SPRINT CORP, 10-Q, 1997-11-10

SPRINT CORP
10-Q, 1997-11-10
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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 September 30, 1997
------------------------------------

[ ] 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
or organization) Identification No.)

P.O. Box 11315, Kansas City, Missouri 64112
- --------------------------------------------------------------------------------
(Address of principal executive offices)

(913) 624-3000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

- --------------------------------------------------------------------------------
(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 SEPTEMBER 30, 1997:
COMMON STOCK 343,564,847
CLASS A COMMON STOCK 86,236,036

<PAGE>

SPRINT CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997

INDEX

Page
Number
-------------------------

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 24

Item 2. Changes in Securities 24

Item 3. Defaults Upon Senior Securities 24

Item 4. Submission of Matters to a Vote of Security Holders 24

Item 5. Other Information 24

Item 6. Exhibits and Reports on Form 8-K 24

Signature 25

Exhibits

</TABLE>

PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
September 30, December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------
(unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 109.4 $ 1,150.6
Accounts receivable, net of allowance for doubtful accounts
of $167.1 and $117.4 2,612.0 2,463.5
Inventories 345.4 305.3
Notes and other receivables 275.0 101.9
Other 344.9 331.5
- --------------------------------------------------------------------------------------------------------------------
Total current assets 3,686.7 4,352.8

Investments in equity securities 262.9 254.5

Property, plant and equipment
Long distance communications services 8,105.8 7,467.8
Local communications services 14,051.8 13,368.7
Other 804.8 574.3
- --------------------------------------------------------------------------------------------------------------------
22,962.4 21,410.8
Less accumulated depreciation 11,851.6 10,946.7
- --------------------------------------------------------------------------------------------------------------------
11,110.8 10,464.1

Investments in and advances to affiliates 1,378.4 1,527.1
Other 1,182.9 347.8
- --------------------------------------------------------------------------------------------------------------------

$ 17,621.7 $ 16,946.3
-----------------------------------------
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt $ 152.1 $ 99.1
Short-term borrowings 394.7 200.0
Accounts payable 927.0 1,026.7
Accrued interconnection costs 860.4 828.9
Accrued taxes 211.8 189.2
Advance billings 188.8 199.7
Other 741.7 770.6
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,476.5 3,314.2

Long-term debt 2,851.2 2,974.8

Deferred credits and other liabilities
Deferred income taxes and investment tax credits 1,063.6 846.9
Postretirement and other benefit obligations 939.6 919.7
Other 364.1 359.0
- --------------------------------------------------------------------------------------------------------------------
2,367.3 2,125.6

Redeemable preferred stock 11.4 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 343.6 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 4,450.1 4,425.9
Retained earnings 3,609.3 3,222.4
Treasury stock, at cost, 6.7 and 6.4 shares (293.5) (262.2)
Other 58.1 42.5
- --------------------------------------------------------------------------------------------------------------------
8,915.3 8,519.9
- --------------------------------------------------------------------------------------------------------------------

$ 17,621.7 $ 16,946.3
-----------------------------------------

See accompanying Condensed Notes to Consolidated Financial Statements

</TABLE>

PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in millions, except per share data)

Quarter Ended Year to Date
September 30, September 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net operating revenues $ 3,791.6 $ 3,515.1 $ 11,059.2 $ 10,334.4

Operating expenses
Costs of services and products 1,879.2 1,746.4 5,523.7 5,125.3
Selling, general and administrative 836.6 773.2 2,429.4 2,269.8
Depreciation and amortization 435.1 396.6 1,265.2 1,184.6
- ------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,150.9 2,916.2 9,218.3 8,579.7
- ------------------------------------------------------------------------------------------------------------------

Operating income 640.7 598.9 1,840.9 1,754.7

Interest expense (49.6) (48.0) (135.1) (145.2)
Equity in loss of Global One (41.0) (24.2) (88.3) (51.5)
Equity in loss of Sprint PCS (186.9) (47.6) (408.8) (120.4)
Other income (expense), net (2.9) 30.7 51.8 86.9
- ------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 360.3 509.8 1,260.5 1,524.5

Income taxes (148.6) (193.6) (502.9) (579.6)
- ------------------------------------------------------------------------------------------------------------------

Income from continuing operations 211.7 316.2 757.6 944.9
Discontinued operation, net -- -- -- (2.6)
Extraordinary losses from early
extinguishments of debt, net -- (3.8) -- (3.8)
- ------------------------------------------------------------------------------------------------------------------

Net income 211.7 312.4 757.6 938.5

Preferred stock dividends (0.3) (0.3) (0.8) (1.1)
- ------------------------------------------------------------------------------------------------------------------

Earnings applicable to common stock $ 211.4 $ 312.1 $ 756.8 $ 937.4
---------------------------------------------------------------------

Earnings per common share
Continuing operations $ 0.49 0.73 $ 1.74 $ 2.23
Extraordinary item -- (0.01) -- (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total $ 0.49 0.72 $ 1.74 $ 2.22
---------------------------------------------------------------------

Weighted average common shares 434.9 434.7 435.1 423.1
---------------------------------------------------------------------

Dividends per common share $ 0.25 $ 0.25 $ 0.75 $ 0.75
---------------------------------------------------------------------

See accompanying Condensed Notes to Consolidated Financial Statements

</TABLE>

PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)

Year to Date
September 30,
----------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------

Operating activities
<S> <C> <C>
Net income $ 757.6 $ 938.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in net losses of affiliates 506.9 165.8
Depreciation and amortization 1,265.2 1,184.6
Deferred income taxes and investment tax credits 217.2 (16.5)
Changes in assets and liabilities:
Accounts receivable, net (123.0) (900.7)
Inventories and other current assets (37.2) 40.3
Accounts payable and other current liabilities (165.4) 250.9
Noncurrent assets and liabilities, net (14.3) (17.0)
Other, net 3.7 26.1
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,410.7 1,672.0
- ------------------------------------------------------------------------------------------------------------------

Investing activities
Capital expenditures (1,903.9) (1,569.6)
Purchase of PCS licenses (460.1) (84.0)
Investments in and advances to affiliates, net (354.4) (410.4)
Paranet acquisition (375.0) --
Credit facility loan to affiliate (154.1) --
Investment in affiliate debt securities -- (100.0)
Other, net 33.8 6.9
- ------------------------------------------------------------------------------------------------------------------
Net cash used by continuing operations (3,213.7) (2,157.1)
Repayment of intercompany advances by cellular division -- 1,400.0
Net investing activities of cellular division -- (140.7)
- ------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (3,213.7) (897.8)
- ------------------------------------------------------------------------------------------------------------------

Financing activities
Payments on long-term debt (110.6) (352.5)
Net change in short-term borrowings 194.7 (1,986.8)
Dividends paid (274.5) (303.4)
Proceeds from Class A common stock issued -- 3,661.3
Proceeds from common stock issued 49.1 19.6
Treasury stock purchased (128.8) (376.1)
Other, net 31.9 21.5
- ------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (238.2) 683.6
- ------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and equivalents (1,041.2) 1,457.8

Cash and equivalents at beginning of period 1,150.6 124.2
- ------------------------------------------------------------------------------------------------------------------

Cash and equivalents at end of period $ 109.4 $ 1,582.0
----------------------------------

See accompanying Condensed Notes to Consolidated Financial Statements

</TABLE>

PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY (UNAUDITED)
(in millions)

Year to Date September 30, 1997
- ---------------------------------------------------------------------------------------------------------------------
Capital
in Excess
Class A of Par or
Common Common Stated Retained Treasury
Stock Stock Value Earnings Stock Other Total
- ---------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1997 $ 875.7 $ 215.6 $ 4,425.9 $ 3,222.4 $ (262.2) $ 42.5 $ 8,519.9

Net income -- -- -- 757.6 -- -- 757.6
Common stock dividends -- -- -- (258.5) -- -- (258.5)
Class A common stock
dividends -- -- -- (64.7) -- -- (64.7)
Stock options exercised -- -- -- (38.2) 87.3 -- 49.1
Tax benefit from stock
options exercised -- -- 19.5 -- -- -- 19.5
Treasury stock purchased -- -- -- -- (128.8) -- (128.8)
Other, net -- -- 4.7 (9.3) 10.2 15.6 21.2
- ---------------------------------------------------------------------------------------------------------------------

Balance as of
September 30, 1997 $ 875.7 $ 215.6 $ 4,450.1 $ 3,609.3 $ (293.5) $ 58.1 $ 8,915.3
----------------------------------------------------------------------------------------

See accompanying Condensed Notes to Consolidated Financial Statements
</TABLE>

<PAGE>

PART I.
Item 1.
SPRINT CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 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 8). 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 and France Telecom, 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:

<TABLE>
<CAPTION>
Quarter Ended Year to Date
September 30, September 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
Results of operations
<S> <C> <C> <C> <C>
Net operating revenues $ 657.8 $ 472.6 $ 1,645.9 $ 1,156.6
---------------------------------------------------------------------
Operating loss $ (607.3) $ (167.0) $ (1,342.1) $ (357.8)
---------------------------------------------------------------------
Net loss $ (633.1) $ (149.5) $ (1,515.9) $ (367.4)
---------------------------------------------------------------------

Sprint's net losses in affiliates $ (226.7) $ (68.5) $ (490.7) $ (163.9)
---------------------------------------------------------------------
</TABLE>

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:

Effect of:
State income taxes, net of federal income tax effect 45.9 51.2
Equity in losses of foreign joint venture 24.2 6.0
Investment tax credits included in income (2.9) (5.3)
Other, net (5.5) (5.9)
- ------------------------------------------------------------------------------------------------------------------

Income tax expense $ 502.9 $ 579.6
----------------------------------

Effective income tax rate 39.9% 38.0%
----------------------------------
</TABLE>

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 were paid in July 1997 to
common and Class A common shareholders.

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 September 30, 1997, no PS shares 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. The remainder was directed to be paid 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 struck down, 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 struck down and granted Network 2000's request that the
award be confirmed.

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.

Various other suits arising in the ordinary course of business are pending
against Sprint. Management cannot predict the final 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
September 30,
----------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
Cash paid for:
Interest (excluding amounts capitalized)
<S> <C> <C>
Continuing operations $ 133.2 $ 152.9
----------------------------------
Cellular division $ -- $ 22.9
----------------------------------
Income taxes $ 288.5 $ 548.5
----------------------------------
</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.

7. Paranet Acquisition

On September 30, 1997, Sprint paid $375 million to purchase the net assets of
Paranet, Inc. (Paranet), a provider of integration, management and support
services for computer networks. In addition, Sprint could pay up to $70 million
if Paranet meets certain financial targets through 1998. The transaction was
accounted for using the purchase method of accounting.

<PAGE>

8. 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.

9. 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
companies to disclose a measure of segment profit or loss (operating income, for
example), segment assets, and reconciliations 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.

10. Subsequent Events

In November 1997, Sprint sold approximately 136,000 residential and business
access lines in a small area of northwest Chicago and 10 nearby suburbs.

In October 1997, Sprint's Board of Directors declared common and Class A common
stock dividends of $0.25 per share payable December 29, 1997.

<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 its reports, in
presentations to analysts and others, and in other publicly-available material.
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. Beginning in the 1997 fourth quarter, emerging businesses
will also include the results of Paranet, Inc. (Paranet), which was purchased on
September 30, 1997. See Note 7 of Condensed Notes to Consolidated Financial
Statements regarding Sprint's acquisition of Paranet.

<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 October 1997,
Sprint PCS had launched service in more than 90 metropolitan markets, and plans
to launch service in several new markets through the end of 1997.

As part of an overall strategy to increase PCS coverage, Sprint directly
acquired the rights to PCS licenses in the FCC's 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.

<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 utility commissions (PUCs) 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 PUCs. 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 customers
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 delayed, 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 core operations generated improved 1997 third quarter and year-to-date
net operating revenues and operating income compared with the same 1996 periods.
Core results exclude the impact from joint ventures and emerging businesses.
Third quarter and year-to-date 1997 long distance calling volumes increased 14%
from the same 1996 periods. Access lines served by the local division increased
5.6% during the past 12 months.

Total net operating revenues for the 1997 third quarter increased 8% to $3.8
billion from $3.5 billion for the same period a year ago. Income from continuing
operations was $212 million ($0.49 per share) versus $316 million ($0.73 per
share) for the 1996 third quarter. Income from core operations increased to $404
million ($0.93 per share) from $372 million ($0.85 per share) during the same
period.

Year-to-date 1997 net operating revenues increased 7% to $11.1 billion from
$10.3 billion for the same 1996 period. Income from continuing operations was
$758 million ($1.74 per share) versus $945 million ($2.23 per share) for the
1996 year-to-date period. Income from core operations increased to $1.2 billion
($2.69 per share) from $1.1 billion ($2.54 per share). Income from continuing
and core operations for year-to-date 1997 includes a charge related to
litigation in the long distance division ($0.03 per share).

<PAGE>

Segmental Results

Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. The
changes affect Sprint's segmental results only; consolidated results are not
affected. The impact on the Long Distance Communications Services division and
Emerging Businesses segment are expected to be insignificant. For comparative
purposes, the Local Communications Services division and the Product
Distribution and Directory Publishing Businesses discussions are based on pro
forma results, which assume these pricing changes occurred at the beginning of
1996.

Long Distance Communications Services
<TABLE>
<CAPTION>

Selected Operating Results
----------------------------------------------------------------------
Quarter Ended
September 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 2,251.7 $ 2,083.6 $ 168.1 8.1%

Operating expenses
Interconnection 959.8 936.2 23.6 2.5%
Operations 316.3 257.9 58.4 22.6%
Selling, general and administrative 500.4 477.3 23.1 4.8%
Depreciation and amortization 187.1 159.3 27.8 17.5%
- -------------------------------------------------------------------------------------------------
Total operating expenses 1,963.6 1,830.7 132.9 7.3%
- -------------------------------------------------------------------------------------------------
Operating income $ 288.1 $ 252.9 $ 35.2 13.9%
----------------------------------------------------
Operating margin 12.8% 12.1%
----------------------------------
</TABLE>
<TABLE>
<CAPTION>

Selected Operating Results
----------------------------------------------------------------------
Year to Date
September 30, Variance
----------------------------------------------------------------------
1997 1996 Dollar %
- -------------------------------------------------------------------------------------------------------------------
(dollars in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 6,642.7 $ 6,138.1 $ 504.6 8.2%

Operating expenses
Interconnection 2,966.8 2,736.1 230.7 8.4%
Operations 909.2 785.3 123.9 15.8%
Selling, general and administrative 1,464.5 1,423.5 41.0 2.9%
Depreciation and amortization 520.9 466.0 54.9 11.8%
- -------------------------------------------------------------------------------------------------
Total operating expenses 5,861.4 5,410.9 450.5 8.3%
- -------------------------------------------------------------------------------------------------
Operating income $ 781.3 (1)$ 727.2 $ 54.1 7.4%
----------------------------------------------------
Operating margin 11.8%(1) 11.8%
----------------------------------
<FN>
(1)Excluding a $20 million charge related to litigation, 1997 year-to-date
operating income would have been $801 million, reflecting a 12.1% operating
margin.
</FN>
</TABLE>

<PAGE>

Both third 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 data services revenue. Revenue growth was affected by a more
competitive pricing environment and a continued increase in the bad debt
provision. Management continues to monitor Sprint's credit extension policies to
ensure they are effective. In addition, year-to-date 1996 includes revenues from
carrying the Internal Revenue Service 800 help line traffic, a service Sprint no
longer provides, while year-to-date 1997 reflects lower yields on other
government contracts.

Both third quarter and year-to-date 1997 calling volumes increased 14% from the
same 1996 periods mainly driven by the small and medium business and wholesale
markets. Residential minute growth was modest due to slower industry growth.

Both third quarter and year-to-date 1997 revenue growth in the business market
reflects increased volumes for toll-free and WATS calls made within the United
States. 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 growth in small and medium business
market revenues reflects the continuing success of the division's small business
product, Fridays Free, which has been extended through the year 2000. 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. Third quarter and year-to-date interconnection
costs in 1997 increased 3% and 8%, respectively, from the same 1996 periods. The
higher costs reflect increased traffic volumes partly offset by reduced rates
charged by other domestic and international carriers for connecting to their
networks. The lower domestic rates are due to FCC-mandated access rate
reductions effective July 1997 -- see "Regulatory Developments" for further
discussion. Interconnection costs as a percentage of net operating revenues were
42.6% for the 1997 third quarter and 44.7% for the 1997 year-to-date period. For
the same 1996 periods, interconnection costs were 44.9% and 44.6%, respectively,
of net operating revenues.

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 equipment sales. Third
quarter 1997 operations expense increased 23% from the same 1996 period, while
year-to-date expenses increased 16%. These increases were mostly due to
increased costs related to FCC-mandated payments to public payphone providers
and increased costs of equipment sales.

Third quarter and year-to-date selling, general and administrative expense
increased 5% and 3%, respectively, from the same 1996 periods. These increases
were mainly due to marketing and promotions to support products and services and
increased administrative costs to support the network.

Third quarter and year-to-date depreciation and amortization expense for 1997
increased 17% and 12%, respectively, from the same 1996 periods generally due to
an increased asset base. Capital expenditures in 1997 were incurred mainly to
enhance network reliability, upgrade capabilities for providing new products and
services, and meet increased demand for data-related services.

<PAGE>

Local Communications Services

Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. For
comparative purposes, the Local Communications Services division discussion is
based on pro forma results, which assume these pricing changes occurred at the
beginning of 1996.

<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Quarter Ended
September 30, Variance
---------------------------------------------------------------------
1997 1996 Dollar %
- ------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Local service $ 583.7 $ 532.5 $ 51.2 9.6 %
Network access 471.5 473.5 (2.0) (0.4)%
Toll service 86.2 103.6 (17.4) (16.8)%
Other (1) 199.5 205.1 (5.6) (2.7)%
- -------------------------------------------------------------------------------------------------
Total net operating revenues 1,340.9 1,314.7 26.2 2.0 %
- -------------------------------------------------------------------------------------------------

Operating expenses
Plant operations (2) 356.8 357.3 (0.5) (0.1)%
Depreciation and amortization (2) 231.2 225.1 6.1 2.7 %
Customer operations 182.5 168.6 13.9 8.2 %
Other 222.7 221.1 1.6 0.7 %
- -------------------------------------------------------------------------------------------------
Total operating expenses 993.2 972.1 21.1 2.2 %
- -------------------------------------------------------------------------------------------------
Operating income (3) $ 347.7 $ 342.6 $ 5.1 1.5 %
----------------------------------------------------
Operating margin (3) 25.9% 26.1%
----------------------------------

<FN>
(1)Other revenue would have increased 13% on a pro forma basis from $177
million in the 1996 third quarter.
(2)Pro forma plant operations, and depreciation and amortization remained
largely consistent with reported amounts.
(3)Operating income would have increased 10% on a pro forma basis from $316
million in the 1996 third quarter. The related 1996 operating margin would
have been 24.5%.
</FN>
</TABLE>

Selected Operating Results
---------------------------------------------------------------------
Year to Date
September 30, Variance
---------------------------------------------------------------------
1997 1996 Dollar %
- ------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Local service $ 1,706.8 $ 1,541.3 $ 165.5 10.7 %
Network access 1,429.1 1,394.8 34.3 2.5 %
Toll service 266.7 323.5 (56.8) (17.6)%
Other (1) 600.9 578.2 22.7 3.9 %
- -------------------------------------------------------------------------------------------------
Total net operating revenues 4,003.5 3,837.8 165.7 4.3 %
- -------------------------------------------------------------------------------------------------

Operating expenses
Plant operations (2) 1,043.0 1,032.4 10.6 1.0 %
Depreciation and amortization (2) 697.7 681.7 16.0 2.3 %
Customer operations 535.9 484.2 51.7 10.7 %
Other 641.7 636.3 5.4 0.8 %
- -------------------------------------------------------------------------------------------------
Total operating expenses 2,918.3 2,834.6 83.7 3.0 %
- -------------------------------------------------------------------------------------------------
Operating income (3) $ 1,085.2 $ 1,003.2 $ 82.0 8.2 %
----------------------------------------------------
Operating margin (3) 27.1% 26.1%
----------------------------------
<FN>
(1)Year-to-date other revenue would have increased 10% on a pro forma basis to
$542 million in 1997 from $493 million in 1996.
(2)Pro forma plant operations, and depreciation and amortization remained
largely consistent with reported amounts.
(3)Year-to-date operating income would have increased 12% on a pro forma basis
to $1.0 billion in 1997 from $922 million in 1996. The related 1997 and 1996
operating margins would have been 26.1% and 24.6%, respectively.
</FN>
</TABLE>

<PAGE>

Local service revenues are derived from local exchange services. During third
quarter and year-to-date 1997, these revenues increased 10% and 11%,
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, return
call and three-way calling.

Network access revenues are derived from interexchange long distance carriers'
use of the local network to complete calls. Third quarter 1997 network access
revenues decreased slightly, while year-to-date revenues increased 2%, compared
with the same 1996 periods. Both 1997 third quarter and year-to-date revenues
reflect strong minute growth. However, both 1997 periods were also impacted by
FCC-mandated 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. Third quarter and year-to-date toll service revenues declined 17%
and 18%, respectively, in 1997 compared with the same 1996 periods. During 1996,
the division resold interexchange long distance services in some 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 became
customers of Sprint's long distance division. 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.
IntraLATA service includes any call that begins and ends within a single LATA.
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, and
billing and collection services. During the 1997 third quarter and year-to-date
periods these pro forma revenues increased 13% and 10%, respectively, from the
same 1996 periods mainly due to increased equipment sales.

Plant operations expense includes network operations, and repair and maintenance
costs for property, plant and equipment. Both third quarter and year-to-date
1997 pro forma plant operations increased slightly compared with the same 1996
periods, reflecting access line growth. Plant operations expense for 1996
includes access charges for reselling interexchange long distance services,
which were phased-out by the division through early 1997.

Customer operations expense includes costs related to business office
operations, billing services, marketing costs, and customer services, including
operator and directory assistance. Third quarter and year-to-date customer
operations expense increased 8% and 11%, respectively, in 1997 compared with the
same 1996 periods. These increases reflect increased sales and marketing, and
customer service costs to promote products and services. The year-to-date
increase also reflects increased bad debt expense. The division is implementing
a number of new processes and procedures to improve its collection results.

Other operating expenses for the 1997 third quarter and year-to-date periods
increased slightly compared with the same 1996 periods. These increases reflect
the increased cost of equipment sales, partly offset by cost savings from the
division's restructuring of the finance functions.

In November 1997, Sprint sold approximately 136,000 residential and business
access lines in a small area of northwest Chicago and 10 nearby suburbs. These
access lines generated year-to-date revenues of approximately $80 million
through September 1997.

<PAGE>

Product Distribution and Directory Publishing Businesses

Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. For
comparative purposes, the Product Distribution and Directory Publishing
Businesses discussion is based on pro forma results, which assume these pricing
changes occurred at the beginning of 1996.

Selected Operating Results
---------------------------------------------------------------------
Quarter Ended
September 30, Variance
---------------------------------------------------------------------
1997 1996 Dollar %
- ------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Non-affiliated $ 229.2 $ 226.6 $ 2.6 1.1%
Affiliated (1) 174.9 94.6 80.3 84.9%
- -------------------------------------------------------------------------------------------------
Total net operating revenues 404.1 321.2 82.9 25.8%
- -------------------------------------------------------------------------------------------------

Operating expenses
Costs of services and products (2) 314.9 271.0 43.9 16.2%
Selling, general and administrative 24.4 22.3 2.1 9.4%
Depreciation and amortization 2.2 1.8 0.4 22.2%
- -------------------------------------------------------------------------------------------------
Total operating expenses 341.5 295.1 46.4 15.7%
- -------------------------------------------------------------------------------------------------
Operating income (3) $ 62.6 $ 26.1 $ 36.5 139.8%
----------------------------------------------------

Operating margin (3) 15.5% 8.1%
----------------------------------

<FN>
(1)Affiliated revenues would have increased 91% on a pro forma basis from $92
million in the 1996 third quarter.
(2)Costs of services and products would have increased 29% on a pro forma basis
from $244 million in the 1996 third quarter.
(3)Operating income would have increased 24% on a pro forma basis from $51
million in the 1996 third quarter. The related 1996 operating margin would
have been 15.9%.
</FN>
</TABLE>

Selected Operating Results
---------------------------------------------------------------------
Year to Date
September 30, Variance
---------------------------------------------------------------------
1997 1996 Dollar %
- ------------------------------------------------------------------------------------------------------------------
(dollars in millions)
Net operating revenues
<S> <C> <C> <C> <C>
Non-affiliated $ 663.5 $ 655.2 $ 8.3 1.3%
Affiliated (1) 414.8 270.3 144.5 53.5%
- -------------------------------------------------------------------------------------------------
Total net operating revenues 1,078.3 925.5 152.8 16.5%
- -------------------------------------------------------------------------------------------------

Operating expenses
Costs of services and products (2) 881.7 776.8 104.9 13.5%
Selling, general and administrative 69.3 67.7 1.6 2.4%
Depreciation and amortization 6.0 5.5 0.5 9.1%
- -------------------------------------------------------------------------------------------------
Total operating expenses 957.0 850.0 107.0 12.6%
- -------------------------------------------------------------------------------------------------
Operating income (3) $ 121.3 $ 75.5 $ 45.8 60.7%
----------------------------------------------------
Operating margin (3) 11.2% 8.2%
----------------------------------

<FN>
(1)Year-to-date affiliated revenues would have increased 56% on a pro forma
basis to $406 million in 1997 from $261 million in 1996.
(2)Year-to-date costs of services and products would have increased 19% on a
pro forma basis to $825 million in 1997 from $696 million in 1996.
(3)Year-to-date operating income would have increased 15% on a pro forma basis
to $169 million in 1997 from $147 million in 1996. The related 1997 and 1996
operating margins would have been 15.8% and 16.0%, respectively.
</FN>
</TABLE>

Sales to affiliates in 1997 reflect increased sales of telecommunications
equipment and distribution services to the local division. Sales to
non-affiliates remained relatively flat compared with 1996 amounts due to
increased competition.

<PAGE>

Emerging Businesses
<TABLE>
<CAPTION>

Selected Operating Results
---------------------------------------------------------------------
Quarter Ended Year to Date
September 30, September 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 6.4 $ 0.1 $ 14.3 $ 0.1
---------------------------------------------------------------------
Operating loss $ (48.7) $ (14.8) $ (119.1) $ (27.5)
---------------------------------------------------------------------
</TABLE>

Sprint's emerging businesses segment includes consumer Internet access services,
CLEC services, international development activities outside the scope of Global
One, and PCS controlled by Sprint. Beginning in the 1997 fourth quarter,
emerging businesses will also include the results of Paranet, which was
purchased on September 30, 1997.

Third quarter and year-to-date operating losses for both 1997 and 1996 largely
reflect activities to develop Sprint Internet access services and enter newly
competitive domestic and international markets.

During 1996, Sprint began offering Internet services to consumers through Sprint
Internet Passport (SM). During 1997, Sprint launched Sprint Internet Private
Passport (SM), providing customized, private Internet access services to
businesses. Sprint's Internet access platform currently consists of more than
200 points of presence.

During the 1997 third quarter, Sprint stopped actively marketing its CLEC
services until the rules for resale become clearer, economics improve and more
effective working arrangements with incumbent LECs can be developed.

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.
Excluding the PCS license costs, Sprint expects to spend a total of $2.3 billion
through 1999 for 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.

Strategic Alliances

Sprint recorded losses from Global One of $41 and $88 million for the 1997 third
quarter and year-to-date periods, respectively, compared with $24 and $51
million for the same 1996 periods. The increased losses in 1997 were due to
higher costs from operations within Global One's existing global markets. Global
One has begun a thorough review of operations, including network deployment, and
management and support systems, in an effort to improve efficiencies and reduce
operating costs.

Sprint's share of operating losses from Sprint PCS were $187 and $409 million
for the 1997 third quarter and year-to-date periods, respectively, compared with
$48 and $120 million for the same 1996 periods. Increased 1997 operating losses
were due to minimal revenues generated on service provided since Sprint PCS
began commercial operations in late 1996. The 1997 losses also reflect costs to
support a growing customer base and costs to obtain new customers, including
subsidies on phone sales and promotional costs.

<PAGE>

Non-Operating Items

Interest Costs

Interest costs consist of the following:
<TABLE>
<CAPTION>
Quarter Ended Year to Date
September 30, September 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Interest expense from continuing operations $ 49.6 $ 48.0 $ 135.1 $ 145.2
Interest costs related to cellular
operations -- -- -- 21.3
Capitalized interest costs 13.0 27.4 69.7 80.6
- ------------------------------------------------------------------------------------------------------------------
Total interest costs $ 62.6 $ 75.4 $ 204.8 $ 247.1
---------------------------------------------------------------------
Average debt outstanding $ 3,132.6 $ 3,384.0 $ 3,156.4 $ 3,692.2
---------------------------------------------------------------------
Effective interest rate 8.0% 8.9% 8.7% 8.9%
---------------------------------------------------------------------
</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, partly
offset by short-term borrowings used to finance the Paranet acquisition. 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 capitalized interest costs on borrowings related to its investment in
Sprint PCS through June 1997. Sprint stopped capitalizing these costs in July
1997 because Sprint PCS no longer qualified as a development-stage company.
Sprint is capitalizing interest costs on its investment in the PCS licenses it
directly acquired in early 1997.

Other Income, Net

Other income consists of the following:
<TABLE>
<CAPTION>

Quarter Ended Year to Date
September 30, September 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Dividend and interest income $ 10.0 $ 22.4 $ 52.8 $ 66.1
Gains (losses) on sales of
telecommunications assets (3.8) 8.1 (3.8) 15.0
Other (9.1) 0.2 2.8 5.8
- ------------------------------------------------------------------------------------------------------------------
Total other income (expense), net $ (2.9) $ 30.7 $ 51.8 $ 86.9
---------------------------------------------------------------------
</TABLE>

Third 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 and has decreased
certain borrowings, 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 totaled $18 billion at September 30, 1997 and $17
billion at year-end 1996. Net property, plant and equipment increased $647
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. Sprint's debt-to-capital ratio improved slightly to 27.6%
at September 30, 1997 versus 27.7% at year-end 1996.

Liquidity and Capital Resources

Cash Flows - Operating Activities

Sprint's year-to-date operating activities provided cash of $2.4 billion during
1997 versus $1.7 billion during the same 1996 period. The 1996 cash flows were
reduced by $600 million due to the termination of an accounts receivable sales
agreement. Operating cash flows for 1997 reflect improved operating results in
Sprint's core businesses. These improved results were partly offset due to the
timing of payments to settle interconnection costs compared with 1996 and
increased 1997 losses from Sprint's emerging businesses.

Cash Flows - Investing Activities

Year-to-date investing activities of Sprint's continuing operations used cash of
$3.2 billion in 1997 and $2.2 billion in 1996. Excluding Sprint's purchase of
the PCS licenses, capital expenditures totaled $1.9 billion in 1997 and $1.6
billion in 1996. Long distance division 1997 year-to-date capital expenditures
increased $101 million from the same 1996 period to $747 million. The 1997
expenditures were incurred mainly to enhance network reliability, upgrade
capabilities for providing new products and services and meet increased demand
for data-related services. Local division 1997 year-to-date capital expenditures
increased $47 million from the same period a year ago to $934 million. The 1997
local capital expenditures were made to accommodate access line growth and
expand the division's capabilities for providing enhanced telecommunications
services.

In 1997, Sprint paid the remaining $460 million balance for its directly-owned
PCS licenses, bringing total payments to $544 million.

"Investments in and advances to affiliates, net" mainly consists of capital
contributions to affiliates in which Sprint exercises significant influence, but
does not control. It also includes advances to affiliates, which are expected to
be repaid, and capitalized interest on Sprint's investment in Sprint PCS.
"Investments in and advances to affiliates, net" mainly reflects year-to-date
1997 capital contributions to Sprint PCS of $233 million versus $274 million in
the same 1996 year-to-date period. Also in 1997, Sprint capitalized $46 million
of interest costs on borrowings related to its investment in Sprint PCS. Sprint
began amortizing these costs in July 1997. Net advances to Global One and
Sprint PCS totaled $40 million in 1997.

During the 1997 third quarter, Sprint purchased the net assets of Paranet for
$375 million.

During the 1997 second quarter, Sprint participated in a vendor financing
facility for Sprint PCS. Sprint's portion of this facility totaled $300 million.
During the 1997 third quarter, Sprint PCS borrowed $154 million against Sprint's
portion of this facility.

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 $238 million, while 1996
year-to-date activities provided cash of $684 million. Financing activities
during 1997 reflect treasury stock purchases of $129 million and dividend
payments of $275 million, partly offset by $195 million of net short-term
borrowings. In 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 $3.4 to $4.0 billion. In
addition, Sprint expects to pay dividends totaling $430 million. Sprint intends
to fund these 1997 cash requirements with cash from operating activities,
temporary investments, and external sources. During 1997 Sprint expects to
borrow $750 million to $1.0 billion.

Excluding the cost of the PCS licenses directly acquired by Sprint, capital
expenditures are expected to total $2.8 to $3.2 billion 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 for network build
out related to the new PCS markets.

During 1997 Sprint expects to invest $600 to $750 million in affiliates. Sprint
PCS will require up to $550 million in 1997 to continue its network build out
and to meet operating cash requirements. Sprint also expects Global One to
require additional contributions for ongoing development activities.

Liquidity

At the end of September 1997, Sprint had the ability to borrow $1.1 billion
under a revolving credit agreement with a syndicate of domestic and
international banks. Sprint may also offer for sale up to $1.1 billion 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 September 30, 1997, Sprint could borrow up to $13.8
billion under the most restrictive of its debt covenants.

The most restrictive covenant related to dividends results from Sprint's
revolving credit agreement. Among other restrictions, Sprint must maintain
specified levels of consolidated net worth. Due to this requirement, $2.7
billion of Sprint's $3.6 billion retained earnings were effectively restricted
from the payment of dividends at the end of September 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. Sprint seeks to minimize counterparty credit
risk through stringent credit approval and review processes, the selection of
only the most creditworthy counterparties, continual review and monitoring of
all counterparties, and thorough legal review of contracts. Sprint also controls
exposure to market risk through regular monitoring of changes in foreign
exchange and interest rate positions under normal and stress conditions to
ensure they do not exceed established limits.

Sprint's derivative transactions are used for hedging purposes only and comply
with board-approved policies. Senior management receives monthly status updates
of all outstanding derivative positions.

<PAGE>

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 sometimes uses
interest rate swaps and caps to adjust its risk profile.

Foreign Exchange Risk Management

Sprint's foreign exchange risk management program focuses on hedging transaction
exposure to optimize consolidated cash flow. Sprint's main transaction exposure
results from net payments made to overseas telecommunications companies for
terminating international calls made by Sprint's domestic customers.

Impact of Recently Issued Accounting Pronouncements

See Note 9 of Condensed Notes to Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.

<PAGE>

PART II.
Other Information

Item 1. Legal Proceedings

There were no reportable events during the quarter ended September 30,
1997.

Item 2. Changes in Securities

There were no reportable events during the quarter ended September 30,
1997.

Item 3. Defaults Upon Senior Securities

There were no reportable events during the quarter ended September 30,
1997.

Item 4. Submission of Matters to a Vote of Security Holders

There were no reportable events during the quarter ended September 30,
1997.

Item 5. Other Information

For the 1997 third quarter, Sprint's ratio of earnings to fixed charges
was 6.88 versus 6.15 for the same 1996 quarter. The 1997 year-to-date
ratio was 6.58 versus 6.04 for the same period a year ago. The ratios
were computed by dividing fixed charges into the sum of earnings (after
certain adjustments) and fixed charges. Earnings include income from
continuing operations before taxes, plus equity in the net losses of
less-than-50%-owned entities, less capitalized interest. Fixed charges
include (a) interest on all debt of continuing operations (including
amortization of debt issuance costs), (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:

(10) Executive Compensation Plans and Arrangements

(a) 1985 Stock Option Plan, as amended

(b) 1990 Stock Option Plan, as amended

(11) Computation of Earnings Per Common Share

(12) Computation of Ratio of Earnings to Fixed Charges

(27) Financial Data Schedule

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended September
30, 1997.

<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: November 10, 1997

<PAGE>

EXHIBIT INDEX

EXHIBIT
NUMBER

(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 Schedule

Exhibit (10)(a)
1985 Stock Option Plan
(As Amended and Restated)

Article 1
Establishment

Sprint Corporation, a Kansas corporation (the "Company"), hereby establishes a
stock option plan to be named the Sprint Corporation 1985 Stock Option Plan (the
"Plan") for its officers and key employees and those of its Subsidiaries.

Article 2
Adoption of 1990 Plan Provisions

The terms of the Sprint Corporation 1990 Stock Option Plan, as amended from time
to time, are hereby adopted as the terms of the Plan in all respects, except as
noted in this Article 2.

2.01. Definitional Differences.

(a) Conflicting Definitions. Any capitalized term used in this Plan shall have
the definition set forth in the 1990 Plan unless a definition is explicitly
set forth in this Plan.
(b) Plan. Whenever the term "Plan" is referred to in the 1990 Plan, it shall be
read as a reference to this Plan for purposes of this Plan.

2.02. Plan Not Enacted Pursuant to Program.

This Plan has not been enacted under the authority of the 1997 Program.
References in the 1990 Plan to the limitations set out in the Program do
not apply to this Plan.

2.03. Shares Authorized to be Issued.

The maximum number of shares of Common Stock that may be issued on exercise of
Options under this Plan shall not exceed 3,152,6181 (1)

2.04. No Reloads to be Issued Under the Plan.

Options issued under the Plan may have Reload Rights, but the Reload Options
granted when Reload Rights are triggered and the shares of Common Stock issued
on exercise of any Reload Option shall be issued under the 1990 Plan and not
under this Plan. 2.05. Effective Date and Duration of Plan. This Plan became
effective on April 23, 1985. No Incentive Stock Options shall be granted under
this Plan after April 22, 1995, but the Expiration Date of Incentive Stock
Options granted on or before that date may fall after that date.

(1)The initial number of shares, 1,500,000, was doubled after
the December, 1989, 2-for-1 stock split to 3,000,000 shares. After the
spin-off of 360 Communications Company on March 7, 1996, the number of
shares subject to Options then outstanding and unexercised were increased
by a factor of 1.214, resulting in an additional 152,618 shares authorized
under this Plan.

Exhibit (10)(b)
- ---------------------------------------------------------------------
Sprint Corporation
1990 Stock Option Plan
Adopted as a Stock Option Plan under the
1997 Sprint Corporation Long-Term Stock Incentive Program
- ---------------------------------------------------------------------
<PAGE>
<TABLE>
Table of Contents
<S> <C> <C>
1 Establishment 1
2 Defined Terms 1
3 Purpose 1
4 Administration 1
4.01 Interpretation of the Plan . . . . . . . . . . . . . . 1
4.02 Abstention in Certain Cases by Committee Members . . 2
5 Number of Shares Authorized to be Issued 2
6 Grant of Options 2
6.01 Eligibility for Grants . . . . . . . . . . . . . . . 2
6.02 Committee Grants . . . . . . . . . . . . . . . . . . . 2
6.03 Limitation on Discretion of Committee . . . . . . . . 3
7 Terms of Options 3
7.01 Standard Terms of Options . . . . . . . . . . . . . . 3
7.02 Mandatory Terms of Incentive Stock Options . . . . . . 6
7.03 Standard Terms of Incentive Stock Options . . . . . . . 6
7.04 Stock Option Agreement . . . . . . . . . . . . . . . . 7
8 Exercise of Options 7
8.01 Notice of Exercise . . . . . . . . . . . . . . . . . . 7
8.02 Form of Payment of Exercise Price . . . . . . . . . . 8
9 Withholding of Payroll Taxes on Exercise 9
9.01 Obligation to Pay Payroll Taxes . . . . . . . . . . . 9
9.02 Amount to Be Withheld . . . . . . . . . . . . . . . 9
9.03 Eligibility to Elect Stock Withholding . . . . . . . 10
9.04 Manner of Withholding . . . . . . . . . . . . . . . . 10
10 Issuance of Shares on Exercise 10
10.01 Generally . . . . . . . . . . . . . . . . . . . . . . . 10
10.02 Elective Issuance of Restricted Shares . . . . . . . . 11
10.03 Mandatory Issuance of Restricted Shares . . . . . . . . 11
i
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10.04 Issuance of Restricted Shares Not Available to
Transferred Options . . . . . . . . . . . . . . . . 12
10.05 Terms of Restricted Shares Issued on Exercise . . . . 12
11 Reload Rights 14
11.01 Grant of Reload Rights on Outstanding Non-Qualified
Options 14
11.02 Terms of Reload Options . . . . . . . . . . . . . . . 14
11.03 Variant Reload Rights . . . . . . . . . . . . . . . . . 15
12 Change in Stock, Adjustments, Etc 15
13 Amendment and Termination 16
14 Effective Date and Duration of the Plan 16
15 Definitions 17
15.01 1989 Program . . . . . . . . . . . . . . . . . . . . . 17
15.02 1997 Program . . . . . . . . . . . . . . . . . . . . . 17
15.03 Affiliate . . . . . . . . . . . . . . . . . . . . . . . 17
15.04 Board . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.05 Change in Control . . . . . . . . . . . . . . . . . . 17
15.06 Code . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.07 Code Section . . . . . . . . . . . . . . . . . . . . . 18
15.08 Committee . . . . . . . . . . . . . . . . . . . . . . 18
15.09 Common Stock . . . . . . . . . . . . . . . . . . . . 18
15.10 Company . . . . . . . . . . . . . . . . . . . . . . . 18
15.11 Corporate Secretary . . . . . . . . . . . . . . . . . 18
15.12 Employee . . . . . . . . . . . . . . . . . . . . . . . 18
15.13 Equity Security . . . . . . . . . . . . . . . . . . . 18
15.14 Exchange Act . . . . . . . . . . . . . . . . . . . . . 18
15.15 Exchange Act Section 16 . . . . . . . . . . . . . . . 18
15.16 Executive Officer . . . . . . . . . . . . . . . . . . 19
15.17 Exercise Date . . . . . . . . . . . . . . . . . . . . 19
15.18 Exercise Price . . . . . . . . . . . . . . . . . . . . 19
15.19 Expiration Date . . . . . . . . . . . . . . . . . . . 19
15.20 Fair Market Value . . . . . . . . . . . . . . . . . . 19
15.21 Grant Date . . . . . . . . . . . . . . . . . . . . . . 19
15.22 Grantee . . . . . . . . . . . . . . . . . . . . . . . . 19
ii
<PAGE>

15.23 Incentive Stock Option . . . . . . . . . . . . . . . . 19
15.24 Minimum Withholding Amount . . . . . . . . . . . . . . 19
15.25 Non-Qualified Option . . . . . . . . . . . . . . . . . 20
15.26 Notice of Exercise . . . . . . . . . . . . . . . . . . 20
15.27 Option . . . . . . . . . . . . . . . . . . . . . . . . 20
15.28 Optionee . . . . . . . . . . . . . . . . . . . . . . . 20
15.29 Payroll Tax . . . . . . . . . . . . . . . . . . . . . . 20
15.30 Payroll Taxpayer . . . . . . . . . . . . . . . . . . 20
15.31 Person . . . . . . . . . . . . . . . . . . . . . . . . 20
15.32 Program Adoption Date . . . . . . . . . . . . . . . . 20
15.33 Plan . . . . . . . . . . . . . . . . . . . . . . . . 20
15.34 Qualified Transferee . . . . . . . . . . . . . . . . . 20
15.35 Qualified Trust . . . . . . . . . . . . . . . . . . . . 20
15.36 Reload Option . . . . . . . . . . . . . . . . . . . . 21
15.37 Restricted Shares . . . . . . . . . . . . . . . . . . 21
15.38 Retirement . . . . . . . . . . . . . . . . . . . . . 21
15.39 Seasoned Shares . . . . . . . . . . . . . . . . . . . 21
15.40 Securities Act . . . . . . . . . . . . . . . . . . . . 21
15.41 Strike Price . . . . . . . . . . . . . . . . . . . . 21
15.42 Subsidiary . . . . . . . . . . . . . . . . . . . . . . 21
15.43 Tax Date . . . . . . . . . . . . . . . . . . . . . . . 21
15.44 Termination Date . . . . . . . . . . . . . . . . . . . 22
15.45 Termination for Cause . . . . . . . . . . . . . . . . 22
15.46 Total Disability . . . . . . . . . . . . . . . . . . . 22
15.47 Underlying Option . . . . . . . . . . . . . . . . . . 22
15.48 Vesting Period . . . . . . . . . . . . . . . . . . . . 22
15.49 Withholding Amount . . . . . . . . . . . . . . . . . . 22
iii
</TABLE>
<PAGE>
Article 1
Establishment
Pursuant to the 1989 Program the Company established a stock option plan named
the 1990 Stock Option Plan (the "Plan") for officers and key employees of the
Company and its subsidiaries. The 1989 Program has been replaced by the 1997
Program, and this Plan is now established pursuant to the 1997 Program.
Article 2
Defined Terms
Capitalized words used throughout this Plan have the meanings assigned to them
parenthetically throughout the Plan or in Article 15.
Article 3
Purpose
The purposes of the Plan are to induce officers and key employees of the Company
or its Subsidiaries who are in a position to contribute materially to the
Company's prosperity to remain with the Company or its Subsidiaries, to of- fer
them incentives and rewards in recognition of their share in the Company's
progress, to encourage them to continue to promote the best interests of the
Company and its stockholders, and to allow the Company and its Subsidiaries to
successfully compete with other enterprises in the recruitment of new officers
and key employees.
Article 4
Administration
The Committee shall administer the Plan as set forth in this Section. 4.01.
Interpretation of the Plan. The Committee may from time to time adopt, and
thereafter amend or 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 1997 Program, as it considers proper.
The interpretation and construction of any provisions of the Plan by the
Committee shall be final. No member of the Board 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 have the
discretion and authority to establish any and all procedures, forms, and rules
of a ministerial nature that he considers necessary or desirable for the orderly
administration of the Plan and shall have other administrative responsibilities
as set forth elsewhere in this Plan.
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<PAGE>
The Committee may designate one or more Employees to hear and resolve disputes
arising under the Plan. 4.02. Abstention in Certain Cases by Committee Members.
If any Committee member's participation in an action to approve the acquisition
or disposition of an Equity Security by an Executive Officer would prevent the
Executive Officer's acquisition or disposition of the Equity Security from being
exempt from the liability provisions of Exchange Act Section 16, the member
shall abstain from voting on the transaction if doing so would cause the
acquisition or disposition to be exempt.
Article 5
Number of Shares Authorized to be Issued
The number of shares of Common Stock that may be issued upon exercise of Options
granted under the Plan may not exceed 20,441,564 shares, subject to adjustment
as provided in Article 12 hereof. The shares issued under the Plan may be either
treasury shares or authorized but unissued shares. The number of shares of
Common Stock that may be issued upon exercise of Options granted pursuant to
this Plan after April 15, 1997, together with shares of Common Stock subject to
other awards under the 1997 Program, may not exceed the limits set forth in
Section 4(a) of the 1997 Program. The number of shares of Common Stock that may
be issued upon exercise of Incentive Stock Options granted pursuant to this Plan
after April 15, 1997, may not exceed 4,000,000 shares. The shares of Common
Stock allocable to the unexercised portion of any Option that for any reason
expires or is forfeited may again be subject to an Option under the Plan.
Article 6
Grant of Options
6.01. Eligibility for Grants.
The Committee may grant Options under this Plan to any Grantee who is an
Employee of the Company or a Subsidiary of the Company on the Grant Date of the
Option and to whom the granting of Options and the exercise thereof would not be
in violation of the laws of the jurisdiction, foreign or domestic, having legal
authority over the issuance of Options to, or the exercise thereof by, Employees
working or residing in such jurisdiction. No Incentive Stock Option may be
granted to any Grantee who owns directly or indirectly shares of Common Stock or
options to purchase shares of Common Stock, together possessing more than 10% of
the total combined voting power or value of all classes of stock of the Company
or any of its Subsidiaries.
2
<PAGE>
6.02. Committee Grants.
The Committee shall determine which Employees among those eligible shall be
granted Options and, with respect to each Option, shall specify the number of
shares of Common Stock subject to the Option. The Committee may designate
Grantees and the number of shares subject to each Option by any objectively
determinable description. The Committee may also specify the Grant Date of the
Option, the Strike Price, the Expiration Date of the Option, the rate at which
the Option may be exercised, and such other terms of the Option as the Committee
may consider appropriate. In making its determinations, the Committee shall take
into consideration the value of the services rendered by the Grantees, their
present and potential contribution to the success of the Company and its
Subsidiaries, and such other factors the Committee may consider relevant in
accomplishing the purposes of the Plan. 6.03. Limitation on Discretion of
Committee. The Committee may not
(i) set the Grant Date of any Option to any date earlier than the date of the
Committee action granting the Option;
(ii)establish the Strike Price of any Option at a price lower than the greater
of (a) the Fair Market Value of one share of Common Stock on the Grant Date
of the Option or (b) the par value on the Grant Date of the Common Stock;
or
(iii)subject more than 3,000,000 shares to Options granted to any single
Employee in any calendar year.
Article 7
Terms of Options
7.01. Standard Terms of Options.
Unless the Committee specifies otherwise, the terms set forth in this
Section 7.01 shall apply to all Options granted under this Plan. Any
Stock Option Agreement that incorporates the terms of the Plan by
reference shall be deemed to have incorporated the terms set forth in
this Section 7.01 to the extent that these terms are not in conflict
with those explicitly set forth in the Stock Option Agreement.
(a) Non-Qualified Options. Each Option shall be a Non-Qualified Option.
(b) Grant Date. The Grant Date of each Option shall be the date of the
Committee action granting the Option.
(c) Strike Price. The Strike Price of each Option shall be the Fair Market Value
of one share of Common Stock on the Grant Date.
3
<PAGE>
(d) Expiration Date. The Expiration Date of each Option shall be the close of
business on the tenth anniversary of the Option's Grant Date. The Option
shall not be exercisable after its Expiration Date.
(e) Rate of Exercisability. Each Option shall become exercisable with respect to
25% of the number of shares of Common Stock subject to the Option on each of
the first four anniversaries of the Grant Date if, on such anniversary date,
the Grantee shall have been continuously employed by the Company, a
Subsidiary of the Company, or an Affiliate from the Grant Date.
(f) Reload Rights. Each Non-Qualified Option, other than Options granted
pursuant to Reload Rights, shall be granted with Reload Rights.
(g) Limitations on Transfer. No Option may, during the lifetime of the Grantee,
be transferred, levied, garnished, executed upon, subjected to a security
interest, or assigned to any person other than the Grantee, except that a
Grantee may transfer an Option to a Qualified Transferee if the transfer is
made without payment of consideration being paid to the Grantee. Documents
evidencing the transfer of any Option and the identity of the Qualified
Transferee shall be in such form as may be required by the Corporate
Secretary. No such Qualified Transferee may dispose of shares issued upon
exercise of an Option, other than to the Company, until such shares are
validly registered or, in the opinion of the Corporate Secretary, exempt
from registration under the Securities Act.
(h) Post-Employment Exercise of Options. Each Option may be exercised after the
Grantee's Termination Date only with respect to the number of shares of
Common Stock that were exercisable on the Grantee's Termination Date. An
Optionee may exercise an Option before its Expiration Date with respect to
those shares during a limited period beginning on the Grantee's Termination
Date and ending
(i) on the fifth anniversary of the Grantee's Termination Date, if the
Grantee's employment terminated by reason of his Retirement or Total
Disability;
(ii)on the first anniversary of the Grantee's Termination Date if
the Grantee's employment terminated by reason of his death;
(iii)on the day three months following the Grantee's Termination Date if
the Grantee terminated his employment voluntarily, for a reason other
than Retirement, or involuntarily for a reason not constituting
Termination for Cause.
If a Grantee's employment has been Terminated for Cause, the Optionee shall
forfeit all outstanding Options immediately on the Grantee's Termination
Date.
(i) Acceleration on Change in Control.
(1) Acceleration. Each Option shall become immediately exercisable
in full upon a Change in Control if
4
<PAGE>
(i) the Change in Control occurs at least one year after the
Option's Grant Date and
(ii)the Grantee of the Option has been an Employee or an employee of an
Affiliate continuously from the Option's Grant Date to the date of
the Change in Control.
(2) Limitation on Acceleration. If the acceleration of exercisability under
Section 7.01(i)(1), together with all other payments or benefits
contingent on the Change in Control with the meaning of Code Section
280G, results in any portion of such payments or benefits not being
deductible by the Company as a result of the application of Code Section
280G, the benefits shall be reduced until the entire amount of the
benefits is deductible. The reduction shall be effected by the exclusion
of grants of options or portions thereof in reverse chronological order
of their respective Grant Dates from the application of Section
7.01(i)(1) until no portion of such benefits is rendered non-deductible
by application of Code Section 280G.
(j) Exercise After Death of Optionee. Upon the death of an Optionee, all Options
held by the Optionee on the Optionee's date of death, to the extent
exercisable under their terms, may be exercised by
(i) the executor or administrator of the Optionee's estate, (ii)the Person
or Persons to whom the Optionee's rights under the
Options pass by the Optionee's will or the laws of descent and
distribution, or
(iii)the beneficiary or beneficiaries designated by the Optionee in
accordance with Section 7.01(k).
(k) Designation of Beneficiaries. An Optionee may designate a beneficiary or
beneficiaries to exercise unexpired Options and to own shares issued upon
any such exercise after the Optionee's death without order of any probate
court or otherwise. A beneficiary so designated may exercise an Option upon
presentation to the Company of evidence satisfactory to the Corpo- rate
Secretary of the beneficiary's identity and the death of the Optionee. An
Optionee may change any beneficiary designation at any time 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 Corporate Secretary. Any designation of a beneficiary by an Optionee
with respect to any Option shall be canceled upon the transfer of such
Option by the Optionee in accordance with the terms of the Plan.
(l) Agreement to Remain Employed. Each Grantee shall, as consideration for the
grant of each Option, agree in the Stock Option Agreement to remain in the
employ of the Company, its Subsidiaries, or an Affiliate at the pleasure
5
<PAGE>
of the Company, such Subsidiary, or Affiliate for at least one year from the
Option's Grant Date or the earlier termination of the Grantee's employment
effected or approved by the Company, the Subsidiary, or Affiliate. If the
Grantee violates the agreement, the Optionee shall forfeit the Option.
Nothing contained in the Plan or in any Option granted pursuant to the Plan
shall confer upon any Grantee any right to continue employment with the
Company, its Subsidiaries, or Affiliates nor interfere in any way with the
right of the Company, its Subsidiaries, or Affiliates to terminate the
Grantee's employment or change the Grantee's compensation at any time.
(m) Forfeiture Upon Conflict of Interest. If any Grantee, without the consent of
the Committee, becomes associated with, employed by, renders services to, or
owns any significant interest in any business that is in competition with
the Company, its Subsidiaries, or Affiliates, any outstanding Option granted
to such Grantee shall be forfeited.
7.02. Mandatory Terms of Incentive Stock Options.
If the Committee specifies that an Option is an Incentive Stock Option, the
terms set forth in this Section 7.02 shall be incorporated into the terms of the
Option in preference to any conflicting terms set forth in Section 7.01. If the
Stock Option Agreement setting forth the terms of any Option contradict the
terms set forth in this Section 7.02, such Option shall be treated as a Non-
Qualified Stock Option, notwithstanding its designation as an Incentive Stock
Option by the Committee. (a) Grant Date within 10 Years of Program Adoption. No
Incentive Stock
Option may be granted under the Plan after the tenth anniversary of the
Program Adoption Date.
(b) Limitation on Option Term. No Incentive Stock Option may be exercised after
the tenth anniversary of its Grant Date.
(c) Strike Price. No Incentive Stock Option may have a Strike Price less than
the Fair Market Value of one share of Common Stock on the Grant Date of the
Incentive Stock Option.
(d) Non-Transferability. No Incentive Stock Option may be transferred by the
Grantee except by the Grantee's will or the laws of descent and
distribution. An Incentive Stock Option may be exercised during the
Grantee's lifetime only by the Grantee, and after the Grantee's death only
by a beneficiary designated by the Grantee pursuant to the terms of the
Plan, or otherwise by the executor or administrator of the Grantee's estate
or the Person succeeding to the Grantee's interest in the Incentive Stock
Option under the Grantee's will or the applicable laws of intestacy.
7.03. Standard Terms of Incentive Stock Options.
Unless the Committee specifies otherwise in the Committee action, the
following terms shall apply to all Incentive Stock Options granted under
the Plan. To
6
<PAGE>
the extent the terms set forth in this Section 7.03 conflict with the
standard terms applicable to Options generally set forth in Section
7.01, the terms of this section shall control the terms of any Options
designated as Incentive Stock Options at the time of grant.
(a) Maximum Rate of Exercisability. The Fair Market Value on the Grant
Date of the shares of Common Stock subject to any Incentive Stock Option
with respect to which the Incentive Stock Option becomes exercisable for the
first time during any calendar year, together with the Fair Market Value of
shares of Common Stock subject to other Incentive Stock Options on their
respective Grant Dates owned by the Optionee under all plans of the Company
and its Subsidiaries and first becoming exercisable in the same calendar
year, shall not exceed $100,000 or, if different, the maximum limitation in
effect under Code Section 422 for Incentive Stock Options on the Grant Date
of such Incentive Stock Option. To the extent the terms of the Option permit
the exercise of an Option for more shares than permitted by this Section
7.03(a), each Option or portion of an Option, in reverse chronological order
of their Grant Dates, shall be treated as Non- Qualified Options until the
remaining Options or portions of Options meet the limitations set forth in
this Section 7.03(a).
(b) Post-Employment Exercise. Any Incentive Stock Option exercised after the end
of the 12-month period beginning on the Grantee's Termination Date shall, to
that extent, be treated as a Non-Qualified Option.
7.04. Stock Option Agreement.
The terms of each Option shall be set forth in a Stock Option Agreement executed
by the Company and the Grantee. The Stock Option Agreement must set forth those
terms that are not made standard terms of the Option pursuant to this Plan.
Article 8
Exercise of Options
8.01. Notice of Exercise.
An Optionee may exercise his Option to purchase shares of Common Stock by
written notice to the Corporate Secretary
(i) unambiguously identifying the Option that he is exercising; (ii)stating the
number of shares with respect to which he is exercising
the Option;
(iii)accompanied by payment of the Exercise Price in cash or any other
form permitted by Section 8.02;
(iv)if the Optionee wants to have the shares issued to be registered jointly
with the Optionee's spouse, a statement to that effect;
7
<PAGE>
(v) if the Optionee is electing to have any Payroll Tax withholding obligation
discharged by delivery of Seasoned Shares or withholding of shares from
shares issuable upon the exercise pursuant to Section 9.04, a statement to
that effect, and, if the Optionee elects to have more than the required
minimum percentage of Payroll Taxes withheld, a statement of the percentage
to be withheld, not exceeding, if the Grantee is an Executive Officer, the
applicable marginal tax rate;
(vi)if the Optionee is electing to receive Restricted Shares pursuant to
Section 10.02, a statement of the Vesting Period the Optionee is electing;
(vii)if the Optionee is delivering or attesting to ownership of Restricted
Shares in payment of the Exercise Price and desires to elect a more
extended Vesting Period pursuant to Section 10.03, a statement of the
extended Vesting Period the Optionee is electing.
The Corporate Secretary may dispense with a written Notice of Exercise in the
case of certain exercises in which he considers a written Notice of Exercise
unnecessary. The Exercise Date shall be the date on which the Notice of
Exercise, together with the payment of the Exercise Price, is received by the
Corporate Secretary or his designee. The Optionee may not, after the Exercise
Date, change the form of payment of the Exercise Price, the election regarding
stock withholding, or other aspects of the exercise dependent on the Fair Market
Value of the Common Stock. The Corporate Secretary may condition the exercise of
an Option on the Optionee's filing with the Company a representation in writing
that at the time of such exercise it is the Optionee's then present intent to
hold the shares being purchased for investment and not for resale, or on the
completion of any registration or other qualification of shares under any state
or federal laws or rulings or regulations of any government regulatory body that
the Corporate Secretary may determine to be necessary or advisable. 8.02. Form
of Payment of Exercise Price. (a) Payment in Cash. Unless the Optionee elects in
the Notice of
Exercise to make payment in another form authorized by the Plan, payment of
the Exercise Price shall be in United States dollars, payable in cash or by
check. The Corporate Secretary may establish procedures to delay the
processing of any Option exercise until any check delivered in payment of
the Exercise Price has cleared, and, if a check fails to clear, cancel the
exercise.
(b) Payment in Shares of Common Stock. On exercise of any Option, the Optionee
may elect in the Notice of Exercise to pay the Exercise Price by surrender
of stock certificates in transferable form representing Seasoned Shares
having an aggregate Fair Market Value, determined as of the Exercise Date,
at least equal to the Exercise Price.
(c) Payment by Attestation. In lieu of the delivery of physical certificates, an

8
<PAGE>
Optionee may deliver shares in payment of the Exercise Price by attesting,
on a form established by the Corporate Secretary, to the ownership, either
outright or through ownership of a broker account, of a sufficient number of
Seasoned Shares to pay the Exercise Price. The attestation must be notarized
and signed by the Optionee and any co-owners with the Optionee of the shares
with respect to which the attestation is being made. The form of attestation
must be accompanied by any other documentation the Corporate Secretary
considers necessary to evidence actual ownership of such shares or otherwise
preserve the integrity of the Plan. Shares, the ownership of which is so
attested to by the Optionee, shall be deemed to have been re-issued to the
Optionee on the Exercise Date in partial satisfaction of the Company's
obligation to issue shares of Common Stock pursuant to the Option exercise
to which it relates.
(d) Fractional Shares. If an Optionee pays the Exercise Price of an Option by
delivery or attestation of Seasoned Shares, the Company shall apply to
payment of the Exercise Price from the shares delivered or attested the
highest number of whole shares having a Fair Market Value on the Exercise
Date less than or equal to the Exercise Price, and the Optionee shall be
required to pay in cash the Fair Market Value of the fractional share
resulting from truncating the number of shares to a whole number of shares.
Article 9
Withholding of Payroll Taxes on Exercise
9.01. Obligation to Pay Payroll Taxes.
Any Optionee, Grantee, or other Person (the "Payroll Taxpayer") with respect to
whom the Company or a Subsidiary of the Company has an obligation under any
Payroll Tax law to withhold amounts with respect to income arising from the
exercise of any Option must pay to the Company or Subsidiary of the Company the
Minnimum Withholding Amount.
9.02. Amount to Be Withheld.
The Payroll Taxpayer may elect in the Notice of Exercise or on another form
specified by the Corporate Secretary for such purpose an amount to be withheld
(the "Withholding Amount") with respect to the exercise of any Option. The
Withholding Amount must be greater than or equal to the Minimum With-holding
Amount and, if the Payroll Taxpayer is an Executive Officer, less than or equal
to the Payroll Taxpayer's combined marginal tax rate for all Payroll Taxes. In
the absence of such an election, the Withholding Amount shall be the Minimum
Withholding Amount. If all amounts withheld in payment of Payroll taxes are
reported to the appropriate taxing jurisdiction as amounts withheld from the
Payroll Taxpayer, the Company or Subsidiary may, in cases where the Corporate
Secretary considers
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it necessary, set the Withholding Amount to an amount in excess of the Minimum
Withholding Amount based on assumptions about the amount required by law to be
withheld. 9.03. Eligibility to Elect Stock Withholding. A Payroll Taxpayer may
elect to pay all or part of the Withholding Amount in shares of Common Stock if
the Optionee pays the Exercise Price by delivering or attesting to ownership of
shares of Common Stock pursuant to Sections 8.02(b) or 8.02(c). 9.04. Manner of
Withholding. If the Payroll Taxpayer is eligible to satisfy his obligation to
pay the Withholding Amount by payment of shares of Common Stock pursuant to
Section 9.03, he may pay the Withholding Amount by one or more of the following
methods:
(i) delivering Seasoned Shares; or
(ii)directing the Company to withhold from those shares that would otherwise be
received upon exercise of the Option or upon the vesting of Restricted
Shares, shares of Common Stock having a Fair Market Value on the Tax Date
of no more than the Minimum Withholding Amount; or
(iii)paying cash to the Company.
If the Payroll Taxpayer is not eligible to elect stock withholding, the
Withholding Amount must be paid entirely in cash. Any portion of the Withholding
Amount that would require withholding or delivery of a fractional share and any
portion of the Withholding Amount not paid by the withholding or surrender of
Common Stock must be paid in cash. (a) Limit on Use of Unvested Restricted
Shares. If the Option exercise
resulted in the issuance of Restricted Shares and the Vesting Period with
respect to the Restricted Shares has not ended on or before the Tax Date,
method (ii) described in Section 9.04 shall not be available as a means of
stock withholding.
(b) Limit with Respect to Transferred Options. If an Option was transferred by
the Grantee or the tax liability resulting from the exercise of the Option
is otherwise not imposed on the Optionee, method (ii) described in Section
9.04 shall not be available as a means of stock withholding.
Article 10
Issuance of Shares on Exercise
10.01. Generally.
No Optionee will be considered a holder of any shares of Common Stock
subject to an Option until a stock certificate or certificates for such
shares are issued to the Optionee after an exercise of the Option under
the terms of the Plan. No
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Optionee shall be entitled to dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions, or other rights with respect
to the shares subject to purchase under the Option unless the record date for
any such dividend, distribution, or other right falls on or after the date the
Optionee becomes a record holder of such shares. All shares of Common Stock
issued pursuant to an exercise of an Option shall be issued in the name of the
Optionee, or in the name of the Optionee and the Optionee's spouse, and shall,
except as otherwise provided in Article 8, be freely transferable by the
registered owners upon issuance. 10.02. Elective Issuance of Restricted Shares.
Certain Optionees, as determined by the Committee, may elect to receive
Restricted Shares upon the exercise of an Option if the Optionee so states in
the Notice of Exercise and has paid the Exercise Price of the Option by
attesting to or by delivering shares of unrestricted Common Stock pursuant to
Sections 8.02(b) or 8.02(c). If an Optionee elects on exercise of any Option to
receive Restricted Shares, the Company shall issue to the Optionee
(i) a number of unrestricted shares of Common Stock equal to the number of
unrestricted shares the Optionee used to pay the Exercise Price plus
(ii)all other shares issuable pursuant to the exercise of the Option as
Restricted Shares, having the Vesting Period specified by the Optionee in
the Notice of Exercise and otherwise subject to the restrictions on
transfer and other terms set forth in Section 10.05.
10.03. Mandatory Issuance of Restricted Shares.
Certain Optionees, as determined by the Committee, may in the exercise of an
Option deliver or attest to ownership of Restricted Shares in payment of the
Exercise Price, notwithstanding restrictions on transferability to which such
shares are subject. If an Optionee elects to so pay the Exercise Price of an
Option, the Company shall issue to the Optionee
(i) a number of shares equal to the number of Restricted Shares used to pay the
Exercise Price as Restricted Shares having a Vesting Period identical to
the Vesting Period of the shares so used in payment of the Exercise Price
and
(ii)all other shares issuable pursuant to the exercise of the Options as
Restricted Shares having a Vesting Period identical to the Vesting Period
of the shares so used to pay the Exercise Price, or if the Optionee elects
in the Notice of Exercise, a Vesting Period extending beyond the end of the
Vesting Period of the shares so used.
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10.04. Issuance of Restricted Shares Not Available to Transferred
Options.
Neither the Optionee, nor the Grantee, of an Option transferred by the
Grantee pursuant to the provisions of this Plan may use Restricted
Shares in payment of the Exercise Price nor elect to receive Restricted
Shares on exercise of the Option.
10.05. Terms of Restricted Shares Issued on Exercise.
Subject to the right of the Optionee to elect the length of the Vesting
Period applicable to Restricted Shares issued pursuant to an Option
exercise under the Plan, all Restricted Shares issued pursuant to the
Plan shall be subject to the terms and conditions set forth in this
Section 10.05.
(a) Restriction on Transfer. An Optionee who receives Restricted Shares
may not sell, transfer, assign, pledge or otherwise encumber or dispose of
the Restricted Shares until the end of the Vesting Period for such shares,
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 or
(ii)to a trust that is a Qualified Trust upon the following terms:
(A) the Company receives, before the transfer, a true copy of
the trust agreement of the Qualified Trust and an opinion from
Optionee's counsel that (1) the trust will be treated as a grantor
trust owned by the Optionee under Subchapter J of the Code at all
times until the restrictions on such stock lapse or the stock is
forfeited under the terms of their grant, (2) the terms of the
trust provide that upon the forfeiture of the Restricted Shares
under the terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the Restricted Shares
shall revert to the Optionee or to the Company, (3) 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 the Restricted Shares except to the Company or to the
Optionee, subject to the restrictions provided for in this Plan,
and (4) 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 Corporate Secretary, in his discretion, may require the
Optionee and the trustee to execute other documents as a
pre-condition to such transfer to insure enforcement of the terms
of the Restricted Shares or otherwise.
(b) Enforcement of Transfer Restrictions. Unless the Corporate
Secretary establishes alternative procedures, certificates
representing Restricted Shares
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shall be registered in the name of the Optionee (or the Qualified Transferee
trust in the case of shares transferred to such a trust pursuant to Section
10.05(a)) and shall be held by the Company in escrow, together with a stock
power assigning the Restricted Shares back to the Company, to be used only
in the event of the forfeiture of any of the Restricted Shares.
(c) Vesting Period. When an Optionee elects a Vesting Period to apply to
Restricted Shares issued under the Plan, the Optionee shall elect a Vesting
Period ending at least six months and no more than ten years after the
Exercise Date of the Option with respect to which the Restricted Shares were
issued, but in no event may the Optionee elect a Vesting Period ending
before the end of the Vesting Period of any Restricted Shares used to pay
the Exercise Price of the Option pursuant to Section 10.03. The Corporate
Secretary may establish restrictions on the dates during the year on which
Vesting Periods electable pursuant to this Article 10 may end for the
convenient administration of Restricted Shares issued under the Plan. At any
time on or before the last day of the 13th calendar month that ends on or
before the last day of the Vesting Period for any Restricted Shares, the
Optionee may elect to extend the Vesting Period on all but not a portion of
the Restricted Shares by any multiple of six months.
(d) Forfeiture and Vesting of Restricted Shares.
(1) Vesting at End of Vesting Period. Any Restricted Shares not
forfeited by the end of the Vesting Period shall vest, and the Company
shall issue a certificate evidencing the shares to the registered owner
thereof promptly after the end of the Vesting Period.
(2) Restricted Shares Issued Mandatorily. Unless the Committee determines
otherwise, Restricted Shares issued mandatorily pursuant to the exercise
of an Option under Section 10.03 shall inherit the vesting conditions of
the Restricted Shares used to pay the Exercise Price. If the Restricted
Shares used to pay the Exercise Price would be for feited upon the
Grantee's termination of employment before the end of the Vesting
Period, the Restricted Shares issued pursuant to such exercise shall be
forfeited; if the Restricted Shares used to pay the Exercise Price would
be vested upon the Grantee's termination of employment before the end of
the Vesting Period, the Restricted Shares issued pursuant to such
exercise shall vest and the Company shall issue a certificate
representing the shares to the registered owner thereof. Likewise,
Restricted Shares issued under the Plan shall be forfeited or shall vest
upon the occurrence of any other event that would cause the forfeiture
or vesting of the Restricted Shares used to pay the Exercise Price under
Section 10.03.
(3) Restricted Shares Issued Electively. Unless the Committee determines
otherwise, Restricted Shares issued at the election of the Optionee
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<PAGE>
under Section 10.02 shall be forfeited if the Grantee terminates his
employment at any time before the end of the Vesting Period for the
Restricted Shares unless (i) the Grantee terminated employment for
Retirement or (ii)the Grantee's employment was terminated involuntarily
other than as a Termination for Cause, in which cases, the
restrictions on the Restricted Shares shall lapse, and the Company
shall issue a certificate representing the shares to the registered
owner thereof.
(e) Rights of Grantee in Restricted Stock. The registered owner of Restricted
Shares shall have the right to vote the shares of stock and to receive
dividends or other distributions with respect to the shares.
Article 11
Reload Rights
11.01. Grant of Reload Rights on Outstanding Non-Qualified Options. The
Committee may grant Reload Rights with respect to any outstanding Non-Qualified
Options issued under any stock option plan of the Company, whether originally
granted with Reload Rights or not.
11.02. Terms of Reload Options.
Any Underlying Option granted Reload Rights shall, unless the Committee
specifies other terms at the time the Reload Rights are granted, entitle
the Grantee to receive a new Option (a "Reload Option") on the
Optionee's exercise of the Underlying Option by delivery or attestation
of shares of Common Stock in payment of the Exercise Price on the terms
set forth in this Article 11.
(a) Conditions to the Grant of Reload Options. No Reload Option shall
be granted on the exercise of the Underlying Option unless
(i) a sufficient number of shares remain authorized and not issued
or subject to purchase under outstanding Options granted under
the Plan;
(ii)the Grantee of the Option is an Employee on the Exercise Date
of the Underlying Option;
(iii)the exercise of the Underlying Option is for the purchase of a number
of shares of Common Stock at least equal to the lesser of (a) 25% of
the total number of shares subject to purchase under the Underlying
Option or (b) 100% of the shares with respect to which the Underlying
Option is then exercisable;
(iv)the Grant Date of the Reload Option would be at least one year
before the Expiration Date of the Underlying Option; and
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<PAGE>
(v) the Fair Market Value of the Common Stock on the Exercise Date is
greater than or equal to the Strike Price of the Underlying Option.
(b) Number of Shares Subject to Purchase; Grant Date. Each Reload
Option shall entitle the Optionee to purchase a number of shares
equal to the sum of
(i) the number of shares used to pay the Exercise Price of the Underlying
Option pursuant to Sections 8.02(b) or 8.02(c) on the Exercise Date and
(ii)the number of shares delivered or withheld in payment of the
With-holding Amount pursuant to Section 9.04.
If the Exercise Date and the Tax Date do not coincide, the Reload Option
shall be issued as two separate Options to purchase the number of shares set
forth in (i) and (ii) above and having Grant Dates on the Exercise Date and
the Tax Date, respectively.
(c) Strike Price. Each Reload Option shall have a Strike Price equal to the Fair
Market Value of one share of Common Stock on the Grant Date of the Reload
Option.
(d) Expiration Date. Each Reload Option shall have the same Expiration Date as
the Underlying Option.
(e) No Reload Rights. No Reload Option shall have Reload Rights.
(f) Rate of Exercisability. Each Reload Option shall become exercisable
in full on the first anniversary of the Grant Date of the Reload
Option.
(g) Forfeiture on Disposition of Shares Acquired in Exercise of Underlying
Option. Each Reload Option shall be forfeited if the Optionee disposes of
any of the shares issued on exercise of the Underlying Option before the
date six months after the Exercise Date to any Person other than the Company
in the payment of Payroll Taxes on exercise of the Underlying Option.
(h) Other Terms and Conditions. Except to the extent in conflict with the terms
set forth in this Article 11, the terms for Options granted under the Plan
as set forth in Section 7.01 shall apply to each Reload Option.
11.03. Variant Reload Rights.
Any terms of Reload Rights or Reload Options different from those set forth in
this Article 11 must be set forth in the Stock Option Agreement for the
Underlying Option.
Article 12
Change in Stock, Adjustments, Etc
If the outstanding Common Stock of the Company is increased or decreased or
changed into or exchanged for a different number of shares or kind of shares
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or other securities of the Company or of another Person by reason of a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or a dividend payable in capital stock
(including a spin-off), or otherwise, the Committee shall make an appropriate
adjustment to 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
to the number and kind of shares as to which outstanding Options, or portions
thereof then unexercised, shall be exercisable and to the Strike Price of the
Options. Each such adjustment to outstanding Incentive Stock Options shall be
made in such a manner as not to constitute a modification as defined in Code
Section 424. If any outstanding Options are subject to any conditions affected
by the event, the Committee shall also make appropriate adjustments to such
conditions. Any such adjustments 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 to sell or transfer all or any part of its business
orassets.
Article 13
Amendment and Termination
The Board may at any time amend or terminate the Plan as it considers advisable
and in the best interests of the Company, but no such termination or amendment
may
(i) without the consent of the Optionee, adversely affect or impair the rights
of the Optionee under any outstanding Option; or
(ii)be inconsistent with the provisions of the 1997 Program.
Article 14
Effective Date and Duration of the Plan This Plan was initially
effective as of February 17, 1990, and was continued as a plan under the 1997
Program on the Program Adoption Date. No Option shall be granted under the Plan
after the last permissible date for the granting of Options under the 1997
Program, but Options granted before that date may have Expiration Dates that
extend beyond such date.
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Article 15
Definitions
15.01. 1989 Program.
"1989 Program" means the Company's Long-Term Stock Incentive Program, approved
by the Company's shareholders on April 18, 1989.
15.02. 1997 Program.
"1997 Program" means the Company's 1997 Long-Term Stock Incentive Pro-
gram, approved by the Company's shareholders on April 15, 1997, as
amended from time to time.
15.03. Affiliate.
"Affiliate" means those Persons, other than Subsidiaries of the Company,
designated from time to time by the Committee as such.(1)
15.04. Board.
"Board" means the board of directors of the Company.
15.05. Change in Control.
"Change in Control" means the occurrence of any of the following events
(i) the acquisition of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities by
any "person" or "group" as such terms are defined in Sections 13(d) and
14(d) of the Exchange Act, other than
(A) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company;
(B) the Company or a Person (or one of its Subsidiaries) owned by the
stockholders of the Company in substantially the same proportions as
their ownership of the stock of the Company; or
(C) Deutsche Telekom AG or France Telecom, individually or collectively;
(ii)at the end of any two-year period, less than a majority of the
directors of the Company are directors
(A) who were directors of the Company at the beginning of the
two-year period or
(B) whose election as director was approved by a vote of two-thirds of the
then directors described in the preceding clause (A) or this clause
(B) by prior election;

(1)Currently, "Sprint Spectrum L.P., Global One, and Alcatel, N.V.,
together with their Subsidiaries."

17
<PAGE>
(iii)the Company's shareholders approve a merger or consolidation in which the
Company is not the surviving entity, or a liquidation or dissolution of
the Company, or a sale of all or substantially all of the Company's
assets; or
(iv)the acquisition by Deutsche Telekom AG or France Telecom, individually or
collectively, of additional securities of the Company that would result in
them possessing in the aggregate 35% or more of the combined voting power
of the Company's then outstanding securities.
15.06. Code.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
15.07. Code Section.
"Code Section" is a reference to a particular section of the Code, and
includes any successor provision or the same or a successor provision as
renumbered at any time.
15.08. Committee.
"Committee" means the the Organization, Compensation, and Nominating
Committee of the Board.
15.09. Common Stock.
"Common Stock" means the Company's common stock, par value $2.50 per
share, as further described in the Company's article of incorporation,
as amended.
15.10. Company.
"Company" means Sprint Corporation, a Kansas corporation, or its
successor.
15.11. Corporate Secretary.
"Corporate Secretary" means the secretary of the Company.
15.12. Employee.
"Employee" means an employee of the Company or a Subsidiary of the Com-
pany.
15.13. Equity Security.
"Equity Security" means an equity security as defined by the Exchange
Act for purposes of Exchange Act Section 16.
15.14. Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time and as interpreted and implemented by the rules and
regulations issued thereunder.
15.15. Exchange Act Section 16.
"Exchange Act Section 16" means section 16 of the Exchange Act.
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15.16. Executive Officer.
"Executive Officer" means an officer of the Company that is subject to the
liability provisions of Exchange Act Section 16.
15.17. Exercise Date.
"Exercise Date" has the meaning indicated in Section 8.01.
15.18. Exercise Price.
"Exercise Price" means, with respect to the exercise of an Option, the
Strike Price of the Option multiplied by the number of shares with
respect to which the Option is being exercised.
15.19. Expiration Date.
"Expiration Date" means, with respect to any Option, the last date on
which the Option may be exercised in the absence of an earlier
forfeiture of the Option.
15.20. Fair Market Value.
"Fair Market Value" means, with respect to the Common Stock on any date,
the average of the high and low prices per share of the Common Stock for
composite transactions on that date, unless there was no trading in the
Common Stock on that date, in which case, on the most recent day before
that date on which the Common Stock was traded. The Fair Market Value of
shares of Restricted Stock shall be determined without taking into
account any restrictions.
"Fair Market Value" means, with respect to other property, the value of
the property as determined by the Committee.
15.21. Grant Date.
"Grant Date" means, with respect to any Option, the date on which the
term of the Option begins, as determined in Article 7 and Article 11.
15.22. Grantee.
"Grantee" means, with respect to any Option, the Employee to whom the
Option was originally granted, notwithstanding any subsequent transfer
of the Option under the terms of the Plan.
15.23. Incentive Stock Option.
"Incentive Stock Option" means an Option designated as such in the
Committee action granting the Option. This Plan's intent is that
Incentive Stock Options meet the requirements of Code Section 422.
15.24. Minimum Withholding Amount.
"Minimum Withholding Amount" means, with respect to any Option exercise,
the amount the employer is required to withhold from the income of the
Payroll Taxpayer under the Payroll Tax laws.
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15.25. Non-Qualified Option.
"Non-Qualified Option" means any Option that is not an Incentive Stock
Option.
15.26. Notice of Exercise.
"Notice of Exercise" means the notice by an Optionee of the exercise of an
Option as set forth in Section 8.01.
15.27. Option.
"Option" means the right, set forth in a written agreement between the Company
and an Optionee, authorized by this Plan to acquire a determinable number of
shares of Common Stock at a determinable price for a determinable period of time
and having such other terms as may be determined by the Committee or as set
forth in this Plan.
15.28. Optionee.
"Optionee" means, with respect to any Option at any particular time, the holder
of the Option at that time.
15.29. Payroll Tax.
"Payroll Tax" means any tax required by an employer to be withheld from
wages paid to its employees, including but not limited to federal income
tax withholding, Social Security and Medicare withholding taxes, and
state and local income tax withholding.
15.30. Payroll Taxpayer.
"Payroll Taxpayer" has the meaning specified in Section 9.01.
15.31. Person.
"Person" means any individual, corporation, partnership, limited
liability company, business trust, or other entity.
15.32. Program Adoption Date.
"Program Adoption Date" means April 15, 1997.
15.33. Plan.
"Plan" means the 1990 Stock Option Plan, the terms of which are set
forth in this document.
15.34. Qualified Transferee.
"Qualified Transferee" means a Qualified Trust.
15.35. Qualified Trust.
"Qualified Trust" means a trust
(i) that is a grantor trust treated as owned by the Grantee under Subchapter J
of the Code;
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<PAGE>
(ii)of which the Grantee, the Grantee's spouse, or the Grantee's
descendants by blood, adoption, or marriage, are the sole
beneficiaries; and
(iii)that, by its terms, may not be amended to violate the foregoing
restrictions so long as the trust is an Optionee under this Plan.
15.36. Reload Option.
"Reload Option" means an Option granted upon exercise of an Option
having Reload Rights under the terms and conditions set forth in Article
11.
15.37. Restricted Shares.
"Restricted Shares" means shares of Common Stock subject to restrictions
on transfer and the possibility of forfeiture for any period of time.
15.38. Retirement.
"Retirement" means termination of employment by an employee who is
entitled to receive payment of pension benefits in accordance with the
Sprint Retirement Pension Plan immediately after the employee's
Termination Date.
15.39. Seasoned Shares.
"Seasoned Shares" means, with respect to any Person, shares of Common
Stock
(i) acquired from the Company and owned by such Person for a period of
at least six months; or
(ii)acquired by such Person other than from the Company.
15.40. Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from time
to time and as interpreted and implemented by the rules and regulations
issued thereunder.
15.41. Strike Price.
"Strike Price" means, with respect to any Option, the price per share at which
the Optionee is entitled to purchase shares of Common Stock.
15.42. Subsidiary.
"Subsidiary" means, with respect to any Person (the "Controlling
Person"),
(i) all Persons (the "Controlled Persons") in whom the Controlling Person,
together with its Subsidiaries, directly owns more than 50% of the voting
rights, and
(ii)all Subsidiaries of the Controlled Persons.
15.43. Tax Date.
"Tax Date" means, with respect to any Option exercise, the date on which the
shares issued pursuant to the Option exercise become subject to federal income
taxation.
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15.44. Termination Date.
"Termination Date" means, with respect to any Employee, the date on
which the Employee ceases to be employed by the Company, any of its
Subsidiaries, or any Affiliate, and ceases to receive severance benefits
under any applicable plans for the payment of severance benefits by the
employing entity.
15.45. Termination for Cause.
"Termination for Cause" means an involuntary termination of employment
because
(i) the employee has materially breached the Company's Code of Ethics,
or the code of ethics of the employer;
(ii)the employee has materially breached the Sprint Employee Agreement
Regarding Property Rights and Business Practices;
(iii)the employee has engaged in acts or omissions constituting dishonesty,
intentional breach of a fiduciary obligation, or intentional acts of
wrongdoing or misfeasance; or
(iv)the employee has acted intentionally and in bad faith in a manner that
results in a material detriment to the assets, business, or prospects of
the employer.
In determinaing whether any particular employee was Terminated for
Cause, the characterization of the reason for termination used for
purposes of other employee benefit plans of the Company or other
employer shall apply to this Plan.
15.46. Total Disability.
"Total Disability" means termination of employment under circumstances
that would make the employee eligible to receive benefits under the
employer's long-term disability plan.
15.47. Underlying Option.
"Underlying Option" means, with respect to any Reload Option, the Option
to which the Reload Rights were attached and the exercise of which
resulted in the grant of the Reload Option.
15.48. Vesting Period.
"Vesting Period" means, with respect to any Restricted Shares, the
period of time during which the Restricted Shares (i) are subject to
limitations on transfer and (ii) may be divested from the owner upon
failure to meet any applicable conditions to vesting.
15.49. Withholding Amount.
"Withholding Amount" has the meaning specified in Section 9.02.

Exhibit (10)(c)
CENTEL DIRECTORS DEFERRED COMPENSATION PLAN
Amended and Restated
as of September 16, 1997
SECTION 1. Plan. Centel Corporation, a Kansas corpora-
tion, hereby establishes this "Centel Directors Deferred
Compensation Plan".
SECTION 2. Definitions. The following words have the
respective meanings stated below unless a different meaning
is plainly required by the context:
(a) "Beneficiary" means any person other than a Director who is entitled
to receive distributions under this Plan pursuant to Section 5.
(b) "Board" means the Board of Directors of the Company or of a
Subsidiary.
(c) "Committee" means the committee which administers this Plan as
provided in Section 8.
(d) "Common Stock" means shares of common stock of Sprint, par value
$2.50 per share.
(e) "Company" means Centel Corporation, a Kansas corporation, and its
successors.
(f) Prior to March 9, 1993, "Director" means an individual who is (1)
serving as a member of a Board or who has been nominated to serve as a member
of a Board and (2) receives compensation for such service other than as
employee of the Company or a Subsidiary. Beginning March 9, 1993, "Director"
means an individual serving as a member of the Board of Directors of Sprint
who was a Director of the Company on March 8, 1993.
(g) "Market Value" of Common Stock or 360 Common Stock on any date means
the closing price of the Common Stock or 360 Common Stock, as the case may
be, on that day on the Composite Transactions Tape, as subsequently reported
in The Wall Street Journal, or, if no sale of such stock shall have been made
on that date, such closing price on the next preceding date on which there
was a sale.
(h) "Plan" means the plan set forth in this instrument, and known as the
"Centel Directors Deferred Compensation Plan".
(i) "Sprint" means Sprint Corporation, a Kansas corporation, and its
successors.
(j) "Subsidiary" means any corporation fifty percent or more of the
voting stock of which is owned, directly or indirectly, by the Company.
(k) "Unit" means the equivalent under this Plan of one share of Common
Stock.
(l) "Value" of a Unit on any date means the Market Value on such date of
one share of Common Stock. "Value" of a 360 Unit on any date means the Market
Value on such date of one share of 360 Common Stock.
(m) "360" means 360 Communications Company, a Delaware corporation, and
its successors.
(n) "360 Common Stock" means shares of common stock of 360, par value
$.01 per share.
(o) "360 Unit" means the equivalent under this Plan of one share of 360
Common Stock.
SECTION 3. Participation. A Director may elect to
defer the payment of:
(a) annual or quarterly compensation for service
as a Director;
(b) compensation paid for attendance at meetings of the Board and of
committees of the Board; or
(c) annual or quarterly compensation for service as a Director plus all
additional compensation paid for attendance at meetings of the Board and of
committees of the Board;
by giving notice: (1) if the Director is a Director on November 30 of any year,
at least thirty days prior to January 1 of the year for which the election is to
be effective, (2) if the Director is not a Director on November 30 of any year,
within 20 days after the date on which the Director is first elected a Director,
or (3) within 20 days after any amendment of this Plan. Each notice shall
continue in force unless and until revoked or modified by notice at least thirty
days before the January 1 on which such revocation or modification is to become
effective. All amounts deferred and accrued under this Plan will be unsecured
liabilities of the Company or a Subsidiary and will not be funded with any
specific assets of the Company or any Subsidiary. Beginning March 9, 1993, no
new deferrals of compensation may be made under this Plan.
SECTION 4. Method of Deferment.
(a) A Director who elects to defer compensation
under this Plan may elect to have such compensation credited to a prime rate
account, to a Common Stock account, or in increments of 25%, to both forms of
account. Except as set forth in Section 4(f), amounts accrued in accounts may
not be transferred from one form to the other. A different election may be
made with respect to compensation earned in each calendar year.
(b) An amount equal to the compensation which a Director has elected to
have deferred will be credited by the Company in a deferred compensation
account in the name of the Director on the date such compensation would
otherwise become payable to the director.
(c) Prime rate account. Interest equivalents will be credited on the
balance in a Director's prime rate account at the end of each calendar
quarter that ends before the commencement of distribution of the Director's
prime rate account pursuant to Section 5(b), Section 5(c), Section 5(d) or
Section 5(g), whichever occurs first, and (1) at the end of the month in
which the Director's termination of service as a Director ("Termination")
occurs if such month is not the last month in a quarter and if distribution
is made following such Termination pursuant to Section 5(c), or (2) as of the
Common Distribution Date (as defined in Section 5(b)) if distribution does
not commence until after the Common Distribution Date. For the purpose of
crediting interest, (1) interest will be computed at the prime rate of
interest in effect at Citicorp, N.A., New York, New York during such period,
and (2) the balance accrued in a Director's prime rate account during any
period will be the average of the balances in the Director's account at the
beginning of each month during the period.
(d) Common Stock account. When compensation is credited to a Common
Stock account, the amount of compensation will be divided by the Market Value
of one share of the Common Stock on the date such compensation is credited to
the account to determine the number of Units (to the nearest one-hundredth)
to be credited to such account. On each record date for determination of
shareowners entitled to receive a dividend on the outstanding shares of
Common Stock, there will be credited to each Common Stock account that number
of additional Units equal to the number of shares (and fraction of a share to
the nearest one-hundredth) of Common Stock which could have been purchased at
the Market Value of Common Stock on that date with the amount, if paid in
cash, or the value, if paid in property, of the dividend to be paid on a
number (to the nearest one-hundredth) of shares of Common Stock equal to the
number of Units (to the nearest one-hundredth) in that account on such record
date. As of March 9, 1993, the aggregate number of Units in a Director's
Common Stock Account (the "Aggregate Units") was increased by multiplying the
Aggregate Units by 1.37 in accordance with the terms of the Agreement and
Plan of Merger, dated as of May 27, 1992, pursuant to which the Company
became a wholly-owned subsidiary of Sprint and which provided that each
outstanding share of common stock of Centel Corporation be converted into the
right to receive 1.37 shares of Common Stock. Upon Termination, the
Director's Common Stock account will be transferred into the Director's prime
rate account as follows: (1) the Common Stock account will be valued (the
"Account Value") at the Market Value of the Common Stock on the last day of
business in the month that the Termination occurs; (2) an amount equal to the
Account Value will be credited to the prime rate account; and (3) interest
equivalents will be credited on the balance in the prime rate account
pursuant to the terms specified in Section 4(c).
(e) 360 Common Stock account. Effective as of March 7, 1996, 360 Units
were credited to each Director's 360 Common Stock account at the rate of one
360 Unit for each 3 Units credited to such Director's Common Stock account at
the close of business on February 27, 1996. On each record date for
determination of shareowners entitled to receive a dividend on the
outstanding shares of 360 Common Stock, there will be credited to each 360
Common Stock account that number of additional 360 Units equal to the number
of shares (and fraction of a share to the nearest one-hundredth) of 360
Common Stock which could have been purchased at the Market Value of 360
Common Stock on that date with the amount, if paid in cash, or the value, if
paid in property, of the dividend to be paid on a number (to the nearest
one-hundredth) of shares of 360 Common Stock equal to the number of 360 Units
(to the nearest one-hundredth) in that account on such record date. Upon
Termination, the Director's 360 Common Stock account will be transferred into
the Director's prime rate account as follows: (1) the 360 Common Stock
account will be valued (the "360 Account Value") at the Market Value of 360
Common Stock on the last day of business in the month that the Termination
occurs; (2) an amount equal to the 360 Account Value will be credited to the
prime rate account; and (3) interest equivalents will be credited on the
balance in the prime rate account pursuant to the terms specified in Section
4(c).
(f) Transfers between Accounts. Within the limitations of this Section
4(f), a Director may elect, by executing and filing with the Company an
Account Transfer Request, to (1) transfer all or any portion of his or her
360 Common Stock account to his or her prime rate account or to his or her
Common Stock account, (2) transfer all or any portion of his or her Common
Stock account to his or her prime rate account, or (3) transfer all or any
portion of his or her prime rate account to his or her Common Stock account.
Such election shall be effective on the last day of the calendar month in
which the Company receives the executed Account Transfer Request. The value
of Units or 360 Units being transferred shall be determined by multiplying
the number of Units or 360 Units being transferred (to the nearest
one-hundredth) by the Market Value of one share of Common Stock or 360 Common
Stock, as the case may be, on the effective date of the transfer. If the
transfer is being made from the 360 Common Stock account or the prime rate
account to the Common Stock account, the value of the 360 Units being
transferred as above determined or the amount being transferred from the
prime rate account will be divided by the Market Value of one share of the
Common Stock on the effective date of transfer to determine the number of
Units (to the nearest one-hundredth) to be credited to the Common Stock
account.
SECTION 5. Distributions.
(a) Except as provided in Section 5(b), the
timing and manner of each distribution to a Director under the Plan shall be
made pursuant to such Director's Valid Election, as defined in the following
sentence. A "Valid Election" means an election by the Director which (i) is
irrevocable except as provided in Section 5(h), (ii) is made in writing
pursuant to such rules as the Committee may determine, and (iii) provides for
a distribution pursuant to paragraphs (c) or (d).
(b) If a Director does not submit a Valid Election, upon the Director's
Termination, the amount accrued in the Director's prime rate account will be
distributed to the Director in a lump sum as soon as practicable after
January 31 of the calendar year following the calendar year in which the
Director's Termination occurs (such January 31 is referred to herein as the
"Common Distribution Date").
(c) If the Director submits a Valid Election prior to the first day of the
calendar year in which such Director's Termination occurs, distributions
shall be paid under the Plan commencing after the date of the Director's
Termination as follows:
(i) in a lump sum either as soon as practicable after the Director's
Termination or as soon as practicable after the Common Distribution
Date, as specified in the Valid Election; or
(ii) in equal annual installment payments over a period from two (2) to
twenty (20) years commencing as soon as practicable after the
Director's Termination or as soon as practicable after the Common
Distribution Date, as specified in the Valid Election. For purposes
of determining the amount of each equal annual installment, the
assumed rate of interest shall be the average of the rates calculated
in accordance with Section 4(c) for the 20 quarters preceding the
date on which the distribution commences.
(d) If the Director submits a Valid Election on or after the first day of
the calendar year in which such Director's Termination occurs but prior to
December 31 of the calendar year in which such Director's Termination occurs,
pursuant to the terms of such Valid Election distributions shall be paid
under the Plan commencing no earlier than the Common Distribution Date using
one of the following methods:
(i) in a lump sum as soon as practicable after
the Common Distribution Date; or
(ii) in equal annual installment payments over a
period specified in the Valid Election from two (2) to twenty (20)
years commencing as soon as practicable after the Common
Distribution Date. For purposes of determining the amount of each
equal annual installment, the assumed rate of interest shall be the
average of the rates calculated in accordance with Section 4(c) for
the 20 quarters preceding the Common Distribution Date.
(e) All distributions of amounts accrued in a Director's deferred
compensation account will be paid exclusively in cash.
(f) Notwithstanding the foregoing, a Director who has an interest in a
prime rate account under this Plan may elect, by giving notice at least 60
but not more than 120 days prior to January 1 of the fifth calendar year
following the year in which deferred compensation was accrued in the
Director's prime rate account to have the amount accrued during such fifth
preceding calendar year, together with interest credited with respect
thereto, paid in cash to the Director on the January 31 following receipt of
the notice.
(g) In the event of a Director's death, any amounts to which the Director
is entitled hereunder will be distributed to the Beneficiary(ies) entitled
thereto:
(i) if installment payments have commenced
pursuant to Section 5(c)(ii) or Section
5(d)(ii), either (1) as a continuation of
the installment payments, or (2) in a lump
sum equal to the present value of the
remaining installments determined using
the same interest rate assumption used in
calculating the amount of the
installments, as provided in a Valid
Election;
(ii) if no distribution has taken place
pursuant to Section 5(c) or Section 5(d),
either (1) in equal annual installments
over a period from two (2) to twenty (20)
years, using the same interest rate
assumption set forth in Section 5(c)(ii)
to calculate the amount of each
installment, or (2) in a lump sum, as
provided in a Valid Election; or
(iii) if no provision is made in a Valid Election filed with the Company
or if all of the Beneficiaries designated by a Director predecease
the Director, in a lump sum payment to the estate of the deceased
Director as soon as practicable following the death of the Director.
(h) Notwithstanding any provision to the contrary hereunder, at any
time, the Director may change a Valid Election by electing to accelerate the
date(s) of payment specified in such prior election, subject to the following
circumstances:
(i) the Committee in its sole discretion consents to the change in Valid
Election, and
(ii) the amounts that are subject to such
accelerated payment date(s) shall be
reduced by 6%. Subject to the preceding
sentence, the calculation of the amount of
the accelerated payment(s) and the
calculation of such reduction shall be
made in the sole discretion of the
Committee.
SECTION 6. Anti-Dilution. In the event of any change in capitalization
which affects the Common Stock or the 360 Common Stock, such as a stock
dividend, a stock distribution, a stock split-up or a subdivision or combination
of shares, such adjustments, if any, as the Board in its discretion deems
appropriate to reflect such change shall be made with respect to the number of
Units in each Common Stock account or the number of 360 Units in each 360 Common
Stock account, as the case may be.
SECTION 7. Beneficiaries.
(a) A Director may, by filing a Beneficiary Designation with the
Company during the Director's lifetime, designate (1) a Beneficiary or
Beneficiaries to whom distribution of the Director's deferred compensation
accounts will be made in the event of the Director's death prior to the
full receipt of the Director's interests under this Plan, and (2) the
proportions to be distributed to each such designated Beneficiary if there
be more than one. Any such designation may be revoked or changed by the
Director at any time and from time to time by filing a new Beneficiary
Designation with the Company. If a designated Beneficiary dies after the
Director but prior to distribution of all that designated Beneficiary's
proportionate share of the Director's interest under this Plan, the then
remaining balance of such share will be distributed in a lump sum payment
to the estate of the designated Beneficiary.
(b) If the Company, after reasonable inquiry, is unable within one
year to determine whether any designated Beneficiary did in fact survive
the event that entitled such Beneficiary to receive distribution under
this Plan, it will be conclusively presumed that such Beneficiary did in
fact die prior to such event.

SECTION 8. Committee. This Plan will be administered by a Committee
consisting of at least three (3) members appointed by the Board of the Company,
who are employees of Sprint or a subsidiary of Sprint and who do not participate
in this Plan.
Except as otherwise expressly provided in this Plan, the Committee shall
have full power and authority, within the limits provided by this Plan:
(a) to construe this Plan and make equitable adjustments for any
mistakes or errors made in the administration of this Plan;
(b) to determine all questions arising in the administration of this
Plan, including the power to determine the rights of Directors
participating in this Plan and their Beneficiaries and the amount of their
respective interests;
(c) to adopt such rules and regulations as it may deem reasonably
necessary for the proper and efficient administration of this Plan
consistent with its purposes;

(d) to enforce this Plan in accordance with its terms and with the
rules and regulations adopted by the Committee; and
(e) to do all other acts which in its judgment are necessary or
desirable for the proper and advantageous administration of this Plan. The
Committee shall act by the vote or concurrence of a majority of its
members and shall maintain a written record of its decisions and actions.
All decisions and actions of the Committee pursuant to the provisions of
this Plan shall be final and binding upon all persons affected thereby. No
member of the Committee shall have any personal liability to anyone,
either as such member or as an individual, for anything done or omitted to
be done in good faith in carrying out the provisions of this Plan.
SECTION 9. Non-Alienation. No right or benefit under this Plan shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber
or charge the same shall be void. No right or benefit under this Plan shall in
any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits except such claims as may be made
by the Company or any Subsidiary.
SECTION 10. Notice. Any notice authorized or required to be given to the
Company under this Plan shall be deemed given upon delivery in writing, signed
by the person giving the notice, to the Secretary of the Company or such other
officer as may be designated by the Board.
SECTION 11. Plan Modifications. The Board of the Company may at any time
terminate this Plan or may, from time to time, amend any provision of this Plan
in such manner and to such extent as it may, in its discretion, deem to be
advisable. In the event this Plan is terminated, any amount remaining in any
Director's account will be distributed in such manner as is determined by the
Committee in its sole discretion.
SECTION 12. Applicable Law. This Plan shall be
governed by the law of the State of Kansas.

EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(in millions, except per share data)

Quarter Ended Year to Date
September 30, September 30,
--------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Primary earnings per share (EPS)
<S> <C> <C> <C> <C>
Income from continuing operations $ 211.7 $ 316.2 $ 757.6 $ 944.9
Preferred stock dividends (0.3) (0.3) (0.8) (1.1)
- ------------------------------------------------------------------------------------------------------------------
211.4 315.9 756.8 943.8
Discontinued operation, net -- -- -- (2.6)
Extraordinary losses from early extinguishments
of debt, net -- (3.8) -- (3.8)
- ------------------------------------------------------------------------------------------------------------------
Earnings applicable to common stock $ 211.4 $ 312.1 $ 756.8 $ 937.4
--------------------------------------------------------------
Weighted average common shares 434.9 434.7 435.1 423.1
--------------------------------------------------------------
Primary EPS
Continuing operations $ 0.49 $ 0.73 $ 1.74 $ 2.23
Extraordinary item -- (0.01) -- (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total $ 0.49 $ 0.72 $ 1.74 $ 2.22
--------------------------------------------------------------

Fully diluted EPS
Income from continuing operations, net of
preferred stock dividends $ 211.4 $ 315.9 $ 756.8 $ 943.8
Convertible preferred stock dividends 0.1 0.1 0.3 0.4
- ------------------------------------------------------------------------------------------------------------------
211.5 316.0 757.1 944.2
Discontinued operation, net -- -- -- (2.6)
Extraordinary losses from early extinguishments
of debt, net -- (3.8) -- (3.8)
- ------------------------------------------------------------------------------------------------------------------
Earnings as adjusted to compute fully
diluted EPS $ 211.5 $ 312.2 $ 757.1 $ 937.8
--------------------------------------------------------------

Weighted average common shares 434.9 434.7 435.1 423.1
Additional dilution for common stock equivalents
and dilutive securities 1.5 1.4 2.1 1.3
- ------------------------------------------------------------------------------------------------------------------
Total 436.4 436.1 437.2 424.4
--------------------------------------------------------------

Fully diluted EPS
Continuing operations $ 0.48 $ 0.73 $ 1.73 $ 2.22
Extraordinary item -- (0.01) -- (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total $ 0.48 $ 0.72 $ 1.73 $ 2.21
--------------------------------------------------------------

</TABLE>

EXHIBIT (12)

SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(dollars in millions)

Quarter Ended Year to Date
September 30, September 30,
---------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Earnings
<S> <C> <C> <C> <C>
Income from continuing operations
before taxes $ 360.3 $ 509.8 $ 1,260.5 $ 1,524.5
Capitalized interest (13.0) (27.4) (69.7) (80.6)
Equity in net losses of less than 50%
owned entities 221.8 60.6 485.0 146.7
- ------------------------------------------------------------------------------------------------------------------
Subtotal 569.1 543.0 1,675.8 1,590.6
- ------------------------------------------------------------------------------------------------------------------

Fixed charges
Interest charges of continuing
operations 62.6 75.4 204.8 225.8
Interest factor of operating rents 34.1 30.0 95.1 89.4
Pre-tax cost of preferred stock
dividends of subsidiaries 0.1 0.1 0.2 0.4
- ------------------------------------------------------------------------------------------------------------------
Total fixed charges 96.8 105.5 300.1 315.6
- ------------------------------------------------------------------------------------------------------------------
Earnings, as adjusted $ 665.9 $ 648.5 $ 1,975.9 $ 1,906.2
---------------------------------------------------------------------
Ratio of earnings to fixed charges 6.88 6.15 6.58 6.04
---------------------------------------------------------------------

Note: The ratios were computed by dividing fixed charges into the sum of
earnings (after certain adjustments) and fixed charges. Earnings
include income from continuing operations before taxes, plus equity in
the net losses of less-than-50%-owned entities, less capitalized
interest. Fixed charges include (a) interest on all debt of continuing
operations (including amortization of debt issuance costs), (b) the
interest component of operating rents, and (c) the pre-tax cost of
subsidiary preferred stock dividends.
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 109,400
<SECURITIES> 0
<RECEIVABLES> 2,779,100
<ALLOWANCES> 167,100
<INVENTORY> 345,400
<CURRENT-ASSETS> 3,686,700
<PP&E> 22,962,400
<DEPRECIATION> 11,851,600
<TOTAL-ASSETS> 17,621,700
<CURRENT-LIABILITIES> 3,476,500
<BONDS> 2,851,200
11,400
0
<COMMON> 1,091,300
<OTHER-SE> 7,824,000
<TOTAL-LIABILITY-AND-EQUITY> 17,621,700
<SALES> 0
<TOTAL-REVENUES> 11,059,200
<CGS> 0
<TOTAL-COSTS> 6,788,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,100
<INCOME-PRETAX> 1,260,500
<INCOME-TAX> 502,900
<INCOME-CONTINUING> 757,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 757,600
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.73

</TABLE>