UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
----------------------------------
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 incorporation (IRS Employer
organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
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(Address of principal executive offices)
(913) 624-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
COMMON SHARES OUTSTANDING AT JUNE 30, 1997:
COMMON STOCK 344,195,482
CLASS A COMMON STOCK 86,236,036
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SPRINT CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
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Page
Number
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Part I - Financial Information
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Consolidated Statements of Common Stock and Other Shareholders'
Equity 4
Condensed Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signature 26
Exhibits
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<TABLE>
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
June 30, December 31,
1997 1996
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(unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 391.7 $ 1,150.6
Accounts receivable, net of allowance for doubtful accounts
of $130.3 and $117.4 2,540.4 2,463.5
Inventories 329.2 305.3
Other 426.0 433.4
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Total current assets 3,687.3 4,352.8
Investments in equity securities 254.5 254.5
Property, plant and equipment
Long distance communications services 7,904.9 7,467.8
Local communications services 13,840.6 13,368.7
Other 699.5 574.3
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22,445.0 21,410.8
Less accumulated depreciation 11,533.9 10,946.7
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10,911.1 10,464.1
Investments in and advances to affiliates 1,383.2 1,527.1
Other 803.4 347.8
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$ 17,039.5 $ 16,946.3
----------------------------------------
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt $ 115.0 $ 99.1
Short-term borrowings -- 200.0
Accounts payable 890.1 1,026.7
Accrued interconnection costs 952.5 828.9
Accrued taxes 230.6 189.2
Advance billings 187.5 199.7
Other 663.6 770.6
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Total current liabilities 3,039.3 3,314.2
Long-term debt 2,918.8 2,974.8
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 916.1 846.9
Postretirement and other benefit obligations 931.4 919.7
Other 378.9 359.0
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2,226.4 2,125.6
Redeemable preferred stock 11.8 11.8
Common stock and other shareholders' equity
Common stock, par value $2.50 per share, authorized 1,000.0 shares,
issued 350.3 shares, and outstanding 344.2 and 343.9 shares 875.7 875.7
Class A common stock, par value $2.50 per share, authorized 500.0
shares, issued and outstanding 86.2 shares 215.6 215.6
Capital in excess of par or stated value 4,445.7 4,425.9
Retained earnings 3,507.1 3,211.8
Treasury stock, at cost, 6.1 and 6.4 shares (258.4) (262.2)
Other 57.5 53.1
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8,843.2 8,519.9
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$ 17,039.5 $ 16,946.3
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See accompanying Condensed Notes to Consolidated Financial Statements
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<PAGE>
<TABLE>
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in millions, except per share data)
Quarter Ended Year to Date
June 30, June 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net operating revenues $ 3,678.6 $ 3,477.0 $ 7,267.6 $ 6,819.3
Operating expenses
Costs of services and products 1,849.6 1,736.9 3,644.5 3,378.9
Selling, general and administrative 814.3 762.4 1,592.8 1,496.6
Depreciation and amortization 419.2 396.8 830.1 788.0
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Total operating expenses 3,083.1 2,896.1 6,067.4 5,663.5
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Operating income 595.5 580.9 1,200.2 1,155.8
Interest expense (40.7) (49.5) (85.5) (97.2)
Equity in loss of Global One (23.6) (12.1) (47.3) (27.3)
Equity in loss of Sprint PCS (136.0) (55.5) (221.9) (72.8)
Other income, net 19.8 44.6 54.7 56.2
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Income from continuing operations before
income taxes 415.0 508.4 900.2 1,014.7
Income taxes (159.1) (191.9) (354.3) (386.0)
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Income from continuing operations 255.9 316.5 545.9 628.7
Discontinued operation, net -- 0.3 -- (2.6)
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Net income 255.9 316.8 545.9 626.1
Preferred stock dividends (0.2) (0.3) (0.5) (0.8)
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Earnings applicable to common stock $ 255.7 $ 316.5 $ 545.4 $ 625.3
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Earnings per common share
Continuing operations $ 0.59 0.73 $ 1.25 $ 1.51
Discontinued operation -- -- -- (0.01)
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Total $ 0.59 0.73 $ 1.25 $ 1.50
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Weighted average common shares 435.6 434.1 435.2 417.2
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Dividends per common share $ 0.25 $ 0.25 $ 0.50 $ 0.50
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See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Year to Date
June 30,
--------------------------------
1997 1996
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Operating activities
<S> <C> <C>
Net income $ 545.9 $ 626.1
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in net losses of affiliates 271.0 93.4
Depreciation and amortization 830.1 788.0
Deferred income taxes and investment tax credits 88.5 (32.4)
Changes in assets and liabilities:
Accounts receivable, net (76.9) (816.4)
Inventories and other current assets (5.4) 45.0
Accounts payable and other current liabilities (119.0) (15.1)
Noncurrent assets and liabilities, net 16.1 (27.8)
Other, net (5.9) 19.2
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Net cash provided by operating activities 1,544.4 680.0
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Investing activities
Capital expenditures (1,268.1) (1,001.1)
Purchase of PCS licenses (433.7) --
Investments in and advances to affiliates, net (140.8) (286.2)
Other, net 14.3 4.4
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Net cash used by continuing operations (1,828.3) (1,282.9)
Repayment of intercompany advances by cellular division -- 1,400.0
Net investing activities of cellular division -- (140.7)
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Net cash used by investing activities (1,828.3) (23.6)
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Financing activities
Payments on long-term debt (70.1) (256.3)
Proceeds from long-term debt -- 6.3
Net change in short-term borrowings (200.0) (1,986.8)
Dividends paid (188.6) (195.7)
Proceeds from Class A common stock issued -- 3,661.3
Proceeds from common stock issued 35.5 27.2
Treasury stock purchased (73.8) (278.6)
Other, net 22.0 (1.4)
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Net cash provided (used) by financing activities (475.0) 976.0
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Increase (decrease) in cash and equivalents (758.9) 1,632.4
Cash and equivalents at beginning of period 1,150.6 124.2
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Cash and equivalents at end of period $ 391.7 $ 1,756.6
----------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY (UNAUDITED)
(in millions)
Year to Date June 30, 1997
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Capital
in Excess
Class A of Par or
Common Common Stated Retained Treasury
Stock Stock Value Earnings Stock Other Total
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1997 $ 875.7 $ 215.6 $ 4,425.9 $ 3,211.8 $ (262.2) $ 53.1 $ 8,519.9
Net income -- -- -- 545.9 -- -- 545.9
Common stock dividends -- -- -- (172.6) -- -- (172.6)
Class A common stock
dividends -- -- -- (43.1) -- -- (43.1)
Stock options exercised -- -- -- (33.1) 68.6 -- 35.5
Tax benefit from stock
options exercised -- -- 15.7 -- -- -- 15.7
Treasury stock purchased -- -- -- -- (73.8) -- (73.8)
Other, net -- -- 4.1 (1.8) 9.0 4.4 15.7
- ---------------------------------------------------------------------------------------------------------------------
Balance as of
June 30, 1997 $ 875.7 $ 215.6 $ 4,445.7 $ 3,507.1 $ (258.4) $ 57.5 $ 8,843.2
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See accompanying Condensed Notes to Consolidated Financial Statements
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<PAGE>
PART I.
Item 1.
SPRINT CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997 and 1996
The information in this Form 10-Q has been prepared according to the rules and
regulations of the Securities and Exchange Commission. In management's opinion,
these consolidated interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary to present fairly
Sprint Corporation's consolidated financial position, results of operations and
cash flows.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared according to generally accepted accounting
principles (GAAP) have been condensed or omitted. These consolidated financial
statements should be read in connection with Sprint Corporation's 1996 annual
report on Form 10-K. Operating results for the 1997 year-to-date period are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
1. Basis of Consolidation
The consolidated financial statements include the accounts of Sprint Corporation
and its wholly-owned and majority-owned subsidiaries (Sprint). Investments in
affiliates in which Sprint exercises significant influence, but does not
control, are accounted for using the equity method.
The consolidated financial statements are prepared according to GAAP. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
In March 1996, Sprint spun off its cellular and wireless communications services
division (Cellular) to Sprint common shareholders (see Note 7). Cellular's
operating results and cash flows have been separately classified as a
discontinued operation and have been excluded from Sprint's continuing
operations.
Certain prior year amounts have been reclassified to conform to the current
period presentation. These reclassifications had no effect on the results of
operations or shareholders' equity as previously reported.
2. Investments
Investments accounted for using the equity method mainly consist of Sprint's
investments in Sprint Spectrum L.P. (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 personal communication services on a broad
geographic basis within the United States.
Global One, a joint venture with Deutsche Telekom AG (DT) and France Telecom
(FT), was formed in 1996 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 a 50% partner in Global One's operating group for the worldwide
activities outside the United States and Europe.
<PAGE>
Combined, summarized income statement information (100% basis) of all affiliates
accounted for using the equity method is as follows:
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<CAPTION>
Quarter Ended Year to Date
June 30, June 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
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(in millions)
Results of operations
<S> <C> <C> <C> <C>
Net operating revenues $ 555.9 $ 413.2 $ 988.1 $ 684.0
---------------------------------------------------------------------
Operating loss $ 416.4 $ 87.2 $ 734.8 $ 190.8
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Net loss $ 541.6 $ 114.2 $ 882.8 $ 217.9
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Sprint's net losses in affiliates $ 157.5 $ 67.0 $ 264.0 $ 95.4
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3. Income Taxes
The differences that cause the effective income tax rate to vary from the
statutory federal income tax rate of 35% are as follows:
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<CAPTION>
Year to Date
June 30,
----------------------------------
1997 1996
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(in millions)
<S> <C> <C>
Income tax expense at the statutory rate $ 315.1 $ 355.1
Effect of:
State income taxes, net of federal income tax effect 30.7 34.7
Equity in losses of foreign joint venture 12.1 4.1
Investment tax credits included in income (1.9) (3.8)
Other, net (1.7) (4.1)
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Income tax expense $ 354.3 $ 386.0
----------------------------------
Effective income tax rate 39.4% 38.0%
----------------------------------
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4. Shareholders' Equity
Shareholder Rights Plan
In June 1997, Sprint adopted a new Shareholder Rights Plan that replaces the
plan adopted in 1989. The new plan contains most of the elements of the previous
plan. It also includes enhancements to better enable the board of directors to
act in the best interests of shareholders in the event of a proposed takeover.
The plan was not adopted in response to any specific threat to acquire control
of Sprint, and Sprint is not aware of any such activity.
When the new plan was adopted, Sprint redeemed the rights issued under the prior
plan and distributed new rights as a dividend. The redemption price for the
existing rights and the dividend of the new rights was paid in July 1997 to
common and Class A common shareholders of record as of June 24, 1997.
Each right is exercisable only if certain takeover events occur. Each new right
will initially entitle the holder to purchase 1/1000 of a share (a Unit) of a
newly authorized no par Preferred Stock-Sixth Series, Junior Participating (PS)
at $225 per Unit or, in certain cases, common stock. The PS is voting,
cumulative and accrues dividends on a quarterly basis generally equal to the
greater of $100 per share or 1,000 times the total per share amount of all
common stock dividends. At June 30, 1997, no PS shares
<PAGE>
were issued or outstanding. The new rights may be redeemed by Sprint at $0.01
per right and will expire in June 2007.
5. 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 remainder to the Missouri state court in which a
proposed class action by Network 2000's independent marketing representatives
against Network 2000 and Sprint is pending.
Sprint filed an action in federal district court, seeking to have the
arbitration panel's award vacated, modified, or corrected, and asking the court
to enter an order regarding the distribution of the award among the defendants.
In March 1997, Sprint deposited $61 million, which had been previously accrued,
in the federal district court's account at a financial institution. In April
1997, the court denied Sprint's request that the arbitration award be vacated
and granted Network 2000's request that the award be confirmed. The distribution
of the $61 million will be addressed by the court in a separate order.
In June 1997, Sprint recorded an additional $20 million charge in connection
with the settlement of both the class action lawsuit against Sprint and Network
2000 and the related claims of Network 2000 against Sprint. The class action
settlement requires court approval, which is expected. Sprint believes this will
complete the Network 2000 litigation.
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 and, in May 1997, that judgment was affirmed on
appeal.
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.
6. Supplemental Cash Flow Information and Noncash Activities
<TABLE>
<CAPTION>
Year to Date
June 30,
----------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
Cash paid for:
Interest (excluding amounts capitalized)
<S> <C> <C>
Continuing operations $ 89.7 $ 109.4
----------------------------------
Cellular division $ - $ 22.8
----------------------------------
Income taxes $ 217.1 $ 418.6
----------------------------------
</TABLE>
Sprint contributed cash, property, plant and equipment, and other assets and
liabilities from some of its international operations to Global One when the
venture was formed in January 1996. The net book value of the contributed
noncash assets and liabilities totaled $73 million.
<PAGE>
7. Spin-off of Cellular Division
In March 1996, Sprint completed the tax-free spin-off of Cellular to Sprint
common shareholders. To complete the spin-off, Sprint distributed all Cellular
common shares at a rate of one share for every three Sprint common shares held.
In addition, Cellular repaid $1.4 billion of its intercompany debt owed to
Sprint. Sprint also contributed to Cellular's equity capital $185 million of
debt owed by Cellular in excess of the amount repaid.
8. Sale of Access Lines
In April 1997, Sprint agreed to sell approximately 136,000 residential and
business access lines in a small area of northwest Chicago and 10 nearby
suburbs. Sprint expects to complete this sale, which is subject to regulatory
approval, in the 1997 fourth quarter.
9. Subsequent Event
In July 1997, Sprint agreed to purchase the net assets of Paranet, Inc.
(Paranet) for $425 million in cash. Paranet is a leading provider of
integration, management and support services for distributed computing
technology. Paranet provides a broad range of custom-designed solutions,
including design, integration, implementation, and day-to-day management for
wide- and local-area networks, Internet, intranets and desktops. Sprint will
account for this transaction using the purchase method of accounting. The
purchase is expected to be completed in the 1997 third quarter.
10. Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income includes all
changes in equity during a period except those due to owner investments and
distributions. It includes items such as foreign currency translation
adjustments, and unrealized gains and losses on available-for-sale securities.
This standard does not change the display or components of present-day net
income. Sprint will present the required disclosures in its financial statements
beginning in the first quarter of 1998.
Also in June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and related Information." This new standard requires companies to
disclose segment data based on how management makes decisions about allocating
resources to segments and how it measures segment performance. SFAS 131 requires
disclosure of segment profit or loss, segment assets and reconciliations of
segmental amounts to consolidated totals. It also requires entity-wide
disclosures about a company's products and services, its major customers and the
material countries in which it holds assets and reports revenues. Sprint will
adopt SFAS 131 in its 1998 year-end financial statements.
In February 1997, the FASB issued SFAS 128, "Earnings per Share" (EPS). This new
standard simplifies the EPS calculation and makes the U.S. standard for
computing EPS more consistent with international accounting standards. Sprint
will adopt SFAS 128 in its 1997 year-end financial statements. This standard is
not expected to have a material effect on Sprint's reported EPS.
<PAGE>
PART I.
Item 2.
SPRINT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Corporation and its subsidiaries (Sprint) includes certain estimates,
projections and other forward-looking statements in their reports, as well as in
presentations to analysts and others, and in other material made available to
the public. Future performance cannot be assured. 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 the 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 related to Sprint's investments in Global One and Sprint
Spectrum L.P. (Sprint PCS), which are presently in the early stages of
operation;
- the impact 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 (Telecom Act);
- unexpected results of litigation filed against Sprint; and
- the possibility of one or more of the markets in which Sprint
competes being impacted by changes 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:
Core businesses
Long Distance Communications Services:The long distance division is the nation's
third-largest long distance telephone company. It operates a nationwide,
all-digital long distance communications network using state-of-the-art
fiber-optic and electronic technology. The division mainly provides domestic and
international voice, video and data communications services. It offers its
services to the public subject to different levels of state and federal
regulation.
Local Communications Services:The local division consists of regulated local
exchange carriers (LECs) serving more than 7 million access lines in 19 states.
It provides local exchange services, access by telephone customers and other
carriers to Sprint's local exchange facilities and sales of telecommunications
equipment. The division also provides long distance services within specified
geographical areas, or local access transport areas (LATAs).
Product Distribution and Directory Publishing: The product distribution and
directory publishing businesses distribute wholesale telecommunications
products, and publish and market white and yellow page telephone directories.
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.
<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.
DT and FT, as Class A common shareholders, have the right in most cases to
proportionate representation on Sprint's board of directors. They may also
purchase additional Class A common shares from Sprint to keep their ownership
level at 10% each. In addition, they have disapproval rights if Sprint
undertakes certain types of transactions.
DT and FT have entered into a standstill agreement with Sprint restricting their
ability to acquire Sprint voting shares (other than as intended 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 regarding the control of Sprint.
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 a
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 enhanced features, such
as paging, voice mail, Caller ID and data transmission. Through July 1997,
Sprint PCS had launched service in 58 cities, with an additional seven cities
expected to be launched by year-end 1997.
As part of an overall strategy to increase PCS coverage, Sprint directly
acquired the rights to PCS licenses in the FCC's 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 about
possibly restructuring their interests in Sprint PCS. Although discussions have
continued, a change in the partnership structure is not certain.
Acquisition
See Note 9 of Condensed Notes to Consolidated Financial Statements for a
discussion of Sprint's pending acquisition of the assets of Paranet, Inc.
<PAGE>
Regulatory Developments
In accordance with the Telecom Act, the FCC adopted detailed rules in 1996 to
govern interconnection to incumbent local networks by new market entrants. Some
LECs and state public service commissions (PSCs) appealed these rules to the
U.S. Court of Appeals, which prevented most of the pricing rules from taking
effect pending a full review by the court.
In July 1997, the court struck down the FCC's pricing rules. It ruled that the
Telecom Act left jurisdiction over pricing matters to the PSCs. The court also
struck down certain other FCC rules on jurisdictional or substantive grounds.
The court's decision adds to the uncertainty, delay and complexity surrounding
local competition. The FCC plans to appeal the decision to the U.S. Supreme
Court.
In May 1997, the FCC issued important decisions on the structure and level of
access charges and universal service. These decisions will impact the industry
in several ways, including the following:
- an additional subsidy was created to support telecommunications
services for schools, libraries and rural health care providers.
Funding for this program, which is estimated to cost $2.7 billion per
year, will be assessed against all carriers providing telecommunications
services. However, it is expected that LECs will be able to pass their
portion of these costs on to long distance carriers;
- interstate access rates charged by LECs will decline by an estimated
$1.4 billion per year beginning July 1997;
- certain monthly flat-rate charges paid by some local telephone subscribers
will increase beginning in 1998;
- certain per-minute access charges paid by long distance companies were
converted to flat monthly charges based on pre-subscribed lines; and
- a basis has been established for replacing implicit access subsidies
with an explicit interstate universal service fund beginning in 1999.
A number of LECs, long distance companies and others have appealed some or all
of the FCC's orders. The effective date of the orders has not been postponed,
but the appeals are expected to take a year or more to conclude. The impact of
these FCC decisions on Sprint is difficult to determine, but is not expected to
be material.
Results Of Operations
Consolidated
Sprint's two main operating divisions -- long distance and local -- generated
improved 1997 second quarter and year-to-date net operating revenues compared
with the same 1996 periods. During the past 12 months, long distance calling
volumes increased 15% and access lines served by the local division increased
5.6%.
Total net operating revenues for the 1997 second quarter increased 6% to $3.7
billion from $3.5 billion for the same period a year ago. Income from continuing
operations was $256 million ($0.59 per share) versus $317 million ($0.73 per
share) for the 1996 second quarter. Income from continuing operations for 1997
includes a charge related to litigation in the long distance division ($0.03 per
share).
Year-to-date 1997 net operating revenues increased 7% to $7.3 billion from $6.8
billion for the same 1996 period. Income from continuing operations was $546
million ($1.25 per share) versus $629 million ($1.51 per share) for the 1996
year-to-date period.
<PAGE>
<TABLE>
<CAPTION>
Long Distance Communications Services
Selected Operating Results
----------------------------------------------------------------------
Quarter Ended
June 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 2,218.6 $ 2,053.0 $ 165.6 8.1%
Operating expenses
Interconnection 999.6 907.2 92.4 10.2%
Operations 317.1 268.1 49.0 18.3%
Selling, general and administrative 493.0 477.0 16.0 3.4%
Depreciation and amortization 167.2 154.0 13.2 8.6%
- ----------------------------------------------------------------------------------------------------
Total operating expenses 1,976.9 1,806.3 170.6 9.4%
- ----------------------------------------------------------------------------------------------------
Operating income $ 241.7 (1)$ 246.7 $ (5.0) (2.0)%
-------------------------------------------------------
Operating margin 10.9% (1) 12.0%
-----------------------------------
<FN>
(1)Excluding a $20 million charge related to litigation, 1997 second quarter operating income and margin would
have been $262 million and 11.8%, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Selected Operating Results
----------------------------------------------------------------------
Year to Date
June 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 4,391.0 $ 4,054.5 $ 336.5 8.3%
Operating expenses
Interconnection 2,007.0 1,799.9 207.1 11.5%
Operations 592.9 527.4 65.5 12.4%
Selling, general and administrative 964.1 946.2 17.9 1.9%
Depreciation and amortization 333.8 306.7 27.1 8.8%
- ----------------------------------------------------------------------------------------------------
Total operating expenses 3,897.8 3,580.2 317.6 8.9%
- ----------------------------------------------------------------------------------------------------
Operating income $ 493.2 (2)$ 474.3 $ 18.9 4.0%
-------------------------------------------------------
Operating margin 11.2% (2) 11.7%
-----------------------------------
<FN>
(2)Excluding a $20 million charge related to litigation, 1997 year-to-date operating income and margin would
have been $513 million and 11.7%, respectively.
</FN>
</TABLE>
<PAGE>
In January 1996, the long distance division contributed certain international
assets and related operations 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. Had this contribution occurred as
of January 1, 1996, year-to-date revenues and operating income (excluding the
nonrecurring charge related to litigation) for 1997 would have increased an
estimated 9% and 6%, respectively, from the same 1996 period. The related 1996
operating margin would have been an estimated 12%.
Both second quarter and year-to-date net operating revenues for 1997 increased
8% from the same 1996 periods. The increases mainly reflect strong minute growth
and increased equipment sales and data services revenue. Revenue growth was
affected by a more competitive pricing environment and an increase in the bad
debt provision, which is consistent with a nationwide increase in consumer bad
debt. Management has taken steps to ensure Sprint's credit extension policies
are sound. In addition, 1996 revenues reflect a seasonal boost from carrying the
Internal Revenue Service 800 help line traffic, a service Sprint no longer
provides.
Both second quarter and year-to-date calling volumes increased 15% in 1997 from
the same 1996 periods mainly driven by strong minute growth in the business and
wholesale markets. Residential minute growth was modest due to increased
competition.
Revenue growth in the business market reflects increased equipment sales and
calling volumes for domestic toll-free and switched WATS. In addition, the small
and medium business market revenues increased largely due to the continuing
success of the division's small business product, Fridays Free, which has been
extended through the year 2000. Revenue growth in the data services market,
which includes sales of capacity on Sprint's network to Internet service
providers, reflects increased demand and expanded service offerings. The
wholesale market experienced strong growth in both international and domestic
markets.
Interconnection costs consist of amounts paid to LECs, other domestic service
providers, and foreign telephone companies for completing calls made by the
division's domestic customers. Second quarter and year-to-date interconnection
costs in 1997 increased 10% and 12%, respectively, from the same 1996 periods
mainly due to increased traffic volumes. The increases were partly offset by
reduced rates charged by other domestic and international carriers for
connecting to their networks. Interconnection costs as a percentage of net
operating revenues for the 1997 second quarter and year-to-date periods were
45.1% and 45.7%, respectively. For the same 1996 periods, interconnection costs
were 44.2% and 44.4%, respectively, of net operating revenues. The higher 1997
percentages reflect changes in revenue mix, particularly the growth in
international traffic, and lower revenue yields due to competitive pricing and a
higher bad debt provision.
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. Second
quarter and year-to-date operations expense in 1997 increased 18% and 12%,
respectively, from the same 1996 periods. These increases were mostly due to
increased costs of providing telecommunications services for public payphones
and increased costs of equipment sales. Current-year operations expense also
reflects increased commissions paid for the right to provide long distance
services in places such as hotels, universities and government agencies.
Excluding the nonrecurring legal charge, 1997 second quarter selling, general
and administrative (SG&A) expense decreased 1% from the 1996 second quarter,
while year-to-date SG&A expense remained at 1996 levels. This improved
efficiency is due to continued cost control and business process improvement
efforts.
Both second quarter and year-to-date depreciation and amortization expense for
1997 increased 9% from the same 1996 periods generally due to an increased asset
base. The increased asset base supports data revenue growth and improved
transport capacity resulting from the deployment of the synchronous optical
network (SONET) and wave division multiplexing (WDM) equipment in the network.
<PAGE>
<TABLE>
<CAPTION>
Local Communications Services
Selected Operating Results
----------------------------------------------------------------------
Quarter Ended
June 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Local service $ 571.3 $ 511.9 $ 59.4 11.6%
Network access 479.0 461.3 17.7 3.8%
Toll service 89.4 106.4 (17.0) (16.0)%
Other 208.2 202.9 5.3 2.6%
- ---------------------------------------------------------------------------------------------------
Total net operating revenues 1,347.9 1,282.5 65.4 5.1%
- ---------------------------------------------------------------------------------------------------
Operating expenses
Plant operations 346.6 344.2 2.4 0.7%
Depreciation and amortization 235.1 230.5 4.6 2.0%
Customer operations 181.1 162.2 18.9 11.7%
Other 215.9 217.4 (1.5) (0.7)%
- ----------------------------------------------------------------------------------------------------
Total operating expenses 978.7 954.3 24.4 2.6%
- ----------------------------------------------------------------------------------------------------
Operating income $ 369.2 $ 328.2 $ 41.0 12.5%
-------------------------------------------------------
Operating margin 27.4% 25.6%
-----------------------------------
Selected Operating Results
---------------------------------------------------------------------
Year to Date
June 30, Variance
---------------------------------------------------------------------
1997 1996 Dollar %
- ------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
Local service $ 1,123.1 $ 1,008.8 $ 114.3 11.3%
Network access 957.6 921.3 36.3 3.9%
Toll service 180.5 219.9 (39.4) (17.9)%
Other 401.4 373.1 28.3 7.6%
- ---------------------------------------------------------------------------------------------------
Total net operating revenues 2,662.6 2,523.1 139.5 5.5%
- ---------------------------------------------------------------------------------------------------
Operating expenses
Plant operations 686.2 675.1 11.1 1.6%
Depreciation and amortization 466.5 456.6 9.9 2.2%
Customer operations 353.4 315.6 37.8 12.0%
Other 419.0 415.2 3.8 0.9%
- ---------------------------------------------------------------------------------------------------
Total operating expenses 1,925.1 1,862.5 62.6 3.4%
- ---------------------------------------------------------------------------------------------------
Operating income $ 737.5 $ 660.6 $ 76.9 11.6%
------------------------------------------------------
Operating margin 27.7% 26.2%
-----------------------------------
</TABLE>
<PAGE>
Local service revenues, derived from local exchange services, increased 12% and
11% for the 1997 second quarter and year-to-date periods, respectively, from the
same 1996 periods. Customer access lines increased 5.6% during the past 12
months. The growth in access lines reflects 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 local area calling plans and increased demand for
advanced intelligent network services such as Caller ID and usage-sensitive
features. In the business market, data services revenues increased significantly
over the same 1996 periods.
Network access revenues are derived from interexchange long distance carriers'
use of the local network to complete calls. Both second quarter and year-to-date
network access revenues increased 4% in 1997 compared with the same 1996
periods. These increases reflect strong minute growth, partly offset by access
rate reductions. The FCC has mandated additional access rate reductions
effective July 1997 -- see "Regulatory Developments" for further discussion.
Toll service revenues are mainly derived from providing long distance services
within LATAs. Second quarter and year-to-date toll service revenues declined 16%
and 18%, respectively, compared with the same 1996 periods. During 1996, the
division resold interexchange long distance services in certain of its service
areas. This reseller service was phased out through early 1997, accounting for
a large portion of the 1997 decline. However, some of those customers continued
as Sprint long distance division customers. The decreases in toll service
revenues also reflect extended local area calling plans and increased
competition in the intrastate long distance market since interexchange long
distance carriers now provide intraLATA long distance services in some states.
The declines in toll service revenues were partly offset by increases in the
division's local and network access revenues.
Other revenues include revenues from telecommunications equipment sales,
directory publishing fees, and billing and collection services. During the 1997
second quarter and year-to-date periods, these revenues increased 3% and 8%
respectively, from the same 1996 periods. The increases were mainly due to
increased equipment sales.
Plant operations expense includes network operations, and repair and maintenance
costs for property, plant and equipment. Second quarter and year-to-date plant
operations expense in 1997 increased 1% and 2%, respectively, compared with the
same 1996 periods, reflecting access line growth. Plant operations expense for
1996 includes access charges for reselling interexchange long distance services.
The division phased-out those reseller services through early 1997.
Second quarter and year-to-date depreciation and amortization expense increased
2% in 1997 compared with the same 1996 periods mainly due to plant additions.
Customer operations expense includes costs related to business office
operations, billing services, marketing costs, and customer services, including
operator and directory assistance. Customer operations expense increased 12% for
both the 1997 second quarter and year-to-date periods compared with the same
1996 periods. These increases reflect increased marketing costs to promote
products and services and increased bad debt expense, which is consistent with a
nationwide increase in consumer bad debt. The division is implementing a number
of new processes and procedures to improve its collection results.
Other operating expenses for the 1997 second quarter decreased 1% compared with
the 1996 second quarter, while year-to-date expenses increased 1% from the same
period a year ago. Both 1997 periods reflect the increased cost of equipment
sales, partly offset by cost savings from the division's restructuring of the
finance functions.
In April 1997, Sprint agreed to sell approximately 136,000 residential and
business access lines in a small area of northwest Chicago and 10 nearby
suburbs. Sprint expects to complete this sale, which is subject to regulatory
approval, in the 1997 fourth quarter.
<PAGE>
<TABLE>
<CAPTION>
Product Distribution and Directory Publishing Businesses
Selected Operating Results
----------------------------------------------------------------------
Quarter Ended
June 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Non-affiliated $ 222.1 $ 223.6 $ (1.5) (0.7)%
Affiliated 142.3 91.0 51.3 56.4%
- --------------------------------------------------------------------------------------------------
Total net operating revenues 364.4 314.6 49.8 15.8%
Operating expenses
Costs of services and products 307.5 264.0 43.5 16.5%
Selling, general and administrative 23.2 23.4 (0.2) (0.9)%
Depreciation and amortization 2.0 1.9 0.1 5.3%
- --------------------------------------------------------------------------------------------------
Total operating expenses 332.7 289.3 43.4 15.0%
- --------------------------------------------------------------------------------------------------
Operating income $ 31.7 $ 25.3 $ 6.4 25.3%
-----------------------------------------------------
Operating margin 8.7% 8.0%
-----------------------------------
Selected Operating Results
----------------------------------------------------------------------
Year to Date
June 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
Non-affiliated $ 434.3 $ 428.6 $ 5.7 1.3%
Affiliated 239.9 175.7 64.2 36.5%
- -------------------------------------------------------------------------------------------------------------------
Total net operating revenues 674.2 604.3 69.9 11.6%
Operating expenses
Costs of services and products 566.8 505.8 61.0 12.1%
Selling, general and administrative 44.9 45.4 (0.5) (1.1)%
Depreciation and amortization 3.8 3.7 0.1 2.7%
- ---------------------------------------------------------------------------------------------------
Total operating expenses 615.5 554.9 60.6 10.9%
- ---------------------------------------------------------------------------------------------------
Operating income $ 58.7 $ 49.4 $ 9.3 18.8%
------------------------------------------------------
Operating margin 8.7% 8.2%
-----------------------------------
</TABLE>
The increases in affiliated revenues reflect the centralization of certain local
division purchasing and warehousing functions at North Supply.
<PAGE>
<TABLE>
<CAPTION>
Emerging Businesses
Selected Operating Results
---------------------------------------------------------------------
Quarter Ended Year to Date
June 30, June 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 5.1 $ -- $ 7.9 $ --
---------------------------------------------------------------------
Operating loss $ (37.6) $ (11.4) $ (70.4) $ (12.7)
---------------------------------------------------------------------
</TABLE>
Sprint's emerging businesses segment consists of consumer Internet access
services, competitive local exchange carrier (CLEC) services, international
development activities outside the scope of Global One, and PCS controlled by
Sprint.
The 1997 operating results largely reflect activities to develop Sprint Internet
access services. During 1997, Sprint launched Sprint Internet Private Passport
(SM), an extension of Sprint's consumer Internet offering -- Sprint Internet
Passport (SM). Sprint Internet Private Passport provides customized, private
Internet access services for key communities such as businesses and on-line game
players. Sprint's Internet access platform currently consists of more than 200
points of presence.
The 1997 operating results also reflect Sprint's efforts in entering newly
competitive domestic and international markets. Sprint is preparing to expand
CLEC service into select major markets. Its initial efforts use a resale
approach that does not entail a large up-front investment in local facilities.
By following this strategy, which calls for resale of local network services and
the purchase of unbundled network elements, Sprint will not invest in local
facilities until it becomes clear that regulatory conditions would support a
large financial commitment.
Through July 1997, Sprint had filed for CLEC status in 48 states and the
District of Columbia, and gained regulatory approval to provide CLEC service in
42 states and the District of Columbia. Sprint currently offers CLEC service in
four metropolitan California cities.
As part of an overall strategy to achieve nationwide PCS coverage, Sprint
directly acquired PCS licenses for $544 million. The licenses cover 139 markets
across the United States, reaching a total population of 70 million people.
Sprint currently expects to spend a total of $2.3 billion through 1999 for the
network build out. Sprint plans to affiliate these licenses with the licenses
previously acquired by 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.
<PAGE>
Non-Operating Items
Interest Expense
Interest costs consist of the following:
<TABLE>
<CAPTION>
Quarter Ended Year to Date
June 30, June 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Interest expense from continuing operations $ 40.7 $ 49.5 $ 85.5 $ 97.2
Interest costs related to cellular
operations -- -- -- 21.3
Capitalized interest costs 27.7 28.8 56.7 53.2
- ------------------------------------------------------------------------------------------------------------------
Total interest costs $ 68.4 $ 78.3 $ 142.2 $ 171.7
---------------------------------------------------------------------
Average debt outstanding $ 3,072.6 $ 3,471.8 $ 3,152.5 $ 3,527.2
---------------------------------------------------------------------
Effective interest rate 8.9% 9.0% 9.0% 9.7%
---------------------------------------------------------------------
</TABLE>
The decrease in average debt outstanding mainly reflects debt repayments funded
by the cash received from DT's and FT's equity investment in Sprint. The
decrease also reflects debt repayments funded by the cash received from the
cellular and wireless communications services division (Cellular) to repay
intercompany debt in connection with Sprint's spin-off of Cellular (Spin-off).
Interest expense related to Cellular's operations has been included in
"Discontinued operation, net" on the 1996 Consolidated Statement of Income.
Sprint capitalizes interest costs on borrowings related to its investment in
Sprint PCS. Sprint PCS is not expected to continue to qualify as a
development-stage company during the 1997 third quarter. As a result, Sprint
will stop capitalizing these interest costs at that time.
Sprint is capitalizing interest costs on its investment in the PCS licenses it
directly acquired.
Other Income, Net
Other income consists of the following:
<TABLE>
<CAPTION>
Quarter Ended Year to Date
June 30, June 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Dividend and interest income $ 15.7 $ 31.3 $ 42.8 $ 43.7
Loss on sales of accounts receivable -- (0.1) -- (4.3)
Other 4.1 13.4 11.9 16.8
- ------------------------------------------------------------------------------------------------------------------
Total other income, net $ 19.8 $ 44.6 $ 54.7 $ 56.2
---------------------------------------------------------------------
</TABLE>
Second quarter dividend and interest income for 1996 reflects income earned on
the cash received from DT and FT for their equity investment in Sprint, as well
as Cellular's repayment of intercompany debt in connection with the Spin-off.
Sprint has since invested these funds in strategic initiatives, reducing the
balance held in temporary investments.
<PAGE>
Income Tax Provision
See Note 3 of Condensed Notes to Consolidated Financial Statements for the
differences that cause the effective income tax rate to vary from the statutory
federal income tax rate.
Financial Condition
Sprint's consolidated assets approximated $17 billion at June 30, 1997 and
year-end 1996. Net property, plant and equipment increased $447 million since
year-end 1996 mainly due to increased capital expenditures to support the core
long distance and local networks and expanded product and service offerings. The
year-end 1996 accounts payable balance reflects an increase in expenditures that
typically occurs during the fourth quarter. Short-term borrowings decreased $200
million due to the repayment of notes. Sprint's debt-to-capital ratio improved
to 25.5% at June 30, 1997 versus 27.7% at year-end 1996.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Year-to-date operating activities of Sprint's continuing operations provided
cash of $1.5 billion during 1997 versus $680 million during the same 1996
period. Operating cash flows for 1997 reflect improved operating results in
Sprint's core businesses. The 1996 cash flows were reduced by $600 million due
to the termination of an accounts receivable sales agreement.
Cash Flows - Investing Activities
Year-to-date investing activities of Sprint's continuing operations used cash of
$1.8 and $1.3 billion in 1997 and 1996, respectively. For the same periods,
capital expenditures totaled $1.3 and $1.0 billion, respectively. Long distance
division 1997 year-to-date capital expenditures increased $160 million from the
same 1996 period to $508 million. The 1997 expenditures were incurred mainly to
enhance network reliability, to upgrade capabilities for providing new products
and services and to meet increased demand for data-related services. Local
division 1997 year-to-date capital expenditures increased $20 million from the
same period a year ago to $647 million. The 1997 local capital expenditures were
made to accommodate access line growth and to expand the division's capabilities
for providing enhanced telecommunications services.
In 1997, Sprint paid $434 million for the PCS licenses it directly acquired,
bringing total payments through June 1997 to $518 million. The remaining $26
million balance was paid in July 1997.
During the first six months of 1997, Sprint made capital contributions of $87
million to Sprint PCS compared with $185 million for the same period a year ago.
These contributions were used to fund Sprint's portion of Sprint PCS capital and
operating requirements. Sprint has advanced $21 and $34 million to Sprint PCS
and Global One, respectively, during the first six months of 1997. A 1996
advance to Sprint PCS totaling $67 million was repaid during the 1997 first
quarter.
In connection with the Spin-off, Cellular repaid $1.4 billion of intercompany
debt to Sprint. Prior to the Spin-off, Cellular's 1996 investing activities
required net cash of $141 million, mainly to acquire additional cellular
properties and to fund capital expenditures.
<PAGE>
Cash Flows - Financing Activities
Year-to-date financing activities for 1997 used cash of $475 million, while 1996
year-to-date activities provided cash of $976 million. Financing activities
during 1997 mainly reflect the $200 million repayment of short-term debt and the
$189 million payment of dividends. In January and April 1996, DT and FT acquired
a new class of Sprint shares for $3.7 billion. Those proceeds, together with the
$1.4 billion received from Cellular, were used to reduce outstanding debt, meet
commitments related to Sprint PCS and terminate the accounts receivable sales
agreement. The remaining proceeds were invested on a temporary basis.
Capital Requirements
Sprint expects its 1997 investing activities, consisting of capital expenditures
and investments in affiliates, to require cash of $4.0 to $4.6 billion. In
addition, Sprint expects to pay dividends totaling $430 million. Sprint intends
to fund these 1997 cash requirements with cash from operating activities,
temporary investments, and from external sources.
Capital expenditures of $3.6 to $4.0 billion are anticipated in 1997. Long
distance and local division capital expenditures are expected to total $2.5
billion. The balance of expected capital expenditures will mainly be used to
build out the network for these new PCS markets.
During 1997 Sprint expects to invest $400 to $600 million in its affiliates.
Sprint PCS will require $400 to $500 million in 1997 to continue its network
build out and for operating cash requirements. Sprint also expects Global One to
require partner contributions for ongoing development activities.
Sprint expects to borrow $1.0 to $1.5 billion during 1997.
Liquidity
At June 30, 1997, Sprint had the ability to borrow $1.5 billion under a
revolving credit agreement with a syndicate of domestic and international banks.
Sprint may also offer for sale up to $175 million of unsecured senior debt
securities under a Medium-Term Note program. In addition, Sprint may offer for
sale $900 million of debt securities under shelf registration statements filed
with the Securities and Exchange Commission. Any borrowings Sprint may incur are
ultimately limited by certain debt covenants. At June 30, 1997, Sprint could
borrow up to $14 billion under the most restrictive of its debt covenants.
During the 1997 second quarter, Sprint participated in a vendor financing
facility for Sprint PCS. Sprint's portion of this facility totaled $300 million.
Sprint expects Sprint PCS to begin borrowing against this facility during the
1997 third quarter.
During July 1997, Sprint agreed to purchase the net assets of Paranet Inc. for
$425 million in cash. Sprint expects to complete this transaction in the third
quarter of 1997.
The most restrictive covenant related to dividends results from Sprint's
revolving credit agreement. Among other restrictions, Sprint must maintain
specified levels of consolidated net worth. Due to this requirement, $2.6
billion of Sprint's $3.5 billion retained earnings were effectively restricted
from the payment of dividends at June 30, 1997.
General Hedging Policies
Sprint selectively enters into interest rate swap and cap agreements to manage
its exposure to interest rate changes on its debt. Sprint also enters into
forward contracts and options in foreign currencies to reduce the impact of
changes in foreign exchange rates. As is customary for these types of
derivatives, Sprint does not require collateral or other security from the other
parties 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 complies with
board-approved policies. Any exposure from Sprint's use of derivatives is
immaterial to its overall operations, financial condition and liquidity.
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- and fixed-rate
debt and minimizing liquidity risk. Sprint uses simulation analysis to assess
its interest rate exposure and to establish the desired ratio of floating- and
fixed-rate debt. To the extent possible, Sprint manages interest rate exposure
and the floating-to-fixed ratio through its borrowings, but occasionally uses
interest rate swaps and caps to adjust its risk profile.
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 main 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.
Impact of Recently Issued Accounting Pronouncements
See Note 10 of Condensed Notes to Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
In May 1997, the United States Court of Appeals for the Seventh Circuit
affirmed the summary judgment granted to Centel Corporation (Centel)
and the other defendants in the class action suit filed in federal
court following the announcement in 1992 of Sprint's merger agreement
with Centel (reported in Sprint's 1996 Annual Report on Form 10-K).
Plaintiffs then sought rehearing of the appellate decision, which was
denied in June 1997.
Item 2. Changes in Securities
On June 9, 1997, Sprint's Board of Directors adopted a new Shareholder
Rights Plan and ordered the redemption of the rights issued under the
rights agreement adopted in 1989. Under the new plan, Sprint common and
Class A common shareholders of record as of the close of business on
June 24, 1997 were granted one right for each share held. Each new
right entitles the registered holder, upon the occurrence of certain
takeover events, to purchase a unit consisting of 1/1000 of a share of
a newly authorized, no par Preferred Stock - Sixth Series, Junior
Participating, at $225 per unit, or to receive Sprint common stock or
common stock of the acquiring company with a value equal to two times
the exercise price of the right, depending on the circumstances. The
exercise price is subject to adjustment in certain circumstances. Under
the new plan, if certain takeover events occur, the Board of Directors
may exchange the rights at an exchange ratio of one common share per
right (subject to adjustment for any stock split, stock dividend or
similar transaction).
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended June 30, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting
On April 15, 1997, Sprint held its Annual Meeting of Shareholders. In
addition to the election of four Class II Directors to serve for a term
of three years, the shareholders (i) approved performance goals under
which executives earn incentive compensation so as to preserve Sprint's
tax deductions for such compensation, (ii) approved the 1997 Long-term
Stock Incentive Program, and (iii) approved the appointment of Ernst &
Young LLP as independent auditors for Sprint. The shareholders did not
approve three shareholder proposals.
The following votes were cast for each of the following nominees for
Director or were withheld with respect to such nominees:
<TABLE>
<CAPTION>
For Withheld
----------------------------------------------------------------------------------------------
<S> <C> <C>
Ruth M. Davis 280,403,136 4,302,951
Harold S. Hook 280,651,063 4,055,024
Ronald T. LeMay 280,640,566 4,065,521
Charles E. Rice 280,568,772 4,137,315
</TABLE>
<PAGE>
The following votes were cast with respect to the proposal to approve
performance goals under which certain executives earn incentive
compensation so as to preserve Sprint's tax deduction under Section
162(m) of the Internal Revenue Code:
For 352,908,821
Against 15,515,858
Abstain 2,517,307
Broker non-votes 137
The following votes were cast with respect to the proposal to approve
the 1997 Long-term Stock Incentive Program:
For 226,977,081
Against 104,409,231
Abstain 2,371,394
Broker non-votes 37,184,417
The following votes were cast with respect to the proposal to approve
the appointment of Ernst & Young LLP as independent auditors of Sprint
for 1997:
For 367,152,592
Against 2,503,968
Abstain 1,284,563
Broker non-votes 1,000
The following votes were cast with respect to a shareholder proposal
requesting that the Board of Directors of Sprint refrain from providing
pension or other retirement benefits to non-employee directors unless
such benefits are submitted to the shareholders for approval:
For 89,619,212
Against 240,598,147
Abstain 3,540,347
Broker non-votes 37,184,417
The following votes were cast with respect to a shareholder proposal
recommending that the Board of Directors take steps to implement a plan
limiting increases in total cash compensation of executive officers to
an amount no greater than the average pay increase granted to Sprint
employees annually:
For 15,977,514
Against 313,915,406
Abstain 3,864,786
Broker non-votes 37,184,417
The following votes were cast with respect to a shareholder proposal
urging the Board of Directors to take the necessary steps to declassify
the Board for the purpose of director elections:
For 121,279,737
Against 208,741,661
Abstain 3,736,308
Broker non-votes 37,184,417
<PAGE>
Item 5. Other Information
Sprint's ratios of earnings to fixed charges were 6.48 and 6.09 for the
1997 and 1996 second quarters periods, respectively, and 6.44 and 5.99
for the 1997 and 1996 year-to-date periods, respectively. These ratios
were computed by dividing fixed charges into the sum of (a) income from
continuing operations before taxes, less capitalized interest and
equity in losses of less than 50% owned entities included in income,
and (b) fixed charges. Fixed charges consist of (a) interest on all
debt of continuing operations (including amortization of debt issuance
expenses), (b) the interest component of operating rents, and (c) the
pre-tax cost of subsidiary preferred stock dividends.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(3) Articles of Incorporation:
(a) Articles of Incorporation, as amended
(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 June 9, 1997, between
Sprint Corporation and UMB Bank, n.a. as Rights Agent
(filed as Exhibit 1 to Sprint Corporation Registration
Statement on Form 8-A dated June 12, 1997 (File
No. 1-4721), and incorporated herein by reference)
(c) 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)
(d) Amendments to Certain Agreements and Interpretation,
dated June 24, 1997, by and among Sprint Corporation,
France Telecom and Deutsche Telekom AG
(10) Executive Compensation Plans and Arrangements
(a) 1985 Stock Option Plan, as amended
(b) 1990 Stock Option Plan, as amended
(c) Management Incentive Stock Option Plan, as amended
(d) 1997 Long-term Stock Incentive Program (filed as
Exhibit 99 to Sprint Corporation's Registration
Statement No. 33-25449 and incorporated herein by
reference)
(11) Computation of Earnings Per Common Share
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedules
(a) June 30, 1997
(b) March 31, 1997 Restated
(c) December 31, 1996 Restated
(d) September 30, 1996 Restated
(e) June 30, 1996 Restated
(f) March 31, 1996 Restated
<PAGE>
(b) Reports on Form 8-K
Sprint filed a Current Report on Form 8-K dated June 9, 1997 in which
it reported that the Sprint Board of Directors had adopted a new
Shareholder Rights Plan and ordered the redemption of the rights issued
pursuant to the rights agreement adopted in 1989.
<PAGE>
SIGNATURE
Pursuant to the requirements 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/ John P. Meyer
John P. Meyer
Senior Vice President -- Controller
Principal Accounting Officer
Dated: August 8, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(3) Articles of Incorporation
(4) Instruments defining the Rights of Sprint's Equity Security Holders
(10) Executive Compensation Plans and Arrangements
(11) Computation of Earnings Per Common Share
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedules
<PAGE>
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF
SPRINT CORPORATION
As Amended July 30, 1997
FIRST
The name of the Corporation is SPRINT CORPORATION.
SECOND
That this Corporation is organized for profit, and that the purposes for
which it is formed are:
The construction and maintenance of a telephone line; the construction and
maintenance of a telegraph line; and the powers (but not by way of limitation)
to enter into joint ventures (whether incorporated or unincorporated),
partnerships and other forms of business relationships with public operators,
governmental agencies, governmental instrumentalities, corporations,
partnerships and other organizations, entities or persons (whether domestic or
foreign) for the construction, leasing, ownership, operation and maintenance of
telecommunications and other information transmission networks and all
businesses related thereto, both domestically and abroad, and to provide voice,
data and other communications and information services to any person or entity;
to lend and borrow money that may be necessary and proper in connection with the
conduct of its business; to hold, purchase, mortgage or otherwise convey such
real and personal estate as the purposes of this Corporation shall require; and
also take, hold and convey such other property, real, personal or mixed, as
shall be requisite for this Corporation to acquire in order to obtain or secure
the payment of any indebtedness or liability due to or belonging to this
Corporation; to sell real, mixed or personal property which may be proper for
the conduct of its business; to carry on its business outside of, as well as
within, the state, and to purchase, hold, sell, transfer, mortgage, pledge or
otherwise dispose of the shares of capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations of
any state, or the United States, or any other country, nation or government,
which corporation shall be incorporated for the accomplishment of the same or
similar purposes as this Corporation or shall be incorporated for purposes, the
accomplishment of which would be incidental to or would aid or facilitate the
accomplishment of the purposes for which this Corporation shall have been
formed, and to exercise all rights, powers and privileges of ownership of such
stock or securities; to do any and all other acts or things necessary, proper
and incidental to the conduct of its business and incidental to the
accomplishment of the purposes for which this Corporation may be formed; and to
engage in any other lawful act or activity for which corporations may be
organized under the Kansas General Corporation Code (the "General Corporation
Code").
THIRD
The Corporation's registered office is located at 2330
Shawnee Mission Parkway, Westwood, Johnson County, Kansas
66205; Mr. J. Richard Devlin is the registered agent at said
address.
FOURTH
The Corporation shall have perpetual existence.
FIFTH
1. Number of Directors; Increases in Number of Directors. (a) The number of
Directors shall not be less than ten nor more than 20 (unless increased to more
than 20 pursuant to subsection (b) of this Section 1 or Section 6(e) of this
ARTICLE FIFTH) as may be determined from time to time by the affirmative vote of
the majority of the Board of Directors or as provided in subsection (b) of this
Section 1 or in Section 6(e) of this ARTICLE FIFTH.
(b) If at any time following the Initial Issuance Date, the Class A Holders
are entitled to elect a number of Directors pursuant to Section 2(a) of this
ARTICLE FIFTH that exceeds the sum of the number of Directors elected by the
Class A Holders then serving on the Board of Directors and the number of
vacancies on the Board of Directors which the Directors elected by the Class A
Holders or the Class A Holders are entitled to fill, the total number of
Directors shall automatically and without further action be increased by the
smallest number necessary to enable the Class A Holders (and the Directors
elected by the Class A Holders in the case of vacancies) to elect the number of
Directors that the Class A Holders are entitled to elect pursuant to such
Section 2(a).
2. Election of Directors. (a) Election of Directors by Class A Holders. (i)
Except as otherwise provided in Sec tions 7(b), 7(f) and 7(k) of the Class A
Provisions, after the Initial Issuance Date, the Class A Holders shall have the
right, voting separately as a class, to elect a number of Directors equal to the
greater of (x) two and (y) the product (rounded to the nearest whole number if
such product is not a whole number) of (I) the aggregate Percentage Ownership
Interests of the Class A Holders and (II) the total number of Directors,
provided that so long as Section 310 of the Com munications Act of 1934, as
amended (or any successor provision of law) ("Section 310"), remains in effect,
under no circumstances shall (A) the Class A Holders have the right to elect
Aliens as Directors such that the total number of Aliens so elected by them
would exceed the maximum percentage of the total number of Directors of this
Corporation permitted under Section 310 to be Aliens or (B) the total number of
Directors elected by the Class A Holders and serving on the Board of Di rectors
exceed the maximum percentage of the total Directors of this Corporation
permitted under Section 310 to be elected by shareholders that are Aliens. Such
Directors elected by the Class A Holders shall not be divided into classes.
(ii) Upon the conversion of all outstanding shares of Class A Common Stock
into Common Stock pursuant to Section 7 of the Class A Provisions, the term of
office of all Class A Directors then in office shall thereupon terminate, the
vacancy or vacancies resulting from such termination shall be filled by the
remaining Directors then in office, acting by majority vote of such remaining
Directors, and the Director or Directors so elected to fill such vacancy or
vacancies shall not be treated hereunder or under the Bylaws of this Corporation
as Class A Directors. If at any time the number of Directors that the Class A
Holders have the right to elect pursuant to this Section 2(a) shall decrease
other than as set forth in the preceding sentence, and the Class A Holders shall
not have removed or caused to resign, in either case effective not later than
the fifteenth day following the event that resulted in such decrease, a number
of Class A Directors so that the total number of Directors elected by the Class
A Holders then in office does not exceed the number provided in the first
sentence of Section 2(a)(i), then the terms of office of all Class A Directors
shall terminate on such fif teenth date. The vacancy or vacancies resulting from
such termination of the terms of the Class A Directors shall be filled as
follows: (A) the vacancy or vacancies equal to the number of Directors that the
Class A Holders then have the right to elect pursuant to this Section 2(a)
(after giving effect to the decrease referred to in the preceding sentence)
shall be filled as provided in Section 4(b) of this ARTICLE FIFTH, and (B) the
remaining vacancy or vacancies shall be filled by the remaining Directors other
than Class A Directors then in office, acting by majority vote of such remaining
Directors, and the Director or Directors so elected to fill such vacancy or
vacancies shall not be treated hereun der or under the Bylaws as Class A
Directors.
(iii) (1) Notwithstanding anything to the contrary in this Section 2, but
subject to paragraphs (2), (3), (4) and (5) of this Section 2(a)(iii) and the
proviso set forth at the end of the first sentence of Section 2(a)(i) of this
ARTICLE FIFTH (the "Section 2(a) Proviso"), if the aggregate Per centage
Ownership Interest of the Class A Holders is 20% or greater, the Class A Holders
at all times shall have the right to elect not less than 20% of the total number
of Directors, provided that, if the Section 2(a) Proviso prevents the Class A
Holders from electing at least 20% of the total number of Directors under such
circumstances, this Corporation shall increase the total number of Directors to
a number not greater than 20 if such increase would enable the Class A Holders
to elect at least 20% of the total number of Directors as increased.
(2) The provisions of Section 2(a)(iii)(1) of this ARTICLE FIFTH (the
"Section 2(a)(iii)(1) Provisions") shall terminate and be of no force and effect
(a "Nullification") unless reinstated in accordance with Section 2(a)(iii)(5),
if either:
(A) this Corporation delivers an opinion of nationally-
recognized U.S. tax counsel to the effect that the
Section 2(a)(iii)(1) Provisions are, with respect to
both FT and DT, either not a Necessary Condition or
not a Sufficient Condition to secure any Treaty
Benefit and within 90 days of the delivery of such
opinion by this Corporation there is not delivered
to this Corporation by FT or DT an opinion of
nationally-recognized U.S. tax counsel concluding
that such provisions are a Necessary Condition and a
Sufficient Condition for either FT or DT to secure a
Treaty Benefit, or
(B) this Corporation provides written notice to FT and
DT in which it agrees to accord FT and DT those
Treaty Benefits to which FT and DT would be entitled
if the Section 2(a)(iii)(1) Provisions were in
effect (the "Continuing Treaty Benefits") and to
indemnify FT and DT on an after-tax basis against
(a) any liability arising out of according FT and DT
Continuing Treaty Benefits to the extent such
liability would not arise if the Section
2(a)(iii)(1) Provisions were in effect and (b) the
loss of those Continuing Treaty Benefits that this
Corporation cannot directly accord; provided that
this Corporation by written notice to FT and DT may
revoke and withdraw such agreement to accord such
Treaty Benefits and to provide such indemnification
following the date of such notice and upon delivery
of such notice the Section 2(a)(iii)(1) Provisions
shall again become effective. Notwithstanding any
revocation or withdrawal pursuant to the proviso
contained in the immediately preceding sentence,
this Corporation shall continue to indemnify FT and
DT on an after-tax basis against any loss of Treaty
Benefits to which FT or DT, as the case may be,
would have been entitled had the Nullification
described in this Section 2(a)(iii)(2)(B) not taken
place.
If a Nullification occurs under the provisions of para graph (A) of this
Section 2(a)(iii)(2), then after the date of any such Nullification, and until
such time as a change in facts or Applicable Law requires a different result,
this Corporation shall accord FT and DT Treaty Benefits under the relevant
treaties between the United States and France and the United States and Germany,
but only to the extent FT or DT, as the case may be, would have been entitled to
claim such benefits had such Nullification not occurred.
(3) In addition to its rights under Section 2(a)(iii)(2), this Corporation
shall have the right, from time to time after the Investment Completion Date, to
deliver to each of FT and DT a written notice requesting that the chief tax
officer of each of FT and DT certify that FT, in the case of the request
furnished to FT, and DT, in the case of the request furnished to DT, is eligible
to claim at least one Treaty Benefit, and that such chief tax officer provide
this Corporation with other facts and information reasonably requested by this
Corporation that are reasonably necessary for this Corporation to determine
whether the Section 2(a)(iii)(1) Provisions are a Sufficient Condition or a
Necessary Condition to secure at least one Treaty Benefit. Unless within 60 days
of delivery of any such request, either FT or DT delivers such requested
certificate to this Corporation, and provides such requested facts or
information, the Section 2(a)(iii)(1) Provisions shall terminate and be of no
force or effect, unless reinstated in accordance with Section 2(a)(iii)(5).
(4) If FT and DT determine, after the Investment Completion Date, that the
Section 2(a)(iii)(1) Provisions are, with respect to both FT and DT, either not
a Necessary Condition or not a Sufficient Condition to secure at least one
Treaty Benefit, FT and DT shall deliver to this Corporation a certification to
such effect, and the Section 2(a)(iii)(1) Provisions shall terminate and be of
no force or effect, unless reinstated in accordance with Section 2(a)(iii)(5).
(5) Each of FT and DT shall have the right, at any time after the date the
Section 2(a)(iii)(1) Provisions are nullified pursuant to paragraph (A) (but not
paragraph (B)) of clause (2) or clause (3) or (4) of this Section 2(a)(iii), to
deliver to this Corporation a certificate signed by the chief tax officer of
either FT or DT to the effect that FT or DT, as the case may be, is eligible to
claim a Treaty Benefit and an opinion of nationally-recognized U.S. tax counsel
to the effect that the Section 2(a)(iii)(1) Provisions are again a Necessary
Condition and a Sufficient Condition for any of FT or DT to secure a Treaty
Benefit. Upon the delivery of any such certificate and opinion, the Section
2(a)(iii)(1) Provisions shall again become effective unless and until they
become ineffective pursuant to the other provisions of this Section 2(a)(iii).
(6) For purposes of this Section 2(a)(iii), the term "FT" shall include any
Qualified Subsidiary of FT organized under the laws of France and the term "DT"
shall include any Qualified Subsidiary of DT organized under the laws of
Germany.
(7) The Section 2(a)(iii)(1) Provisions shall be a "Necessary Condition"
with respect to any Treaty Benefit if FT or DT would not be entitled to claim
such Treaty Benefit unless such Section 2(a)(iii)(1) Provisions are in effect.
(8) The Section 2(a)(iii)(1) Provisions shall be a "Sufficient Condition"
with respect to any Treaty Benefit if FT and DT will otherwise fulfill all other
relevant conditions to claiming such Treaty Benefit if the Section 2(a)(iii)(1)
Provisions are in effect.
(b) Election of Directors by Other Holders. (i) Subject to clause (ii)
below, the holders of Common Stock shall have the right to elect that number of
Directors equal to the excess of (x) the total number of Directors over (y) the
sum of the number of Directors the Class A Holders are entitled to elect and the
number of Directors, if any, that the holders of Preferred Stock, voting
separately by class or series, are entitled to elect in accordance with the
provisions of ARTICLE SIXTH of these Articles of Incor poration. The Class A
Holders shall have no right to vote for Directors under this Section 2(b)(i).
(ii) So long as Section 310 remains in effect, under no circumstances shall
an Alien Director elected by the holders of Common Stock be qualified to serve
as a Director if the number of Aliens who would then be serving as members of
the Board of Directors, including such elected Alien, would con stitute more
than the maximum number of Aliens permitted by Section 310 on the Board of
Directors.
(iii) The Directors (other than the Directors elected by the Class A
Holders and any Directors elected by the holders of any one or more classes or
series of Preferred Stock having the right, voting separately by class or
series, to elect Directors) shall be divided into three classes, designated
Class I, Class II and Class III, with the term of office of one class expiring
each year. The number of Class I, Class II and Class III Directors shall
consist, as nearly as prac ticable, of one third of the total number of
Directors (other than the Directors elected by the Class A Holders and any
Directors elected by the holders of any one or more classes or series of
Preferred Stock having the right, voting separately by class or series, to elect
Directors). At each annual meeting of stockholders of this Corporation after the
Initial Issuance Date, successors to the class of Directors whose term expires
at that annual meeting shall be elected for a three-year term.
(iv) Whenever the holders of any one or more classes or series of Preferred
Stock shall have the right, voting separately by class or series, to elect
Directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such direc torships shall be
governed by the terms of these Articles of Incorporation applicable thereto, and
such Directors so elected shall not be divided into classes pursuant to this
ARTICLE FIFTH unless expressly provided by such terms.
3. Change in Number of Directors. If the number of Directors (other than
Directors elected by Class A Holders and any Directors elected by the holders of
any one or more classes or series of Preferred Stock having the right, voting
separately by class or series, to elect Directors) is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
Directors in each class as nearly equal as possible.
4. Term of Office. (a) Each Director shall be elected for a three year
term. A Director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify to serve, subject to prior death, resignation, retirement,
disqualification or removal from office.
(b) Any vacancy on the Board of Directors (whether resulting from an
increase in the total number of Directors, the departure of one of the Directors
or otherwise) may be filled by the affirmative vote of a majority of the
Directors elected by the same class or classes of stockholders which would be
entitled to elect the Director who would fill such vacancy if the annual meeting
of stockholders of this Corporation were held on the date on which such vacancy
oc curred, provided that at any time when there is only one such Director so
elected and then serving, such Director may fill such vacancy and, provided,
further, that at any time when there are no such Directors then serving, the
stockholders of the class or classes entitled to elect the Director who will
fill such vacancy shall have the right to fill such vacancy and, provided,
further, that, so long as any Class A Stock is outstanding, any vacancy to be
filled by the Director or Directors elected by the holders of Common Stock may
not be filled with a Person who, upon his election, would not be an Independent
Director or would be an Alien, as the case may be, if the effect of such
election would be that less than a majority of the Board of Directors following
such election would be Independent Directors, or that the number of Aliens who
would then be serving on the Board of Directors would constitute more than the
maximum number of Aliens permitted on the Board of Directors under Section 310.
(c) Any additional Director of any class elected to fill a vacancy
resulting from an increase in the number of Directors of such class shall hold
office for a term that shall coincide with the remaining term of the Directors
of that class, but, except as provided in Section 2(a)(ii) of this ARTICLE
FIFTH, in no case will a decrease in the number of Directors shorten the term of
any incumbent Director. Any Director elected to fill a vacancy not resulting
from an increase in the number of Directors shall have the same remaining term
as that of his predecessor.
5. Rights, Powers, Duties, Rules and Procedures; Amendment of Bylaws. (a)
Except to the extent prohibited by law or as set forth in these Articles of
Incorporation or the Bylaws, the Board of Directors shall have the right (which,
to the extent exercised, shall be exclusive) to establish the rights, powers,
duties, rules and procedures that from time to time shall govern the Board of
Directors and each of its members, including, without limitation, the vote
required for any action by the Board of Directors, and that from time to time
shall affect the Directors' power to manage the business and affairs of this
Corporation. No Bylaw shall be adopted by stockholders which shall impair or
impede the implementation of the foregoing.
(b) The Board of Directors is expressly authorized and empowered, in the
manner provided in the Bylaws of this Corporation, to adopt, amend and repeal
the Bylaws of this Corporation in any respect to the full extent permitted by
the General Corporation Code not inconsistent with the laws of the General
Corporation Code or with these Articles of Incorporation, provided that the
following provisions of the Bylaws may not be amended, altered, repealed or made
inopera tive or ineffective by adoption of other provisions to the Bylaws
without the affirmative vote of the holders of record of a majority of the
shares of Class A Stock then outstanding, voting separately as a class, at any
annual or special meeting of stockholders, the notice of which shall have
specified or summarized the proposed amendment, alteration or repeal of the
Bylaws: ARTICLE III, SECTIONS 2, 4, 5, 8 AND 9; ARTICLE IV, SECTIONS 5, 6, 10,
11 AND 12; ARTICLE VI, SECTION 1; AND ARTICLE VII, SECTIONS 1 AND 2.
6. Removal; Changes in Status; Preferred Stock Directors. (a) Except as
provided in paragraphs (c) or (d) of this Section 6, a Director (other than a
Director elected by the Class A Holders or by the holders of any class or series
of Preferred Stock having the right, voting separately by class or series, to
elect Directors) may be removed only for cause. No Director so removed may be
reinstated for so long as the cause for removal continues to exist. Such removal
for cause may be effected only by the affirmative vote of the holders of a
majority of shares of the class or classes of stockholders which were entitled
to elect such Director.
(b) A Director elected by the holders of the Class A Stock may be removed
with or without cause. If removed for cause, no Director so removed may be
reinstated for so long as the cause for removal continues to exist. Removal may
be effected with or without cause by the affirmative vote of the holders of a
majority of shares of Class A Stock or with cause by the affirmative vote of the
holders of two-thirds of the shares of the Common Stock, the Class A Stock and
other capital stock of this Corporation entitled to general voting power, voting
together as a single class.
(c) If a Director elected by the holders of Common Stock who was not, at
the time of his election to the Board of Directors, an Alien, subsequently
becomes an Alien, the effect of which would be that the number of Aliens who
would then be serving as members of the Board of Directors, including the
Director who changed status, would constitute more than the maximum number of
Aliens permitted on the Board of Directors under Section 310, such Director
shall upon his change in status automatically and without further action be
removed from the Board of Directors.
(d) So long as any Class A Stock is outstanding, if an Independent Director
elected by the holders of Common Stock subsequently ceases to be an Independent
Director, the effect of which would be that the Independent Directors who would
then be serving as members of the Board of Directors would not constitute a
majority of the Board of Directors, such Director shall automatically and
without further action upon his change in status be removed from the Board of
Directors.
(e) (i) So long as any Class A Stock is outstanding, if a Director elected
by the holders of any class or series of Preferred Stock having the right,
voting separately by class or series, to elect Directors (a "Preferred Stock
Director") is an Alien, or after election becomes an Alien, the effect of which
would be that the number of Aliens who would then be serving as members of the
Board of Directors (including such Preferred Stock Director) would constitute
more than the maximum number of Aliens permitted on the Board of Directors under
Section 310, the total number of Directors shall automatically and without
further action be increased by the smallest number necessary to enable the Class
A Holders (and the Directors elected by the Class A Holders in the case of
vacancies) to elect Aliens as Directors to the fullest extent that the Class A
Holders are entitled to elect Directors pursuant to Section 2(a) of this ARTICLE
FIFTH without vio lating the requirements of Section 310.
(ii) So long as any Class A Stock is outstanding, if a Preferred Stock
Director is not an Independent Director, or after election ceases to be an
Independent Director, the effect of which would be that the Independent
Directors who would then be serving as members of the Board of Directors would
not constitute a majority of the Board of Directors, the total number of
Directors shall automatically and without further action be increased by the
smallest number necessary so that the number of Directors then serving who are
not Independent Directors (including such Preferred Stock Director and any
vacancies which the holders of Class A Stock have a right to fill) constitute
less than a majority of the Board of Directors.
7. Definitions. Certain capitalized terms used in this
ARTICLE FIFTH without definition shall have the meanings set
forth in Section 12 of the Class A Provisions.
SIXTH
The total number of shares of capital stock which may be issued by this
Corporation is 1,520,000,000, of which 500,000,000 shares shall be Class A
Common Stock with a par value of $2.50 per share (hereinafter, the "Class A
Common Stock"); 1,000,000,000 shares shall be Common Stock with a par value of
$2.50 per share (hereinafter, the "Common Stock"); and 20,000,000 shares shall
be Preferred Stock (herein referred to as the "Preferred Stock") without par
value.
GENERAL PROVISIONS RELATING TO ALL STOCK
1. Preemptive Rights; Cumulative Voting. No holder of shares of capital
stock of any class of this Corporation or holder of any security or obligation
convertible into shares of capital stock of any class of this Corporation shall
have any preemptive right whatsoever to subscribe for, purchase or otherwise
acquire shares of capital stock of any class of this Corporation, whether now or
hereafter authorized; provided that this provision shall not prohibit this
Corporation from granting, contractually or otherwise, to any such holder, the
right to purchase additional securities of this Corporation. Stockholders of
this Corporation shall not be entitled to cumulative voting of their shares in
elections of Directors.
2. Redemption of Shares Held by Aliens. Not withstanding any other
provision of these Articles of Incorporation to the contrary, outstanding shares
of Common Stock and Class A Stock Beneficially Owned by Aliens may be redeemed
by this Corporation, by action duly taken by the Board of Directors (with the
approval of a majority of the Continuing Directors (as defined in ARTICLE
SEVENTH) at a meeting at which at least seven Continuing Directors are present,
except that no such approval of the Continuing Directors shall be required if
(i) the Fair Price Provisions have been deleted in their entirety, (ii) the Fair
Price Pro visions have been modified so as explicitly not to apply to any Class
A Holder, or they have been modified in a manner rea sonably satisfactory to FT
and DT so as explicitly not to apply to any transactions with any Class A Holder
contemplated under these Articles of Incorporation, (iii) the transaction in
question is not a "Business Combination" within the meaning of the Fair Price
Provisions, or (iv) the Class A Holder that is a party to the transaction, along
with its Affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on October 1, 1982) and Associates (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as in
effect on October 1, 1982), is no longer an "Interested Stockholder" or
"Affiliate" of an "Interested Stockholder" within the meaning of the Fair Price
Provisions), to the extent necessary or advisable, in the judgment of the Board
of Directors, for this Corporation or any of its Subsidiaries to comply with the
requirements of Section 310 (each of (i) through (iv), a "Fair Price
Condition"), provided that shares of Class A Stock only may be redeemed if, and
only to the extent that, the outstanding shares of Class A Stock represent Votes
constituting greater than 20% of the aggregate Voting Power of this Corporation
immediately prior to the time of such redemption. The terms and conditions of
such redemption shall be as follows, subject in any case to any other rights of
a particular Alien or of this Corporation pursuant to any contract or agreement
between such Alien and this Corporation:
(a) except as provided in Section 2(f), the redemp tion price of the
shares to be redeemed pursuant to this Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH shall be equal to the
Market Price of such shares on the third Business Day prior to the date
notice of such redemption is given pursuant to subsection (d) of this
Section 2, provided that, except as provided in clause (f), below, such
redemption price as to any Alien who purchased such shares of Common Stock
after November 21, 1995 and within one year prior to the Redemption Date
shall not (unless otherwise determined by the Board of Directors) exceed
the purchase price paid by such Alien for such shares;
(b) the redemption price of such shares may be paid
in cash, Redemption Securities or any combination
thereof;
(c) if less than all of the shares Beneficially Owned by Aliens are to
be redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection
first of the most recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of Directors to be
equi table, provided that this Corporation shall in all cases be entitled
to redeem shares of Common Stock Beneficially Owned by Aliens prior to
redeeming any shares of Class A Common Stock Beneficially Owned by Aliens;
(d) this Corporation shall give notice of the Redemption Date at least
30 days prior to the Redemption Date to the record holders of the shares
selected to be redeemed (unless waived in writing by any such holder) by
delivering a written notice by first class mail, postage pre-paid, to the
holders of record of the shares selected to be redeemed, addressed to such
holders at their last address as shown upon the stock transfer books of
this Corporation (each such notice of redemption specifying the date fixed
for redemption, the redemption price, the place or places of payment and
that payment will be made upon presentation and surrender of the
certificates repre senting such shares), provided that the Redemption Date
may be the date on which written notice shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such record holders and
subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed;
(e) on the Redemption Date, unless this Corporation shall have
defaulted in paying or setting aside for payment the cash or Redemption
Securities payable upon such redemption, any and all rights of Aliens in
respect of shares so redeemed (including without limitation any rights to
vote or participate in dividends), shall cease and terminate, and from and
after such Redemption Date such Aliens shall be entitled only to receive
the cash or Redemption Securities payable upon redemption of the shares to
be redeemed; and
(f) such other terms and conditions as the Board of Directors shall
determine to be equitable, provided that, if any shares of Class A Stock
are redeemed pursuant to this Section 2 of these GENERAL PROVISIONS
RELATING TO ALL STOCK of ARTICLE SIXTH, the redemption price of any such
shares redeemed shall be a per share price equal to the greater of (A) the
Market Price of a share of Common Stock on the Redemption Date and (B) the
Weighted Average Price paid by the Class A Holders for the Class A Common
Stock together with a stock appreciation factor thereon (calculated on the
basis of a 365-day year) at the rate of 3.88% through and including the
Redemption Date, such stock appreciation factor to be calculated, on an
annual compounding basis, from the date of purchase of such Class A Common
Stock until the Redemption Date (the "Alternative Price"), provided, that
if this Corporation redeems any shares of Class A Common Stock after the
third anniversary of the Investment Completion Date, the redemption price
of any such shares redeemed shall be the Market Price of a share of Common
Stock on the Redemption Date. The redemption price to be paid to the Class
A Holders shall be modified in accordance with Article IX of the
Stockholders' Agreement if either (i) such redemption is effected on or
prior to the third anniversary of the Investment Completion Date, or (ii)
such redemption is effected within the 120-day period described in the last
sentence of Section 2.11 of the Stockholders' Agreement (as such period may
be extended pursuant thereto) following an election by this Corporation to
redeem shares in accordance with such Section.
Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares to be redeemed
received such notice, provided that all notices to be given to the Class A
Holders shall be made and deemed delivered in accordance with Section 13 of the
Class A Provisions; and failure to give such notice by mail, or any defect in
such notice, to holders of shares designated for redemption shall not affect the
validity of the proceedings for the redemption of any other shares.
3. Beneficial Ownership Inquiry. (a) This Corporation may by written notice
require a Person that is a holder of record of Common Stock or Class A Stock or
that this Corpo ration knows to have, or has reasonable cause to believe has,
Beneficial Ownership of Common Stock or Class A Stock to certify that, to the
knowledge of such Person:
(i) no Common Stock or Class A Stock as to which such Person has
record ownership or Beneficial Ownership is Beneficially Owned by Aliens;
or
(ii) the number and class or series of shares of Common Stock or Class
A Stock owned of record or Beneficially Owned by such Person that are owned
of record or Beneficially Owned by Persons that are Aliens are as set forth
in such certificate.
(b) With respect to any Common Stock or Class A Stock identified by such
Person in response to Section 3(a)(ii) above, this Corporation may require such
Person to provide such further information as this Corporation may reasonably
require in order to implement the provisions of Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH.
(c) For purposes of applying Section 2 of these GENERAL PROVISIONS RELATING
TO ALL STOCK of ARTICLE SIXTH with respect to any Common Stock or Class A Stock,
in the event of the failure of any Person to provide the certificate or other
information to which this Corporation is entitled pursuant to this Section, this
Corporation in its sole discretion may presume that the Common Stock or Class A
Stock in question is, or is not, Beneficially Owned by Aliens.
4. Factual Determinations. The Board of Directors shall have the power and
duty to construe and apply the provisions of Sections 2 and 3 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH and, with respect to shares of
Common Stock, to make all determinations necessary or desirable to implement
such provisions, including but not limited to: (a) the number of shares of
Common Stock that are Beneficially Owned by any Person; (b) whether a Person is
an Alien; (c) the application of any other definition of these Articles of
Incorporation to the given facts; and (d) any other matter relating to the
applicability or effect of Section 2 of these GENERAL PROVISIONS RELATING TO ALL
STOCK of ARTICLE SIXTH.
5. Loss of Voting Rights. If (a) there is a breach by FT, DT, any Qualified
Subsidiary, any Strategic Investor or any Qualified Stock Purchaser of any of
the provisions of Sections 3.1(a) or 3.2(b) (as it relates to matters described
in Section 3.1(a)) of the Standstill Agreement or any corresponding provision of
any Qualified Subsidiary Standstill Agreement, Strategic Investor Standstill
Agreement or Qualified Stock Purchaser Standstill Agreement, (b) there is a
willful breach in any material respect by FT, DT, any Qualified Subsidiary, any
Strategic Investor or any Qualified Stock Purchaser of any provision of Section
3.1 (other than Section 3.1(a)) of the Standstill Agreement or any correspond
ing provision of any Qualified Subsidiary Standstill Agreement, Strategic
Investor Standstill Agreement or Qualified Stock Purchaser Standstill Agreement,
or (c) a Government Affiliate or Related Company (each as defined in the
Standstill Agreement) takes an action which if taken by FT or DT would violate
Sections 3.1 or 3.2(b) (as it relates to matters other than those described in
Section 3.1(a)) of the Standstill Agreement, then FT and its Qualified
Subsidiaries (except in the case of a breach arising from the action of a
Government Affiliate of Germany, a Related Company of DT or a Strategic Investor
in a Qualified Subsidiary of DT in which FT is not an investor), DT and its
Qualified Subsidiaries (except in the case of a breach arising from the action
of a Government Affiliate of France, a Related Company of FT or a Strategic
Investor in a Qualified Subsidiary of FT in which DT is not an investor) and
each Qualified Stock Purchaser shall not be entitled to vote any of their shares
of capital stock of this Corporation with respect to any matter or proposal
arising from, relating to or involving, such breach or action, and no such
purported vote by such Class A Holders on such matter shall be effective or
shall be counted.
6. Definitions. Certain capitalized terms used in these GENERAL PROVISIONS
RELATING TO ALL STOCK without definition shall have the meanings set forth in
Section 12 of the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO CLASS A STOCK.
GENERAL PROVISIONS RELATING TO COMMON STOCK
AND CLASS A STOCK
1. Except as expressly set forth in ARTICLE FIFTH of these Articles of
Incorporation or in the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO ALL STOCK and GENERAL PROVISIONS RELATING TO CLASS A STOCK, each
share of Common Stock and each share of Class A Common Stock shall be entitled
to one Vote on all matters in respect of which the holders of Common Stock are
entitled to vote, and the Class A Holders and the holders of Common Stock shall
vote together with the holders of all other classes or series of capital stock
which have general voting power on all such matters as a single class.
2. Dividends shall be declared and paid only out of net
income or earned surplus of this Corporation.
3. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of this Corporation, after payment or provision for payment of the
debts and other liabilities of this Corporation, including the liquidation
preferences of any series of Preferred Stock, the holders of Class A Common
Stock and the holders of Common Stock shall be entitled to share ratably in the
remaining net assets of this Corporation.
Neither the merger nor consolidation of this Corporation, nor the
Transfer of all or part of its assets, shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of this Corporation within
the meaning of this clause 3.
GENERAL PROVISIONS RELATING TO COMMON STOCK
1. Dividends. The holders of the Common Stock shall be entitled to receive,
when and if declared by the Board of Directors out of funds legally available
therefor, dividends in respect of the Common Stock equivalent on a per share
basis to those payable on the Class A Common Stock. Dividends on the Common
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Class A Common Stock and shall be in an
amount per share equal to the full per share amount of any cash dividend paid on
shares of Class A Common Stock, plus the full per share amount (payable in kind)
of any non-cash dividend paid on shares of Class A Common Stock, provided that
if this Corporation shall declare and pay any dividends on shares of Class A
Common Stock payable in shares of Class A Common Stock, or in options, warrants
or rights to acquire shares of Class A Common Stock, or in securities
convertible into or exchangeable for shares of Class A Common Stock, then in
each case, this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, an equivalent dividend per share on the
Common Stock payable in shares of Common Stock, or options, warrants or rights
to acquire shares of Common Stock, or securities convertible into or
exchangeable for shares of Common Stock.
2. No Dilution or Impairment. No reclassification, subdivision or
combination of the outstanding shares of Class A Stock shall be effected
directly or indirectly (including, without limitation, any reclassification,
subdivision or combination effected pursuant to a consolidation, merger or
liquidation) unless at the same time the Common Stock is reclassified,
subdivided or combined so that the holders of the Common Stock are entitled, in
the aggregate, to Voting Power representing the same percentage of the Voting
Power of this Corporation relative to the Class A Stock as was represented by
the shares of Common Stock outstanding immedi ately prior to such
reclassification, subdivision or combination, subject to the limitations,
restrictions and conditions on such rights contained herein.
GENERAL PROVISIONS RELATING TO
CLASS A STOCK
1. Rights and Privileges. Except as otherwise set forth in ARTICLE FIFTH of
these Articles of Incorporation, that portion of ARTICLE SIXTH entitled GENERAL
PROVISIONS RELATING TO ALL STOCK, or the Class A Provisions, the holders of
Class A Common Stock shall be entitled to all of the rights and privileges
pertaining to the ownership of Common Stock without any limitations,
prohibitions, restrictions or qualifications whatsoever, and shall be entitled
to such other rights and privileges as are expressly set forth in ARTICLE FIFTH
of these Articles of Incorporation, that portion of ARTICLE SIXTH entitled
GENERAL PROVISIONS RELATING TO ALL STOCK or in the Class A Provisions.
2. Dividends. The holders of shares of Class A Common Stock shall be
entitled to receive, when and if declared by the Board of Directors out of funds
legally available therefor, dividends in respect of the Class A Common Stock
equivalent on a per share basis to those payable on the Common Stock. Dividends
on the Class A Common Stock shall be payable on the same date fixed for the
payment of the corresponding dividend on shares of Common Stock and shall be in
an amount per share equal to the full per share amount of any cash dividend paid
on shares of Common Stock, plus the full per share amount (payable in kind) of
any non-cash dividend paid on shares of Common Stock.
If this Corporation shall declare and pay any dividend on shares of Common
Stock payable in shares of Common Stock, or in options, warrants or rights to
acquire shares of Common Stock, or in securities convertible into or
exchangeable for shares of Common Stock, then in each case, this Corporation
shall declare and pay, at the same time that it declares and pays any such
dividend, an equivalent dividend per share on the Class A Common Stock.
3. Deleted.
4. Special Rights to Disapprove Certain Actions. At least 40 days prior to
the occurrence of a Subject Event (as defined below), this Corporation shall
deliver to each Class A Holder a notice (a "Notice") of such proposed Subject
Event, setting forth in reasonable detail the nature of such proposed Subject
Event. This Corporation shall thereafter be entitled to effect such proposed
Subject Event unless within 30 days of delivery of such Notice there shall have
been a Class A Action exercising the special rights of the Class A Holders to
disapprove such Subject Event, provided that the Class A Holders shall have no
special right to disapprove any action (x) which this Corporation is required to
take to comply with its obligations or exercise its rights under the Investment
Agreement, the Stockholders' Agreement, the Standstill Agreement, the
Registration Rights Agreement or the Joint Venture Agreement or any document
executed pursuant to any such agreement or the Class A Provisions, or (y) taken
to comply with Applicable Law or the rules of any exchange or market system on
which securities of this Corporation may be traded, and provided, further, that
any action to be taken by this Corporation in reliance on clause (y) of the
foregoing proviso is the only action commercially reasonably available to this
Corporation to effect such compliance, as certified to the Class A Holders by
resolution of the Independent Directors. For purposes of these Articles, the
term "Subject Event" means only the following transactions and only if such
transactions are consummated within the respective time periods indicated below:
(a) Until the second anniversary of the Initial Issuance Date or, in
the case of clause (iv) below, the later of (x) the second anniversary of
the Initial Issuance Date and (y) the Investment Completion Date:
(i) any transaction or series of related transactions (other than
Exempt Asset Divestitures or Exempt Long Distance Asset Divestitures)
that results, directly or indirectly, in Transfers of assets of this
Corporation or its Subsidiaries with an aggregate Fair Market Value
(calculated in the case of each Transfer as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such Transfer) of more than 20 percent of Market
Capitalization (calculated (x) in the case of a single transaction as
at the date this Corporation or any such Subsid iary enters into a
definitive agreement to effect such Transfer and (y) in the case of a
series of related transactions, as at the date this Corporation or any
such Subsidiary enters into a definitive agreement to effect the last
of such Transfers);
(ii) any transaction or series of related transactions
(including, without limitation, mergers, purchases of stock or assets,
joint ventures or other acquisitions), but excluding any transaction
constituting an Exempt Asset Divestiture or Exempt Long Distance Asset
Divestiture, resulting, directly or indirectly, in the acquisition by
this Corporation or its Subsidiaries for cash or debt securities
maturing in less than one year from the date of issuance of (x) assets
constituting or predominantly used in Core Businesses ("Core Business
Assets") for a purchase price or, in the case of a series of related
transactions, an aggregate purchase price that exceeds 20 percent of
Market Capitalization (calculated as at the date this Corporation or
any such Subsidiary enters into a definitive agreement to effect such
transaction or, in the case of a series of related transactions, as at
the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect the last of such related transactions)
or (y) other assets for a purchase price or, in the case of a series
of related transactions, for an aggregate purchase price that exceeds
five percent of Market Capitalization (calculated as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such transaction or, in the case of a series of related
transactions, as at the date this Corporation or any such Subsidiary
enters into a definitive agreement to effect the last of such related
transactions), provided that, if any such other assets are proposed to
be obtained in the course of a proposed transaction in which both Core
Business Assets and other assets are to be acquired and the ratio of
the fair market value of the Core Business Assets to be acquired to
the fair market value of the other assets to be acquired exceeds 1.75
to 1, then the holders of the Class A Stock shall not be entitled to
disapproval rights with respect to such transaction except as provided
in clause (x) of this Section 4(a)(ii);
(iii) issuance by this Corporation of any capital stock or debt
(including, without limitation, direct or indirect issuances such as
pursuant to mergers and other business combinations) with both (x) a
class vote to elect one or more Directors and (y) rights with respect
to dispositions of Long Distance Assets or other assets, or share
issuances, which rights are in scope and duration as extensive as or
more extensive than the comparable related rights granted to the Class
A Holders in these Articles of Incorporation or in the Stockholders'
Agreement, provided that this Section 4(a)(iii) shall not apply to the
extent that (a) such rights are required by Applicable Law, (b) the
holders of any series of Preferred Stock have the right, voting
separately as a class, to elect a number of Directors of this
Corporation upon the occurrence of a default in payment of dividends
or redemption price, or (c) such rights described in clause (y) are
granted in connection with borrowings and are reflected in a loan
agreement, credit agree ment, trust indenture or similar agreement or
instrument;
(iv) declaration of any Extraordinary Dividends during any one
year that, individually or in the aggregate, exceed five percent of
Market Capitalization as at the Business Day immediately preceding the
declaration of the last such dividend or distribution (other than in
connection with transactions within the meaning of clause (e) of the
definition of Exempt Asset Divestitures or clause (g) of the
definition of Exempt Long Distance Asset Divestitures); or
(v) any merger or other business combination
in which this Corporation is not the surviving
parent corporation.
(b) Until the earliest of (i) the fifth anniversary of the Initial
Issuance Date, (ii) such time as (A) legislation has been enacted repealing
Section 310, (B) an FCC Order shall have been issued, or (C) outside
counsel to this Corporation with a nationally recognized expertise in
telecommunications regulatory matters delivers to each of FT and DT a legal
opinion, addressed to each of them, in form and substance reasonably
satisfactory to FT and DT, to the effect that Section 310 does not prohibit
FT and DT from owning the Long Distance Assets proposed to be Transferred
by this Corporation, (iii) the delivery by FT, DT, Atlas or any of their
Affiliates (or a Permitted Designee (as such term is defined in the Joint
Venture Agreement)) of a notice pursuant to Section 17.2(b) of the Joint
Venture Agreement indicating the agreement to purchase all of the Sprint
Venture Interests (as such term is defined in the Joint Venture Agreement)
following an offer by this Corporation or Sprint Sub pursuant to Section
17.2(a) of the Joint Venture Agreement, and (iv) the delivery by this
Corporation and/or Sprint Sub of a notice pursuant to Section 17.3(a) of
the Joint Venture Agreement exer cising the put right to sell all of their
Sprint Venture Interests (as such term is defined in the Joint Venture
Agreement) to FT, DT and Atlas (or a Permitted Designee (as such term is
defined in the Joint Venture Agreement)), a direct or indirect Transfer
(other than in connection with an Exempt Long Distance Asset Divesti ture)
after the Initial Issuance Date by this Corporation or its Subsidiaries of
Long Distance Assets with a Fair Market Value (calculated as at the date
this Corporation or any such Subsidiary enters into a definitive agreement
to effect such Transfer) that, when aggregated with the Fair Market Value
of all other Long Distance Assets Transferred by this Corporation or its
Subsidiaries since the Initial Issuance Date (other than in Exempt Long
Distance Asset Divestitures) (calculated in each case as at the date this
Corporation or any such Subsidiary enters into a definitive agreement to
effect each such respective Transfer) exceeds five percent of the Fair
Market Value of the Long Distance Assets of this Corpo ration and its
Subsidiaries, on a consolidated basis (calculated as at the date this
Corporation or any such Subsidiary enters into a definitive agreement to
effect the last such Transfer).
(c) Except as otherwise provided in Section 7 of the Class A
Provisions, for so long as any shares of Class A Stock are outstanding:
(i) any amendment to these Articles of Incorporation, the Bylaws
or the Rights Agreement that would adversely affect the rights of the
Class A Holders under these Articles of Incorporation or the Bylaws;
(ii) issuance by this Corporation (including, without limitation,
pursuant to mergers or other business combinations) of any series or
class of capital stock or debt security with Supervoting Powers;
(iii) any merger or other business combination involving this
Corporation that results directly or indirectly in a Change of
Control, unless the surviving corporation expressly (x) assumes all of
this Corporation's obligations in respect of the rights of the Class A
Holders under Section 4(b) of the Class A Provisions and the
provisions of Article III of the Stockholders' Agreement (except, in
each case, as they may be otherwise terminated pursuant to the Class A
Provisions or the Stockholders' Agreement) and all of the provisions
of the Registration Rights Agreement and (y) agrees to be bound by any
applicable Tie-Breaking Vote in accor dance with Articles 17 and 18 of
the Joint Venture Agreement; or
(iv) any merger or other business combination involving this
Corporation that does not result directly or indirectly in a Change of
Control unless:
(x) this Corporation survives as the
parent entity; or
(y) the surviving corporation expressly assumes all of this
Corporation's obligations in respect of the rights of the Class A
Holders granted pursuant to these Articles of Incorpo ration and
the Class A Provisions and under the Bylaws, the Stockholders'
Agreement and the Registration Rights Agreement.
5. Special Rights Regarding Major Issuances. At least 90 days before the
consummation, directly or indirectly, by this Corporation of any Major Issuance
prior to the second anniversary of the Initial Issuance Date, this Corporation
shall deliver to each Class A Holder a notice of such proposed Major Issuance.
This Corporation shall be entitled to effect such proposed Major Issuance (upon
receipt of the requisite approval of the Board of Directors described below)
unless within 75 days of the delivery of such notice there shall have been a
Class A Action exercising the special rights of the Class A Holders to
disapprove such Major Issuance. In addition, so long as any Class A Stock is
outstanding, prior to effecting any Major Issuance:
(a) occurring on or prior to the fifth anniversary of the Initial
Issuance Date, this Corporation shall obtain the prior approval of
two-thirds of the Independent Directors by resolution, certified to the
Class A Holders; and
(b) occurring after the fifth anniversary of the Initial Issuance
Date, this Corporation shall obtain the prior approval of a majority of the
Independent Directors.
6. Special Rights Regarding Holdings by Major Competitors of FT or DT. (a)
Until the tenth anniversary of the Initial Issuance Date, at least 90 days prior
to consummating any transaction or taking any other action that, directly or
indirectly, would result in, or is taken for the purpose of encouraging or
facilitating, a Major Competitor of FT or DT or of the Joint Venture having, or
being granted by this Corporation any right, permission or approval to acquire
(other than pursuant to a Strategic Merger), a Percentage Ownership Interest of
ten percent or more (a "Major Competitor Transaction"), this Corporation shall
provide each Class A Holder with notice of such Major Competitor Transaction in
the manner set forth in Subsection (c) below and, if there is a Class A Action
exercising the special rights of the Class A Holders to disapprove such Major
Competitor Transaction within 75 days of the delivery of such notice, this
Corporation shall not consummate such Major Competitor Transaction.
(b) Until the tenth anniversary of the Initial Issuance Date, if a Major
Competitor of FT or DT or of the Joint Venture obtains a Percentage Ownership
Interest of 20 percent or more as a result, directly or indirectly, of a
Strategic Merger:
(i) if the Class A Holders have not made the commitment described in
Article VI of the Stockholders' Agreement, this Corporation (or its
successor in such Strategic Merger) shall, subject to the provisos of
Sections 2.1(a)(iii) and 2.2(a) of the Standstill Agreement, nonetheless
take all action necessary or advisable to lift all restrictions,
contractual or otherwise, imposed by this Corporation or such successor on
the ability of the Class A Holders, at any time after the Class A Common
Issuance Date, to purchase shares of Common Stock or other Voting
Securities from third par ties sufficient to permit the Class A Holders to
have a Percentage Ownership Interest equal to that of the Major Competitor
of FT or DT or of the Joint Venture; and
(ii) this Corporation shall ensure that the Class A Holders have
rights with regard to (w) a class vote to elect Directors, (x) class
approval and disapproval rights, (y) any other special rights in respect of
the business or operations of this Corporation and (z) any rights to
receive special dividends, distributions or other rights from this
Corporation, which are in scope and duration at least as extensive as any
rights granted by this Corporation to such Major Competitor of FT or DT or
of the Joint Venture (other than rights deriving solely from the number of
Voting Securities owned), regardless of whether or not the Class A Holders
purchase any additional Voting Securities.
(c) Until the tenth anniversary of the Initial Issuance Date, this
Corporation shall deliver to each Class A Holder notice of its intent to issue
Voting Securities in a Major Competitor Transaction to any Major Competitor of
FT or DT or of the Joint Venture at least 30 days prior to such issuance, such
notice to contain a complete and correct description in reasonable detail of the
transaction in question, including, without limitation, the purchase price for
such securities, the nature of such securities, the identity of the Major
Competitor of FT or DT or of the Joint Venture and the rights (contractual and
other) this Corporation would grant such Major Competitor. This Corporation
shall also deliver to each Class A Holder notice of any such issuance within
five days after it occurs, such notice to contain a description of the
transaction in question and be accompanied by complete and correct copies of all
agreements, instruments and written understandings of this Corporation, its
Subsidiaries and Affiliates and such Major Competitor of FT or DT or of the
Joint Venture and the Subsidiaries and Affiliates of such Major Competitor
executed in respect of such transaction.
7. Conversion of Shares. (a) Failure to Maintain
Ownership. If the aggregate Committed Percentage of the Class
A Holders shall be below ten percent (i) for more than 180
consecutive days or (ii) immediately following a Transfer of
Class A Stock by a Class A Holder, each outstanding share of
Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid
and nonassessable share of Common Stock, such conversion to
take place on the next Business Day following the end of such
180-day period in the case of clause (i) or on the date of
such Transfer in the case of clause (ii), provided that, if
the aggregate Committed Percentage of the Class A Holders
shall fall below ten percent for more than 180 consecutive
days following the date of a Major Issuance as a result of the
consummation of such Major Issuance, then unless all of the
outstanding shares of Class A Common Stock shall have been
converted earlier pursuant to this Section 7 of the Class A
Provisions, (x) the Class A Common Stock shall not convert
into Common Stock until the third anniversary of the date of
such Major Issuance, and (y) the Class A Holders shall con
tinue to be entitled to elect Directors pursuant to
ARTICLE FIFTH of these Articles of Incorporation until the
third anniversary of the date of such Major Issuance, but
(z) after the expiration of 180 days following the date of
such Major Issuance, the Class A Holders shall no longer have
their rights under Sections 4, 5, 6, 7 and 8 of the Class A
Provisions, and provided, further, that such conversion shall
not be considered to be an acquisition of Common Stock for
purposes of Section 7(i) of the Class A Provisions.
(b) FT/DT Joint Venture Termination; Material Breach of Investment
Documents. (i) Each outstanding share of Class A Common Stock shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and non assessable share of Common Stock if:
(t) the Sprint Parties receive the Tie-Breaking
Vote pursuant to Section 17.5 of the Joint Venture
Agreement;
(u) there is an FT/DT Joint Venture Termination;
(v) FT or DT or any Qualified Subsidiary breaches
in any material respect its obligations under Section 2.4
of the Stockholders' Agreement;
(w) FT or DT or any Qualified Subsidiary breaches in any material
respect its obligations under Article II (other than Section 2.4) of the
Stockholders' Agreement;
(x) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Article 2 (other than Section 2.1(b)) of the Standstill Agreement or any
corresponding provision of any Qualified Subsidiary Standstill Agreement;
(y) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Sections 3.1 or 3.2 of the Stand still Agreement or any corresponding
provisions of any Qualified Subsidiary Standstill Agreement, in each case
in a Control Context, or otherwise breaches Sections 3.1(a)(ii), (iii) or
(iv) or Section 3.1(g) of the Standstill Agreement or any corresponding
provision of any Qualified Subsidiary Standstill Agreement; or
(z) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section
3.1(g)) or 3.2 of the Standstill Agreement or any corresponding provisions
of any Qualified Subsidiary Standstill Agreement, in each case other than
in a Control Context;
provided that, with respect to an alleged breach of the type described in
clauses (v), (w), (x), (y) or (z) above, the Class A Holders alleged to have
committed such breach (the "Breaching Holders") shall deliver a notice
(I) except with respect to a breach of the type described in
clause (y) above, in accordance with clauses (ii)(x) or (iii)(x)
below, in which case no conversion of the Class A Common Stock shall
take place unless such breach fails to be cured within the time
provided for cure in such clause (ii) or (iii), as the case may be;
(II) in accordance with clauses (ii)(y), (iii)(y) or (iv) below,
in which case no conversion of the Class A Common Stock shall take
place until there is issued a final nonappealable decision or order of
a court of competent jurisdiction finding that such breach has
occurred and, if applicable, was not cured within the time provided
for cure in clauses (ii) or (iii) below, as the case may be; or
(III) admitting that such a breach has occurred, and (if
applicable) cannot be cured within the time periods provided for cure
in clauses (ii) or (iii) below, in which case each outstanding share
of Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock upon delivery of such notice; and
provided, further, that if the Breaching Holders fail to perform the actions
described in clauses (I) or (II) above within the time periods provided for
performing such actions in clauses (ii), (iii) or (iv) below, they shall be
deemed to have taken the action described in clause (III) above.
(ii) For any alleged breach of the type described in clauses (w), (x) or
(z) of clause (i) above, the Breaching Holders shall have the right, within five
Business Days after the date (for purposes of this clause (ii), the "Breach
Notice Date") that notice of such breach is delivered to each Breaching Holder
by this Corporation, to deliver to this Corpo ration a notice either:
(x) committing to effect a cure as soon as practical, in which case
the Breaching Holders shall effect such cure as soon as practical, but in
no event later than the 20th Business Day from the Breach Notice Date (or,
with respect to an alleged breach of clauses (w) or (x), if such cure
cannot be effected within such time period due to the anti-fraud rules of
the U.S. securities laws, such longer period as is reasonably necessary to
cure such breach in a manner consistent with such rules), provided that
(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;
(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner;
(III) with respect to an alleged breach of clause (i)(x) above,
this Corporation shall have the right at any time after the end of
such 20-day period to purchase such number of shares of Common Stock
or Class A Stock, as the case may be, as is necessary to return the
Class A Holders to the ownership level permitted by the Standstill
Agreement or a Qualified Subsidiary Standstill Agree ment, as the case
may be, at a price equal to the lower of (A) the Market Price for such
shares at the time of such redemption and (B) the price paid by the
Breaching Holders for such shares, provided that this Corporation may
only exercise such right if a majority of the Continuing Directors
shall have first approved, at a meeting at which at least seven
Continuing Directors are present, such a purchase of Shares, unless a
Fair Price Condition has been satisfied; and
(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred, provided that during
such time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (ii),
the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right
to elect members of the Board of Directors of the holders of the Class A
Stock under ARTICLE FIFTH of these Articles of Incorporation shall be
suspended and may not be exer cised by the Class A Holders.
(iii) For any alleged breach of the type described in clause (i)(v) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iii), the "Breach Notice Date") that notice
of such breach is delivered to each Breaching Holder by this Corporation, to
deliver to this Corporation a notice either:
(x) committing to effect a cure as soon as practical, in which case
the Breaching Holders shall effect such cure as soon as practical, but in
no event later than the 20th Business Day from the Breach Notice Date (or,
if such cure cannot be effected within such time period due to the
anti-fraud rules of the U.S. securities laws, such longer period as is
reasonably necessary to cure such breach in a manner consistent with such
rules), provided that
(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;
(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner; and
(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred;
provided that, in each case, from the Breach Notice Date until the earlier
to occur of the cure of such breach and the issuance of a decision or order
of a court of compe tent jurisdiction finding that such breach has not oc
curred or was cured within the time provided for cure in clause (x) of this
clause (iii), the rights provided to the Class A Holders under Sections 4
(except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and
the right to elect members of the Board of Directors of the holders of the
Class A Stock under ARTICLE FIFTH of these Articles of Incorporation shall
be suspended and may not be exercised by the Class A Holders; and provided,
further, that following such decision or order, such rights shall be
suspended during such time as the most recent decision or order of a court
of competent jurisdiction is to the effect that such breach has oc curred
and was not cured within the time provided for cure in clause (x) of this
clause (iii).
(iv) For any alleged breach of the type described in clause (i)(y) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iv), the "Breach Notice Date") that notice of
such breach is delivered to each Breaching Holder by this Corporation, to
deliver to this Corporation a notice disputing that such a breach has occurred,
provided that from the Breach Notice Date until the issuance of a decision or
order of a court of competent jurisdiction finding that such breach has not
occurred, the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right to
elect members of the Board of Directors of the holders of the Class A Stock
under ARTICLE FIFTH of these Articles of Incorporation shall be suspended and
may not be exercised by the Class A Holders; and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.
(v) For purposes of this Section 7(b), an alleged breach shall be deemed to
have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by any Class A
Holder or any other Person having the purpose or effect of changing or
influencing the control of this Corporation.
(vi) No conversion pursuant to this Section 7(b) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.
(c) Deleted.
(d) Corporation Joint Venture Termination. Unless the Class A Common Stock
shall have been converted earlier pursuant to this Section 7 of the Class A
Provisions, if there is a Corporation Joint Venture Termination, each
outstanding share of Class A Common Stock shall automatically convert (without
the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock on the third anniversary of the date of such
Corporation Joint Venture Termination, provided that any such conversion shall
not be considered to be an acquisition of Common Stock for purposes of Section
7(i) of the Class A Provisions.
(e) Other Joint Venture Termination. If (i) there is a sale of all the
Venture Interests of the Sprint Parties or the FT/DT Parties pursuant to Section
17.2, 17.3, 17.4, 19.3, 20.6 or 20.11 of the Joint Venture Agreement or (ii) the
Joint Venture is otherwise terminated, in each case other than due to (i) an
FT/DT Joint Venture Termination or (ii) a Corporation Joint Venture Termination:
(x) on the date of such termination, the rights provided to the Class
A Holders in Sections 4 (except Sections 4(c)(i) and 4(c)(iii)), 5 and 6 of
the Class A Provisions shall terminate; and
(y) unless the Class A Common Stock shall have been converted pursuant
to this Section 7 of the Class A Provisions, each outstanding share of
Class A Common Stock shall automatically convert (without the payment of
any consideration) into one duly issued, fully paid and nonassessable share
of Common Stock on the third anniversary of the date of such termination,
provided that any such conversion shall not be considered to be an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.
(f) Change of Control. If there is a Change of Control within the meaning
of clause (a) of the definition of Change of Control, (i) the rights provided to
the Class A Holders in ARTICLE FIFTH of these Articles of Incorporation, and
Sections 4 (except Sections 4(b), 4(c)(iii) (as to rights provided under Section
4(b)) and 4(c)(iv) (as to rights provided under Section 4(b)), 5 and 6 of the
Class A Provisions shall terminate upon the consummation of the transactions
contemplated thereby, provided that, prior to such consummation, this
Corporation shall engage in good faith negotiations with any potential acquiror
of Control to provide the Class A Holders with rights equivalent to those
provided in ARTICLE FIFTH of these Articles of Incorporation and (ii) all, but
not less than all, of the Class A Holders shall have the right (but not the
obligation) to deliver to this Corpora tion a written notice upon which delivery
each outstanding share of Class A Common Stock shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock. Any such conversion of Class A Stock
pursuant to this clause (f) shall not be considered to be an acquisition of
Common Stock for purposes of Section 7(i) of the Class A Provisions.
(g) Unequal Ownership. (i) If the ratio (the "Ownership Ratio") of the
Percentage Ownership Interest of either FT or DT to the Percentage Ownership
Interest of the other exceeds the Applicable Ratio for 60 consecutive days
following a notice of such event delivered by this Corporation to each of FT and
DT, each share of Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and nonassessable
share of Common Stock, provided that any such conversion shall not be considered
to be an acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.
(ii) For purposes of calculating the Ownership Ratio, FT and DT shall be
deemed to own shares of Class A Stock owned by a Qualified Subsidiary as
follows:
(x) if only one of FT or DT owns, directly or indirectly, Votes in
such Qualified Subsidiary, FT or DT, as the case may be, shall be deemed to
own all of the shares of Class A Stock owned by such Qualified Subsid iary;
and
(y) if both FT and DT own, directly or indirectly, Votes in such
Qualified Subsidiary, each of FT and DT shall be deemed to own its
respective Applicable Percentage of the shares of Class A Stock owned by
such Qualified Subsidiary. As used herein, the "Applicable Percentage"
shall mean the percentage of the equity interests of such Qualified
Subsidiary owned, directly or indirectly, by FT or DT, as the case may be.
(h) Unauthorized Transfers. Unless approved by this Corporation, upon any
Transfer of shares of Class A Stock (other than a Transfer to a Qualified
Subsidiary, a Qualified Stock Purchaser or to FT or DT, in each case which
Transfer is effected in accordance with the provisions of Article II of the
Stockholders' Agreement), each share of Class A Common Stock so Transferred
shall automatically convert (without the payment of any consideration) into one
duly issued, fully paid and nonassessable share of Common Stock as of the date
of such Transfer, provided that no conversion of Class A Stock pursuant to this
Section 7(h) shall be considered to be an acquisition of Common Stock for
purposes of Section 7(i) of the Class A Provisions.
(i) Conversion of Common Stock into Class A Stock. Until the conversion of
all of the shares of Class A Common Stock pursuant to this Section 7, each share
of Common Stock acquired by a Class A Holder shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Class A Common Stock at the date of such acquisition.
(j) Notice of Conversion; Exchange of Stock Certificates; Effect of
Conversion of all Class A Stock, etc. (i) Immediately upon the conversion of
shares of Class A Stock into shares of Common Stock, or shares of Common Stock
into shares of Class A Stock, as the case may be and in each case pursuant to
this Section 7 (the shares of Class A Stock or shares of Common Stock so
converted hereinafter referred to as the "Converted Shares"), the rights of the
holders of such Converted Shares, as such, shall cease and the holders thereof
shall be treated for all purposes as having become the record owners of the
shares of Class A Stock or Common Stock, as the case may be, issuable upon such
conversion (the "New Shares"), provided that such Persons shall be entitled to
receive when paid any dividends declared on the Converted Shares as of a record
date preceding the time the Converted Shares were converted (the "Conversion
Time") and unpaid as of the Conversion Time. If the stock transfer books of this
Corporation shall be closed at the Conversion Time, such Person or Persons shall
be deemed to have become such holder or holders of record of the New Shares at
the opening of business on the next succeeding day on which such stock transfer
books are open.
(ii) As promptly as practicable after the Conversion Time, upon the
delivery to this Corporation of the certificates formerly representing Converted
Shares, this Corporation shall deliver or cause to be delivered, to or upon the
written order of the record holder of such certificates, a certificate or
certificates representing the number of duly issued, fully paid and
nonassessable New Shares into which the Converted Shares formerly represented by
such certificates have been converted in accordance with the provisions of this
Section 7.
(iii) This Corporation shall pay all United States federal, state or local
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of New Shares upon the conversion of Converted Shares pursuant
to this Section 7, provided that this Corporation shall not be required to pay
any tax which may be payable in respect of any registration of Transfer involved
in the issue or delivery of New Shares in a name other than that of the
registered holder of shares converted or to be converted, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to this Corporation the amount of any such tax or has established, to the
satisfaction of this Corporation, that such tax has been paid.
(iv) This Corporation shall at all times reserve and keep available, out of
the aggregate of its authorized but unissued Class A Common Stock and Common
Stock and its issued Common Stock held in its treasury, for the purpose of
effecting the conversion of the Common Stock and Class A Common Stock
contemplated hereby, the full number of shares of Common Stock then deliverable
upon the conversion of all outstanding shares of Class A Stock, and the full
number of shares of Class A Stock that would be deliverable upon conversion of
all of the shares of Common Stock the Class A Holders are permitted to acquire
hereunder and under the Investment Agreement, the Stockholders' Agreement and
the Standstill Agreement.
(v) Following conversion of all outstanding shares of Class A Common Stock
into shares of Common Stock pursuant to this Section 7 of the Class A
Provisions, this Corporation shall not, directly or indirectly, issue, or sell
from the treasury, any shares of Class A Common Stock.
(k) Class A Stock Held by Qualified Stock Purchasers. (i) If any Qualified
Stock Purchaser shall become a Major Competitor of this Corporation or of the
Joint Venture, on the date the writing referred to in the definition of Major
Competitor in Section 12 of these Class A Provisions is delivered to each Class
A Holder, each share of Class A Common Stock owned by such Qualified Stock
Purchaser shall automat ically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock.
(ii) Each outstanding share of Class A Common Stock owned by a Qualified
Stock Purchaser shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock if:
(v) such Qualified Stock Purchaser breaches in any
material respect its obligations under Section 2.4 of the
Stockholders' Agreement;
(w) such Qualified Stock Purchaser breaches in any material respect
its obligations under Article II (other than Section 2.4) of the
Stockholders' Agreement;
(x) such Qualified Stock Purchaser breaches any of
the provisions of Article 2 of the Qualified Stock
Purchaser Standstill Agreement;
(y) such Qualified Stock Purchaser breaches any of the provisions of
Section 3.1 or 3.2 of the Qualified Stock Purchaser Standstill Agreement in
a Control Context, or such Qualified Stock Purchaser otherwise breaches
Sections 3.1(a)(ii), (iii) or (iv) or Section 3.1(g) of the Qualified Stock
Purchaser Standstill Agreement; or
(z) such Qualified Stock Purchaser breaches any of the provisions of
Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g))
or 3.2 of the Qualified Stock Purchaser Standstill Agreement, in each case
other than in a Control Context;
provided, that such Qualified Stock Purchaser shall deliver a
notice
(I) except with respect to a breach of the type described in clause
(y) above, in accordance with clauses (iii)(x) or (iv)(x) below, in which
case no conversion of the Class A Common Stock owned by such Qualified
Stock Purchaser shall take place unless such breach fails to be cured
within the time provided for cure in such clause (iii) or (iv), as the case
may be;
(II) in accordance with clauses (iii)(y), (iv)(y) or (v) below, in
which case no conversion of the Class A Common Stock owned by such
Qualified Stock Purchaser shall take place until there is issued a final
nonappeal able decision or order of a court of competent jurisdiction
finding that such breach has occurred and, if applicable, was not cured
within the time provided for cure in clauses (iii) or (iv) below, as the
case may be; or
(III) admitting that such a breach has occurred, and (if applicable)
cannot be cured within the time periods provided for cure in clauses (iii)
or (iv) below, in which case each outstanding share of Class A Common Stock
owned by such Qualified Stock Purchaser shall auto matically convert
(without the payment of any consid eration) into one duly issued, fully
paid and nonassessable share of Common Stock upon delivery of such notice;
and
provided, further, that if such Qualified Stock Purchaser fails to perform the
actions described in clauses (I) or (II) above within the time periods provided
for performing such actions in clauses (iii), (iv) or (v) below, it shall be
deemed to have taken the action described in clause (III) above.
(iii) For any alleged breach of the type described in clauses (w), (x) or
(z) of clause (ii) above, such Qualified Stock Purchaser shall have the right,
within five Business Days after the date (for purposes of this clause (iii), the
"Breach Notice Date") that notice of such breach is delivered to such Qualified
Stock Purchaser by this Corporation, to deliver to this Corporation a notice
either:
(x) committing to effect a cure as soon as practical, in which case
such Qualified Stock Purchaser shall effect such cure as soon as practical,
but in no event later than the 20th Business Day from the Breach Notice
Date (or, with respect to an alleged breach of clauses (w) or (x), if such
cure cannot be effected within such time period due to the anti-fraud rules
of the U.S. securities laws, such longer period as is reasonably necessary
to cure such breach in a manner consistent with such rules), provided that
(I) such Qualified Stock Purchaser shall have no right to cure
unless such breach is susceptible to cure;
(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure
in a diligent manner;
(III) with respect to an alleged breach of clause (ii)(x) above,
this Corporation shall have the right at any time after the end of
such 20-day period to purchase such number of shares of Class A Stock
as is necessary to return such Qualified Stock Purchaser to the
ownership level permitted by the Qualified Stock Purchaser Standstill
Agreement, at a price equal to the lower of (A) the Market Price for
such Shares at the time of such redemption and (B) the price paid by
such Qualified Stock Purchaser for such Shares, provided that this
Corporation may only exercise such right if a majority of the
Continuing Directors shall have first approved, at a meeting at which
at least seven Continuing Directors are present, such a purchase of
Shares, unless a Fair Price Condition has been satisfied; and
(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred, provided that during
such time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (iii),
the rights provided to such Qualified Stock Purchaser under Sections 4
(except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and
the right of such Qualified Stock Purchaser to elect members of the Board
of Directors as a holder of the Class A Common Stock under ARTICLE FIFTH of
these Articles of Incorporation shall be suspended and may not be exercised
by such Qualified Stock Purchaser.
(iv) For any alleged breach of the type described in clause (ii)(v) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (iv), the "Breach Notice Date") that
notice of such breach is delivered to such Qualified Stock Purchaser by this
Corporation, to deliver to this Corporation a notice either:
(x) committing to effect a cure as soon as practical, in which case
such Qualified Stock Purchaser shall effect such cure as soon as practical,
but in no event later than the 20th Business Day from the Breach Notice
Date (or, if such cure cannot be effected within such time period due to
the anti-fraud rules of the U.S. securities laws, such longer period as is
reasonably necessary to cure such breach in a manner consistent with such
rules), provided that
(I) such Qualified Stock Purchaser shall have no right to cure
unless such breach is susceptible to cure;
(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure
in a diligent manner; and
(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred;
provided that, in each case, from the Breach Notice Date until the earlier to
occur of the cure of such breach and the issuance of a decision or order of a
court of competent jurisdiction finding that such breach has not occurred or was
cured within the time provided for cure in clause (x) of this clause (iv), the
rights provided to such Qualified Stock Purchaser under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right of
such Qualified Stock Purchaser to elect members of the Board of Directors as a
holder of the Class A Common Stock under ARTICLE FIFTH of these Articles of
Incorporation shall be suspended and may not be exercised by such Qualified
Stock Purchaser; and provided, further, that following such decision or order,
such rights shall be suspended during such time as the most recent decision or
order of a court of competent jurisdiction is to the effect that such breach has
occurred and was not cured within the time provided for cure in clause (x) of
this clause (iv).
(v) For any alleged breach of the type described in clause (ii)(y) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (v), the "Breach Notice Date") that
notice of such breach is delivered to such Qualified Stock Purchaser by this
Corporation, to deliver to this Corporation a notice disputing that such a
breach has occurred, provided that from the Breach Notice Date until the
issuance of a decision or order of a court of competent jurisdiction finding
that such breach has not occurred, the rights provided to such Qualified Stock
Purchaser under Sections 4 (except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the
Class A Provisions and the right of such Qualified Stock Purchaser to elect
members of the Board of Directors as a holder of the Class A Common Stock under
ARTICLE FIFTH of these Articles of Incorporation shall be suspended and may not
be exercised by such Qualified Stock Purchaser and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.
(vi) For purposes of this Section 7(k), an alleged breach shall be deemed
to have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by such Qualified
Stock Purchaser or any other Person having the purpose or effect of changing or
influencing the control of this Corpora tion.
(vii) No conversion pursuant to this Section 7(k) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.
(l) Effect of Conversion. Following the conversion of all of the shares of
Class A Common Stock pursuant to this Section 7, each share of Class A Common
Stock issued by this Corporation pursuant to the Investment Agreement, the
Stockholders' Agreement or these Articles of Incorporation shall automatically
convert (without the payment of any consideration) into one duly issued, fully
paid and nonassessable share of Common Stock, provided that such conversion
shall not be considered an acquisition of Common Stock for purposes of Section
7(i) of the Class A Provisions.
(m) Exclusionary Tender Offer. If the Board of Directors shall determine
not to oppose a tender offer by a Person other than FT, DT or any of their
respective Affiliates for Voting Securities of this Corporation representing not
less than 35 percent of the Voting Power of this Corporation, and the terms of
such tender offer do not permit the Class A Holders to sell an equal or greater
percentage of their Shares as the other holders of Voting Securities of this
Corporation are permitted to sell taking into account any proration, all, but
not less than all, of the Class A Holders shall have the right (but not the
obligation) to deliver to this Corporation a written notice requesting
conversion of certain shares of Class A Common Stock designated by the Class A
Holders into Common Stock, upon which delivery each share of Class A Common
Stock so designated in such notice shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and nonassessable
share of Common Stock, provided that (i) conversion pursuant to this clause (m)
shall not be considered to be an acquisition of Common Stock for pur poses of
Section 7(i) of the Class A Provisions, (ii) unless the Class A Common Stock
shall have otherwise been converted into Common Stock pursuant to Section 7 of
these Class A Provisions upon or prior to the consummation or abandonment of the
transaction contemplated by such tender offer, immediately following the
consummation of such transaction or the delivery by this Corporation to each
Class A Holder of a notice that such transaction has been abandoned, each share
of Common Stock, if any, held by a Class A Holder shall automatically reconvert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Class A Common Stock; and (iii) only those shares of
Class A Common Stock related to shares of Common Stock that were not so
reconverted shall be deemed for any purpose under these Articles, the
Stockholders' Agreement, the Investment Agreement, the Standstill Agreement, the
Registration Rights Agreement, or any agreement or document related thereto to
have been converted into Common Stock pursuant to this Section 7(m) of the Class
A Provisions, and the Class A Common Stock so reconverted shall be deemed to
have been at all times outstanding shares of Class A Common Stock.
8. Change of Control Procedures. As long as shares of Class A Stock are
outstanding, but subject to Sections 7(a), (b), (f) and (k) of the Class A
Provisions, if this Corpo ration, directly or indirectly, (a) determines to sell
all or substantially all of the assets of this Corporation, (b) determines not
to oppose a third-party tender, exchange or other purchase offer for Voting
Securities with a number of Votes in excess of 35 percent of the Voting Power of
this Cor poration, (c) determines to effect a merger or other business
combination involving this Corporation that would result in a Person (other than
any Class A Holder) holding Voting Securities of the resulting entity
representing 35 percent or more of the Voting Power of such entity or (d)
otherwise determines to sell Control of this Corporation, this Corporation shall
conduct such transaction in accordance with reasonable procedures to be
determined by the Board of Directors, and permit FT and DT to participate in
that process on a basis no less favorable than that granted any other
participant.
9. No Dilution or Impairment. (a) No reclassification, subdivision or
combination of the outstanding shares of Common Stock shall be effected directly
or indirectly (including without limitation any reclassification, subdivision or
combination effected pursuant to a consolidation, merger or liquidation) unless
at the same time the Class A Common Stock is reclassified, subdivided, combined
or consolidated so that the holders of the Class A Common Stock (i) are
entitled, in the aggregate, to a number of Votes representing the same
percentage of the Voting Power of this Corporation relative to the Common Stock
as were represented by the shares of Class A Common Stock outstanding
immediately prior to such reclassi fication, subdivision or combination and (ii)
maintain all of the rights associated with the Class A Common Stock set forth in
these Articles of Incorporation, including without limitation the right to
receive dividends and other distributions (including liquidating and other
distributions) that are equivalent to those payable per share in respect of
shares of Common Stock, subject to the limitations, re strictions and conditions
on such rights contained herein.
(b) Without limiting the generality of the foregoing, in the case of any
consolidation or merger of this Corporation with or into any other entity (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock) or any reclassification of the
Common Stock into any other form of capital stock of this Corporation, whether
in whole or in part, each Class A Holder shall, after such consolidation, merger
or reclassification, have the right (but not the obligation), by notice
delivered to this Corporation or any successor thereto within 90 days after the
consummation of such consolidation, merger or reclas sification, to convert each
share of Class A Common Stock held by it into the kind and amount of shares of
stock and other securities and property which such Class A Holder would have
been entitled to receive upon such consolidation, merger, or reclassification if
such Class A Holder had converted its shares of Class A Common Stock into Common
Stock immediately prior to such merger, consolidation or reclassification. This
Corporation shall not effect, directly or indirectly, any such reclassification,
subdivision or combination of outstanding shares of Common Stock unless it
delivers to the Class A Holders written notice of its intent to take such action
at least ten Business Days before taking such action.
10. Class Voting. Except as otherwise provided in Section 2(a) of ARTICLE
FIFTH or in the Class A Provisions, the Class A Holders shall not have, nor be
entitled to, a class vote with respect to any matter to be voted on by the
stockholders of this Corporation.
11. Amendment of Class A Provisions and ARTICLE FIFTH. The Class A
Provisions and Section 2(a)(iii) of ARTICLE FIFTH of these Articles of
Incorporation may be amended in any manner which would not materially alter or
change the powers, preferences or rights of the holders of shares of the Common
Stock or Preferred Stock so as to affect such powers, preferences or rights
adversely, by the Board of Directors of this Corporation with the affirmative
vote of only the holders of at least two-thirds of the outstanding shares of
Class A Stock, voting together as a single class, and without the affirmative
vote of the holders of shares of the Common Stock or the Preferred Stock. Upon
the retirement of shares of Class A Stock, (i) such shares shall not resume the
status of authorized and unissued shares of that class, (ii) such shares shall
not be reissued, and (iii) upon the execution, acknowledgment and filing of a
certificate in accordance with Kan. Stat. Ann. 17-6003 and 17-6603 (or any
successor provisions) stating that the reissuance of such shares is pro hibited,
identifying the shares and reciting their retirement, then the filing of such
certificate shall have the effect of amending these Articles of Incorporation so
as to reduce accordingly the number of authorized shares of Class A Common
Stock, or if such retired shares constitute all of the autho rized shares of
such class, then the filing of such cer tificate shall have the effect of
amending these Articles of Incorporation automatically so as to eliminate all
references to such class of stock therefrom.
12. Definitions. For purposes of ARTICLE FIFTH of these Articles of
Incorporation, the provisions of ARTICLE SIXTH of these Articles of
Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK, GENERAL
PROVISIONS RELATING TO COMMON STOCK AND CLASS A STOCK, GENERAL PROVISIONS
RELATING TO COMMON STOCK, and the Class A Provisions:
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any Class A Holder or this
Corporation unless (i) FT, DT and Atlas own a majority of the Voting Power of
such JV Entity and this Corporation does not have the Tie-Breaking Vote (as
defined in Section 18.1 of the Joint Venture Agreement), or (ii) FT, DT or Atlas
has the Tie-Breaking Vote; (b) FT, DT and this Corporation shall not be deemed
Affiliates of each other; (c) Atlas shall be deemed an Affiliate of FT and DT;
and (d) the term "Affiliate" shall not include any Governmental Authority of
France or Germany or any other Person Controlled, directly or indirectly, by any
such Governmental Authority except in each case for FT, DT, Atlas and any other
Person directly, or indirectly through one or more intermediaries, Controlled by
FT, DT or Atlas.
"Alien" shall mean "aliens", "their representatives", "a foreign government
or representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act of 1934, as amended, or as hereafter may be amended, or any
successor provision of law.
"Applicable Ratio" shall have the meaning set forth in Section 7.5(a) of
the Stockholders' Agreement.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act, provided that when used to indicate a relationship with
FT or DT or their respective Subsidiaries or Affiliates, the term "Associate"
shall mean (a) in the case of FT, any Person occupying any of the posi tions
listed on Schedule A to the Stockholders' Agreement and (b) in the case of DT,
any Person occupying any of the posi tions listed on Schedule B to the
Stockholders' Agreement, provided, further, that, in each case, no Person
occupying any such position described in clause (a) or (b) hereof shall be
deemed an "Associate" of FT or DT, as the case may be, unless the Persons
occupying all such positions described in clauses (a) and (b) hereof
Beneficially Own, in the aggregate, more than 0.2% of the Voting Power of the
Company.
"Atlas" shall mean the company formed as a socit anonyme under the laws of
Belgium pursuant to the Joint Venture Agreement, dated as of December 15, 1994,
between FT and DT, as amended.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, shall mean any
Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including, without limitation, pursuant to the Investment Agreement and the
Stockholders' Agree ment, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 under the
Exchange Act but including all such securities which a Person has the right
to acquire beneficial ownership of whether or not such right is exercisable
within the 60- day period specified therein) such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); or
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof),
provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates shall not also be deemed to be Beneficially Owned by the other of FT
or DT or its Affiliates.
"Board of Directors" shall mean the board of directors of
this Corporation.
"Business Day" shall mean any day other than a day on which commercial
banks in The City of New York, Paris, France, or Frankfurt am Main, Germany, are
required or authorized by law to be closed.
"Buyers" shall have the meaning set forth in the
Investment Agreement.
"Bylaws" shall mean the Bylaws of this Corporation as amended or
supplemented from time to time.
"Cellular" shall mean (a) until immediately prior to the Cellular Spin-off
Date, the Cellular and Wireless Division, (b) immediately prior to the Cellular
Spin-off Date, the direct or indirect wholly owned subsidiary of this
Corporation owning the assets of the Cellular and Wireless Division, the shares
of which subsidiary are to be distributed to this Corporation's stockholders in
connection with the Cellular Spin-off, and (c) on and after the Cellular
Spin-off Date, such company, provided that the term "Cellular" shall not include
any assets retained by this Corporation after the Cellular Spin-off Date.
"Cellular and Wireless Division" shall mean the Cellular
and Wireless Communications Services Division of this
Corporation.
"Cellular Common Stock" shall mean the shares of common
stock of Cellular.
"Cellular Spin-off" shall mean the distribution by this Corporation on a
pro rata basis to the holders of the Common Stock of shares of Cellular Common
Stock representing all of the common equity of Cellular.
"Cellular Spin-off Date" shall mean the date on which shares of Cellular
Common Stock are distributed to the holders of Common Stock.
"Change of Control" shall mean a:
(a) decision by the Board of Directors to sell Control of this
Corporation or not to oppose a third party tender offer for Voting
Securities of this Corporation representing more than 35% of the Voting
Power of this Corporation; or
(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,
provided that a Strategic Merger shall not be deemed to be a Change of Control
and provided, further, that any transaction between this Corporation and FT and
DT or otherwise involving FT and DT and any of their direct or indirect
Subsidiaries which are party to a Contract therefor shall not be deemed to be a
Change of Control.
"Class A Action" shall mean action by the holders of a majority of the
shares of Class A Stock taken by a vote at either a regular or special meeting
of the stockholders of this Corporation or of the holders of the Class A Stock
or by written consent delivered to the Secretary of this Corpora tion.
"Class A Common Issuance Date" shall mean the date this Corporation first
issues shares of Class A Common Stock.
"Class A Common Stock" shall have the meaning set forth in ARTICLE SIXTH of
these Articles of Incorporation.
"Class A Director" shall mean any Director elected by the Class A Holders
pursuant to Section 2(a) of ARTICLE FIFTH of these Articles of Incorporation or
appointed by Class A Directors pursuant to Section 4(b) of ARTICLE FIFTH of
these Articles of Incorporation.
"Class A Holders" shall mean (a) the holders of the Class A Stock, and (b)
any Qualified Stock Purchaser who has executed with this Corporation a Qualified
Stock Purchaser Assumption Agreement (as such term is defined in the
Stockholders' Agreement), for so long as such Person holds Class A Common Stock.
"Class A Provisions" shall mean the portion of ARTICLE SIXTH of these
Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO CLASS A STOCK.
"Class A Stock" shall mean the Class A Common Stock.
"Closing Price" shall mean, with respect to a security on any day, the last
sale price, regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on The New York Stock Exchange, Inc.
or, if such security is not listed or admitted to trading on such exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
security is listed or admitted to trading or, if the security is not listed or
admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by NASDAQ or such other system then in
use, or, if on any such date such security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the security selected in good faith
by the Board of Directors. If the security is not publicly held or so listed or
publicly traded, "Closing Price" shall mean the Fair Market Value of such
security.
"Committed Percentage" shall mean, as to any Class A Holder, the percentage
obtained by dividing the aggregate number of Votes represented or to be
represented by the Voting Securities of this Corporation (a) owned of record by
such Class A Holder or by its nominees; and (b) which such Class A Holder has
committed to this Corporation to purchase pursuant to Articles V and VI and
Sections 7.3 and 7.8 of the Stockholders Agreement and Article II of the
Investment Agreement, by the sum of (i) the Voting Power of this Corporation,
plus (ii) the Votes to be represented by any Voting Securities of this
Corporation such Class A Holder has committed to this Corporation to purchase
from this Corporation pursuant to Articles V and VI and Section 7.3 of the
Stockholders' Agreement and Article II of the Investment Agreement.
"Continuing Director" shall have the meaning set forth in
the Fair Price Provisions.
"Contract" shall mean any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, contract, or other agreement,
obligation, instrument or binding commitment of any nature.
"Control" shall mean, with respect to a Person or Group,
any of the following:
(a) ownership by such Person or Group of Votes entitling it to
exercise in the aggregate more than 35 percent of the Voting Power of the
entity in question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or otherwise.
"Core Businesses" shall mean all businesses in the fields of
telecommunications and information technology and applications, and equipment,
software applications and consumer and business services related thereto or
making use of the technology thereof, including value-added consumer and
business services generated through or as a result of underlying
telecommunications services using all technology (voice, data and image) and
physical transport, network intel ligence, and software applications, and cable
television (but not including any programming or content-related activities with
respect thereto).
"Corporation Joint Venture Termination" shall mean any of
the following:
(a) the sale of Venture Interests by a Sprint Party
pursuant to Section 20.5(a) of the Joint Venture
Agreement; or
(b) the receipt by the FT/DT Parties of the Tie- Breaking Vote due to
a Funding Default, Material Non- Funding Default or Bankruptcy (as such
terms are defined in the Joint Venture Agreement) on the part of any of the
Sprint Parties.
"Director" shall mean a member of the Board of Directors.
"DT" shall mean Deutsche Telekom AG, an Aktiengesellschaft formed under the
laws of Germany.
"ESMR" shall mean any commercial mobile radio service, and the resale of
such service, of the type authorized under the rules for Specialized Mobile
Radio Services designated under Subpart S of Part 90 of the FCC's rules or
similar Applicable Laws of any other country in effect on the date hereof,
including the networking, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Europe" shall mean the current geographic area covered by the following
countries and territories located on the European continent, plus, in the case
of France, its territories and possessions located outside the European
continent: Albania, Andorra, Austria, Belgium, Bosnia- Hercegovina, Bulgaria,
Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein,
Lithu ania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands,
Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia,
Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the United States Securities and Exchange
Commission promulgated
thereunder.
"Exempt Asset Divestitures" shall mean, with respect to this Corporation
and its Subsidiaries:
(a) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to joint ventures approved by FT and DT prior to the
Initial Issuance Date;
(b) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to (i) any entity in exchange for equity interests in
such entity if, after such transaction, this Corporation owns at least 51
percent of both the Voting Power and equity interests in such entity or
(ii) any joint venture that is an operating joint venture not controlled by
any of its principals and in which (x) this Corporation has the right,
acting alone, to disapprove (and thereby prohibit) decisions relating to
acquisitions and divestitures involving more than 20 percent of the Fair
Market Value of such entity's assets, mergers, consolidations and
dissolution or liquidation of such entity and the adoption of such entity's
business plan, and (y) Major Competitors of the Joint Venture do not in the
aggregate own more than 20% of the equity interests or Voting Power; or
(c) transactions in which this Corporation exchanges one or more (i)
local exchange telephone businesses for one or more such businesses or (ii)
public cellular or wireless radio telecommunications service systems for
one or more such systems, provided that this Corporation shall not,
directly or indirectly, receive cash in any such transaction in an amount
greater than 20 percent of the Fair Market Value of the property or
properties Transferred by it;
(d) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) by this Corporation to any of its Subsidiaries, or by
any of its Subsidiaries to this Corporation or any other Subsidiary of this
Corporation;
(e) (i) any Spin-off of equity interests of a wholly-owned Subsidiary
that is not a Subsidiary which, directly or indirectly, owns Long Distance
Assets (for purposes of this definition, the "Spun-off Entity"), provided
that, in the case of a Spin-off which is consummated following the Initial
Issuance Date, the Class A Holders receive securities in the Spun-off
Entity of a separate class with rights no less favorable to the Class A
Holders than those applicable to the Class A Stock set forth in these
Articles of Incorporation and the Bylaws, or (ii) the Cellular Spin-off;
(f) Transfers of assets (other than Long Distance Assets) of this
Corporation or any of its Subsidiaries that are primarily or exclusively
used in connection with providing information technology or data processing
functions or services (collectively, for purposes of this definition, the
"IT Assets") to any Person that regularly provides information technology
or data processing functions or services on a commercial basis, in
connection with a contractual arrangement (for purposes of this definition,
an "IT Service Contract") pursuant to which such Person undertakes to
provide information tech nology or data processing functions or services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such assets prior to such
Transfer and upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, provided that (i) the term of
such IT Service Contract shall be for a period at least as long as the
weighted average useful life of such assets, or this Corporation or such
Subsidiary shall have the right to cause such IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, and (ii) the Transfer of such
assets will not materially and adversely affect the operation of this
Corporation; or
(g) Transfers of assets (other than Long Distance Assets or IT Assets)
of this Corporation or any of its Subsidiaries to any Person in connection
with any contractual arrangement (for purposes of this definition, a
"Non-IT Service Contract") pursuant to which such Person undertakes to
provide services to this Corporation or any of its Subsidiaries of
substantially the same nature as the services associated with the use of
such assets prior to such Transfer and upon commercially reasonable terms
to this Corporation as determined in good faith by this Corporation,
provided, that (i) the Fair Market Value of such assets, together with the
Fair Market Value of assets of this Corporation Transferred to such Person
or other Persons in related transactions, do not represent more than five
percent of the Fair Market Value of the assets of this Corporation, (ii)
the Transfer of such assets will not materially and adversely affect the
operation of this Corporation, and (iii) the term of such Non-IT Service
Contract shall be for a period at least as long as the weighted average
useful life of the assets so Transferred or this Corporation or such
Subsidiary has the right to cause such Non-IT Ser vice Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation.
"Exempt Long Distance Asset Divestitures" shall mean, with respect to this
Corporation and its Subsidiaries:
(a) Transfers of Long Distance Assets to a
Qualified Joint Venture;
(b) Transfers of Long Distance Assets to any entity if this
Corporation and its Subsidiaries after such transaction own at least 70
percent of both the Voting Power and equity interests of such entity,
provided that if a Major Competitor of FT or DT or of the Joint Venture
holds equity interests in such entity, such Major Compet itor's equity
interests and Votes in such entity as a percentage of the Voting Power of
such entity shall not, directly or indirectly, exceed 20 percent;
(c) Transfers of Long Distance Assets pursuant to an underwritten,
widely-distributed public offering at the conclusion of which this
Corporation and its Subsidiaries shall own at least 51 percent of both the
Voting Power and equity interests in the entity that owns such Long
Distance Assets;
(d) Transfers in the ordinary course of business of Long Distance
Assets determined by this Corporation to be unnecessary for the orderly
operation of this Corporation's business, and sale-leasebacks of Long
Distance Assets and similar financing transactions after which this
Corporation and its Subsidiaries continue in possession and control of the
Long Distance Assets involved in such transaction;
(e) Transfers of Long Distance Assets by this Corporation to any of
its Subsidiaries, or by any of its Subsidiaries to this Corporation or any
other Subsidiary of this Corporation;
(f) Transfers of Long Distance Assets to FT or DT
or any assignee thereof pursuant to the Stockholders'
Agreement;
(g) any Spin-off of equity interests of a wholly-owned Subsidiary
which, directly or indirectly, owns Long Distance Assets (for purposes of
this definition, the "Spun-off Entity"), provided that the Class A Holders
receive securities in the Spun-off Entity of a separate class with rights
no less favorable to the Class A Holders than those applicable to the Class
A Stock set forth in these Articles of Incorporation and the Bylaws;
(h) Transfers of Long Distance Assets of this Corporation or any of
its Subsidiaries that are primarily or exclusively used in connection with
providing information technology or data processing functions or services
(collectively, for purposes of this definition, the "IT Assets") to any
Person that regularly provides information technology or data processing
functions or services on a commercial basis, in connection with a
contractual arrangement (for purposes of this definition, an "IT Service
Contract") pursuant to which such Person undertakes to provide information
technology or data processing functions or services to this Corporation or
any of its Subsidiaries of substantially the same nature as the services
associated with the use of such Long Distance Assets prior to such Transfer
and upon commer cially reasonable terms to this Corporation as determined
in good faith by this Corporation, provided that (i) the term of such IT
Service Contract shall be for a period at least as long as the weighted
average useful life of such Long Distance Assets, or this Corporation or
such Subsid iary shall have the right to cause such IT Service Contract to
be renewed or extended for a period at least as long as such weighted
average useful life upon commercially reasonable terms to this Corporation
as determined in good faith by this Corporation, and (ii) the Transfer of
such Long Distance Assets will not materially and adversely affect the
operation of the Long Distance Business. Any such IT Service Contract
involving Transfers of Long Distance Assets, including any renewal or
extension thereof, shall be deemed to be a Long Distance Asset; or
(i) Transfers of Long Distance Assets (other than IT Assets) of this
Corporation or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such Long Distance Assets
prior to such Transfer and upon commercially reasonable terms to this
Corporation as determined in good faith by this Corporation, provided, that
(i) the Fair Market Value of such Long Distance Assets, together with the
Fair Market Value of Long Distance Assets Transferred to such Person or
other Persons in related transactions, do not represent more than three
percent of the Fair Market Value of the Long Distance Assets of this
Corporation, (ii) the Transfer of such Long Distance Assets will not
materially and adversely affect the operation of the Long Distance
Business, and (iii) the term of such Non-IT Service Contract shall be for a
period at least as long as the weighted average useful life of the Long
Distance Assets so Transferred or this Corporation or such Subsidiary has
the right to cause such Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to this Corporation as determined in good
faith by this Corporation. Any such Non-IT Service Contract involving
Transfers of Long Distance Assets, including any renewal or extension
thereof, shall be deemed to be a Long Dis tance Asset.
"Extraordinary Dividend" shall mean, with respect to capital stock of this
Corporation, a cash dividend or other cash distribution, other than (a) a
regular periodic dividend payable in cash; or (b) a dividend payable in
accordance with the terms of the Preferred Stock.
"Fair Market Value" shall mean, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arm's-length
negotiated transaction without undue time restraints, as determined in good
faith by a majority of the Independent Directors as certified in a resolution
delivered to all of the Class A Holders.
"Fair Price Condition" shall have the meaning set forth in that section of
ARTICLE SIXTH of these Articles of Incorporation entitled GENERAL PROVISIONS
RELATING TO ALL STOCK.
"Fair Price Provisions" shall mean ARTICLE SEVENTH of these Articles of
Incorporation, and any successor provision thereto.
"FCC" shall mean the Federal Communications Commission.
"FCC Order" shall mean, with respect to any proposed Transfer of Long
Distance Assets by this Corporation, either:
(a) an effective written order or other final action from the FCC
(either in the first instance or upon review or reconsideration) either
declaring that FT and DT are not prohibited by Section 310 from owning such
Long Distance Assets or stating that no such declaration is required, and
as to which no Proceeding shall be pending or threatened that presents a
substantial possibility of resulting in a reversal thereof; or
(b) an effective written order from, or other final action taken by,
the FCC pursuant to delegated authority (either in the first instance or
upon review or reconsideration) either declaring that FT and DT are not
prohibited by Section 310 from owning such Long Distance Assets, or stating
that no such declaration is required, which order or final action shall no
longer be subject to further administrative review, and as to which no
Proceeding shall be pending or threatened that presents a substantial
possibility of resulting in a reversal thereof;
For purposes of clause (b) of this definition, an order from, or other final
action taken by, the FCC pursuant to delegated authority shall be deemed no
longer subject to further administrative review:
(x) if no petition for reconsideration or appli
cation for review by the FCC of such order or
final action has been filed within thirty days
after the date of public notice of such order
or final action, as such 30-day period is
computed and as such date is defined in
Sections 1.104 and 1.4 (or any successor provi
sions), as applicable, of the FCC's rules, and
the FCC has not initiated review of such order
or final action on its own motion within forty
days after the date of public notice of the
order or final action, as such 40-day period is
computed and such date is defined in Sections
1.117 and 1.4 (or any successor provisions) of
the FCC's rules; or
(y) if any such petition for reconsideration or application for
review has been filed, or, if the FCC has initiated review of
such order or final action on its own motion, the FCC has issued
an effective written order or taken final action to the effect
set forth in clause (a) above.
"France" shall mean the Republic of France, including
French Guiana, Guadeloupe, Martinique and Runion, and its
territories and possessions.
"FT" shall mean France Tlcom, an exploitant public formed under the laws of
France.
"FT/DT Joint Venture Termination" shall mean any of the
following:
(a) the sale of Venture Interests by an FT/DT Party
pursuant to Section 20.5(b), 20.5(c) or 20.5(d) of the
Joint Venture Agreement; or
(b) the receipt by the Sprint Parties of the Tie- Breaking Vote due to
a Funding Default, Material Non- Funding Default or Bankruptcy (as such
terms are defined in the Joint Venture Agreement) on the part of any of the
FT/DT Parties.
"FT/DT Party" shall have the meaning set forth in the
Joint Venture Agreement.
"Germany" shall mean the Federal Republic of Germany.
"Governmental Authority" shall mean any federation, nation, state,
sovereign, or government, any federal, supranational, regional, state or local
political subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercis ing executive, legislative, judicial, regulatory or
administrative functions of a government, provided that the term "Governmental
Authority" shall not include FT, DT, Atlas or any of their respective
Subsidiaries.
"Group" shall mean any group within the meaning of Section 13(d)(3) of the
Exchange Act.
"Independent Director" shall mean any member of the Board of Directors who
(a) is not an officer or employee of this Corporation, or any Class A Holder, or
any of their respective Subsidiaries, (b) is not a former officer of this
Corporation, or any Class A Holder, or any of their respective Subsidiaries, (c)
does not, in addition to such person's role as a Director, act on a regular
basis, either individually or as a member or representative of an organization,
serving as a professional adviser, legal counsel or consultant to this
Corporation, or any Class A Holder, or their respective Subsidiaries, if, in the
opinion of the Nominating Committee of the Board of Directors of this
Corporation (the "Nominating Committee") or the Board of Directors if a
Nominating Committee is not in existence, such relationship is material to this
Corporation, any Class A Holder, or the organization so represented or such
person, and (d) does not represent, and is not a member of the immediate family
of, a person who would not satisfy the requirements of the preceding clauses
(a), (b) and (c) of this sentence. A person who has been or is a partner,
officer or director of an organization that has customary commercial,
industrial, banking or underwriting rela tionships with this Corporation, any
Class A Holder, or any of their respective Subsidiaries, that are carried on in
the ordinary course of business on an arms-length basis and who otherwise
satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the
first sentence of this definition, may qualify as an Independent Director,
unless, in the opinion of the Nominating Committee or the Board of Directors if
a Nominating Committee is not in existence, such person is not independent of
the management of this Corporation, or any Class A Holder, or any of their
respective Subsidiaries, or the relationship would interfere with the exercise
of independent judgment as a member of the Board of Directors. A person who
otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d)
of the first sentence of this definition and who, in addition to fulfilling the
customary director's role, also provides additional services directly for the
Board of Directors and is separately compensated therefor, would nonetheless
qualify as an Independent Director. Notwithstanding anything to the contrary
contained in this definition, each Director as of the date of the execution of
the Investment Agreement who is not an executive officer of this Corporation
shall be deemed to be an Inde pendent Director hereunder.
"Initial Issuance Date" shall mean January 31, 1996.
"Investment Agreement" shall mean the Investment Agreement, dated as of
July 31, 1995, among FT, DT and this Corporation (and all exhibits and schedules
thereto), as it may be amended or supplemented from time to time.
"Investment Completion Date" shall mean the Class A
Common Issuance Date.
"Investment Documents" means the Investment Agreement and
the Stockholders' Agreement.
"Joint Venture" shall mean the joint venture formed by FT, DT, this
Corporation and Sprint Sub, as provided in the Joint Venture Agreement.
"Joint Venture Agreement" shall mean the Joint Venture Agreement, dated as
of June 22, 1995 among FT, DT, Sprint Sub, and this Corporation.
"JV Entity" shall have the meaning set forth in the Joint
Venture Agreement.
"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Lien Transfer" shall mean the granting of any Lien on any Long Distance
Asset, other than:
(a) a lien securing purchase money indebtedness that does not have a
term longer than the estimated useful life of such Long Distance Asset;
(b) Liens or other comparable arrangements relating
to the financing of accounts receivable; and
(c) Liens securing any other indebtedness for borrowed money, provided
that (i) the amount of such indebtedness, when added to the aggregate
amount of purchase money indebtedness referred to in clause (a) above, does
not exceed 30% of the total book value of the Long Distance Assets as at
the date of the most recently published balance sheet of this Corporation,
(ii) the indebtedness secured by such Liens is secured only by Liens on
Long Distance Assets, (iii) the face amount of such indebtedness does not
exceed the book value of the Long Distance Assets subject to such Liens,
and (iv) such indebtedness is for a term no longer than the estimated
useful life of the Long Distance Assets subject to such Liens.
"Local Exchange Division" shall mean the Local
Communications Services Division of this Corporation.
"Long Distance Assets" shall mean:
(a) the assets reflected in this Corporation's balance sheet for the
year ended December 31, 1994 as included in the Long Distance Division;
(b) any assets acquired by this Corporation or any of its Subsidiaries
following December 31, 1994 that are reflected in this Corporation's
balance sheet as included in the Long Distance Division;
(c) any assets of this Corporation or any of its Subsidiaries that are
not reflected in this Corporation's balance sheet for the year ended
December 31, 1994 as in cluded in the Long Distance Division, which after
December 31, 1994 are transferred by this Corporation or any of its
Subsidiaries to, or reclassified by this Corporation or any of its
Subsidiaries as part of, the Long Distance Division;
(d) any assets acquired by this Corporation after December 31, 1994
that are used or held for use primarily for the benefit of the Long
Distance Business; and
(e) any assets referred to in clauses (a) through (c) above that are
used or held for use primarily for the benefit of the Long Distance
Business which are trans ferred or reclassified by this Corporation or any
of its Subsidiaries outside of the Long Distance Division, but which
continue to be owned by this Corporation or any of its Subsidiaries;
provided that the term "Long Distance Assets" shall not include (i) any assets
that are used or held for use primarily for the benefit of any Non-Long Distance
Business, or (ii) any other assets reflected in this Corporation's balance sheet
for the year ended December 31, 1994 as included in the Cellular and Wireless
Division or the Local Exchange Division (other than as such assets in the
Cellular and Wireless Division or the Local Exchange Division may be transferred
or reclassified in accordance with paragraph (c) of this definition).
"Long Distance Business" shall mean all long distance telecommunications
activities and services of this Corporation and its Subsidiaries at the relevant
time, including (but not limited to) all long distance transport services,
switching and value-added services for voice, data, video and multimedia
transmission, migration paths and intelligent overlapping architectures,
provided that the term "Long Distance Business" shall not include any activities
or services primarily related to any Non-Long Distance Business.
"Long Distance Division" shall mean the Long Distance
Communications Services Division of this Corporation.
"Major Competitor" shall mean (a) with respect to FT or DT, a Person that
materially competes with a major portion of the telecommunications services
business of FT or DT in Europe or a Person that has taken substantial steps to
become such a Major Competitor and which FT or DT has reasonably concluded, in
its good faith judgment, will be such a competitor in the near future in France
or Germany, provided that FT and/or DT furnish in writing to this Corporation
reasonable evidence of the occurrence of such steps; (b) with respect to this
Corpo ration, a Person that materially competes with a major portion of the
telecommunications services business of this Corporation in North America, or a
Person that has taken substantial steps to become such a Major Competitor and
which this Corporation has reasonably concluded, in its good faith judgment,
will be such a competitor in the near future in the United States of America
provided that this Corporation furnish in writing to each Class A Holder
reasonable evidence of the occurrence of such steps; and (c) with respect to the
Joint Venture, a Person that materially competes with a major portion of the
telecommunications services business of the Joint Venture, or a Person that has
taken substantial steps to become such a Major Competitor and which FT, DT or
this Corporation has reasonably concluded, in its good faith judgment, will be
such a competitor in the near future, provided that FT, DT or this Corporation
furnish in writing to the other two of them reasonable evidence of the
occurrence of such steps.
"Major Competitor Transaction" shall have the meaning set forth in Section
6(a) of the Class A Provisions.
"Major Issuance" shall mean any transaction, including, but not limited to,
a merger or business combination, resulting, directly or indirectly, in the
issuance (or sale from treasury) in connection with such transaction of Voting
Securities of this Corporation with a number of Votes equal to or greater than
30 percent of the Voting Power of this Corporation immediately prior to such
issuance.
"Market Capitalization" shall mean, with respect to this Corporation at any
date, the sum of the average Market Price over the immediately preceding 20
Business Days of each share of outstanding capital stock of this Corporation,
securities convertible into such capital stock and options, warrants or other
rights to acquire such capital stock.
"Market Price" shall mean with respect to a security on any date, the
Closing Price of such security on the Trading Day immediately prior to such
date. The Market Price shall be deemed to be equal to, in the case of a share of
Class A Common Stock, the Market Price of a share of Common Stock. The Market
Price of any options, warrants, rights or other securities convertible into or
exercisable for Class A Common Stock shall be equal to the Market Price of
options, warrants, rights or other securities convertible into or exercisable
for Common Stock upon the same terms and otherwise containing the same terms as
such options, warrants, rights or other securities convertible into or
exercisable for Class A Common Stock.
"NASDAQ" means the National Association of Securities
Dealers, Inc. Automated Quotations System.
"Non-Long Distance Business" shall mean (a) the ownership of any equity or
other interests in the Joint Venture or any of the JV Entities; the enforcement
or performance of any of the rights or obligations of this Corporation or any
Subsid iary of this Corporation pursuant to the Joint Venture Agreement; or any
activities or services of the Joint Venture or any of the JV Entities; (b) the
Triple Play Activities; (c) any activities or services primarily related to the
provi sion of subscriber connections to a local exchange or switch providing
access to the public switched telephone network; (d) any activities or services
primarily related to the provision of exchange access services for the purpose
of originating or terminating long distance telecommunications services; (e) any
activities or services primarily related to the resale by the Local Exchange
Division of long distance telecommunications services of this Corporation or
other carriers; (f) any activities or services primarily related to the
provision of inter-LATA long distance telecommunications services that are
incidental to the local exchange services business of the Local Exchange
Division; (g) any activities or services primarily related to the provision of
intra-LATA long distance telecommunications services; (h) any activities or
services (whether local, intra-LATA or inter-LATA) primarily related to the
provision of cellular, PCS, ESMR or paging services, mobile telecommunications
services or any other voice, data or voice/data wireless services, whether fixed
or mobile, or related to telecommunications services provided through
communications satellite systems (whether low, medium or high orbit systems);
and (i) the use of the "Sprint" brand name or any other brand names, trade names
or trademarks owned or licensed by this Corporation or any of its Subsidiaries.
"North America" shall mean the current geographic area
covered by the following countries: Canada, the United States
of Mexico and the United States of America.
"PCS" shall mean a radio communications system of the type authorized under
the rules for broadband personal communications services designated as Subpart E
of Part 24 of the FCC's rules or similar Applicable Laws of any other country,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Percentage Ownership Interest" shall mean, with respect to any Person,
that percentage of the Voting Power of this Corporation represented by Votes
associated with the Voting Securities of this Corporation owned of record by
such Person or by its nominees.
"Person" shall mean an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized or existing
under Applicable Law, an unincorporated organization or any Governmental
Authority.
"Preferred Stock" shall have the meaning set forth in ARTICLE SIXTH of
these Articles of Incorporation.
"Preferred Stock Director" shall have the meaning set forth in ARTICLE
FIFTH of these Articles of Incorporation.
"Proceeding" shall mean any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or otherwise,
before any Govern mental Authority.
"Qualified Joint Venture" shall have the meaning set forth in Article I of
the Investment Agreement.
"Qualified Stock Purchaser" shall mean a Person that (a) FT and DT
reasonably believe has the legal and financial ability to purchase shares of
Class A Stock from this Corporation in accordance with Article VI of the
Stockholders' Agreement and (b) would not be a Major Competitor of this
Corporation or of the Joint Venture immediately following such purchase.
"Qualified Stock Purchaser Standstill Agreement" shall have the meaning set
forth in the Standstill Agreement.
"Qualified Subsidiary" shall have the meaning set forth
in the Investment Agreement.
"Qualified Subsidiary Standstill Agreement" shall have the meaning set
forth in the Investment Agreement.
"Redemption Date" shall mean the date fixed by the Board of Directors for
the redemption of any shares of capital stock of this Corporation pursuant to
Section 2 of the provisions of ARTICLE SIXTH of these Articles of Incorporation
entitled GENERAL PROVISIONS RELATING TO ALL STOCK.
"Redemption Securities" shall mean any debt or equity securities of this
Corporation, any of its Subsidiaries, or any combination thereof having such
terms and conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price pursuant to
subsection (b) of Section 2 of the provisions of ARTICLE SIXTH of these Articles
of Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK, in the opin
ion of an investment banking firm of recognized national standing selected by
the Board of Directors (which may be a firm which provides other investment
banking, brokerage or other services to this Corporation), have a Market Price,
at the time notice of redemption is given pursuant to sub section (d) of Section
2 of the provisions of ARTICLE SIXTH of these Articles of Incorporation entitled
GENERAL PROVISIONS RELATING TO ALL STOCK, at least equal to the redemption price
required to be paid by subsection (a) of such Section 2.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the Initial Issuance Date, among FT, DT and this Corporation,
as it may be amended or supplemented from time to time.
"Rights Agreement" shall mean the Rights Agreement, dated as of August 8,
1989, between this Corporation and UMB Bank, n.a., as amended on June 4, 1992
and as of July 31, 1995, and as it may be amended or supplemented from time to
time.
"Section 310" shall have the meaning set forth in Section 2(a) of ARTICLE
FIFTH of these Articles of Incorporation.
"Shares" shall mean (a) shares of Class A Stock, Common Stock or any other
Voting Securities of this Corporation, (b) securities of this Corporation
convertible into Voting Securities of this Corporation and (c) options, warrants
or other rights to acquire such Voting Securities, but in the case of clause (c)
excluding any rights of the Class A Holders or FT and DT to acquire Voting
Securities of this Corporation pursuant to the Investment Agreement and the
Stockholders' Agreement (but not excluding any Voting Securities received upon
the exercise of such rights).
"Spin-off" shall mean any spin-off or other pro rata distribution of equity
interests of a wholly-owned direct or indirect Subsidiary of this Corporation to
the stockholders of this Corporation, provided that the term "Spin-off" shall
not include the Cellular Spin-off.
"Sprint Party" shall have the meaning set forth in the
Joint Venture Agreement.
"Sprint Sub" shall mean Sprint Global Venture, Inc.
"Standstill Agreement" shall mean the Standstill Agreement, dated as of
July 31, 1995, among FT, DT and this Corporation, as it may be amended or
supplemented from time to time.
"Stockholders' Agreement" shall mean the Stockholders' Agreement, dated as
of the Initial Issuance Date, among FT, DT and this Corporation (and all
exhibits thereto), as it may be amended or supplemented from time to time.
"Strategic Investor" shall have the meaning set forth in
the Investment Agreement.
"Strategic Merger" shall mean a merger or other business combination
involving this Corporation (a) in which the Class A Holders are entitled to
retain or receive, as the case may be, voting equity securities of the surviving
parent entity in exchange for or in respect of (by conversion or otherwise) such
Class A Stock, with an aggregate Fair Market Value equal to at least 75% of the
sum of (i) the Fair Market Value of all consideration which such Class A Holders
have a right to receive with respect to such merger or other business
combination, and (ii) if this Corporation is the surviving parent entity, the
Fair Market Value of the equity securities of the surviving parent entity which
the Class A Holders are entitled to retain, (b) immediately after which the
surviving parent entity is an entity whose voting equity securities are
registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act or
which otherwise has any class or series of its voting equity securities held by
at least 500 holders and (c) immediately after which no Person or Group (other
than the Class A Holders) owns Voting Securities of such surviving parent entity
with Votes equal to more than 35 percent of the Voting Power of such surviving
parent entity.
"Subsidiary" shall mean, with respect to any Person (the "Parent"), any
other Person in which the Parent, one or more direct or indirect Subsidiaries of
the Parent, or the Parent and one or more of its direct or indirect Subsidiaries
(a) have the ability, through ownership of securities individu ally or as a
group, ordinarily, in the absence of contingencies, to elect a majority of the
directors (or individuals performing similar functions) of such other Person,
and (b) own more than 50% of the equity interests, provided that Atlas shall be
deemed to be a Subsidiary of each of FT and DT.
"Supervoting Powers" shall mean, as to the capital stock and debt
securities of this Corporation:
(a) Common Stock entitled to more than one Vote per
share (other than pursuant to the Rights Agreement); or
(b) Voting Securities of this Corporation other than Common Stock
entitled to a number of Votes per share or unit, as the case may be,
greater than the quotient of (i) the price per share or unit, as the case
may be, at which such security will be issued by this Corporation di vided
by (ii) the Market Price per share of Common Stock on the date of issuance.
"Tie-Breaking Vote" shall have the meaning set forth in Section 18.1(a) of
the Joint Venture Agreement, and shall include any successor provision thereto.
"Trading Day" shall mean, with respect to any security, any day on which
the principal national securities exchange on which such security is listed or
admitted to trading or NASDAQ, if such security is listed or admitted to trading
thereon, is open for the transaction of business (unless such trading shall have
been suspended for the entire day) or, if such security is not listed or
admitted to trading on any national securities exchange or NASDAQ, any day other
than a Saturday, Sunday, or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order to close.
"Transfer" shall mean any act pursuant to which, directly or indirectly,
the ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens, (b) any conversion or exchange of any security of this Corporation
pursuant to a merger or other business combination involving this Corporation,
(c) any transfer of ownership of assets to the surviving entity in a Strategic
Merger or pursuant to any other merger or other business combination not
prohibited by the Class A Provisions, or (d) any foreclosure or other execution
upon any of the assets of this Corporation or any of its Subsidiaries other than
foreclosures resulting from Lien Transfers.
"Treaty Benefit" shall mean:
(a) the 5% rate of dividend withholding (or any
successor rate applicable to non-portfolio
investments);
(b) the exemption from income tax with respect to
dividends paid or profits distributed by this
Corporation;
(c) the exemption from income tax with respect to gains or profits derived
from the sale, exchange, or disposal of stock in this Corporation; or
(d) the exemption from taxes on capital with respect to
stock in this Corporation;
under, in the case of (a), (b), (c) and (d) above, either (i) the relevant
income tax treaty between the United States and France, in the case of FT,
and the United States and Germany, in the case of DT, or (ii) any
provisions of French statutory law, in the case of FT, or German statutory
law, in the case of DT, which refers to, or is based on or derived from,
any provision of such treaty, or
(e) any other favorable treaty benefit or statutory
benefit, that specifically requires the ownership of
a certain amount of voting power or voting interest
in this Corporation, under a provision of the
relevant income tax treaty between the United States
and France or the statutory laws of France, in the
case of FT, or the relevant income tax treaty
between the United States and Germany or the
statutory laws of Germany, in the case DT, provided
that the chief tax officer of FT or DT certifies
that such benefit is reasonably expected to provide
to FT or DT, as the case may be, combined tax
savings in the year such certification is made and
in future years of at least U.S. $15 million.
"Triple Play Activities" shall mean (a) the ownership of any equity or
other interests in MajorCo, L.P. or any of its successors or Affiliates; the
enforcement or performance of any of the rights or obligations of this
Corporation or any Subsidiary of this Corporation pursuant to the Agreement of
Limited Partnership of MajorCo, L.P. or any other agreement or arrangement
contemplated thereby, except to the extent relating to the provision of services
by this Corporation as the long distance telecommunications provider to MajorCo,
L.P.; or any activities or services of MajorCo, L.P. or any of its successors or
Affiliates; (b) the ownership of any equity or other interests in any Teleport
Entity (as that term is defined in the Contribution Agreement (the "Contribution
Agreement"), dated as of March 28, 1995, by and among TCI Network Services,
Comcast Telephony Services, Cox Telephony Partnership, MajorCo, L.P. and
NewTelco, L.P.); or any activities or services of any Teleport Entity or any of
their respective successors or Affiliates; and (c) the ownership of any equity
or other interests in PhillieCo, L.P., or any of its successors or Affiliates;
the enforcement or performance of any of the rights or obligations of this
Corporation or any Subsidiary of this Corporation pursuant to the Amended and
Restated Agreement of Limited Partnership of PhillieCo, L.P., dated as of
February 17, 1995, or any other agreement or arrangement contemplated thereby,
except to the extent relat ing to the provision of services by this Corporation
as the long distance telecommunications provider to PhillieCo, L.P.; or any
activities or services of PhillieCo, L.P. or any of its successors or
Affiliates.
"Venture Interests" shall have the meaning set forth in
the Joint Venture Agreement.
"Vote" shall mean, with respect to any entity, the ability to cast a vote
at a stockholders', members' or comparable meeting of such entity with respect
to the election of directors, managers or other members of such entity's
governing body, or the ability to cast a general partnership or comparable vote,
provided that with respect to this Corporation only, the term "Vote" shall mean
the ability to exercise general voting power (as opposed to the exercise of
special voting or disapproval rights such as those set forth in the Class A
Provisions) with respect to matters other than the election of directors at a
meeting of the stockholders of this Corporation.
"Voting Power" shall mean, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such entity.
"Voting Securities" shall mean, with respect to an entity, any capital
stock or debt securities of such entity if the holders thereof are ordinarily,
in the absence of contingencies, entitled to a Vote, even though the right to
such Vote has been suspended by the happening of such a contingency, and in the
case of this Corporation, shall include, without limitation, the Common Stock
and the Class A Stock, but shall not include any shares issued pursuant to the
Rights Agreement to the extent such issuance is caused by action of a Class A
Holder.
"Weighted Average Price" shall mean the weighted average per unit price
paid by the purchasers of any capital stock, debt instrument or security of this
Corporation. In determining the price of shares of Common Stock or Class A
Common Stock issued upon the conversion or exchange of securities or issued upon
the exercise of options, warrants or other rights, the consideration for such
shares shall be deemed to include the price paid to purchase the convertible
security or the warrant, option or other right, plus any additional
consideration paid upon conversion or exercise. If any portion of the price paid
is not cash, the Independent Directors (acting by majority vote) shall determine
in good faith the Fair Market Value of such non-cash consideration. If any new
shares of Common Stock are issued together with other shares or securities or
other assets of this Corporation for consideration which covers both the new
shares and such other shares, securities or other assets, the portion of such
consideration allocable to such new shares shall be determined in good faith by
the Independent Directors (acting by majority vote), in each case as certified
in a resolution sent to all Class A Holders.
13. Notices. All notices made by this Corporation pursuant to the Class A
Provisions shall be made in writing and any such notice shall be deemed
delivered when the same has been delivered in person to, or transmitted by telex
or telecopier to, or seven days after it has been sent by air mail to the
addresses of, all of the Class A Holders as indicated on the stock transfer
books of this Corporation. Communications by telex or telecopier also shall be
sent concurrently by air mail, but shall in any event be effective as stated
above.
14. No Other Beneficiaries. The Class A Provisions are intended for the
benefit of the Class A Holders only, and nothing in the Class A Provisions is
intended or will be construed to confer upon or to give any third party or other
stockholder of this Corporation any rights or remedies by virtue hereof. Any
term of the Class A Provisions may be waived by the holders of at least
two-thirds of the outstanding shares of Class A Stock, voting together as a
single class.
GENERAL PROVISIONS RELATING TO PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more
series, each of such series to have such voting powers (full or limited or
without voting powers) designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein, or in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
hereinafter provided.
2. Authority is hereby granted to the Board of Directors, subject to the
provisions of this ARTICLE SIXTH, to create one or more series of Preferred
Stock and, with respect to each series, to fix or alter as permitted by law, by
resolution or resolutions providing for the issue of such series:
(a) the number of shares to constitute such ser-
ies and the distinctive designation thereof;
(b) the dividend rate on the shares of such series, the dividend payment
dates, the periods in respect of which dividends are payable
("dividend periods") whether such dividends shall be cumulative, and
if cumulative, the date or dates from which dividends shall
accumulate;
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, on what terms, including the redemption prices which the
shares of such series shall be entitled to receive upon the redemption
thereof;
(d) whether or not the shares of such series
shall be subject to the operation of
retirement or sinking funds to be applied to
the purchase or redemption of such shares
for retirement and, if such retirement or
sinking fund or funds be established, the
annual amount thereof and the terms and
provisions relative to the operation
thereof;
(e) whether or not the shares of such series
shall be convertible into, or exchangeable
for, shares of any other class or classes or
of any other series of the same or any other
class or classes of stock of the Corporation
and the conversion price or prices or rate or
rates, or the rate or rates at which such
exchange may be made, with such adjustments,
if any, as shall be stated and expressed or
provided in such resolution or resolutions;
(f) the voting power, if any, of the shares of
such series; and
(g) such other terms, conditions, special rights and protective provisions
as the Board of Directors may deem advisable.
3. No dividend shall be declared and set apart for payment on any series of
Preferred Stock in respect of any dividend period unless there shall likewise be
or have been paid, or declared and set apart for payment, on all shares of
Preferred Stock of each other series entitled to cumulative dividends at the
time outstanding which rank equally as to dividends with the series in question,
dividends ratably in accordance with the sums which would be payable on the said
shares through the end of the last preceding dividend period if all dividends
were declared and paid in full.
4. If upon any dissolution of the Corporation, the assets of the
Corporation distributable among the holders of any one or more series of
Preferred Stock which are (i) entitled to a preference over the holders of the
Common Stock upon such dissolution, and (ii) rank equally in connection with any
such distribution, shall be insufficient to pay in full the preferential amount
to which the holders of such shares shall be entitled, then such assets, or the
proceeds thereof, shall be distributed among the holders of each such series of
the Preferred Stock ratably in accordance with the sums which would be payable
on such distribution if all sums payable were discharged in full.
5. In the event that the Preferred Stock of any series shall be redeemable,
then, at the option of the Board of Directors, the Corporation may at such time
or times as may be specified by the Board of Directors as provided in paragraph
(c) of Section 2 of this ARTICLE SIXTH redeem all, or any number less than all,
of the outstanding shares of such series at the redemption price thereof and on
the other terms fixed herein or by the Board of Directors as provided in said
paragraph (c) (the sum so payable upon any redemption of preferred Stock being
herein referred to as the "redemption price").
PREFERRED STOCK-FIRST SERIES, CONVERTIBLE
Amount
The number of shares to constitute the initial series of Preferred Stock
shall be 1,742,853 and the designation thereof shall be Preferred Stock-First
Series (hereafter "First Series").
Dividends
Holders of shares of the First Series will be entitled to receive
cumulative cash dividends at the quarterly rate of $.22-1/2 per share for six
consecutive quarters commencing in September, 1967 (the specific date to
coincide with the date the Corporation pays its third quarter Common Stock
dividend); thereafter the cumulative quarterly dividend rate will be $.37- 1/2
per share. All such payments will be made out of funds legally available for the
payment of such dividends, when and as declared, before any distribution shall
be made on the Corporation's Common Stock.
Conversion Rights
The holders of shares of the First Series may convert any or all of said
shares into Common Stock at any time after December 7, 1989, on the basis of
three (3) shares of the Common Stock of the Corporation for each share of the
First Series. Such ratio is herein referred to as the "conversion rate."
The conversion rate shall be subject to the following adjustments:
A. In case the Corporation shall (i) pay a dividend in
Common Stock or (ii)subdivide the outstanding shares
of Common Stock into a greater number of shares of
Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares of
Common Stock, the conversion rate in effect
immediately prior to such stock dividend,
subdivision or combination shall be proportionately
increased or decreased as the case may be.
B. No such adjustment shall be required, however, if
the aggregate number of shares of Common Stock
issued as dividends on the Common Stock since the
most recent previous adjustment does not exceed 5%
of the total number of shares of Common Stock
outstanding; provided, however, that when the
aggregate number of shares of Common Stock issued as
dividends since the most recent previous adjustment
shall exceed the foregoing 5%, the conversion rate
shall be increased in proportion to the same
percentage or ratio that the aggregate of all such
dividends in shares of Common Stock since the most
recent previous adjustment bears to the total number
of shares of Common Stock outstanding.
C. In the event the Corporation shall fix a record date
for the purpose of determining the holders of shares
of Common Stock entitled to receive any dividend in
Common Stock, the conversion rate or any subsequent
conversion rate in effect immediately prior to the
record date fixed for the determination of
shareholders entitled to such dividend shall be
proportionately increased (subject to the limitation
of subparagraph (B) above) and such adjustment will
become effective immediately after the opening of
business on the day following such record date.
D. The conversion rate shall not be adjusted by reason of: (i) the
issuance of shares pursuant to options and stock purchase agreements
granted or entered into with officers or employees of the Corporation;
and (ii) the issuance of shares for cash or in exchange for assets or
stock of another company.
E. Any adjustment in the conversion rate as herein provided shall be to
the nearest, or if there shall be no nearest, then to the next lower,
one-hundredth of a share of Common Stock, and shall remain in effect
until further adjustment as required hereunder.
F. In case the Corporation shall be recapitalized, or
shall be consolidated with or merged into, or shall
sell or transfer its property and assets as, or
substantially as, an entirety to any other
corporation, proper provisions shall be made as a
part of the terms of such recapitalization,
consolidation, merger, sale or transfer whereby the
holder of any shares of the First Series at the time
outstanding immediately prior to such event shall
thereafter be entitled to such conversion rights,
with respect to securities of the Corporation
resulting from such recapitalization, consolidation
or merger, or to which such sale or transfer shall
be made, as shall be substantially equivalent to the
conversion rights herein provided for.
G. No fraction of a share of Common Stock shall be
issued upon any conversion. In lieu of the fraction
of a share to which the holder of shares of the
First Series surrendered for conversion would
otherwise be entitled, such holder shall receive, as
soon as practicable after the date of conversion, an
amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For
the purposes of this subparagraph, the market value
of a share of Common Stock shall be the last
recorded sale price of such a share on the New York
Stock Exchange on the day immediately preceding the
date upon which such shares of such series are
surrendered for conversion, or if there be no such
recorded sale price on such date, the last quoted
bid price per share of Common Stock on such Exchange
at the close of business on such date.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the First Series will be entitled to receive out of
the assets of the Corporation available for distribution to stockholders, before
any distribution of the assets shall be made to the holders of Common Stock, the
sum of $42.50 per share if such liquidation is voluntary and the sum of $40.00
per share if such liquidation is involuntary, plus in each case any accumulated
unpaid dividends. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Preferred Stock are not paid
in full, the holders of the Preferred Stock will share ratably in any
distribution of assets in proportion to the full preferential amounts to which
they are entitled.
Redemption
The First Series may be redeemed by the Corporation after July 1, 1972, at
any time or from time to time, upon at least thirty days' prior notice, at the
redemption price of $42.50 per share, plus any accumulated unpaid dividends. If
less than all the outstanding First Series is to be redeemed, the shares to be
redeemed shall be determined in such manner as may be prescribed by the Board of
Directors. Shares so redeemed shall be retired and not reissued.
Voting Rights
Each holder of the First Series will be entitled to one (1) vote for each
share held.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid.
Consent of the holders of at least two-thirds of the then outstanding
Preferred Stock of all classes will be necessary to: (a) authorize any stock
ranking either as to payment of dividend or distribution of assets prior to the
First Series or any other Preferred Stock then outstanding or (b) amend, alter,
or change in any material respect prejudicial to the holders thereof the
preferences of any then outstanding Preferred Stock.
Consent of the holders of a majority of the then outstanding Preferred
Stock of all classes will be necessary to: (a) increase the authorized amount of
the Preferred Stock or (b) create any other class of stock ranking on a parity
with the Preferred Stock.
Preemptive Rights
No holder of Preferred Stock will have any preemptive rights.
Listing
The Corporation intends to apply for listing on the New York Stock
Exchange, subject to the approval of that Exchange, of its First Series.
PREFERRED STOCK-SECOND SERIES, CONVERTIBLE
Amount, Rank and Designation
The amount of shares to constitute the Second Series of Preferred Stock
shall be 8,758,472 shares plus such an additional amount, if any, as shall be
required under the Agreement and Plan of Merger between the Company and Carolina
Telephone and Telegraph Company dated as of July 18, 1968. The designation
thereof shall be "Preferred Stock-Second Series, Convertible" (hereinafter
"Second Series"). Shares of the Second Series shall rank on a parity with shares
of the First Series of the Preferred Stock as to dividends and upon liquidation
and shall have a preference over the shares of the Common Stock and any other
class or series of stock ranking junior to the Second Series as to dividends or
upon liquidation.
Dividends
Holders of shares of the Second Series will be entitled to receive
cumulative cash dividends each calendar quarter payable in March, June,
September and December of each year, at the following rates: $.31-1/4 per share
for the eight (8) consecutive quarters beginning with the quarter ending March
31, 1969 through the quarter ending December 31, 1970; $.34- 3/8 per share for
eight (8) quarters beginning with the quarter ending March 31, 1971 through the
quarter ending December 31, 1972; and $.37-1/2 per share in each quarter
thereafter.
All such payments will be made out of funds legally available for the
payment of such dividends, when and as declared by the Board of Directors of the
Corporation. Before any dividends on the Common Stock or any other class or
series of stock of the Corporation ranking junior to the Second Series as to
dividends shall be paid or declared and set apart for payment, the holders of
shares of the Second Series shall be entitled to receive the full accumulated
cash dividends for all quarterly dividend periods ending on or before the date
on which any dividend on any such class or series of stock ranking junior to the
Second Series as to dividends or upon liquidation is declared or is to be paid.
Conversion Rights
The holders of shares of the Second Series may convert any or all of said
shares into Common Stock at any time after February 27, 1996, on the basis of
three and nine-one hundredths (3.09) shares of the Common Stock of the
Corporation for each one share of the Second Series. Such ratio is herein
referred to as the "conversion rate." In case of the redemption of any shares of
the Second Series, such right of conversion shall cease and terminate as to the
shares duly called for redemption, at the close of business on the date fixed
for redemption, unless default shall be made in the payment of the redemption
price. Upon conversion the Corporation shall make no payment or adjustment on
account of dividends accrued or in arrears on the Second Series surrendered for
conversion.
The conversion rate in effect at any time shall be subject to adjustment as
follows:
A. In case the Corporation shall (i) declare a dividend
on its Common Stock in shares of its capital stock,
(ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or
(iv) issue any shares by reclassification of its
shares of Common Stock (including any
reclassification in connection with a consolidation
or merger in which the Corporation is the continuing
corporation), at the conversion rate in effect at
the time of the record date for such dividend or of
the effective date of such subdivision, combination
or reclassification shall be proportionately
adjusted so that the holder of any shares of the
Second Series surrendered for conversion after such
time shall be entitled to receive the number of
shares which he would have owned or have been
entitled to receive had such shares of the Second
Series been converted immediately prior to such
time. Such adjustment shall be made successively
whenever any event listed above shall occur.
B. In case the Corporation shall fix a record date for
the issuance of rights or warrants to all holders of
its Common Stock entitling them (for a period
expiring within 45 days after such record date) to
subscribe for or purchase shares of Common Stock at
a price per share less than the current market price
per share of Common Stock (as defined in Paragraph D
below) on such record date, the conversion rate
after such record date shall be determined by
multiplying the conversion rate in effect
immediately prior to such record date by a fraction,
of which the numerator shall be the number of shares
of Common Stock outstanding on such record date plus
the number of additional shares of Common Stock to
be offered for subscription or purchase, and of
which the denominator shall be the number of shares
of Common Stock outstanding on such record date plus
the number of shares of Common Stock which the
aggregate offering price (without deduction for
expenses or commissions of any kind) of the total
number of shares so to be offered would purchase at
such current market price. Such adjustment shall be
made successively whenever such a record date is
fixed; and in the event that such rights or warrants
are not so issued, the conversion rate shall again
be adjusted to be the conversion rate which would
then be in effect if such record date had not been
fixed.
C. In case the Corporation shall fix a record date for
the making of a distribution to all holders of its
Common Stock (including any such distribution made
in connection with a consolidation or merger in
which the Corporation is the continuing corporation)
of evidences of its indebtedness or assets
(excluding dividends paid in, or distributions of,
cash) or subscription rights or warrants (excluding
those referred to in Paragraph B above), the
conversion rate after such record date shall be
determined by multiplying the conversion rate in
effect immediately prior to such record date by a
fraction, of which the numerator shall be the
current market price per share of Common Stock (as
defined in Paragraph D below) on such record date,
and of which the denominator shall be such current
market price per share of Common Capital Stock, less
the fair market value (as determined by the Board of
Directors whose determination shall be conclusive,
and described in a statement filed with the transfer
agent or agents for the Second Series and with the
principal office of the Corporation) of the portion
of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or
warrants applicable to one share of Common Stock.
Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that
such distribution is not so made, the conversion
rate shall again be adjusted to the conversion rate
which would then be in effect if such record date
had not been fixed.
D. For the purpose of any computation under Paragraphs
B and C above, the current market price per share of
Common Stock on any record date shall be deemed to
be the average of the daily closing prices for the
30 consecutive business days commencing 45 business
days before such date. The closing price for each
day shall be the last sale price regular way or, in
case no such sale takes place on such day, the mean
between the closing bid and asked prices regular
way, in either case on the New York Stock Exchange.
E. The conversion rate shall not be adjusted by reason of: (i) the
issuance of shares pursuant to options and stock purchase agreements
granted or entered into with officers or employees of the Corporation;
and (ii) the issuance of shares for cash (except as provided in
Paragraph B above) or in exchange for assets or stock of another
company.
F. Any adjustment in the conversion rate as herein provided shall be to
the nearest, or if there shall be no nearest, then to the next lower,
one-hundredth of a share of Common Stock, and shall remain in effect
until further adjustment as required hereunder.
G. In case the Corporation shall be recapitalized, or
shall be consolidated with or merged into, or shall
sell or transfer its property and assets as, or
substantially as, an entirety to any other
corporation, proper provisions shall be made as a
part of the terms of such recapitalization,
consolidation, merger, sale or transfer whereby the
holder of any shares of the Second Series at the
time outstanding immediately prior to such event
shall thereafter be entitled to such conversion
rights, with respect to securities of the
Corporation resulting from such recapitalization,
consolidation or merger or to which such sale or
transfer shall be made, as shall be substantially
equivalent to the conversion rights herein provided
for.
H. No fraction of a share of Common Stock shall be
issued upon any conversion. In lieu of the fraction
of a share to which the holder of shares of the
Second Series surrendered for conversion would
otherwise be entitled, such holder shall receive, as
soon as practicable after the date of conversion, an
amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For
the purposes of this subparagraph, the market value
of a share of Common Stock shall be the last
recorded sale price of such a share on the New York
Stock Exchange on the day immediately preceding the
date upon which such shares of such series are
surrendered for conversion, or if there be no such
recorded sale price on such day, the last quoted bid
price per share of Common Stock on such Exchange at
the close of business on such date.
I. Whenever there shall be an adjustment in the
conversion rate as provided by the foregoing, the
Corporation will file with each transfer agent for
shares of the Second Series a certificate signed by
the President or the chief financial or accounting
officer of the Corporation, setting forth in
reasonable detail the calculation of the adjustment,
and shall mail to each holder of record thereof, a
notice describing the adjustment and stating the
applicable record or effective date therefor, at
least 20 days prior thereto.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the Second Series will be entitled to receive out of
the assets of the Corporation available for distribution to stockholders, before
any distribution of the assets shall be made to the holders of the Common Stock
or any other class or series of stock ranking junior to the Second Series either
as to dividends or upon liquidation, the sum of $35.42 per share if such
liquidation is voluntary and the sum of $33.33 per share if such liquidation is
involuntary, plus in each case any accumulated unpaid dividends (whether or not
declared), to the end of the current quarterly dividend period in which the
payment is made. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Second Series and any other
series of Preferred Stock which ranks on a parity with the Second Series are not
paid in full, the holders of the Second Series and such parity Preferred Stock
will share ratably in any distribution of assets in proportion to the full
preferential amounts to which they are entitled.
Redemption
Subject to the provisions herein and in the charter contained, the Second
Series may be redeemed by the Corporation after December 31, 1975, at any time
or from time to time, upon at least thirty days' prior notice, at the redemption
price of $50.00 per share, plus any accumulated unpaid dividends (whether or not
declared), to the end of the current quarterly dividend period in which the
payment is made. If less than all the outstanding Second Series is to be
redeemed, the shares to be redeemed shall be selected by lot, in such equitable
manner as may be prescribed by the Board of Directors. Shares so redeemed shall
be retired and not reissued.
Reservation of Shares
The Corporation shall at all times keep available and reserved the number
of shares of its Common Stock required for conversion of the outstanding and any
reserved shares of the Second Series.
Certain Protective Provisions
If at any time the full cumulative dividends on shares of the Second Series
have not been paid or declared and set aside for payment for the current and all
past quarterly dividend periods, the Corporation (a) will not declare, or pay,
or set apart for payment any dividends or make any distribution, on any other
class or series of stock of the Corporation ranking junior to the Second Series
whether as to dividends or upon liquidation; (b) will not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any shares of any junior class or series if the Corporation shall be in default
with respect to any dividend payable on shares of the Second Series, provided
that notwithstanding the foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such junior class in
exchange for, or out of the net cash proceeds from the substantially
simultaneous sale of, other shares of stock of any junior class; and (c) will
not redeem pursuant to redemption rights in the terms of such stock any stock
ranking on a parity with the Second Series unless at the same time it redeems
all the shares of the Second Series.
Unless the consent of all or a greater number of such shares is required by
law, the consent of the holders of at least two-thirds (2/3) of the then
outstanding shares of the Second Series shall be necessary in order to liquidate
or dissolve the Corporation voluntarily or by any other means involving the vote
or consent of any stockholders of the Corporation.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of at least two-thirds (2/3) of the then outstanding
aggregate number of shares of the Second Series and each other series of the
Preferred Stock whose terms provide for such consent, taken together, will be
necessary to: (a) authorize (by whatever means) any stock ranking either as to
payment of dividends or distribution of assets prior to the Second Series or any
other Preferred Stock then outstanding; or (b) authorize any merger or
consolidation (or transfer of all or substantially all of the assets of the
Corporation in a transaction contemplating in substance and effect the exchange
of shares of the Preferred Stock for stock of another corporation) unless the
surviving, resulting or other corporation in such transaction shall have
authorized no stock ranking prior to the Preferred Stock as to dividends or upon
liquidation (unless such stock is a stock substantially the same as, and to be
exchanged for, stock of the Corporation previously authorized pursuant to the
preceding clause (a)); or (c) amend, alter, or change in any material respect
adverse to the holders thereof the preferences of any then outstanding Preferred
Stock; provided that in case of any such action described in the preceding
clauses (a), (b) and (c) which, in any material respect, is adverse to the
Second Series as a series and is not a term generally applicable to and with the
same relative effect upon all series, the consent of the holders of two-thirds
(2/3) of the then outstanding shares of the Second Series will be required.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of a majority of the then outstanding aggregate
number of shares of the Second Series and each other series of the Preferred
Stock whose terms provide for such consent, taken together, will be necessary
to: (a) increase the authorized amount of the Preferred Stock; (b) authorize any
merger or consolidation (or transfer of all or substantially all the assets of
the Corporation to another corporation contemplating in substance and effect the
exchange of shares of the Preferred Stock for stock of another corporation)
unless the surviving, resulting or other corporation in such transaction shall
have no greater authorized amount of stock ranking on a parity with the
Preferred Stock as to payment of dividends or upon liquidation than was
authorized by the Corporation immediately prior to such transaction; or (c)
create any other class of stock ranking on a parity with the Preferred Stock as
to dividends or upon liquidation.
Voting Rights
Each holder of the Second Series will be entitled to one (1) vote for each
share held, and, in addition to the other class and series voting rights of the
shares of the Second Series, shall have general voting power, share for share,
with the Common Stock of the Corporation and any other shares having general
voting power.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid. The Corporation will promptly take all such action as shall be necessary
to permit such election to occur promptly after such arrearage occurs.
PREFERRED STOCK-FIFTH SERIES
(1) Designation; Number of Shares; Stated Value. The Series shall be
designated as Preferred Stock-Fifth Series (the "Fifth Series") and shall
consist of ninety-five (95) shares. The shares of such series are hereinafter
sometimes called the "Fifth Series Shares." The stated value of the Fifth Series
Shares shall be One Hundred Thousand Dollars ($100,000) per share.
(2) Dividends. The rate of dividends upon the Fifth Series Shares (which
shall be cumulative from the date of issue) and the time of payment thereof
shall be 6.00% of the stated value per share per annum, payable quarterly on the
last days of January, April, July and October in each year.
(3) Rank. The Fifth Series Shares shall rank on a parity with shares of the
First Series and Second Series of the Preferred Stock as to dividends and upon
liquidation.
(4) Voting Rights. Holders of Fifth Series Shares will be entitled to one
vote for each share held and will be entitled to exercise such voting rights
together with the holders of Common Stock of the Corporation, without
distinction as to class. If no dividends or less than full cumulative dividends
on the Fifth Series Shares shall have been paid for each of four consecutive
dividend periods, or if arrearages in the payment of dividends on the Fifth
Series Shares shall have cumulated to an amount equal to full cumulative
dividends on the Fifth Series Shares for six quarterly dividend periods, the
holders of the Fifth Series Shares shall, at all meetings held for the election
of Directors until full cumulative dividends for all past quarterly dividend
periods and the current quarterly dividend period on the Fifth Series Shares
shall have been paid or declared and set apart for payment, possess voting
power, acting alone, to elect the smallest number constituting a majority of the
Directors then to be elected. The Corporation will promptly take all such action
as shall be necessary to permit such election to occur promptly after such
arrearage occurs.
(5) Non-Convertible. The Fifth Series Shares shall not be convertible into
or exchangeable for stock of any other class or classes of the Corporation.
(6) Repurchase by the Corporation. Upon six months' prior written notice,
the holders of the Fifth Series Shares may tender all and not less than all of
the Fifth Series Shares to the Corporation for purchase at a price per share
equal to the stated value of One Hundred Thousand Dollars ($100,000) per share
plus accrued dividends to the date of repurchase by the Company (the Purchase
Price). Upon such proper tender of all shares of the Fifth Series Shares by the
holders, the Corporation shall purchase the Fifth Series Shares at the Purchase
Price.
(7) Tender Procedures. The Fifth Series Shares will not be deemed tendered
unless and until the certificate or certificates therefor have been received by
the Corporation or the bank or trust company designated for the purpose and, if
payment upon acceptance of tender thereof is to be made other than to the record
holders, such certificate or certificates have been duly endorsed and are in
proper form for transfer, with all transfer taxes due in respect thereof paid or
provided for.
(8) Redemption. If the holders have not theretofore tendered the Fifth
Series Shares to the Corporation for purchase pursuant to paragraphs 6 and 7
hereof by March 14, 2003, then the Corporation shall redeem all of the
outstanding Fifth Series Shares at the Purchase Price on a date set forth in
written notice to the holders as the redemption date (the Redemption Date). The
Corporation shall give notice of such redemption not less than thirty (30) days
prior to the Redemption Date, by mail to the holders of record of the
outstanding shares at their respective addresses then appearing on the books of
the Corporation. At any time before the Redemption Date, the Corporation may
deposit in trust the funds necessary for such redemption with a bank or trust
company to be designated in the notice of redemption, doing business in the City
of Chicago and State of Illinois or in the City and State of New York, and
having capital, surplus and undivided profits aggregating $25,000,000. In the
event such deposit is made so that the deposited funds shall be forthwith
available to the holders of the shares to be redeemed upon surrender of the
certificates evidencing such shares, then, upon the giving of the notice of such
redemption, as hereinabove provided, or upon the earlier delivery to such bank
or trust company of irrevocable authorization and direction so to give such
notice, all shares with respect to the redemption of which such deposit shall
have been made and the giving of such notice effected shall, whether or not the
certificates for such shares shall be surrendered for cancellation, be deemed to
be no longer outstanding for any purpose and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the holders
of the certificates for such shares to receive, out of the funds so deposited in
trust, from and after the time of such deposit, the amount payable upon the
redemption thereof, without interest.
(9) Cancelled Shares. The Fifth Series Shares, purchased upon tender or
redeemed as herein provided, shall be cancelled and upon such cancellation shall
be deemed to be authorized and unissued shares of Preferred Stock, without par
value, of the Corporation but shall not be reissued as shares of the same or any
theretofore outstanding series.
(10) Default. Default by the Corporation in complying with the provisions
of paragraph 6 or 8 hereof shall preclude the declaration or the payment of
dividends or the making of any other distribution whatsoever upon the Common
Stock of the Corporation (other than a distribution in shares of its Common
Stock) until the Corporation shall have cured such default by depositing the
funds necessary therefor in the manner and upon the terms herein provided. The
holders of the Fifth Series Shares shall not be entitled to apply to any court
of law or equity for a money judgment or remedy on account of any such default
other than to restrain the Corporation from the actions specified above upon the
Common Stock of the Corporation until such default shall have been cured; and
(11) Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation the holders of the Fifth Series will be entitled
to receive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of the assets shall be made to the holders
of Common Stock, the sum of $100,000 per share, plus an amount equal to
cumulative dividends accrued and unpaid thereon to the date of distribution to
holders of the Fifth Series. If upon any liquidation, dissolution or winding up
of the Corporation the amounts payable with respect to the Fifth Series and any
other series of Preferred Stock which ranks on a parity with the Fifth Series
are not paid in full, the holders of the Fifth Series and such parity Preferred
Stock will share ratably in any distribution of assets in proportion to the full
preferential amounts to which they are entitled.
PREFERRED STOCK-SIXTH SERIES
(1) Designation and Amount. The shares of such series shall be designated
as "Preferred Stock - Sixth Series, Junior Participating" (hereafter "Sixth
Series") and the number of shares constituting such series shall be one million
five hundred thousand (1,500,000).
(2) Dividends. Subject to the prior and superior rights of the holders of
any shares of any other series of Preferred Stock of the Corporation ("Preferred
Stock"), or any similar stock ranking prior and superior to the shares of the
Sixth Series with respect to dividends, the holders of shares of the Sixth
Series, in preference to the holders of Common Stock, par value $2.50 per share,
of the Corporation ("Common Stock"), Class A Common Stock, par value $2.50 per
share, of the Corporation ("Class A Common Stock") and any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash, on Janu ary 1, April 1, July 1 and October 1 in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date") in an amount
(rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) subject
to the provision for adjustment hereinafter set forth, 1,000 times the aggregate
per share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in cash, based upon the fair market value at the time the
non-cash dividend or other distribution is declared as determined in good faith
by the Board of Directors) of all non-cash divi dends or other distributions
other than a dividend payable in shares of Common Stock or Class A Common Stock,
as the case may be, or a subdivision of the outstanding shares of Common Stock
or Class A Common Stock, as the case may be (by reclas sification or otherwise),
declared (but not withdrawn) on the Common Stock or Class A Common Stock, as the
case may be, since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of the Sixth Series. In the event
this Corporation shall at any time after June 9, 1997 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of the Sixth Series were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(3) Voting Rights. Except as prescribed by law and in addition to the
rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the
Corporation, as amended, and subject to the provision for adjustment hereinafter
set forth, the holders of the shares of the Sixth Series shall be entitled to
1,000 votes for each share held and shall be entitled to exercise such voting
rights with the holders of Common Stock, without distinction as to class, at any
annual or special meeting of stockholders for the election of directors and on
any other matter submitted to a vote of the stockholders of the Corporation at
such meeting. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of the Sixth Series
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event. Except as otherwise provided herein, in the Articles of
Incorporation of the Corporation, in any other Certificate of Designation
establishing a series of Preferred Stock or any similar stock or otherwise
required by law, the holders of the shares of the Sixth Series and the holders
of Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the shares of the Sixth Series as provided in
Section (2) are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares
of the Sixth Series outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends (except a dividend payable in
Common Stock and/or any other class of stock ranking junior to
the shares of the Sixth Series) on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the shares of the
Sixth Series;
(ii) declare or pay dividends on or make any other
distribution on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the shares of the Sixth Series, except dividends paid
ratably on the shares of the Sixth Series and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the shares of the Sixth Series, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the shares of the
Sixth Series; or
(iv) purchase or otherwise acquire for consideration any
shares of the Sixth Series, or any shares of stock ranking on a
parity with the shares of the Sixth Series, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section (4), purchase or otherwise acquire such
shares at such time and in such manner.
(5) Reacquired Shares. Any shares of the Sixth Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein, in the Articles of Incorporation,
in any other Certificate of Designation establishing a series of Preferred Stock
or any similar stock or as otherwise required by law.
(6) Liquidation, Dissolution or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the shares of the Sixth Series shall be entitled to receive the
greater of (a) $1,000.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of the Sixth Series were entitled
immediately prior to such event pursuant to clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of the Sixth
Series shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of the Sixth Series
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(8) Ranking. The shares of the Sixth Series shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends and
the distribution of assets, unless the terms of any such series shall provide
otherwise. Nothing herein shall preclude the Board of Directors of the
Corporation from creating any series of Preferred Stock or any similar stock
ranking on a parity with or prior to the shares of the Sixth Series as to the
payment of dividends or distribution of assets.
(9) Fractional Shares. Shares of the Sixth Series may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of shares of the Sixth Series.
SEVENTH
1. In addition to any affirmative vote required by law or these Articles of
Incorporation, and except as expressly provided in section 2 of this ARTICLE
SEVENTH, the affirmative vote of the holders of eighty (80) percent of the
outstanding shares of the Corporation entitled to vote in an election of
Directors shall be required for the approval or authorization of any Business
Combination (as hereinafter defined).
2. The provisions of section 1 of this ARTICLE SEVENTH
shall not be applicable if:
A. The Business Combination shall have been approved by a majority of
the Continuing Directors (as hereinafter defined); provided, however, that
such approval shall only be effective if obtained at a meeting of Directors
at which at least seven Continuing Directors are present; or
B. The Business Combination is a merger or consolidation and the cash
or Fair Market Value (as hereinafter defined) of the property, securities
or other consideration to be received per share by the stockholders of each
class of stock of the Corporation in the Business Combination, if
applicable, is not less than the highest per share price paid by the
Interested Stockholder (as hereinafter defined), with appropriate
adjustments for stock splits, stock dividends and like distributions, in
the acquisition by the Interested Stockholder of any of its holdings of
each class of the Corporation's capital stock.
3. For purposes of this ARTICLE SEVENTH:
A. The term "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
subsidiary of the Corporation with (a) any Interested Stockholder or
(b) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be,
an Affiliate (as defined on October 1, 1982 in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
an Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any subsidiary of the
Corporation that have an aggregate Fair Market Value of $1,000,000 or
more;
(iii) the issuance or transfer by the Corporation or any
subsidiary of the Corporation (in one transaction or a series of
transactions) of any securities of the Corporation or any subsidiary
of the Corporation to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market
Value of $1,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder.
B. The term "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director if the successor is unaffiliated with
the Interested Stockholder and is recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors, provided that
such recommendation or election shall only be effective if made at a
meeting of Directors at which at least seven Continuing Directors are
present.
C. The term "Fair Market Value" shall mean:
(i) in the case of stock, the highest closing sale price during
the 30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Exchange Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined in good faith by a majority of Continuing
Directors, provided that such determination shall only be effective if
made at a meeting of Directors at which at least seven Continuing
Directors are present; or
(ii) in the case of property or securities other than cash or
stock, the fair market value of such property or securities on the
date in question as determined in good faith by a majority of
Continuing Directors, provided that such determination shall only be
effective if made at a meeting of Directors at which at least seven
Continuing Directors are present.
D. The term "Interested Stockholder" shall mean and include any
individual, corporation, partnership or other person or entity which,
together with its Affiliates and "Associates" (as defined on October 1,
1982 in Rule 12b-2 under the Exchange Act), "Beneficially Owns" (as defined
on October 1, 1982 in Rule 13d-3 under the Exchange Act) in the aggregate
ten percent or more of the outstanding shares of the Corporation entitled
to vote in an election of Directors, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity.
EIGHTH
1. Prevention of "Greenmail." Any direct or indirect purchase or other
acquisition by this Corporation of any Equity Security (as hereinafter defined)
of any class at a price above Market Price (as hereinafter defined) from any
Interested Securityholder (as hereinafter defined) who has beneficially owned
any Equity Security of the class to be purchased for less than two years prior
to the date of such purchase or any agreement in respect thereof shall, except
as hereinafter expressly provided, require the affirmative vote of the holders
of at least a majority of the voting power of the then outstanding shares of
capital stock of this Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), excluding Voting Stock bene ficially owned by
such Interested Securityholder, voting together as a single class (it being
understood that for the purposes of this ARTICLE EIGHTH, each share of the
Voting Stock shall have the number of votes granted to it pursuant to ARTICLE
SIXTH of this Certificate of Incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange, or otherwise, but (i) no such affirmative vote shall be
required with respect to any purchase, redemption or other acquisition by this
Corporation of capital stock from FT, DT, any Qualified Subsidiary or any
Qualified Stock Purchaser pursuant to the provisions of the Investment Documents
(as such term is defined in Section 12 of the provisions of ARTICLE SIXTH of
these Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO CLASS A
STOCK) or these Articles of Incorporation, and (ii) no such affirmative vote
shall be required with respect to any purchase or other acquisition of
securities made as part of a tender or exchange offer by this Corporation to
purchase securities of the same class made on the same terms to all holders of
such securities and complying with the applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations).
2. Certain Definitions. For the purposes of this
ARTICLE EIGHTH:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Securityholder" shall mean any
person (other than the Corporation or any corporation of
which a majority of any class of Equity Security is
owned, directly or indirectly, by the Corporation) who or
which:
(i) is the beneficial owner, directly or
indirectly, of 5% or more of the class of securities
to be acquired; or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the class
of securities to be acquired; or
(iii) is an assignee or has otherwise succeeded to any shares of
the class of securities to be acquired which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by an Interested Securityholder, if such assignment
or succession shall have occurred in the course of a transaction or
transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
C. A person shall be a "beneficial owner" of any
security of any class of the Corporation:
(i) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) any right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any security of
any class of the Corporation.
D. For the purposes of determining whether a person is an Interested
Securityholder pursuant to paragraph B of this Section 2, the relevant
class of securities outstanding shall be deemed to comprise all such
securities deemed owned through application of paragraph C of this Section
2, but shall not include other securities of such class which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on October 1, 1982.
F. "Equity Security" shall have the meaning
ascribed to such term in Section 3(a)(11) of the
Securities Exchange Act of 1934, as in effect on January
1, 1985.
G. "Market Price" shall mean the highest closing sale price during the
thirty-day period immediately preceding the date in question, of a share of
any Equity Security on the Composite Tape for New York Stock Exchange
issues or, if such Equity Security is not quoted on the Composite Tape or
is not listed on such Exchange, on the principal United States security
exchange registered under the Securities Exchange Act of 1934, as amended,
on which such Equity Security is listed, or, if such Equity Security is not
listed on any such exchange, the highest closing bid quotation with respect
to a share of such Equity Security during the thirty-day period preceding
the date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or, if no such
quotations are available, the fair market value on the date in question of
a share of such Equity Security.
3. Compliance. The Board of Directors of the Corporation shall have the
power to determine the application of, or compliance with, this ARTICLE EIGHTH,
including, without limitation: (i) whether a person is an Interested
Securityholder; (ii) whether a person is a beneficial owner of any Equity
Security; and (iii) the Market Price of any Equity Security. Any decision or
action taken by the Board of Directors arising out of or in connection with the
construction, interpretation and effect of this ARTICLE EIGHTH shall lie within
its absolute discretion and shall be conclusive and binding, except in
circumstances involving bad faith.
NINTH
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such Director as a Director; provided, however, that this ARTICLE NINTH
shall not eliminate or limit the liability of a Director to the extent provided
by applicable law (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 51 of the General Corporation Code of the State of Kansas, or (iv) for
any transaction from which the Director derived an improper personal benefit. No
amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect
on the liability or alleged liability of any Director of the Corporation for or
with respect to any acts or omissions of such Director occurring prior to such
amendment or repeal.
<PAGE>
Exhibit (10)(c)
MANAGEMENT INCENTIVE STOCK OPTION PLAN (As Amended April 18, 1995, August
8, 1995,
August 12, 1996, February 11, 1997 and
April 15, 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 the grantee's employment
with the Company or a subsidiary of the
Company is terminated, the optionee may
exercise options that 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 period below,
beginning on the grantee's:
(i) retirement: five years after the
grantee's retirement date.
(ii) disability (qualifying for long-
term disability benefits under the
Company's Basic Long-Term
Disability Plan): five years after
the grantee's qualification date.
(iii)death: one year after the
grantee's 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 grantee's date of
termination of employment.
If a grantee's employment is terminated for a reason constituting good
cause, any outstanding options granted under the Plan shall
automatically terminate. For this purpose, "good cause" means conduct
by the grantee that reflects adversely on the grantee's honesty,
trustworthiness or fitness as an employee, or the grantee's willful
engagement in conduct which is demonstrably and materially injurious
to the Company.
If a grantee becomes associated with, becomes employed by, renders services
to, or owns any interest in (other than a insubstantial interest, as determined
by the Committee) any business in competition with the Company, all outstanding
options granted to the grantee whether vested or unvested shall automatically
terminate and shares of restricted stock received upon the exercise of an option
pursuant to Section 6 hereof that 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 re-employed by the Company or its subsidiaries.
i. Restricted Stock. Certain grantees may
elect to deliver restricted shares or
receive restricted shares in connection
with an exercise of an option by the
grantee, as provided in Section 6
hereof.
j. Beneficiary Designations. The grantee
of an option may designate a beneficiary
or beneficiaries to exercise unexpired
options held by the grantee and to own
shares issued upon any such exercise
after the grantee'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 grantee. A grantee may change
any beneficiary designation of options
held by the grantee 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 Corporate 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 a trust in accordance with the
terms of the Plan.
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. 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 grantee, except that the
grantee may transfer an option to a
trust of the kind described in Section
6(b). Any such trust as transferee of an
option may not (1) dispose of shares
received in an exercise of such options
until such shares are validly registered
or exempt from registration under any
applicable exemption from registration
under the Securities Act of 1933, as
amended, in the opinion of the Corporate
Secretary or (2) while continuing to
hold options issued under this plan, be
amended to change beneficiaries to
persons other than those permissible
under Section 6(b). Documents evidencing
the transfer of any option and the
identity of the transferee shall be in
such form as may be required by the
Corporate Secretary.
6. Restricted Stock. Certain grantees, 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 grantee 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 grantees 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 grantee shall elect a vesting period
for the restricted common stock to be
received upon exercise of the option of
between 6 months and 10 years, subject
to rules and procedures established by
the Plan Administrator, but in no event
may a grantee 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 grantee
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 grantee 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 grantee, the grantee's
spouse, or descendants (by blood,
adoption, or marriage) 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. A grantee 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
grantee or his representative shall sign
any document and take any other action
required to assign said restricted
shares back to the Company.
f. The grantee 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 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. 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:
(1) will not be granted 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) will not be
granted if the grantee is not, on the
exercise date, an employee of Sprint or
a Sprint subsidiary; (3) will not be
granted if the original option is
exercised less than one year before the
expiration of the original option; and
(4) with respect to options transferred
by the grantee to another person in
accordance with this Plan, reload
options shall be granted to the grantee
upon a stock-for-stock exercise by the
optionee to the same extent as if the
grantee had exercised the option in a
similar manner.
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. Such election is irrevocable after the Tax Date. 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.
If the exercise of an option by an optionee other than the grantee after
transfer of the option pursuant to this plan from the grantee to the
optionee results in a withholding obligation on the part of the grantee,
the grantee may elect to satisfy his withholding obligation by delivery of
shares to the Company as permitted in clause (i) above.
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 optionee, 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 (4)(d)
AMENDMENTS TO CERTAIN AGREEMENTS AND INTERPRETATION
THIS AMENDMENT, dated June 24, 1997, is entered into by and among SPRINT
CORPORATION, a corporation formed under the laws of Kansas ("Sprint"), FRANCE
TELECOM, a societe anonyme formed under the laws of France ("FT"), and DEUTSCHE
TELEKOM AG, an Aktiengesellschaft formed under the laws of Germany ("DT").
WITNESSETH:
WHEREAS, Sprint, FT and DT have entered into that certain Investment
Agreement dated as of July 31, 1995, as amended (the "Investment Agreement");
and
WHEREAS, Sprint, FT and DT have also entered into a Standstill Agreement
dated as of July 31, 1995 (the "Standstill Agreement"); and
WHEREAS, Sprint, FT and DT have also entered into a Stockholders' Agreement
dated as of January 31, 1996 (the "Stockholders' Agreement"); and
WHEREAS, the Investment Agreement, the Standstill Agreement and the
Stockholders' Agreement each makes reference to the Rights Agreement dated as of
August 8, 1989, as amended, between Sprint and UMB Bank, n.a. (the "1989 Rights
Agreement"), and the Board of Directors of Sprint has replaced such agreement
with a new Rights Agreement dated as of June 9, 1997, between Sprint and UMB
Bank, n.a.; and
WHEREAS, the Articles of Incorporation of Sprint also makes reference to
the 1989 Rights Agreement, as it may be amended and supplemented from time to
time.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of FT, DT and Sprint (each a "Party"), intending to be
legally bound, hereby agrees as follows:
1. Effective as of 5:00 p.m. New York City time on June 24, 1997, the
definition of "Sprint Rights Plan" in Section 1.1 of the Standstill Agreement is
deleted in its entirety and the following definition is substituted in lieu
thereof:
"Sprint Rights Plan" shall mean the Rights Agreement dated as of June 9,
1997, between Sprint and UMB Bank, n.a., as rights agent.
2. Effective as of 5:00 p.m. New York City time on June 24, 1997, the
definition of "Sprint Rights Plan" in Section 1.1 of the Qualified Subsidiary
Standstill Agreement (Exhibit A to the Standstill Agreement) and in Section 1.1
of the Strategic Investor Standstill Agreement (Exhibit B to the Standstill
Agreement) is deleted in its entirety and the following definition is
substituted in lieu thereof:
"Sprint Rights Plan" shall mean the Rights Agreement dated as of June 9,
1997, between Sprint and UMB Bank, n.a., as rights agent.
3. Effective as of 5:00 p.m. New York City time on June 24, 1997, the
definition of "Rights Agreement" in Article I of the Investment Agreement is
deleted in its entirety and the following definition is substituted in lieu
thereof:
"Rights Agreement" means the Rights Agreement dated as of June 9, 1997,
between Sprint and UMB Bank, n.a., as rights agent.
4. Effective as of 5:00 p.m. New York City time on June 24, 1997, the
definition of "Rights Agreement" in Article I of the Stockholders' Agreement is
deleted in its entirety and the following definition is substituted in lieu
thereof:
"Rights Agreement" means the Rights Agreement dated as of June 9, 1997,
between Sprint and UMB Bank, n.a., as rights agent.
5. The Parties understand and agree that the words "amended or
supplemented" used in the definition of "Rights Agreement" set forth in ARTICLE
SIXTH - GENERAL PROVISIONS RELATING TO CLASS A STOCK, Section 12, shall be
interpreted to include, without limitation, a replacement of the Rights
Agreement and in particular shall include the Rights Agreement dated as of June
9, 1997, between Sprint and UMB Bank, n.a.
6. This Amendment will be binding upon and inure to
the benefit of the Parties and their successors and
permitted assigns.
7. The invalidity or unenforceability of any provision hereof in any
jurisdiction will not affect the validity or enforceability of the remainder
hereof in that jurisdiction or the validity or enforceability of this Amendment,
including that provision, in any other jurisdiction. To the extent permitted by
applicable law, each Party waives any provision of applicable law that renders
any provision hereof prohibited or unenforceable in any respect. If any
provision of this Amendment is held to be unenforceable for any reason, it shall
be adjusted rather than voided, if possible, in order to achieve the intent of
the Parties to the extent possible.
8. The Parties have negotiated this Amendment in the English language, and
have prepared successive drafts and the definitive text of this Amendment in the
English language. For purposes of complying with loi n 94-665 du 4 aout 1994
relative a l'emploi de law langue francaise, the parties hereto have prepared a
French version of this Amendment, which French version was executed and
delivered simultaneously with the execution and delivery of the English version
hereof. The parties deem the French and English versions of this Amendment to be
equally authoritative.
9. This Amendment may be executed in one or more counterparts each of which
when so executed and delivered will be deemed an original but all of which will
constitute one and the same agreement.
IN WITNESS WHEREOF, Sprint, FT and DT have caused their respective duly
authorized officers to execute this Amendment as of the day and year first above
written.
SPRINT CORPORATION
By: /s/ Don A. Jensen
Name: Don A. Jensen
Title: Vice President
FRANCE TELECOM
By: /s/ J. Champeaux
Name: J. Champeaux
Title: Directeur Executif
DEUTSCHE TELEKOM AG
By: /s/ Juergen Bohm
Name: Juergen Bohm
Title: GESCHAFTSBEREICHSLEITER
<PAGE>
Exhibit (10)(a)
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, February
11, 1997 and April 15, 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.
<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 grantee, except that the grantee may transfer an option to
a trust of the kind described in Section 9(e). Any such trust as transferee of
an option may not (1) dispose of shares received in an exercise of such options
until such shares are validly registered or exempt from registration under any
applicable exemption from registration under the Securities Act of 1933, as
amended, in the opinion of the Corporate Secretary or (2) while continuing to
hold options issued under this plan, be amended to change beneficiaries to
persons other than those permissible under Section 9(e). Documents evidencing
the transfer of any option and the identity of the transferee shall be in such
form as may be required by the Corporate Secretary.
(c) Post-Employment Exercise of Options.
An optionee may exercise an option issued under
the Plan only during the term of the grantee's
employment and within a period following the
grantee's termination of
(1) (A) 12 months in the case of Incentive
Stock Options and
(B) 60 months, in the case of all other
options
granted to a grantee 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 granted
to a grantee whose employment terminated by
reason of his death;
(3) 3 months in the case of options granted
to a grantee whose employment terminated
voluntarily; and
(4) 3 months in the case of options granted to a grantee whose employment
terminated involuntarily other than for cause.
An optionee holding options granted to an a grantee whose employment has been
terminated for cause, as determined by the Committee, shall forfeit all
outstanding options immediately upon termination of the grantee's 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 the grantee's 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 grantee'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 grantee continues to be an employee of the Company or of
a subsidiary. Only those options exercisable at the date the grantee's
employment terminates may be exercised during the period following such
termination. For purposes of the forfeiture provisions of this Plan, unless the
Committee, at the time of grant specifies otherwise, a grantee 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 re-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 by an optionee upon the death of the grantee may be exercised
by (i) the executor or administrator of the grantee'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)
by the beneficiary designated by the grantee in accordance with the following
paragraph.
The grantee of an option may designate a beneficiary or beneficiaries to
exercise unexpired options held by the grantee and to own shares issued upon any
such exercise after the grantee'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 grantee. A grantee may change
any beneficiary designation of options held by the grantee 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
Corporate 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 a 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 grantee 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 one year from
the date of the granting of such option or until earlier termination of the
grantee's employment effected or approved by the Company or by such subsidiary.
In the event of a violation by the grantee of such agreement, any options
granted to the grantee shall be forfeited. The Committee may waive this
requirement in the case of any grantee. Nothing contained in the Plan, or in any
option granted pursuant to the provisions of this Section 8, 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 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 grantees, as determined by the Committee, may,
while employed by Sprint or its subsidiaries, elect to receive restricted shares
upon payment of the exercise price of an option in the unrestricted common
stock. The grantee 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 grantees 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 grantee 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 a grantee 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 grantee 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 grantee 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 grantee, the grantee's spouse, or the grantee's descendants
(by blood, adoption, or marriage) 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.
(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 after the Tax Date. 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.
If the exercise of an option by an optionee other than the grantee after
transfer of the option pursuant to this plan from the grantee to the optionee
results in a withholding obligation on the part of the grantee, the grantee may
elect to satisfy his withholding obligation by delivery of shares to the Company
as permitted in clause (i) above.
<PAGE>
Exhibit (10)(b)
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, February 11, 1997, and April 15, 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 grantee, except that the grantee may transfer an option to
a trust of the kind described in Section 9(e). Any such trust as transferee of
an option may not (1) dispose of shares received in an exercise of such options
until such shares are validly registered or exempt from registration under any
applicable exemption from registration under the Securities Act of 1933, as
amended, in the opinion of the Corporate Secretary or (2) while continuing to
hold options issued under this plan, be amended to change beneficiaries to
persons other than those permissible under Section 9(e). Documents evidencing
the transfer of any option and the identity of the transferee shall be in such
form as may be required by the Corporate Secretary.
(c) Post-Employment Exercise of Options. An
optionee may exercise an option issued under the
Plan only during the term of the grantee's
employment and within a period following the
grantee's termination of
(1) (A) 12 months in the case of Incentive Stock
Options and
(B) 60 months, in the case of all other
options
granted to a grantee 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 granted to a
grantee whose employment terminated by reason of
his death;
(3) 3 months in the case of options granted to a
grantee whose employment terminated voluntarily;
and
(4) 3 months in the case of options granted to a
grantee whose employment terminated involuntarily
other than for cause.
An optionee holding options granted to a grantee whose employment has been
terminated for cause, as determined by the Committee, shall forfeit all
outstanding options immediately upon termination of the grantee's 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 the grantee's 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 grantee'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 grantee continues to be an employee of the
Company or of a subsidiary. Only those options exercisable at the date the
grantee's employment terminates may be exercised during the period following
such termination. For purposes of the forfeiture provisions of this Plan, unless
the Committee, at the time of grant specifies otherwise, a grantee 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 re-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 by an optionee upon the death of the grantee may be exercised
by (i) the executor or administrator of the grantee'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)
by the beneficiary designated by the grantee in accordance with the following
paragraph.
The grantee of an optionee may designate a beneficiary or beneficiaries to
exercise unexpired options held by the grantee and to own shares issued upon any
such exercise after the grantee'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 grantee. A grantee may change
any beneficiary designation of options held by the grantee 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
Corporate 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 a 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: (1) will not be granted 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) will
not be granted if the optionee is not, on the exercise date, an employee of
Sprint or a Sprint subsidiary; (3) will not be granted if the original option is
exercised less than one year before the expiration of the original option; and
(4) with respect to options transferred by the grantee to another person in
accordance with this Plan, reload options shall be granted to the grantee upon a
stock-for-stock exercise by the optionee to the same extent as if the grantee
had exercised the option in a similar manner.
(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 grantee 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 one year from
the date of the granting of such option or until earlier termination of the
grantee's employment effected or approved by the Company or by such subsidiary.
In the event of a violation by the grantee of such agreement, any options
granted to the grantee shall be forfeited. The Committee may waive this
requirement in the case of any grantee. 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 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.
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 grantees, as determined by the Committee, may,
while employed by Sprint or its subsidiaries, elect to receive restricted shares
upon payment of the exercise price of an option in the unrestricted common
stock. The grantee 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 grantees 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 grantee 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 a grantee 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 grantee 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 grantee 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 grantee, the grantee's spouse, or the grantee's descendants
(by blood, adoption, or marriage) 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.
(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 an optionee's consent, impair the optionee's rights
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 grantee of the grant of the option, and submit to the grantee 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 grantee
execute the agreement or agreements within sixty (60) days after the mailing by
the Company of the notice to the optionee. The grantee 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 withholding 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 after the Tax Date. 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.
If the exercise of an option by an optionee other than the grantee after
transfer of the option pursuant to this plan from the grantee to the optionee
results in a withholding obligation on the part of the grantee, the grantee may
elect to satisfy his withholding obligation by delivery of shares to the Company
as permitted in clause (i) above.
<PAGE>
Exhibit (10)(c)
MANAGEMENT INCENTIVE STOCK OPTION PLAN (As Amended April 18, 1995, August
8, 1995,
August 12, 1996, February 11, 1997 and
April 15, 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 the grantee's employment
with the Company or a subsidiary of the
Company is terminated, the optionee may
exercise options that 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 period below,
beginning on the grantee's:
(i) retirement: five years after the
grantee's retirement date.
(ii) disability (qualifying for long-
term disability benefits under the
Company's Basic Long-Term
Disability Plan): five years after
the grantee's qualification date.
(iii)death: one year after the
grantee's 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 grantee's date of
termination of employment.
If a grantee's employment is terminated for a reason constituting good
cause, any outstanding options granted under the Plan shall
automatically terminate. For this purpose, "good cause" means conduct
by the grantee that reflects adversely on the grantee's honesty,
trustworthiness or fitness as an employee, or the grantee's willful
engagement in conduct which is demonstrably and materially injurious
to the Company.
If a grantee becomes associated with, becomes employed by, renders services
to, or owns any interest in (other than a insubstantial interest, as determined
by the Committee) any business in competition with the Company, all outstanding
options granted to the grantee whether vested or unvested shall automatically
terminate and shares of restricted stock received upon the exercise of an option
pursuant to Section 6 hereof that 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 re-employed by the Company or its subsidiaries.
i. Restricted Stock. Certain grantees may
elect to deliver restricted shares or
receive restricted shares in connection
with an exercise of an option by the
grantee, as provided in Section 6
hereof.
j. Beneficiary Designations. The grantee
of an option may designate a beneficiary
or beneficiaries to exercise unexpired
options held by the grantee and to own
shares issued upon any such exercise
after the grantee'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 grantee. A grantee may change
any beneficiary designation of options
held by the grantee 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 Corporate 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 a trust in accordance with the
terms of the Plan.
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. 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 grantee, except that the
grantee may transfer an option to a
trust of the kind described in Section
6(b). Any such trust as transferee of an
option may not (1) dispose of shares
received in an exercise of such options
until such shares are validly registered
or exempt from registration under any
applicable exemption from registration
under the Securities Act of 1933, as
amended, in the opinion of the Corporate
Secretary or (2) while continuing to
hold options issued under this plan, be
amended to change beneficiaries to
persons other than those permissible
under Section 6(b). Documents evidencing
the transfer of any option and the
identity of the transferee shall be in
such form as may be required by the
Corporate Secretary.
6. Restricted Stock. Certain grantees, 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 grantee 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 grantees 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 grantee shall elect a vesting period
for the restricted common stock to be
received upon exercise of the option of
between 6 months and 10 years, subject
to rules and procedures established by
the Plan Administrator, but in no event
may a grantee 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 grantee
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 grantee 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 grantee, the grantee's
spouse, or descendants (by blood,
adoption, or marriage) 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. A grantee 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
grantee or his representative shall sign
any document and take any other action
required to assign said restricted
shares back to the Company.
f. The grantee 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 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. 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:
(1) will not be granted 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) will not be
granted if the grantee is not, on the
exercise date, an employee of Sprint or
a Sprint subsidiary; (3) will not be
granted if the original option is
exercised less than one year before the
expiration of the original option; and
(4) with respect to options transferred
by the grantee to another person in
accordance with this Plan, reload
options shall be granted to the grantee
upon a stock-for-stock exercise by the
optionee to the same extent as if the
grantee had exercised the option in a
similar manner.
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. Such election is irrevocable after the Tax Date. 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.
If the exercise of an option by an optionee other than the grantee after
transfer of the option pursuant to this plan from the grantee to the
optionee results in a withholding obligation on the part of the grantee,
the grantee may elect to satisfy his withholding obligation by delivery of
shares to the Company as permitted in clause (i) above.
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 optionee, 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.
<TABLE>
<CAPTION>
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(in millions, except per share data)
Quarter Ended Year to Date
June 30, June 30,
--------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Primary earnings per share (EPS)
<S> <C> <C> <C> <C>
Income from continuing operations $ 255.9 $ 316.5 $ 545.9 $ 628.7
Preferred stock dividends (0.2) (0.3) (0.5) (0.8)
- ------------------------------------------------------------------------------------------------------------------
255.7 316.2 545.4 627.9
Discontinued operation, net -- 0.3 -- (2.6)
- ------------------------------------------------------------------------------------------------------------------
Earnings applicable to common stock $ 255.7 $ 316.5 $ 545.4 $ 625.3
--------------------------------------------------------------
Weighted average common shares 435.6 434.1 435.2 417.2
--------------------------------------------------------------
Primary EPS
Continuing operations $ 0.59 $ 0.73 $ 1.25 $ 1.51
Discontinued operation -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total $ 0.59 $ 0.73 $ 1.25 $ 1.50
--------------------------------------------------------------
Fully diluted EPS
Income from continuing operations, net of
preferred stock dividends $ 255.7 $ 316.2 $ 545.4 $ 627.9
Convertible preferred stock dividends 0.1 0.1 0.2 0.3
- ------------------------------------------------------------------------------------------------------------------
255.8 316.3 545.6 628.2
Discontinued operation, net -- 0.3 -- (2.6)
- ------------------------------------------------------------------------------------------------------------------
Earnings as adjusted to compute fully
diluted EPS $ 255.8 $ 316.6 $ 545.6 $ 625.6
--------------------------------------------------------------
Weighted average common shares 435.6 434.1 435.2 417.2
Additional dilution for common stock equivalents
and dilutive securities 2.4 1.3 2.9 2.1
- ------------------------------------------------------------------------------------------------------------------
Total 438.0 435.4 438.1 419.3
--------------------------------------------------------------
Fully diluted EPS
Continuing operations $ 0.58 $ 0.73 $ 1.25 $ 1.50
Discontinued operation -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total $ 0.58 $ 0.73 $ 1.25 $ 1.49
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(dollars in millions)
Quarter Ended Year to Date
June 30, June 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Earnings
Income from continuing operations
<S> <C> <C> <C> <C>
before taxes $ 415.0 $ 508.4 $ 900.2 $ 1,014.7
Capitalized interest (27.7) (28.8) (56.7) (53.2)
Equity in losses of less than 50% owned
entities 154.9 67.7 263.2 86.2
- ------------------------------------------------------------------------------------------------------------------
Subtotal 542.2 547.3 1,106.7 1,047.7
- ------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest charges of continuing
operations 68.4 78.3 142.2 150.4
Interest factor of operating rents 30.4 29.2 61.0 59.4
Pre-tax cost of preferred stock
dividends of subsidiaries 0.1 0.1 0.2 0.3
- ------------------------------------------------------------------------------------------------------------------
Total fixed charges 98.9 107.6 203.4 210.1
- ------------------------------------------------------------------------------------------------------------------
Earnings, as adjusted $ 641.1 $ 654.9 $ 1,310.1 $ 1,257.8
---------------------------------------------------------------------
Ratio of earnings to fixed charges 6.48 6.09 6.44 5.99
---------------------------------------------------------------------
<FN>
Note: These ratios were computed by dividing fixed charges into the sum of
(a) income from continuing operations before taxes, less capitalized
interest and equity in losses of less than 50% owned entities included
in income, and (b) fixed charges. Fixed charges consist of (a) interest
on all debt of continuing operations (including amortization of debt
issuance expenses), (b) the interest component of operating rents, and
(c) the pre-tax cost of preferred stock dividends of subsidiaries.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 391,700
<SECURITIES> 0
<RECEIVABLES> 2,670,700
<ALLOWANCES> 130,300
<INVENTORY> 329,200
<CURRENT-ASSETS> 3,687,300
<PP&E> 22,445,000
<DEPRECIATION> 11,533,900
<TOTAL-ASSETS> 17,039,500
<CURRENT-LIABILITIES> 3,039,300
<BONDS> 2,918,800
11,800
0
<COMMON> 1,091,300
<OTHER-SE> 7,751,900
<TOTAL-LIABILITY-AND-EQUITY> 17,039,500
<SALES> 0
<TOTAL-REVENUES> 7,267,600
<CGS> 0
<TOTAL-COSTS> 4,474,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,500
<INCOME-PRETAX> 900,200
<INCOME-TAX> 354,300
<INCOME-CONTINUING> 545,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,900
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 1,060,200
<SECURITIES> 0
<RECEIVABLES> 2,685,000
<ALLOWANCES> 128,900
<INVENTORY> 325,000
<CURRENT-ASSETS> 4,298,500
<PP&E> 21,870,300
<DEPRECIATION> 11,256,000
<TOTAL-ASSETS> 16,955,000
<CURRENT-LIABILITIES> 3,157,100
<BONDS> 2,931,700
11,800
0
<COMMON> 1,091,300
<OTHER-SE> 7,618,400
<TOTAL-LIABILITY-AND-EQUITY> 16,955,000
<SALES> 0
<TOTAL-REVENUES> 3,589,000
<CGS> 0
<TOTAL-COSTS> 2,205,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,800
<INCOME-PRETAX> 485,200
<INCOME-TAX> 195,200
<INCOME-CONTINUING> 290,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,000
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.66
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<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> 305,300
<CURRENT-ASSETS> 4,352,800
<PP&E> 21,410,800
<DEPRECIATION> 10,946,700
<TOTAL-ASSETS> 16,946,300
<CURRENT-LIABILITIES> 3,314,200
<BONDS> 2,974,800
11,800
0
<COMMON> 1,091,300
<OTHER-SE> 7,428,600
<TOTAL-LIABILITY-AND-EQUITY> 16,946,300
<SALES> 0
<TOTAL-REVENUES> 13,927,300
<CGS> 0
<TOTAL-COSTS> 8,503,900
<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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 1,582,000
<SECURITIES> 0
<RECEIVABLES> 2,505,300
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