Sprint had interest rate swap agreements with notional
amounts of $350 and $275 million outstanding at year-end 1996 and 1995,
respectively. Net interest expense (income) related to interest rate swap
agreements was $2 million, $(400,000) and $1 million for 1996, 1995 and 1994,
respectively. There were no deferred gains or losses related to any terminated
interest rate swap agreements at year-end 1996, 1995 or 1994.
Foreign Currency Contracts
As part of its foreign currency exchange risk management program, Sprint
purchases and sells over-the-counter forward contracts and options in various
foreign currencies. Sprint had outstanding $46 and $13 million of open forward
contracts to buy various foreign currencies at year-end 1996 and 1995,
respectively. Sprint had $3 and $24 million of outstanding open purchase option
contracts to call various foreign currencies at year-end 1996 and 1995,
respectively. The premium paid for an option is expensed as incurred and the
fair value of an option is recorded as an asset at the end of each period. The
forward contracts open at year-end 1996 and 1995 all had original maturities of
six months or less. The net gain or loss recorded to reflect the fair value of
these contracts is recorded in the period incurred. Total net losses of
$400,000, $1 million and $2 million were recorded related to foreign currency
transactions and contracts for 1996, 1995 and 1994, respectively.
11. Adoption of Accounting Principles for a Competitive Marketplace
As of year-end 1995, Sprint determined that its local division no longer
met the criteria necessary for the continued use of SFAS 71. As a result, 1995
results include a noncash, extraordinary charge of $565 million, net of income
tax benefits of $437 million.
The decision to discontinue the use of SFAS 71 was based on changes in the
regulatory framework and the convergence of competition in the
telecommunications industry.
The 1995 extraordinary charge recognized upon the discontinued use of SFAS
71 consisted of the following:
<TABLE>
<CAPTION>
Pre-Tax After-Tax
- ------------------------------------------------------------------------- -- ----------------- -- -----------------
(in millions)
<S> <C> <C>
Increase in accumulated depreciation $ 979.1 $ 607.9
Recognition of switch software asset (99.5) (61.7)
Elimination of other net regulatory assets 123.1 76.3
-- ----------------- -- -----------------
Total $ 1,002.7 622.5
-- -----------------
Tax-related net regulatory liabilities (43.9)
Accelerated amortization of investment tax credits (13.3)
-- -----------------
Extraordinary charge $ 565.3
-- -----------------
</TABLE>
F-39
<PAGE>
11. Adoption of Accounting Principles for a Competitive Marketplace (continued)
The adjustment to accumulated depreciation was based on depreciation
reserve and impairment studies. The depreciation reserve study analyzed, by
individual plant asset category, the impact of regulator-prescribed depreciable
asset lives compared with Sprint's estimated economic lives. The results
identified the cumulative under-depreciation of certain asset categories. The
impairment study, which validated the depreciation study results, estimated the
impact on future revenues of price changes and developing industry competition,
and their effects on cash flows.
The discontinued use of SFAS 71 also required Sprint to eliminate from the
Consolidated Balance Sheets the effects of any actions of regulators that had
been recognized as assets and liabilities under SFAS 71, but would not have been
recognized as assets and liabilities by enterprises in general. The elimination
of other net regulatory assets mainly related to deferred postretirement benefit
obligations and deferred debt financing costs.
The tax-related adjustments were required to adjust deferred income taxes
to the currently enacted statutory rates and to eliminate tax-related regulatory
assets and liabilities. Sprint's local division uses the deferral method of
accounting for investment tax credits and amortizes the credits as a reduction
to tax expense over the life of the asset that gave rise to the tax credit.
Since plant asset lives were shortened, the related investment tax credits were
adjusted to reduce the unamortized balance by a corresponding amount.
12. Spin-off of Cellular Division
In March 1996, Sprint completed the tax-free spin-off of Cellular
(Spin-off) to the holders of Sprint common stock. The Spin-off was effected by
distributing to all holders of Sprint common stock all shares of Cellular common
stock at a rate of one share of Cellular common stock for every three shares of
Sprint common stock held. In connection with the Spin-off, Cellular repaid $1.4
billion of intercompany debt owed by Cellular to Sprint. In addition, Sprint
contributed to the equity capital of Cellular $185 million of debt owed by
Cellular in excess of the amount repaid. This equity contribution, together with
Sprint's previous investment in Cellular, resulted in Sprint's net investment in
Cellular totaling $260 million at the date of the Spin-off.
Cellular's net operating results, as summarized below, have been separately
classified as discontinued operations in the Consolidated Statements of Income.
Interest expense was allocated to Cellular based on the assumed repayment of
intercompany debt to Sprint by Cellular. The operating expenses as presented
below do not include Cellular's share of Sprint's general corporate overhead
expenses. These expenses, totaling $2, $13 and $12 million for 1996, 1995 and
1994, respectively, were reallocated to Sprint's other operating segments.
<TABLE>
<CAPTION>
1996 (1) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Net operating revenues $ 190.2 $ 834.4 $ 626.5
Operating expenses 156.0 675.6 529.4
- -------------------------------------------------------------------------------------------------------------------
Operating income 34.2 158.8 97.1
Interest expense (21.5) (124.0) (97.3)
Other income (expense), net (8.3) 10.9 (5.6)
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) before income taxes 4.4 45.7 (5.8)
Income tax provision (7.0) (31.2) (9.7)
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) from cellular division $ (2.6) $ 14.5 $ (15.5)
----------------------------------------------------
<FN>
(1) 1996 reflects Cellular's operating results only through the date of the
Spin-off.
</FN>
</TABLE>
F-40
<PAGE>
12. Spin-off of Cellular Division (continued)
In 1995, Cellular's net assets and liabilities, as summarized below, were
separately classified as "Net investment in cellular division" on the
Consolidated Balance Sheets.
<TABLE>
<CAPTION>
1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in
millions)
<S> <C>
Current assets $ 153.9
Noncurrent assets 1,799.0
Advance payable to Sprint (1,433.0)
Other current liabilities (166.6)
Noncurrent liabilities (246.4)
-- -------------
Net investment in cellular division $ 106.9
-- -------------
</TABLE>
13. Additional Financial Information
Segment Information
Information related to Sprint's operating business segments is included in
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Segmental Results of Operations." The net operating revenues and
operating expenses shown in those tables include revenues and expenses
eliminated in consolidation. The amounts eliminated are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
(in millions)
<S> <C> <C> <C>
Long distance division $ 30.9 $ 38.9 $ 41.6
Local division 293.1 266.4 233.1
Product distribution and directory publishing 325.9 336.8 350.8
Intercompany revenues not eliminated under SFAS 71 -- (262.4) (285.5)
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net operating revenues 649.9 379.7 340.0
Operating expenses 618.3 379.7 340.0
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 31.6 $ -- $ --
--- ------------- -- ------------- --- -------------
</TABLE>
Capital expenditures and identifiable assets not related to operating
segments are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
(in millions)
<S> <C> <C> <C>
Capital expenditures $ 98.0 $ 37.0 $ 56.6
--- ------------- -- ------------- --- -------------
Identifiable assets (1) $ 2,815.2 $ 2,917.9 $ 1,804.0
--- ------------- -- ------------- --- -------------
<FN>
(1) 1995 and 1994 amounts include the net assets of the discontinued cellular
division.
</FN>
</TABLE>
F-41
<PAGE>
13. Additional Financial Information (continued)
Realignment and Restructuring Charge
In 1995, Sprint initiated a restructuring within its local division in an
effort to streamline certain processes and reduce costs in an increasingly
competitive marketplace. These actions resulted in the planned elimination over
several years of approximately 1,600 positions, mainly in the network and
finance functions. As a result, the local division recorded an $88 million
nonrecurring charge in 1995, which reduced income from continuing operations by
$55 million ($0.16 per share). The accrued liability related to this charge
specifically relates to the benefits that affected employees will receive upon
termination.
Through 1996, approximately 400 positions have been eliminated resulting in
termination benefit payments of $10 million, with an additional $10 million to
be paid in 1997. Substantially all of the remaining positions are expected to be
eliminated during 1997 with the related costs expected to be paid during 1997
and 1998.
Accounts Receivable Sold with Recourse
Under an agreement available through year-end 1996, Sprint could sell on a
continuous basis, with recourse, up to $600 million of undivided interests in a
designated pool of its accounts receivable. Sprint elected to terminate this
agreement in early 1996 and repaid the $600 million in receivables that were
uncollected at year-end 1995.
Supplemental Cash Flows Information
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------
(in millions)
Cash paid for:
Interest (net of amounts capitalized)
<S> <C> <C> <C>
Continuing operations $ 212.1 $ 263.5 $ 320.8
--- ------------ -- ------------- -- ------------
Cellular division $ 21.5 $ 124.0 $ 97.3
--- ------------ -- ------------- -- ------------
Income taxes $ 695.3 $ 532.8 $ 435.1
--- ------------ -- ------------- -- ------------
</TABLE>
On January 31, 1996, in connection with the formation of the Global One
joint venture, Sprint contributed cash, property, plant and equipment, and other
assets and liabilities of certain of its international operations to Global One.
The net book value of the noncash assets and liabilities contributed to Global
One totaled $73 million.
During 1996 and 1994, in connection with the ESPP, Sprint issued common
stock totaling $65 and $53 million, respectively.
During 1996, as discussed in Note 12, Sprint completed the Spin-off which
had no immediate effect on cash flows other than Cellular's repayment of $1.4
billion in intercompany debt owed to Sprint.
During 1994, Sprint contributed previously unissued common stock to the
employee savings plans. The stock had a market value of $31 million.
Related Party Transactions
During 1996, Sprint provided various voice, data and administrative
services to Global One totaling $361 million. In addition, Global One provided
data and administrative services to Sprint totaling $130 million. At year-end
1996, Sprint's receivable due from Global One was $163 million and Sprint's
payable to Global One was $49 million.
F-42
<PAGE>
14. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Quarter
--- ------------- -- ------------------------------- -- -------------
1996 1st 2nd 3rd 4th (1)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Net operating revenues $ 3,371.9 $ 3,506.4 $ 3,544.4 $ 3,622.0
Operating income 574.9 580.9 598.9 512.5
Income before extraordinary items 309.3 316.8 316.2 246.0
Net income 309.3 316.8 312.4 245.3
EPS from income before extraordinary items $ 0.77 $ 0.73 $ 0.73 $ 0.57
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Quarter
--- ------------- -- ------------- --- ------------- -- -------------
1995 1st 2nd 3rd 4th (2)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in millions, except per share data)
Net operating revenues $ 3,079.1 $ 3,142.1 $ 3,205.3 $ 3,338.6
Operating income 442.8 461.8 497.1 432.6
Income before extraordinary items 224.3 245.7 268.5 222.1
Net income (loss) 224.3 245.7 268.5 (343.2)
EPS from income before extraordinary items $ 0.64 $ 0.70 $ 0.76 $ 0.63
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<FN>
(1) During the 1996 fourth quarter, Sprint recorded a nonrecurring charge of
$60 million related to litigation within the long distance division. This
charge reduced income from continuing operations by $36 million ($0.08 per
share) (see Note 9).
(2) During the 1995 fourth quarter, Sprint recorded a nonrecurring charge of
$88 million related to a restructuring within the local division. This
charge reduced income from continuing operations by $55 million ($0.16 per
share) (see Note 13).
During the 1995 fourth quarter, Sprint adopted accounting principles for a
competitive marketplace for its local division and discontinued the use of
SFAS 71. As a result, Sprint recorded a noncash, after-tax extraordinary
charge of $565 million ($1.61 per share) (see Note 11).
</FN>
</TABLE>
F-43
<PAGE>
SPRINT CORPORATION
SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additions
---------------------------
Balance Charged to Balance
beginning Charged to other Other end of
of year income accounts deductions year
- -------------------------------------------------------------------------------------------------------------------
(in millions)
1996
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 125.8 $ 248.5 $ (1.5) $ (255.4) (1) $ 117.4
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 17.4 $ 1.9 $ -- $ (5.6) $ 13.7
-----------------------------------------------------------------------------
1995
Allowance for doubtful accounts $ 87.5 $ 219.2 $ 7.0 $ (187.9) (1) $ 125.8
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 21.1 $ 4.3 $ -- $ (8.0) $ 17.4
-----------------------------------------------------------------------------
1994
Allowance for doubtful accounts $ 81.5 $ 179.1 $ 7.4 $ (180.5) (1) $ 87.5
-----------------------------------------------------------------------------
Valuation allowance - deferred
income tax assets $ 22.1 $ 2.2 $ -- $ (3.2) $ 21.1
-----------------------------------------------------------------------------
<FN>
(1) Accounts written off, net of recoveries.
</FN>
</TABLE>
F-44
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed as Exhibit
3(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 and
incorporated herein by reference).
(b) Bylaws, as amended (filed as Exhibit 3(a) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721), and incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
<PAGE>
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) 1985 Stock Option Plan, as amended (Appendix to Stock
Option Plans filed as Exhibit (10)(h) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by
reference).
(i) 1990 Stock Option Plan, as amended. See Exhibit (10)
(h) for Appendix to Stock Option Plans.
(j) 1990 Restricted Stock Plan, as amended.
(k) Executive Deferred Compensation Plan, as amended.
(l) Management Incentive Stock Option Plan, as amended.
See Exhibit (10)(h) for Appendix to Stock Option Plans.
(m) Long-Term Stock Incentive Program, as amended (filed as
Exhibit (10)(f) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996
and incorporated herein by reference).
<PAGE>
(n) Sprint Supplemental Executive Retirement Plan (filed as
Exhibit (10)(i) to Sprint Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
(o) Amended and Restated Centel Directors Deferred
Compensation Plan (filed as Exhibit (10)(j) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 and incorporated
herein by reference).
(p) Restated Memorandum Agreements Respecting Supplemental
Pension Benefits between Sprint Corporation (formerly
United Telecommunications, Inc.) and two of its current
and former executive officers (filed as Exhibit 10(i)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(q) Executive Long-Term Incentive Plan (filed as Exhibit
10(j) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(r) Executive Management Incentive Plan (filed as Exhibit
10(k) to Sprint Corporation Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference).
(s) Long-Term Incentive Compensation Plan, as amended
(filed as Exhibit 10(i) to Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996, and incorporated herein by reference).
(t) Short-Term Incentive Compensation Plan (filed as
Exhibit 10(k) to United Telecommunications, Inc. Annual
Report on Form 10-K for the year ended December 31,
1989, and incorporated herein by reference).
(u) Retirement Plan for Directors, as amended.
(v) Key Management Benefit Plan, as amended (filed as
Exhibit 10(g) to Sprint Corporation Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 and
incorporated herein by reference).
(w) Agreements Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and certain of its Executive Officers
(filed as Exhibit 10(x) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, Exhibit 10(d) to Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30,
1994 and Exhibit 10 (h) of Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended March 31,
1996 and incorporated herein by reference). Agreement
Regarding Special Compensation and Post Employment
Restrictive Covenants between Sprint Corporation and
one of its Executive Officers, as amended.
(x) Director's Deferred Fee Plan, as amended.
(y) Form of Contingency Employment Agreements between
Sprint Corporation and certain of its executive
officers (filed as Exhibit 10(b) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, and incorporated herein by reference).
(z) Form of Indemnification Agreements between Sprint
Corporation (formerly United Telecommunications, Inc.)
and its Directors and Officers (filed as Exhibit 10(s)
to Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991, and incorporated
herein by reference).
<PAGE>
(aa) Summary of Executive Officer and Board of Directors
Benefits (filed as Exhibit (10)(k) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated
herein by reference).
(bb) Description of agreement regarding Supplemental Pension
Benefits between Sprint Corporation and one of its
executive officers (filed as Exhibit 10(e) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, and incorporated
herein by reference).
(cc) Amended and Restated Centel Director Stock Option Plan
(filed as Exhibit 10(aa) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference).
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedules:
(a) December 31, 1996 Financial Data Schedule.
(b) December 31, 1995 Restated Financial Data Schedule.
<PAGE>
Exhibit (10)(h)
1985 STOCK OPTION PLAN
(as amended on February 7, 1987, August 11, 1987,
April 12, 1988, December 12, 1989, April 16, 1991,
August 13, 1991, April 18, 1995, August 8, 1995,
August 12, 1996, and February 11, 1997)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas
corporation ("Company"), hereby establishes a
stock option plan to be named the United
Telecommunications, Inc. 1985 Stock Option Plan
("Plan"), for officers and key employees of the
Company and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers
and key employees of the Company and its
subsidiaries, who are in a position to contribute
materially to the prosperity thereof, to remain
with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their
share in the Company's progress, and to encourage
them to continue to promote the best interests of
the Company and its subsidiaries. The Plan will
also aid the Company and its subsidiaries in
competing with other enterprises for the services
of new key personnel needed to help insure their
continued development.
Options granted to an optionee shall be
either Incentive Stock Options within the meaning
of Section 422A of the Internal Revenue Code of
1986, as amended, or nonstatutory stock options,
provided that no Incentive Stock Options shall be
granted which would permit options first
exercisable in any calendar year to exceed the
limitations set forth in Section 6(a) hereof.
Options which become first exercisable in any
calendar year in excess of said limitations shall
be nonstatutory stock options. Options designated
"Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said
Section 6(a) and shall not be treated as Incentive
Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock
Option Committee (the "Committee") consisting of
three or more persons who shall be members of the
Board of Directors of the Company. The Committee
shall be elected by the Board of Directors of the
Company which may from time to time appoint
members of the Committee in substitution for
members previously appointed and may fill
vacancies, however caused, in the Committee. The
Committee shall hold its meetings at such times
and places as it may determine. A majority of the
Committee shall constitute a quorum and the acts
of a majority of the members present at any
meeting at which a quorum is present, or acts
approved in writing by a majority of the
Committee, shall be deemed the acts of the
Committee. The Company shall grant options and
related stock appreciation rights under the Plan
in accordance with determinations made by the
Committee pursuant to the provisions of the Plan.
Members of the Committee shall be disinterested
persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934
("Exchange Act"). The Committee from time to time
may adopt (and thereafter amend and rescind) such
rules and regulations for carrying out the Plan
and take such action in the administration of the
Plan, not inconsistent with the provisions hereof,
as it shall deem proper. The interpretation and
construction of any provisions of the Plan by the
Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final
and conclusive. No member of the Board of
Directors or the Committee shall be liable for any
action or determination made in good faith with
respect to the Plan or any option granted under
it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock
($2.50 par value) of the Company which may be
issued upon exercise of options under the Plan
shall not exceed 3,152,618 (f1) (subject to adjustment
as provided in Section 11 hereof). The shares
sold under the Plan may be either issued shares
reacquired by the Company at any time or
authorized but unissued shares, as the Board of
Directors from time to time may determine.
____________________________________
(fn)
(f1) The initial number of shares authorized was
doubled due to the December, 1989 two-for-one
stock split.
In the event that any outstanding options
under the Plan for any reason expire or are
terminated, the shares of common stock of the
Company allocable to the unexercised portion of
all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and
key employees of the Company or its subsidiaries.
The Committee will, in its discretion, determine
the officers and key employees to be granted
options, the time or times at which options shall
be granted, the number of shares subject to each
option, whether the options are Incentive Stock
Options or nonstatutory stock options, and the
manner in which options may be exercised. In
making such determination, the Committee may take
into consideration the value of the services
rendered by the respective individuals, their
present and potential contributions to the success
of the Company and its subsidiaries and such other
factors which the Committee may deem relevant in
accomplishing the purpose of the Plan.
No option may be granted to any individual
who immediately after the option grant owns
directly or indirectly stock possessing more than
five percent (5%) of the total combined voting
power or value of all classes of stock of the
Company or any subsidiary.
An individual may be granted more than one
option but only on the terms and subject to the
restrictions hereinafter set forth. No person
shall be eligible to receive an option for a larger
number of shares than is recommended for such
individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after
December 31, 1986, the aggregate fair market value
(determined at the time the option is granted) of
the stock with respect to which Incentive Stock
Options are exercisable for the first time during
any calendar year by the optionee under all plans
of the Company and its subsidiaries shall not
exceed $100,000.
(b) Fair Market Value. Fair market value
shall be deemed to be the average of the high and
low prices of the common stock of the Company for
composite transactions as published by major
newspapers for the date the Incentive Stock Option
is granted or, if no sale of the Company's stock
shall have been made on that day, the next
preceding day on which there was a sale of such
stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be
evidenced by a Stock Option Agreement in such form
not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option
Agreement clearly and separately identifies
nonstatutory stock options and Incentive Stock
Options and that the substance of the following
terms and conditions be included therein:
(a) Option Price. The price at which each
share of common stock covered by such option may
be purchased shall be determined by the Committee
and shall be no less than one hundred percent
(100%) of the fair market value of the stock on
the date the option is granted. Fair market value
shall be deemed to be the average of the high and
low prices of the common stock of the Company for
composite transactions as published by major
newspapers for the date the option is granted or,
if no sale of the Company's stock shall have been
made on that day, the next preceding day on which
there was a sale of such stock.
(b) Limitations on Transfer. Options
may not be transferred, levied, garnished,
executed upon, subjected to a security interest,
or assigned to any person other than the optionee,
except that the optionee may transfer a
nonqualified option to a trust of which the
optionee is the sole beneficiary during his
lifetime. Upon the death of the optionee, the
trustee of such trust may exercise any options to
which the trustee has legal title on or before the
expiration date of such options, and shares issued
pursuant to such exercise shall be issued to the
trustee. Documents evidencing the transfer of any
option and the identity of the trustee shall be in
such form as may be required by the Secretary of
the Company.
(c) Post-Employment Exercise of Options. An
optionee whose employment has terminated may
exercise an option issued under the Plan on or
before the expiration date of the option and
within a period following his termination of
(1) (A) 12 months in the case of Incentive Stock
Options and
(B) 60 months, in the case of all other
options
held by an optionee who is a retiree of the
Company (for this purpose, a retiree is a person
who is entitled to receive pension benefits in
accordance with the Sprint Retirement Pension Plan
immediately upon termination of employment) or who
terminated by reason of permanent and total
disability;
(2) 12 months in the case of options held by an
optionee whose employment terminated by reason of
his death;
(3) 3 months in the case of options held by an
optionee whose employment terminated voluntarily;
and
(4) 3 months in the case of options held by an
optionee whose employment terminated involuntarily
other than for cause.
An optionee whose employment has been
terminated for cause, as determined by the
Committee, shall forfeit all his outstanding
options immediately upon termination of his
employment, and the Secretary of the Corporation
may suspend processing of stock option exercises
of any optionee with respect to whom any officer
of the Company has notified the Secretary of
probable termination for cause until the next
scheduled meeting of the Committee, at which
meeting a final and binding determination of the
Committee with respect to such optionee's
termination for cause shall be made.
Options granted under the Plan shall not be
affected by any change of duties or position so
long as the optionee continues to be an employee
of the Company or of a subsidiary. Only those
options exercisable at the date the optionee's
employment terminates may be exercised during the
period following such termination. For purposes
of this Plan, unless the Committee, at the time of
grant specifies otherwise, an employee who becomes
employed by Sprint Spectrum L.P., Global One, or
Alcatel, N.V. (each, together with their
subsidiaries, an "Affiliated Entity"), shall not,
except with respect to incentive stock options, be
considered to have terminated employment with the
Company or a subsidiary of the Company until his
employment is terminated with all Affiliated
Entities without becoming employed by the Company
or its subsidiaries. Employees of Affiliated
Entities shall not, however, by reason of the
foregoing, be eligible for new grants of options.
(d) Term of Option. The option and any
related SAR shall not be exercisable after the
expiration of ten (10) years from the date the
option was granted.
(e) Exercise After Death of Employee;
Designation of Beneficiaries. An option
exercisable upon the death of an employee may be
exercised by (i) the executor or administrator of
the optionee's estate, (ii) by the person or
persons to whom the optionee's rights under the
option pass by the optionee's will or the laws of
descent and distribution, (iii) by a trustee to
whom legal title to the option has been
transferred in accordance with this plan, or (iv)
the beneficiary designated by the optionee in
accordance with the following paragraph.
An optionee may designate a beneficiary or
beneficiaries to exercise unexpired options and to
own shares issued upon any such exercise after the
optionee's death without order of any probate
court or otherwise. A beneficiary so designated
may exercise an option upon presentation to the
Company of evidence satisfactory to the Secretary
of (1) the beneficiary's identity and (2) the
death of the optionee. An optionee may change any
beneficiary designation at anytime before his
death but may not do so by testamentary
designation in his will or otherwise. Beneficiary
designations must be made in writing on a form
provided by the Secretary. Beneficiary
designations shall become effective on the date
that the form, properly completed, signed and
notarized, is received by the Secretary. Any
designation of a beneficiary with respect to any
option shall be deemed canceled upon the transfer
of such option to an inter vivos trust in
accordance with the terms of the Plan.
(f) Sequential Exercise of Incentive Stock
Options. No Incentive Stock Option granted prior
to January 1, 1987, shall be exercisable while
there is outstanding any other Incentive Stock
Option which was granted to the optionee at an
earlier time to purchase stock in the Company or
in any corporation which (at the time of the
granting of such Incentive Stock Option) is a
subsidiary of the Company, or in any predecessor
of any of such corporations. For the purpose of
this Section 7(f), an Incentive Stock Option which
has not been exercised in full is outstanding
until the expiration of the period during which,
under its initial terms, it could have been
exercised. The cancellation of an earlier
Incentive Stock Option will not enable a
subsequent Incentive Stock Option to be exercised
any sooner.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the
grant of the option, agree in writing to remain in
the employ of the Company or of one of its
subsidiaries, at the pleasure of the Company or of
such subsidiary, for at least (1) year from the
date of the granting of such option or until
earlier termination of the optionee's employment
effected or approved by the Company or by such
subsidiary. In the event of a violation by the
optionee of such agreement, any options still held
by such person at the time of such violation shall
automatically terminate. The Committee may waive
this requirement in the case of any optionee.
Nothing contained in the Plan, or in any option
granted pursuant to the Plan, nor in any agreement
made pursuant to the provisions of this Section 8,
shall confer upon any optionee any right with
respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any
way with the right of the Company or its
subsidiaries to terminate the optionee's
employment or change the optionee's compensation
at any time.
Section 9. Exercise of Options - Purchase of
Shares.
Unless otherwise determined by the Committee,
25% of the total number of shares subject to an
option granted under the Plan shall become
exercisable one year from date of grant and 25% on
each of the three succeeding anniversaries. An
optionee's right to purchase shares with respect
to shares which become exercisable shall be
cumulative during the term of the option. An
option shall be exercisable by purchase of shares
only upon payment to the Company of the full
purchase price of the shares with respect to which
the option is exercised; provided, however, that
the Company shall not be required to issue or
deliver any certificates for shares of common
stock purchased upon the exercise of an option
prior to (i) if requested by the Company, the
filing with the Company by the optionee or
purchaser acting under Section 7(e) hereof of a
representation in writing that at the time of such
exercise it is the optionee's or purchaser's then
present intention to acquire the shares being
purchased for investment and not for resale, or
(ii) the completion of any registration or other
qualification of such shares under any state or
federal laws or rulings or regulations of any
government regulatory body, which the Company
shall determine to be necessary or advisable.
Payment for the shares shall be either in
United States dollars, payable in cash or by
check, or by surrender of stock certificates
representing like common stock of the Company
having an aggregate fair market value, determined
as of the date of exercise, equal to the number of
shares with respect to which such option is
exercised multiplied by the option price per
share; provided that the Committee may impose
whatever restrictions it deems necessary or
desirable with respect to the payment for shares
by the surrender of stock certificates
representing like common stock of the Company. In
lieu of the delivery of physical certificates, the
optionee may deliver shares in payment of the
exercise price by attesting, on a form established
for such purpose by the Secretary, to the
ownership, either outright or through ownership of
a broker account, of a sufficient number of shares
held for a period of at least six months to pay
the exercise price. The attestation must be
notarized and signed by the optionee's spouse if
the spouse is a joint owner of the shares with
respect to which such attestation is made and must
be accompanied by such documentation as the
Corporate Secretary may consider necessary to
evidence actual ownership of such shares. The
fair market value of common stock on the date of
exercise of an option shall be determined in the
same manner as the fair market value of common
stock on the date of grant of an option is
determined pursuant to Section 7(a). Such payment
shall be accompanied by a written request for the
shares purchased. An option shall be deemed
exercised on the date such payment and written
request are received by the Secretary of the
Company.
In addition, for all nonqualified options
outstanding on February 17, 1995, or issued
thereafter, certain optionees, as determined by
the Committee, may elect to receive restricted
shares upon payment for the exercise of an option
in the form of unrestricted common stock. The
optionee will receive the same number of
unrestricted shares as the number of shares
surrendered to pay the exercise price, while the
shares received in excess of the number
surrendered to pay the exercise price may be
restricted. Such optionees may also elect to
deliver restricted shares of the Company's common
stock in payment of the exercise price
notwithstanding restrictions on transferability to
which such shares are subject. The Company shall
be authorized to issue restricted shares of common
stock upon such exercises of stock options,
subject to the following conditions:
(a) The optionee shall elect a vesting
period for the restricted common stock to be
received upon exercise of the option of between
six (6) months and ten (10) years, but in no event
may an optionee elect a vesting period shorter
than the period provided in paragraph (c) hereof.
At any time on or before the 13th calendar month
preceding the date on which restrictions on shares
of restricted stock would otherwise lapse, the
optionee may elect to extend the vesting period on
all but not a portion of such shares by six months
or any multiple of six months.
(b) Restricted common stock issued upon an
exercise shall include the right to have stock
withheld for taxes on the lapse of the
restrictions.
(c) Restricted common stock received in such
an exercise or from an election to receive a Long-
Term Incentive Plan payout in restricted stock, or
any Restricted Stock Award granted pursuant to the
Long-Term Stock Incentive Program, shall be
eligible for use in payment of the exercise price
of a stock option, so long as all the shares
received as a result of such an exercise are
restricted for a period at least as long as, and
with terms at least as restrictive as the terms
of, the restricted common stock used in payment.
Any such restricted common stock so delivered in
payment of the exercise price shall have an
aggregate fair market value (determined as of the
date of exercise and in the same manner as the
fair market value of unrestricted common stock of
the Company on the date of exercise of an option
is determined pursuant to Section 7(a)) equal to
the number of shares with respect to which such
option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock
received in an exercise of a stock option that
continue to be restricted shall be forfeited in
the event that vesting conditions are not
satisfied, subject to the discretion of the
Committee, except in the case of death,
disability, normal retirement, or involuntary
termination for reasons other than cause, in which
case all restrictions lapse; provided, however,
that in no event shall restrictions lapse if the
restrictions on shares used to pay for the
exercise would not have lapsed under the same
conditions.
(e) The optionee who receives restricted
stock may not sell, transfer, assign, pledge or
otherwise encumber or dispose of shares of
restricted stock until such time as all
restrictions on such stock have lapsed except:
(i) to the Company in payment of the exercise
price of a stock option issued by the Company
under any employee stock option plan adopted by
the Company that provides for payment of the
exercise price in the form of restricted stock,
provided that such payment is made in accordance
with the terms of such plan; or (ii) to a trust of
which the optionee, the optionee's spouse, or
descendants of the optionee are the primary
beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the
Internal Revenue Code, upon the following terms:
(A) the Company receives, prior to such
transfer, a true copy of the trust agreement
and an opinion from optionee's counsel (1)
that the trust will be treated as a grantor
trust owned by the optionee under Subchapter
J of the Internal Revenue Code at all times
until the restrictions on such stock lapse or
the stock is forfeited under the terms of its
grant, (2) that the terms of the trust
provide that upon the forfeiture of the
restricted stock under the terms of its grant
or the earlier termination of the trust for
whatever reason, ownership of the restricted
stock shall revert to the optionee or to the
Company, (3) that the trustee of such trust
may not, prior to the lapsing of restrictions
on such stock, sell, transfer, assign,
pledge, or otherwise encumber or dispose of
shares of restricted stock except to the
Company or to the optionee, subject to the
restrictions provided for in this Plan, and
(4) that, until the restrictions lapse, the
trustee is not authorized to incur
liabilities on behalf of the trust, other
than to the beneficiaries of the trust; and
(B) the optionee and the trustee of the trust
shall execute stock powers in blank to be
held in the custody of the Company; and
(C) the Corporate Secretary of the Company
may, in his discretion, enforce the foregoing
transfer restrictions by maintaining physical
custody of the certificate or certificates
representing such shares of restricted stock,
by placing a restrictive legend on such
certificates, by requiring the optionee and
the trustee to execute other documents as a
pre-condition to such transfer, or otherwise.
(f) The optionee will have all the rights of
a stockholder with respect to shares of restricted
stock received upon the exercise of an option,
including the right to vote the shares of stock
and the right to dividends on the stock. Unless
the Corporate Secretary establishes alternative
procedures, the shares of restricted stock will be
registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms,
conditions and restrictions applicable to the
award and shall be held in escrow by the Company.
The optionee shall execute a stock power or powers
assigning the shares of restricted stock back to
the Company, which stock powers shall be held in
escrow by the Company and used only in the event
of the forfeiture of any of the shares of
restricted stock. A certificate evidencing
unrestricted shares of common stock shall be
issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(g) The Corporate Secretary shall have the
discretion and authority to establish any and all
procedures, including the requirement of election
forms, which he deems necessary or desirable for
the orderly administration of such exercises.
No optionee or optionee's executor or
administrator, legatees or distributees, as the
case may be, will be, or will be deemed to be, a
holder of any shares subject to an option unless
and until a stock certificate or certificates for
such shares are issued to such person or them
under the terms of the Plan. No adjustment shall
be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or
distributions or other rights for which the record
date is prior to the date such stock certificate
is issued, except as provided in Section 11
hereof.
In the event that any optionee shall be
dismissed from the employ of the Company or any of
its subsidiaries for any reason which in the
opinion of the Committee shall constitute good
cause for dismissal, any option still held by such
person at such time shall automatically terminate.
The decision of the Committee as to what shall
constitute good cause for dismissal shall be final
and binding upon all concerned.
Section 10. Exercise of Options - Stock
Appreciation Rights.
In addition to providing for the exercise of
an option as set forth in Section 9, at the time
of grant of such option the Committee may by
separate agreement, in conjunction with all or
part of any option granted under the Plan, permit
an optionee to exercise the option in an
alternative manner based on the appreciated value
of the common stock subject to option ("Stock
Appreciation Right"); provided, however, that no
Stock Appreciation Right granted to an optionee
who is an officer of the Company or who is
otherwise subject to Section 16(b) of the Exchange
Act shall be exercisable during the six-month
period following the date of grant, except that
such limitation shall not apply in the event of
death or physical disability of such optionee
occurring prior to the expiration of such six-
month period. Stock Appreciation Rights may be
exercised by an optionee by surrendering the
related option or applicable portion thereof.
Upon such exercise and surrender, the optionee
shall be entitled to receive the value of such
Stock Appreciation Rights determined in the manner
prescribed in this Section 10. Options which have
been so surrendered, in whole or in part, shall no
longer be exercisable.
Each agreement evidencing Stock Appreciation
Rights shall clearly and separately identify the
nonstatutory stock options and Incentive Stock
Options to which it relates and shall contain such
terms and conditions not inconsistent with other
provisions of the Plan as shall be determined from
time to time by the Committee, which shall include
the following:
(a) Stock Appreciation Rights shall expire
no later than the expiration of the related
option.
(b) Stock Appreciation Rights shall be
transferable only when and to the extent that the
related option is transferable.
(c) Stock Appreciation Rights shall be
exercisable at such time or times and only to the
extent that the related option is exercisable.
(d) Stock Appreciation Rights shall be
exercisable only when there is a positive spread,
that is, when the market price of the stock
subject to the related option exceeds the exercise
price of such option.
(e) Upon the exercise of Stock Appreciation
Rights, an optionee shall be entitled to receive
the value thereof, which value shall be equal to
the excess of the fair market value on the date of
exercise of one share of common stock over the
option price per share specified in the related
option multiplied by the number of shares in
respect of which the Stock Appreciation Rights
shall have been exercised. The fair market value
of common stock on the date of exercise of Stock
Appreciation Rights shall be determined in the
same manner as the fair
market value of common stock on the date of grant
of an option is determined pursuant to Section
7(a).
(f) Upon an exercise of Stock Appreciation
Rights, the optionee shall notify the Company of
the form in which payment of the value thereof
will be made (i.e., cash, common stock, or any
combination thereof).
Upon the exercise of Stock Appreciation
Rights, the option or part thereof to which such
Stock Appreciation Rights is related shall be
deemed to have been exercised for the purpose of
the limitation of the number of shares of common
stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential
exercise of Incentive Stock Options as set forth
in Section 7(f). Stock Appreciation Rights shall
be deemed exercised on the date written notice of
exercise is received by the Secretary of the
Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of
common stock of the Company are hereafter
increased or decreased or changed into or
exchanged for a different number of shares or kind
of shares or other securities of the Company or of
another corporation, by reason of reorganization,
merger, consolidation, recapitalization,
reclassification, stock split-up, combination of
shares, or a dividend payable in capital stock
(including a spin-off), appropriate adjustment
shall be made by the Committee in the number and
kind of shares for the purchase of which options
may be granted under the Plan including the
maximum number that may be granted to any one
person. In addition, the Committee shall make
appropriate adjustment in the number and kind of
shares as to which outstanding options, or
portions thereof then unexercised, shall be
exercisable, to the end that the optionee's
proportionate interest shall be maintained as
before the occurrence of such event, and such
adjustment of outstanding options shall be made
without material change of the total price
applicable to the unexercised portion of the
option and with a corresponding adjustment in the
option price per share; provided, however, that
each such adjustment in the number and kind of
shares subject to outstanding options, including
any adjustment in the option price, shall be made
in such manner as not to constitute a modification
as defined in Section 425 of the Internal Revenue
Code of 1986, as amended. If any outstanding
options are subject to any conditions, the
Committee shall also make appropriate adjustments
to such conditions. Any such adjustment made by
the Committee shall be conclusive.
The grant of an option pursuant to the Plan
shall not affect in any way the right or power of
the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or
assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at
any time terminate the Plan or make such
amendments thereof as it shall deem advisable and
in the best interests of the Company, without
further action on the part of the stockholders of
the Company; provided, however, that no such
termination or amendment shall, without the
consent of the individual to whom any option shall
theretofore have been granted, affect or impair
the rights of such individual under such option,
and provided further, that unless the stockholders
of the Company shall have first approved thereof,
no amendment of this Plan shall be made whereby
(a) the total number of shares which may be
optioned under the Plan to all individuals, or any
of them, shall be increased, except by operation
of the adjustment provisions of Section 11 hereof,
(b) the authority to administer the Plan by a
committee consisting of directors of the Company
not eligible to receive options granted under the
Plan shall be withdrawn, (c) the term of the
options shall be extended, (d) the minimum option
price shall be decreased, or (e) the class of
employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted
under the Plan after November 30, 1994, but
Incentive Stock Options granted prior to or as of
such date may extend beyond such date in
accordance with the provisions hereof.
Section 13. Effectiveness of Plan.
This Plan shall not become effective unless
and until the following conditions shall have been
met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding
shares of the Company present and entitled to vote
at a meeting of the stockholders at which a quorum
is present within one (1) year of its approval by
the Board of Directors.
(b) The Committee shall have been advised by
counsel that all other applicable legal
requirements incident to the establishment and
operation of the Plan have been complied with.
Section 14. Date of Granting of Options.
The granting of an option pursuant to the
Plan shall take place on the date the Committee
decides to grant the option. Within thirty (30)
days of the granting of the option, the Company
shall notify the optionee of the grant of the
option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement
respecting Stock Appreciation Rights, duly
executed by and on behalf of the Company, with the
request that the optionee execute the agreement or
agreements within thirty (30) days after the
mailing by the Company of the notice to the
optionee. If the optionee shall fail to execute
the written option agreement and, if applicable,
the agreement respecting Stock Appreciation Rights
within said 30-day period, such person's option
shall be automatically terminated.
Section 15. Application of Funds.
The proceeds received by the Company from the
sale of stock subject to option are to be added to
the general funds of the Company and used for its
corporate purposes as the Board of Directors shall
determine.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no
obligation on the optionee to exercise such
option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with
the exercise of a stock option by delivering
shares of stock in payment of the exercise price,
or an exercise of an SAR for stock, or upon the
lapse of restrictions on restricted stock received
upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse
hereinafter referred to as the "Tax Date"), the
optionee may elect to make payment for the
withholding of federal, state and local taxes,
including Social Security and Medicare ("FICA")
taxes, up to the optionee's marginal tax rate, by
one or both of the following methods:
(i) delivering part or all of the
payment in previously-owned shares (which
shall be valued at fair market, as defined
herein, on the Tax Date) which shares, if
acquired from the Company, must have been
held for at least six months;
(ii) requesting the Company to withhold
from those shares that would otherwise be
received upon exercise of the option, upon
exercise of an SAR for stock, or upon the
lapse of restrictions, a number of shares
having a fair market value (as defined
herein) on the Tax Date equal to the amount
to be withheld. The amount of tax with-
holding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, including FICA
taxes, required to be withheld under federal,
state and local law.
Such election is irrevocable. Any fractional
share amount and any additional withholding not
paid by the withholding or surrender of shares
must be paid in cash. If no timely election is
made, cash must be delivered to satisfy all tax
withholding requirements.
<PAGE>
Exhibit (10)(i)
1990 STOCK OPTION PLAN
(As Amended February 16, 1991, April 16, 1991,
August 13, 1991, December 8, 1992,
February 18, 1995, April 18, 1995, August 8, 1995,
August 12, 1996, and February 11, 1997)
Section 1. Establishment.
Pursuant to the Sprint Corporation Long-Term
Stock Incentive Program (the "Program"), Sprint
Corporation, a Kansas corporation (the "Company"),
hereby establishes a stock option plan to be named
the 1990 Stock Option Plan (the "Plan"), for
officers and key employees of the Company and its
subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers
and key employees of the Company and its
subsidiaries, who are in a position to contribute
materially to the prosperity thereof, to remain
with the Company or its subsidiaries, to offer
them incentives and rewards in recognition of
their share in the Company's progress, and to
encourage them to continue to promote the best
interests of the Company and its affiliates. The
Plan will also aid the Company and its
subsidiaries in competing with other enterprises
for the services of new key personnel needed to
help insure their continued development.
Options granted to an optionee shall be
either Incentive Stock Options within the meaning
of Section 422A of the Internal Revenue Code of
1986, as amended, or Nonqualified Stock Options,
provided that no Incentive Stock Options shall be
granted which would permit options first
exercisable in any calendar year to exceed the
limitations set forth in Section 6(a) hereof.
Options which become first exercisable in any
calendar year in excess of said limitations shall
be Nonqualified Stock Options. Options designated
"Nonqualified Stock Options" shall not be
restricted by the limitations of said Section 6(a)
and shall not be treated as Incentive Stock
Options.
Section 3. Administration.
The Plan shall be administered by the
Organization and Compensation Committee (the
"Committee") of the Board of Directors of the
Company. Members of the Committee shall be
Disinterested Persons as defined in the Program.
The Committee shall hold its meetings at such
times and places as it may determine. A majority
of the Committee shall constitute a quorum and the
acts of a majority of the members present at any
meeting at which a quorum is present, or acts
approved in writing by a majority of the
Committee, shall be deemed the acts of the
Committee. The Company shall grant options and
related Stock Appreciation Rights ("SARs") under
the Plan in accordance with determinations made by
the Committee pursuant to the provisions of the
Plan and the Program. The Committee from time to
time may adopt (and thereafter amend and rescind)
such rules and regulations for carrying out the
Plan and take such action in the administration of
the Plan, not inconsistent with the provisions of
the Plan and the Program, as it shall deem proper.
The interpretation and construction of any
provisions of the Plan by the Committee shall,
unless otherwise determined by the Board of
Directors of the Company, be final and conclusive.
No member of the Board of Directors or the
Committee shall be liable for any action or
determination made in good faith with respect to
the Plan or any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock
($2.50 par value) of the Company which may be
issued upon exercise of options under the Plan
shall not exceed 20,441,564 (subject to adjustment
as provided in Section 11 hereof). The shares
sold under the Plan may be either treasury shares
or authorized but unissued shares, as the Board of
Directors from time to time may determine. The
maximum number of shares of common stock which may
be issued upon exercise of options granted in any
calendar year, together with shares of common
stock subject to other awards under the Program,
shall not exceed the limits set forth in Section
4(a) of the Program.
In the event that any outstanding options
under the Plan for any reason expire or are
terminated, the shares of common stock of the
Company allocable to the unexercised portion of
all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and
key employees of the Company or its subsidiaries.
The Committee will, in its discretion, determine
the officers and key employees to be granted
options, the time or times at which options shall
be granted, the number of shares subject to each
option, whether the options are Incentive Stock
Options or Nonqualified Stock Options, any
conditions on the exercise of the options, and the
manner in which options may be exercised. In
making such determination, the Committee may take
into consideration the value of the services
rendered by the respective individuals, their
present and potential contributions to the success
of the Company and its affiliates and such other
factors which the Committee may deem relevant in
accomplishing the purpose of the Plan.
No option may be granted to any individual
who immediately after the option grant owns
directly or indirectly stock possessing more than
five percent (5%) of the total combined voting
power or value of all classes of stock of the
Company or any subsidiary.
An individual may be granted more than one
option but only on the terms and subject to the
restrictions hereinafter set forth. No person
shall be eligible to receive an option for a
larger number of shares than is recommended for
such individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. The aggregate fair market
value (determined at the time the option is
granted) of the stock with respect to which
Incentive Stock Options are exercisable for the
first time during any calendar year by the
optionee under all plans of the Company and its
subsidiaries shall not exceed $100,000 or, if
different, the maximum limitation in effect at the
time of grant under Section 422A of the Internal
Revenue Code of 1986, as amended, or any successor
provision, and any regulations promulgated
thereunder.
(b) Fair Market Value. Fair market value
shall be deemed to be the average of the high and
low prices of the common stock of the Company for
composite transactions as published by major
newspapers for the date the Incentive Stock Option
is granted or, if no sale of the Company's stock
shall have been made on that day, the next
preceding day on which there was a sale of such
stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be
evidenced by a Stock Option Agreement in such form
not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option
Agreement clearly and separately identifies
Nonqualified Stock Options and Incentive Stock
Options and that the substance of the following
terms and conditions be included therein:
(a) Option Price. The price at which each
share of common stock covered by such option may
be purchased shall be determined by the Committee
and shall be no less than one hundred percent
(100%) of the fair market value of the stock on
the date the option is granted. Fair market value
shall be deemed to be the average of the high and
low prices of the common stock of the Company for
composite transactions as published by major
newspapers for the date the option is granted or,
if no sale of the Company's stock shall have been
made on that day, the next preceding day on which
there was a sale of such stock.
(b) Limitations on Transfer. Options may not
be transferred, levied, garnished, executed upon,
subjected to a security interest, or assigned to
any person other than the optionee, except that
the optionee may transfer an option to a trust of
which the optionee is the sole beneficiary during
his lifetime. Upon the death of the optionee, the
trustee of such trust may exercise any options to
which the trustee has legal title on or before the
expiration date of such options, and shares issued
pursuant to such exercise shall be issued to the
trustee. Documents evidencing the transfer of any
option and the identity of the trustee shall be in
such form as may be required by the Secretary of
the Company.
(c) Post-Employment Exercise of Options. An
optionee whose employment has terminated may
exercise an option issued under the Plan only
during the term of his employment and within a
period following his termination of
(1) (A) 12 months in the case of Incentive Stock
Options and
(B) 60 months, in the case of all other
options
held by an optionee who is a retiree of the
Company (for this purpose, a retiree is a person
who is entitled to receive pension benefits in
accordance with the Sprint Retirement Pension Plan
immediately upon termination of employment) or who
terminated by reason of permanent and total
disability;
(2) 12 months in the case of options held by an
optionee whose employment terminated by reason of
his death;
(3) 3 months in the case of options held by an
optionee whose employment terminated voluntarily;
and
(4) 3 months in the case of options held by an
optionee whose employment terminated involuntarily
other than for cause.
An optionee whose employment has been
terminated for cause, as determined by the
Committee, shall forfeit all his outstanding
options immediately upon termination of his
employment, and the Secretary of the Corporation
may suspend processing of stock option exercises
of any optionee with respect to whom any officer
of the Company has notified the Secretary of
probable termination for cause until the next
scheduled meeting of the Committee, at which
meeting a final and binding determination of the
Committee with respect to such optionee's
termination for cause shall be made.
Options granted under the Plan shall not be
affected by any change of duties or position so
long as the optionee continues to be an employee
of the Company or of a subsidiary. Only those
options exercisable at the date the optionee's
employment terminates may be exercised during the
period following such termination. For purposes
of this Plan, unless the Committee, at the time of
grant specifies otherwise, an employee who becomes
employed by Sprint Spectrum L.P., Global One, or
Alcatel, N.V. (each, together with their
subsidiaries, an "Affiliated Entity"), shall not,
except with respect to incentive stock options, be
considered to have terminated employment with the
Company or a subsidiary of the Company until his
employment is terminated with all Affiliated
Entities without becoming employed by the Company
or its subsidiaries. Employees of Affiliated
Entities shall not, however, by reason of the
foregoing, be eligible for new grants of options.
(d) Term of Option. The option and any
related SAR shall not be exercisable after the
expiration of ten (10) years from the date the
option was granted.
(e) Exercise After Death of Employee;
Designation of Beneficiaries. An option
exercisable upon the death of an employee may be
exercised by (i) the executor or administrator of
the optionee's estate, (ii) by the person or
persons to whom the optionee's rights under the
option pass by the optionee's will or the laws of
descent and distribution, (iii) by a trustee to
whom legal title to the option has been
transferred in accordance with this plan, or (iv)
the beneficiary designated by the optionee in
accordance with the following paragraph.
An optionee may designate a beneficiary or
beneficiaries to exercise unexpired options and to
own shares issued upon any such exercise after the
optionee's death without order of any probate
court or otherwise. A beneficiary so designated
may exercise an option upon presentation to the
Company of evidence satisfactory to the Secretary
of (1) the beneficiary's identity and (2) the
death of the optionee. An optionee may change any
beneficiary designation at anytime before his
death but may not do so by testamentary
designation in his will or otherwise. Beneficiary
designations must be made in writing on a form
provided by the Secretary. Beneficiary
designations shall become effective on the date
that the form, properly completed, signed and
notarized, is received by the Secretary. Any
designation of a beneficiary with respect to any
option shall be deemed canceled upon the transfer
of such option to an inter vivos trust in
accordance with the terms of the Plan.
Section 7A. Reload Options.
In connection with nonqualified options,
including newly-granted options or outstanding
options granted under the Plan, or the stock
option plans of 1978, 1981, 1985 and 1989 of the
Company, the Committee may provide that an
optionee has the right to a reload option, which
shall be subject to the following terms and
conditions:
(a) Grant of the Reload Option; Number of
Shares, Price. Subject to subsections (b) and (c)
of this Section 7A and to the availability of
shares to be optioned under the Plan, if an
optionee has an option (the "original option")
with reload rights and pays for the exercise of
the original option by surrendering common stock
of the Company, the optionee shall receive a new
option ("reload option") for the number of shares
so surrendered at an option price equal to the
fair market value of the stock on the date of the
exercise of the original option.
(b) Minimum Purchase Required. A reload
option will be granted only if the exercise of the
original option is an exercise of at least 25% of
the total number of shares granted under the
original option (or an exercise of all the shares
remaining under the original option if less than
25% of the shares remain to be exercised).
(c) Other Requirements. A reload option
will not be granted: (1) if the market value of
the common stock of the Company on the date of
exercise of the original option is less than the
exercise price of the original option; (2) if the
optionee is no longer an employee of Sprint or a
Sprint subsidiary; or (3) if the original option
is exercised less than one year prior to the
expiration of the original option.
(d) Term of Option. The reload option shall
expire on the same date as the original option.
(e) Type of Option. The reload option shall
be a non-qualified option.
(f) No Additional Reload Options. The
reload options shall not include any right to a
second reload option.
(g) Date of Grant, Vesting. The date of
grant of the reload option shall be the date of
the exercise of the original option. The reload
options shall be exercisable in full beginning one
year from date of grant; provided, however, that
all shares purchased upon the exercise of the
original option (except for any shares withheld
for tax withholding obligations) shall not be
sold, transferred or pledged within six months
from the date of exercise of the original option.
In no event shall a reload option be exercised
after the original option expires as provided in
subsection (d) of this Section 7A.
(h) Stock Withholding; Grants of Reload
Options. If the other requirements of this
Section 7A are satisfied, and if shares are
withheld or shares surrendered for tax withholding
pursuant to Section 17, a reload option will be
granted for the number of shares surrendered as
payment for the exercise of the original option
plus the number of shares surrendered or withheld
to satisfy tax withholding. In connection with
reload options for officers who are subject to
Section 16 of the Securities Exchange Act of 1934
("Insiders"), the Committee may at any time impose
any limitations which, in the Committee's sole
discretion, are necessary or desirable in order to
comply with Section 16(b) of the Securities
Exchange Act of 1934 and the rules and regulations
thereunder, or in order to obtain any exemption
therefrom.
(i) Other Terms and Conditions. Except as
otherwise provided in this Section 7A, all the
provisions of the 1990 Stock Option Plan shall
apply to reload options granted pursuant to this
Section 7A.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the
grant of the option, agree in writing to remain in
the employ of the Company or of one of its
subsidiaries, at the pleasure of the Company or of
such subsidiary, for at least (1) year from the
date of the granting of such option or until
earlier termination of the optionee's employment
effected or approved by the Company or by such
subsidiary. In the event of a violation by the
optionee of such agreement, any options still held
by such person at the time of such violation shall
automatically terminate. The Committee may waive
this requirement in the case of any optionee.
Nothing contained in the Plan, or in any option
granted pursuant to the Plan, nor in any agreement
made pursuant to the provisions of this Section 8,
shall confer upon any optionee any right with
respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any
way with the right of the Company or its
subsidiaries to terminate the optionee's
employment or change the optionee's compensation
at any time.
Section 9. Exercise of Options - Purchase of
Shares.
Options and related SARs shall be exercisable
at such time or times, and upon the satisfaction
of such conditions, as determined by the
Committee; provided, however, that unless
otherwise determined by the Committee, no
Incentive Stock Option shall be exercisable during
the year ending on the day before the first
anniversary date of the granting of the Incentive
Stock Option. An optionee's right to purchase
shares with respect to shares which become
exercisable shall be cumulative during the term of
the option. An option shall be exercisable by
purchase of shares only upon payment to the
Company of the full purchase price of the shares
with respect to which the option is exercised;
provided, however, that the Company shall not be
required to issue or deliver any certificates for
shares of common stock purchased upon the exercise
of an option prior to (i) if requested by the
Company, the filing with the Company by the
optionee or purchaser acting under Section 7(e)
hereof of a representation in writing that at the
time of such exercise it is the optionee's or
purchaser's then present intention to acquire the
shares being purchased for investment and not for
resale, or (ii) the completion of any
registration or other qualification of such shares
under any state or federal laws or rulings or
regulations of any government regulatory body
which the Company shall determine to be necessary
or advisable.
Payment for the shares shall be either in
United States dollars, payable in cash or by
check, or by surrender of stock certificates
representing like common stock of the Company
having an aggregate fair market value, determined
as of the date of exercise, equal to the number of
shares with respect to which such option is
exercised multiplied by the option price per
share; provided that the Committee may impose
whatever restrictions it deems necessary or
desirable with respect to the payment for shares
by the surrender of stock certificates
representing like common stock of the Company. In
lieu of the delivery of physical certificates, the
optionee may deliver shares in payment of the
exercise price by attesting, on a form established
for such purpose by the Secretary, to the
ownership, either outright or through ownership of
a broker account, of a sufficient number of shares
held for a period of at least six months to pay
the exercise price. The attestation must be
notarized and signed by the optionee's spouse if
the spouse is a joint owner of the shares with
respect to which such attestation is made and must
be accompanied by such documentation as the
Corporate Secretary may consider necessary to
evidence actual ownership of such shares. The
fair market value of common stock on the date of
exercise of an option shall be determined in the
same manner as the fair market value of common
stock on the date of grant of an option is
determined pursuant to Section 7(a). Such payment
shall be accompanied by a written request for the
shares purchased. An option shall be deemed
exercised on the date such payment and written
request are received by the Secretary of the
Company.
In addition, for all nonqualified options
outstanding on February 17, 1995, or issued
thereafter, certain optionees, as determined by
the Committee, may elect to receive restricted
shares upon payment for the exercise of an option
in the form of unrestricted common stock. The
optionee will receive the same number of
unrestricted shares as the number of shares
surrendered to pay the exercise price, while the
shares received in excess of the number
surrendered to pay the exercise price may be
restricted. Such optionees may also elect to
deliver restricted shares of the Company's common
stock in payment of the exercise price
notwithstanding restrictions on transferability to
which such shares are subject. The Company shall
be authorized to issue restricted shares of common
stock upon such exercises of stock options,
subject to the following conditions:
(a) The optionee shall elect a vesting
period for the restricted common stock to be
received upon exercise of the option of between
six (6) months and ten (10) years, but in no event
may an optionee elect a vesting period shorter
than the period provided in paragraph (c) hereof.
At any time on or before the 13th calendar month
preceding the date on which restrictions on shares
of restricted stock would otherwise lapse, the
optionee may elect to extend the vesting period on
all but not a portion of such shares by six months
or any multiple of six months.
(b) Restricted common stock issued upon an
exercise shall include the right to have stock
withheld for taxes on the lapse of the
restrictions.
(c) Restricted common stock received in such
an exercise or from an election to receive a Long-
Term Incentive Plan payout in restricted stock, or
any Restricted Stock Award granted pursuant to the
Long-Term Stock Incentive Program, shall be
eligible for use in payment of the exercise price
of a stock option, so long as all the shares
received as a result of such an exercise are
restricted for a period at least as long as, and
with terms at least as restrictive as the terms
of, the restricted common stock used in payment.
Any such restricted common stock so delivered in
payment of the exercise price shall have an
aggregate fair market value (determined as of the
date of exercise and in the same manner as the
fair market value of unrestricted common stock of
the Company on the date of exercise of an option
is determined pursuant to Section 7(a)) equal to
the number of shares with respect to which such
option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock
received in an exercise of a stock option that
continue to be restricted shall be forfeited in
the event that vesting conditions are not
satisfied, subject to the discretion of the
Committee, except in the case of death,
disability, normal retirement, or involuntary
termination for reasons other than cause, in which
case all restrictions lapse; provided, however,
that in no event shall restrictions lapse if the
restrictions on shares used to pay for the
exercise would not have lapsed under the same
conditions.
(e) The optionee who receives restricted
stock may not sell, transfer, assign, pledge or
otherwise encumber or dispose of shares of
restricted stock until such time as all
restrictions on such stock have lapsed except:
(i) to the Company in payment of the exercise
price of a stock option issued by the Company
under any employee stock option plan adopted by
the Company that provides for payment of the
exercise price in the form of restricted stock,
provided that such payment is made in accordance
with the terms of such plan; or (ii) to a trust of
which the optionee, the optionee's spouse, or
descendants of the optionee are the primary
beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the
Internal Revenue Code, upon the following terms:
(A) the Company receives, prior to such
transfer, a true copy of the trust agreement
and an opinion from optionee's counsel (1)
that the trust will be treated as a grantor
trust owned by the optionee under Subchapter
J of the Internal Revenue Code at all times
until the restrictions on such stock lapse or
the stock is forfeited under the terms of its
grant, (2) that the terms of the trust
provide that upon the forfeiture of the
restricted stock under the terms of its grant
or the earlier termination of the trust for
whatever reason, ownership of the restricted
stock shall revert to the optionee or to the
Company, (3) that the trustee of such trust
may not, prior to the lapsing of restrictions
on such stock, sell, transfer, assign,
pledge, or otherwise encumber or dispose of
shares of restricted stock except to the
Company or to the optionee, subject to the
restrictions provided for in this Plan, and
(4) that, until the restrictions lapse, the
trustee is not authorized to incur
liabilities on behalf of the trust, other
than to the beneficiaries of the trust; and
(B) the optionee and the trustee of the trust
shall execute stock powers in blank to be
held in the custody of the Company; and
(C) the Corporate Secretary of the Company
may, in his discretion, enforce the foregoing
transfer restrictions by maintaining physical
custody of the certificate or certificates
representing such shares of restricted stock,
by placing a restrictive legend on such
certificates, by requiring the optionee and
the trustee to execute other documents as a
pre-condition to such transfer, or otherwise.
(f) Except as otherwise provided herein, the
optionee will have all the rights of a stockholder
with respect to shares of restricted stock
received upon the exercise of an option, including
the right to vote the shares of stock and the
right to dividends on the stock. Unless the
Corporate Secretary establishes alternative
procedures, the shares of restricted stock will be
registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms,
conditions and restrictions applicable to the
award and shall be held in escrow by the Company.
The optionee shall execute a stock power or powers
assigning the shares of restricted stock back to
the Company, which stock powers shall be held in
escrow by the Company and used only in the event
of the forfeiture of any of the shares of
restricted stock. A certificate evidencing
unrestricted shares of common stock shall be
issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(g) The Corporate Secretary shall have the
discretion and authority to establish any and all
procedures, including the requirement of election
forms, which he deems necessary or desirable for
the orderly administration of such exercises.
No optionee or optionee's beneficiary,
executor or administrator, legatees or
distributees, as the case may be, will be, or will
be deemed to be, a holder of any shares subject to
an option unless and until a stock certificate or
certificates for such shares are issued to such
person or them under the terms of the Plan. No
adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or
other property) or distributions or other rights
for which the record date is prior to the date
such stock certificate is issued, except as
provided in Section 11 hereof.
In the event that any optionee shall be
dismissed from the employ of the Company or any of
its subsidiaries for any reason which in the
opinion of the Committee shall constitute good
cause for dismissal, any option still held by such
person at such time shall automatically terminate.
The decision of the Committee as to what shall
constitute good cause for dismissal shall be final
and binding upon all concerned.
In the event that any optionee, without the
consent of the Committee, while employed by the
Company or any affiliate of the Company or after
termination of such employment, becomes associated
with, employed by, renders services to, or owns
any interest in (other than any nonsubstantial
interest, as determined by the Committee), any
business that is in competition with the Company
or with any business in which the Company has a
substantial interest, as determined by the
Committee, any option still held by such person at
such time shall automatically terminate. The
decision of the Committee on any such matters
shall be final and binding upon all concerned.
Section 10. Exercise of Options - Stock
Appreciation Rights.
In addition to providing for the exercise of
an option as set forth in Section 9, at the time
of grant of such option the Committee may by
separate agreement, in conjunction with all or
part of any option granted under the Plan, permit
an optionee to exercise the option in an
alternative manner based on the appreciated value
of the common stock subject to option; provided,
however, that no SAR granted to an optionee who is
subject to Section 16(b) of the Exchange Act (an
"Insider") shall be exercisable during the six-
month period following the date of grant, except
that such limitation shall not apply in the event
of death or physical disability of such optionee
occurring prior to the expiration of such six-
month period. SARs may be exercised by an
optionee by surrendering the related option or
applicable portion thereof. Upon such exercise
and surrender, the optionee shall be entitled to
receive the value of such SARs determined in the
manner prescribed in this Section 10. Options
which have been so surrendered, in whole or in
part, shall no longer be exercisable.
Each agreement evidencing SARs shall clearly
and separately identify the Nonqualified Stock
Options and Incentive Stock Options to which it
relates and shall contain such terms and
conditions not inconsistent with other provisions
of the Plan and the Program as shall be determined
from time to time by the Committee, which shall
include the following:
(a) SARs shall expire no later than the
expiration of the related option.
(b) SARs shall be transferable only when and
to the extent that the related option is
transferable.
(c) SARs shall be exercisable at such time
or times and only to the extent that the related
option is exercisable. The SAR shall terminate
and no longer be exercisable upon the termination
or exercise of the related option, except that
SARs granted with respect to less than the full
number of shares covered by a related option shall
not be reduced until the exercise or termination
of the related option exceeds the number of shares
not covered by the SARs.
(d) SARs shall be exercisable only when
there is a positive spread, that is, when the
market price of the stock subject to the related
option exceeds the exercise price of such option.
(e) Upon the exercise of SARs, an optionee
shall be entitled to receive the value thereof,
which value shall be equal to the excess of the
fair market value on the date of exercise of one
share of common stock over the option price per
share specified in the related option multiplied
by the number of shares in respect of which the
SARs shall have been exercised. The fair market
value of common stock on the date of exercise of
SARs shall be determined in the same manner as the
fair market value of common stock on the date of
grant of an option is determined pursuant to
Section 7(a).
(f) Upon an exercise of SARs, the optionee
shall notify the Company of the form in which
payment of the value thereof will be made (i.e.,
cash, common stock, or any combination thereof).
Upon the exercise of SARs, the option or part
thereof to which such SARs are related shall be
deemed to have been exercised for the purpose of
the limitation of the number of shares of common
stock to be issued under the Plan as set forth in
Section 4 and the limitation of the number of
shares of common stock to be issued under the
Program as set forth in Section 4(a) of the
Program. SARs shall be deemed exercised on the
date written notice of exercise is received by the
Secretary of the Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of
common stock of the Company are hereafter
increased or decreased or changed into or
exchanged for a different number of shares or kind
of shares or other securities of the Company or of
another corporation, by reason of reorganization,
merger, consolidation, recapitalization,
reclassification, stock split-up, combination of
shares, or a dividend payable in capital stock
(including a spin-off), appropriate adjustment
shall be made by the Committee in the number and
kind of shares for the purchase of which options
may be granted under the Plan including the
maximum number that may be granted to any one
person. In addition, the Committee shall make
appropriate adjustment in the number and kind of
shares as to which outstanding options, or
portions thereof then unexercised, shall be
exercisable, to the end that the optionee's
proportionate interest shall be maintained as
before the occurrence of such event, and such
adjustment of outstanding options shall be made
without material change of the total price
applicable to the unexercised portion of the
option and with a corresponding adjustment in the
option price per share; provided, however, that
each such adjustment in the number and kind of
shares subject to outstanding options, including
any adjustment in the option price, shall be made
in such manner as not to constitute a modification
as defined in Section 425 of the Internal Revenue
Code of 1986, as amended. If any outstanding
options are subject to any conditions, the
Committee shall also make appropriate adjustments
to such conditions. Any such adjustment made by
the Committee shall be conclusive.
The grant of an option pursuant to the Plan
shall not affect in any way the right or power of
the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or
assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at
any time terminate the Plan or make such
amendments thereof as it shall deem advisable and
in the best interests of the Company; provided,
however, that no such termination or amendment
shall, without the consent of the individual to
whom any option shall theretofore have been
granted, affect or impair the rights of such
individual under such option; and provided
further, that any such amendment shall be
consistent with the provisions of the Program, as
it may be amended from time to time.
No stock option shall be granted under the
Plan after April 18, 1999, but stock options
granted prior to or as of such date may extend
beyond such date in accordance with the provisions
hereof.
Section 13. Effectiveness of Plan.
This Plan shall be effective as of February
17, 1990.
Section 14. Date of Granting of Options.
The date of grant of a reload option shall be
determined in accordance with Section 7A(g). The
date of grant of all other options shall be the
date designated by the Committee as the date of
grant, provided that in no event shall the date of
grant be earlier than the date on which the
Committee approves the grant. Within sixty (60)
days of the granting of the option, the Company
shall notify the optionee of the grant of the
option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement
respecting SARs, duly executed by and on behalf of
the Company, with the request that the optionee
execute the agreement or agreements within sixty
(60) days after the mailing by the Company of the
notice to the optionee. The optionee shall
execute the written option agreement and, if
applicable, the agreement respecting SARs, within
said 60-day period.
Section 15. Application of Funds.
The proceeds received by the Company from the
sale of stock subject to option are to be added to
the general funds of the Company and used for its
corporate purposes.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no
obligation on the optionee to exercise such
option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with
the exercise of a stock option by delivering
shares of stock in payment of the exercise price,
or an exercise of an SAR for stock, or upon the
lapse of restrictions on restricted stock received
upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse
hereinafter referred to as the "Tax Date"), the
optionee may elect to make payment for the
withholding of federal, state and local taxes,
including Social Security and Medicare ("FICA")
taxes, up to the optionee's marginal tax rate, by
one or both of the following methods:
(i) delivering part or all of the
payment in previously-owned shares (which
shall be valued at fair market, as defined
herein, on the Tax Date) which shares, if
acquired from the Company, must have been
held for at least six months;
(ii) requesting the Company to withhold
from those shares that would otherwise be
received upon exercise of the option, upon
exercise of an SAR for stock, or upon the
lapse of restrictions, a number of shares
having a fair market value (as defined
herein) on the Tax Date equal to the amount
to be withheld. The amount of tax with-
holding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, including FICA
taxes, required to be withheld under federal,
state and local law.
Such election is irrevocable. Any fractional
share amount and any additional withholding not
paid by the withholding or surrender of shares
must be paid in cash. If no timely election is
made, cash must be delivered to satisfy all tax
withholding requirements.
<PAGE>
Exhibit (10)(j)
1990 RESTRICTED STOCK PLAN
(as amended June 9, 1992, August 10, 1993,
December 13, 1994, February 18, 1995,
August 8, 1995, December 12, 1995,
August 12, 1996 and February 11, 1997)
Section 1. Establishment.
Pursuant to the Sprint Long-Term Stock
Incentive Program (the "Program"), Sprint
Corporation, a Kansas corporation (the "Company"),
hereby establishes a restricted stock plan to be
named the 1990 Restricted Stock Plan (the "Plan").
Section 2. Purpose.
The purpose of the Plan is to aid the Company
and its subsidiaries in competing with other
enterprises for the services of new key personnel
needed to help ensure their continued development.
The Plan will also help the Company and its
subsidiaries retain key personnel.
Section 3. Administration.
The Plan shall be administered by the
Organization and Compensation Committee (the
"Compensation Committee") of the Board of
Directors of the Company. Members of the
Compensation Committee shall be Disinterested
Persons as defined in the Program. The
Compensation Committee shall hold its meetings at
such times and places as it may determine. A
majority of the Compensation Committee shall
constitute a quorum and the acts of a majority of
the members present at any meeting at which a
quorum is present, or acts approved in writing by
a majority of the Compensation Committee, shall be
deemed the acts of the Compensation Committee.
The Compensation Committee may delegate to the
Chief Executive Officer of the Company (the "CEO")
the right to grant awards of restricted stock to
employees of the Company and its subsidiaries who
are not officers or directors of the Company and
to cancel or suspend such awards. The CEO may not
make awards of restricted stock to any one
individual in excess of 15,000 shares and may not
make awards of restricted stock aggregating in
excess of 50,000 shares between meetings of the
Compensation Committee. The awards made by the
CEO shall be reported to the Compensation
Committee at each of its meetings.
The Company shall issue shares of restricted
stock under the Plan in accordance with
determinations made by the Compensation Committee
or the CEO pursuant to the provisions of the Plan
and the Program. The Compensation Committee from
time to time may adopt (and thereafter amend and
rescind) such rules and regulations for carrying
out the Plan and take such action in the
administration of the Plan, not inconsistent with
the provisions of the Plan and the Program, as it
shall deem proper. Except as set forth in Section
6(a) hereof, the Compensation Committee may
accelerate the time or times at which restrictions
lapse and may waive any forfeiture of restricted
stock. The interpretation and construction of any
provisions of the Plan by the Compensation
Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final
and conclusive. No member of the Board of
Directors or the Compensation Committee shall be
liable for any action or determination made in
good faith with respect to the Plan or any grant
under it.
Section 4. Total Number of Shares Subject to
Grant.
The maximum number of shares of common stock
($2.50 par value) of the Company which may be
issued under the Plan shall not exceed 577,482
(subject to adjustment as provided in Section 7
hereof). The shares issued under the Plan may be
either treasury shares or authorized but unissued
shares, as the Board of Directors from time to
time may determine. The maximum number of shares
of common stock which may be issued in any
calendar year, together with shares of common
stock subject to other awards under the Program,
shall not exceed the limits set forth in Section
4(a) of the Program.
In the event that any outstanding shares of
restricted stock under the Plan are forfeited for
any reason, such shares of common stock may again
be subject to grant under the Plan.
Section 5. Eligibility.
Restricted stock shall be granted only to key
employees of the Company or its subsidiaries,
including new hires. No grants shall be made by
the CEO to any individual who is an officer or
director of the Company or who will be proposed to
be elected as an officer or director at the next
meeting of the Board of Directors or Stockholders
of the Company. The Compensation Committee or the
CEO will, in its discretion, determine the key
employees to be granted restricted stock, the time
or times at which restricted stock shall be
granted, the number of shares to be granted and
the duration of restrictions on the shares
granted. In making such determination, the
Compensation Committee and the CEO may take into
consideration the value of the services rendered
or to be rendered by the respective individuals,
their present and potential contributions to the
success of the Company and its affiliates and such
other factors which the Compensation Committee or
the CEO may deem relevant in accomplishing the
purposes of the Plan.
No restricted stock may be granted to any
individual who immediately after the grant owns
directly or indirectly stock possessing more than
five percent (5%) of the total combined voting
power or value of all classes of stock of the
Company or any subsidiary. No person shall be
eligible to receive a larger number of shares of
restricted stock than is recommended for such
individual by the Compensation Committee or the
CEO.
Section 6. Terms and Conditions of Grants.
Each grant under the Plan shall be evidenced
by an Agreement in such form not inconsistent with
the Plan as the Compensation Committee or the CEO
shall determine; provided that the substance of
the following terms and conditions be included
therein:
(a) Duration of Restrictions. The
restrictions on restricted stock shall
lapse at such time or times as
determined by the Compensation Committee
or the CEO; provided, however, that no
restricted stock shall become free of
restrictions prior to the first
anniversary date of the granting of the
restricted stock. At any time on or
before the 13th calendar month preceding
the date on which restrictions on shares
of restricted stock would otherwise
lapse, the grantee may elect to extend
the period of restriction on all but not
a portion of such shares by six months
or any multiple of six months.
(b) Nontransferable. The employee who
receives restricted stock (the
"Grantee") may not sell, transfer,
assign, pledge or otherwise encumber or
dispose of shares of restricted stock
until such time as all restrictions on
such stock have lapsed except: (i) to
the Company in payment of the exercise
price of a stock option issued by the
Company under any employee stock option
plan adopted by the Company that
provides for payment of the exercise
price in the form of restricted stock,
provided that such payment is made in
accordance with the terms of such plan;
or (ii) to a trust of which the Grantee,
the Grantee's spouse, or descendants of
the Grantee are the primary
beneficiaries and which is a grantor
trust treated as owned by the Grantee
under Subchapter J of the Internal
Revenue Code, upon the following terms:
(A) the Company receives, prior to
such transfer, a true copy of the trust
agreement and an opinion from Grantee's
counsel (1) that the trust will be
treated as a grantor trust owned by the
Grantee under Subchapter J of the
Internal Revenue Code at all times until
the restrictions on such stock lapse or
the stock is forfeited under the terms
of its grant, (2) that the terms of the
trust provide that upon the forfeiture
of the restricted stock under the terms
of its grant or the earlier termination
of the trust for whatever reason,
ownership of the restricted stock shall
revert to the Grantee or to the Company,
(3) that the trustee of such trust may
not, prior to the lapsing of
restrictions on such stock, sell,
transfer, assign, pledge, or otherwise
encumber or dispose of shares of
restricted stock except to the Company
or to the Grantee, subject to the
restrictions provided for in this Plan,
and (4) that, until the restrictions
lapse, the trustee is not authorized to
incur liabilities on behalf of the
trust, other than to the beneficiaries
of the trust; and
(B) the Grantee and the trustee of the
trust shall execute stock powers in
blank to be held in the custody of the
Company; and
(C) the Corporate Secretary of the
Company may, in his discretion, enforce
the foregoing transfer restrictions by
maintaining physical custody of the
certificate or certificates representing
such shares of restricted stock, by
placing a restrictive legend on such
certificates, by requiring the Grantee
and the trustee to execute other
documents as a pre-condition to such
transfer, or otherwise.
(c) Termination of Employment. If, before
the restrictions on shares of restricted
stock lapse, the Grantee ceases to be
employed by the Company or a subsidiary
of the Company for any reason (including
death or disability), the shares of
restricted stock that continue to be
restricted shall be forfeited and the
Grantee or his representative shall sign
any document and take any other action
required to assign said restricted
shares back to the Company. For
purposes of this Plan, unless the
Committee determines otherwise at the
time of grant, an employee who becomes
employed by Sprint Spectrum L.P., Global
One, or Alcatel, N.V. (each, together
with their subsidiaries, an "Affiliated
Entity"), shall not, except with respect
to incentive stock options, be
considered to have terminated employment
with the Company or a subsidiary of the
Company until his employment is
terminated with all Affiliated Entities
without becoming employed by the Company
or its subsidiaries.
(d) Consideration. Each Grantee shall, as
consideration for the grant of
restricted stock, agree in writing to
remain in the employ of the Company or
of one of its subsidiaries, at the
pleasure of the Company or of such
subsidiary, for the period of time until
the restrictions on the restricted stock
lapse. Nothing contained in the Plan or
in any Agreement shall confer upon any
Grantee any right with respect to
continuance of employment by the Company
or its subsidiaries, nor interfere in
any way with the right of the Company or
its subsidiaries to terminate the
Grantee's employment or change the
Grantee's compensation at any time.
(e) Interest in Competitor. In the event
that any Grantee, without the consent of
the Compensation Committee, renders
services to, or owns any interest in
(other than any nonsubstantial interest,
as determined by the Compensation
Committee) any business that is in
competition with the Company or with any
business in which the Company has a
substantial interest, as determined by
the Compensation Committee, any
restricted stock shall automatically be
forfeited. The decision of the
Compensation Committee on any such
matters shall be final and binding upon
all concerned.
(f) Rights as Stockholder. Except as set
forth in the Plan, a Grantee will have
all rights of a stockholder with respect
to shares of restricted stock, including
the right to vote the shares of stock
and the right to dividends on the stock.
The shares of restricted stock will be
registered in the name of the Grantee
and the certificates evidencing such
shares shall bear an appropriate legend
referring to the terms, conditions and
restrictions applicable to the award and
shall be held in escrow by the Company.
The Grantee shall execute a stock power
or powers assigning the shares of
restricted stock back to the Company,
which stock powers shall be held in
escrow by the Company and used only in
the event of the forfeiture of any of
the shares of restricted stock. A
certificate evidencing unrestricted
shares of common stock shall be issued
to the Grantee promptly after the
restrictions lapse on any restricted
shares.
(g) Stock Withholding Election. When taxes
are withheld upon the lapse of
restrictions on restricted stock (the
date on which such restrictions lapse
hereinafter referred to as the "Tax
Date"), the Grantee may elect to make
payment for the withholding of federal,
state and local taxes, including Social
Security and Medicare ("FICA") taxes, up
to the Grantee's marginal tax rate, by
one or both of the following methods:
(i) delivering part or all of the
payment in previously-owned shares
(which shall be valued at fair market,
as defined herein, on the Tax Date)
which shares, if acquired from the
Company, must have been held for at
least six months; or
(ii) requesting the Company to
withhold from those shares that would
otherwise be received upon the lapse of
restrictions, a number of shares having
a fair market value (as defined herein)
on the Tax Date equal to the amount to
be withheld. The amount of tax
withholding to be satisfied by
withholding shares is limited to the
minimum amount of taxes, including FICA
taxes, required to be withheld under
federal, state and local law.
Any fractional share amount and any
additional withholding not paid by the
withholding or surrender of shares must
be paid in cash. If no timely election
is made, cash must be delivered to
satisfy all tax withholding
requirements.
Section 7. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of
common stock of the Company are hereafter
increased or decreased or changed into or
exchanged for a different number of shares or kind
of shares or other securities of the Company or of
another corporation, by reason of reorganization,
merger, consolidation, recapitalization,
reclassification, stock split-up, combination of
shares, or a dividend payable in capital stock,
outstanding shares of restricted stock shall be
treated the same as other outstanding shares of
common stock and appropriate adjustment shall be
made by the Compensation Committee in the number
and kind of shares that may be granted under the
Plan and that may be granted by the CEO under the
Plan.
The grant of restricted stock pursuant to the
Plan shall not affect in any way the right or
power of the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure or to merge or
to consolidate or to dissolve, liquidate, or sell
or transfer all or any part of its business or
assets.
Section 8. Duration, Amendment and Termination.
The Board of Directors of the Company may at
any time terminate the Plan or make such
amendments thereof as it shall deem advisable and
in the best interests of the Company; provided,
however, that no such termination or amendment
shall, without the consent of the individual to
whom any restricted stock shall theretofore have
been granted, affect or impair the rights of such
individual with respect to such restricted stock;
and provided further, that any such amendment
shall be consistent with the provisions of the
Program, as it may be amended from time to time.
No restricted stock shall be granted under
the Plan after April 18, 1999.
Section 9. Effectiveness of Plan.
This Plan shall be effective as of February
17, 1990.
Section 10. Date of Granting of Restricted Stock.
The granting of restricted stock pursuant to
the Plan shall take place on the date the
Compensation Committee or the CEO decides to grant
the restricted stock. As soon as practicable but
no later than twenty (20) days after the granting
of the restricted stock, the Company shall notify
the employee of the grant and, within sixty (60)
days of the granting of the restricted stock, the
Company shall submit to the employee an Agreement
duly executed by and on behalf of the Company, and
a stock power or powers with respect to the
restricted stock, with the request that the
employee execute the Agreement and stock powers
within sixty (60) days after the mailing by the
Company of the notice to the employee. The
employee shall execute the written Agreement and
stock powers within said 60-day period.
<PAGE>
Exhibit 10(k)
Executive Deferred Compensation Plan
(as amended through December 10, 1996)
ARTICLE I
PURPOSE
The purpose of the Sprint Corporation Executive
Deferred Compensation Plan (hereinafter referred to as
the "Plan") is to provide funds for retirement or death
for executive employees (and their beneficiaries) of
Sprint Corporation and its subsidiaries. It is
intended that the Plan will aid in retaining and
attracting employees of exceptional ability by
providing such employees with a means to supplement
their standard of living at retirement.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the
context clearly indicates otherwise:
2.1 Account Transfer Request. "Account Transfer
Request" means a written notice, in a form prescribed
by the Company, by a Participant to transfer all or any
portion of one Deferred Benefit Account to another
Deferred Benefit Account as provided for in paragraph
6.7.
2.2 Beneficiary. "Beneficiary" means the person,
persons or entity designated by the Participant, or as
provided in Article VIII, to receive any benefits
payable under the Plan. Any Participant Beneficiary
Designation shall be made in a written instrument filed
with the Company and shall become effective only when
received, accepted and acknowledged in writing by the
Company.
2.3 Board. "Board" means the Board of Directors of
the Company.
2.4 Cellular. "Cellular" means Sprint Cellular
Company, however renamed, or any successor thereto.
2.5 Cellular Insider. "Cellular Insider" means, as of
any time when the determination thereof is relevant,
any Participant subject to liability under Section 16
of the Securities Exchange Act of 1934 with respect to
trading in the equity securities of Cellular.
2.6 Cellular Share Unit. "Cellular Share Unit" means
a measure of participation under the Plan having a
value based on the market value of one share of common
stock of Cellular after the distribution thereof by the
Company to the Company's shareholders.
2.7 Committee. "Committee" means Deferred
Compensation Committee appointed to review the Plan
decisions pursuant to Article III.
2.8 Company. "Company" means Sprint Corporation, or
any successor thereto.
2.9 Compensation. "Compensation" means the Base
Salary, Annual Incentive Compensation and Long-Term
Incentive Compensation payable to a Participant during
a Plan Year other than a distribution under this plan.
(a) Base Salary. "Base Salary" means all regular cash
remuneration for services, other than such items
as Annual Incentive Compensation, payable by the
Employer to a Participant in cash during a Plan
Year, but before reduction for amounts deferred
pursuant to this Plan or any other Plan of the
Employer.
(b) Annual Incentive Compensation. "Annual Incentive
Compensation" means any annual cash incentive
compensation payable by the Employer to a
Participant in a Plan Year.
(c) Long-Term Incentive Compensation. "Long-Term
Incentive Compensation" means any incentive
compensation earned over a period of at least two
years.
2.10 Deferral Benefit. "Deferral Benefit" means the
benefit payable to a Participant on his retirement,
death, disability, or termination of employment as
calculated in Article VII hereof.
2.11 Deferred Benefit Account. "Deferred Benefit
Account" means the accounts maintained on the books of
account of the Employer for each Participant pursuant
to Article VI. Separate Deferred Benefit Accounts
shall be maintained for each Participant. More than
one Deferred Benefit Account shall be maintained for
each Participant to reflect (a) Termination and
Retirement Interest Yields, (b) separate deferral
elections, and (c) Account A, Account B, Account C,
Account AA, Account BB, and Account CC elections.
For Account AA two sub-accounts (a Retirement Deferred
Benefit Account and a Termination Deferred Benefit
Account) shall be maintained to reflect the difference
in Interest Yields as provided in Article VI, paragraph
6.4.
For Account BB two sub-accounts (a Retirement Deferred
Benefit Account and a Termination Deferred Benefit
Account) shall be maintained to reflect, in the event
of a transfer from Account AA to Account BB pursuant to
paragraph 6.7, the difference in values of the two sub-
accounts of Account AA transferred to Account BB.
For Account CC two sub-accounts (a Retirement Deferred
Benefit Account and a Termination Deferred Benefit
Account) shall be maintained to reflect the crediting
of Cellular Share Units with respect to Share Units in
the respective sub-accounts of the Account BB with
respect to which the Cellular Share Units were credited
pursuant to Section 6.3(b).
A Participant's Deferred Benefit Accounts shall be used
solely as a device for the measurement and
determination of the amounts to be paid to the
Participant pursuant to this Plan. A Participant's
Deferred Benefit Account shall not constitute or be
treated as a trust fund of any kind. Unless the
context requires otherwise, "Deferred Benefit Account"
shall mean the aggregate balance of all accounts of a
Participant.
2.12 Determination Date. "Determination Date" means
the date on which the amount of a Participant's
Deferred Benefit Account is determined as provided in
Article VI hereof. The last day of each calendar
month shall be a Determination Date.
2.13 Disability. "Disability" or "Disabled
Participant" means a physical or mental condition of a
Participant resulting in a determination of disability
for purposes of receiving benefits under the Employer
Long-Term Disability Insurance Plan.
2.14 Distribution Agreement. "Distribution Agreement"
means the agreement entered into by the Company,
Cellular, and Centel Corporation for the purpose of
providing for the distribution by the Company of its
stock in Cellular to the Company's stockholders.
2.15 Distribution Dividend Rate. "Distribution
Dividend Rate" means the Dividend Rate as defined in
the Distribution Agreement.
2.16 Distribution Time. "Distribution Time" is defined
in the Distribution Agreement.
2.17 Early Retirement Date. "Early Retirement Date"
means the date on which the Participant actually
terminates employment following the first day of the
month coincidental with or next following a
Participant's attainment of age fifty-five (55), but
before his Normal Retirement Date.
2.18 Employer. "Employer" means Sprint Corporation,
any successor to the business thereof or any affiliate
or subsidiary designated by the Board.
2.19 Internal Revenue Code. "Internal Revenue Code"
means Internal Revenue Code of 1986, as amended or
supplemented from time to time. References to any
section of the Internal Revenue Code shall be to that
section as it is renumbered, amended, supplemented or
re-enacted.
2.20 Interest Yield. "Interest Yield" means with
respect to any calendar month the Termination Interest
Yield or the Retirement Interest Yield as defined
below:
(a) Termination Interest Yield. The "Termination
Interest Yield" means (1) in the case of balances
in Account AA, the composite yield on Moody's
Seasoned Corporate Bond Yield Index for the
preceding calendar month as determined from
Moody's Bond Record published by Moody's Investors
Services, Inc. (or any successor thereto), or,
if such monthly yield is no longer published, a
substantially similar average selected by the
Company, and (2) in the case of balances in
Account A, the greater of (i) the prime rate in
effect at Citibank, N.A. at the opening of
business on the first business day of the month,
or if said bank, for any reason, no longer
publishes its prime rate, the prime rate similarly
determined of another major bank selected by the
Company and (ii) six percent per annum.
(b) Retirement Interest Yield. The "Retirement
Interest Yield" means (1) in the case of balances
in Account AA, three percentage points over the
Termination Interest Yield, and (2) in the case of
balances in Account A, the Termination Interest
Yield.
2.21 Normal Retirement Age. "Normal Retirement Age"
means the time at which a Participant attains age sixty
- -five (65).
2.22 Normal Retirement Date. "Normal Retirement Date"
means the first day of the month coincidental with or
next following a Participant's Normal Retirement Age.
2.23 Participant. "Participant" means any individual
who is designated by the Company in accordance with
paragraph 4.1 to participate in this Plan and who
elects to participate by filing a Participation
Agreement as provided in Article IV.
2.24 Participation Agreement. "Participation
Agreement" means the agreement, in a form prescribed by
the Company, filed by a Participant before the
beginning of the first period in which the
Participant's Compensation is to be deferred pursuant
to the Plan and the Participation Agreement. A new
Participation Agreement shall be filed by the
Participant for each separate Base Salary deferral
election and for each Annual Incentive Compensation and
Long-Term Incentive Compensation deferral election not
accompanying a Base Salary deferral election.
2.25 Plan. "Plan" means the Sprint Corporation
Executive Deferred Compensation Plan as set forth in
this document. This Plan is the successor to, and
comprises an amendment and revision of, the United
Telecommunications, Inc. 1985 Executive Deferred
Compensation Plan adopted February 12, 1985.
2.26 Plan Administrator. "Plan Administrator" means
the person appointed by the Company to represent the
Company in the administration of this Plan.
2.27 Plan Year. "Plan Year" means a twelve month
period commencing May 1st and ending the following
April 30th. The first Plan Year shall commence on May
1, 1985.
2.28 Retirement Plan. "Retirement Plan" means the
Sprint Retirement Pension Plan, as amended from time to
time.
2.29 Share Unit. "Share Unit" means a measure of
participation under the Plan having a value based on
the market value of a share of common stock of the
Company.
2.30 Spouse. "Spouse" means a Participant's wife or
husband who was lawfully married to the Participant
upon the Participant's retirement, death or severance
from service.
2.31 Sprint Insider. "Sprint Insider" means, as of any
time when the determination thereof is relevant, any
Participant subject to liability under Section 16 of
the Securities Exchange Act of 1934 with respect to
trading in the equity securities of the Company.
2.32 Transition Date. "Transition Date" means May 1,
1990.
ARTICLE III
ADMINISTRATION
3.1 Plan Administrator; Company and Committee; Duties.
This Plan shall be administered by the Committee. The
Committee shall consist of not more than five persons
appointed by the Board. The Committee may be a
consolidated Committee administering other benefit
plans of the Company in addition to this Plan. The
Committee shall have the authority to make, amend,
interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and
decide or resolve any and all questions including
interpretations of this Plan, as may arise in
connection with the Plan. The Committee may appoint a
Benefit Administrative Committee and a Plan
Administrator. The Committee may delegate its duties
for the day-to-day operations of the Plan to the Plan
Administrator and other duties to the Benefit
Administrative Committee. Members of the Committee,
the Benefit Administrative Committee and the Plan
Administrator may be Participants under this Plan.
3.2 Claim for Benefits. Any claim for benefits under
this Plan shall be made in writing to the Plan
Administrator. If a claim for benefits is wholly or
partially denied, the Plan Administrator shall so
notify the Participant or Beneficiary within 90 days
after receipt of the claim. The notice of denial shall
be written in a manner calculated to be understood by
the Participant or Beneficiary and shall contain (a)
the specific reason or reasons for denial of the claim,
(b) specific references to the pertinent Plan
provisions upon which the denial is based, (c) a
description of any additional material or information
necessary to perfect the claim together with an
explanation of why such material or information is
necessary and (d) an explanation of the claims review
procedure. The decision or action of the Plan
Administrator shall be final, conclusive and binding on
all persons having any interest in the Plan, unless a
written appeal is filed as provided in Section 3.3
hereof.
3.3 Review of Claim. Within 60 days after the receipt
by the Participant or Beneficiary of notice of denial
of a claim, the Participant or Beneficiary may (a) file
a request with the Benefit Administrative Committee
that it conduct a full and fair review of the denial of
the claim, (b) review pertinent documents and (c)
submit questions and comments to the Committee in
writing.
3.4 Decision After Review. Within 60 days after the
receipt of a request for review under Section 3.3, the
Committee shall deliver to the Participant or
Beneficiary a written decision with respect to the
claim, except that if there are special circumstances
(such as the need to hold a hearing) which require more
time for processing, the 60-day period shall be
extended to 120 days upon notice to the Participant or
Beneficiary to that effect. The decision shall be
written in a manner calculated to be understood by the
Participant or Beneficiary and shall (a) include the
specific reason or reasons for the decision and (b)
contain a specific reference to the pertinent Plan
provisions upon which the decision is based.
ARTICLE IV
PARTICIPATION
4.1 Participation. Participation in the Plan shall be
limited to executives having a job grade level of E14
or above, or any other employees designated by the
Committee, who elect to participate in the Plan by
filing a Participation Agreement with the Company.
Except as provided below, a Participation Agreement
must be filed before the March 31st immediately
preceding the Plan Year in which the Participant's
participation under the agreement will commence, and
the election to participate shall be effective on the
first day of the Plan Year following receipt by the
Company of a properly completed and executed
Participation Agreement; provided, however, that if
March 31st falls on a Saturday, Sunday or holiday, the
filing date for the Participation Agreement shall be no
later than the next business day after March 31st. A
Participant in the Plan, who is also a participant in
the Employer's 1975 Executive Deferred Compensation
Plan, may elect to transfer to this Plan all, and not
less than all, of the dollar value of his Account A and
the dollar value of his Account B under the 1975 Plan.
Such election shall be made by delivering to the
Company a properly executed Participation Agreement;
such an election must be made when the Participant is
first eligible for the 1985 Plan.
4.2 Minimum and Maximum Deferral and Length of
Participation. A Participant may elect in any
Participation Agreement to defer a portion of his
Compensation. The minimum and maximum amounts that may
be deferred under any single Participation Agreement
shall be in $100 units and shall be as follows:
<TABLE>
<CAPTION>
Minimum Maximum
Deferral Deferral
<S> <C> <C>
With respect $300 per 50% of Base
to initial month Salary
Base Salary
Deferrals
With respect $100 per 50% of Base
to month Salary
Subsequent
Base Salary
Deferrals
With respect 25% of 100% of
to Annual Annual Annual
Incentive Incentive Incentive
Compensation Compensation Compensation
With respect 25% of Long- 100% of Long-
to Long-Term Term Term
Incentive Incentive Incentive
Compensation Compensation Compensation
</TABLE>
(a) With respect to Base Salary deferrals, the dollar
amount of deferral elected in each Participation
Agreement shall be the amount of Base Salary that
will be deferred in each month subject to the
Participation Agreement. Each Participation
Agreement shall apply to the Participant's Base
Salary payable over a period (1) for Participation
Agreements first effective before the Transition
Date, of either four or eight Plan Years, or (2)
for Participation Agreements first effective on or
after the Transition Date, one Plan Year (or, in
either case, until the Participant's retirement,
whichever occurs first), commencing with the Plan
Year immediately following the Plan Year in which
the respective Participation Agreement is filed.
The fixed dollar amount of Base Salary deferral
applicable over a deferral period shall not be
changed by virtue of a change in Base Salary
alone.
(b) With respect to Annual Incentive Compensation or
Long-Term Incentive Compensation deferrals, the
deferral percentage selected in each Participation
Agreement shall apply only to the Participant's
Annual Incentive Compensation or Long-Term
Incentive Compensation paid in the Plan Year
immediately following receipt of the respective
Participation Agreement.
(c) From time to time, the Company may increase or
decrease the minimum and maximum deferrals set
forth above as well as the period for which the
deferrals are effective by giving reasonable
written notice to the affected Participants. Such
changes shall be effective for all Participation
Agreements filed thereafter.
(d) A Participant's election to defer Compensation
shall be irrevocable upon the filing of the
respective Participation Agreement; provided,
however, that the deferral of Compensation under
any Participation Agreement may be suspended or
amended as provided in paragraphs 7.5 or 9.1.
4.3 Additional Participation Agreements. A
Participant may enter into additional Participation
Agreements by filing a Participation Agreement with the
Company before April 15th of any calendar year, stating
the amount that the Participant elects to have
deferred. Such additional agreements shall be
effective as to Compensation paid in Plan Years
beginning after the last day of the Plan Year in which
the respective agreement is filed with the Company.
Each additional Participation Agreement is subject to
all of the provisions and requirements set forth in
paragraph 4.2, including without limitation, the
provisions relating to minimum and maximum deferral
amounts and duration of the agreements; provided, that
the minimum Base Salary deferral for each additional
Participation Agreement shall be $1,200 per year. In
addition, the aggregate amount of Base Salary that a
Participant may have deferred under this Plan out of
his Base Salary for any single Plan Year under all
applicable Participation Agreements shall not exceed
50% of his Base Salary, excluding Incentive
Compensation. In the event a Participant elects to
defer Compensation for a new period, the new election
shall be treated as an arrangement for which a separate
Deferred Benefit Account shall be maintained and
separate Deferred Benefits shall be payable.
ARTICLE V
DEFERRED COMPENSATION
5.1 Elective Deferred Compensation. The amount of
Compensation that a Participant elects to defer in the
Participation Agreement executed by the Participant,
with respect to each Plan Year of participation in the
Plan, shall be credited by the Company to the
Participant's Deferred Benefit Account throughout each
Plan Year as the Participant is paid the non-deferred
portion of Compensation for such Plan Year. The amount
credited to a Participant's Deferred Benefit Account
shall equal the amount deferred. To the extent that
the Employer is required to withhold any taxes or other
amounts from the employees' deferred wages pursuant to
any state, federal or local law, such amounts shall be
taken out of the portion of the Participant's
Compensation which is not deferred under this Plan.
5.2 Additional Payments. The Company also intends
that supplemental payments shall be made at death,
disability or termination of employment, as the case
may be, for any reduction in benefits due to deferrals
of Compensation under this Plan in respect of any of
the Employer's life insurance or disability plans or
Employees Stock Purchase Plan now in existence or
adopted after the effective date of this Plan.
5.3 Vesting of Deferred Benefit Account. A
Participant shall be 100% vested in his/her Deferred
Benefit Account.
ARTICLE VI
DEFERRED BENEFIT ACCOUNT
6.1 Determination of Account. Each Participant's
Deferred Benefit Account, as of each Determination
Date, shall consist of the balance of the Participant's
Deferred Benefit Account as of the immediately
preceding Determination Date, plus the Participant's
elective deferred compensation withheld since the
immediately preceding Determination Date pursuant to
paragraph 5.1 and plus amounts credited to the
Participant's Deferred Benefit Account pursuant to
paragraphs 6.4 and 6.5. The Deferred Benefit Account
of each Participant shall be reduced by the amount of
all distributions, if any, made from such Deferred
Benefit Account since the preceding Determination Date.
6.2 Type of Deferral. A Participant may elect to have
any portion of the amount deferred credited to either
Account A (fixed income return) or to Account B (Share
Units). The initial election shall be made by a
properly executed Participation Agreement. With
respect to a Participation Agreement first effective
before the Transition Date, an election to defer any
amount to Account A shall be treated as an election to
defer to Account AA, except as set forth below.
An election to change the apportionment of deferred
amounts between Accounts A and B may be made by a
Participant filing with the Plan Administrator a
revised Participation Agreement indicating such change
on or before April 15th of each calendar year. The
revised Participation Agreement shall be deemed a
continuation of the initial Participation Agreement to
which it relates for purposes of complying with the
provisions of paragraphs 4.2 and 4.3 relating to the
minimum and maximum deferrals and duration of the
Participation Agreement. The revised Participation
Agreement shall be effective for Plan Years beginning
after the date it is filed.
Deferrals in such Plan Years shall be credited in
accordance with the election of the revised
Participation Agreement, provided, however, that an
election to allocate a portion of deferrals to Account
A in excess of the portion allocated in the
Participation Agreement to be deferred into the fixed
income account as of May 1, 1989, shall be deemed to be
an election by the Participant to allocate to Account
AA a portion of deferrals equal to the portion so
allocated to the fixed income account on May 1, 1989,
and to allocate to Account A the portion in excess of
such portion.
6.3 Creation of Accounts AA, BB, C, and CC.
(a) Accounts AA and BB. As of the start of business
on the Transition Date, all amounts standing to
the credit of each Participant in Account A shall
be transferred to an Account AA. As of the start
of business on the Transition Date, amounts
standing to the credit of each Participant in
Account B that are attributable to prior transfers
from Account A into Account B shall be transferred
to an Account BB. The amount of such transfers
shall be an amount equal to the sum of the dollar
amount of all transfers from Account A to Account
B during the period beginning on the effective
date of the Participation Agreement and ending on
the Transition Date. For all purposes of this
Plan, except as otherwise noted in this Plan,
Account AA shall be treated in the same manner as
Account A, and Account BB shall be treated in the
same manner as Account B. Compensation earned by
employees on or after the Transition Date subject
to deferral under a Participation Agreement first
effective before the Transition Date shall be
credited to Accounts AA and B (in accordance with
the Participant's election to allocate such
deferrals to Accounts A or B, respectively, in
such Participation Agreements) for such
Participation Agreement.
(b) Accounts C and CC. On the Determination Date
first following the Distribution Time, there shall
be credited to Accounts C and CC, created for each
Participant having a positive balance in an
Account B or BB with respect to any Plan Year, a
number of Cellular Share Units determined as
follows:
(1) one Cellular Share Unit in Account C for each
Distribution Dividend Rate number of Share
Units in Account B for such Participant for
such Plan Year as of the Distribution Time;
and
(2) one Cellular Share Unit in the Retirement
Deferred Benefit Account of Account CC for
each Distribution Dividend Rate number of
Share Units in the Retirement Deferred
Benefit Account of Account BB for such
Participant for such Plan Year as of the
Distribution Time; and.
(3) one Cellular Share Unit in the Termination
Deferred Benefit Account of Account CC for
each Distribution Dividend Rate number of
Share Units in the Termination Deferred
Benefit Account of Account BB for such
Participant for such Plan Year as of the
Distribution Time.
6.4 Maintenance of Accounts A and AA. As of each
Determination Date, the Participant's Deferred Benefit
Accounts A and AA shall be increased by the amount of
interest earned since the preceding Determination Date.
Interest on Accounts A and AA shall be based upon the
Interest Yield. For Account AA, a Retirement Deferred
Benefit Account shall be maintained and increased at
the rate specified by the Retirement Interest Yield and
a Termination Deferred Benefit Account shall be
maintained and increased at the rate specified by the
Termination Interest Yield. Interest shall be credited
on the mean average of the balances of the Deferred
Benefit Account on the Determination Date (before
crediting the interest) and on the last preceding
Determination Date, but after the Deferred Benefit
Account has been adjusted for any contributions or
distributions to be credited or deducted for each such
day.
6.5 Maintenance of Share Unit Accounts.
(a) Maintenance of Accounts B and BB.
(1) Conversion between Dollar Amounts and Share
Units in Accounts B and BB. When an amount
is to be added to a Participant's Deferred
Benefit Accounts B or BB, it shall be
converted into Share Units, or fractions
thereof, by dividing the amount to be
credited by the closing price of the
Company's common stock as reported by the New
York Stock Exchange on the last trading day
on or before the Determination Date. When a
number of Share Units is to be subtracted
from a Participant's Deferred Benefit
Accounts B or BB, such number of Share Units
shall be converted into a dollar amount by
multiplying such number of Share Units by the
closing price of the Company's common stock
as reported by the New York Stock Exchange on
the last trading day on or before the
Determination Date.
(2) Sub-accounts to be Maintained for Purposes of
Computing Retirement and Termination
Benefits. Two sub-accounts shall be
maintained for Account BB: (i) a Retirement
Deferred Benefit Account which shall include
the transfer from Account B into Account BB
described in paragraph 6.3(a) plus amounts
transferred from the Account AA Retirement
Deferred Benefit Account, if any, plus other
additions pursuant to this paragraph 6.5(a);
and (ii) a Termination Deferred Benefit
Account which shall include the transfer from
Account B into Account BB described in
paragraph 6.3(a) plus amounts transferred
from the Account AA Termination Deferred
Benefit Account, if any, plus other additions
pursuant to this paragraph 6.5(a).
(3) Dividends. When a dividend is declared and
paid by the Company on its common stock, an
amount shall be credited to the Participant's
Accounts B and BB as though the same dividend
had been paid on the Share Units in such
accounts as of the Determination Date
immediately preceding the declaration of the
dividend, and such amount shall be converted
to Share Units. Such amount shall be valued
as of the Determination Date immediately
preceding the declaration of the dividend.
(4) [Deleted]
(5) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Share Units credited to a Participant's
Accounts B and BB as may be necessary to give
effect to such change in the Company's
capital structure.
(6) Conversion of Share Units to Dollars on Dis
tribution. Share Units in Accounts B and BB
shall be converted to an equivalent dollar
amount before any distribution thereof to a
Participant pursuant to Article VII. For
purposes of distribution, the value of a
Share Unit shall be the average closing price
of the Company's common stock on the New York
Stock Exchange on the last trading day of
each of the twelve calendar months
immediately preceding the date of
distribution. If a Participant elects
payment in other than a lump sum, Share Units
shall be so converted to a dollar amount with
respect to each payment made in the
distribution. During the period of
distribution, dividends and other equitable
adjustments shall be credited to the
Participant's Accounts B and BB in accordance
with paragraphs 6.5(a)(3), 6.5(a)(4), and
6.5(a)(5). For such purposes, a Participant
that is a Sprint Insider immediately before
the event that entitles the Participant to
distribution shall be deemed a Sprint Insider
during the period of distribution.
(b) Maintenance of Accounts C and CC.
(1) Conversion between Dollar Amounts and
Cellular Share Units in Accounts B and
BB. When an amount is to be added to a
Participant's Deferred Benefit Accounts C or
CC, it shall be converted into Cellular Share
Units, or fractions thereof, by dividing the
amount to be credited by the closing price of
Cellular's common stock as reported by the
New York Stock Exchange on the last trading
day on or before the Determination Date.
When a number of Cellular Share Units is to
be subtracted from a Participant's Deferred
Benefit Accounts C or CC, such number of
Cellular Share Units shall be converted into
a dollar amount by multiplying such number of
Cellular Share Units by the closing price of
Cellular's common stock as reported by the
New York Stock Exchange on the last trading
day on or before the Determination Date.
(2) Sub-accounts to be Maintained for Purposes of
Computing Retirement and Termination
Benefits. Two sub-accounts shall be
maintained for Account CC: (i) a Retirement
Deferred Benefit Account which shall include
the value of the Cellular Share Units
credited pursuant to paragraph 6.3(b)(2) plus
other additions pursuant to this paragraph
6.5(b) and (ii) a Termination Deferred
Benefit Account which shall include the value
of the Cellular Share Units credited pursuant
to paragraph 6.3(b)(3) plus other additions
pursuant to this paragraph 6.5(b).
(3) Dividends to non-Cellular Insiders. For all
Participants other than Cellular Insiders,
when a dividend is declared and paid by
Cellular on its common stock, an amount shall
be credited to the Participant's Accounts C
and CC as though the same dividend had been
paid on the Cellular Share Units in such
accounts as of the Determination Date
immediately preceding the declaration of the
dividend, and such amount shall be converted
to Cellular Share Units. Such amount shall
be valued as of the Determination Date
immediately preceding the declaration of the
dividend.
(4) Dividends to Cellular Insiders. For
Participants that are Cellular Insiders, when
a cash dividend is declared and paid by
Cellular on its common stock, an amount equal
to such dividend shall be credited to the
Participant's Account A or Account AA with
respect to Cellular Share Units in Accounts C
or CC, respectively as of the Determination
Date immediately preceding the declaration of
the dividend.
(5) Effect of Recapitalization. In the event of
a stock dividend, stock split or other
corporate reorganization involving Cellular's
common stock, the Company shall make
equitable adjustment to the number of
Cellular Share Units credited to a
Participant's Accounts C and CC as may be
necessary to give effect to such change in
Cellular's capital structure.
(6) Conversion of Cellular Share Units to Dollars
on Distribution. Cellular Share Units in
Accounts C and CC shall be converted to an
equivalent dollar amount before any
distribution thereof to a Participant
pursuant to Article VII. For purposes of
distribution, the value of a Cellular Share
Unit shall be the average closing price of
Cellular's common stock on the New York Stock
Exchange on the last trading day for each of
(i) the 12 calendar months immediately
preceding the date of such distribution or
(ii) the smaller number of calendar months
elapsed from the Distribution Time to such
distribution. If a Participant elects
payment in other than a lump sum, Cellular
Share Units shall be so converted to a dollar
amount with respect to each payment made in
the distribution. During the period of
distribution, dividends and other equitable
adjustments shall be credited to the
Participant's Accounts C and CC in accordance
with paragraphs 6.5(b)(3), 6.5(b)(4), and
6.5(b)(5). For such purposes, a Participant
that is a Cellular Insider immediately before
the event that entitles the Participant to
distribution shall be deemed a Cellular
Insider during the period of distribution.
6.6 Statement of Accounts. The Company shall submit
to each Participant, within 120 days after the close of
each Plan Year, a statement in such form as the Company
deems desirable, setting forth the balance to the
credit of such Participant in his Deferred Benefit
Accounts A, B, and C and in his Deferred Benefit
Accounts AA, BB, and CC (showing separate calculations
for each Interest Yield), in each case, as of the last
day of the preceding Plan Year.
6.7 Transfers Between Accounts. Within the
limitations of this paragraph 6.7, a Participant may
elect, by executing an Account Transfer Request: (1) to
transfer all or any portion of his Account A to Account
B, (2) to transfer all or any portion of his Account B
to Account A, (3) to transfer all or any portion of his
Account AA to Account BB, (4) to transfer all or any
portion of his Account BB to Account AA, (5) to
transfer all or any portion of his Account C to Account
A, (6) to transfer all or any portion of his Account C
to Account B, (7) to transfer all or any portion of his
Account CC to Account AA, and (8) to transfer all or
any portion of his Account CC to Account BB. Such
election shall be effective on the last day of the
calendar month in which the Plan Administrator timely
receives the Participant's executed Account Transfer
Request. Transfers may not be made more than four
times in any Plan Year, and no such transfer may be
made unless a period of at least three months shall
have elapsed from the effective date of the most recent
such transfer (whether it occurred in the current Plan
Year or not) to the effective date of the current
transfer.
ARTICLE VII
BENEFITS
7.1 Benefit for Normal or Early Retirement and
Termination After Age 55. Subject to paragraph 7.6
below, upon a Participant's (i) retirement after
reaching the Normal Retirement Date, or (ii) retirement
after reaching the Early Retirement Date, or (iii)
termination of employment after attaining age 55, he
shall be entitled to a Deferral Benefit equal to the
amount of his Retirement Deferred Benefit Account
determined under paragraph 6.1 hereof as of the
Determination Date coincident with or immediately
following such event.
7.2 Termination of Employment Before Age 55. Upon any
termination of service of the Participant before age 55
for reasons other than death or Disability, the
Employer shall pay to the Participant, as compensation
earned for services rendered before his termination of
service, a Deferral Benefit equal to the amount of his
Termination Deferred Benefit Account determined under
paragraph 6.1 hereof. The Termination Deferred Benefit
Account of a Participant whose employment has
terminated shall be paid in a single sum to the
terminated Participant within 30 days following
termination of employment, if the aggregate balance of
the Deferred Benefit Account(s) of such Participant is
$20,000 or less. If such aggregate balance of a
Participant's Deferred Benefit Account(s) is more than
$20,000, payment shall commence pursuant to the
Participant's election in the Participation Agreement.
7.3 Death. If a Participant dies after the
commencement of payments of his Deferral Benefit, his
Beneficiary shall continue to receive the remaining
installments of his Deferred Benefit Account in
accordance with the Participant's election pursuant to
paragraph 7.6.
If a Participant dies while employed, before any
payments of a Deferral Benefit, the aggregate amounts
deferred under all Participation Agreements shall be
determined as follows:
(a) In the case of deferrals pursuant to a
Participation Agreement first effective before the
Transition Date:
(1) Deferrals of Incentive Compensation shall be
the Retirement Deferred Benefit Account value
thereof.
(2) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total
deferral of less than $15,000 per year
allocated to Accounts A and AA pursuant to
the Participation Agreement as revised on the
date of the Participant's death shall be the
greater of (i) the Retirement Deferred
Benefit Account value thereof or (ii) ten
times the amount of the elected annual Base
Salary deferral.
(3) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total
deferral of $15,000 or more per year
allocated to Accounts A and AA pursuant to
the Participation Agreement as revised on the
date of the Participant's death shall be
determined as follows: (i) that portion of
the deferral which totals $15,000 per year
shall be the greater of (x) the Retirement
Deferred Benefit Account value thereof and
(y) ten times the amount of the elected
annual Base Salary deferral, and (ii) the
portion of such deferral which is in excess
of $15,000 per year shall be the Retirement
Deferred Benefit Account value of such
excess.
(4) Deferrals allocated to Accounts B and BB
shall be the Retirement Deferred Benefit
Account value thereof.
(b) In the case of deferrals pursuant to a
Participation Agreement first effective on or
after the Transition Date, the aggregate amount of
all deferrals shall be the Retirement Deferred
Benefit Account value of Accounts A and B. The
Deferral Benefit shall be payable as provided for
in paragraph 7.6. The Deferral Benefit provided
above shall be in lieu of all other benefits under
this Plan.
7.4 Disability. In the event of Disability while
employed by the Employer, before the completion of all
deferrals provided for under a Participation Agreement,
the Employer shall credit to the disabled Participant's
Deferred Benefit Account an amount equal to the amount
of the Participant's Agreement to defer during such
period of Disability, but not beyond the period
elected.
In the event of Disability before termination of
employment or the Normal Retirement Date, the disabled
Participant, unless he otherwise elects under this
paragraph, shall be entitled to the amount in his
Retirement Deferred Benefit Account (rather than his
Termination Deferred Benefit Account) determined under
paragraph 6.1 as of the Determination Date next
following such Disability, with payments to commence
upon attainment of the Participant's Normal Retirement
Date in the form specified in paragraph 7.6(a)(2)
and/or 7.6(a)(3) over a 15 year period. Before
payments commence under the preceding sentence, a
Disabled Participant may elect, subject to Committee
approval upon good cause shown: (i) to accelerate
commencement of the payments to any earlier date, but
not sooner than 60 days after the onset of Disability
and/or (ii) to change the form of payment permitted
under paragraph 7.6(a).
7.5 Suspension of Participation; Failure to Continue
Participation. The Committee, in its sole discretion,
may suspend the deferral of a Participant's
Compensation upon the advanced written request of a
Participant on account of financial hardship suffered
by that Participant. A Participant must file any
request for such suspension on or before the 15th day
preceding the regular payment date on which the
suspension is to take effect. The Committee, in its
sole discretion, shall determine the amount, if any,
that will not be deferred by the Participant as a
result of the financial hardship.
The suspension of any deferrals under this paragraph
shall not affect amounts deferred with respect to
periods before the effective date of the suspension. A
Participant whose deferrals are suspended may not
execute a subsequent Participation Agreement that would
take effect before the beginning of the third Plan Year
following the close of the Plan Year in which the
suspension first took effect.
In the event the Participant ceases to remain a member
of the class of employees who are eligible to
participate in this Plan, the Participant may elect to
suspend the amount of any remaining deferral commitment
in the same manner as described for other suspensions
in this paragraph, except that Committee approval shall
not be required.
7.6 Form of Benefit Payment.
(a) Upon the happening of an event described in
paragraphs 7.1, 7.2, 7.3 or 7.4 above, the
Employer shall pay to the Participant or his
Beneficiary the amount specified in one of the
following forms as elected by the Participant in
the Participation Agreement filed by the
Participant:
(1) a lump sum payment at a time designated in
the Participation Agreement but no later than
the Participant's Normal Retirement Date.
(2) with respect to balances in Accounts A and
AA, an annual payment of a fixed amount that
shall amortize the Deferred Benefit Account
balance in equal annual payments of principal
and interest over a period from 2 to 20
years. For purposes of determining the
amount of the annual payment, the assumed
rate of interest on Accounts A and AA shall
be the average of the applicable Interest
Yield as of each Determination Date for the
60 months preceding the initial annual
installment payment.
(3) with respect to balances in Accounts B and
BB, an annual payment over a period from 2 to
20 years, each such payment having a value,
as determined pursuant to paragraph
6.5(a)(6), of the number of Share Units equal
to (i) the number of Share Units in the
accounts on the Determination Date
immediately following the event described in
paragraph 7.1, 7.2, 7.3 or 7.4, divided by
(ii) the number of annual installments
elected. During the period that a
Participant is receiving a distribution from
Account B or BB, Share Unit dividends will be
added to the Accounts in accordance with
subparagraph 6.5(a)(3) or 6.5(a)(4) hereof.
Such Share Unit dividends shall be valued in
the same manner as previously described, and
all such Share Units accruing after a
distribution from Accounts B or BB is made
shall be paid to the Participant with the
next distribution from the account.
(4) with respect to balances in Accounts C and
CC, an annual payment over a period from 2 to
20 years, each such payment having a value,
as determined pursuant to paragraph
6.5(b)(6), of the number of Cellular Share
Units equal to (i) the number of Cellular
Share Units in the accounts on the
Determination Date immediately following the
event described in paragraph 7.1, 7.2, 7.3 or
7.4, divided by (ii) the number of annual
installments elected. During the period that
a Participant is receiving a distribution
from Account C or CC, Cellular Share Unit
dividends will be added to the Accounts in
accordance with subparagraph 6.5(b)(3) or
6.5(b)(4) hereof. Such Cellular Share Unit
dividends shall be valued in the same manner
as previously described, and all such
Cellular Share Units accruing after a
distribution from Accounts C or CC is made
shall be paid to the Participant with the
next distribution from the account.
(b) A Participant may change the form in which his
benefits shall be paid by filing a revised
Participation Agreement indicating such change at
least 13 months before the date upon which the
payments to be made are determined. Such revised
Participation Agreement shall be deemed a
continuation of the initial Participation
Agreement to which it relates for purposes of
complying with the provisions of paragraphs 4.2
and 4.3 relating to the minimum and maximum
deferrals and the duration of Participation
Agreements. No such revised Participation
Agreement shall change the amount elected to be
deferred in the original Participation Agreement,
nor the time elected for commencement of benefit
payments.
(c) In the absence of a Participant's election under
subparagraph 7.6(a), benefits shall be paid in the
form specified in subparagraph 7.6(a)(2),
7.6(a)(3), and 7.6(a)(4) over a 15 year period,
except as provided in paragraph 7.2. In the event
of a Disabled Participant, payment shall be in the
form described in paragraph 7.4.
7.7 Withholding; Payroll Taxes. To the extent
required by the law in effect at the time payments are
made, the Employer shall withhold from payments made
hereunder any taxes required to be withheld from an
employee's wages for the federal or any state or local
government.
7.8 Commencement of Payments. Unless otherwise
provided, payments under this Plan shall begin within
60 days following receipt of notice by the Plan
Administrator of an event which entitles a Participant
(or a Beneficiary) to payments under this Plan, or at
such earlier date as may be determined by the Company
pursuant to the terms of the Plan. All payments shall
be made as of the first day of the month.
7.9 Termination of SpinCo Group Employees. For
purposes of this Plan, any Participant who, within the
meaning of the Distribution Agreement, is a SpinCo
Group Employee immediately after the Distribution Time
shall be treated as terminated on the Distribution
Time.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant shall
have the right, at any time, to designate any person or
persons as his Beneficiary or Beneficiaries (both
principal as well as contingent) to whom payment under
this Plan shall be paid in the event of his death
before complete distribution to the Participant of the
benefits due him under the Plan.
8.2 Amendments. Any Beneficiary Designation may be
changed by a participant by the written filing of such
change on a form prescribed by the Company. The filing
of a new Beneficiary Designation form will cancel all
Beneficiary Designations previously filed.
8.3 No Beneficiary Designation. If a Participant
fails to designate a Beneficiary as provided above, or
if all designated Beneficiaries predecease the
Participant, then the Participant's designated
Beneficiary shall be deemed to be the person or persons
surviving him in the first of the following classes in
which there is a survivor, share and share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of
the children predecease the Participant but leave
issue surviving, then such issue shall take by
right of representation the share their parent
would have taken if living;
(c) The Participant's personal representative
(executor or administrator).
8.4 Effect of Payment. The payment to the deemed
Beneficiary shall completely discharge the Employer's
obligations under this Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Board may at any time amend the
Plan in whole or in part; provided, however, that no
amendment shall be effective to decrease or restrict
any Deferred Benefit Account at the time of such
amendment.
9.2 Employer's Right to Terminate. The Board may at
any time terminate the Plan with respect to new
elections to defer if, in its judgment, the continuance
of the Plan, the tax, accounting, or other effects
thereof, or potential payments thereunder would not be
in the best interests of the Company. The Board may
also terminate the Plan in its entirety at any time,
and upon any such termination, each Participant (a) who
is then receiving a Deferral Benefit shall be paid in a
lump sum, or over such period of time as determined by
the Company, the then remaining balance in his Deferred
Benefit Account, and (b) who has not received a
Deferral Benefit shall be paid in a lump sum, or over
such period of time as determined by the Company, the
balance in his Deferred Benefit Account.
ARTICLE X
MISCELLANEOUS
10.1 Unsecured General Creditor. Participants and
their Beneficiaries shall have no legal or equitable
rights, interest or claims in any property or assets of
the Employer, nor shall they be Beneficiaries of, or
have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds
therefrom owned or which may be acquired by the
Employer ('Policies'). Such Policies or other assets
of the Employer shall not be held under any trust for
the benefit of Participants or their Beneficiaries or
held in any way as collateral security for the
fulfilling of the obligations of the Employer under
this Plan. Any and all of the Employer's assets and
Policies shall be, and remain, the general, unpledged,
unrestricted assets of the Employer. The Employer's
obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Employer to pay
money in the future.
10.2 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell,
assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be
unassignable and non-transferable. No part of the
amounts payable shall, before actual payment, be
subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance
owed by a Participant or any other person, nor be
transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.
10.3 Not a Contract of Service. The terms and
conditions of this Plan shall not be deemed to
constitute a contract of service between the Employer
and the Participant, and the Participant (or his
Beneficiary) shall have no rights against the Employer
except as may otherwise be specifically provided
herein. Moreover, nothing in this Plan shall be deemed
to give a Participant the right to be retained in the
service of the Employer or to interfere with the right
of the Employer to discipline or discharge him at any
time.
10.4 Protective Provisions. A Participant will
cooperate with the Employer by furnishing any and all
information requested by the Employer, in order to
facilitate the payment of benefits hereunder, and by
taking such physical examinations as the Employer may
deem necessary and taking such other action as may be
requested by the Employer.
10.5 Applicable Law. The Plan, and any Participation
Agreement related thereto, shall be governed by the
laws of the State of Kansas, without regard to the
principles of conflicts of law.
10.6 For purposes of this Plan, an employee who becomes
employed by Sprint Spectrum L.P., Global One, or
Alcatel, N.V. (each, together with their subsidiaries,
an "Affiliated Entity"), shall not, except with respect
to incentive stock options, be considered to have
terminated employment with the Company or a subsidiary
of the Company until his employment is terminated with
all Affiliated Enitites without becoming employed by
the Company or its subsidiaries.
<PAGE>
Exhibit (10)(l)
MANAGEMENT INCENTIVE STOCK OPTION PLAN
(As Amended April 18, 1995, August 8, 1995,
August 12, 1996 and February 11, 1997)
1. Establishment and Purpose. Sprint
Corporation, a Kansas corporation (the
"Company"), hereby establishes a stock option
plan to be named the Management Incentive
Stock Option Plan (the "Plan") The purpose of
the Plan is to permit employees of the
Company and its subsidiaries who are eligible
to receive annual incentive compensation to
receive nonqualified stock options in lieu of
a portion of the target incentive under the
Company's management incentive plans
("MIPs"), thereby encouraging the employees
to focus on the growth and profitability of
the Company and the performance of its common
stock. Subject to approval of the Company's
stockholders, the Plan provides for options
to be granted beginning March 15, 1995, and
ending April 18, 2005. Stock options granted
prior to or as of April 18, 2005, may extend
beyond that date.
2. Administration. The Plan shall be
administered by the Organization and
Compensation Committee of the Board of
Directors (the "Committee"). The Company
shall grant options under the Plan in
accordance with determinations made by the
Committee pursuant to the provisions of the
Plan. The Committee from time to time may
adopt (and thereafter amend and rescind) such
rules and regulations for carrying out the
Plan and take such action in the
administration of the Plan, not inconsistent
with the provisions of the Plan, as it shall
deem proper. The Committee may correct any
defect, supply any omission or reconcile any
inconsistency in the Plan, or in any option
or restricted shares of common stock granted
or issued pursuant to the Plan, in the manner
and to the extent it shall deem desirable to
effect the terms of the Plan. The
interpretation and construction of any
provisions of the Plan by the Committee
shall, unless otherwise determined by the
Board of Directors of the Company, be final
and conclusive. No member of the Board of
Directors or the Committee shall be liable
for any action or determination made in good
faith with respect to the Plan or any option
granted under it. The Corporate Secretary
shall act as Plan Administrator carrying out
the day-to-day administration of the Plan
unless the Committee appoints another officer
or employee of the Company as Plan
Administrator.
3. Eligibility. The Committee will determine
each year whether options will be granted in
such year, whether participation will be
elective or automatic and the amount of
incentive compensation to be given up for
each stock option. Any salaried employee of
the Company and its subsidiaries shall be
eligible to be selected for participation in
the MIPs. The Committee will, in its
discretion, determine the employees who
participate in the MIPs and, therefore, who
will be eligible for options, the dates on
which options shall be granted, and any
conditions on the exercise of the options.
No option may be granted to any individual
who immediately after the option grant owns
directly or indirectly stock possessing more
than five percent (5%) of the total combined
voting power or value of all classes of stock
of the Company or any subsidiary.
4. Common Stock Subject to the Plan. The shares
of common stock of the Company, $2.50 par
value, to be issued upon the exercise of a
nonqualified option to purchase common stock
granted in lieu of MIP payout may be made
available from the authorized but unissued
common stock of the Company, shares of common
stock held in the treasury, or common stock
purchased on the open market or otherwise.
Approval of the Plan by the Stockholders of
the Company shall constitute authorization to
use such shares for the Plan subject to the
discretion of the Board or as such discretion
may be delegated to the Committee.
Subject to the provisions of the following
paragraph, the total number of shares for
which options may be granted under the Plan
each year shall be 0.9% of the total
outstanding shares of common stock of the
Company as of the first day of such year;
provided, however, that such number shall be
increased in any year by the number of shares
available in previous years for which options
have not been granted. If and when an option
granted under the Plan is terminated without
having been exercised in full, the
unpurchased or forfeited shares shall become
available for grant to other employees.
The number of shares subject to the Plan may
be appropriately adjusted by the Committee in
the circumstances outlined in Section 5(k).
5. Stock Options; Terms and Conditions. Each
option will represent the right to purchase a
specific number of shares of common stock of
the Company and shall be subject to the
following terms and conditions and to such
additional terms and conditions, not
inconsistent with the terms of the Plan, as
the Committee shall deem desirable:
a. Consideration for and Number of Options.
Each option shall be granted in lieu of
a portion of the optionee's cash payout
under the MIPs. The Committee shall
determine the number of shares or the
manner of calculating the number of
shares available for each option each
year, subject to the total number of
shares available under the Plan for such
year, and the amount or the method of
determining the amount of annual
incentive compensation to be given up by
each participant in return for an
option, taking into consideration
appropriate factors in making such
determinations, such as interest rates,
volatility of the market price of common
stock of the Company and the term of the
option, provided, however that shares
subject to options granted to any
individual employee during any calendar
year shall not exceed a total of 500,000
shares.
b. Participation in the Plan.
Participation in the Plan may be
voluntary or automatic, as determined by
the Committee. The rules and procedures
for voluntary participation, when
applicable, shall be established and
implemented by the Plan Administrator.
c. Exercise Price. The price at which each
share covered by an option may be
purchased shall be one hundred percent
(100%) of the fair market value of the
Company's common stock on the date the
option is granted. Fair market value
shall be deemed to be the average of the
high and low prices of the Company's
common stock for composite transactions
as published by major newspapers for the
date the option is granted or, if no
sale of the Company's common stock shall
have been made on that day, the next
preceding day on which there was a sale
of such stock.
d. Vesting. Unless the Committee
determines otherwise, stock option
grants shall provide that the total
number of shares subject to an option
shall become exercisable December 31 in
the year of the date of grant.
e. Term of Option. Options shall not be
exercisable after the expiration of ten
(10) years from the date of grant.
f. Payment of Exercise Price. Options
shall be exercisable only upon payment
to the Company of the full purchase
price of the shares with respect to
which options are exercised. Payment
for the shares shall be either in United
States dollars, payable in cash or by
check, or by surrender of stock
certificates representing like common
stock of the Company having an aggregate
fair market value, determined as of the
date of exercise, equal to the number of
shares with respect to which such
options are exercised multiplied by the
exercise price per share. The fair
market value of common stock on the date
of exercise of options shall be
determined in the same manner as the
fair market value of common stock on the
date of grant of options is determined.
Certain optionees may use restricted
stock as payment for the exercise price
in accordance with Section 6 hereof. In
that event, fair market value of the
shares of restricted stock will be
determined as if the shares were not
restricted. In lieu of the delivery of
physical certificates, the optionee may
deliver shares in payment of the
exercise price by attesting, on a form
established for such purpose by the
Secretary, to the ownership, either
outright or through ownership of a
broker account, of a sufficient number
of shares held for a period of at least
six months to pay the exercise price.
The attestation must be notarized and
signed by the optionee's spouse if the
spouse is a joint owner of the shares
with respect to which such attestation
is made and must be accompanied by such
documentation as the Corporate Secretary
may consider necessary to evidence
actual ownership of such shares.
g. Manner of Exercise. A completed
exercise form and the exercise price,
whether in the form of cash or stock,
must be delivered to the Plan
Administrator in order to exercise an
option. An option shall be deemed
exercised on the date such exercise form
and payment are received by the Plan
Administrator.
h. Time for Exercise. Each option expires
if it has not been exercised within its
term. Once an option has expired for
any reason, it can no longer be
exercised. If employment with the
Company or a subsidiary of the Company
is terminated, the optionee may exercise
options which are exercisable on the
date of termination of employment until
the earlier of (1) the date on which the
option expires and (2) the end of the
applicable time period below:
(i) retirement: five years after
retirement date.
(ii) disability (qualifying for long-
term disability benefits under the
Company's Basic Long-Term
Disability Plan): five years after
qualification date.
(iii) death: one year after death
for the estate or designated
beneficiary to exercise the
decedent's options.
(iv) involuntary termination other than
for cause: the date on which the
option expires.
(v) voluntary termination: three
months from the date of termination
of employment.
If an optionee's employment is
terminated for a reason constituting
good cause, any outstanding options
granted under the Plan and held by such
optionee at such time will automatically
terminate. For this purpose, "good
cause" shall mean conduct by the
optionee which reflects adversely on his
or her honesty, trustworthiness or
fitness as an employee, or the
optionee's willful engagement in conduct
which is demonstrably and materially
injurious to the Company.
If an optionee becomes associated with,
becomes employed by, renders services to, or owns
any interest in (other than a nonsubstantial
interest, as determined by the Committee) any
business in competition with the Company, all
outstanding options whether vested or unvested
shall automatically terminate and shares of
restricted stock received upon the exercise of an
option pursuant to Section 6 hereof which continue
to be restricted shall be forfeited. For purposes
of this Plan, an employee who becomes employed by
Sprint Spectrum L.P., Global One, or Alcatel, N.V.
(each, together with their subsidiaries, an
"Affiliated Entity"), shall not, except with
respect to incentive stock options, be considered
to have terminated employment with the Company or
a subsidiary of the Company until his employment
is terminated with all Affiliated Entities without
becoming employed by the Company or its
subsidiaries.
i. Restricted Stock. Certain optionees may
elect to deliver restricted shares or
receive restricted shares in connection
with an exercise of an option, as
provided in Section 6 hereof.
j. Beneficiary Designations. An optionee
may designate a beneficiary or
beneficiaries to exercise unexpired
options and to own shares issued upon
any such exercise after the optionee's
death without order of any probate court
or otherwise. A beneficiary so
designated may exercise an option upon
presentation to the Company of evidence
satisfactory to the Corporate Secretary
of (1) the beneficiary's identity and
(2) the death of the optionee. An
optionee may change any beneficiary
designation at anytime before his death
but may not do so by testamentary
designation in his will or otherwise.
Beneficiary designations must be made in
writing on a form provided by the Plan
Administrator. Beneficiary designations
shall become effective on the date that
the form, properly completed, signed and
notarized, is received by the Plan
Administrator.
k. Change in Stock, Adjustments. In the
event that the outstanding shares of
common stock of the Company are
hereafter increased or decreased or
changed into or exchanged for a
different number of shares or kind of
shares or other securities of the
Company or of another corporation, by
reason of reorganization, merger,
consolidation, recapitalization,
reclassification, stock split up,
combination of shares, or a dividend
payable in capital stock (including a
spin-off), appropriate adjustment shall
be made by the Committee in the number
of shares as to which outstanding
options, or portions thereof then
unexercised, shall be exercisable, to
the end that the optionee's
proportionate interest shall be
maintained as before the occurrence of
such event, and such adjustment of
outstanding options shall be made
without change of the total price
applicable to unexercised options and
with a corresponding adjustment in the
exercise price per share.
l. Limited Transferability. Options may
not be transferred, levied, garnished,
executed upon, subjected to a security
interest, or assigned to any person
other than the optionee, except that the
optionee may transfer an option to a
trust of which the optionee is the sole
beneficiary during his lifetime. Upon
the death of the optionee, the trustee
of such trust may exercise any options
to which the trustee has legal title on
or before the expiration date of such
options, and shares issued pursuant to
such exercise shall be issued to the
trustee. Documents evidencing the
transfer of any option and the identity
of the trustee shall be in such form as
may be required by the Secretary of the
Company.
6. Restricted Stock. Certain optionees, as
determined by the Committee, may elect to
receive restricted shares upon payment for
the exercise of an option in the form of
unrestricted common stock. The optionee will
receive the same number of unrestricted
shares as the number of shares surrendered to
pay the exercise price, while the shares
received in excess of the number surrendered
to pay the exercise price may be restricted.
Such optionees may also elect to deliver
restricted shares of the Company's common
stock in payment of the exercise price
notwithstanding restrictions on
transferability to which such shares are
subject. The Company shall be authorized to
issue restricted shares of common stock upon
such exercises of stock options, subject to
the following conditions:
a. The optionee shall elect a vesting
period for the restricted common stock
to be received upon exercise of the
option of between six (6) months and ten
(10) years, subject to rules and
procedures established by the Plan
Administrator, but in no event may an
optionee elect a vesting period shorter
than the period provided in paragraph
(d) of this Section 6. At any time on
or before the 13th calendar month
preceding the date on which restrictions
on shares of restricted stock would
otherwise lapse, the optionee may elect
to extend the vesting period on all but
not a portion of such shares by six
months or any multiple of six months.
b. The optionee who receives restricted
stock may not sell, transfer, assign,
pledge or otherwise encumber or dispose
of shares of restricted stock until such
time as all restrictions on such stock
have lapsed except: (i) to the Company
in payment of the exercise price of a
stock option issued by the Company under
any employee stock option plan adopted
by the Company that provides for payment
of the exercise price in the form of
restricted stock, provided that such
payment is made in accordance with the
terms of such plan; or (ii) to a trust
of which the optionee, the optionee's
spouse, or descendants of the optionee
are the primary beneficiaries and which
is a grantor trust treated as owned by
the optionee under Subchapter J of the
Internal Revenue Code, upon the
following terms:
(A) the Company receives, prior to such
transfer, a true copy of the trust
agreement and an opinion from
optionee's counsel (1) that the
trust will be treated as a grantor
trust owned by the optionee under
Subchapter J of the Internal
Revenue Code at all times until the
restrictions on such stock lapse or
the stock is forfeited under the
terms of its grant, (2) that the
terms of the trust provide that
upon the forfeiture of the
restricted stock under the terms of
its grant or the earlier
termination of the trust for
whatever reason, ownership of the
restricted stock shall revert to
the optionee or to the Company, (3)
that the trustee of such trust may
not, prior to the lapsing of
restrictions on such stock, sell,
transfer, assign, pledge, or
otherwise encumber or dispose of
shares of restricted stock except
to the Company or to the optionee,
subject to the restrictions
provided for in this Plan, and (4)
that, until the restrictions lapse,
the trustee is not authorized to
incur liabilities on behalf of the
trust, other than to the
beneficiaries of the trust; and
(B) the optionee and the trustee of the
trust shall execute stock powers in
blank to be held in the custody of
the Company; and
(C) the Corporate Secretary of the
Company may, in his discretion,
enforce the foregoing transfer
restrictions by maintaining
physical custody of the certificate
or certificates representing such
shares of restricted stock, by
placing a restrictive legend on
such certificates, by requiring the
optionee and the trustee to execute
other documents as a pre-condition
to such transfer, or otherwise.
c. An optionee who elects to receive
restricted common stock upon an exercise
shall have the right to satisfy tax
withholding obligations in the manner
provided in Section 8 hereof.
d. Restricted common stock received in such
an exercise or from an election to
receive a Long-Term Incentive Plan
payout in restricted stock, or any
Restricted Stock Award granted pursuant
to the Long-Term Stock Incentive
Program, shall be eligible for use in
payment of the exercise price of a stock
option, so long as all the shares
received as a result of such an exercise
are restricted for a period at least as
long as, and with terms at least as
restrictive as the terms of, the
restricted common stock used in payment.
e. The shares of restricted common stock
received in an exercise of a stock
option that continue to be restricted
shall be forfeited in the event that
vesting conditions are not satisfied,
subject to the discretion of the
Committee, except in the case of death,
disability, normal retirement, or
involuntary termination for reasons
other than cause, in which case all
restrictions lapse; provided, however,
that in no event shall restrictions
lapse if the restrictions on shares used
to pay for the exercise have not lapsed
under the same conditions. If
restricted shares are forfeited, the
optionee or his representative shall
sign any document and take any other
action required to assign said
restricted shares back to the Company.
f. The optionee will have all the rights of
a stockholder with respect to shares of
restricted stock received upon the
exercise of an option, including the
right to vote the shares of stock and
the right to dividends on the stock.
Unless the Plan Administrator
establishes alternative procedures, the
shares of restricted stock will be
registered in the name of the optionee
and the certificates evidencing such
shares shall bear an appropriate legend
referring to the terms, conditions and
restrictions applicable to the award and
shall be held in escrow by the Company.
The optionee shall execute a stock power
or powers assigning the shares of
restricted stock back to the Company,
which stock powers shall be held in
escrow by the Company and used only in
the event of the forfeiture of any of
the shares of restricted stock. A
certificate evidencing unrestricted
shares of common stock shall be issued
to the optionee promptly after the
restrictions lapse on any restricted
shares.
g. The Plan Administrator shall have the
discretion and authority to establish
any rules in connection with the use of
restricted stock, including but not
limited to regulating the timing of the
lapse of restrictions within the six-
month to ten-year period and prescribing
election forms as the Plan Administrator
deems necessary or desirable for the
orderly administration of such
exercises.
7. Reload Options. The Committee may provide
that optionees have the right to a reload
option, which shall be subject to the
following terms and conditions:
a. Grant of the Reload Option; Number of
Shares; Price. Subject to subsections
(b) and (c) of this Section 7 and to the
availability of shares to be optioned
under the Plan, if an optionee has an
option (the "original option") with
reload rights and pays for the exercise
of the original option by surrendering
common stock of the Company, the
optionee shall receive a new option
("reload option") for the number of
shares so surrendered (or, if
applicable, the number of shares
provided for in paragraph (h) of this
Section 7) at an exercise price equal to
the fair market value of the stock on
the date of the exercise of the original
option.
b. Minimum Purchase Required. A reload
option will be granted only if the
exercise of the original option is an
exercise of at least 25% of the total
number of shares granted under the
original option (or an exercise of all
the shares remaining under the original
option if less than 25% of the shares
remain to be exercised).
c. Other Requirements. A reload option
will not be granted: (1) if the market
value of the common stock of the Company
on the date of exercise of the original
option is less than the exercise price
of the original option; (2) if the
optionee is no longer an employee of the
Company or its subsidiary; or (3) if the
original option is exercised less than
one year prior to the expiration of the
original option.
d. Term of Option. The reload option shall
expire on the same date as the original
option.
e. Type of Option. The reload option shall
be a nonqualified option.
f. No Additional Reload Options. The
reload options shall not include any
right to a second reload option.
g. Date of Grant, Vesting. The date of
grant of the reload option shall be the
date of the exercise of the original
option. The reload options shall be
exercisable in full beginning one year
from date of grant; provided, however,
that all shares purchased upon the
exercise of the original option (except
for any shares withheld for tax
withholding obligations) shall not be
sold, transferred or pledged within six
months from the date of exercise of the
original option. In no event shall a
reload option be exercised after the
original option expires as provided in
subsection (d) of this Section 7.
h. Stock Withholding; Grants of Reload
Options. If the other requirements of
this Section 7 are satisfied, and if
shares are withheld or shares
surrendered for tax withholding, a
reload option will be granted for the
number of shares surrendered as payment
for the exercise of the original option
plus the number of shares surrendered or
withheld to satisfy tax withholding. In
connection with reload options for
officers who are subject to Section 16
of the Securities Exchange Act of 1934,
the Committee may at any time impose any
limitations which, in the Committee's
sole discretion, are necessary or
desirable in order to comply with
Section 16(b) of the Securities Exchange
Act of 1934 and the rules and
regulations thereunder, or in order to
obtain any exemption therefrom.
i. Other Terms and Conditions. Except as
otherwise provided in this Section 7,
all the provisions of the Plan shall
apply to reload options.
8. Stock Withholding Election. When taxes are
withheld in connection with the exercise of a
stock option by delivering shares of stock in
payment of the exercise price, or an exercise
of an SAR for stock, or upon the lapse of
restrictions on restricted stock received
upon the exercise of an option (the date on
which such exercise occurs or such
restrictions lapse hereinafter referred to as
the "Tax Date"), the optionee may elect to
make payment for the withholding of federal,
state and local taxes, including Social
Security and Medicare ("FICA") taxes, up to
the optionee's marginal tax rate, by one or
both of the following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be
valued at fair market, as defined
herein, on the Tax Date) which shares,
if acquired from the Company, must have
been held for at least six months;
(ii) requesting the Company to withhold from
those shares that would otherwise be
received upon exercise of the option,
upon exercise of an SAR for stock, or
upon the lapse of restrictions, a number
of shares having a fair market value (as
defined herein) on the Tax Date equal to
the amount to be withheld. The amount
of tax with-holding to be satisfied by
withholding shares from the option
exercise is limited to the minimum
amount of taxes, including FICA taxes,
required to be withheld under federal,
state and local law.
Any fractional share amount and any
additional withholding not paid by the
withholding or surrender of shares must be
paid in cash. If no timely election is made,
cash must be delivered to satisfy all tax
withholding requirements.
9. Miscellaneous.
a. Amendment. The Company reserves the
right to amend the Plan at any time by
action of the Board of Directors
provided that no such amendment may
materially and adversely affect any
outstanding stock options without the
consent of the respective participants,
and provided that, without the approval
of the stockholders, no such amendment
may increase the total number of shares
reserved for the purposes of the Plan.
b. Effectiveness of Plan. This Plan shall
be effective as of February 18, 1995,
subject to approval of Stockholders of
the Company prior to February 18, 1996.
c. Rights in Securities. All certificates
for shares delivered under the Plan
shall be subject to such stock-transfer
orders and other restrictions as the
Committee may deem advisable under the
rules, regulations, and other
requirements of the Securities and
Exchange Commission, any stock exchange
upon which the shares are then listed,
and any applicable federal or state
securities law, and the Committee may
cause a legend or legends to be put on
any such certificates to make
appropriate reference to such
restrictions. No optionee or optionee's
beneficiary, executor or administrator,
legatees or distributees, as the case
may be, will be, or will be deemed to
be, a holder of any shares subject to an
option unless and until a stock
certificate or certificates for such
shares are issued to such person or
persons under the terms of the Plan. No
adjustment shall be made for dividends
(ordinary or extraordinary, whether in
cash, securities or other property) or
distributions or other rights for which
the record date is prior to the date
such stock certificate is issued, except
as provided in Section 5(k) hereof.
d. Date of Grant. The grant of an option
shall be effective no earlier than the
date the Committee decides to grant the
option, except that grants of reload
options shall be effective as provided
in Section 7g hereof.
e. Application of Funds. The proceeds
received by the Company from the sale of
stock subject to option are to be added
to the general funds of the Company and
used for its corporate purposes.
f. No Obligation to Exercise Option.
Granting of an option shall impose no
obligation on the optionee to exercise
such option.
<PAGE>
Exhibit (10)(u)
SPRINT CORPORATION
RETIREMENT PLAN FOR DIRECTORS
(as amended through December 10, 1996)
1. Name and Purpose
The name of the Plan is the Sprint Corporation Retirement
Plan for Directors ("Plan"). The purpose of the Plan is to
provide any Director of Sprint who is not concurrently an
employee of Sprint or any subsidiary of Sprint with continuing
compensation for services rendered as a retired Director and
thereby assist Sprint in the realization of its long-term
strategies and objectives.
It is intended that a person retired under this Plan will be
available to provide advice and counsel from time to time on such
matters as the Chairman of the Board shall request.
2. Definitions
"Sprint" means Sprint Corporation, a Kansas Corporation, or
any successor to a substantial portion of its business.
"Credited Service" means all whole years of service as an
Eligible Director of Sprint, including service as an Eligible
Director prior to the Effective Date of the Plan and service as a
Director of Centel Corporation prior to March 9, 1994. Service
while a Director but not an Eligible Director will not be deemed
to be service for any purpose under this Plan. Service as a
Director of a subsidiary of Sprint will not be deemed to be
service for any purpose under this Plan, except for service as a
Director of Centel Corporation prior to the merger between Sprint
and Centel Corporation effective March 9, 1993.
"Director" means any member of the Board of Directors of
Sprint.
"Eligible Director" means any Director who is not
concurrently employed by Sprint or any subsidiary of Sprint.
"Effective Date" means March 1, 1982.
"Participant" means any Eligible Director whose service has
terminated and who has otherwise qualified to commence to receive
a benefit under the terms of this Plan.
"Plan" means the Sprint Corporation Retirement Plan for
Directors.
"Plan Administrator" means the General Counsel of Sprint or
any other officer designated by the Chairman of the Board.
"Retainer" means the annual fee established by the Board of
Directors of Sprint and paid monthly for service as a Director,
but excludes any meeting fee, expense reimbursement, or any other
compensation received by a Director unless such compensation is
specifically included as a part of the Retainer by action of the
Board.
"Termination of Service" means cessation of service as a
Director.
3. Eligibility for Benefits
Except as provided in the following sentence, each Director
who has accumulated five or more years of Credited Service shall
be entitled to benefits as provided under the Plan upon his or
her termination of service as a Director. No Director who has
not accumulated five or more years of Credited Service as of
December 10, 1996, shall be entitled to a benefit under the Plan.
4. Plan Benefits
The monthly benefit payable under the Plan to any
Participant whose Termination of Service occurs prior to April 1,
1989, shall be equal to one-twelfth of one-half of the Retainer
in effect for Eligible Directors. Any increase in the Retainer
subsequent to Termination of Service of any such Participant
shall apply in the determination of prospective monthly payments
for such Participant. The monthly benefit payable under the Plan
to any Participant whose Termination of Service occurs on or
after April 1, 1989, shall be equal to one-twelfth of the
Retainer in effect for Eligible Directors at the time Termination
of Service of such Participant occurs. There shall be no
adjustment in the benefit payable to any Participant whose
Termination of Service occurs on or after April 1, 1989 if the
Retainer is changed after his or her Termination of Service. The
benefit shall be paid to the Participant on or before the last
day of each month commencing with the month following his or her
Termination of Service. No benefit shall be paid hereunder to
any Director terminated for cause.
5. Duration of Benefits
The monthly payments provided by this Plan shall continue
until the first to occur of: (a) the number of monthly
payments made equals the number of months of service by the
Participant as an Eligible Director; or (b) 120 monthly
payments have been made; or (c) the last day of the month
following the death of the Participant. No benefit shall be paid
under this Plan in any month in which a Participant is employed
by or serving as a Director of any company if such service
constitutes or would in the opinion of the General Counsel of
Sprint be deemed to constitute a conflict of interest or other
legal impediment of such a nature as would preclude such
Participant from concurrently serving as a Director of Sprint.
6. Suspension of Benefits
If a Participant returns to service as a Director or becomes
an employee of Sprint or is or becomes a Director or employee of
any subsidiary of Sprint, payment of benefits under this Plan
shall be immediately suspended and shall commence again on the
last day of the month following the month in which such service
terminates. Following such termination, the amount of each
monthly payment for a Participant whose Termination of Service
occurred prior to April 1, 1989, shall be equal to one-twelfth of
one-half of the Retainer in effect for Eligible Directors at the
time payments under this Plan are resumed, and the amount of each
monthly payment for a Participant whose Termination of Service
occurred on or after April 1, 1989, shall be equal to one-twelfth
of the Retainer at the time such Participant's most recent
Termination of Service occurred.
Monthly payments shall continue until the first to occur of
(a) the number of monthly payments made, including payments
prior to the Participant's return to service, equals the number
of months of service by the individual as an Eligible Director:
or (b) 120 such monthly payments, including payments prior to
the Participant's return to service have been made; or (c) the
last day of the month following the death of the Participant.
7. Funding
No promise under this Plan shall be secured by any specific
asset of Sprint, nor shall any asset of Sprint be designated as
attributable to or be allocated to the satisfaction of any such
promise. Each benefit payment shall be made from Sprint's
general revenues.
8. Administration
The Plan Administrator shall have full power and authority
to administer the Plan, including the power to promulgate rules
of Plan administration, the power to settle any disputes as to
rights or benefits arising from the Plan, the power to appoint
agents and delegate his duties, and the power to make such
decisions or take such action as the Plan Administrator, in his
sole discretion, deems necessary or advisable to aid in the
proper administration of the Plan.
9. Alienation of Benefits
No benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt thereat shall be void.
No such benefit payment shall, prior to receipt thereof by any
Participant, be in any manner liable for or subject to such
Participant's debt, alimony, child support, contract, liability,
engagement, or tort.
10. Withholding Taxes
The Company shall deduct from the amount of any payment
hereunder any tax required to be withheld by applicable law.
11. Governing Law
This Plan shall be governed and construed by the laws of the
State of Kansas.
12. Amendment, Modification, Or Termination Of The Plan
The Board of Directors may, at any time, terminate or, in
any respect, amend or modify the Plan, but such action shall not
affect the rights of any Participant then receiving benefits
under the Plan.
<PAGE>
Exhibit (10)(w)
AGREEMENT REGARDING SPECIAL COMPENSATION
AND POST EMPLOYMENT RESTRICTIVE COVENANTS
THIS AGREEMENT made this 9th day of November, 1993, by and
between SPRINT/UNITED MANAGEMENT COMPANY, a Kansas corporation
and subsidiary of Sprint Corporation ("Employer"), and GARY D.
FORSEE ("Executive").
W I T N E S S E T H:
WHEREAS, Employer and its parent and affiliates are engaged
in the telecommunications business;
WHEREAS, Executive has expertise, experience and capability
in the business of Employer and the telecommunications business
in general;
WHEREAS, Executive has been, and/or now is serving Employer
as Senior Vice President, Staff Operations;
WHEREAS, Employer desires to enter into this Agreement to
provide severance and other benefits for Executive and obtain
Executive's agreements regarding confidentiality and post-
employment restrictive covenants for Employer; and
WHEREAS, Executive is willing to provide such agreements to
Employer.
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which consideration
is mutually acknowledged by the parties, it is hereby agreed as
follows:
1. Recitals.
The recitals hereinbefore set forth constitute an integral
part of this Agreement, evidencing the intent of the parties in
executing this Agreement, and describing the circumstances
surrounding its execution. Said recitals are by express
reference made a part of the covenants hereof, and this Agreement
shall be construed in light thereof.
2. Duties and Responsibilities.
The duties and responsibilities of Executive are and shall
continue to be of an executive nature as shall be required by
Employer in the conduct of its business. Executive's powers and
authority shall include all those presently delegated to him or
such other duties and responsibilities as from time to time may
be assigned to him. Executive recognizes, that during his
employment hereunder, he owes an undivided duty of loyalty to
Employer, and agrees to devote his entire business time and
attention to the performance of said duties and responsibilities
and to use his best efforts to promote and develop the business
of Employer.
3. Employment Term.
Executive's employment may be terminated by either party in
accordance with Sections 5, 6, 7, or 8 herein.
4. Compensation and Benefits.
During employment, Executive shall be entitled to receive a
base annual salary, shall be reimbursed for reasonable expenses
incurred and accounted for in accordance with the policies and
procedures of Employer, and shall be entitled to vacation pay and
other benefits applicable to employees generally, each as may
from time to time be established, amended or terminated. In
addition, upon execution of this Agreement, Executive shall be
awarded five thousand (5,000) shares of restricted stock as set
forth in a restricted stock agreement of even date herewith,
attached hereto and incorporated herein (the "Restricted Stock
Agreement"), shall be entitled to the Special Compensation set
forth in Section 6 hereof in accordance with the terms of this
Agreement, and shall be entitled, subject to approval of the
Organization and Compensation Committee, to participation in the
Key Management Benefit Plan in accordance with the terms of said
plan.
5. Termination by Employer: Special Compensation.
At any time, Employer may terminate Executive's employment
for any reason. If Executive's termination is other than
pursuant to Section 6, Executive shall, subject to the other
provisions of this Section 5, be entitled to the following
Special Compensation (as that term is defined in this Section 5)
in lieu of any benefits available under any and all Employer
separation plans or policies. If Executive's termination is
pursuant to Sections 5, 6 or 7, Executive's obligations under
Sections 11, 12, 13, and 14 hereof shall continue.
For purposes of this Agreement, "Special Compensation" shall
consist of :
(a) to continue to receive for a period of eighteen
(18) months from the date of termination (the "Severance
Period") biweekly compensation at the rate equal to the
biweekly amount of his base annual salary in effect at the
date of termination of employment;
(b) to receive a bonus, based on actual performance
results, up to the target amount, under the Management
Incentive Plan ("MIP") throughout the Severance Period
provided that the amount, if any, payable under such Plan
for the award period including the last day of the Severance
Period shall be pro rated based upon the number of months of
the Severance Period that fall within the award period and
the total number of months in such award period;
(c) to receive an award under the Long Term Incentive
Plan, pro rated based on the Executive's last day worked,
exclusive of any Severance Period, determined in accordance
with the terms of said Plan;
(d) acceleration of vesting of restricted stock in
accordance with the relevant provisions of the Restricted
Stock Agreement;
(e) to continue to receive throughout the Severance
Period any executive medical, dental, life, and qualified or
nonqualified retirement benefits which the Executive was
receiving or was entitled to receive at the time of
termination, except that long term disability and short term
disability benefits cease on the last day worked;
(f) outplacement counseling by a firm selected by
Employer to continue until Executive becomes employed; and
(g) to continue to receive throughout the Severance
Period all applicable executive perquisites (including
automobile allowance, long distance services and all
miscellaneous services) except country club membership dues
and accrual of vacation.
Employer shall pay or cause to be paid the amounts payable
under paragraph (a) above in equal installments, bi-weekly in
arrears, and the amount payable under paragraphs (b) and (c) in
accordance with the terms of the Plans. All payments pursuant to
this Section shall be subject to applicable federal and state
income and other withholding taxes.
In addition to the Special Compensation described above,
Executive shall also be entitled to any vacation pay for vacation
accrued by Executive in the calendar year of termination but not
taken at the time of termination.
In the event Executive becomes employed full time during the
Severance Period, Executive's entitlement to continuation of the
benefits described in paragraph (e) shall immediately cease,
however, Executive shall retain any rights to continue medical
insurance coverage under the COBRA continuation provisions of the
group medical insurance plan by paying the applicable premium
therefor.
The payments and benefits provided for in this Section shall
be in addition to all other sums then payable and owing to
Executive hereunder and, except as expressly provided herein,
shall not be subject to reduction for any amounts received by
Executive for employment or services provided after termination
of employment hereunder, and shall be in full settlement and
satisfaction of all of Executive's claims and demands.
In all events, Executive's right to receive severance and/or
other benefits pursuant to this Section shall cease immediately
in the event Executive is re-employed by Employer or an affiliate
or Executive breaches his Confidential Information Covenant (as
defined in Section 11 hereof), or breaches Sections 12, 13 or 14
hereof. In all cases, Employer's rights under Section 15 shall
continue.
6. Voluntary Resignation by Executive; Termination
for Cause; Total Disability
Upon termination of Executive's employment by either
Voluntary Resignation, Termination for Cause (as those terms are
defined in this Section 6), or Total Disability, as that term is
defined in the Long Term Disability Plan, Executive shall have no
right to compensation, severance pay or other benefits described
herein but Executive's obligations under Sections 11, 12, 13 and
14 hereof shall continue.
(a) Voluntary Resignation by Executive. At any
time, Executive has the right, by written notice to
Employer, to terminate his services hereunder ("Voluntary
Resignation"), effective as of thirty (30) days after such
notice.
(b) Termination for Cause by Employer. At any
time, Employer has the right to terminate Executive's
employment. Termination upon the occurrence of any of the
following shall be deemed termination for cause
("Termination for Cause"):
(i) Conduct by the Executive which reflects
adversely on the Executive's honesty, trustworthiness
or fitness as an Executive, or
(ii) Executive's willful engagement in conduct
which is demonstrably and materially injurious to the
Employer.
For Termination for Cause, written notice of the
termination of Executive's employment by Employer shall be
served upon Executive and shall be effective as of the date
of such service. Such notice given by Employer shall specify
the act or acts of Executive underlying such termination.
(c) Total Disability. Upon the total disability of
the Executive, as that term is defined in the Long Term
Disability Plan, Executive shall have no right to
compensation or severance pay described herein but shall
be entitled to long term disability and other such
benefits afforded under the applicable policies and plans.
7. Resignation Following Constructive Discharge.
If at any time, except in connection with a termination
pursuant to Section 5, 6, or 8 Executive is Constructively
Discharged (as that term is defined in this Section 7) then
Executive shall have the right, by written notice to Employer
within sixty (60) days of such Constructive Discharge, to
terminate his services hereunder, effective as of thirty (30)
days after such notice. Executive shall in such event be
entitled to the compensation and benefits as if such employment
were terminated pursuant to Section 5 of this Agreement.
For purposes of this Agreement, the Executive shall be
"Constructively Discharged" upon the occurrence of any one of the
following events:
(a) Executive is removed from his position with Employer
other than as a result of Executive's appointment to
positions of equal or superior scope and responsibility; or
(b) Executive's targeted total compensation is reduced
by more than 10% (other than across-the-board reductions
similarly affecting all officers of the Long Distance
Division of Employer).
8. Effect of Change in Control.
In the event that within one year of a Change in Control (as
that term is defined in this Section 8) Executive's employment is
terminated:
(a) by the Employer other than pursuant to Section 6
hereof, or,
(b) by Executive pursuant to Section 7 hereof,
then Executive shall be entitled to the Special Compensation
described in Section 5 and shall be bound by Section 11, but
shall not have any continuing obligations under Sections 12, 13,
and 14, except as otherwise required by common law or statute.
For purposes of this Agreement, a "Change in Control" shall
be deemed to have occurred if:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) other than a trustee or other fiduciary
holding securities under an employee benefit plan of Sprint
Corporation ("Sprint") or any of its affiliates, and other
than Sprint or a corporation owned, directly or indirectly,
by the stockholders of Sprint in substantially the same
proportions as their ownership of stock of Sprint, is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of Sprint representing 20% or more of the
combined voting power of Sprint's then outstanding
securities, or
(ii) during any period of two consecutive years (not
including any period prior to the date of this Agreement),
incumbent members cease for any reason to constitute a
majority of the members of the Board of Directors of Sprint.
A member of the Board of Directors of Sprint shall be an
"incumbent member" if such individual is as of the date of this
Agreement or at the beginning of the applicable two consecutive
year period a member of the Board of Directors of Sprint, and any
new director after the date of this Agreement (other than a
director designated by person who has entered into an agreement
to effect a transaction described in subparagraph (i) above)
whose election to the Board or nomination for election by the
stockholders of Sprint was approved by a vote of at least two-
thirds (2/3) of the directors still in office who either were
directors as of the date hereof or as of the first day of the
applicable two consecutive year period or whose election or
nomination for election was previously so approved.
9. Dispute Resolution.
All disputes arising under this Agreement, other than those
disputes relating to Executive's alleged violations of Sections
11 through 14 herein, shall be submitted to arbitration by the
American Arbitration Association of Kansas City, Missouri. Costs
of arbitration shall be borne equally by the parties. The
decision of the arbitrators shall be final and there shall be no
appeal from any award rendered. Any award rendered may be
entered as a judgment in any court of competent jurisdiction. In
any judicial enforcement proceeding, the losing party shall
reimburse the prevailing party for its reasonable costs and
attorneys' fees for enforcing its rights under this Agreement, in
addition to any damages or other relief granted. This Section 9
does not apply to any action by Employer to enforce Sections 11
through 14 of this Agreement and does not in any way restrict
Employer's rights under Section 15 herein.
10. Enforcement.
In the event Employer shall fail to pay any amounts due to
Executive under this Agreement as they come due, Employer agrees
to pay interest on such amounts at a rate of prime plus two
percent (2%) per annum. Employer agrees that Executive and any
successor shall be entitled to recover all costs of successfully
enforcing any provision of this Agreement, including reasonable
attorney fees and costs of litigation.
11. Confidential Information.
Executive acknowledges that during the course of his
employment he has learned or will learn or develop Confidential
Information (as that term is defined in this Section 11).
Executive further acknowledges that unauthorized disclosure or
use of such Confidential Information, other than in discharge of
Executive's duties, will cause Employer irreparable harm.
For purposes of this Section, Confidential Information means
trade secrets (such as technical and non-technical data, a
formula, pattern, compilation, program, device, method,
technique, drawing, process) and other proprietary information
concerning the products, processes or services of Employer or its
parent, and/or affiliates, including but not limited to: computer
programs; unpatented inventions, discoveries or improvements;
marketing, manufacturing, or organizational research and
development; business plans; sales forecasts; personnel
information, including the identity of other employees of
Employer, their responsibilities, competence, abilities, and
compensation; pricing and financial information; current and
prospective customer lists and information on customers or their
employees; information concerning planned or pending acquisitions
or divestitures; and information concerning purchases of major
equipment or property, which information: (a) has not been made
generally available to the public; and (b) is useful or of value
to the current or anticipated business, or research or
development activities of Employer or of any customer or supplier
of Employer, or (c) has been identified to Employee as
confidential by Employer, either orally or in writing.
Except in the course of his employment and in the pursuit of
the business of Employer or any of its subsidiaries or
affiliates, Executive shall not, during the course of his
employment, or for a period of eighteen (18) months following
termination of his employment for any reason, directly or
indirectly, disclose, publish, communicate or use on his behalf
or another's behalf, any proprietary information or data of
Employer or any of its subsidiaries or affiliates.
Executive acknowledges that Employer operates and competes
nationally, and that Employer will be harmed by unauthorized
disclosure or use of Confidential Information regardless of where
such disclosure or use occurs, and that therefore this
confidentiality agreement is not limited to any single state or
other jurisdiction.
12. Non-Competition.
Executive acknowledges that use or disclosure of Confidential
Information described in Section 11 is likely if Executive were
to perform telecommunications functions relating to long distance
services on behalf of a competitor of Employer. Therefore,
Executive shall not, for eighteen (18) months following
termination of employment for any reason (the "Non-Compete
Period"), accept any position, including but not limited to a
position in the long distance operations of AT&T or MCI, where
the performance of duties in that position will involve managing,
controlling, participating in, investing in, acting as consultant
or advisor to, rendering services for, or otherwise assisting any
person or entity in the long distance business and performing
functions relating to long distance services, including all forms
of interexchange, interstate, intrastate, interlata and
international communications.
Executive acknowledges that Employer operates and competes
nationally, and that therefore this non-competition agreement is
not limited to any single state or other jurisdiction.
This section shall not prevent Executive from using general
skills and experience developed during employment with Employer
or other employers; or from accepting a position of employment
with another company, firm, or other organization which competes
with Employer, if its business is diversified and Executive is
employed in a part of the business that is not related to long
distance Services and provided that such position does not
require or permit the disclosure or use of Confidential
Information.
13. Inducement of Other Employees.
For a eighteen (18) month period following termination of
employment, Executive will not directly or indirectly solicit,
induce or encourage any employee or agent of Employer to
terminate his relationship with Employer.
14. Return of Employer's Property.
All notes, reports, sketches, plans, published memoranda or
other documents created, developed, generated or held by
Executive during employment, concerning or related to Employer's
business, and whether containing or relating to Confidential
Information or not, are the property of Employer and will be
promptly delivered to Employer upon termination of Executive's
employment for any reason whatsoever. During the course of
employment, Executive shall not remove any of the above property
containing Confidential Information, or reproductions or copies
thereof, or any apparatus from Employer's premises without
authorization.
15. Remedies.
Executive acknowledges that the restraints and agreements
herein provided are fair and reasonable, that enforcement of the
provisions of Sections 11, 12, 13 and 14 will not cause him undue
hardship and that said provisions are reasonably necessary and
commensurate with the need to protect Employer and its legitimate
and proprietary business interests and property from irreparable
harm.
Executive acknowledges that failure to comply with the terms
of this Agreement will cause irreparable damage to Employer.
Therefore, Executive agrees that, in addition to any other
remedies at law or in equity available to Employer for
Executive's breach or threatened breach of this Agreement,
Employer is entitled to specific performance or injunctive
relief, without bond, against Executive to prevent such damage or
breach, and the existence of any claim or cause of action
Executive may have against Employer will not constitute a
defense thereto. Executive further agrees to pay reasonable
attorney fees and costs of litigation incurred by Employer in any
proceeding relating to the enforcement of the Agreement or to any
alleged breach thereof in which Employer shall prevail in whole
or in part.
In the event of a breach or a violation by Executive of any
of the covenants and provisions of this Agreement, the running of
the Non-Compete Period (but not of Executive's obligation
thereunder), shall be tolled during the period of the continuance
of any actual breach or violation.
16. Confidentiality of Agreement.
As a specific condition to Executive's right to Special
Compensation or other benefits described herein, Executive agrees
that he will not disclose or discuss: the existence of this
Agreement; the Special Compensation provided hereunder; or any
other terms of the Agreement except: (1) to members of his
immediate family; (2) to his financial advisor or attorney but
then only to the extent necessary for them to assist him; or (3)
as required by law or to enforce legal rights.
17. Entire Understanding.
This Agreement constitutes the entire understanding between
the parties relating to Executive's employment hereunder and
supersedes and cancels all prior written and oral understandings
and agreements with respect to such matters, except for the terms
and provisions of the Key Management Benefit Plan and any other
employee benefit or other compensation plans (or any agreements
or awards thereunder) referred to in or contemplated by this
Agreement and except for the SPRINT UNITED EMPLOYEE
AGREEMENT REGARDING PROPERTY RIGHTS AND BUSINESS
PRACTICES which the Executive has signed and by which Executive
continues to be bound.
18. Binding Effect.
This Agreement shall be binding upon and inure to the benefit
of Executive's executors, administrators, legal representatives,
heirs and legatees and the successors and assigns of Employer.
19. Partial Invalidity.
The various provisions of this Agreement are intended to be
severable and to constitute independent and distinct binding
obligations. Should any provision of this Agreement be
determined to be void and unenforceable, in whole or in part, it
shall not be deemed to affect or impair the validity of any other
provision or part thereof, and such provision or part thereof
shall be deemed modified to the extent required to permit
enforcement. Without limiting the generality of the foregoing,
if the scope of any provision contained in this Agreement is too
broad to permit enforcement to its full extent, but may be made
enforceable by limitations thereon, such provision shall be
enforced to the maximum extent permitted by law, and Executive
hereby agrees that such scope may be judicially modified
accordingly.
20. Strict Construction.
The language used in this Agreement will be deemed to be the
language chosen by Employer and Executive to express their mutual
intent and no rule of strict construction shall be applied
against any person.
21. Waiver.
The waiver of any party hereto of a breach of any provision
of this Agreement by any other party shall not operate or be
construed as a waiver of any subsequent breach.
22. Notices.
Any notice or other communication required or permitted to be
given hereunder shall be determined to have been duly given to
any party (a) upon delivery to the address of such party
specified below if delivered personally or by courier; (b) upon
dispatch if transmitted by telecopy or other means of facsimile,
provided a copy thereof is also sent by regular mail or courier;
or (c) within forty-eight (48) hours after deposit thereof in the
U.S. mail, postage prepaid, for delivery as certified mail,
return receipt requested, addressed, in any case to the party at
the following address(es) or telecopy numbers:
If to Executive:
Gary D. Forsee
Sprint Communications Company, L.P.
8140 Ward Parkway
Kansas City, MO 64114
If to Employer and/or Company:
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, KS 66205
Attention: Corporate Secretary
or to such other address(es) or telecopy number(s) as any party
may designate by Written Notice in the aforesaid manner.
23. Governing Law.
This Agreement shall be governed by, and interpreted,
construed and enforced in accordance with, the laws of the State
of Kansas.
24. Gender and Number.
Wherever from the context it appears appropriate, each term
stated in either the singular of plural shall include the
singular and the plural, and the pronouns stated in either the
masculine, the feminine or the neuter gender shall include the
masculine, feminine or neuter.
25. Headings.
The headings of the Sections of this Agreement are for
reference purposes only and do not define or limit, and shall not
be used to interpret or construe the contents of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed at Westwood, Kansas, on the date above set
forth.
GARY D. FORSEE SPRINT/UNITED MANAGEMENT COMPANY
/s/ Gary D. Forsee By: /s/ B. Watson
Authorized Officer
AMENDMENT
The Agreement Regarding Special Compensation and Post
Employment Restrictive Covenants (the "Special Agreement")
between Sprint/United Management Company and Gary D. Forsee (the
"Executive") is hereby amended as follows, effective January 3,
1994:
1. The first sentence of Section 8 shall be changed by
adding the word "or" at the end of item (b) and by adding
the following item (c):
(c) by Executive if Executive is required to be based
anywhere other than the Kansas City metropolitan area
or the Dallas, Texas metropolitan area except for
required travel on business to an extent substantially
consistent with Executive's business travel obligations
immediately prior to the Change in Control;
2. Section 12 shall be changed by:
(a) deleting from the second sentence of the first
paragraph the words "the performance of duties in that
position will involve", and substituting in lieu
thereof the words "Executive dedicates his time and
efforts principally to"; and
(b) changing the last sentence of the Section to read:
This section shall not prevent Executive from using
general skills and experience developed during
employment with Employer or other employers; or from
accepting a position of employment with another
company, firm, or other organization which competes
with Employer, if its business is diversified and
Executive is employed in a part of the business that is
not related principally to long distance services and
provided that such position does not require or permit
the disclosure or use of Confidential Information.
Except as amended herein, the terms of the Special Agreement
shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed at Westwood, Kansas, as of the date
above set forth.
EXECUTIVE SPRINT/UNITED MANAGEMENT
COMPANY
/s/ Gary D. Forsee By: /s/ B. Watson
1/10/94 Title: SVP - HR
Amendment No. 2
This amendment (the "Amendment") is made as of the 12th
day of August, 1996, by and between Sprint/United
Management Company, a Kansas Corporation and a wholly-
owned subsidiary of Sprint ("Employer") and Gary D.
Forsee ("Executive").
Recitals
1. Employer and Executive entered into an Agreement
Regarding Special Compensation and Post Employment
Covenants, dated November 9, 1993 (the
"Agreement").
2. Employer and Executive amended the Agreement as of
January 3, 1994.
3. Employer desires to expand the scope of
Executive's covenants not to compete under the
Agreement.
4. Employer is issuing to Executive additional
shares* of restricted stock in consideration for
Executives agreement to amend the Agreement.
Now, therefore, in consideration of the foregoing
premises and other good and valuable consideration, the
receipt and sufficiency of which the parties hereby
acknowledge, the parties agree as follows.
1. Section 12 of the Agreement is amended by adding
the following language to the end of the last sentence
of the first paragraph: ", together with related
services such as information services."
2. In all other respects, the parties ratify and
affirm the Agreement as previously amended.
In Witness Whereof, the parties have executed this
Amendment as of the 12th day of August, 1996.
Sprint/United Management
Corporation
/s/ Gary D. Forsee By: /s/ B. Watson
Gary D. Forsee Authorized Officer
* 15,000 shares
<PAGE>
Exhibit (10)(x)
Directors' Deferred Fee Plan
(as amended through December 10, 1996)
ARTICLE I
PURPOSE
The purpose of the Sprint Corporation Directors'
Deferred Fee Plan (hereinafter referred to as the
"Plan") is to provide funds upon termination of service
or death for Directors (and their beneficiaries) of
Sprint Corporation and its subsidiaries. It is
intended that the Plan will aid in retaining and
attracting Directors of exceptional ability by
providing such Directors with a means to supplement
their standard of living.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the
context clearly indicates otherwise:
2.1 Account Transfer Request. "Account Transfer
Request" means a written notice, in a form prescribed
by the Company, by a Participant to transfer all or any
portion of one Deferred Benefit Account to another
Deferred Benefit Account as provided for in paragraph
6.7.
2.2 Beneficiary. "Beneficiary" means the person,
persons, or entity designated by the Participant, as
provided in Article VIII, to receive any benefits
payable under the Plan. Any Participant Beneficiary
Designation shall be made in a written instrument filed
with the Company and shall become effective only when
received, accepted, and acknowledged in writing by the
Company.
2.3 Board "Board" means the Board of Directors of the
Company.
2.4 Cellular. "Cellular" means Sprint Cellular
Company, however renamed, or any successor thereto.
2.5 Cellular Insider. "Cellular Insider" means, as of
any time when the determination thereof is relevant,
any Participant subject to liability under Section 16
of the Securities Exchange Act of 1934 with respect to
trading in the equity securities of Cellular.
2.6 Cellular Share Unit. "Cellular Share Unit" means
a measure of participation under the Plan having a
value based on the market value of one share of common
stock of Cellular after the distribution thereof by the
Company to the Company's shareholders.
2.7 Committee. "Committee" means the Organization and
Compensation Committee of the Board.
2.8 Company. "Company" means Sprint Corporation, or
any successor thereto.
2.9 Deferral Benefit. "Deferral Benefit" means the
benefit payable to a Participant on his death or
termination of service as a Director, as calculated in
Article VII hereof.
2.10 Deferred Benefit Account. "Deferred Benefit
Account" means the accounts maintained on the books of
account of the Company for each Participant pursuant to
Article VI. Separate Deferred Benefit Accounts shall
be maintained for each Participant. More than one
Deferred Benefit Account shall be maintained for each
Participant to reflect (a) separate deferral elections
made pursuant to separately executed Participation
Agreements as provided in paragraph 4.3, and (b)
Account A, Account B, Account C, Account AA, Account
BB, and Account CC elections made by each Participant
in each such Participation Agreement.
A Participant's Deferred Benefit Account shall be used
solely as a device for the measurement and
determination of the amounts to be paid to the
Participant pursuant to this Plan. A Participant's
Deferred Benefit Account shall not constitute or be
treated as a trust fund of any kind.
2.11 Determination Date. "Determination Date" means
the date on which the amount of a Participant's
Deferred Benefit Account is determined as provided in
Article VI hereof. The last day of each calendar month
shall be a Determination Date.
2.12 Director. "Director" means a member of the Board
of Directors of the Company or its subsidiaries who is
not an employee of the Company or its subsidiaries.
2.13 Distribution Agreement. "Distribution Agreement"
means the agreement entered into by the Company,
Cellular, and Centel Corporation for the purpose of
providing for the distribution by the Company of its
stock in Cellular to the Company's stockholders.
2.14 Distribution Dividend Rate. "Distribution
Dividend Rate" means the Dividend Rate as defined in
the Distribution Agreement.
2.15 Distribution Time. "Distribution Time" is
defined in the Distribution Agreement.
2.16 Fee. "Fee" means any cash compensation paid to a
Director for his services as a Director other than a
distribution under this Plan.
2.17 Interest Yield. "Interest Yield" means, with
respect to any calendar month, (a) in the case of
balances in Account AA, three percentage points over
the composite yield on Moody's Seasoned Corporate Bond
Yield Index for the preceding calendar month as
determined from Moody's Bond Record published by
Moody's Investors Services, Inc. (or any successor
thereto), or, if such monthly yield is no longer
published, a substantially similar average selected by
the Company, (b) in the case of balances in Account A,
the greater of (i) the prime rate in effect at
Citibank, N.A., at the opening of business on the first
business day of the month, or if said bank, for any
reason, no longer publishes its prime rate, the prime
rate similarly determined of another major bank
selected by the Company and (ii) six percent per annum.
2.18 Participant. "Participant" means any Director who
elects to participate by filing a Participation Agree
ment as provided in Article IV.
2.19 Participation Agreement. "Participation
Agreement" means the agreement, in a form prescribed by
the Company, filed by a Participant before the
beginning of the first period in which the
Participant's Fees are to be deferred pursuant to the
Plan. A new Participation Agreement shall be filed by
the Participant for each separate fee deferral
election.
2.20 Plan. "Plan" means the Sprint Corporation
Directors' Deferred Fee Plan as set forth in this
document. This Plan is the successor to, and comprises
an amendment and revision of, the United
Telecommunications, Inc., 1985 Directors' Deferred Fee
Plan adopted February 12, 1985.
2.21 Plan Administrator. "Plan Administrator" means
the person appointed by the Company to represent the
Company in the administration of this Plan.
2.22 Plan Year. "Plan Year" means a twelve-month
period commencing May 1st and ending the following
April 30th. The first Plan Year shall commence on May
1, 1985.
2.23 Share Unit. "Share Unit" means a measure of
participation under the Plan having a value based on
the market value of a share of common stock of the
Company.
2.24 Spouse. "Spouse" means a Participant's wife or
husband who was lawfully married to the Participant
upon the Participant's death or severance from service.
2.25 Transition Date. "Transition Date" means May 1,
1990.
ARTICLE III
ADMINISTRATION
3.1 Plan Administrator; Company and Committee;
Duties. This Plan shall be administered by the Plan
Administrator. Decisions of the Plan Administrator may
be reviewed by the Company through the Committee.
Members of the Committee may be Participants under this
Plan. The Company shall also have the authority to
make, amend interpret, and enforce all appropriate
rules and regulations for the administration of this
Plan and decide or resolve any and all questions
including interpretations of this Plan as may arise in
connection with the Plan.
3.2 Binding Effect of Decisions. The decision or
action of the Company in respect to any question aris
ing out of or in connection with the administration,
interpretation, and application of the Plan and the
rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons
having any interest in the Plan unless a written appeal
is received by the Company within sixty days of the
disputed action. The appeal will be reviewed by the
Committee, and its decision shall be final, conclusive,
and binding on the Participant and on all persons
claiming by, through, or under the Participant.
ARTICLE IV
PARTICIPATION
4.1 Participation. Participation in the Plan shall be
limited to Directors, under age 70, who elect to
participate in the Plan by filing a Participation
Agreement with the Company. Except as provided below,
a Participation Agreement must be filed before the
March 31st immediately preceding the Plan Year in which
the Participant's participation under the agreement
will commence, and the election to participate shall be
effective on the first day of the Plan Year following
receipt by the Company of a properly completed and
executed Participation Agreement; provided, however,
that if March 31st falls on a Saturday, Sunday or
holiday, the filing date for the Participation
Agreement shall be no later than the next business day
after March 31st. With respect to an individual
becoming a Director during a Plan Year who thereby
becomes eligible to participate herein, an initial
Participation Agreement may be filed within 30 days of
the Company's notification to him of his eligibility to
participate, and such election to participate shall be
effective on the first day of the month following the
Company's receipt thereof, except that elections not
received by the Company before the 15th day of any
calendar month shall be effective no earlier than the
first day of the second month following the month of
receipt.
4.2 Amount of Deferral and Length of Participation. A
Participant may elect in any Participation Agreement to
defer up to 100% of the Fees that are expected at the
time of election to be earned over a period of (1) for
Participation Agreements first effective before the
Transition Date, either 4 or 8 Plan Years, (2) for
Participation Agreements first effective on or after
the Transition Date, one Plan Year, and (3) for
Participation Agreements first effective on or after
May 1, 1997, the Plan Year for which the Participation
Agreement relates and all subsequent Plan Years until
changed by the Participant's filing of a new
Participant Agreement, provided, the minimum amount of
Fees that may be deferred shall, in each case, be
$5,000 per year or 100% of Fees payable, whichever is
less.
(a) The deferral percentage in each Participation
Agreement shall be applied to the Participant's
Fees as they are payable during the period of
election.
(b) A Participant's election to defer his Fees shall
be irrevocable upon the filing of the respective
Participation Agreement; provided, however, that
the deferral of Fees under any Participation
Agreement may be suspended or amended as provided
in paragraphs 7.3 or 9.1.
4.3 Additional Participation Agreements. A
Participant may enter into additional Participation
Agreements by filing a Participation Agreement with the
Company before April 15th of any calendar year, stating
the amount that the Participant elects to have
deferred. Such additional agreements shall be
effective as to Fees paid in Plan Years beginning after
the last day of the Plan Year in which the respective
agreement is filed with the Company. Each additional
Participation Agreement is subject to all of the
provisions and requirements set forth in paragraph 4.2.
In the event a Participant elects to defer Fees
pursuant to a new Participation Agreement, the new
election shall be treated as an arrangement for which a
separate Deferred Benefit Account shall be maintained
and separate Deferral Benefits shall be payable.
ARTICLE V
DEFERRED FEES
5.1 Elective Deferred Fees. The amount of Fees that a
Participant elects to defer in the Participation
Agreement executed by the Participant, with respect to
each Plan Year of participation in the Plan, shall be
credited by the Company to the Participant's Deferred
Benefit Account throughout each Plan Year as the
Participant is paid. The amount credited to a
Participant's Deferred Benefit Account shall equal the
amount deferred. To the extent that the Company is
required to withhold any taxes or other amounts from
the Directors' deferred Fees pursuant to any state,
federal or local law, such amounts shall be taken out
of the Participant's Fees.
5.2 Vesting of Deferred Benefit Account. A
Participant shall be 100% vested in the Deferred
Benefit Account.
ARTICLE VI
DEFERRED BENEFIT ACCOUNT
6.1 Determination of Account. Each Participant's
Deferred Benefit Account, as of each Determination
Date, shall consist of the balance of the Participant's
Deferred Benefit Account as of the immediately
preceding Determination Date plus the Participant's
elective deferred Fees withheld since the immediately
preceding Determination Date pursuant to paragraph 5.1
and plus amounts credited to the Participant's Deferred
Benefit Account pursuant to paragraphs 6.4 and 6.5.
The Deferred Benefit Account of each Participant shall
be reduced by the amount of all distributions, if any,
made from such Deferred Benefit Account since the
preceding Determination Date.
6.2 Type of Deferral. A Participant may elect to have
any portion of the amount deferred credited to either
Account A (fixed income return) or to Account B (Share
Units). The initial election shall be made by a
properly executed Participation Agreement. With
respect to a Participation Agreement first effective
before the Transition Date, an election to defer any
amount to Account A shall be treated as an election to
defer to Account AA, except as set forth below.
An election to change the apportionment of deferred
amounts between Accounts A and B may be made by a
Participant filing with the Plan Administrator a
revised Participation Agreement indicating such change
on or before April 15th of each calendar year. The
revised Participation Agreement shall be deemed a
continuation of the initial Participation Agreement to
which it relates for purposes of complying with the
provisions of paragraphs 4.2 and 4.3 relating to the
minimum and maximum deferrals and duration of the
Participation Agreement. The revised Participation
Agreement shall be effective for Plan Years beginning
after the date it is filed.
Deferrals in such Plan Years shall be credited in
accordance with the election of the revised
Participation Agreement, provided, however, that with
respect to Participation Agreements first effective
before the Transition Date, an election to allocate a
portion of deferrals to Account A in excess of the
portion allocated in the Participation Agreement to be
deferred into the fixed income account as of May 1,
1989, shall be deemed to be an election by the
Participant to allocate to Account AA a portion of
deferrals equal to the portion so allocated to the
fixed income account on May 1, 1989, and to allocate to
Account A the portion in excess of such portion.
6.3 Creation of Accounts AA, BB, C, and CC.
(a) Accounts AA and BB. As of the start of business
on the Transition Date, all amounts standing to
the credit of each Participant in Account A shall
be transferred to an Account AA. As of the start
of business on the Transition Date, amounts
standing to the credit of each Participant in
Account B that are attributable to prior transfers
from Account A into Account B shall he transferred
to an Account BB. The amount of such transfers
shall be an amount equal to the sum of the dollar
amount of all transfers from Account A to Account
B during the period beginning on the effective
date of the Participation Agreement and ending on
the Transition Date. For all purposes of this
Plan, except as otherwise noted in this Plan,
Account AA shall be treated in the same manner as
Account A, and Account BB shall be treated in the
same manner as Account B. Fees earned by
Directors on or after the Transition Date subject
to deferral under a Participation Agreement first
effective before the Transition Date shall be
credited to Accounts AA and B (in accordance with
the Participant's election to allocate such
deferrals to Accounts A or B, respectively, in
such Participation Agreements) for such
Participation Agreement.
(b) Accounts C and CC. On the Determination Date
first following the Distribution Time, there shall
be credited to an Account C and CC, created for
each Participant having a positive balance in an
Account B or BB with respect to any Plan Year, a
number of Cellular Share Units determined as
follows:
(1) one Cellular Share Unit in Account C for each
Distribution Dividend Rate number of Share
Units in Account B for such Participant for
such Plan Year as of the Distribution Time;
and
(2) one Cellular Share Unit in Account CC for
each Distribution Dividend Rate number of
Share Units in Account BB for such
Participant for such Plan Year as of the
Distribution Time.
6.4 Maintenance of Accounts A and AA. As of each
Determination Date, the Participant's Deferred Benefit
Accounts A and AA shall be increased by the amount of
interest earned since the preceding Determination Date
based on the Interest Yield. Interest shall be
credited on the average of the balances of the Deferred
Benefit Account on the Determination Date (before
crediting the interest) and on the last preceding
Determination Date, but after the Deferred Benefit
Account has been adjusted for any contributions or
distributions to be credited or deducted for each such
day.
6.5 Maintenance of Share Unit Accounts.
Accounts B and BB and Accounts C and CC shall maintain
balances in Share Units and Cellular Share Units,
respectively.
(a) Maintenance of Accounts B and BB.
(1) Conversion between Dollar Amounts and Share
Units in Accounts B and BB. When an amount
is to be added to a Participant's Deferred
Benefit Accounts B or BB, it shall be
converted into Share Units, or fractions
thereof, by dividing the amount to be
credited by the closing price of the
Company's common stock as reported by the New
York Stock Exchange on the last trading day
on or before the Determination Date. When a
number of Share Units is to be subtracted
from a Participant's Deferred Benefit
Accounts B or BB, such number of Share Units
shall be converted into a dollar amount by
multiplying such number of Share Units by the
closing price of the Company's common stock
as reported by the New York Stock Exchange on
the last trading day on or before the
Determination Date.
(2) Dividends on Share Units. When a dividend is
declared and paid by the Company on its
common stock, an amount shall be credited to
the Participant's Accounts B and BB as though
the same dividend had been paid on the Share
Units in such accounts as of the
Determination Date immediately preceding the
declaration of the dividend, and such amount
shall be converted to Share Units. Such
amount shall be valued as of the
Determination Date immediately preceding the
declaration of the dividend.
(3) [Deleted]
(4) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Share Units credited to a Participant's
Accounts B and BB as may be necessary to give
effect to such change in the Company's
capital structure.
(5) Conversion of Share Units to Dollars on Dis
tribution. Share Units in Accounts B and BB
shall be converted to an equivalent dollar
amount before any distribution thereof to a
Participant pursuant to Article VII. For
purposes of distribution, the value of a
Share Unit shall be the average closing price
of the Company's common stock on the New York
Stock Exchange on the last trading day of
each of the 12 calendar months immediately
preceding the date of distribution. If a
Participant elects payment in other than a
lump sum, Share Units shall be so converted
to a dollar amount with respect to each
payment made in the distribution. During the
period of distribution, dividends and other
equitable adjustments shall be credited to
the Participant's Accounts A, AA, B, and BB
in accordance with paragraphs 6.5(a)(2),
6.5(a)(3), and 6.5(a)(4).
(b) Maintenance of Accounts C and CC.
(1) Conversion between Dollar Amounts and
Cellular Share Units in Accounts C and
CC. When an amount is to be added to a
Participant's Deferred Benefit Accounts C or
CC, it shall be converted into Cellular Share
Units, or fractions thereof, by dividing the
amount to be credited by the market value of
a share of Cellular's common stock on the
Determination Date. When a number of
Cellular Share Units is to be subtracted from
a Participant's Deferred Benefit Accounts C
or CC, such number of Cellular Share Units
shall be converted into a dollar amount by
multiplying such number of Cellular Share
Units by the closing price of Cellular's
common stock as reported by the New York
Stock Exchange on the last trading day on or
before the Determination Date.
(2) Dividends on Cellular Share Units. With
respect to balances in Accounts C and CC,
when a dividend is declared and paid by
Cellular on its common stock, an amount shall
be credited to the Participant's Accounts C
and CC as though the same dividend had been
paid on the Cellular Share Units in such
accounts as of the Determination Date
immediately preceding the declaration of the
dividend, and such amount shall be converted
to Cellular Share Units. Such amount shall
be valued as of the Determination Date
immediately preceding the declaration of the
dividend.
(3) Effect of Recapitalization. In the event of
a stock dividend, stock split, or other
corporate reorganization involving the
Company's common stock, the Company shall
make equitable adjustment to the number of
Cellular Share Units credited to a
Participant's Accounts C and CC as may be
necessary to give effect to such change in
the Employer's capital structure.
(4) Conversion of Cellular Share Units to Dollars
on Distribution. Cellular Share Units in
Accounts C and CC shall be converted to an
equivalent dollar amount before any
distribution thereof to a Participant
pursuant to Article VII. For purposes of
distribution, the value of a Share Unit shall
be the average closing price of the Company's
common stock on the New York Stock Exchange
on the last trading day of each of the (i) 12
calendar months immediately preceding the
date of distribution or (ii) the smaller
number of calendar months elapsed from the
Distribution Time to such distribution. If a
Participant elects payment in other than a
lump sum, Cellular Share Units shall be so
converted to a dollar amount with respect to
each payment made in the distribution.
During the period of distribution, dividends
and other equitable adjustments shall be
credited to the Participant's Accounts A, AA,
C, and CC in accordance with paragraphs
6.5(b)(2) and 6.5(a)(3).
6.6 Statement of Accounts. The Company shall submit
to each Participant, within 120 days after the close of
each Plan Year, a statement in such form as the Company
deems desirable, setting forth the balance to the
credit of such Participant in his Deferred Benefit
Accounts A and AA, B and BB, and C and CC, in each case
as of the last day of the preceding Plan Year.
6.7 Transfer Between Accounts. Within the limitations
of this paragraph 6.7, a Participant may elect, by
executing an Account Transfer Request: (1) to transfer
all or any portion of his Account A to Account B, (2)
to transfer all or any portion of his Account B to
Account A, (3) to transfer all or any portion of his
Account AA to Account BB, (4) to transfer all or any
portion of his Account BB to Account AA, (5) to
transfer all or any portion of his Account C to Account
A, (6) to transfer all or any portion of his Account C
to Account B, (7) to transfer all or any portion of his
Account CC to Account AA, and (8) to transfer all or
any portion of his Account CC to Account BB. Such
election shall be effective on the last day of the
calendar month in which the Plan Administrator timely
receives the Participant's executed Account Transfer
Request. Transfers may not be made more than four times
in any Plan Year, and no such transfer may be made
unless a period of at least three months shall have
elapsed from the effective date of the most recent such
transfer (whether it occurred in the current Plan Year
or not) to the effective date of the current transfer.
ARTICLE VII
BENEFITS
7.1 Termination of Service as Director. Subject to
paragraph 7.4 below, upon any termination of service of
the Participant for reasons other than his death, the
Company shall pay to the Participant a Deferral Benefit
equal to the amount of his Deferred Benefit Account
determined under paragraph 6.1 thereof.
7.2 Death. If a Participant dies after the
commencement of payments of his Deferral Benefit, his
Beneficiary shall continue to receive the remaining
balance of his Deferred Benefit Account in accordance
with the Participant's election pursuant to paragraph
7.4.
If a Participant dies before any payments of a Deferral
Benefit, the amounts deferred under each Participation
Agreement shall be determined separately as follows:
(a) deferrals allocated to Accounts A, B, BB, C, and
CC shall be the Deferred Benefit Account values
thereof and
(b) deferrals allocated to Account AA shall be the
greater of (i) the Deferred Benefit Account value
thereof and (ii) ten times the amount of the
elected annual fee deferral allocated to Account
AA pursuant to the Participation Agreement as
revised on the date of the Participant's death,
subject to such conditions relating to the
Participant's health as the Company may impose.
The Deferral Benefit shall be payable as provided for
in paragraph 7.4.
The Deferral Benefit provided above shall be in lieu of
all other benefits under this Plan.
7.3 Suspension of Participation; Failure to Continue
Participation. The Committee, in its sole discretion,
may suspend the deferral of a Participant's Fees upon
the advanced written request of a Participant on
account of financial hardship suffered by that
Participant. A Participant must file any request for
such suspension on or before the 15th day preceding the
regular payment date on which the suspension is to take
effect. The Committee, in its sole discretion, shall
determine the amount, if any, that will not be deferred
by the Participant as a result of the financial
hardship. The suspension of any deferrals under this
paragraph shall not affect amounts deferred with
respect to periods before the effective date of the
suspension. A Participant whose deferrals are
suspended may not execute a subsequent Participation
Agreement that would take effect before the beginning
of the third Plan Year following the close of the Plan
Year in which the suspension first took effect.
7.4 Form of Benefit Payment
(a) Upon the happening of an event described in
paragraphs 7.1 or 7.2 above, the Company shall pay
to the Participant or his Beneficiary the amount
specified therein in one of the following forms as
elected by the Participant in the Participation
Agreement filed by the Participant:
(1) a lump sum payment at a time designated in
the Participation Agreement but no later than
the applicable Company's mandatory
termination date for Directors.
(2) with respect to balances in Accounts A and
AA, an annual payment of a fixed amount that
shall amortize the Deferred Benefit Account
balance in equal annual payments of principal
and interest over a period from 2 to 20
years. For purposes of determining the
amount of the annual payment, the assumed
rate of interest on Accounts A and AA shall
be the average of the applicable Interest
Yield as of each Determination Date for the
60 months preceding the initial annual
installment payment.
(3) with respect to balances in Accounts B and
BB, an annual payment over a period from 2 to
20 years. Each payment shall be the value,
as determined pursuant to paragraph
6.5(a)(5), of the number of Share Units equal
to (i) the number of Share Units in the
accounts on the Determination Date
immediately following the event described in
paragraphs 7.1 or 7.2, divided by (ii) the
number of annual installments elected.
During the period that a Participant is
receiving a distribution from Account B or
BB, Share Unit dividends will be added to the
Accounts in accordance with subparagraph
6.5(a)(2) or 6.5(a)(3) hereof. Such Share
Unit dividends shall be valued in the same
manner as previously described, and all such
Share Units accruing after a distribution
from Accounts B or BB is made shall be paid
to the Participant with the next distribution
from the account.
(4) With respect to balances in Accounts C and
CC, an annual payment over a period from 2 to
20 years. Each payment shall be the value,
as determined pursuant to paragraph
6.5(b)(4), of the number of Cellular Share
Units equal to (i) the number of Cellular
Share Units in the accounts on the
Determination Date immediately following the
event described in paragraphs 7.1 or 7.2,
divided by (ii) the number of annual
installments elected.
During the period that a Participant is
receiving a distribution from Account C or
CC, Share Unit dividends will be added to the
Accounts in accordance with subparagraph
6.5(b)(2) hereof. Such Cellular Share Unit
dividends shall be valued in the same manner
as previously described, and all such
Cellular Share Units accruing after a
distribution from Accounts C or CC is made
shall be paid to the Participant with the
next distribution from the account.
(b) A Participant may change the form in which his
benefits shall be paid by filing a revised
Participation Agreement indicating such change at
least 13 months before the date upon which the
initial payment to be made is determined. Such
revised Participation Agreement shall be deemed a
continuation of the initial Participation
Agreement to which they relate for purposes of
complying with the provisions of paragraphs 4.2
and 4.3 relating to the minimum and maximum
deferrals and duration of the Participation
Agreements. No such revised Participation
Agreement shall change the amount elected to be
deferred in the original Participation Agreement
nor the time elected for commencement of benefit
payments.
(c) In the absence of a Participant's election under
subparagraph 7.4(a), benefits shall be paid in the
form specified in subparagraphs 7.4(a)(2),
7.4(a)(3), and 7.4(a)(4) over a 15 year period.
7.5 Commencement of Payments. Unless otherwise
provided, payments under this Plan shall begin within
60 days following receipt of notice by the Company of
an event that entitles a Participant (or a Beneficiary)
to payments under this Plan, or at such earlier date as
may be determined by the Company pursuant to the terms
of the Plan. All payments shall be made as of the
first day of the month.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant shall
have the right, at any time, to designate any person or
persons as his Beneficiary or Beneficiaries (both
principal as well as contingent) to whom payment under
this Plan shall be paid in the event of his death
before complete distribution to the Participant of the
benefits due him under the Plan.
8.2 Amendments. Any Beneficiary Designation may be
changed by a Participant by the written filing of such
change on a form prescribed by the Company. The filing
of a new Beneficiary Designation form will cancel all
Beneficiary Designations previously filed.
8.3 No Beneficiary Designation. If a Participant
fails to designate a Beneficiary as provided above, or
if all designated Beneficiaries predecease the
Participant, then the Participant's designated
Beneficiary shall be deemed to be the person or persons
surviving him in the first of the following classes in
which there is a survivor, share and share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of
the children predecease the Participant but leave
issue surviving, then such issue shall take by
right of representation the share their parent
would have taken if living;
(c) The Participant's personal representative
(executor or administrator).
8.4 Effect of Payment. The payment to the deemed
Beneficiary shall completely discharge the Company's
obligations under this Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Board may at any time amend the
Plan in whole or in part; provided, however, that no
amendment shall be effective to decrease or restrict
any Deferred Benefit Account at the time of such
amendment.
9.2 Employer's Right to Terminate. The Board may at
any time terminate the Plan with respect to new
elections to defer if, in its judgment, the continuance
of the Plan, the tax, accounting, or other effects
thereof, or potential payments thereunder would not be
in the best interests of the Company. The Board may
also terminate the Plan in its entirety at any time,
and upon any such termination, each Participant (a) who
is then receiving a Deferral Benefit shall be paid in a
lump sum, or over such period of time as determined by
the Company, the then remaining balance in his Deferred
Benefit Account, and (b) who has not received a
Deferral Benefit shall be paid in a lump sum, or over
such period of time as determined by the Company, the
balance in his Deferred Benefit Account.
ARTICLE X
MISCELLANEOUS
10.1 Unsecured General Creditor. Participants and
their Beneficiaries shall have no legal or equitable
rights, claims, or interests in any property or assets
of the Company, nor shall they be Beneficiaries of, or
have any rights, claims, or interests in any life
insurance policies, annuity contracts or the proceeds
therefrom owned or that may be acquired by the Company
("Policies"). Such Policies or other assets of the
Company shall not be held under any trust for the
benefit of Participants or their Beneficiaries or held
in any way as collateral security for the fulfilling of
the obligations of the Company under this Plan. Any
and all of the Company's assets and Policies shall be
and remain the general, unpledged, unrestricted assets
of the Company. The Company's obligation under the
Plan shall be merely that of an unfunded and unsecured
promise of the Employer to pay money in the future.
10.2 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell,
assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be
unassignable and non-transferable. No part of the
amounts payable shall, before actual payment, be
subject to seizure or sequestration for the payment of
any debts, judgments, alimony, or separate maintenance
owed by a Participant or any other person, nor be
transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.
10.3 Not a Contract of Service. The terms and
conditions of this Plan shall not be deemed to
constitute a contract of service between the Company
and the Participant, and the Participant (or his
Beneficiary) shall have no rights against the Company
except as may otherwise be specifically provided
herein. Moreover, nothing in this Plan shall be deemed
to give a Participant the right to be retained in the
service of the Company.
10.4 Protective Provisions. A Participant will
cooperate with the Company by furnishing any and all
information requested by the Company, in order to
facilitate the payment of benefits hereunder, by taking
such physical examinations as the Company may deem
necessary, and by taking such other action as may be
requested by the Company.
10.5 Applicable Law. The Plan, and any Participation
Agreement related thereto, shall be governed by the
laws of the State of Kansas, without regard to the
principles of conflicts of law.
APPENDIX
Current non-employee Directors of Sprint who had
not accumulated at least 5 years of service as a Board
member as of December 10, 1996 and any new Directors of
Sprint are not entitled to benefits under the
Retirement Plan for Directors; in lieu of participation
in the Retirement Plan for Directors, these Directors
are entitled to a one-time grant of 2,500 unvested
share units to be credited into the share unit account
of the Directors Deferred Fee Plan (the "Plan"). The
share units, together with additional share units
resulting from dividend credits, will vest at the rate
of 50% on the fifth anniversary of the Director's
election as a Director and 10% per year on the sixth
through tenth anniversaries of such election. The
share units may not be transferred to any other
investment option under the Plan. The value of the
share units will be distributed in accordance with the
payout provisions of the Plan. In the event of the
death of the Director or termination of Board service,
only the value of those share units that have vested at
that time will be paid out of the Plan.
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
(in millions, except per share data)
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C>
Income from continuing operations $ 1,190.9 $ 946.1 $ 899.2
Preferred stock dividends (1.3) (2.6) (2.7)
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
1,189.6 943.5 896.5
Discontinued operations, net (2.6) 14.5 (8.5)
Extraordinary items (4.5) (565.3) --
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Earnings applicable to common stock $ 1,182.5 $ 392.7 $ 888.0
-- ------------ -- ------------ -- -----------
Weighted average number of common shares (1) 426.0 350.1 348.7
-- ------------ -- ------------ -- -----------
Primary earnings per share
Continuing operations $ 2.79 $ 2.69 $ 2.57
Discontinued operations -- 0.04 (0.02)
Extraordinary items (0.01) (1.61) --
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total $ 2.78 $ 1.12 $ 2.55
-- ------------ -- ------------ -- -----------
FULLY DILUTED EARNINGS PER SHARE
Income from continuing operations, net of preferred stock
dividends $ 1,189.6 $ 943.5 $ 896.5
Convertible preferred stock dividends 0.5 0.5 0.6
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
1,190.1 944.0 897.1
Discontinued operations, net (2.6) 14.5 (8.5)
Extraordinary items (4.5) (565.3) --
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Earnings as adjusted for purposes of computing fully diluted
earnings per share $ 1,183.0 $ 393.2 $ 888.6
-- ------------ -- ------------ -- -----------
Weighted average number of common shares 426.0 350.1 348.7
Additional dilution for common stock equivalents and dilutive
securities 1.3 2.7 1.3
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total 427.3 352.8 350.0
-- ------------ -- ------------ -- -----------
Fully diluted earnings per share
Continuing operations $ 2.78 $ 2.68 $ 2.56
Discontinued operations -- 0.04 (0.02)
Extraordinary items (0.01) (1.61) --
- ------------------------------------------------------------------- -- ------------ -- ------------ -- -----------
Total $ 2.77 $ 1.11 $ 2.54
-- ------------ -- ------------ -- -----------
<FN>
(1) Weighted average number of common shares outstanding has been adjusted for
dilutive common stock equivalents using the treasury stock method.
</FN>
</TABLE>
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
(in millions)
Earnings
<S> <C> <C> <C> <C> <C>
Income from continuing operations before
taxes $ 1,911.9 $ 1,480.4 $ 1,387.9 $ 813.1 $ 842.7
Capitalized interest (104.0) (57.0) (7.5) (7.3) (10.4)
Equity in losses of less than 50 percent
owned entities 262.2 31.4 -- -- --
- -------------------------------------------------------------------------------------------------------------------
Subtotal 2,070.1 1,454.8 1,380.4 805.8 832.3
------------------------------------------------------------------
Fixed charges
Interest charges 300.7 317.7 308.2 374.3 434.8
Interest factor of operating rents 119.2 120.1 111.5 117.4 113.2
Pre-tax cost of preferred stock
dividends of subsidiaries 0.4 0.7 0.9 1.6 2.1
- -------------------------------------------------------------------------------------------------------------------
Total fixed charges 420.3 438.5 420.6 493.3 550.1
------------------------------------------------------------------
Earnings, as adjusted $ 2,490.4 $ 1,893.3 $ 1,801.0 $ 1,299.1 $ 1,382.4
------------------------------------------------------------------
Ratio of earnings to fixed charges 5.93 (1) 4.32 (2) 4.28 2.63 (3) 2.51
------------------------------------------------------------------
<FN>
(1) Earnings as computed for the ratio of earnings to fixed charges includes
the nonrecurring charge related to litigation of $60 million recorded in
1996. Excluding this charge, the ratio of earnings to fixed charges would
have been 6.07 for 1996.
(2) Earnings as computed for the ratio of earnings to fixed charges includes
the nonrecurring restructuring charge of $88 million recorded in 1995.
Excluding this charge, the ratio of earnings to fixed charges would have
been 4.52 for 1995.
(3) Earnings as computed for the ratio of earnings to fixed charges includes
the nonrecurring merger, integration and restructuring costs of $293
million recorded in 1993. Excluding these costs, the ratio of earnings to
fixed charges would have been 3.23 for 1993.
NOTE: The above ratios have been computed by dividing fixed charges into
the sum of (a) income from continuing operations before taxes less
capitalized interest and equity losses of less than 50 percent owned
entities included in income and (b) fixed charges. Fixed charges
consist of interest on all indebtedness (including amortization of debt
issuance expenses), the interest component of operating rents and the
pre-tax cost of preferred stock dividends of subsidiaries.
</FN>
</TABLE>
EXHIBIT (21)
SPRINT CORPORATION
SUBSIDIARIES OF REGISTRANT
Sprint Corporation is the parent. The subsidiaries of Sprint Corporation are as
follows:
<TABLE>
<CAPTION>
Ownership
Interest Held
Jurisdiction of By Its
Incorporation or Immediate Parent
Name Organization
- ---------------------------------------------------------------------- --------------------------- -----------------
<S> <C> <C>
Carolina Telephone and Telegraph Company North Carolina 100
Subsidiaries:
Carolina Telephone Long Distance, Inc. North Carolina 100
NOCUTS, Inc. Pennsylvania 100
SC One Company Kansas 100
Centel Corporation Kansas 91.4(1)
Subsidiaries:
Centel Capital Corporation Delaware 100
Centel Cellular Company of Mexico Delaware 100
Subsidiary:
Telefonia Celular del Norte, S.A. de C.V. Mexico 20
Centel Credit Company Delaware 100
Centel Directory Company Delaware 100
Subsidiary:
The CenDon Partnership Illinois Partnership 50
Centel-Texas, Inc. Texas 100
Subsidiary:
Central Telephone Company of Texas Texas 100
Central Telephone Company Delaware 97.7(2)
Subsidiaries:
Central Telephone Company of Illinois Illinois 100
Central Telephone Company of Virginia Virginia 100
Sprint-Florida, Incorporated Florida 100
Subsidiaries:
United Telephone Communications Systems,
Incorporated Florida` 100
United Telephone Long Distance, Incorporated Florida 100
C FON Corporation Delaware 100
DirectoriesAmerica, Inc. Kansas 100
Subsidiary:
Sprint Publishing & Advertising, Inc. Kansas 100
- ----------------------------
(1) Sprint Corporation owns all of the common stock. The voting preferred stock is held by 11 Sprint subsidiaries.
(2) Centel Corporation owns all of the common stock.
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF REGISTRANT (continued)
Ownership
Interest Held
Jurisdiction of By Its
Incorporation or Immediate
Name Organization Parent
- ---------------------------------------------------------------------- --------------------------- ----------------
Sprint Corporation Subsidiaries (continued)
Florida Telephone Corporation Florida 100
Subsidiaries:
Sprint Metropolitan Networks, Inc. Florida 100
Sprint Payphone Services, Inc. Florida 100
Sprint TELECENTERS Inc. Florida 100
Vista-United Telecommunications Florida 49
LD Corporation Kansas 100
North Supply Company Ohio 100
Subsidiaries:
Northstar Transportation, Inc. Kansas 100
North Supply Chile, S.A. Chile 18
North Supply Company of Lenexa Delaware 100
North Supply International, Ltd. Kansas 100
NSC Advertising, Inc. Kansas 100
Sprint Products Group, Inc. Kansas 100
Sprint Asian American, Inc. Kansas 100
Subsidiary:
Asian American Communications, L.L.C. Kansas 25.5
Sprint Capital Corporation Delaware 100
SprintCom, Inc. Kansas 100
Sprint Communications of Michigan, Inc. Michigan 100
Sprint Healthcare Systems, Inc. Kansas 100
Sprint International Holding, Inc. Kansas 100
Sprint Mid-Atlantic Telecom, Inc. North Carolina 100
Sprint/United Management Company Kansas 100
Sprint Ventures, Inc. Kansas 100
UCOM, Inc. Missouri 100
Subsidiaries:
Sprint Communications Company L.P. Delaware Partnership 34
Subsidiaries:
Asian American Communications, L.L.C. Kansas 23.5
Call-Net Enterprises, Inc. Canada 25
Sprint Communications Company of New Hampshire,
Inc. New Hampshire 100
Sprint Communications Company of Virginia, Inc. Virginia 100
Sprint Licensing, Inc. Kansas 100
USST of Texas, Inc. Texas 100
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF REGISTRANT (continued)
Ownership
Interest Held
Jurisdiction of By Its
Incorporation or Immediate Parent
Name Organization
- ---------------------------------------------------------------------- --------------------------- -----------------
UCOM, Inc. Subsidiaries (continued)
Sprint Enterprises, L.P. Delaware Partnership 32
Subsidiaries:
Sprint Spectrum Holding Company, L.P. Delaware Partnership 40
Subsidiaries:
American PCS, L.P. Delaware Partnership 49
Cox Communication PCS, L.P. Delaware Partnership 49
NewTelco, L.P. Delaware Partnership 99(3)
Sprint Spectrum L.P. Delaware Partnership 99(3)
Subsidiaries:
Sprint Spectrum Equipment Company, L.P. Delaware Partnership 99(4)
Sprint Spectrum Finance Corporation Delaware 100
Sprint Spectrum Realty Company, L.P. Delaware Partnership 99(4)
WirelessCo, L.P. Delaware Partnership 99(4)
MinorCo, L.P. Delaware Partnership 40
Subsidiaries:
NewTelco, L.P Delaware Partnership (5)
Sprint Spectrum Equipment Company, L.P. Delaware Partnership (5)
Sprint Spectrum L.P. Delaware Partnership (5)
Sprint Spectrum Realty Company, L.P. Delaware Partnership (5)
WirelessCo, L.P. Delaware Partnership (5)
PhillieCo, L.P. Delaware Partnership 47
Sprint Global Venture, Inc. Kansas (6)
Subsidiaries:
Global One Communications Europe, L.L.C. Delaware 33
Global One Communications GBN Holding, Ltd. Ireland 50
Global One Communications Holding, B.V. Netherlands 33
Global One Communications, L.L.C. Delaware 50
Global One Communications Operations, Ltd. Ireland 33
Global One Communications Service, B.V. Netherlands 33
Global One Communications World Holding, B.V. Netherlands 50
Global One Communications World Operations, Ltd. Ireland 50
Global One Communications World Service, B.V. Netherlands 50
UC PhoneCo, Inc. Kansas 100
Subsidiary:
Sprint Enterprises, L.P. Delaware Partnership 17
- ----------------------------------
(3) Sprint Spectrum Holding Company, L.P. holds the general partnership interest of greater than 99%.
(4) Sprint Spectrum L.P. holds the general partnership interest of greater than 99%.
(5) MinorCo, L..P. holds a limited and preferred partnership interest of less than 1%.
(6) Ucom, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1% of the common stock.
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF REGISTRANT (continued)
Ownership
Interest Held
Jurisdiction of By Its
Incorporation or Immediate Parent
Name Organization
- ---------------------------------------------------------------------- --------------------------- -----------------
Sprint Corporation Subsidiaries (continued)
United Telephone Company of the Carolinas South Carolina 100
Subsidiaries:
SC Two Company Kansas 100
United Telephone Long Distance, Inc. South Carolina 100
United Telephone Company of Eastern Kansas Delaware 100
Subsidiary:
Sprint/United Midwest Management Services Company Kansas 20
Subsidiary:
United Teleservices, Inc. Kansas 100
United Telephone Company of Indiana, Inc. Indiana 100
Subsidiary:
SC Four Company Kansas 100
United Telephone Company of Kansas Kansas 100
Subsidiary:
Sprint/United Midwest Management Services Company Kansas 80
United Telephone Company of Minnesota Minnesota 100
United Telephone Company of Missouri Missouri 100
Subsidiary:
SC Eight Company Kansas 100
United Telephone Company of New Jersey, Inc. New Jersey 100
United Telephone Company of the Northwest Oregon 100
United Telephone Company of Ohio Ohio 100
Subsidiaries:
SC Five Company Kansas 100
United Telephone Communications Services of Ohio, Inc. Ohio 100
United Telephone Long Distance, Inc. Ohio 100
Subsidiary:
Sprint Alarm Monitoring Services, Inc. Ohio 100
United Telephone Long Distance of Indiana, Inc. Indiana 100
United Telephone Company of Pennsylvania, The Pennsylvania 100
Subsidiaries:
SC Six Company Kansas 100
United Telephone Long Distance, Inc. Pennsylvania 100
Valley Network Partnership Virginia Partnership 20
United Telephone Company of Southcentral Kansas Arkansas 100
United Telephone Company of Texas, Inc. Texas 100
Subsidiary:
SC Seven Company Kansas 50
United Telephone Company of the West Delaware 100
United Telephone-Southeast, Inc. Virginia 100
Subsidiaries:
SC Three Company Kansas 100
United Telephone Long Distance, Inc. Tennessee 100
UTLD, Inc. Virginia 100
Valley Network Partnership Virginia Partnership 20
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF REGISTRANT (continued)
Ownership
Interest Held
Jurisdiction of By Its
Incorporation or Immediate Parent
Name Organization
- ---------------------------------------------------------------------- --------------------------- -----------------
Sprint Corporation Subsidiaries (continued)
US Telecom, Inc. Kansas 100
Subsidiaries:
ASC Telecom, Inc. Kansas 100
LCF, Inc. California 100
SC Seven Company Kansas 50
Sprint Communications Company L.P. Delaware Partnership 59
Sprint Enterprises, L.P. Delaware Partnership 33
Sprint Global Venture, Inc. Kansas (6)
Sprint Iridium, Inc. Kansas 100
Subsidiary:
Iridium U.S., L.P. Delaware Partnership 27
United Telecommunications, Inc. Delaware 100
US Telecom of New Hampshire, Inc. New Hampshire 100
UST PhoneCo, Inc. Kansas 100
Subsidiary:
Sprint Enterprises, L.P. Delaware Partnership 18
Utelcom, Inc. Kansas 100
Subsidiaries:
Private TransAtlantic Telecommunications System, Inc. Delaware 100
Subsidiary:
Private Trans-Atlantic Telecommunications System
(N.J.), Inc. New Jersey 100
Sprint Communications Company L.P. Delaware Partnership 4
Sprint Global Venture, Inc. Kansas (6)
Sprint International Incorporated Delaware 100
Subsidiaries:
Consortium Communications International, Inc. New York 100
Sprint Bulgaria Limited Bulgaria 50
Sprint FON Inc. Delaware 100
Sprint Global Venture, Inc. Kansas 86
Sprint International Caribe, Inc. Puerto Rico 100
Sprint International Communications Corporation Delaware 100
Subsidiaries:
Alcatel Data Networks SA France 49
Sprint Communications Company L.P. Delaware Partnership 2
Sprint Global Venture, Inc. Kansas 13
Sprint International Construction Company Delaware 100
Sprint International France S.A. France 100
Sprint Israel Cellular, Inc. Delaware 100
Sprint R.P. Telekom Sp. z o.o. Poland 50
Sprint Telecommunications France Inc. Delaware 100
Sprint Telecommunications Services GmbH Germany 100
Sprint Telecommunications (UK) Limited Delaware 100
- ------------------------------------------
(6) Ucom, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1% of the common stock.
</TABLE>
EXHIBIT (23)
SPRINT CORPORATION
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 33-34567; Form S-3, No. 33-48689; Form S-3, No. 33-58488; Form
S-3, No. 33-64564; Form S-8, No. 33-35173; Form S-8, No. 33-44255; Form S-8, No.
33-38761; Form S-8, No. 33-21662; Form S-8, No. 33-28544; Form S-8, No.
33-31802; Form S-8, No. 2-97322; Form S-8, No. 2-71704; Form S-8, No. 2-62061;
Form S-8, No. 33-59316; Form S-8, No. 33-59318; Form S-8, No. 33-59322; Form
S-8, No. 33-59324; Form S-8, No. 33-59326; Form S-8, No. 33-59328; Form S-8,
No. 33-53695; Form S-8, No. 33-57785; Form S-8, No. 33-57911; Form S-8, No.
33-59349; Form S-8, No. 33-65147; and Form S-8, No. 33-65149) of Sprint
Corporation and in the related Prospectuses of our report dated February 4,
1997, with respect to the consolidated financial statements and schedule of
Sprint Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
March 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,150,600
<SECURITIES> 0
<RECEIVABLES> 2,580,900
<ALLOWANCES> 117,400
<INVENTORY> 0
<CURRENT-ASSETS> 4,352,800
<PP&E> 21,410,800
<DEPRECIATION> 10,946,700
<TOTAL-ASSETS> 16,953,000
<CURRENT-LIABILITIES> 3,314,200
<BONDS> 2,981,500
11,800
0
<COMMON> 1,091,300
<OTHER-SE> 7,428,600
<TOTAL-LIABILITY-AND-EQUITY> 16,953,000
<SALES> 0
<TOTAL-REVENUES> 14,044,700
<CGS> 0
<TOTAL-COSTS> 8,619,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 196,700
<INCOME-PRETAX> 1,911,900
<INCOME-TAX> 721,000
<INCOME-CONTINUING> 1,190,900
<DISCONTINUED> (2,600)
<EXTRAORDINARY> (4,500)
<CHANGES> 0
<NET-INCOME> 1,183,800
<EPS-PRIMARY> 2.78
<EPS-DILUTED> 2.77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 124,200
<SECURITIES> 0
<RECEIVABLES> 1,649,500
<ALLOWANCES> 125,800
<INVENTORY> 0
<CURRENT-ASSETS> 3,619,400
<PP&E> 19,915,900
<DEPRECIATION> 10,200,100
<TOTAL-ASSETS> 15,195,900
<CURRENT-LIABILITIES> 5,142,100
<BONDS> 3,253,000
32,500
0
<COMMON> 872,900
<OTHER-SE> 3,769,700
<TOTAL-LIABILITY-AND-EQUITY> 15,195,900
<SALES> 0
<TOTAL-REVENUES> 12,765,100
<CGS> 0
<TOTAL-COSTS> 7,971,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,700
<INCOME-PRETAX> 1,480,400
<INCOME-TAX> 534,300
<INCOME-CONTINUING> 946,100
<DISCONTINUED> 14,500
<EXTRAORDINARY> (565,300)
<CHANGES> 0
<NET-INCOME> 395,300
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.11
</TABLE>
