-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TNKAPe+1vAqeshT8mF03uxPOQI597JR5wQPJwHTiDmju5+Dx1P1xaTzoVfrcwVOG EmudWWAfCZ5W5NxDznT2yg== 0000101830-97-000004.txt : 19970312 0000101830-97-000004.hdr.sgml : 19970312 ACCESSION NUMBER: 0000101830-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970311 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRINT CORP CENTRAL INDEX KEY: 0000101830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 480457967 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04721 FILM NUMBER: 97554653 BUSINESS ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: P O BOX 11315 CITY: WESTWOOD STATE: KS ZIP: 66205 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: NULL CITY: WESTWOOD STATE: KS ZIP: 66205 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TELECOMMUNICATIONS INC DATE OF NAME CHANGE: 19920316 FORMER COMPANY: FORMER CONFORMED NAME: UNITED UTILITIES INC DATE OF NAME CHANGE: 19731011 10-K 1 SPRINT CORPORATION FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 ----------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4721 SPRINT CORPORATION (Exact name of registrant as specified in its charter) KANSAS 48-0457967 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) P.O. Box 11315, Kansas City, Missouri 64112 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (913) 624-3000 --------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ----------------------------------- ------------------------------------------ Preferred Stock, without par value First series, $7.50 stated value New York Stock Exchange Second series, $6.25 stated value New York Stock Exchange Common stock, $2.50 par value, and Rights New York Stock Exchange (shares outstanding at February 28, Chicago Stock Exchange 1997, 344,594,632) Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for these shorter period that the registrant was required to file these reports), and (2) has been subject to these filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of voting stock held by non-affiliates at February 28, 1997 is $15,637,309,097. Documents incorporated by reference. Registrant's definitive proxy statement filed pursuant to Regulation 14A promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 is incorporated by reference in Part III hereof. SPRINT CORPORATION SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT ON FORM 10-K Part I Item 1. Business The Corporation Sprint Corporation, incorporated in 1938 under the laws of Kansas, is mainly a holding company. The principal activities of Sprint and its subsidiaries (Sprint) include domestic and international long distance and local exchange telecommunications services. Other activities include emerging businesses and product distribution and directory publishing as discussed below. In March 1996, Sprint spun off its cellular and wireless communications services division (Cellular) to holders of Sprint's common stock. Telecommunications Law The Telecommunications Act of 1996 (the Act), which was signed into law in February 1996, promotes competition in all aspects of telecommunications. Of particular relevance to Sprint, the Act eliminates legal and regulatory barriers to entry into local telephone markets and requires incumbent local exchange carriers (LECs), among other things, to allow local resale at wholesale rates, negotiate interconnection agreements, provide nondiscriminatory access to unbundled network elements and allow collocation of interconnection equipment by competitors. The Act also allows Bell Operating Companies (BOCs) to provide in-region long distance service once they obtain state certification of compliance with a competitive "checklist," have a facilities-based competitor, and obtain a Federal Communications Commission (FCC) ruling that the provision of in-region long distance service is in the public interest. As part of its public interest inquiry, the FCC must solicit the views of the Department of Justice and give those views substantial weight. The FCC adopted detailed rules in August 1996 to govern interconnection to incumbent local networks by new market entrants. Some LECs and state public service commissions (PSC) appealed these rules to the U.S. Court of Appeals, which stayed some of the pricing rules pending full review by the court. A court decision is expected in mid-1997. The FCC is also expected to issue decisions in 1997 on two related matters critical to local competition -- universal service reform and access reform. Currently, local rates are subsidized through implicit subsidies, such as above-cost access charges imposed on long distance companies for connections to local customers. The purpose of universal service reform is to establish an explicit subsidy mechanism to replace the current implicit subsidies. Access reform will change the structure and level of access charges and will determine the degree of regulatory oversight for those charges. The impact of the Act on Sprint cannot be determined because the rules for local competition are still being decided by regulators and the courts. Sprint intends to provide competitive local exchange carrier (CLEC) service and has filed for certification in most states in anticipation of the opening of local markets to competition. This CLEC activity is important to Sprint both from offensive and defensive perspectives because it will allow customers to look to Sprint for all their telecommunications needs. Because of high development costs, however, CLEC activities are unlikely to be profitable for the first few years. In those areas where Sprint is the incumbent LEC, local competition is expected to eventually result in some loss of market share. However, because Sprint's LEC operations are geographically dispersed and largely in rural markets, local competition is expected to occur more gradually. Entry is most likely to be through the resale of Sprint LEC services or through the purchase of Sprint LEC unbundled network elements. This will allow Sprint to retain revenue for customers lost to CLEC competition. 1 The impact of local competition is also dependent on the outcome of the universal service reform and access reform dockets at the FCC. While Sprint has presented a proposal to the FCC that fairly balances the conflicting interests of industry participants, Sprint cannot predict what the FCC will do. If regulators were to require an immediate reduction in access subsidies flowing to local service without offsetting universal service support or giving LECs an opportunity to re-balance local rates, Sprint's local division would be adversely impacted. On the other hand, a reduction in access charges would benefit Sprint's long distance division (and other long distance companies) because access charges are the largest single cost of providing long distance service. Long distance companies should benefit from lower access charges even if these lower rates are flowed through to customers because lower long distance prices will likely stimulate additional demand. Several BOCs claim that they meet the competitive checklist and will seek FCC approval to offer in-region long distance service in 1997. Given the absence of local competition ground rules and the absence of any meaningful local competition, Sprint believes these applications are premature. However, even if BOCs were to get authority to offer in-region long distance services, it is likely that any loss of Sprint customers at the retail level would be offset, since Sprint is the underlying network provider to at least three of the seven regional Bell operating companies. Strategic Alliances Sprint is a 40% partner in Sprint Spectrum L.P. (Sprint PCS), a partnership with Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc. Sprint PCS is building the nation's first single technology, 100% digital, state-of-the-art, wireless network to provide personal communication services (PCS) across the United States. During December 1996, Sprint PCS launched service in the first of 65 metropolitan markets. Sprint PCS expects to complete this first phase in 1997 and have service in markets covering nearly 100 million people by early 1998. Sprint PCS, through its affiliate, American Personal Communications (APC), launched the nation's first PCS system in the Washington, D.C., and Baltimore, Maryland, areas in November 1995. Sprint is a partner in Global One, a joint venture with Deutsche Telekom AG (DT) and France Telecom (FT) to provide seamless global telecommunications services to business, residential and carrier markets worldwide. Sprint is a one-third partner in Global One's operating group serving Europe (excluding France and Germany), and is a 50% partner in Global One's operating group for the worldwide activities outside the United States and Europe. In connection with the formation of the Global One joint venture on January 31, 1996, the long distance division contributed certain assets and related operations of its international business unit to Global One. 2 Long Distance Communications Services The long distance communications services division is the nation's third-largest long distance telephone company. It operates a nationwide all-digital long distance communications network that uses state-of-the-art fiber-optic and electronic technology. The division primarily provides domestic and international voice, video and data communications services. The division offers its services to the public subject to different levels of state and federal regulation, but rates are not subject to rate-base regulation except nominally in some states. The division's net operating revenues were $8.3, $7.3 and $6.8 billion in 1996, 1995 and 1994, respectively. AT&T dominates the long distance communications market and is expected to continue to dominate the market for some years into the future. MCI Communications Corporation (MCI) is the nation's second largest long distance telephone company. Sprint's long distance division competes with AT&T, MCI and other telecommunications providers in all segments of the long distance communications market. Competition is based on price and pricing plans, the types of services offered, customer service, and communications quality, reliability and availability. As competition has developed in long distance markets in recent years, the FCC has streamlined regulation of interstate interexchange carriers, including AT&T. Nondominant competitive long distance carriers (like Sprint) have been subject to considerably less regulation, because market forces served as a more effective regulator of prices. As AT&T lost domestic market share, it sought to be relieved of regulation as well. The FCC ended rate-of-return regulation of AT&T in 1989, and removed some competitive services from price cap regulation in 1991. In 1995, the FCC reclassified AT&T as a nondominant domestic carrier, in exchange for commitments to protect rates charged to low income, low volume and reseller customers. The FCC did not find that the long distance market was completely competitive and some interstate regulation continues to apply. AT&T was also subsequently declared to be a nondominant international telecommunications carrier. See "Telecommunications Law" for a discussion of the new telecommunications legislation and its potential impact on the long distance division. 3 Local Communications Services The local communications services division consists of regulated LECs that serve more than seven million access lines in 19 states. The division provides local exchange services, access by telephone customers and other carriers to Sprint's local exchange facilities, sales of telecommunications equipment, and long distance services within specified geographical areas.
The division's net operating revenues were $5.2, $4.7 and $4.4 billion in 1996, 1995 and 1994, respectively. The following table reflects major revenue categories as a percentage of the division's total net operating revenues: 1996 1995 1994 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Local service 40.3% 39.8% 39.7% Network access 36.2 36.1 36.2 Toll service 8.2 10.3 12.0 Other 15.3 13.8 12.1 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 100.0% 100.0% 100.0% -- ------------- --- ------------- -- -------------
AT&T is the division's largest customer for network access services. In 1996, 13.3% of the division's net operating revenues was derived from services (mainly network access services) provided to AT&T, compared with 15.2% in 1995 and 16.6% in 1994. On a consolidated basis, revenues from AT&T were 5.2% of Sprint's revenues in 1996, 6.0% in 1995 and 6.3% in 1994. While AT&T is a significant customer, Sprint does not believe the division's revenues are dependent upon AT&T, as customers' demand for interLATA long distance telephone service is not tied to any one long distance carrier. Historically, as the market share of AT&T's long distance competitors increases, the percentage of revenues derived from network access services provided to AT&T decreases. The division's LECs are subject to FCC jurisdiction, as well as state PSC jurisdiction in each state in which the LECs operate. In each state in which the PSCs exercise authority to grant certificates of public convenience and necessity, the LECs have been granted certificates of indefinite duration to provide local exchange telephone service in their current service areas. In 1991, the FCC adopted a price cap regulatory format for the BOCs and the GTE LECs. Other LECs could voluntarily become subject to price cap regulation. The division's LECs elected to be subject to price cap regulation. Under price caps, prices for network access service must be adjusted each year to reflect industry average productivity gains (as specified by the FCC), inflation and certain allowed cost changes. During 1995, the FCC adopted modifications to the price cap plan to reset productivity elections, change certain rate adjustment methods, address new service offerings and generally reduce regulatory requirements. Under these changes, the division's LECs adopted a rate formula based on the maximum productivity factors that effectively removes the earnings cap on the division's interstate access revenues. Interstate access revenues currently comprise approximately 60 percent of the division's network access revenues. See "Telecommunications Law" for a discussion of the new telecommunications legislation and its potential impact on the local communications division. 4 Product Distribution and Directory Publishing The product distribution and directory publishing businesses (PDDP) consist of North Supply Company (North Supply) and Sprint Publishing & Advertising (SPA). North Supply is a wholesale distributor of telecommunications products. Products range from basics, such as wire and cable, telephones and repair parts, to complete PBX systems, transmission systems and security and alarm equipment. The nature of competition in North Supply's markets demands a high level of customer service to succeed, as a number of competitors, including other national wholesale distributors, sell the same products and services. SPA publishes and markets white and yellow page telephone directories in certain of Sprint's local exchange territories, as well as in the greater metropolitan areas of Milwaukee, Wisconsin and Chicago, Illinois. SPA's revenues are principally derived from selling directory advertisements. The company competes with publishers of telephone directories and others for advertising revenues. Emerging Businesses Emerging businesses consists of consumer Internet access services, CLEC services, international development activities (outside the scope of Global One), and PCS controlled by Sprint. In December 1996, Sprint launched its consumer Internet access service, Sprint Internet Passport(SM), to the general public. Sprint has substantially completed the buildout of its Internet access platform, which now contains more than 230 points of presence and can be reached by 85% of the nation's population through a local call. To take advantage of newly competitive markets, Sprint has initiated efforts to enter local markets across the United States by filing for CLEC status. Through January 1997, Sprint had filed in 47 states and the District of Columbia, and gained regulatory approval to provide competitive local telephone service in 25 states and the District of Columbia. In January 1997, Sprint launched its initial competitive local service offering in Southern California. The timing of entry, means of access to the customer and product offering will be influenced by a number of factors, including buy versus build economic trade-offs, competitive positioning, customer needs and the regulatory environment. Sprint, to the extent possible, will employ existing sales channels and marketing resources to market its CLEC services. Sprint has undertaken efforts to pursue selected business opportunities in key countries and markets around the world. Projects will be selected based on their ability to provide significant growth and financial return, the impact on Global One's position in world markets, and the volume of traffic terminated on Sprint's U.S. networks. As part of an overall strategy to achieve nationwide PCS coverage, Sprint directly acquired PCS licenses in the FCC's recent auction. These licenses cover 139 markets across the United States reaching a total population of 70 million people. Sprint plans to affiliate these licenses with the licenses previously acquired by Sprint PCS. With the affiliation of Sprint's licenses, licensed coverage for Sprint-branded PCS will include nearly 260 million people across the United States, Puerto Rico and the U.S. Virgin Islands. 5 Spin-off of Cellular In March 1996, Sprint completed the tax-free spin-off of Cellular to Sprint common shareholders. The spin-off was effected by distributing all shares of Cellular common stock to all of Sprint's common shareholders at a rate of one Cellular common share for every three Sprint common shares held. In connection with the spin-off, Cellular repaid $1.4 billion of intercompany debt owed to Sprint. In addition, Sprint contributed to the equity capital of Cellular $185 million of debt owed by Cellular in excess of the amount repaid. This equity contribution, together with Sprint's previous investment in Cellular, resulted in Sprint's net investment in Cellular totaling $260 million at the date of the spin-off. Environment Sprint's environmental compliance and remediation expenditures are mainly due to the operation of standby power generators for its telecommunications equipment. The expenditures arise in connection with permits, standards compliance, or occasional remediation, which are usually related to generators, batteries or fuel storage. Sprint has been designated a potentially responsible party at sites relating to either landfill contamination or discontinued power generation operations. Sprint's environmental compliance and remediation expenditures have not been material to its financial statements or to its operations and are not expected to have any future material effects. Patents, Trademarks and Licenses Sprint owns numerous patents, patent applications and trademarks in the United States and other countries. Sprint is also licensed under domestic and foreign patents and trademarks owned by others. In total, these patents, patent applications, trademarks and licenses are of material importance to Sprint's business. Generally, Sprint's trademarks and trademark licenses have no limitation on duration; Sprint's patents and licensed patents have lives generally ranging from one to 17 years. Sprint's PCS licenses have an initial duration of 10 years. Sprint expects to renew these licenses for additional 10 year terms under FCC rules. Employee Relations As of year-end 1996, Sprint had approximately 48,000 employees, of whom 24% are represented by unions. During 1996, Sprint had no material work stoppages caused by labor controversies. Information as to Industry Segments For information required by this section, refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Segmental Results of Operations" and Note 13 of the "Notes to Consolidated Financial Statements" sections of the Financial Statements and Financial Statement Schedule filed as part of this report. 6 Item 2. Properties Sprint's property, plant and equipment totaled $21.4 billion at year-end 1996, of which $13.4 billion relates to local communications services and $7.4 billion relates to long distance communications services. These properties mainly consist of land, buildings, digital fiber-optic network, switching equipment, microwave radio and cable and wire facilities. Sprint leases certain switching equipment and several general office facilities. The long distance division has been granted easements, rights-of-way and rights-of-occupancy, mainly by railroads and other private landowners, for its fiber-optic network. PDDP's properties mainly consist of office and warehouse facilities to support the business units in the distribution of telecommunications products and publication of telephone directories. Sprint owns its corporate headquarters building and other property located in the greater Kansas City metropolitan area. Property, plant and equipment totaling $12.4 billion is either pledged as security for first mortgage bonds and certain notes or is restricted for use as mortgaged property. Item 3. Legal Proceedings Following the announcement of the Sprint/Centel merger agreement in May 1992, class action suits were filed against Centel and certain of its officers and directors in federal and state courts. The federal actions were consolidated in the United States District Court for the Northern District of Illinois. An amended complaint was filed against the Company and two officers/directors. The amended complaint alleged violations of federal securities laws by failing to disclose pertinent information regarding the value of Centel common stock. In June 1996, the defendants were granted summary judgment on the plaintiffs' claims, and the plaintiffs have appealed. In January 1995, a purported class action suit was filed against Centel's financial advisors in state court in New York in connection with the Sprint/Centel merger. In October 1995, the New York trial court granted a motion to dismiss that suit, and the order dismissing the claims was affirmed on appeal by the intermediate appellate court in New York. Sprint may have indemnification obligations to the financial advisors in connection with this suit. Various other suits arising in the ordinary course of business are pending against Sprint. Management cannot predict the ultimate outcome of these actions or the above-described litigation, but believes they will not result in a material effect on Sprint's consolidated financial statements. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the fourth quarter of 1996. 7
Item 10(b). Executive Officers of the Registrant Office Name Age - -------------------------------------------------------------- --------------------------------- ------ Chairman and Chief Executive Officer William T. Esrey (1) 57 President and Chief Operating Officer Ronald T. LeMay (2) 51 President and Chief Operating Officer - Local Telecommunications Division Michael B. Fuller (3) 52 President and Chief Operating Officer - Long Distance Division Gary D. Forsee (4) 46 President and Chief Operating Officer - National Integrated Services D. Wayne Peterson (5) 61 Executive Vice President - Law and External Affairs J. Richard Devlin (6) 46 Executive Vice President - Chief Financial Officer Arthur B. Krause (7) 55 Senior Vice President - Corporate Finance Gene M. Betts (8) 44 Senior Vice President - External Affairs John R. Hoffman (9) 51 Senior Vice President - Controller John P. Meyer (10) 46 Senior Vice President - Strategic Planning and Corporate Development Theodore H. Schell (11) 52 Senior Vice President - Quality Development and Public Relations Richard C. Smith, Jr. (12) 55 Senior Vice President - Treasurer M. Jeannine Strandjord (13) 51 Senior Vice President - Human Resources I. Benjamin Watson (14) 48 Vice President - Secretary Don A. Jensen (15) 61 (1) Mr. Esrey was elected Chairman in 1990. He was elected Chief Executive Officer and a member of the Board of Directors in 1985. (2) Mr. LeMay was elected President and Chief Operating Officer in February 1996. He had served as Vice Chairman since April 1995. From 1989 to 1995, he had served as President and Chief Operating Officer Long Distance Division. He was elected to the Board of Directors of Sprint in 1993. (3) Mr. Fuller was elected President - Local Telecommunications Division in October 1996. From 1990 to 1996, he served as President of United Telephone - Midwest Group, an operating group of subsidiaries of Sprint. (4) Mr. Forsee was elected President - Long Distance Division in March 1995. He also serves as President and Chief Operating Officer of Sprint Communications Company L.P. (the Limited Partnership), a subsidiary of Sprint. Mr. Forsee had served as Senior Vice President - Staff Operations of the Limited Partnership since 1993. From 1991 to 1993, he was President of the Limited Partnership's Business Service Group. (5) Mr. Peterson was elected President - National Integrated Services in October 1996. He had served as President - Local Telecommunications Division since 1993. From 1980 to 1993, he served as President of Carolina Telephone and Telegraph Company, a subsidiary of Sprint. (6) Mr. Devlin was elected Executive Vice President - Law and External Affairs in 1989. (7) Mr. Krause was elected Executive Vice President - Chief Financial Officer in 1988. (8) Mr. Betts was elected Senior Vice President in 1990. (9) Mr. Hoffman was elected Senior Vice President - External Affairs in 1990. 8 (10) Mr. Meyer was elected Senior Vice President and Controller in 1993. He had served as Vice President and Controller of Centel since 1989. (11) Mr. Schell was elected Senior Vice President - Strategic Planning and Corporate Development in 1990. (12) Mr. Smith was elected Senior Vice President - Quality Development and Public Relations in 1991. (13) Ms. Strandjord was elected Senior Vice President and Treasurer in 1990. (14) Mr. Watson was elected Senior Vice President - Human Resources in 1993. He had served as Vice President Finance and Administration of United Telephone - Eastern Group, an operating group of subsidiaries of Sprint, since 1990. (15) Mr. Jensen was elected Vice President and Secretary in 1975. There are no known family relationships between any of the persons named above or between any of these persons and any outside directors of Sprint. Officers are elected annually.
9 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Price Per Share - --------------------- ----------------------------------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------- 1996 1995* ---------------------------------------------- --------------------------------------------- -- ----------- --- ------------ --- ---------- --- ----------- -- ----------- -- ----------- End of End of High Low Period High Low Period -- ----------- --- ------------ --- ---------- --- ----------- -- ----------- -- ----------- First quarter $ 38 5/8* $ 31 15/16* $ 38 $ 26 5/16 $ 21 5/16 $ 24 15/16 Second quarter 44 3/8 37 1/2 42 29 9/16 25 1/16 27 3/4 Third quarter 42 7/8 34 1/2 38 7/8 30 3/8 26 7/8 28 7/8 Fourth quarter 44 37 1/2 39 7/8 33 15/16 27 7/16 32 11/16 - --------------------- -- ----------- --- ------------ --- ---------- -- --- ----------- -- ----------- -- ----------- * Adjusted to reflect the spin-off of Cellular.
As of February 28, 1997, Sprint had approximately 100,000 common stock record holders and 2 Class A common stock record holders. The principal trading market for Sprint's common stock is the New York Stock Exchange. The common stock is also listed and traded on the Chicago and Pacific Stock Exchanges. The Class A common stock is not publicly traded. Sprint declared common stock dividends of $0.25 per share during each quarter of 1996 and 1995. During the last three quarters of 1996, Sprint declared dividends of $0.25 per share on its Class A common stock. Item 6. Selected Financial Data For information required by Item 6, refer to the "Selected Financial Data" section of the Financial Statements and Financial Statement Schedule filed as part of this report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations For information required by Item 7, refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Financial Statements and Financial Statement Schedule filed as part of this report. Item 8. Financial Statements and Supplementary Data For information required by Item 8, refer to the "Consolidated Financial Statements and Schedule" section of the Financial Statements and Financial Statement Schedule filed as part of this report. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 10 Part III Item 10. Directors and Executive Officers of the Registrant Pursuant to Instruction G(3) to Form 10-K, the information relating to Directors of Sprint required by Item 10 is incorporated by reference from Sprint's definitive proxy statement filed pursuant to Regulation 14A. For information pertaining to Executive Officers of Sprint, as required by Instruction 3 of Paragraph (b) of Item 401 of Regulation S-K, refer to the "Executive Officers of the Registrant" section of Part I of this report. Pursuant to Instruction G(3) to Form 10-K, the information relating to compliance with Section 16(a) required by Item 10 is incorporated by reference from Sprint's definitive proxy statement filed pursuant to Regulation 14A. Item 11. Executive Compensation Pursuant to Instruction G(3) to Form 10-K, the information required by Item 11 is incorporated by reference from Sprint's definitive proxy statement filed pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management Pursuant to Instruction G(3) to Form 10-K, the information required by Item 12 is incorporated by reference from Sprint's definitive proxy statement filed pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions Pursuant to Instruction G(3) to Form 10-K, the information required by Item 13 is incorporated by reference from Sprint's definitive proxy statement filed pursuant to Regulation 14A. 11 Part IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a) 1. The consolidated financial statements of Sprint filed as part of this report are listed in the Index to Financial Statements and Financial Statement Schedule. 2. The consolidated financial statement schedule of Sprint filed as part of this report is listed in the Index to Financial Statements and Financial Statement Schedule. 3. The following exhibits are filed as part of this report: EXHIBITS (3) Articles of Incorporation and Bylaws: (a) Articles of Incorporation, as amended (filed as Exhibit 3(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference). (b) Bylaws, as amended (filed as Exhibit 3(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (4) Instruments defining the Rights of Sprint's Equity Security Holders: (a) The rights of Sprint's equity security holders are defined in the Fifth, Sixth, Seventh and Eighth Articles of Sprint's Articles of Incorporation. See Exhibit 3(a). (b) Rights Agreement dated as of August 8, 1989, between Sprint Corporation (formerly United Telecommunications, Inc.) and UMB Bank, n.a. (formerly United Missouri Bank of Kansas City, N.A.), as Rights Agent (filed as Exhibit 2(b) to Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721), and incorporated herein by reference). (c) Amendment and supplement dated June 4, 1992 to Rights Agreement dated as of August 8, 1989 (filed as Exhibit 2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721), and incorporated herein by reference). (d) Second Amendment to Rights Agreement dated as of July 31, 1995 between Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 2(d) to Form 8-A/A-2 dated October 20, 1995 amending Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721) and incorporated herein by reference). (e) Standstill Agreement dated as of July 31, 1995, by and among Sprint Corporation, France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). 12 (10) Material Agreements - Joint Ventures: (a) Joint Venture Agreement dated as of June 22, 1995 among Sprint Corporation, Sprint Global Venture, Inc., France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (b) Amendment No. 1 to Joint Venture Agreement, dated as of January 31, 1996, among Sprint Corporation, Sprint Global Venture, Inc., France Telecom, Deutsche Telekom AG and Atlas Telecommunications, S.A. (filed as Exhibit 99A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (c) Investment Agreement dated as of July 31, 1995 among Sprint Corporation, France Telecom and Deutsche Telekom AG (including as an exhibit the Stockholders' Agreement among France Telecom, Deutsche Telekom AG and Sprint Corporation) (filed as Exhibit (10)(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (d) Amended and Restated Agreement of Limited Partnership of MajorCo., L.P., dated as of January 31, 1996, among Sprint Spectrum, L.P., TCI Network Services, Comcast Telephony Services and Cox Telephony Partnership (filed as Exhibit 99C to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (e) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Tele-Communications, Inc. (filed as Exhibit 99D to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (f) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Comcast Corporation (filed as Exhibit 99E to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (g) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Cox Communications, Inc. (filed as Exhibit 99F to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements (h) 1985 Stock Option Plan, as amended (Appendix to Stock Option Plans filed as Exhibit (10)(h) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). (i) 1990 Stock Option Plan, as amended. See Exhibit (10) (h) for Appendix to Stock Option Plans. (j) 1990 Restricted Stock Plan, as amended. (k) Executive Deferred Compensation Plan, as amended. (l) Management Incentive Stock Option Plan, as amended. See Exhibit (10)(h) for Appendix to Stock Option Plans. (m) Long-Term Stock Incentive Program, as amended (filed as Exhibit (10)(f) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). 13 (n) Sprint Supplemental Executive Retirement Plan (filed as Exhibit (10)(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (o) Amended and Restated Centel Directors Deferred Compensation Plan (filed as Exhibit (10)(j) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (p) Restated Memorandum Agreements Respecting Supplemental Pension Benefits between Sprint Corporation (formerly United Telecommunications, Inc.) and two of its current and former executive officers (filed as Exhibit 10(i) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference). (q) Executive Long-Term Incentive Plan (filed as Exhibit 10(j) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (r) Executive Management Incentive Plan (filed as Exhibit 10(k) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (s) Long-Term Incentive Compensation Plan, as amended (filed as Exhibit 10(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and incorporated herein by reference). (t) Short-Term Incentive Compensation Plan (filed as Exhibit 10(k) to United Telecommunications, Inc. Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference). (u) Retirement Plan for Directors, as amended. (v) Key Management Benefit Plan, as amended (filed as Exhibit 10(g) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (w) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and certain of its Executive Officers (filed as Exhibit 10(x) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, Exhibit 10(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and Exhibit 10 (h) of Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference). Agreement Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and one of its Executive Officers, as amended. (x) Director's Deferred Fee Plan, as amended. (y) Form of Contingency Employment Agreements between Sprint Corporation and certain of its executive officers (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). (z) Form of Indemnification Agreements between Sprint Corporation (formerly United Telecommunications, Inc.) and its Directors and Officers (filed as Exhibit 10(s) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated herein by reference). 14 (aa) Summary of Executive Officer and Board of Directors Benefits (filed as Exhibit (10)(k) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (bb) Description of agreement regarding Supplemental Pension Benefits between Sprint Corporation and one of its executive officers (filed as Exhibit 10(e) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, and incorporated herein by reference). (cc) Amended and Restated Centel Director Stock Option Plan (filed as Exhibit 10(aa) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (11) Computation of Earnings Per Common Share. (12) Computation of Ratio of Earnings to Fixed Charges. (21) Subsidiaries of Registrant. (23) Consent of Ernst & Young LLP. (27) Financial Data Schedules: (a) December 31, 1996 Financial Data Schedule. (b) December 31, 1995 Restated Financial Data Schedule. Sprint will furnish to the Securities and Exchange Commission, upon request, a copy of the instruments defining the rights of holders of its long-term debt. The total amount of securities authorized under any of said instruments does not exceed 10% of the total assets of Sprint. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1996. (c) Exhibits are listed in Item 14(a). 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SPRINT CORPORATION (Registrant) By /s/ W. T. Esrey William T. Esrey Chairman and Chief Executive Officer Date: March 11, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 11th day of March, 1997. /s/ W. T. Esrey William T. Esrey Chairman and Chief Executive Officer /s/ Arthur B. Krause Arthur B. Krause Executive Vice President and Chief Financial Officer /s/ John P. Meyer John P. Meyer Senior Vice President and Controller Principal Accounting Officer 16 SIGNATURES SPRINT CORPORATION (Registrant) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 11th day of March, 1997. /s/ DuBose Ausley DuBose Ausley, Director /s/ Warren L. Batts Warren L. Batts, Director /s/ Michel Bon Michel Bon, Director /s/ Ruth M. Davis Ruth M. Davis, Director /s/ W. T. Esrey William T. Esrey, Director /s/ Donald J. Hall Donald J. Hall, Director /s/ Harold S. Hook Harold S. Hook, Director /s/ Ronald T. LeMay Ronald T. LeMay, Director /s/ Linda Koch Lorimer Linda Koch Lorimer, Director /s/ Charles E. Rice Charles E. Rice, Director /s/ Ron Sommer Ron Sommer, Director /s/ Stewart Turley Stewart Turley, Director 17
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Sprint Corporation Page Reference --------------------- Selected Financial Data F-2 Management's Discussion and Analysis of Financial Condition and Results of Operations F-3 Consolidated Financial Statements and Schedule: Management Report F-16 Report of Independent Auditors - Ernst & Young LLP F-17 Consolidated Statements of Income for each of the three years ended December 31, 1996 F-18 Consolidated Balance Sheets as of December 31, 1996 and 1995 F-19 Consolidated Statements of Cash Flows for each of the three years ended December 31, 1996 F-20 Consolidated Statements of Common Stock and Other Shareholders' Equity for each of the three years ended December 31, 1996 F-21 Notes to Consolidated Financial Statements F-22 Financial Statement Schedule for each of the three years ended December 31, 1996: II - Consolidated Valuation and Qualifying Accounts F-44 Certain financial statement schedules have been omitted because the required information is not present, or has been included in the consolidated financial statements and notes thereto.
F-1
SELECTED FINANCIAL DATA Sprint Corporation - --------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- (in millions, except per share data) Results of Operations Net operating revenues $ 14,044.7 $ 12,765.1 $ 11,986.6 $ 10,914.7 $ 10,105.7 Operating income (1) 2,267.2 1,834.3 1,690.7 1,214.1 1,199.8 Income from continuing operations (1), (2) 1,190.9 946.1 899.2 517.1 550.6 Earnings per common share from continuing operations (1), (2) 2.79 2.69 2.57 1.50 1.62 Dividends per common share 1.00 1.00 1.00 1.00 1.00 Financial Position Total assets $ 16,953.0 $ 15,195.9 $ 14,547.5 $ 13,898.1 $ 13,431.7 Property, plant and equipment, net 10,464.1 9,715.8 10,258.8 9,883.1 9,895.6 Total debt (including short-term borrowings) 3,280.6 5,677.4 4,937.2 5,094.4 5,442.7 Redeemable preferred stock 11.8 32.5 37.1 38.6 40.2 Common stock and other shareholders' equity 8,519.9 4,642.6 4,524.8 3,918.3 3,971.6 Cash Flow Data Cash from operating activities - continuing operations(3) $ 2,403.6 $ 2,609.6 $ 2,339.6 $ 2,007.8 $ 2,397.3 Capital expenditures 2,433.6 1,857.3 1,751.6 1,429.8 1,342.4 (1) During 1996, Sprint recorded a nonrecurring charge of $60 million related to litigation within the long distance division. This charge reduced income from continuing operations by $36 million ($0.08 per share). During 1995, Sprint recorded a nonrecurring charge of $88 million related to a restructuring within the local division. This charge reduced income from continuing operations by $55 million ($0.16 per share). During 1993, Sprint recorded nonrecurring charges of $293 million related to (a) transaction costs associated with the merger with Centel Corporation and the expenses of integrating and restructuring the operations of the two companies and (b) a realignment and restructuring within the long distance division. These charges reduced income from continuing operations by $193 million ($0.56 per share). (2) During 1994, Sprint sold an investment in equity securities, realizing a gain of $35 million, which increased income from continuing operations by $22 million ($0.06 per share). During 1993, due to the enactment of the Revenue Reconciliation Act of 1993, Sprint adjusted its deferred income tax assets and liabilities to reflect the increased tax rate. This adjustment reduced income from continuing operations by $11 million ($0.03 per share). During 1992, Sprint recognized gains related to sales of certain local telephone properties, which increased income from continuing operations by $44 million ($0.13 per share). (3) The 1996 amount was reduced by $600 million for cash required to terminate an accounts receivable sales agreement. The 1992 amount includes $300 million of cash proceeds from the sale of accounts receivable.
F-2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Sprint Corporation and its subsidiaries (Sprint) include certain estimates, projections and other forward-looking statements in its reports, presentations to analysts and others, and other material disseminated to the public. There can be no assurances of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from estimates or projections contained in forward-looking statements include: - the effects of vigorous competition in the markets in which Sprint operates; - the cost of entering new markets necessary to provide seamless services; - the risks associated with Sprint's investments in Sprint Spectrum L.P. (Sprint PCS) and Global One, which are presently in the early stages of development; - the impacts of any unusual items resulting from ongoing evaluations of Sprint's business strategies; - requirements imposed on Sprint and its competitors by the Federal Communications Commission (FCC) and state regulatory commissions under the Telecommunications Act of 1996; - unexpected results of litigation filed against Sprint; and - the possibility of one or more of the markets in which Sprint competes being affected by variations in political, economic or other factors such as monetary policy, legal and regulatory changes or other external factors over which Sprint has no control. Sprint's principal activities consist of the following: Long Distance Communications Services The long distance communications services division is the nation's third-largest long distance telephone company. It operates a nationwide, all-digital long distance communications network that uses state-of-the-art fiber-optic and electronic technology. The division primarily provides domestic and international voice, video and data communications services. The division offers its services to the public subject to different levels of state and federal regulation, but rates are not subject to rate-base regulation except nominally in some states. Local Communications Services The local communications services division consists of regulated local exchange carriers (LECs) that serve more than seven million access lines in 19 states. The division provides local exchange services, access by telephone customers and other carriers to Sprint's local exchange facilities, sales of telecommunications equipment, and long distance services within specified geographical areas. Emerging Businesses Emerging businesses consists of consumer Internet access services, competitive local exchange carrier (CLEC) services, international development activities (outside the scope of Global One), and personal communication services (PCS) controlled by Sprint. Product Distribution and Directory Publishing The product distribution and directory publishing businesses include the wholesale distribution of telecommunications products and the publishing and marketing of white and yellow page telephone directories. F-3 Strategic Alliances Global One Sprint is a partner in Global One, a joint venture with Deutsche Telekom AG (DT) and France Telecom (FT) to provide seamless global telecommunications services to business, residential and carrier markets worldwide. Sprint is a one-third partner in Global One's operating group serving Europe (excluding France and Germany), and is a 50% partner in Global One's operating group for the worldwide activities outside the United States and Europe. In connection with the formation of the Global One joint venture on January 31, 1996, the long distance division contributed certain assets and related operations of its international business unit to Global One. On January 31, 1996, DT and FT acquired shares of a new class of Sprint convertible preference stock for a total of $3.0 billion. This resulted in DT and FT each holding 7.5% of Sprint's voting power. In April 1996, following the March 1996 spin-off of Sprint's cellular and wireless communications services division (Cellular), the preference stock was converted into Sprint Class A common stock, and DT and FT each acquired additional shares of Class A common stock. Following their total investment of $3.7 billion, DT and FT each own shares of Class A common stock with 10% of Sprint's voting power. See Note 7 of Notes to Consolidated Financial Statements for further information. Sprint PCS Sprint is a 40% partner in Sprint PCS, a partnership with Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc. Sprint PCS is building the nation's first single technology, all digital, state-of-the-art, wireless network to provide PCS across the United States. PCS uses digital technology, which has sound quality superior to existing cellular technology and is less susceptible to interference and eavesdropping. In addition, PCS offers additional features, such as paging, voice mail, Caller ID and data transmission. Through 1996, the four partners had invested more than $3.2 billion in Sprint PCS to fund the acquisition of licenses and the related network buildout. During December 1996, Sprint PCS launched service in the first of 65 metropolitan markets. Sprint PCS expects to complete this first phase in 1997 and have service in markets covering nearly 100 million people by early 1998. Sprint PCS, through its affiliate, American Personal Communications (APC), launched the nation's first PCS system in the Washington, D.C., and Baltimore, Maryland, areas in November 1995. As part of an overall strategy to increase PCS coverage, Sprint directly acquired the rights to PCS licenses in the FCC's most recent auction. The licenses cover 139 markets across the United States reaching a total population of 70 million people. Sprint expects to affiliate these licenses with Sprint PCS. With this affiliation, licensed coverage for Sprint-branded PCS will include nearly 260 million people across the United States, Puerto Rico and the U.S. Virgin Islands. Beginning in 1996, discussions have taken place among the partners concerning the possible restructuring of their interests in Sprint PCS. Although discussions have continued, there is no certainty these discussions will result in any change to the partnership structure. F-4 Telecommunications Law The Telecommunications Act of 1996 (the Act), which was signed into law in February 1996, promotes competition in all aspects of telecommunications. Of particular relevance to Sprint, the Act eliminates legal and regulatory barriers to entry into local telephone markets and requires incumbent LECs, among other things, to allow local resale at wholesale rates, negotiate interconnection agreements, provide nondiscriminatory access to unbundled network elements and allow collocation of interconnection equipment by competitors. The Act also allows Bell Operating Companies (BOCs) to provide in-region long distance service once they obtain state certification of compliance with a competitive "checklist," have a facilities-based competitor, and obtain an FCC ruling that the provision of in-region long distance service is in the public interest. As part of its public interest inquiry, the FCC must solicit the views of the Department of Justice and give those views substantial weight. The FCC adopted detailed rules in August 1996 to govern interconnection to incumbent local networks by new market entrants. Some LECs and state public service commissions appealed these rules to the U.S. Court of Appeals, which stayed some of the pricing rules pending full review by the court. A court decision is expected in mid-1997. The FCC is also expected to issue decisions in 1997 on two related matters critical to local competition -- universal service reform and access reform. Currently, local rates are subsidized through implicit subsidies, such as above-cost access charges imposed on long distance companies for connections to local customers. The purpose of universal service reform is to establish an explicit subsidy mechanism to replace the current implicit subsidies. Access reform will change the structure and level of access charges and will determine the degree of regulatory oversight for those charges. The impact of the Act on Sprint cannot be determined because the rules for local competition are still being decided by regulators and the courts. Sprint intends to provide CLEC service and has filed for certification in most states in anticipation of the opening of local markets to competition. This CLEC activity is important to Sprint both from offensive and defensive perspectives because it will allow customers to look to Sprint for all their telecommunications needs. Because of high development costs, however, CLEC activities are unlikely to be profitable for the first few years. In those areas where Sprint is the incumbent LEC, local competition is expected to eventually result in some loss of market share. However, because Sprint's LEC operations are geographically dispersed and largely in rural markets, local competition is expected to occur more gradually. Entry is most likely to be through the resale of Sprint LEC services or through the purchase of Sprint LEC unbundled network elements. This will allow Sprint to retain revenue for customers lost to CLEC competition. The impact of local competition is also dependent on the outcome of the universal service reform and access reform dockets at the FCC. While Sprint has presented a proposal to the FCC that fairly balances the conflicting interests of industry participants, Sprint cannot predict what the FCC will do. If regulators were to require an immediate reduction in access subsidies flowing to local service without offsetting universal service support or giving LECs an opportunity to re-balance local rates, Sprint's local division would be adversely impacted. On the other hand, a reduction in access charges would benefit Sprint's long distance division (and other long distance companies) because access charges are the largest single cost of providing long distance service. Long distance companies should benefit from lower access charges even if these lower rates are flowed through to customers because lower long distance prices will likely stimulate additional demand. Several BOCs claim that they meet the competitive checklist and will seek FCC approval to offer in-region long distance service in 1997. Given the absence of local competition ground rules and the absence of any meaningful local competition, Sprint believes these applications are premature. However, even if BOCs were to get authority to offer in-region long distance services, it is likely that any loss of Sprint customers at the retail level would be offset since Sprint is the underlying network provider to at least three of the seven regional Bell operating companies. F-5 Spin-off of Cellular Division In March 1996, Sprint completed the tax-free spin-off of Cellular (Spin-off) to Sprint common shareholders. The Spin-off was effected by distributing all shares of Cellular common stock to all of Sprint's common shareholders at a rate of one Cellular common share for every three Sprint common shares held. In connection with the Spin-off, Cellular repaid $1.4 billion of intercompany debt owed to Sprint. In addition, Sprint contributed to the equity capital of Cellular $185 million of debt owed by Cellular in excess of the amount repaid. This equity contribution, together with Sprint's previous investment in Cellular, resulted in Sprint's net investment in Cellular totaling $260 million at the date of the Spin-off. Results of Operations Consolidated Sprint's two primary divisions -- long distance and local -- generated record levels of net operating revenues and improved operating results in 1996. The long distance division generated a 20% growth in traffic volumes in 1996, and the number of access lines served by the local division grew 5.6%. Total net operating revenues for 1996 were $14.0 billion, a 10% increase from $12.8 billion in 1995. Total net operating revenues for 1994 were $12.0 billion. Income from continuing operations was $1.2 billion ($2.79 per share) for 1996 compared with $946 million ($2.69 per share) for 1995 and $899 million ($2.57 per share) for 1994. Income from continuing operations for 1996 includes a charge related to litigation in the long distance division ($0.08 per share), while 1995 includes a charge for restructuring within the local division ($0.16 per share). Income from continuing operations for 1994 includes a gain on the sale of an investment in equity securities ($0.06 per share). Segmental Results of Operations Long Distance Communications Services
- -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1996 1995 1994 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (in millions) Net operating revenues $ 8,302.1 $ 7,277.4 $ 6,805.1 Operating expenses Interconnection 3,722.7 3,102.7 2,994.5 Operations 1,051.8 1,046.6 925.4 Selling, general and administrative 1,970.3 1,839.7 1,737.0 Depreciation and amortization 633.3 581.6 550.5 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 7,378.1 6,570.6 6,207.4 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 924.0 (1) $ 706.8 $ 597.7 -- ------------- --- ------------- -- ------------- Operating margin 11.1% (1) 9.7% 8.8% -- ------------- --- ------------- -- ------------- Capital expenditures $ 1,133.7 $ 861.7 $ 774.1 -- ------------- --- ------------- -- ------------- Identifiable assets $ 6,040.6 $ 4,912.2 $ 4,546.0 -- ------------- --- ------------- -- ------------- (1) Excluding the $60 million charge related to litigation, operating income and margin for 1996 would have been $984 million and 11.9%, respectively.
On January 31, 1996, the long distance division contributed certain international assets and related operations to Global One (the Contribution to Global One). Accordingly, the operating results of the contributed operations have been reflected in the division's operating results only through the date of contribution. The contribution had two significant effects on the division's operating results. First, revenue was reduced because customers of Sprint's F-6 international operations became Global One customers. Because Global One traffic carried by the division is priced on a wholesale, rather than retail basis, the division's revenue yield related to these international customers declined. Second, operating expenses were reduced to the extent they related to contributed operations. Had the Contribution to Global One occurred on January 1, 1994, year-over-year operating income growth would have been an estimated 29% in 1996 (excluding the nonrecurring charge) versus 21% in 1995. The related operating margins would have been an estimated 12.0% in 1996 (excluding the nonrecurring charge), 10.9% in 1995 and 9.5% in 1994. Net operating revenues increased 14% in 1996 and 7% in 1995. Traffic volumes increased 20% and 7% in the same periods. Revenue growth was mainly driven by strong volume growth in the residential, business and wholesale markets and continued growth in the data services markets. Growth in the residential market reflects the continuing success of Sprint Sense(R), a flat-rate calling plan. The small-to-medium business market, which experienced declining revenue during 1995, produced increased revenue in 1996. This improvement generally reflects the success of the Fridays Free calling plan, which experienced strong domestic and international volume growth. Growth in the data services market, which includes sales of capacity on Sprint's network to Internet service providers, reflects continued growth in demand and expanded service offerings. The wholesale market experienced strong growth in both the international and domestic markets. Growth in the wholesale international market was due, in part, to Global One traffic. These increases in 1996 revenues were partly offset by reduced long distance rates. Average long distance rates have declined due to increased competition both domestically and internationally, and due to Global One traffic being priced on a wholesale, rather than retail, basis. Had the Contribution to Global One occurred as of January 1, 1994, the division's year-over-year growth in net operating revenues would have been an estimated 17% in 1996 and 6% in 1995. Interconnection costs consist of amounts paid to LECs, other domestic service providers, and foreign telephone companies to complete calls made by the division's domestic customers. Interconnection costs increased during 1996 and 1995 mainly due to strong growth in both international outbound and domestic traffic volumes. Interconnection costs were 44.8% of net operating revenues in 1996 versus 42.6% in 1995 and 44.0% in 1994. The 1996 increase in interconnection costs as a percentage of net operating revenues reflects changes in revenue mix, particularly the growth in international traffic. These factors were partly offset by reduced rates charged by other domestic and international carriers for connecting to their networks. In addition, this percentage relationship was affected in 1996 by reduced long distance rates and reduced revenue due to the Contribution to Global One. Had the contribution occurred as of January 1, 1994, interconnection costs as a percentage of net operating revenues would have been an estimated 45.0% in 1996, 43.9% in 1995 and 45.0% in 1994. Operations expense consists of costs related to operating and maintaining the long distance network; costs of providing various services such as operator services, public payphones, telecommunications services for the hearing impaired, and video teleconferencing; and costs of data system sales. Operations expense increased less than 1% in 1996 and 13% in 1995. These increases were mainly due to overall revenue growth. The 1996 increase was offset by the Contribution to Global One. Had the contribution occurred as of January 1, 1994, operations expense would have increased an estimated 17% in 1996 and 6% in 1995. As a percentage of net operating revenues, operations expense would have been an estimated 12.5% in 1996, 12.4% in 1995 and 12.5% in 1994. Selling, general and administrative (SG&A) expense increased 7% in 1996 and 6% in 1995. The 1996 increase reflects a $60 million nonrecurring charge related to litigation (see Note 9 of Notes to Consolidated Financial Statements), partly offset by the Contribution to Global One. Excluding these items, the increases reflect the overall growth in the division's operating activities as well as increased advertising and marketing efforts due to the intensely competitive long distance marketplace. Had the Contribution to Global One occurred as of January 1, 1994, SG&A expense would have increased 8% in 1996 (excluding the nonrecurring charge) and 6% in 1995. As a percentage of net operating revenues, SG&A expense would have been an estimated 23.0% in 1996 (excluding the nonrecurring charge), 24.8% in 1995 and 24.9% in 1994. F-7 Depreciation and amortization expense increased $52 million in 1996 and $31 million in 1995, generally due to an increased asset base. The increased asset base supports data services revenue growth and expanded service capabilities. Local Communications Services
- -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1996 1995 1994 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (in millions) Net operating revenues Local service $ 2,083.7 $ 1,875.7 $ 1,752.3 Network access 1,870.8 1,705.8 1,598.4 Toll service 421.5 485.4 529.3 Other 790.1 652.5 532.8 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total net operating revenues 5,166.1 4,719.4 4,412.8 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating expenses Plant operations 1,379.6 1,360.6 1,298.3 Depreciation and amortization 909.1 835.6 794.6 Customer operations 676.6 601.0 549.3 Other 863.8 793.8 752.4 Restructuring costs -- 87.6 -- - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 3,829.1 3,678.6 3,394.6 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 1,337.0 $ 1,040.8 (1)$ 1,018.2 -- ------------- --- ------------- -- ------------- Operating margin 25.9% 22.1% (1) 23.1% -- ------------- --- ------------- -- ------------- Capital expenditures $ 1,142.6 $ 950.8 $ 914.2 -- ------------- --- ------------- -- ------------- Identifiable assets $ 7,512.8 $ 6,970.4 $ 7,821.3 -- ------------- --- ------------- -- ------------- (1) Excluding the $87.6 million restructuring charge, operating income and margin for 1995 would have been $1,128.4 million and 23.9%, respectively.
At year-end 1995, Sprint adopted accounting principles for a competitive marketplace and discontinued applying Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," to its local division (see Note 11 of Notes to Consolidated Financial Statements). This resulted in a 1995 after-tax, noncash, extraordinary charge of $565 million. Beginning in 1996, the local division's business transactions have been recorded based on their economic substance, and regulatory assets and liabilities based on SFAS 71 have not been recognized. The primary effects of Sprint's discontinued use of SFAS 71 were that certain accumulated depreciation balances were increased; plant asset lives were shortened to reflect their economic lives; and switch software costs, which were previously expensed as incurred, are now capitalized and amortized over their estimated economic lives. Local service revenues, derived from local exchange services, increased 11% in 1996 and 7% in 1995 reflecting increases in customer access lines of 5.6% in 1996 and 4.7% in 1995. The growth in access lines reflects strong economic growth in the division's service areas and second-line service to existing business and residential customers to meet lifestyle and data access needs. Local service revenues also increased due to extended area calling plans and increased demand for advanced intelligent network services, including caller ID, voice dialing and return call. Network access revenues, derived from interexchange long distance carriers' use of the local network to complete calls, increased 10% in 1996 and 7% in 1995. The increases are largely due to increased traffic volumes of 10% in 1996 and 9% in 1995, and the impact of the FCC's interim interstate price cap plan. F-8 Traffic volumes increased due to strong economic conditions in many of the division's service areas, the migration of traffic related to toll service revenues as described below, and the harsh 1996 winter season experienced on the East Coast. The impact of the FCC's interim interstate price cap plan, which became effective in 1995, increased network access revenues for 1996 and had a nominal effect on 1995. Under the new plan, the local division adopted a rate formula based on the maximum productivity factors that effectively removes the earnings cap on the division's interstate access revenues. Interstate access revenues currently comprise approximately 60% of the division's network access revenues. Toll service revenues, related to the provision of long distance services within specified geographical areas and the reselling of interexchange long distance services, decreased 13% in 1996 and 8% in 1995. The decreases primarily reflect increased competition in the intrastate long distance market since interexchange long distance carriers are now offering intraLATA long distance service in certain states. In addition, toll service revenues have declined due to the expansion of extended local area calling plans. Reductions in toll service revenues were partly offset by increased local service and network access revenues. Other revenues, including revenues from telecommunications equipment sales, directory publishing fees, and billing and collection services, increased 21% in 1996 and 22% in 1995. The increases were mainly due to business and residential equipment sales growth. A major factor in the 1996 growth was the introduction of several leading-edge telephone instruments, such as Caller ID. Plant operations expense mainly includes network operations, and repair and maintenance costs related to property, plant and equipment. Plant operations expense increased 1% in 1996 and 5% in 1995. These increases mainly reflect increased service costs due to customer access line growth. In addition, the increases reflect repair and maintenance expenses in the division's Florida and Mid-Atlantic regions due to bad weather conditions, including severe storms and hurricanes. The 1996 increase was largely offset by the change in accounting for switch software costs. Depreciation and amortization expense increased $74 million in 1996 and $41 million in 1995 mainly due to plant additions. The 1996 increase also reflects amortization of capitalized switch software costs, which largely offset the related decrease in plant operations expense discussed above. Customer operations expense includes costs related to business office operations, billing services, marketing, and customer services, including operator and directory assistance. Customer operations expense increased 13% in 1996 and 9% in 1995. The increases were mainly due to increased marketing costs to promote new products and services, and increased customer service costs due to access line growth. Other operating expenses increased $70 million in 1996 and $41 million in 1995 mainly due to the growth in equipment sales. In 1995, Sprint initiated a restructuring within its local division in an effort to streamline certain processes and reduce costs in an increasingly competitive marketplace. These actions resulted in the planned elimination over several years of approximately 1,600 positions, mainly in the network and finance functions. As a result, the local division recorded an $88 million nonrecurring charge in 1995. The accrued liability related to this charge specifically relates to the benefits that affected employees will receive upon termination. Through 1996, approximately 400 positions have been eliminated resulting in termination benefit payments of $10 million, with an additional $10 million to be paid in 1997. Substantially all of the remaining positions are expected to be eliminated during 1997, with the related costs expected to be paid during 1997 and 1998. F-9 Emerging Businesses
- -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1996 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (in millions) Net operating revenues $ 0.5 -- ------------- Operating loss $ (63.8) -- ------------- Capital expenditures $ 49.9 -- ------------- Identifiable assets $ 138.3 -- -------------
During 1996, Sprint established a new emerging businesses segment consisting of consumer Internet access services, CLEC services, international development activities (outside the scope of Global One), and PCS controlled by Sprint. The 1996 operating results largely reflect activities related to Sprint Internet Passport(SM), Sprint's consumer Internet offering, which was launched in the 1996 fourth quarter. Sprint has substantially completed the buildout of its Internet access platform, which now contains more than 230 points of presence and can be reached by 85% of the nation's population through a local call. In addition, the operating results reflect Sprint's efforts in entering newly competitive markets. Sprint has initiated efforts to enter local markets across the United States by filing for CLEC status. Through January 1997, Sprint had filed in 47 states and the District of Columbia, and gained regulatory approval to provide competitive local telephone service in 25 states and the District of Columbia. In January 1997, Sprint launched its initial competitive local service offering in Southern California. As part of an overall strategy to achieve nationwide PCS coverage, Sprint directly acquired licenses in the FCC's recent auction for a total cost of $544 million. The licenses cover 139 markets across the United States reaching a total population of 70 million people. Sprint expects to spend approximately $1.5 billion over the next three years for the network buildout related to these licenses. Sprint plans to affiliate these licenses with the licenses previously acquired by Sprint PCS. With the affiliation of Sprint's licenses, licensed coverage for Sprint-branded PCS will include nearly 260 million people across the United States, Puerto Rico and the U.S. Virgin Islands. Product Distribution and Directory Publishing
- -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- 1996 1995 1994 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (in millions) Net operating revenues $ 1,225.9 $ 1,148.0 $ 1,108.7 Operating expenses Costs of services and products 1,025.7 965.8 938.2 Selling, general and administrative 91.4 88.1 88.8 Depreciation and amortization 7.2 7.4 6.9 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Total operating expenses 1,124.3 1,061.3 1,033.9 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- Operating income $ 101.6 $ 86.7 $ 74.8 -- ------------- --- ------------- -- ------------- Operating margin 8.3% 7.6% 6.7% -- ------------- --- ------------- -- ------------- Capital expenditures $ 9.4 $ 7.8 $ 6.7 -- ------------- --- ------------- -- ------------- Identifiable assets $ 446.1 $ 395.4 $ 376.2 -- ------------- --- ------------- -- -------------
F-10 Product distribution and directory publishing's net operating revenues increased $78 million in 1996 and $39 million in 1995 mainly due to increased sales to customers not affiliated with Sprint. The 1995 increase also reflects overall price increases. Nonoperating Items Interest Expense Interest costs consist of the following:
- ------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Interest expense from continuing operations $ 196.7 $ 260.7 $ 300.7 Interest expense related to Cellular (1) 21.5 124.0 97.3 Capitalized interest costs 104.0 57.0 7.5 - ------------------------------------------------------------------------------------------------------------------- Total interest costs $ 322.2 $ 441.7 $ 405.5 ---------------------------------------------------- Average debt outstanding $ 3,604.9 $ 5,505.2 $ 4,900.7 ---------------------------------------------------- Effective interest rate 8.9% 8.0% 8.3% ---------------------------------------------------- (1) Interest expense related to Cellular is included in "Discontinued operations, net" on the Consolidated Statements of Income.
Sprint's average debt outstanding decreased $1.9 billion in 1996, generally due to repayments funded by a portion of the cash received from DT and FT for their equity investments in Sprint and from Cellular's repayment of intercompany debt in connection with the Spin-off. In 1995, Sprint's average debt outstanding increased by $605 million, mainly due to short-term borrowings incurred to fund investments in Sprint PCS. Sprint capitalizes interest costs on borrowings related to its investment in Sprint PCS. Capitalized interest costs increased in 1996 and 1995 due to Sprint's increased investment in Sprint PCS. Sprint will continue to capitalize these interest costs until Sprint PCS is no longer in the development stage. Sprint does not expect that Sprint PCS will meet the criteria of a development stage company beyond mid-1997. Beginning in 1997, Sprint expects to capitalize interest costs related to the investment in PCS licenses directly acquired by Sprint and the related network buildout. Sprint's effective interest rate increased to 8.9% in 1996 from 8.0% in 1995 mainly due to the decrease in short-term borrowings as a percentage of total borrowings. F-11 Other Expense, Net Other income (expense) consists of the following:
- ------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Equity in loss of Sprint PCS $ (191.8) $ (31.4) $ (1.3) Equity in loss of Global One and related venture costs (82.1) (22.9) (6.1) Dividend and interest income 99.7 12.6 14.4 Gains on sales of assets 15.9 -- 34.7 Loss on sales of accounts receivable (4.2) (38.6) (28.7) Other, net 3.9 (12.9) (15.1) - ------------------------------------------------------------------------------------------------------------------- Total other expense, net $ (158.6) $ (93.2) $ (2.1) ----------------------------------------------------
Income Tax Provision Sprint's income tax provisions for 1996, 1995 and 1994 resulted in effective tax rates of 37.7%, 36.1% and 35.2%, respectively. See Note 4 of Notes to Consolidated Financial Statements for information regarding the differences that cause the effective income tax rates to vary from the statutory federal income tax rate. Discontinued Operations During 1996, 1995 and 1994, Sprint recognized income (losses) of $(3), $15, and $(16) million, respectively, associated with its investment in Cellular, which was spun off to Sprint common shareholders in March 1996 (see Note 12 of Notes to Consolidated Financial Statements). During 1994, Sprint also recognized income of $7 million for the settlement of matters related to another discontinued operation. Extraordinary Items During 1996, Sprint redeemed, prior to maturity, $190 million of debt with interest rates ranging from 6.0% to 9.5%. These early redemptions resulted in a $5 million ($0.01 per share) after-tax loss. At year-end 1995, Sprint adopted accounting principles for a competitive marketplace and discontinued applying SFAS 71 to its local division (see Note 11 of Notes to Consolidated Financial Statements). SFAS 71 requires the accounting recognition of regulators' rate actions where appropriate. Sprint determined that the local division no longer met the criteria for applying SFAS 71 due to changes in the regulatory framework and the evolving competitive environment. As a result, Sprint recorded an after-tax, noncash, extraordinary charge of $565 million ($1.61 per share). F-12 Financial Condition Sprint's financial condition at year-end 1996 compared with year-end 1995 mainly reflects the completion of strategic initiatives during the first half of 1996. A portion of the cash received from DT's and FT's investments in Sprint and from Cellular's repayment of intercompany debt was used to reduce short- and long-term debt. In addition, Sprint used a portion of the cash to terminate a $600 million accounts receivable sales agreement and to meet its commitments related to Sprint PCS. The remaining proceeds were invested on a temporary basis. Sprint's accounts receivable increased $940 million in 1996, reflecting the termination of the accounts receivable sales agreement as well as the 10% increase in consolidated net operating revenues. The allowance for doubtful accounts as a percentage of gross accounts receivable decreased to 5% at year-end 1996 from 8% at year-end 1995 generally because the termination of the accounts receivable sales agreement did not require a related increase in the allowance for doubtful accounts. Property, plant and equipment, net of accumulated depreciation, increased $748 million in 1996. This increase was mainly due to increased capital expenditures to enhance and upgrade Sprint's networks, expand service capabilities and increase productivity. At year-end 1996, Sprint's total capitalization was $11.8 billion, consisting of short-term borrowings, long-term debt (including current maturities), redeemable preferred stock, and common stock and other shareholders' equity. Short-term borrowings and long-term debt (including current maturities) declined to 27.8% of total capitalization at year-end 1996 from 54.8% at year-end 1995. Liquidity and Capital Resources Operating Activities - Continuing Operations Cash flows from operating activities, which are Sprint's primary source of liquidity, were $2.4, $2.6 and $2.3 billion in 1996, 1995 and 1994, respectively. Excluding the effect of terminating the $600 million accounts receivable sales agreement, cash flows increased $394 million in 1996. This increase generally reflects improved operating results in all divisions. The 1995 increase reflects improved operating results and reduced working capital requirements. Investing Activities - Continuing Operations Sprint's investing activities used cash of $3.1, $2.9 and $1.8 billion in 1996, 1995 and 1994, respectively. Capital expenditures, which are Sprint's most significant investing activity, were $2.4, $1.9 and $1.8 billion in 1996, 1995 and 1994, respectively. Long distance capital expenditures were incurred each year mainly to meet increased demand for data related services, to enhance network reliability and to upgrade capabilities for providing new products and services. Capital expenditures for the local division were made to accommodate access line growth and expand the division's capabilities for providing enhanced telecommunications services. Local division 1996 capital expenditures also include $76 million of switch software costs. In previous years, these costs were expensed as incurred. Investments in and advances to affiliates consists mainly of contributions to Sprint PCS. During 1996, 1995 and 1994, Sprint contributed $298, $911 and $52 million, respectively. Also in 1996, Sprint loaned $67 million to Sprint PCS. The 1996 amounts were used to fund Sprint's portion of Sprint PCS' capital and operating requirements. In 1995, $840 million of the contribution was used to fund Sprint's share of payments for PCS licenses. The remainder was used to fund Sprint's share of Sprint PCS' acquisition of a limited partnership interest in APC, and for capital and operating requirements. During 1996, Sprint purchased $183 million (face value) of Sprint PCS Senior Discount bonds for $100 million. During 1996, Sprint made an $84 million deposit to directly acquire PCS licenses. See "Segmental Results of Operations -- Emerging Businesses" for further discussion. F-13 Financing Activities Sprint's financing activities provided cash of $479 million in 1996 and $423 million in 1995, and used cash of $457 million in 1994. During 1996, DT and FT acquired shares of a new class of Sprint stock for a total of $3.7 billion. A portion of these proceeds, together with proceeds from Cellular's repayment of intercompany debt, were used to reduce outstanding debt. During 1995, Sprint issued $261 million of long-term debt and increased short-term borrowings by $1.1 billion to fund commitments related to Sprint PCS and repay long-term debt. During 1996, Sprint purchased 10 million treasury shares for $407 million. Sprint's Board of Directors has authorized, through 1998, the repurchase of shares on the open market to meet share issuance requirements of employee benefit plans and for the conversion of preferred stock. Sprint paid dividends to common, preference and preferred shareholders of $420, $352 and $349 million in 1996, 1995 and 1994, respectively. Sprint's indicated annual dividend rate on common stock is currently $1.00 per share. Discontinued Operations In connection with the March 1996 Spin-off, Cellular repaid $1.4 billion of intercompany debt owed to Sprint. Prior to the Spin-off, Cellular's 1996 investing activities required net cash of $141 million, mainly for the acquisition of additional cellular properties and capital expenditures. During 1995 and 1994, Cellular's cash flows from operating activities were $163 and $180 million, respectively. Cellular's investing activities used cash of $325 and $272 million in 1995 and 1994, respectively, mainly for capital expenditures. Capital Requirements Sprint expects its 1997 investing activities, consisting of capital expenditures and investments in affiliates, to require cash of $4.5 to $5.0 billion. In addition, Sprint expects to pay dividends totaling $430 million. Sprint intends to fund these 1997 cash requirements with cash from operating activities, cash on hand, and from external sources. Capital expenditures of $4.1 to $4.4 billion are anticipated in 1997. Capital expenditures for the long distance and local divisions are expected to total $2.5 billion. In early 1997, Sprint will pay $460 million for the balance due on the PCS licenses directly acquired in the recent FCC auction. The balance of anticipated capital expenditures will primarily be used to build out the network for these new PCS markets and the emerging CLEC markets. Sprint expects to invest $400 to $600 million in its affiliates during 1997. Sprint PCS will require $350 to $500 million in 1997 to continue its network buildout and for operating cash requirements. Sprint also expects that Global One will require partner contributions for ongoing development activities. In addition to these investing activities, international development opportunities apart from Global One may create further cash requirements during 1997. Sprint expects to borrow $1.0 to $1.5 billion during 1997, excluding any borrowings that may be required to take advantage of any new international opportunities. A combination of long- and short-term borrowings will be used depending on capital market conditions during the year. F-14 Liquidity At year-end 1996, Sprint had the ability to borrow $1.3 billion under a revolving credit agreement with a syndicate of domestic and international banks and other bank commitments. Other available financing sources include a Medium-Term Note program, under which Sprint may offer for sale up to $175 million of unsecured senior debt securities. In addition, as of year-end 1996, Sprint could offer for sale $900 million of debt securities pursuant to shelf registration statements filed with the Securities and Exchange Commission. Additional borrowings that may be incurred are ultimately limited by certain covenants contained in existing debt agreements. At year-end 1996, Sprint had borrowing capacity of $13.2 billion under the most restrictive of its debt covenants. The most restrictive covenant related to dividends results from Sprint's revolving credit agreement. Among other restrictions, the agreement requires Sprint to maintain specified levels of net worth. Due to this requirement, $2.5 billion of Sprint's $3.2 billion retained earnings were effectively restricted from the payment of dividends at the end of 1996. General Hedging Policies Sprint uses certain derivative instruments in an effort to manage exposure to interest rate risk and foreign exchange risk. Sprint's use of these derivative instruments related to hedging activities is limited to interest rate swap agreements, interest rate caps and forward contracts and options in foreign currencies. As is customary for these types of derivative instruments, Sprint does not require collateral or other security from the counterparties to the agreements. However, since Sprint controls its exposure to credit risk through credit approvals, credit limits, and internal monitoring procedures, Sprint believes its credit risk exposure is limited. Sprint will in no circumstance take speculative positions and create an exposure to benefit from market fluctuations. All hedging activity is in accordance with Board-approved policies. Any exposure from Sprint's use of derivative instruments is immaterial to its overall operations, financial condition and liquidity. See Note 10 of Notes to Consolidated Financial Statements for more information related to Sprint's portfolio of derivative instruments. Interest Rate Risk Management Sprint's interest rate risk management program focuses on minimizing exposure to interest rate movements, setting an optimal mixture of floating-rate and fixed-rate debt in the liability portfolio and preventing liquidity risk. Sprint primarily employs a gap methodology to measure interest rate exposure and uses simulation analysis to manage interest rate risk. Sprint takes an active stance in modifying hedge positions to benefit from the value of timing flexibility and fixed-rate/floating-rate adjustments. Foreign Exchange Risk Management Sprint's foreign exchange risk management program focuses on optimizing consolidated cash flows and stabilizing accounting results. Sprint does not hedge translation exposure because it believes optimizing consolidated cash flows will, over time, maintain shareholder value. Sprint's primary transaction exposure in foreign currencies results from changes in foreign exchange rates between the dates Sprint incurs and settles liabilities (payable in a foreign currency). These liabilities consist of charges from overseas telephone companies for terminating international calls made by Sprint's domestic customers. F-15 MANAGEMENT REPORT The management of Sprint Corporation has the responsibility for the integrity and objectivity of the information contained in this Annual Report. Management is responsible for the consistency of reporting such information and for ensuring that generally accepted accounting principles are used. In discharging this responsibility, management maintains a comprehensive system of internal controls and supports an extensive program of internal audits, has made organizational arrangements providing appropriate divisions of responsibility and has established communication programs aimed at assuring that its policies, procedures and codes of conduct are understood and practiced by its employees. The consolidated financial statements included in this Annual Report have been audited by Ernst & Young LLP, independent auditors. Their audit was conducted in accordance with generally accepted auditing standards and their report is included herein. The responsibility of the Board of Directors for these financial statements is pursued mainly through its Audit Committee. The Audit Committee, composed entirely of directors who are not officers or employees of Sprint, meets periodically with the internal auditors and independent auditors, both with and without management present, to assure that their respective responsibilities are being fulfilled. The internal and independent auditors have full access to the Audit Committee to discuss auditing and financial reporting matters. /s/ W. T. Esrey William T. Esrey Chairman and Chief Executive Officer /s/ Arthur B. Krause Arthur B. Krause Executive Vice President and Chief Financial Officer F-16 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Sprint Corporation We have audited the accompanying consolidated balance sheets of Sprint Corporation (Sprint) as of December 31, 1996 and 1995, and the related consolidated statements of income, cash flows, and common stock and other shareholders' equity for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index to Financial Statements and Financial Statement Schedule. These financial statements and the schedule are the responsibility of the management of Sprint. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sprint at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 11 to the consolidated financial statements, Sprint discontinued accounting for the operations of its local telecommunications division in accordance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation," in 1995. ERNST & YOUNG LLP Kansas City, Missouri February 4, 1997 F-17
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation - ------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions, except per share data) Net Operating Revenues $ 14,044.7 $ 12,765.1 $ 11,986.6 Operating Expenses Costs of services and products 7,028.7 6,504.9 6,154.5 Selling, general and administrative 3,157.8 2,871.9 2,755.4 Depreciation and amortization 1,591.0 1,466.4 1,386.0 Restructuring costs -- 87.6 -- ------------------------------------------------------------------------------------------------------------- Total operating expenses 11,777.5 10,930.8 10,295.9 ------------------------------------------------------------------------------------------------------------- Operating Income 2,267.2 1,834.3 1,690.7 Interest expense (196.7) (260.7) (300.7) Other expense, net (158.6) (93.2) (2.1) - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 1,911.9 1,480.4 1,387.9 Income tax provision (721.0) (534.3) (488.7) - ------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations 1,190.9 946.1 899.2 Discontinued operations, net (2.6) 14.5 (8.5) Extraordinary items, net (4.5) (565.3) -- - ------------------------------------------------------------------------------------------------------------------- Net income 1,183.8 395.3 890.7 Preferred stock dividends (1.3) (2.6) (2.7) - ------------------------------------------------------------------------------------------------------------------- Earnings applicable to common stock $ 1,182.5 $ 392.7 $ 888.0 ----------------------------------------------- Earnings per Common Share Continuing operations $ 2.79 $ 2.69 $ 2.57 Discontinued operations -- 0.04 (0.02) Extraordinary items (0.01) (1.61) -- - ------------------------------------------------------------------------------------------------------------------- Total $ 2.78 $ 1.12 $ 2.55 ----------------------------------------------- Weighted average number of common shares 426.0 350.1 348.7 ----------------------------------------------- Dividends per common share $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
F-18
CONSOLIDATED BALANCE SHEETS Sprint Corporation - ------------------------------------------------------------------------------------------------------------------------ December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ (in millions, except per share data) Assets Current assets Cash and equivalents $ 1,150.6 $ 124.2 Accounts receivable, net of allowance for doubtful accounts of $117.4 and $125.8 2,463.5 1,523.7 Receivable from cellular division -- 1,400.0 Other 738.7 571.5 ------------------------------------------------------------------------------------------------------------------ Total current assets 4,352.8 3,619.4 Investments in equity securities 254.5 262.9 Property, plant and equipment Long distance communications services 7,390.8 6,773.7 Local communications services 13,368.7 12,603.1 Other 651.3 539.1 ------------------------------------------------------------------------------------------------------------------ 21,410.8 19,915.9 Less accumulated depreciation 10,946.7 10,200.1 ------------------------------------------------------------------------------------------------------------------ 10,464.1 9,715.8 Investments in and advances to affiliates 1,527.1 1,195.7 Net investment in cellular division -- 106.9 Other assets 354.5 295.2 -------------------------------------------------------------------------------------------------------------------- $ 16,953.0 $ 15,195.9 ------------------------------------ Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt $ 99.1 $ 280.4 Short-term borrowings 200.0 2,144.0 Accounts payable 1,026.7 938.9 Accrued interconnection costs 828.9 617.7 Accrued taxes 189.2 235.5 Advance billings 199.7 202.9 Other 770.6 722.7 ----------------------------------------------------------------------------------------------------------------- Total current liabilities 3,314.2 5,142.1 Long-term debt 2,981.5 3,253.0 Deferred credits and other liabilities Deferred income taxes and investment tax credits 846.9 843.4 Postretirement and other benefit obligations 919.7 889.3 Other 359.0 393.0 ----------------------------------------------------------------------------------------------------------------- 2,125.6 2,125.7 Redeemable preferred stock 11.8 32.5 Common stock and other shareholders' equity Common stock, par value $2.50 per share, authorized 1,000.0 shares, issued 350.3 and 349.2 shares, and outstanding 343.9 and 349.2 shares 875.7 872.9 Class A common stock, par value $2.50 per share, authorized 500.0 shares, issued and outstanding 86.2 shares 215.6 -- Capital in excess of par or stated value 4,425.9 960.0 Retained earnings 3,211.8 2,763.0 Treasury stock, at cost, 6.4 shares (262.2) -- Other 53.1 46.7 ----------------------------------------------------------------------------------------------------------------- 8,519.9 4,642.6 ----------------------------------------------------------------------------------------------------------------- $ 16,953.0 $ 15,195.9 ---------------------------------- See accompanying Notes to Consolidated Financial Statements.
F-19
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation - ----------------------------------------------------------------- ----------------- ---------------- ----------------- Years Ended December 31, 1996 1995 1994 - ----------------------------------------------------------------- ----------------- ---------------- ----------------- (in millions) Operating Activities Net income $ 1,183.8 $ 395.3 $ 890.7 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations, net 2.6 (14.5) 8.5 Extraordinary items, net 4.9 565.3 -- Equity in net losses of affiliates 273.7 39.1 3.8 Depreciation and amortization 1,591.0 1,466.4 1,386.0 Deferred income taxes and investment tax credits (10.3) 5.8 53.2 Changes in operating assets and liabilities Accounts receivable, net (988.8) (135.8) (226.5) Inventories and other current assets 15.7 (38.6) (56.1) Accounts payable and other current liabilities 368.7 178.5 120.2 Noncurrent assets and liabilities, net (23.7) 124.0 128.5 Other, net (14.0) 24.1 31.3 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided by continuing operations 2,403.6 2,609.6 2,339.6 Net cash provided (used) by cellular division (0.1) 162.5 179.9 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided by operating activities 2,403.5 2,772.1 2,519.5 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Investing Activities Capital expenditures (2,433.6) (1,857.3) (1,751.6) Proceeds from sale of investment in equity securities -- -- 117.7 Investments in and advances to affiliates (446.1) (948.7) (74.1) Investment in affiliate debt securities (100.0) -- -- Deposit for PCS licenses (84.0) -- -- Other, net (51.8) (53.6) (45.0) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash used by continuing operations (3,115.5) (2,859.6) (1,753.0) Repayment by cellular division of intercompany advances 1,400.0 -- -- Net cash used by cellular division (140.7) (324.6) (272.4) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash used by investing activities (1,856.2) (3,184.2) (2,025.4) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Financing Activities Proceeds from long-term debt 9.4 260.7 107.9 Retirements of long-term debt (433.1) (630.0) (597.0) Net increase (decrease) in short-term borrowings (1,986.8) 1,109.5 321.5 Proceeds from common stock issued 20.5 16.9 42.7 Proceeds from Class A common stock issued 3,661.3 -- -- Proceeds from employee stock purchase installments 38.1 38.8 33.1 Dividends paid (419.6) (351.5) (349.4) Purchase of treasury stock (407.2) -- (9.8) Other, net (3.5) (21.8) (5.9) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net cash provided (used) by financing activities 479.1 422.6 (456.9) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Increase in cash and equivalents 1,026.4 10.5 37.2 Cash and equivalents at beginning of year 124.2 113.7 76.5 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Cash and equivalents at end of year $ 1,150.6 $ 124.2 $ 113.7 --- ------------- -- ------------- --- ------------- See accompanying Notes to Consolidated Financial Statements.
F-20
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY Sprint Corporation - ----------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- (in millions) Common Stock Balance beginning of year $ 872.9 $ 871.4 $ 858.5 Common stock issued 2.5 1.4 12.8 Other, net 0.3 0.1 0.1 - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 875.7 872.9 871.4 - ----------------------------------------------------------------------------------------------------------------------- Class A Common Stock Balance beginning of year -- -- -- Class A common stock issued (86.2 shares) 215.6 -- -- - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 215.6 -- -- - ----------------------------------------------------------------------------------------------------------------------- Capital in Excess of Par or Stated Value Balance beginning of year 960.0 942.9 827.4 Common stock issued 17.5 13.5 111.9 Class A common stock issued 3,436.3 -- -- Other, net 12.1 3.6 3.6 - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 4,425.9 960.0 942.9 - ----------------------------------------------------------------------------------------------------------------------- Retained Earnings Balance beginning of year 2,763.0 2,730.9 2,184.2 Net income 1,183.8 395.3 890.7 Common stock dividends (346.1) (348.9) (346.7) Class A common stock and preference stock dividends (74.9) -- -- Preferred stock dividends (1.3) (2.6) (2.7) Spin-off of cellular division (260.2) -- -- Treasury stock issued (52.9) (3.5) -- Other, net 0.4 (8.2) 5.4 - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 3,211.8 2,763.0 2,730.9 - ----------------------------------------------------------------------------------------------------------------------- Treasury Stock Balance beginning of year -- (9.6) (0.3) Treasury stock purchased (407.2) -- (9.8) Treasury stock issued 145.0 9.6 0.5 - ----------------------------------------------------------------------------------------------------------------------- Balance end of year (262.2) -- (9.6) - ----------------------------------------------------------------------------------------------------------------------- Other Balance beginning of year 46.7 (10.8) 48.5 Change in unrealized holding gains on investments, net 2.9 54.6 (20.5) Other, net 3.5 2.9 (38.8) - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 53.1 46.7 (10.8) - ----------------------------------------------------------------------------------------------------------------------- $ 8,519.9 $ 4,642.6 $ 4,524.8 ----------------------------------------------------- Shares of Common Stock Outstanding Balance beginning of year 349.2 348.3 343.4 Common stock issued (including Class A common stock) 87.3 0.6 5.2 Treasury stock purchased (10.1) -- (0.3) Treasury stock issued 3.7 0.3 -- - ----------------------------------------------------------------------------------------------------------------------- Balance end of year 430.1 349.2 348.3 ----------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation 1. Summary of Significant Accounting Policies Basis of Consolidation and Presentation The consolidated financial statements include the accounts of Sprint Corporation and its wholly-owned and majority-owned subsidiaries (Sprint). Investments in entities in which Sprint exercises significant influence, but does not control, are accounted for using the equity method (see Note 2). The consolidated financial statements are prepared in conformity with generally accepted accounting principles (GAAP). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Those estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts previously reported have been reclassified to conform to the current year presentation in the consolidated financial statements. These reclassifications had no effect on the results of operations or shareholders' equity as previously reported. In accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," revenues and related net income resulting from transactions between Sprint's nonregulated operations and its regulated local exchange carriers were not eliminated in the consolidated financial statements before 1996. Revenues related to these intercompany transactions were $262 and $285 million in 1995 and 1994, respectively. All other significant intercompany transactions have been eliminated. Classification of Operations The long distance communications services division provides domestic and international voice, video and data communications services. The division offers its services to the public subject to different levels of state and federal regulation, but rates are generally not subject to rate-base regulation. The local communications services division consists of regulated telephone companies. These operations provide local exchange services, access by telephone customers and other carriers to local exchange facilities, sales of telecommunications equipment and long distance services within specified geographical areas. Emerging businesses consists of activities related to consumer Internet access services, competitive local exchange carrier (CLEC) services, personal communication services (PCS) controlled by Sprint and international development activities outside the scope of the Global One joint venture. The product distribution and directory publishing businesses include the wholesale distribution of telecommunications products and the publishing and marketing of white and yellow page telephone directories. Revenue Recognition Sprint recognizes operating revenues as services are rendered or as products are delivered to customers. The long distance division records operating revenues net of an estimate for uncollectible accounts. F-22 1. Summary of Significant Accounting Policies (continued) Cash and Equivalents Cash equivalents generally include highly liquid investments with original maturities of three months or less and are stated at cost, which approximates market value. As part of its cash management program, Sprint uses controlled disbursement banking arrangements. At year-end 1996 and 1995, outstanding checks in excess of cash balances of $127 and $131 million, respectively, were included in accounts payable. Sprint had sufficient funds available to fund these outstanding checks when they were presented for payment. Investments in Debt and Equity Securities Investments in debt and equity securities are classified as available for sale and reported at fair value (estimated based on quoted market prices). Gross unrealized holding gains and losses are reflected as adjustments to "Common stock and other shareholders' equity - Other," net of related income taxes. Inventories Inventories, consisting principally of those related to Sprint's product distribution business, are stated at the lower of cost (principally first-in, first-out method) or market. Property, Plant and Equipment Property, plant and equipment is recorded at cost. Generally, ordinary asset retirements and disposals are charged against accumulated depreciation with no gain or loss recognized. Repairs and maintenance costs are expensed as incurred. Depreciation The cost of property, plant and equipment is generally depreciated on a straight-line basis over estimated economic useful lives. Prior to the discontinued use of SFAS 71 as of year-end 1995, the cost of property, plant and equipment for Sprint's local division had been generally depreciated on a straight-line basis over the lives prescribed by regulatory commissions. Income Taxes Deferred income taxes are provided for certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Investment tax credits related to regulated telephone property, plant and equipment have been deferred and are being amortized over the estimated useful lives of the related assets. Capitalized Interest Sprint capitalizes interest costs related to the construction of capital assets and to its investment in Sprint Spectrum L.P. (Sprint PCS). Capitalized interest totaled $104, $57 and $8 million in 1996, 1995 and 1994, respectively. F-23 1. Summary of Significant Accounting Policies (continued) Earnings Per Share (EPS) EPS is based on the weighted average of both outstanding and issuable shares assuming all dilutive options are exercised, as applicable. Had the Class A common stock discussed in Note 7 been issued as of January 1, 1996, and the related proceeds been used to repay debt or invested on a temporary basis at that time, Sprint's 1996 EPS from continuing operations would have decreased from $2.79 per share to an estimated $2.76 per share. 2. Investments Investment in Affiliate Debt Securities In August 1996, Sprint purchased $183 million (face value) of Sprint PCS Senior Discount bonds for $100 million. The bonds mature in 2006. At year-end 1996, the accreted cost of the bonds was $104 million and gross unrealized holding gains totaled $18 million. This investment has been included in "Current assets - Other" on the 1996 Consolidated Balance Sheet. Investments in Equity Securities The cost of equity securities was $105 and $109 million at year-end 1996 and 1995, respectively. Gross unrealized holding gains were $149 million in 1996 and $154 million in 1995. Investments in and Advances to Affiliates Investments accounted for using the equity method mainly consist of Sprint's investments in Sprint PCS and Global One. Sprint is a 40% partner in Sprint PCS, a partnership with Tele-Communications Inc., Comcast Corporation and Cox Communications, Inc. Sprint PCS is building a wireless network to provide PCS on a broad geographic basis within the United States. In 1996, Sprint became a partner in Global One, a joint venture with Deutsche Telekom AG (DT) and France Telecom (FT). Global One was formed to provide seamless global telecommunications services to business, residential and carrier markets worldwide. Sprint is a one-third partner in Global One's operating group serving Europe (excluding France and Germany), and is a 50% partner in Global One's operating group for the worldwide activities outside the United States and Europe. At year-end 1996, Sprint's share of underlying equity in Global One's net assets exceeded the carrying value of Sprint's investment in Global One by $186 million. This difference is being amortized through January 2001. F-24 2. Investments (continued) Combined, summarized financial information (100% basis) of all entities accounted for using the equity method is as follows:
1996 1995 1994 - -------------------------------------------------------------- -- ------------- --- ------------- -- ------------- (in millions) Results of operations Net operating revenues $ 1,727.9 $ 779.5 $ 520.5 -- ------------- --- ------------- -- ------------- Operating loss $ (794.0) $ (58.3) $ (22.3) -- ------------- --- ------------- -- ------------- Net loss $ (844.3) $ (90.6) $ (23.3) -- ------------- --- ------------- -- ------------- Financial position Current assets $ 1,360.7 $ 384.4 Noncurrent assets 6,779.3 2,613.4 - -------------------------------------------------------------- -- ------------- --- ------------- $ 8,140.0 $ 2,997.8 -- ------------- --- ------------- Current liabilities $ 1,185.5 $ 223.7 Noncurrent liabilities 2,042.1 135.4 Owners' equity 4,912.4 2,638.7 - -------------------------------------------------------------- -- ------------- --- ------------- $ 8,140.0 $ 2,997.8 -- ------------- --- -------------
During 1996, 1995 and 1994, Sprint recorded net income (losses) in affiliates accounted for using the equity method of $(264), $(23) and $3 million, respectively. These amounts are included in "Other expense, net" on the Consolidated Statements of Income. As of year-end 1996, Sprint had loaned Sprint PCS $67 million. 3. Employee Benefit Plans Defined Benefit Pension Plan Substantially all Sprint employees are covered by a noncontributory defined benefit pension plan. Benefits for plan participants represented by collective bargaining units are based on negotiated schedules of defined amounts. For participants not covered by collective bargaining agreements, the plan provides pension benefits based on years of service and participants' compensation. Sprint's policy is to make annual plan contributions equal to an actuarially determined amount consistent with applicable federal tax regulations. The funding objective is to accumulate funds at a relatively stable rate over the participants' working lives so that benefits are fully funded at retirement. At year-end 1996, the plan's assets consisted mainly of investments in corporate equity securities and U.S. government and corporate debt securities. F-25 3. Employee Benefit Plans (continued) The net pension cost (credit) and related weighted average assumptions consist of the following:
1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Service cost -- benefits earned during the period $ 65.4 $ 51.8 $ 61.6 Interest cost on projected benefit obligation 138.5 129.7 121.6 Actual return on plan assets (353.0) (472.1) (1.1) Net amortization and deferral 159.4 287.9 (176.6) - ------------------------------------------------------------------------------------------------------------------- Net pension cost (credit) $ 10.3 $ (2.7) $ 5.5 ---------------------------------------------------- Discount rate 7.25% 8.50% 7.50% Expected long-term rate of return on plan assets 9.50% 9.50% 9.50% Anticipated composite rate of future increases in compensation 4.25% 5.00% 4.50%
The funded status and amounts recognized in the Consolidated Balance Sheets for the plan, at year-end, are as follows:
1996 1995 - ------------------------------------------------------------------------------------------------------------------- (in millions) Actuarial present value of benefit obligations Vested benefit obligation $ (1,713.6) $ (1,705.1) ----------------------------------- Accumulated benefit obligation $ (1,864.1) $ (1,866.0) ----------------------------------- Projected benefit obligation $ (1,967.0) $ (1,962.7) Plan assets at fair value 2,584.2 2,331.3 - ------------------------------------------------------------------------------------------------------------------- Plan assets in excess of the projected benefit obligation 617.2 368.6 Unrecognized net gains (481.8) (199.2) Unrecognized prior service cost 100.4 101.3 Unamortized transition asset (147.1) (170.9) - ------------------------------------------------------------------------------------------------------------------- Prepaid pension cost $ 88.7 $ 99.8 ----------------------------------- Discount rate 7.75% 7.25% Anticipated composite rate of future increases in compensation 4.75% 4.25%
Defined Contribution Plans Sprint sponsors defined contribution employee savings plans covering substantially all employees. Participants may contribute portions of their compensation to the plans. Contributions of participants represented by collective bargaining units are matched by Sprint based on defined amounts as negotiated by the respective parties. Contributions of participants not covered by collective bargaining agreements are also matched by Sprint. For these participants, Sprint provides matching contributions in Sprint common stock equal to 50% of participants' contributions up to 6% of their compensation. In addition, Sprint may, at the discretion of the Board of Directors, provide matching contributions based on the performance of Sprint common stock compared with other telecommunications companies. Sprint's matching contributions were $56, $51 and $47 million in 1996, 1995 and 1994, respectively. At year-end 1996, the plans held 22 million shares of Sprint common stock. F-26 3. Employee Benefit Plans (continued) Postretirement Benefits Sprint provides postretirement benefits (principally medical benefits) to substantially all employees. Employees retiring before specified dates are eligible for benefits at no cost, or a reduced cost. Employees retiring after specified dates are eligible for benefits on a shared-cost basis. Sprint funds the accrued costs as benefits are paid. The net postretirement benefits cost consists of the following:
1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Service cost -- benefits earned during the period $ 21.7 $ 22.2 $ 23.2 Interest on accumulated postretirement benefit obligation 49.9 58.7 53.2 Net amortization and deferral (13.7) (9.4) (1.9) - ------------------------------------------------------------------------------------------------------------------- Net postretirement benefits cost $ 57.9 $ 71.5 $ 74.5 ----------------------------------------------------
For measurement purposes, a weighted average annual health care cost trend rate of 9.6% was assumed for 1996, gradually decreasing to an ultimate level of 5% by 2001. The effect of a 1% increase in the assumed trend rates would have increased the 1996 net postretirement benefits cost by an estimated $12 million. The discount rates for 1996, 1995 and 1994 were 7.25%, 8.50% and 7.50%, respectively. The amounts recognized in the Consolidated Balance Sheets, at year-end, are as follows:
1996 1995 - ------------------------------------------------------------------------------- --- ------------- -- ------------- (in millions) Accumulated postretirement benefit obligation Retirees $ 277.9 $ 312.4 Active plan participants -- fully eligible 127.6 118.3 Active plan participants -- other 320.7 328.6 - ------------------------------------------------------------------------------- --- ------------- -- ------------- 726.2 759.3 Unrecognized prior service benefit 5.7 5.6 Unrecognized net gains 178.7 115.3 - ------------------------------------------------------------------------------- --- ------------- -- ------------- Accrued postretirement benefits cost $ 910.6 $ 880.2 --- ------------- -- -------------
The year-end 1996 and 1995 accumulated benefit obligations were based on discount rates of 7.75% and 7.25%, respectively. The assumed 1997 annual health care cost trend rate was 9%, gradually decreasing to an ultimate level of 5% by 2005. The effect of a 1% annual increase in the assumed health care cost trend rates would have increased the year-end 1996 accumulated postretirement benefit obligation by an estimated $96 million. F-27 4. Income Taxes The income tax provisions allocated to continuing operations consist of the following:
1996 1995 1994 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- (in millions) Current income tax provision Federal $ 655.4 $ 437.4 $ 355.7 State 75.9 91.1 79.8 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- 731.3 528.5 435.5 Deferred income tax provision (benefit) Federal (22.2) 45.9 81.6 State 23.5 (23.6) (6.4) Amortization of deferred investment tax credits (11.6) (16.5) (22.0) - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- (10.3) 5.8 53.2 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total income tax provision $ 721.0 $ 534.3 $ 488.7 -- -------------- -- ------------- --- -------------
The differences that cause the effective income tax rate to vary from the statutory federal income tax rate of 35% are as follows:
1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Income tax provision at the statutory rate $ 669.2 $ 518.1 $ 485.8 Less investment tax credits included in income 11.6 16.5 22.0 - ------------------------------------------------------------------------------------------------------------------- Expected federal income tax provision after investment tax credits 657.6 501.6 463.8 Effect of State income taxes, net of federal income tax effect 64.6 43.9 47.7 Equity in losses of foreign joint venture 8.6 -- -- Other, net (9.8) (11.2) (22.8) - ------------------------------------------------------------------------------------------------------------------- Income tax provision, including investment tax credits $ 721.0 $ 534.3 $ 488.7 ----------------------------------------------------- Effective income tax rate 37.7% 36.1% 35.2% -----------------------------------------------------
The income tax provisions (benefits) allocated to other items are as follows:
1996 1995 1994 - ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------ (in millions) Discontinued operations $ 7.0 $ 31.2 $ 0.7 Extraordinary items (2.9) (437.4) -- Unrealized holding gains on investments (1) 1.7 30.7 (11.6) Stock ownership, purchase and options arrangements (1) (14.1) (7.5) (8.1) - ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------ (1) These amounts have been recorded directly to "Common stock and other shareholders' equity - Other."
F-28 4. Income Taxes (continued) Deferred income taxes are provided for the temporary differences between the carrying amounts of Sprint's assets and liabilities for financial statement purposes and their tax bases. The sources of the differences that give rise to the deferred income tax assets and liabilities at year-end 1996 and 1995, along with the income tax effect of each, are as follows:
1996 Deferred Income Tax 1995 Deferred Income Tax ------------- -- ------------- --- ------------- -- ------------- Assets Liabilities Assets Liabilities - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- (in millions) Property, plant and equipment $ -- $ 1,304.3 $ -- $ 1,276.7 Postretirement and other benefits 360.3 -- 347.0 -- Reserves and allowances 115.6 -- 94.9 -- Unrealized holding gains on securities -- 57.3 -- 55.6 Other, net 106.8 -- 132.0 -- - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- 582.7 1,361.6 573.9 1,332.3 Less valuation allowance 13.7 -- 17.4 -- - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- Total $ 569.0 $ 1,361.6 $ 556.5 $ 1,332.3 --- ------------- -- ------------- --- ------------- -- -------------
During 1996, 1995 and 1994, the valuation allowance related to deferred income tax assets decreased $4, $4 and $1 million, respectively. Sprint's management believes it is more likely than not that these deferred income tax assets, net of the valuation allowance, will be realized based on current income tax laws and expectations of future taxable income stemming from the reversal of existing deferred tax liabilities or ordinary operations. Uncertainties surrounding income tax law changes, shifts in operations between state taxing jurisdictions, and future operating income levels may, however, affect the ultimate realization of all or some portion of these deferred income tax assets. At year-end 1996, Sprint had available, for income tax purposes, $3 million of state alternative minimum tax credit carryforwards to offset state income tax payable in future years, and tax benefits of $18 million related to state operating loss carryforwards. The loss carryforwards expire in varying amounts per year from 1997 through 2011. F-29 5. Borrowings Long-term Debt Long-term debt, at year-end, is as follows:
Maturing 1996 1995 - -------------------------------------------------------------------------------------------------------------------- (in millions) Corporate Senior notes 10.45% 1996 $ -- $ 100.0 9.2% to 9.8% 1997 to 2001 325.3 325.3 8.1% to 9.5% 2002 to 2006 350.0 350.0 Debentures 9.25% 2022 200.0 200.0 Other 8.25% (1) 2000 146.4 138.4 Long Distance Division Vendor financing agreements 7.4% to 10.2% 1997 to 1999 67.9 177.6 Local Division First mortgage bonds 5.3% to 6.3% 1996 -- 31.6 2.0% to 9.4% 1997 to 2001 291.7 311.3 4.0% to 7.8% 2002 to 2006 507.1 510.9 6.9% to 9.8% 2007 to 2011 151.7 151.7 6.9% to 7.5% 2012 to 2016 90.0 90.0 8.8% to 9.9% 2017 to 2021 325.5 297.7 7.1% to 8.4% 2022 to 2026 145.0 173.8 Debentures and notes 5.0% to 9.6% 1997 to 2016 275.3 415.6 Notes payable and commercial paper 1996 -- 42.8 Other 2.0% to 19.5% 1997 to 2009 6.2 9.8 Other Debentures 9.00% 2019 150.0 150.0 Other 5.4% to 12.5% 1997 to 2003 48.5 56.9 - -------------------------------------------------------------------------------------------------------------------- 3,080.6 3,533.4 Less current maturities 99.1 280.4 - -------------------------------------------------------------------------------------------------------------------- Long-term debt $ 2,981.5 $ 3,253.0 ----------------------------------- (1) Notes may be exchanged at maturity for shares of Southern New England Telecommunications Corporation (SNET) common stock owned by Sprint, or cash. Based on SNET's closing market prices, had the notes matured at year-end 1996 or 1995, they could have been exchanged for 3.8 million shares of SNET stock. At year-end 1996 and 1995, Sprint held 4.2 and 4.4 million shares, respectively, of SNET stock, which have been included in "Investments in equity securities" on the Consolidated Balance Sheets.
F-30 5. Borrowings (continued) Long-term debt maturities during each of the next five years are as follows:
- ------------------------------------------------------------------------------------------------------------------- (in millions) 1997 $ 99.1 1998 128.3 1999 30.9 2000 648.4 2001 37.8 - -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment with a total cost of $12.4 billion is either pledged as security for first mortgage bonds and certain notes or is restricted for use as mortgaged property. During 1996, Sprint redeemed, prior to scheduled maturities, $190 million of debt with interest rates ranging from 6.0% to 9.5%. These early redemptions resulted in a $5 million after-tax extraordinary loss. Short-term Borrowings Notes payable and commercial paper outstanding and related weighted average interest rates, at year-end, are as follows:
1996 1995 - ------------------------------------------------------------------------------------------------------------------- (in millions) Bank notes, 5.9% $ 200.0 $ 1,551.8 Commercial paper, 6.3% -- 635.0 - ------------------------------------------------------------------------------------------------------------------- Total notes payable and commercial paper $ 200.0 $ 2,186.8 -----------------------------------
At year-end 1995, $43 million of notes payable and commercial paper were classified as long-term debt based on Sprint's ability and intent to refinance the borrowings on a long-term basis. The bank notes are renewable at various dates throughout the year. Sprint pays a fee to certain commercial banks to support current and future credit requirements based on loan commitments. Lines of credit could be withdrawn by the banks if there were a material adverse change in Sprint's financial condition. At year-end 1996, Sprint's unused bank lines of credit totaled $1.3 billion. Other Sprint is in compliance with all restrictive or financial covenants relating to its debt arrangements at year-end 1996. F-31 6. Redeemable Preferred Stock Sprint has approximately 25 million authorized shares of preferred stock, including nonredeemable preferred stock. The redeemable preferred stock outstanding, at year-end, is as follows:
1996 1995 - ------------------------------------------------------------------------------------------------------------------- (in millions, except per share and share data) Third series -- stated value $100 per share, shares - 184,000, nonparticipating, nonvoting, cumulative 7.75% annual dividend rate $ -- $ 18.4 Fifth series -- stated value $100,000 per share, shares - 95, voting, cumulative 6% annual dividend rate 9.5 9.5 Other -- stated values ranging from $25 to $100 per share, shares - 22,800 and 110,675, annual dividend rates ranging from 4.7% to 5.0% 2.3 4.6 - ------------------------------------------------------------------------------------------------------------------- Total redeemable preferred stock $ 11.8 $ 32.5 -----------------------------------
In 1996, 24,000 shares of Sprint's third series preferred stock were redeemed at $100.00 per share and 160,000 shares were redeemed at $101.77 per share. Sprint's fifth series preferred stock must be redeemed in full in 2003. If less than full dividends have been paid for four consecutive dividend periods, or if the total amount of dividends in arrears exceeds the dividend payment for six dividend periods, the holders of the fifth series preferred stock may elect a majority of directors standing for election until all arrears in dividend payments have been paid. 7. Common Stock Common Stock At year-end 1996, common stock reserved for future grants under stock option plans or for future issuances under various arrangements was as follows:
Number of Shares - ---------------------------------------------------------------------------------------------------------------- (in millions) Employees Stock Purchase Plan (ESPP) 6.2 Employee savings plans 3.4 Automatic Dividend Reinvestment Plan 1.2 Officer and key employees' and directors' stock options 13.8 Conversion of preferred stock and other 1.5 - ---------------------------------------------------------------------------------------------------------------- Total 26.1 ------------------
Under a Shareholder Rights plan, one-half of a Preferred Stock Purchase Right is attached to each share of Sprint common stock and Class A common stock. Each Right is exercisable and detachable only if certain takeover events occur. The Rights entitle shareholders to buy units consisting of one one-hundredth of a newly issued Preferred Stock-Fourth Series, Junior Participating share at $235.00 per unit or, in certain circumstances, common stock. Under certain circumstances, Rights beneficially owned by an acquiring person become null and void. Sprint's Preferred Stock-Fourth Series is without par value. It is voting, cumulative and accrues dividends generally equal to the greater of $10.00 per share or 200 times the aggregate per share amount of all common stock dividends. No shares of Preferred Stock-Fourth Series were issued or outstanding at year-end 1996. The Rights may be redeemed by Sprint at $0.01 per Right and will expire in September 1999. F-32 7. Common Stock (continued) During 1996, 1995 and 1994, Sprint declared and paid annual common stock dividends of $1.00 per share. The most restrictive covenant related to common stock dividends results from Sprint's $1.5 billion revolving credit agreement. Among other restrictions, this agreement requires Sprint to maintain specified levels of consolidated net worth, as defined. Due to this requirement, $2.5 billion of Sprint's $3.2 billion consolidated retained earnings were effectively restricted from the payment of dividends at year-end 1996. The indentures and financing agreements of certain of Sprint's subsidiaries contain various provisions restricting the payment of cash dividends on subsidiary common stock held by Sprint. In connection with these restrictions, $145 million of the related subsidiaries' $1.2 billion total retained earnings were restricted at year-end 1996. The flow of cash in the form of advances from the subsidiaries to Sprint is generally not restricted. During 1990, the Savings Plan Trust, an employee savings plan, acquired common stock from Sprint in exchange for a $75 million promissory note payable to Sprint. The note bears interest at 9% and is to be repaid from the common stock dividends received by the plan and the contributions made to the plan by Sprint according to plan provisions. The remaining $51.2 million note receivable balance at year-end 1996 is reflected as a reduction to "Common stock and other shareholders' equity - Other." Class A Common Stock On January 31, 1996, DT and FT acquired shares of a new class of convertible preference stock for a total of $3.0 billion. This resulted in DT and FT each holding 7.5% of Sprint's voting power. In April 1996, following the spin-off of Sprint's cellular and wireless communications services division (Cellular) (see Note 12), the preference stock was converted into Class A common stock, and DT and FT each acquired additional shares of Class A common stock. Following their total investment of $3.7 billion, DT and FT each own shares of Class A common stock with 10% of Sprint's voting power. During 1996, Sprint declared and paid dividends of $0.16 per share for the preference stock and $0.75 per share for the Class A common stock. DT and FT, as the holders of the Class A common stock, have the right in most circumstances to proportionate representation on Sprint's Board of Directors and to purchase additional shares of Class A common stock from Sprint to maintain their total ownership level at 20%. In addition, the holders of Class A common stock have disapproval rights with respect to Sprint's undertaking certain types of transactions. DT and FT have entered into a standstill agreement with Sprint that contains restrictions on their ability to acquire voting securities of Sprint other than as contemplated by their investment agreement with Sprint and related agreements. The standstill agreement also contains customary provisions restricting DT and FT from initiating or participating in any proposal with respect to the control of Sprint. F-33 8. Stock-based Compensation Sprint's Management Incentive Stock Option Plan (MISOP) provides for the granting of stock options to employees who are eligible to receive annual incentive compensation. Eligible employees are entitled to receive stock options in lieu of a portion of the target incentive under Sprint's management incentive plans. The options generally become exercisable on December 31 of the year granted and have a maximum term of 10 years. MISOP options are granted with exercise prices equal to the market price of Sprint's common stock on the grant date. At year-end 1996, authorized shares under this plan approximated eight million. This amount increased by approximately three million shares on January 1, 1997. The Sprint Corporation Stock Option Plans (SOP) provide for the granting of stock options to officers and key employees. The options generally become exercisable at the rate of 25% per year, beginning one year from the grant date, and have a maximum term of 10 years. SOP options are granted with exercise prices equal to the market price of Sprint's common stock on the grant date. At year-end 1996, authorized shares under these plans approximated 18 million. This amount increased by approximately two million shares on January 1, 1997. Every two years, the ESPP offers all employees the election to purchase Sprint common stock at a price equal to 85% of the market value on the grant or exercise date, whichever is less. At year-end 1996, authorized shares under this plan approximated 18 million. In 1996, Sprint adopted the pro forma disclosure requirements under SFAS No. 123, "Accounting for Stock-based Compensation," and continued to apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," to its stock option and employee stock purchase plans. Under APB 25, Sprint has recognized no compensation expense related to these plans. Pro forma net income and EPS have been determined as if Sprint had used the fair value method of accounting for its stock option grants and ESPP share elections after 1994. Under this method, these pro forma amounts have been reduced for compensation expense. Compensation expense is recognized over the applicable vesting periods and is based on the number of shares under option and their related fair values on the grant date. The following pro forma information will not likely represent the information reported in future years because options granted and ESPP shares elected after 1994 will continue to vest over the next several years. In addition, compensation expense resulting from the spin-off of Cellular will decline over the next several years. Sprint's pro forma net income and EPS for 1996 and 1995 are as follows:
1996 (1) 1995 - ------------------------------------------------------------------------------- --- ------------- -- ------------- (in millions, except per share data) Pro forma net income $ 1,158 $ 388 --- ------------- -- ------------- Pro forma EPS $ 2.72 $ 1.10 --- ------------- -- ------------- (1) Pro forma net income was reduced by $6 million ($0.01 per share) in 1996 due to additional compensation resulting from modifications to terms of options and ESPP share elections made in connection with the spin-off of Cellular.
During 1996, Sprint employees elected to purchase 2.8 million ESPP shares with a weighted average fair value (using the Black-Scholes pricing model) of $10.06 per share. No ESPP shares were offered in 1995. F-34 8. Stock-based Compensation (continued) The following tables reflect the weighted average fair value per option granted during the year, as well as the significant weighted average assumptions used in determining those fair values using the Black-Scholes pricing model:
1996 MISOP SOP - ------------------------------------------------------------------------------------------------------------------- Fair value on grant date $ 9.17 $ 10.96 Risk-free interest rate 5.2% 5.2% Expected volatility 23.3% 23.3% Expected dividend yield 2.5% 2.5% Expected life (years) 4 6 - ------------------------------------------------------------------------------------------------------------------- 1995 MISOP SOP - ------------------------------------------------------------------------------------------------------------------- Fair value on grant date $ 6.67 $ 8.73 Risk-free interest rate 6.9% 7.2% Expected volatility 23.3% 23.3% Expected dividend yield 2.5% 2.5% Expected life (years) 4 6 - -------------------------------------------------------------------------------------------------------------------
A summary of stock option plan activity is as follows:
Weighted Average per Share Number of Exercise Shares (1) Price (1) - --------------------------------------------------- ------------- --- ----------- ------------- --- -------------- (in millions, except per share data) Outstanding January 1, 1994 7.8 $ 21.38 Granted 3.3 30.02 Exercised 1.2 17.25 Forfeited / Expired 0.6 26.46 ------------- Outstanding December 31, 1994 9.3 24.67 Granted 4.3 24.69 Exercised 0.8 19.81 Forfeited / Expired 0.5 27.06 ------------- Outstanding December 31, 1995 12.3 24.88 Granted 4.9 36.94 Exercised 2.6 22.28 Forfeited / Expired 1.0 29.22 ------------- Outstanding December 31, 1996 13.6 $ 29.42 ------------- -- ----------- (1) Due to the spin-off of Cellular, the number of shares and the related exercise prices have been adjusted to maintain both the total fair market value of common stock underlying the options, and the relationship between the market value of Sprint's common stock and the option's exercise price. Outstanding options held by Cellular employees were converted into options and grants to purchase Cellular common stock and are not included in the above table.
F-35 8. Stock-based Compensation (continued) After adjustment for the spin-off of Cellular, options exercisable, at year-end 1995 and 1994 were 6.4 and 4.5 million, respectively. The following table summarizes outstanding and exercisable options at year-end 1996:
Options Outstanding Options Exercisable ------------------------------------------------ -------------------------------- Weighted Average Weighted Remaining Weighted Average Number Contractual Average Number Exercise Range of Outstanding Life Exercise Exercisable Price Exercise Prices (in millions) (in years) Price (in millions) - ---------------------------- --------------- --------------- -- ------------- --- --------------- -- ------------- $11.56 - $14.96 0.3 2.3 $ 13.14 0.3 $ 13.14 $15.18 - $19.24 0.3 4.3 17.69 0.3 17.69 $20.08 - $24.50 3.9 6.8 23.48 2.2 22.79 $25.07 - $29.96 2.6 5.4 27.32 2.0 26.62 $30.12 - $34.80 2.0 7.2 30.60 1.8 30.27 $35.32 - $39.88 4.4 9.1 36.84 1.8 36.82 $40.19 - $44.06 0.1 5.9 42.12 -- -- - ---------------------------- --------------- --------------- -- ------------- --- --------------- -- -------------
9. Commitments and Contingencies Litigation, Claims and Assessments In December 1996, an arbitration panel entered a $61 million award in favor of Network 2000 Communications Corporation (Network 2000) on its breach of contract claim against Sprint. The arbitrators directed Sprint to pay one-half of this award to Network 2000, and the remaining amount to the Missouri state court in which a proposed class action by Network 2000's independent marketing representatives (IMRs) against Network 2000 and Sprint is pending. The arbitrators denied all other claims by Network 2000, including claims of fraud and deceit. In December 1996, Sprint filed an action in federal district court in Kansas City, Missouri, naming as defendants Network 2000, Network 2000's attorneys, and representatives of a proposed class of IMRs. Sprint seeks to have the arbitration panel's award vacated, modified, or corrected, and has asked the court to enter an order regarding the distribution of the award among the defendants. In the proposed class action, the IMRs seek to certify a class to pursue breach of contract and tort claims against Network 2000 and Sprint. Sprint believes the IMRs' contract claims have been or will be addressed by the arbitration panel's award and the related federal court action filed by Sprint. Further, Sprint believes the IMRs' tort claims are not appropriate for class action treatment. In 1996, Sprint accrued $60 million based on its ongoing assessment of the potential liability related to actions by Network 2000 and its IMRs. This charge reduced income from continuing operations by $36 million ($0.08 per share). F-36 9. Commitments and Contingencies (continued) Following the announcement in 1992 of Sprint's merger agreement with Centel Corporation (Centel), class action suits were filed against Centel and certain of its officers and directors in federal and state courts. The state suits were dismissed. In June 1996, Centel and the other defendants were granted summary judgment in the federal action. The plaintiffs have appealed the court's order. In October 1995, the New York trial court granted the motion of Centel's financial advisors to dismiss a purported class action suit filed against them in connection with their representation of Centel in the merger. The order dismissing the claims was affirmed on appeal by the intermediate appellate court in New York. Sprint may have indemnification obligations to the financial advisors in connection with this suit. Various other suits arising in the ordinary course of business are pending against Sprint. Management cannot predict the ultimate outcome of these actions but believes they will not result in a material effect on Sprint's consolidated financial statements. Commitments Sprint expects to invest $400 to $600 million in its affiliates during 1997. Sprint PCS will require $350 to $500 million in 1997 to continue its network buildout and for operating cash requirements. Sprint also expects Global One will require partner contributions for ongoing development activities. In the FCC's recently completed PCS license auctions, Sprint directly acquired licenses for a total of $544 million. Sprint will pay the $460 million balance due on these licenses in early 1997. Operating Leases Minimum rental commitments at year-end 1996 for all noncancelable operating leases, consisting mainly of leases for data processing equipment and real estate, are as follows:
- ------------------------------------------------------------------------------------------------------------------- (in millions) 1997 $ 207.6 1998 203.7 1999 177.7 2000 127.2 2001 92.0 Thereafter 252.4 - -------------------------------------------------------------------------------------------------------------------
Gross rental expense totaled $401, $402 and $379 million in 1996, 1995 and 1994, respectively. Rental commitments for subleases, contingent rentals and executory costs are not significant. F-37 10. Financial Instruments Fair Value of Financial Instruments Sprint estimates the fair value of its financial instruments using available market information and appropriate valuation methodologies. Accordingly, the following estimates are not necessarily indicative of the values Sprint could realize in a current market exchange. Although management is not aware of any factors that would affect the estimated fair values presented at year-end 1996, those amounts have not been comprehensively revalued for purposes of these financial statements since that date. Therefore, estimates of fair value after year-end 1996 may differ significantly from the amounts presented below. The carrying amounts and estimated fair values of Sprint's financial instruments, at year-end, are as follows:
1996 1995 ------------------------------ ------------------------------ Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- (in millions) Financial assets Cash and equivalents $ 1,150.6 $ 1,150.6 $ 124.2 $ 124.2 Investment in affiliate debt securities 122.5 122.5 -- -- Investments in equity securities 254.5 254.5 262.9 262.9 Financial liabilities Short-term borrowings 200.0 200.0 2,144.0 2,144.0 Long-term debt Corporate 1,021.7 1,142.1 1,113.7 1,282.9 Long distance division 67.9 69.0 177.6 184.5 Local division 1,792.5 1,855.8 2,035.2 2,237.5 Other 198.5 206.8 206.9 242.8 Other financial instruments Interest rate swap agreements -- 0.2 -- (3.4) Foreign currency contracts (0.5) (0.5) 0.5 0.4 - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
The carrying values of Sprint's cash and equivalents approximate fair value at year-end 1996 and 1995. The fair value of Sprint's investments in debt and equity securities is estimated based on quoted market prices. The fair value of Sprint's long-term debt is estimated based on quoted market prices for publicly traded issues. The fair value of all other issues is estimated based on the present value of estimated future cash flows using a discount rate based on the risks involved. The fair value of interest rate swap agreements is estimated as the amount Sprint would receive (pay) to terminate the swap agreements at year-end 1996 and 1995, taking into account the then-current interest rates. The fair value of foreign currency contracts is estimated as the replacement cost of the contracts at year-end 1996 and 1995, taking into account the then-current foreign currency exchange rates. Concentrations of Credit Risk Sprint's accounts receivable are not subject to any concentration of credit risk. Interest rate swap agreements and foreign currency contracts involve the risk of dealing with counterparties and their ability to meet the contract terms. Notional principal amounts are often used to express the volume of these transactions, but the amounts subject to credit risk are significantly smaller. In the event of nonperformance by the counterparties, Sprint's accounting loss would be limited to the net amount it would be entitled to receive under the terms of the applicable interest rate swap agreement or foreign currency contract. However, Sprint does not anticipate nonperformance by any of the counterparties associated with these agreements. Sprint controls credit risk and the concentration of credit risk of its interest rate swap agreements and foreign currency contracts through credit approvals, dollar exposure limits and internal monitoring procedures. F-38 10. Financial Instruments (continued) Interest Rate Swap Agreements Sprint uses interest rate swap agreements as part of its interest rate risk management program. Net interest paid or received related to these agreements is recorded using the accrual method and is recorded as an adjustment to interest expense. Sprint had interest rate swap agreements with notional amounts of $350 and $275 million outstanding at year-end 1996 and 1995, respectively. Net interest expense (income) related to interest rate swap agreements was $2 million, $(400,000) and $1 million for 1996, 1995 and 1994, respectively. There were no deferred gains or losses related to any terminated interest rate swap agreements at year-end 1996, 1995 or 1994. Foreign Currency Contracts As part of its foreign currency exchange risk management program, Sprint purchases and sells over-the-counter forward contracts and options in various foreign currencies. Sprint had outstanding $46 and $13 million of open forward contracts to buy various foreign currencies at year-end 1996 and 1995, respectively. Sprint had $3 and $24 million of outstanding open purchase option contracts to call various foreign currencies at year-end 1996 and 1995, respectively. The premium paid for an option is expensed as incurred and the fair value of an option is recorded as an asset at the end of each period. The forward contracts open at year-end 1996 and 1995 all had original maturities of six months or less. The net gain or loss recorded to reflect the fair value of these contracts is recorded in the period incurred. Total net losses of $400,000, $1 million and $2 million were recorded related to foreign currency transactions and contracts for 1996, 1995 and 1994, respectively. 11. Adoption of Accounting Principles for a Competitive Marketplace As of year-end 1995, Sprint determined that its local division no longer met the criteria necessary for the continued use of SFAS 71. As a result, 1995 results include a noncash, extraordinary charge of $565 million, net of income tax benefits of $437 million. The decision to discontinue the use of SFAS 71 was based on changes in the regulatory framework and the convergence of competition in the telecommunications industry. The 1995 extraordinary charge recognized upon the discontinued use of SFAS 71 consisted of the following:
Pre-Tax After-Tax - ------------------------------------------------------------------------- -- ----------------- -- ----------------- (in millions) Increase in accumulated depreciation $ 979.1 $ 607.9 Recognition of switch software asset (99.5) (61.7) Elimination of other net regulatory assets 123.1 76.3 -- ----------------- -- ----------------- Total $ 1,002.7 622.5 -- ----------------- Tax-related net regulatory liabilities (43.9) Accelerated amortization of investment tax credits (13.3) -- ----------------- Extraordinary charge $ 565.3 -- -----------------
F-39 11. Adoption of Accounting Principles for a Competitive Marketplace (continued) The adjustment to accumulated depreciation was based on depreciation reserve and impairment studies. The depreciation reserve study analyzed, by individual plant asset category, the impact of regulator-prescribed depreciable asset lives compared with Sprint's estimated economic lives. The results identified the cumulative under-depreciation of certain asset categories. The impairment study, which validated the depreciation study results, estimated the impact on future revenues of price changes and developing industry competition, and their effects on cash flows. The discontinued use of SFAS 71 also required Sprint to eliminate from the Consolidated Balance Sheets the effects of any actions of regulators that had been recognized as assets and liabilities under SFAS 71, but would not have been recognized as assets and liabilities by enterprises in general. The elimination of other net regulatory assets mainly related to deferred postretirement benefit obligations and deferred debt financing costs. The tax-related adjustments were required to adjust deferred income taxes to the currently enacted statutory rates and to eliminate tax-related regulatory assets and liabilities. Sprint's local division uses the deferral method of accounting for investment tax credits and amortizes the credits as a reduction to tax expense over the life of the asset that gave rise to the tax credit. Since plant asset lives were shortened, the related investment tax credits were adjusted to reduce the unamortized balance by a corresponding amount. 12. Spin-off of Cellular Division In March 1996, Sprint completed the tax-free spin-off of Cellular (Spin-off) to the holders of Sprint common stock. The Spin-off was effected by distributing to all holders of Sprint common stock all shares of Cellular common stock at a rate of one share of Cellular common stock for every three shares of Sprint common stock held. In connection with the Spin-off, Cellular repaid $1.4 billion of intercompany debt owed by Cellular to Sprint. In addition, Sprint contributed to the equity capital of Cellular $185 million of debt owed by Cellular in excess of the amount repaid. This equity contribution, together with Sprint's previous investment in Cellular, resulted in Sprint's net investment in Cellular totaling $260 million at the date of the Spin-off. Cellular's net operating results, as summarized below, have been separately classified as discontinued operations in the Consolidated Statements of Income. Interest expense was allocated to Cellular based on the assumed repayment of intercompany debt to Sprint by Cellular. The operating expenses as presented below do not include Cellular's share of Sprint's general corporate overhead expenses. These expenses, totaling $2, $13 and $12 million for 1996, 1995 and 1994, respectively, were reallocated to Sprint's other operating segments.
1996 (1) 1995 1994 - ------------------------------------------------------------------------------------------------------------------- (in millions) Net operating revenues $ 190.2 $ 834.4 $ 626.5 Operating expenses 156.0 675.6 529.4 - ------------------------------------------------------------------------------------------------------------------- Operating income 34.2 158.8 97.1 Interest expense (21.5) (124.0) (97.3) Other income (expense), net (8.3) 10.9 (5.6) - ------------------------------------------------------------------------------------------------------------------- Income (Loss) before income taxes 4.4 45.7 (5.8) Income tax provision (7.0) (31.2) (9.7) - ------------------------------------------------------------------------------------------------------------------- Income (Loss) from cellular division $ (2.6) $ 14.5 $ (15.5) ---------------------------------------------------- (1) 1996 reflects Cellular's operating results only through the date of the Spin-off.
F-40 12. Spin-off of Cellular Division (continued) In 1995, Cellular's net assets and liabilities, as summarized below, were separately classified as "Net investment in cellular division" on the Consolidated Balance Sheets.
1995 - ------------------------------------------------------------------------------- --- ------------- -- ------------- (in millions) Current assets $ 153.9 Noncurrent assets 1,799.0 Advance payable to Sprint (1,433.0) Other current liabilities (166.6) Noncurrent liabilities (246.4) -- ------------- Net investment in cellular division $ 106.9 -- -------------
13. Additional Financial Information Segment Information Information related to Sprint's operating business segments is included in "Management's Discussion and Analysis of Financial Condition and Results of Operation - Segmental Results of Operations." The net operating revenues and operating expenses shown in those tables include revenues and expenses eliminated in consolidation. The amounts eliminated are as follows:
1996 1995 1994 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- (in millions) Long distance division $ 30.9 $ 38.9 $ 41.6 Local division 293.1 266.4 233.1 Product distribution and directory publishing 325.9 336.8 350.8 Intercompany revenues not eliminated under SFAS 71 -- (262.4) (285.5) - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Net operating revenues 649.9 379.7 340.0 Operating expenses 618.3 379.7 340.0 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- Operating income $ 31.6 $ -- $ -- --- ------------- -- ------------- --- -------------
Capital expenditures and identifiable assets not related to operating segments are as follows:
1996 1995 1994 - ----------------------------------------------------------------- --- ------------- -- ------------- --- ------------- (in millions) Capital expenditures $ 98.0 $ 37.0 $ 56.6 --- ------------- -- ------------- --- ------------- Identifiable assets (1) $ 2,815.2 $ 2,917.9 $ 1,804.0 --- ------------- -- ------------- --- ------------- (1) 1995 and 1994 amounts include the net assets of the discontinued cellular division.
F-41 13. Additional Financial Information (continued) Realignment and Restructuring Charge In 1995, Sprint initiated a restructuring within its local division in an effort to streamline certain processes and reduce costs in an increasingly competitive marketplace. These actions resulted in the planned elimination over several years of approximately 1,600 positions, mainly in the network and finance functions. As a result, the local division recorded an $88 million nonrecurring charge in 1995, which reduced income from continuing operations by $55 million ($0.16 per share). The accrued liability related to this charge specifically relates to the benefits that affected employees will receive upon termination. Through 1996, approximately 400 positions have been eliminated resulting in termination benefit payments of $10 million, with an additional $10 million to be paid in 1997. Substantially all of the remaining positions are expected to be eliminated during 1997 with the related costs expected to be paid during 1997 and 1998. Accounts Receivable Sold with Recourse Under an agreement available through year-end 1996, Sprint could sell on a continuous basis, with recourse, up to $600 million of undivided interests in a designated pool of its accounts receivable. Sprint elected to terminate this agreement in early 1996 and repaid the $600 million in receivables that were uncollected at year-end 1995. Supplemental Cash Flows Information
1996 1995 1994 - ---------------------------------------------------------------- --- ------------ -- ------------- -- ------------ (in millions) Cash paid for: Interest (net of amounts capitalized) Continuing operations $ 212.1 $ 263.5 $ 320.8 --- ------------ -- ------------- -- ------------ Cellular division $ 21.5 $ 124.0 $ 97.3 --- ------------ -- ------------- -- ------------ Income taxes $ 695.3 $ 532.8 $ 435.1 --- ------------ -- ------------- -- ------------
On January 31, 1996, in connection with the formation of the Global One joint venture, Sprint contributed cash, property, plant and equipment, and other assets and liabilities of certain of its international operations to Global One. The net book value of the noncash assets and liabilities contributed to Global One totaled $73 million. During 1996 and 1994, in connection with the ESPP, Sprint issued common stock totaling $65 and $53 million, respectively. During 1996, as discussed in Note 12, Sprint completed the Spin-off which had no immediate effect on cash flows other than Cellular's repayment of $1.4 billion in intercompany debt owed to Sprint. During 1994, Sprint contributed previously unissued common stock to the employee savings plans. The stock had a market value of $31 million. Related Party Transactions During 1996, Sprint provided various voice, data and administrative services to Global One totaling $361 million. In addition, Global One provided data and administrative services to Sprint totaling $130 million. At year-end 1996, Sprint's receivable due from Global One was $163 million and Sprint's payable to Global One was $49 million. F-42 14. Quarterly Financial Data (Unaudited)
Quarter --- ------------- -- ------------------------------- -- ------------- 1996 1st 2nd 3rd 4th (1) - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- (in millions, except per share data) Net operating revenues $ 3,371.9 $ 3,506.4 $ 3,544.4 $ 3,622.0 Operating income 574.9 580.9 598.9 512.5 Income before extraordinary items 309.3 316.8 316.2 246.0 Net income 309.3 316.8 312.4 245.3 EPS from income before extraordinary items $ 0.77 $ 0.73 $ 0.73 $ 0.57 - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- Quarter --- ------------- -- ------------- --- ------------- -- ------------- 1995 1st 2nd 3rd 4th (2) - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- (in millions, except per share data) Net operating revenues $ 3,079.1 $ 3,142.1 $ 3,205.3 $ 3,338.6 Operating income 442.8 461.8 497.1 432.6 Income before extraordinary items 224.3 245.7 268.5 222.1 Net income (loss) 224.3 245.7 268.5 (343.2) EPS from income before extraordinary items $ 0.64 $ 0.70 $ 0.76 $ 0.63 - -------------------------------------------- --- ------------- -- ------------- --- ------------- -- ------------- (1) During the 1996 fourth quarter, Sprint recorded a nonrecurring charge of $60 million related to litigation within the long distance division. This charge reduced income from continuing operations by $36 million ($0.08 per share) (see Note 9). (2) During the 1995 fourth quarter, Sprint recorded a nonrecurring charge of $88 million related to a restructuring within the local division. This charge reduced income from continuing operations by $55 million ($0.16 per share) (see Note 13). During the 1995 fourth quarter, Sprint adopted accounting principles for a competitive marketplace for its local division and discontinued the use of SFAS 71. As a result, Sprint recorded a noncash, after-tax extraordinary charge of $565 million ($1.61 per share) (see Note 11).
F-43 SPRINT CORPORATION SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1996, 1995 and 1994
Additions --------------------------- Balance Charged to Balance beginning Charged to other Other end of of year income accounts deductions year - ------------------------------------------------------------------------------------------------------------------- (in millions) 1996 Allowance for doubtful accounts $ 125.8 $ 248.5 $ (1.5) $ (255.4) (1) $ 117.4 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 17.4 $ 1.9 $ -- $ (5.6) $ 13.7 ----------------------------------------------------------------------------- 1995 Allowance for doubtful accounts $ 87.5 $ 219.2 $ 7.0 $ (187.9) (1) $ 125.8 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 21.1 $ 4.3 $ -- $ (8.0) $ 17.4 ----------------------------------------------------------------------------- 1994 Allowance for doubtful accounts $ 81.5 $ 179.1 $ 7.4 $ (180.5) (1) $ 87.5 ----------------------------------------------------------------------------- Valuation allowance - deferred income tax assets $ 22.1 $ 2.2 $ -- $ (3.2) $ 21.1 ----------------------------------------------------------------------------- (1) Accounts written off, net of recoveries.
F-44 EXHIBIT INDEX EXHIBIT NUMBER (3) Articles of Incorporation and Bylaws: (a) Articles of Incorporation, as amended (filed as Exhibit 3(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference). (b) Bylaws, as amended (filed as Exhibit 3(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (4) Instruments defining the Rights of Sprint's Equity Security Holders: (a) The rights of Sprint's equity security holders are defined in the Fifth, Sixth, Seventh and Eighth Articles of Sprint's Articles of Incorporation. See Exhibit 3(a). (b) Rights Agreement dated as of August 8, 1989, between Sprint Corporation (formerly United Telecommunications, Inc.) and UMB Bank, n.a. (formerly United Missouri Bank of Kansas City, N.A.), as Rights Agent (filed as Exhibit 2(b) to Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721), and incorporated herein by reference). (c) Amendment and supplement dated June 4, 1992 to Rights Agreement dated as of August 8, 1989 (filed as Exhibit 2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721), and incorporated herein by reference). (d) Second Amendment to Rights Agreement dated as of July 31, 1995 between Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 2(d) to Form 8-A/A-2 dated October 20, 1995 amending Sprint Corporation Registration Statement on Form 8-A dated August 11, 1989 (File No. 1-4721) and incorporated herein by reference). (e) Standstill Agreement dated as of July 31, 1995, by and among Sprint Corporation, France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(c) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (10) Material Agreements - Joint Ventures: (a) Joint Venture Agreement dated as of June 22, 1995 among Sprint Corporation, Sprint Global Venture, Inc., France Telecom and Deutsche Telekom AG (filed as Exhibit (10)(a) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (b) Amendment No. 1 to Joint Venture Agreement, dated as of January 31, 1996, among Sprint Corporation, Sprint Global Venture, Inc., France Telecom, Deutsche Telekom AG and Atlas Telecommunications, S.A. (filed as Exhibit 99A to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (c) Investment Agreement dated as of July 31, 1995 among Sprint Corporation, France Telecom and Deutsche Telekom AG (including as an exhibit the Stockholders' Agreement among France Telecom, Deutsche Telekom AG and Sprint Corporation) (filed as Exhibit (10)(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). (d) Amended and Restated Agreement of Limited Partnership of MajorCo., L.P., dated as of January 31, 1996, among Sprint Spectrum, L.P., TCI Network Services, Comcast Telephony Services and Cox Telephony Partnership (filed as Exhibit 99C to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (e) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Tele-Communications, Inc. (filed as Exhibit 99D to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (f) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Comcast Corporation (filed as Exhibit 99E to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (g) Parents Agreement dated as of January 31, 1996, between Sprint Corporation and Cox Communications, Inc. (filed as Exhibit 99F to Sprint Corporation Current Report on Form 8-K dated January 31, 1996 and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements (h) 1985 Stock Option Plan, as amended (Appendix to Stock Option Plans filed as Exhibit (10)(h) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). (i) 1990 Stock Option Plan, as amended. See Exhibit (10) (h) for Appendix to Stock Option Plans. (j) 1990 Restricted Stock Plan, as amended. (k) Executive Deferred Compensation Plan, as amended. (l) Management Incentive Stock Option Plan, as amended. See Exhibit (10)(h) for Appendix to Stock Option Plans. (m) Long-Term Stock Incentive Program, as amended (filed as Exhibit (10)(f) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (n) Sprint Supplemental Executive Retirement Plan (filed as Exhibit (10)(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (o) Amended and Restated Centel Directors Deferred Compensation Plan (filed as Exhibit (10)(j) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). (p) Restated Memorandum Agreements Respecting Supplemental Pension Benefits between Sprint Corporation (formerly United Telecommunications, Inc.) and two of its current and former executive officers (filed as Exhibit 10(i) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference). (q) Executive Long-Term Incentive Plan (filed as Exhibit 10(j) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (r) Executive Management Incentive Plan (filed as Exhibit 10(k) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). (s) Long-Term Incentive Compensation Plan, as amended (filed as Exhibit 10(i) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and incorporated herein by reference). (t) Short-Term Incentive Compensation Plan (filed as Exhibit 10(k) to United Telecommunications, Inc. Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference). (u) Retirement Plan for Directors, as amended. (v) Key Management Benefit Plan, as amended (filed as Exhibit 10(g) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (w) Agreements Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and certain of its Executive Officers (filed as Exhibit 10(x) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, Exhibit 10(d) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and Exhibit 10 (h) of Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference). Agreement Regarding Special Compensation and Post Employment Restrictive Covenants between Sprint Corporation and one of its Executive Officers, as amended. (x) Director's Deferred Fee Plan, as amended. (y) Form of Contingency Employment Agreements between Sprint Corporation and certain of its executive officers (filed as Exhibit 10(b) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). (z) Form of Indemnification Agreements between Sprint Corporation (formerly United Telecommunications, Inc.) and its Directors and Officers (filed as Exhibit 10(s) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated herein by reference). (aa) Summary of Executive Officer and Board of Directors Benefits (filed as Exhibit (10)(k) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference). (bb) Description of agreement regarding Supplemental Pension Benefits between Sprint Corporation and one of its executive officers (filed as Exhibit 10(e) to Sprint Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, and incorporated herein by reference). (cc) Amended and Restated Centel Director Stock Option Plan (filed as Exhibit 10(aa) to Sprint Corporation Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference). (11) Computation of Earnings Per Common Share. (12) Computation of Ratio of Earnings to Fixed Charges. (21) Subsidiaries of Registrant. (23) Consent of Ernst & Young LLP. (27) Financial Data Schedules: (a) December 31, 1996 Financial Data Schedule. (b) December 31, 1995 Restated Financial Data Schedule. EX-10 2 1985 STOCK OPTION PLAN Exhibit (10)(h) 1985 STOCK OPTION PLAN (as amended on February 7, 1987, August 11, 1987, April 12, 1988, December 12, 1989, April 16, 1991, August 13, 1991, April 18, 1995, August 8, 1995, August 12, 1996, and February 11, 1997) Section 1. Establishment. United Telecommunications, Inc., a Kansas corporation ("Company"), hereby establishes a stock option plan to be named the United Telecommunications, Inc. 1985 Stock Option Plan ("Plan"), for officers and key employees of the Company and its subsidiaries. Section 2. Purpose. The purpose of the Plan is to induce officers and key employees of the Company and its subsidiaries, who are in a position to contribute materially to the prosperity thereof, to remain with the Company or its subsidiaries, to offer them incentives and reward in recognition of their share in the Company's progress, and to encourage them to continue to promote the best interests of the Company and its subsidiaries. The Plan will also aid the Company and its subsidiaries in competing with other enterprises for the services of new key personnel needed to help insure their continued development. Options granted to an optionee shall be either Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended, or nonstatutory stock options, provided that no Incentive Stock Options shall be granted which would permit options first exercisable in any calendar year to exceed the limitations set forth in Section 6(a) hereof. Options which become first exercisable in any calendar year in excess of said limitations shall be nonstatutory stock options. Options designated "Nonqualified" or "Nonstatutory" Stock Options shall not be restricted by the limitations of said Section 6(a) and shall not be treated as Incentive Stock Options. Section 3. Administration. The Plan shall be administered by a Stock Option Committee (the "Committee") consisting of three or more persons who shall be members of the Board of Directors of the Company. The Committee shall be elected by the Board of Directors of the Company which may from time to time appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it may determine. A majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee, shall be deemed the acts of the Committee. The Company shall grant options and related stock appreciation rights under the Plan in accordance with determinations made by the Committee pursuant to the provisions of the Plan. Members of the Committee shall be disinterested persons as defined in regulations issued under Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"). The Committee from time to time may adopt (and thereafter amend and rescind) such rules and regulations for carrying out the Plan and take such action in the administration of the Plan, not inconsistent with the provisions hereof, as it shall deem proper. The interpretation and construction of any provisions of the Plan by the Committee shall, unless otherwise determined by the Board of Directors of the Company, be final and conclusive. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. Section 4. Total Number of Shares to be Optioned. The maximum number of shares of common stock ($2.50 par value) of the Company which may be issued upon exercise of options under the Plan shall not exceed 3,152,618 (f1) (subject to adjustment as provided in Section 11 hereof). The shares sold under the Plan may be either issued shares reacquired by the Company at any time or authorized but unissued shares, as the Board of Directors from time to time may determine. ____________________________________ (fn) (f1) The initial number of shares authorized was doubled due to the December, 1989 two-for-one stock split. In the event that any outstanding options under the Plan for any reason expire or are terminated, the shares of common stock of the Company allocable to the unexercised portion of all of such options may again be subject to an option under the Plan. Section 5. Eligibility. Options shall be granted only to officers and key employees of the Company or its subsidiaries. The Committee will, in its discretion, determine the officers and key employees to be granted options, the time or times at which options shall be granted, the number of shares subject to each option, whether the options are Incentive Stock Options or nonstatutory stock options, and the manner in which options may be exercised. In making such determination, the Committee may take into consideration the value of the services rendered by the respective individuals, their present and potential contributions to the success of the Company and its subsidiaries and such other factors which the Committee may deem relevant in accomplishing the purpose of the Plan. No option may be granted to any individual who immediately after the option grant owns directly or indirectly stock possessing more than five percent (5%) of the total combined voting power or value of all classes of stock of the Company or any subsidiary. An individual may be granted more than one option but only on the terms and subject to the restrictions hereinafter set forth. No person shall be eligible to receive an option for a larger number of shares than is recommended for such individual by the Committee. Section 6. Limitation on Incentive Stock Options. (a) General Rule. For options granted after December 31, 1986, the aggregate fair market value (determined at the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year by the optionee under all plans of the Company and its subsidiaries shall not exceed $100,000. (b) Fair Market Value. Fair market value shall be deemed to be the average of the high and low prices of the common stock of the Company for composite transactions as published by major newspapers for the date the Incentive Stock Option is granted or, if no sale of the Company's stock shall have been made on that day, the next preceding day on which there was a sale of such stock. Section 7. Terms and Conditions of Options. Each option granted under the Plan shall be evidenced by a Stock Option Agreement in such form not inconsistent with the Plan as the Committee shall determine, provided that such Stock Option Agreement clearly and separately identifies nonstatutory stock options and Incentive Stock Options and that the substance of the following terms and conditions be included therein: (a) Option Price. The price at which each share of common stock covered by such option may be purchased shall be determined by the Committee and shall be no less than one hundred percent (100%) of the fair market value of the stock on the date the option is granted. Fair market value shall be deemed to be the average of the high and low prices of the common stock of the Company for composite transactions as published by major newspapers for the date the option is granted or, if no sale of the Company's stock shall have been made on that day, the next preceding day on which there was a sale of such stock. (b) Limitations on Transfer. Options may not be transferred, levied, garnished, executed upon, subjected to a security interest, or assigned to any person other than the optionee, except that the optionee may transfer a nonqualified option to a trust of which the optionee is the sole beneficiary during his lifetime. Upon the death of the optionee, the trustee of such trust may exercise any options to which the trustee has legal title on or before the expiration date of such options, and shares issued pursuant to such exercise shall be issued to the trustee. Documents evidencing the transfer of any option and the identity of the trustee shall be in such form as may be required by the Secretary of the Company. (c) Post-Employment Exercise of Options. An optionee whose employment has terminated may exercise an option issued under the Plan on or before the expiration date of the option and within a period following his termination of (1) (A) 12 months in the case of Incentive Stock Options and (B) 60 months, in the case of all other options held by an optionee who is a retiree of the Company (for this purpose, a retiree is a person who is entitled to receive pension benefits in accordance with the Sprint Retirement Pension Plan immediately upon termination of employment) or who terminated by reason of permanent and total disability; (2) 12 months in the case of options held by an optionee whose employment terminated by reason of his death; (3) 3 months in the case of options held by an optionee whose employment terminated voluntarily; and (4) 3 months in the case of options held by an optionee whose employment terminated involuntarily other than for cause. An optionee whose employment has been terminated for cause, as determined by the Committee, shall forfeit all his outstanding options immediately upon termination of his employment, and the Secretary of the Corporation may suspend processing of stock option exercises of any optionee with respect to whom any officer of the Company has notified the Secretary of probable termination for cause until the next scheduled meeting of the Committee, at which meeting a final and binding determination of the Committee with respect to such optionee's termination for cause shall be made. Options granted under the Plan shall not be affected by any change of duties or position so long as the optionee continues to be an employee of the Company or of a subsidiary. Only those options exercisable at the date the optionee's employment terminates may be exercised during the period following such termination. For purposes of this Plan, unless the Committee, at the time of grant specifies otherwise, an employee who becomes employed by Sprint Spectrum L.P., Global One, or Alcatel, N.V. (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Entities without becoming employed by the Company or its subsidiaries. Employees of Affiliated Entities shall not, however, by reason of the foregoing, be eligible for new grants of options. (d) Term of Option. The option and any related SAR shall not be exercisable after the expiration of ten (10) years from the date the option was granted. (e) Exercise After Death of Employee; Designation of Beneficiaries. An option exercisable upon the death of an employee may be exercised by (i) the executor or administrator of the optionee's estate, (ii) by the person or persons to whom the optionee's rights under the option pass by the optionee's will or the laws of descent and distribution, (iii) by a trustee to whom legal title to the option has been transferred in accordance with this plan, or (iv) the beneficiary designated by the optionee in accordance with the following paragraph. An optionee may designate a beneficiary or beneficiaries to exercise unexpired options and to own shares issued upon any such exercise after the optionee's death without order of any probate court or otherwise. A beneficiary so designated may exercise an option upon presentation to the Company of evidence satisfactory to the Secretary of (1) the beneficiary's identity and (2) the death of the optionee. An optionee may change any beneficiary designation at anytime before his death but may not do so by testamentary designation in his will or otherwise. Beneficiary designations must be made in writing on a form provided by the Secretary. Beneficiary designations shall become effective on the date that the form, properly completed, signed and notarized, is received by the Secretary. Any designation of a beneficiary with respect to any option shall be deemed canceled upon the transfer of such option to an inter vivos trust in accordance with the terms of the Plan. (f) Sequential Exercise of Incentive Stock Options. No Incentive Stock Option granted prior to January 1, 1987, shall be exercisable while there is outstanding any other Incentive Stock Option which was granted to the optionee at an earlier time to purchase stock in the Company or in any corporation which (at the time of the granting of such Incentive Stock Option) is a subsidiary of the Company, or in any predecessor of any of such corporations. For the purpose of this Section 7(f), an Incentive Stock Option which has not been exercised in full is outstanding until the expiration of the period during which, under its initial terms, it could have been exercised. The cancellation of an earlier Incentive Stock Option will not enable a subsequent Incentive Stock Option to be exercised any sooner. Section 8. Consideration for Options. Each optionee shall, as consideration for the grant of the option, agree in writing to remain in the employ of the Company or of one of its subsidiaries, at the pleasure of the Company or of such subsidiary, for at least (1) year from the date of the granting of such option or until earlier termination of the optionee's employment effected or approved by the Company or by such subsidiary. In the event of a violation by the optionee of such agreement, any options still held by such person at the time of such violation shall automatically terminate. The Committee may waive this requirement in the case of any optionee. Nothing contained in the Plan, or in any option granted pursuant to the Plan, nor in any agreement made pursuant to the provisions of this Section 8, shall confer upon any optionee any right with respect to continuance of employment by the Company or its subsidiaries, nor interfere in any way with the right of the Company or its subsidiaries to terminate the optionee's employment or change the optionee's compensation at any time. Section 9. Exercise of Options - Purchase of Shares. Unless otherwise determined by the Committee, 25% of the total number of shares subject to an option granted under the Plan shall become exercisable one year from date of grant and 25% on each of the three succeeding anniversaries. An optionee's right to purchase shares with respect to shares which become exercisable shall be cumulative during the term of the option. An option shall be exercisable by purchase of shares only upon payment to the Company of the full purchase price of the shares with respect to which the option is exercised; provided, however, that the Company shall not be required to issue or deliver any certificates for shares of common stock purchased upon the exercise of an option prior to (i) if requested by the Company, the filing with the Company by the optionee or purchaser acting under Section 7(e) hereof of a representation in writing that at the time of such exercise it is the optionee's or purchaser's then present intention to acquire the shares being purchased for investment and not for resale, or (ii) the completion of any registration or other qualification of such shares under any state or federal laws or rulings or regulations of any government regulatory body, which the Company shall determine to be necessary or advisable. Payment for the shares shall be either in United States dollars, payable in cash or by check, or by surrender of stock certificates representing like common stock of the Company having an aggregate fair market value, determined as of the date of exercise, equal to the number of shares with respect to which such option is exercised multiplied by the option price per share; provided that the Committee may impose whatever restrictions it deems necessary or desirable with respect to the payment for shares by the surrender of stock certificates representing like common stock of the Company. In lieu of the delivery of physical certificates, the optionee may deliver shares in payment of the exercise price by attesting, on a form established for such purpose by the Secretary, to the ownership, either outright or through ownership of a broker account, of a sufficient number of shares held for a period of at least six months to pay the exercise price. The attestation must be notarized and signed by the optionee's spouse if the spouse is a joint owner of the shares with respect to which such attestation is made and must be accompanied by such documentation as the Corporate Secretary may consider necessary to evidence actual ownership of such shares. The fair market value of common stock on the date of exercise of an option shall be determined in the same manner as the fair market value of common stock on the date of grant of an option is determined pursuant to Section 7(a). Such payment shall be accompanied by a written request for the shares purchased. An option shall be deemed exercised on the date such payment and written request are received by the Secretary of the Company. In addition, for all nonqualified options outstanding on February 17, 1995, or issued thereafter, certain optionees, as determined by the Committee, may elect to receive restricted shares upon payment for the exercise of an option in the form of unrestricted common stock. The optionee will receive the same number of unrestricted shares as the number of shares surrendered to pay the exercise price, while the shares received in excess of the number surrendered to pay the exercise price may be restricted. Such optionees may also elect to deliver restricted shares of the Company's common stock in payment of the exercise price notwithstanding restrictions on transferability to which such shares are subject. The Company shall be authorized to issue restricted shares of common stock upon such exercises of stock options, subject to the following conditions: (a) The optionee shall elect a vesting period for the restricted common stock to be received upon exercise of the option of between six (6) months and ten (10) years, but in no event may an optionee elect a vesting period shorter than the period provided in paragraph (c) hereof. At any time on or before the 13th calendar month preceding the date on which restrictions on shares of restricted stock would otherwise lapse, the optionee may elect to extend the vesting period on all but not a portion of such shares by six months or any multiple of six months. (b) Restricted common stock issued upon an exercise shall include the right to have stock withheld for taxes on the lapse of the restrictions. (c) Restricted common stock received in such an exercise or from an election to receive a Long- Term Incentive Plan payout in restricted stock, or any Restricted Stock Award granted pursuant to the Long-Term Stock Incentive Program, shall be eligible for use in payment of the exercise price of a stock option, so long as all the shares received as a result of such an exercise are restricted for a period at least as long as, and with terms at least as restrictive as the terms of, the restricted common stock used in payment. Any such restricted common stock so delivered in payment of the exercise price shall have an aggregate fair market value (determined as of the date of exercise and in the same manner as the fair market value of unrestricted common stock of the Company on the date of exercise of an option is determined pursuant to Section 7(a)) equal to the number of shares with respect to which such option is exercised, multiplied by the exercise price per share. (d) Shares of restricted common stock received in an exercise of a stock option that continue to be restricted shall be forfeited in the event that vesting conditions are not satisfied, subject to the discretion of the Committee, except in the case of death, disability, normal retirement, or involuntary termination for reasons other than cause, in which case all restrictions lapse; provided, however, that in no event shall restrictions lapse if the restrictions on shares used to pay for the exercise would not have lapsed under the same conditions. (e) The optionee who receives restricted stock may not sell, transfer, assign, pledge or otherwise encumber or dispose of shares of restricted stock until such time as all restrictions on such stock have lapsed except: (i) to the Company in payment of the exercise price of a stock option issued by the Company under any employee stock option plan adopted by the Company that provides for payment of the exercise price in the form of restricted stock, provided that such payment is made in accordance with the terms of such plan; or (ii) to a trust of which the optionee, the optionee's spouse, or descendants of the optionee are the primary beneficiaries and which is a grantor trust treated as owned by the optionee under Subchapter J of the Internal Revenue Code, upon the following terms: (A) the Company receives, prior to such transfer, a true copy of the trust agreement and an opinion from optionee's counsel (1) that the trust will be treated as a grantor trust owned by the optionee under Subchapter J of the Internal Revenue Code at all times until the restrictions on such stock lapse or the stock is forfeited under the terms of its grant, (2) that the terms of the trust provide that upon the forfeiture of the restricted stock under the terms of its grant or the earlier termination of the trust for whatever reason, ownership of the restricted stock shall revert to the optionee or to the Company, (3) that the trustee of such trust may not, prior to the lapsing of restrictions on such stock, sell, transfer, assign, pledge, or otherwise encumber or dispose of shares of restricted stock except to the Company or to the optionee, subject to the restrictions provided for in this Plan, and (4) that, until the restrictions lapse, the trustee is not authorized to incur liabilities on behalf of the trust, other than to the beneficiaries of the trust; and (B) the optionee and the trustee of the trust shall execute stock powers in blank to be held in the custody of the Company; and (C) the Corporate Secretary of the Company may, in his discretion, enforce the foregoing transfer restrictions by maintaining physical custody of the certificate or certificates representing such shares of restricted stock, by placing a restrictive legend on such certificates, by requiring the optionee and the trustee to execute other documents as a pre-condition to such transfer, or otherwise. (f) The optionee will have all the rights of a stockholder with respect to shares of restricted stock received upon the exercise of an option, including the right to vote the shares of stock and the right to dividends on the stock. Unless the Corporate Secretary establishes alternative procedures, the shares of restricted stock will be registered in the name of the optionee and the certificates evidencing such shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the award and shall be held in escrow by the Company. The optionee shall execute a stock power or powers assigning the shares of restricted stock back to the Company, which stock powers shall be held in escrow by the Company and used only in the event of the forfeiture of any of the shares of restricted stock. A certificate evidencing unrestricted shares of common stock shall be issued to the optionee promptly after the restrictions lapse on any restricted shares. (g) The Corporate Secretary shall have the discretion and authority to establish any and all procedures, including the requirement of election forms, which he deems necessary or desirable for the orderly administration of such exercises. No optionee or optionee's executor or administrator, legatees or distributees, as the case may be, will be, or will be deemed to be, a holder of any shares subject to an option unless and until a stock certificate or certificates for such shares are issued to such person or them under the terms of the Plan. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 11 hereof. In the event that any optionee shall be dismissed from the employ of the Company or any of its subsidiaries for any reason which in the opinion of the Committee shall constitute good cause for dismissal, any option still held by such person at such time shall automatically terminate. The decision of the Committee as to what shall constitute good cause for dismissal shall be final and binding upon all concerned. Section 10. Exercise of Options - Stock Appreciation Rights. In addition to providing for the exercise of an option as set forth in Section 9, at the time of grant of such option the Committee may by separate agreement, in conjunction with all or part of any option granted under the Plan, permit an optionee to exercise the option in an alternative manner based on the appreciated value of the common stock subject to option ("Stock Appreciation Right"); provided, however, that no Stock Appreciation Right granted to an optionee who is an officer of the Company or who is otherwise subject to Section 16(b) of the Exchange Act shall be exercisable during the six-month period following the date of grant, except that such limitation shall not apply in the event of death or physical disability of such optionee occurring prior to the expiration of such six- month period. Stock Appreciation Rights may be exercised by an optionee by surrendering the related option or applicable portion thereof. Upon such exercise and surrender, the optionee shall be entitled to receive the value of such Stock Appreciation Rights determined in the manner prescribed in this Section 10. Options which have been so surrendered, in whole or in part, shall no longer be exercisable. Each agreement evidencing Stock Appreciation Rights shall clearly and separately identify the nonstatutory stock options and Incentive Stock Options to which it relates and shall contain such terms and conditions not inconsistent with other provisions of the Plan as shall be determined from time to time by the Committee, which shall include the following: (a) Stock Appreciation Rights shall expire no later than the expiration of the related option. (b) Stock Appreciation Rights shall be transferable only when and to the extent that the related option is transferable. (c) Stock Appreciation Rights shall be exercisable at such time or times and only to the extent that the related option is exercisable. (d) Stock Appreciation Rights shall be exercisable only when there is a positive spread, that is, when the market price of the stock subject to the related option exceeds the exercise price of such option. (e) Upon the exercise of Stock Appreciation Rights, an optionee shall be entitled to receive the value thereof, which value shall be equal to the excess of the fair market value on the date of exercise of one share of common stock over the option price per share specified in the related option multiplied by the number of shares in respect of which the Stock Appreciation Rights shall have been exercised. The fair market value of common stock on the date of exercise of Stock Appreciation Rights shall be determined in the same manner as the fair market value of common stock on the date of grant of an option is determined pursuant to Section 7(a). (f) Upon an exercise of Stock Appreciation Rights, the optionee shall notify the Company of the form in which payment of the value thereof will be made (i.e., cash, common stock, or any combination thereof). Upon the exercise of Stock Appreciation Rights, the option or part thereof to which such Stock Appreciation Rights is related shall be deemed to have been exercised for the purpose of the limitation of the number of shares of common stock to be issued under the Plan as set forth in Section 4 and the requirement of sequential exercise of Incentive Stock Options as set forth in Section 7(f). Stock Appreciation Rights shall be deemed exercised on the date written notice of exercise is received by the Secretary of the Company. Section 11. Change in Stock, Adjustments, Etc. In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or a dividend payable in capital stock (including a spin-off), appropriate adjustment shall be made by the Committee in the number and kind of shares for the purchase of which options may be granted under the Plan including the maximum number that may be granted to any one person. In addition, the Committee shall make appropriate adjustment in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the optionee's proportionate interest shall be maintained as before the occurrence of such event, and such adjustment of outstanding options shall be made without material change of the total price applicable to the unexercised portion of the option and with a corresponding adjustment in the option price per share; provided, however, that each such adjustment in the number and kind of shares subject to outstanding options, including any adjustment in the option price, shall be made in such manner as not to constitute a modification as defined in Section 425 of the Internal Revenue Code of 1986, as amended. If any outstanding options are subject to any conditions, the Committee shall also make appropriate adjustments to such conditions. Any such adjustment made by the Committee shall be conclusive. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. Section 12. Duration, Amendment and Termination. The Board of Directors of the Company may at any time terminate the Plan or make such amendments thereof as it shall deem advisable and in the best interests of the Company, without further action on the part of the stockholders of the Company; provided, however, that no such termination or amendment shall, without the consent of the individual to whom any option shall theretofore have been granted, affect or impair the rights of such individual under such option, and provided further, that unless the stockholders of the Company shall have first approved thereof, no amendment of this Plan shall be made whereby (a) the total number of shares which may be optioned under the Plan to all individuals, or any of them, shall be increased, except by operation of the adjustment provisions of Section 11 hereof, (b) the authority to administer the Plan by a committee consisting of directors of the Company not eligible to receive options granted under the Plan shall be withdrawn, (c) the term of the options shall be extended, (d) the minimum option price shall be decreased, or (e) the class of employees to whom options may be granted shall be changed. No Incentive Stock Option shall be granted under the Plan after November 30, 1994, but Incentive Stock Options granted prior to or as of such date may extend beyond such date in accordance with the provisions hereof. Section 13. Effectiveness of Plan. This Plan shall not become effective unless and until the following conditions shall have been met: (a) The Plan shall have been adopted by the affirmative vote of a majority of the outstanding shares of the Company present and entitled to vote at a meeting of the stockholders at which a quorum is present within one (1) year of its approval by the Board of Directors. (b) The Committee shall have been advised by counsel that all other applicable legal requirements incident to the establishment and operation of the Plan have been complied with. Section 14. Date of Granting of Options. The granting of an option pursuant to the Plan shall take place on the date the Committee decides to grant the option. Within thirty (30) days of the granting of the option, the Company shall notify the optionee of the grant of the option, and submit to the optionee a Stock Option Agreement and, if applicable, an agreement respecting Stock Appreciation Rights, duly executed by and on behalf of the Company, with the request that the optionee execute the agreement or agreements within thirty (30) days after the mailing by the Company of the notice to the optionee. If the optionee shall fail to execute the written option agreement and, if applicable, the agreement respecting Stock Appreciation Rights within said 30-day period, such person's option shall be automatically terminated. Section 15. Application of Funds. The proceeds received by the Company from the sale of stock subject to option are to be added to the general funds of the Company and used for its corporate purposes as the Board of Directors shall determine. Section 16. No Obligation to Exercise Option. Granting of an option shall impose no obligation on the optionee to exercise such option. Section 17. Stock Withholding Election. When taxes are withheld in connection with the exercise of a stock option by delivering shares of stock in payment of the exercise price, or an exercise of an SAR for stock, or upon the lapse of restrictions on restricted stock received upon the exercise of an option (the date on which such exercise occurs or such restrictions lapse hereinafter referred to as the "Tax Date"), the optionee may elect to make payment for the withholding of federal, state and local taxes, including Social Security and Medicare ("FICA") taxes, up to the optionee's marginal tax rate, by one or both of the following methods: (i) delivering part or all of the payment in previously-owned shares (which shall be valued at fair market, as defined herein, on the Tax Date) which shares, if acquired from the Company, must have been held for at least six months; (ii) requesting the Company to withhold from those shares that would otherwise be received upon exercise of the option, upon exercise of an SAR for stock, or upon the lapse of restrictions, a number of shares having a fair market value (as defined herein) on the Tax Date equal to the amount to be withheld. The amount of tax with- holding to be satisfied by withholding shares from the option exercise is limited to the minimum amount of taxes, including FICA taxes, required to be withheld under federal, state and local law. Such election is irrevocable. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. If no timely election is made, cash must be delivered to satisfy all tax withholding requirements. EX-10 3 1990 STOCK OPTION PLAN Exhibit (10)(i) 1990 STOCK OPTION PLAN (As Amended February 16, 1991, April 16, 1991, August 13, 1991, December 8, 1992, February 18, 1995, April 18, 1995, August 8, 1995, August 12, 1996, and February 11, 1997) Section 1. Establishment. Pursuant to the Sprint Corporation Long-Term Stock Incentive Program (the "Program"), Sprint Corporation, a Kansas corporation (the "Company"), hereby establishes a stock option plan to be named the 1990 Stock Option Plan (the "Plan"), for officers and key employees of the Company and its subsidiaries. Section 2. Purpose. The purpose of the Plan is to induce officers and key employees of the Company and its subsidiaries, who are in a position to contribute materially to the prosperity thereof, to remain with the Company or its subsidiaries, to offer them incentives and rewards in recognition of their share in the Company's progress, and to encourage them to continue to promote the best interests of the Company and its affiliates. The Plan will also aid the Company and its subsidiaries in competing with other enterprises for the services of new key personnel needed to help insure their continued development. Options granted to an optionee shall be either Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended, or Nonqualified Stock Options, provided that no Incentive Stock Options shall be granted which would permit options first exercisable in any calendar year to exceed the limitations set forth in Section 6(a) hereof. Options which become first exercisable in any calendar year in excess of said limitations shall be Nonqualified Stock Options. Options designated "Nonqualified Stock Options" shall not be restricted by the limitations of said Section 6(a) and shall not be treated as Incentive Stock Options. Section 3. Administration. The Plan shall be administered by the Organization and Compensation Committee (the "Committee") of the Board of Directors of the Company. Members of the Committee shall be Disinterested Persons as defined in the Program. The Committee shall hold its meetings at such times and places as it may determine. A majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee, shall be deemed the acts of the Committee. The Company shall grant options and related Stock Appreciation Rights ("SARs") under the Plan in accordance with determinations made by the Committee pursuant to the provisions of the Plan and the Program. The Committee from time to time may adopt (and thereafter amend and rescind) such rules and regulations for carrying out the Plan and take such action in the administration of the Plan, not inconsistent with the provisions of the Plan and the Program, as it shall deem proper. The interpretation and construction of any provisions of the Plan by the Committee shall, unless otherwise determined by the Board of Directors of the Company, be final and conclusive. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. Section 4. Total Number of Shares to be Optioned. The maximum number of shares of common stock ($2.50 par value) of the Company which may be issued upon exercise of options under the Plan shall not exceed 20,441,564 (subject to adjustment as provided in Section 11 hereof). The shares sold under the Plan may be either treasury shares or authorized but unissued shares, as the Board of Directors from time to time may determine. The maximum number of shares of common stock which may be issued upon exercise of options granted in any calendar year, together with shares of common stock subject to other awards under the Program, shall not exceed the limits set forth in Section 4(a) of the Program. In the event that any outstanding options under the Plan for any reason expire or are terminated, the shares of common stock of the Company allocable to the unexercised portion of all of such options may again be subject to an option under the Plan. Section 5. Eligibility. Options shall be granted only to officers and key employees of the Company or its subsidiaries. The Committee will, in its discretion, determine the officers and key employees to be granted options, the time or times at which options shall be granted, the number of shares subject to each option, whether the options are Incentive Stock Options or Nonqualified Stock Options, any conditions on the exercise of the options, and the manner in which options may be exercised. In making such determination, the Committee may take into consideration the value of the services rendered by the respective individuals, their present and potential contributions to the success of the Company and its affiliates and such other factors which the Committee may deem relevant in accomplishing the purpose of the Plan. No option may be granted to any individual who immediately after the option grant owns directly or indirectly stock possessing more than five percent (5%) of the total combined voting power or value of all classes of stock of the Company or any subsidiary. An individual may be granted more than one option but only on the terms and subject to the restrictions hereinafter set forth. No person shall be eligible to receive an option for a larger number of shares than is recommended for such individual by the Committee. Section 6. Limitation on Incentive Stock Options. (a) General Rule. The aggregate fair market value (determined at the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year by the optionee under all plans of the Company and its subsidiaries shall not exceed $100,000 or, if different, the maximum limitation in effect at the time of grant under Section 422A of the Internal Revenue Code of 1986, as amended, or any successor provision, and any regulations promulgated thereunder. (b) Fair Market Value. Fair market value shall be deemed to be the average of the high and low prices of the common stock of the Company for composite transactions as published by major newspapers for the date the Incentive Stock Option is granted or, if no sale of the Company's stock shall have been made on that day, the next preceding day on which there was a sale of such stock. Section 7. Terms and Conditions of Options. Each option granted under the Plan shall be evidenced by a Stock Option Agreement in such form not inconsistent with the Plan as the Committee shall determine, provided that such Stock Option Agreement clearly and separately identifies Nonqualified Stock Options and Incentive Stock Options and that the substance of the following terms and conditions be included therein: (a) Option Price. The price at which each share of common stock covered by such option may be purchased shall be determined by the Committee and shall be no less than one hundred percent (100%) of the fair market value of the stock on the date the option is granted. Fair market value shall be deemed to be the average of the high and low prices of the common stock of the Company for composite transactions as published by major newspapers for the date the option is granted or, if no sale of the Company's stock shall have been made on that day, the next preceding day on which there was a sale of such stock. (b) Limitations on Transfer. Options may not be transferred, levied, garnished, executed upon, subjected to a security interest, or assigned to any person other than the optionee, except that the optionee may transfer an option to a trust of which the optionee is the sole beneficiary during his lifetime. Upon the death of the optionee, the trustee of such trust may exercise any options to which the trustee has legal title on or before the expiration date of such options, and shares issued pursuant to such exercise shall be issued to the trustee. Documents evidencing the transfer of any option and the identity of the trustee shall be in such form as may be required by the Secretary of the Company. (c) Post-Employment Exercise of Options. An optionee whose employment has terminated may exercise an option issued under the Plan only during the term of his employment and within a period following his termination of (1) (A) 12 months in the case of Incentive Stock Options and (B) 60 months, in the case of all other options held by an optionee who is a retiree of the Company (for this purpose, a retiree is a person who is entitled to receive pension benefits in accordance with the Sprint Retirement Pension Plan immediately upon termination of employment) or who terminated by reason of permanent and total disability; (2) 12 months in the case of options held by an optionee whose employment terminated by reason of his death; (3) 3 months in the case of options held by an optionee whose employment terminated voluntarily; and (4) 3 months in the case of options held by an optionee whose employment terminated involuntarily other than for cause. An optionee whose employment has been terminated for cause, as determined by the Committee, shall forfeit all his outstanding options immediately upon termination of his employment, and the Secretary of the Corporation may suspend processing of stock option exercises of any optionee with respect to whom any officer of the Company has notified the Secretary of probable termination for cause until the next scheduled meeting of the Committee, at which meeting a final and binding determination of the Committee with respect to such optionee's termination for cause shall be made. Options granted under the Plan shall not be affected by any change of duties or position so long as the optionee continues to be an employee of the Company or of a subsidiary. Only those options exercisable at the date the optionee's employment terminates may be exercised during the period following such termination. For purposes of this Plan, unless the Committee, at the time of grant specifies otherwise, an employee who becomes employed by Sprint Spectrum L.P., Global One, or Alcatel, N.V. (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Entities without becoming employed by the Company or its subsidiaries. Employees of Affiliated Entities shall not, however, by reason of the foregoing, be eligible for new grants of options. (d) Term of Option. The option and any related SAR shall not be exercisable after the expiration of ten (10) years from the date the option was granted. (e) Exercise After Death of Employee; Designation of Beneficiaries. An option exercisable upon the death of an employee may be exercised by (i) the executor or administrator of the optionee's estate, (ii) by the person or persons to whom the optionee's rights under the option pass by the optionee's will or the laws of descent and distribution, (iii) by a trustee to whom legal title to the option has been transferred in accordance with this plan, or (iv) the beneficiary designated by the optionee in accordance with the following paragraph. An optionee may designate a beneficiary or beneficiaries to exercise unexpired options and to own shares issued upon any such exercise after the optionee's death without order of any probate court or otherwise. A beneficiary so designated may exercise an option upon presentation to the Company of evidence satisfactory to the Secretary of (1) the beneficiary's identity and (2) the death of the optionee. An optionee may change any beneficiary designation at anytime before his death but may not do so by testamentary designation in his will or otherwise. Beneficiary designations must be made in writing on a form provided by the Secretary. Beneficiary designations shall become effective on the date that the form, properly completed, signed and notarized, is received by the Secretary. Any designation of a beneficiary with respect to any option shall be deemed canceled upon the transfer of such option to an inter vivos trust in accordance with the terms of the Plan. Section 7A. Reload Options. In connection with nonqualified options, including newly-granted options or outstanding options granted under the Plan, or the stock option plans of 1978, 1981, 1985 and 1989 of the Company, the Committee may provide that an optionee has the right to a reload option, which shall be subject to the following terms and conditions: (a) Grant of the Reload Option; Number of Shares, Price. Subject to subsections (b) and (c) of this Section 7A and to the availability of shares to be optioned under the Plan, if an optionee has an option (the "original option") with reload rights and pays for the exercise of the original option by surrendering common stock of the Company, the optionee shall receive a new option ("reload option") for the number of shares so surrendered at an option price equal to the fair market value of the stock on the date of the exercise of the original option. (b) Minimum Purchase Required. A reload option will be granted only if the exercise of the original option is an exercise of at least 25% of the total number of shares granted under the original option (or an exercise of all the shares remaining under the original option if less than 25% of the shares remain to be exercised). (c) Other Requirements. A reload option will not be granted: (1) if the market value of the common stock of the Company on the date of exercise of the original option is less than the exercise price of the original option; (2) if the optionee is no longer an employee of Sprint or a Sprint subsidiary; or (3) if the original option is exercised less than one year prior to the expiration of the original option. (d) Term of Option. The reload option shall expire on the same date as the original option. (e) Type of Option. The reload option shall be a non-qualified option. (f) No Additional Reload Options. The reload options shall not include any right to a second reload option. (g) Date of Grant, Vesting. The date of grant of the reload option shall be the date of the exercise of the original option. The reload options shall be exercisable in full beginning one year from date of grant; provided, however, that all shares purchased upon the exercise of the original option (except for any shares withheld for tax withholding obligations) shall not be sold, transferred or pledged within six months from the date of exercise of the original option. In no event shall a reload option be exercised after the original option expires as provided in subsection (d) of this Section 7A. (h) Stock Withholding; Grants of Reload Options. If the other requirements of this Section 7A are satisfied, and if shares are withheld or shares surrendered for tax withholding pursuant to Section 17, a reload option will be granted for the number of shares surrendered as payment for the exercise of the original option plus the number of shares surrendered or withheld to satisfy tax withholding. In connection with reload options for officers who are subject to Section 16 of the Securities Exchange Act of 1934 ("Insiders"), the Committee may at any time impose any limitations which, in the Committee's sole discretion, are necessary or desirable in order to comply with Section 16(b) of the Securities Exchange Act of 1934 and the rules and regulations thereunder, or in order to obtain any exemption therefrom. (i) Other Terms and Conditions. Except as otherwise provided in this Section 7A, all the provisions of the 1990 Stock Option Plan shall apply to reload options granted pursuant to this Section 7A. Section 8. Consideration for Options. Each optionee shall, as consideration for the grant of the option, agree in writing to remain in the employ of the Company or of one of its subsidiaries, at the pleasure of the Company or of such subsidiary, for at least (1) year from the date of the granting of such option or until earlier termination of the optionee's employment effected or approved by the Company or by such subsidiary. In the event of a violation by the optionee of such agreement, any options still held by such person at the time of such violation shall automatically terminate. The Committee may waive this requirement in the case of any optionee. Nothing contained in the Plan, or in any option granted pursuant to the Plan, nor in any agreement made pursuant to the provisions of this Section 8, shall confer upon any optionee any right with respect to continuance of employment by the Company or its subsidiaries, nor interfere in any way with the right of the Company or its subsidiaries to terminate the optionee's employment or change the optionee's compensation at any time. Section 9. Exercise of Options - Purchase of Shares. Options and related SARs shall be exercisable at such time or times, and upon the satisfaction of such conditions, as determined by the Committee; provided, however, that unless otherwise determined by the Committee, no Incentive Stock Option shall be exercisable during the year ending on the day before the first anniversary date of the granting of the Incentive Stock Option. An optionee's right to purchase shares with respect to shares which become exercisable shall be cumulative during the term of the option. An option shall be exercisable by purchase of shares only upon payment to the Company of the full purchase price of the shares with respect to which the option is exercised; provided, however, that the Company shall not be required to issue or deliver any certificates for shares of common stock purchased upon the exercise of an option prior to (i) if requested by the Company, the filing with the Company by the optionee or purchaser acting under Section 7(e) hereof of a representation in writing that at the time of such exercise it is the optionee's or purchaser's then present intention to acquire the shares being purchased for investment and not for resale, or (ii) the completion of any registration or other qualification of such shares under any state or federal laws or rulings or regulations of any government regulatory body which the Company shall determine to be necessary or advisable. Payment for the shares shall be either in United States dollars, payable in cash or by check, or by surrender of stock certificates representing like common stock of the Company having an aggregate fair market value, determined as of the date of exercise, equal to the number of shares with respect to which such option is exercised multiplied by the option price per share; provided that the Committee may impose whatever restrictions it deems necessary or desirable with respect to the payment for shares by the surrender of stock certificates representing like common stock of the Company. In lieu of the delivery of physical certificates, the optionee may deliver shares in payment of the exercise price by attesting, on a form established for such purpose by the Secretary, to the ownership, either outright or through ownership of a broker account, of a sufficient number of shares held for a period of at least six months to pay the exercise price. The attestation must be notarized and signed by the optionee's spouse if the spouse is a joint owner of the shares with respect to which such attestation is made and must be accompanied by such documentation as the Corporate Secretary may consider necessary to evidence actual ownership of such shares. The fair market value of common stock on the date of exercise of an option shall be determined in the same manner as the fair market value of common stock on the date of grant of an option is determined pursuant to Section 7(a). Such payment shall be accompanied by a written request for the shares purchased. An option shall be deemed exercised on the date such payment and written request are received by the Secretary of the Company. In addition, for all nonqualified options outstanding on February 17, 1995, or issued thereafter, certain optionees, as determined by the Committee, may elect to receive restricted shares upon payment for the exercise of an option in the form of unrestricted common stock. The optionee will receive the same number of unrestricted shares as the number of shares surrendered to pay the exercise price, while the shares received in excess of the number surrendered to pay the exercise price may be restricted. Such optionees may also elect to deliver restricted shares of the Company's common stock in payment of the exercise price notwithstanding restrictions on transferability to which such shares are subject. The Company shall be authorized to issue restricted shares of common stock upon such exercises of stock options, subject to the following conditions: (a) The optionee shall elect a vesting period for the restricted common stock to be received upon exercise of the option of between six (6) months and ten (10) years, but in no event may an optionee elect a vesting period shorter than the period provided in paragraph (c) hereof. At any time on or before the 13th calendar month preceding the date on which restrictions on shares of restricted stock would otherwise lapse, the optionee may elect to extend the vesting period on all but not a portion of such shares by six months or any multiple of six months. (b) Restricted common stock issued upon an exercise shall include the right to have stock withheld for taxes on the lapse of the restrictions. (c) Restricted common stock received in such an exercise or from an election to receive a Long- Term Incentive Plan payout in restricted stock, or any Restricted Stock Award granted pursuant to the Long-Term Stock Incentive Program, shall be eligible for use in payment of the exercise price of a stock option, so long as all the shares received as a result of such an exercise are restricted for a period at least as long as, and with terms at least as restrictive as the terms of, the restricted common stock used in payment. Any such restricted common stock so delivered in payment of the exercise price shall have an aggregate fair market value (determined as of the date of exercise and in the same manner as the fair market value of unrestricted common stock of the Company on the date of exercise of an option is determined pursuant to Section 7(a)) equal to the number of shares with respect to which such option is exercised, multiplied by the exercise price per share. (d) Shares of restricted common stock received in an exercise of a stock option that continue to be restricted shall be forfeited in the event that vesting conditions are not satisfied, subject to the discretion of the Committee, except in the case of death, disability, normal retirement, or involuntary termination for reasons other than cause, in which case all restrictions lapse; provided, however, that in no event shall restrictions lapse if the restrictions on shares used to pay for the exercise would not have lapsed under the same conditions. (e) The optionee who receives restricted stock may not sell, transfer, assign, pledge or otherwise encumber or dispose of shares of restricted stock until such time as all restrictions on such stock have lapsed except: (i) to the Company in payment of the exercise price of a stock option issued by the Company under any employee stock option plan adopted by the Company that provides for payment of the exercise price in the form of restricted stock, provided that such payment is made in accordance with the terms of such plan; or (ii) to a trust of which the optionee, the optionee's spouse, or descendants of the optionee are the primary beneficiaries and which is a grantor trust treated as owned by the optionee under Subchapter J of the Internal Revenue Code, upon the following terms: (A) the Company receives, prior to such transfer, a true copy of the trust agreement and an opinion from optionee's counsel (1) that the trust will be treated as a grantor trust owned by the optionee under Subchapter J of the Internal Revenue Code at all times until the restrictions on such stock lapse or the stock is forfeited under the terms of its grant, (2) that the terms of the trust provide that upon the forfeiture of the restricted stock under the terms of its grant or the earlier termination of the trust for whatever reason, ownership of the restricted stock shall revert to the optionee or to the Company, (3) that the trustee of such trust may not, prior to the lapsing of restrictions on such stock, sell, transfer, assign, pledge, or otherwise encumber or dispose of shares of restricted stock except to the Company or to the optionee, subject to the restrictions provided for in this Plan, and (4) that, until the restrictions lapse, the trustee is not authorized to incur liabilities on behalf of the trust, other than to the beneficiaries of the trust; and (B) the optionee and the trustee of the trust shall execute stock powers in blank to be held in the custody of the Company; and (C) the Corporate Secretary of the Company may, in his discretion, enforce the foregoing transfer restrictions by maintaining physical custody of the certificate or certificates representing such shares of restricted stock, by placing a restrictive legend on such certificates, by requiring the optionee and the trustee to execute other documents as a pre-condition to such transfer, or otherwise. (f) Except as otherwise provided herein, the optionee will have all the rights of a stockholder with respect to shares of restricted stock received upon the exercise of an option, including the right to vote the shares of stock and the right to dividends on the stock. Unless the Corporate Secretary establishes alternative procedures, the shares of restricted stock will be registered in the name of the optionee and the certificates evidencing such shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the award and shall be held in escrow by the Company. The optionee shall execute a stock power or powers assigning the shares of restricted stock back to the Company, which stock powers shall be held in escrow by the Company and used only in the event of the forfeiture of any of the shares of restricted stock. A certificate evidencing unrestricted shares of common stock shall be issued to the optionee promptly after the restrictions lapse on any restricted shares. (g) The Corporate Secretary shall have the discretion and authority to establish any and all procedures, including the requirement of election forms, which he deems necessary or desirable for the orderly administration of such exercises. No optionee or optionee's beneficiary, executor or administrator, legatees or distributees, as the case may be, will be, or will be deemed to be, a holder of any shares subject to an option unless and until a stock certificate or certificates for such shares are issued to such person or them under the terms of the Plan. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 11 hereof. In the event that any optionee shall be dismissed from the employ of the Company or any of its subsidiaries for any reason which in the opinion of the Committee shall constitute good cause for dismissal, any option still held by such person at such time shall automatically terminate. The decision of the Committee as to what shall constitute good cause for dismissal shall be final and binding upon all concerned. In the event that any optionee, without the consent of the Committee, while employed by the Company or any affiliate of the Company or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in (other than any nonsubstantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest, as determined by the Committee, any option still held by such person at such time shall automatically terminate. The decision of the Committee on any such matters shall be final and binding upon all concerned. Section 10. Exercise of Options - Stock Appreciation Rights. In addition to providing for the exercise of an option as set forth in Section 9, at the time of grant of such option the Committee may by separate agreement, in conjunction with all or part of any option granted under the Plan, permit an optionee to exercise the option in an alternative manner based on the appreciated value of the common stock subject to option; provided, however, that no SAR granted to an optionee who is subject to Section 16(b) of the Exchange Act (an "Insider") shall be exercisable during the six- month period following the date of grant, except that such limitation shall not apply in the event of death or physical disability of such optionee occurring prior to the expiration of such six- month period. SARs may be exercised by an optionee by surrendering the related option or applicable portion thereof. Upon such exercise and surrender, the optionee shall be entitled to receive the value of such SARs determined in the manner prescribed in this Section 10. Options which have been so surrendered, in whole or in part, shall no longer be exercisable. Each agreement evidencing SARs shall clearly and separately identify the Nonqualified Stock Options and Incentive Stock Options to which it relates and shall contain such terms and conditions not inconsistent with other provisions of the Plan and the Program as shall be determined from time to time by the Committee, which shall include the following: (a) SARs shall expire no later than the expiration of the related option. (b) SARs shall be transferable only when and to the extent that the related option is transferable. (c) SARs shall be exercisable at such time or times and only to the extent that the related option is exercisable. The SAR shall terminate and no longer be exercisable upon the termination or exercise of the related option, except that SARs granted with respect to less than the full number of shares covered by a related option shall not be reduced until the exercise or termination of the related option exceeds the number of shares not covered by the SARs. (d) SARs shall be exercisable only when there is a positive spread, that is, when the market price of the stock subject to the related option exceeds the exercise price of such option. (e) Upon the exercise of SARs, an optionee shall be entitled to receive the value thereof, which value shall be equal to the excess of the fair market value on the date of exercise of one share of common stock over the option price per share specified in the related option multiplied by the number of shares in respect of which the SARs shall have been exercised. The fair market value of common stock on the date of exercise of SARs shall be determined in the same manner as the fair market value of common stock on the date of grant of an option is determined pursuant to Section 7(a). (f) Upon an exercise of SARs, the optionee shall notify the Company of the form in which payment of the value thereof will be made (i.e., cash, common stock, or any combination thereof). Upon the exercise of SARs, the option or part thereof to which such SARs are related shall be deemed to have been exercised for the purpose of the limitation of the number of shares of common stock to be issued under the Plan as set forth in Section 4 and the limitation of the number of shares of common stock to be issued under the Program as set forth in Section 4(a) of the Program. SARs shall be deemed exercised on the date written notice of exercise is received by the Secretary of the Company. Section 11. Change in Stock, Adjustments, Etc. In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or a dividend payable in capital stock (including a spin-off), appropriate adjustment shall be made by the Committee in the number and kind of shares for the purchase of which options may be granted under the Plan including the maximum number that may be granted to any one person. In addition, the Committee shall make appropriate adjustment in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the optionee's proportionate interest shall be maintained as before the occurrence of such event, and such adjustment of outstanding options shall be made without material change of the total price applicable to the unexercised portion of the option and with a corresponding adjustment in the option price per share; provided, however, that each such adjustment in the number and kind of shares subject to outstanding options, including any adjustment in the option price, shall be made in such manner as not to constitute a modification as defined in Section 425 of the Internal Revenue Code of 1986, as amended. If any outstanding options are subject to any conditions, the Committee shall also make appropriate adjustments to such conditions. Any such adjustment made by the Committee shall be conclusive. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. Section 12. Duration, Amendment and Termination. The Board of Directors of the Company may at any time terminate the Plan or make such amendments thereof as it shall deem advisable and in the best interests of the Company; provided, however, that no such termination or amendment shall, without the consent of the individual to whom any option shall theretofore have been granted, affect or impair the rights of such individual under such option; and provided further, that any such amendment shall be consistent with the provisions of the Program, as it may be amended from time to time. No stock option shall be granted under the Plan after April 18, 1999, but stock options granted prior to or as of such date may extend beyond such date in accordance with the provisions hereof. Section 13. Effectiveness of Plan. This Plan shall be effective as of February 17, 1990. Section 14. Date of Granting of Options. The date of grant of a reload option shall be determined in accordance with Section 7A(g). The date of grant of all other options shall be the date designated by the Committee as the date of grant, provided that in no event shall the date of grant be earlier than the date on which the Committee approves the grant. Within sixty (60) days of the granting of the option, the Company shall notify the optionee of the grant of the option, and submit to the optionee a Stock Option Agreement and, if applicable, an agreement respecting SARs, duly executed by and on behalf of the Company, with the request that the optionee execute the agreement or agreements within sixty (60) days after the mailing by the Company of the notice to the optionee. The optionee shall execute the written option agreement and, if applicable, the agreement respecting SARs, within said 60-day period. Section 15. Application of Funds. The proceeds received by the Company from the sale of stock subject to option are to be added to the general funds of the Company and used for its corporate purposes. Section 16. No Obligation to Exercise Option. Granting of an option shall impose no obligation on the optionee to exercise such option. Section 17. Stock Withholding Election. When taxes are withheld in connection with the exercise of a stock option by delivering shares of stock in payment of the exercise price, or an exercise of an SAR for stock, or upon the lapse of restrictions on restricted stock received upon the exercise of an option (the date on which such exercise occurs or such restrictions lapse hereinafter referred to as the "Tax Date"), the optionee may elect to make payment for the withholding of federal, state and local taxes, including Social Security and Medicare ("FICA") taxes, up to the optionee's marginal tax rate, by one or both of the following methods: (i) delivering part or all of the payment in previously-owned shares (which shall be valued at fair market, as defined herein, on the Tax Date) which shares, if acquired from the Company, must have been held for at least six months; (ii) requesting the Company to withhold from those shares that would otherwise be received upon exercise of the option, upon exercise of an SAR for stock, or upon the lapse of restrictions, a number of shares having a fair market value (as defined herein) on the Tax Date equal to the amount to be withheld. The amount of tax with- holding to be satisfied by withholding shares from the option exercise is limited to the minimum amount of taxes, including FICA taxes, required to be withheld under federal, state and local law. Such election is irrevocable. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. If no timely election is made, cash must be delivered to satisfy all tax withholding requirements. EX-10 4 1990 RESTRICTED STOCK PLAN Exhibit (10)(j) 1990 RESTRICTED STOCK PLAN (as amended June 9, 1992, August 10, 1993, December 13, 1994, February 18, 1995, August 8, 1995, December 12, 1995, August 12, 1996 and February 11, 1997) Section 1. Establishment. Pursuant to the Sprint Long-Term Stock Incentive Program (the "Program"), Sprint Corporation, a Kansas corporation (the "Company"), hereby establishes a restricted stock plan to be named the 1990 Restricted Stock Plan (the "Plan"). Section 2. Purpose. The purpose of the Plan is to aid the Company and its subsidiaries in competing with other enterprises for the services of new key personnel needed to help ensure their continued development. The Plan will also help the Company and its subsidiaries retain key personnel. Section 3. Administration. The Plan shall be administered by the Organization and Compensation Committee (the "Compensation Committee") of the Board of Directors of the Company. Members of the Compensation Committee shall be Disinterested Persons as defined in the Program. The Compensation Committee shall hold its meetings at such times and places as it may determine. A majority of the Compensation Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Compensation Committee, shall be deemed the acts of the Compensation Committee. The Compensation Committee may delegate to the Chief Executive Officer of the Company (the "CEO") the right to grant awards of restricted stock to employees of the Company and its subsidiaries who are not officers or directors of the Company and to cancel or suspend such awards. The CEO may not make awards of restricted stock to any one individual in excess of 15,000 shares and may not make awards of restricted stock aggregating in excess of 50,000 shares between meetings of the Compensation Committee. The awards made by the CEO shall be reported to the Compensation Committee at each of its meetings. The Company shall issue shares of restricted stock under the Plan in accordance with determinations made by the Compensation Committee or the CEO pursuant to the provisions of the Plan and the Program. The Compensation Committee from time to time may adopt (and thereafter amend and rescind) such rules and regulations for carrying out the Plan and take such action in the administration of the Plan, not inconsistent with the provisions of the Plan and the Program, as it shall deem proper. Except as set forth in Section 6(a) hereof, the Compensation Committee may accelerate the time or times at which restrictions lapse and may waive any forfeiture of restricted stock. The interpretation and construction of any provisions of the Plan by the Compensation Committee shall, unless otherwise determined by the Board of Directors of the Company, be final and conclusive. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan or any grant under it. Section 4. Total Number of Shares Subject to Grant. The maximum number of shares of common stock ($2.50 par value) of the Company which may be issued under the Plan shall not exceed 577,482 (subject to adjustment as provided in Section 7 hereof). The shares issued under the Plan may be either treasury shares or authorized but unissued shares, as the Board of Directors from time to time may determine. The maximum number of shares of common stock which may be issued in any calendar year, together with shares of common stock subject to other awards under the Program, shall not exceed the limits set forth in Section 4(a) of the Program. In the event that any outstanding shares of restricted stock under the Plan are forfeited for any reason, such shares of common stock may again be subject to grant under the Plan. Section 5. Eligibility. Restricted stock shall be granted only to key employees of the Company or its subsidiaries, including new hires. No grants shall be made by the CEO to any individual who is an officer or director of the Company or who will be proposed to be elected as an officer or director at the next meeting of the Board of Directors or Stockholders of the Company. The Compensation Committee or the CEO will, in its discretion, determine the key employees to be granted restricted stock, the time or times at which restricted stock shall be granted, the number of shares to be granted and the duration of restrictions on the shares granted. In making such determination, the Compensation Committee and the CEO may take into consideration the value of the services rendered or to be rendered by the respective individuals, their present and potential contributions to the success of the Company and its affiliates and such other factors which the Compensation Committee or the CEO may deem relevant in accomplishing the purposes of the Plan. No restricted stock may be granted to any individual who immediately after the grant owns directly or indirectly stock possessing more than five percent (5%) of the total combined voting power or value of all classes of stock of the Company or any subsidiary. No person shall be eligible to receive a larger number of shares of restricted stock than is recommended for such individual by the Compensation Committee or the CEO. Section 6. Terms and Conditions of Grants. Each grant under the Plan shall be evidenced by an Agreement in such form not inconsistent with the Plan as the Compensation Committee or the CEO shall determine; provided that the substance of the following terms and conditions be included therein: (a) Duration of Restrictions. The restrictions on restricted stock shall lapse at such time or times as determined by the Compensation Committee or the CEO; provided, however, that no restricted stock shall become free of restrictions prior to the first anniversary date of the granting of the restricted stock. At any time on or before the 13th calendar month preceding the date on which restrictions on shares of restricted stock would otherwise lapse, the grantee may elect to extend the period of restriction on all but not a portion of such shares by six months or any multiple of six months. (b) Nontransferable. The employee who receives restricted stock (the "Grantee") may not sell, transfer, assign, pledge or otherwise encumber or dispose of shares of restricted stock until such time as all restrictions on such stock have lapsed except: (i) to the Company in payment of the exercise price of a stock option issued by the Company under any employee stock option plan adopted by the Company that provides for payment of the exercise price in the form of restricted stock, provided that such payment is made in accordance with the terms of such plan; or (ii) to a trust of which the Grantee, the Grantee's spouse, or descendants of the Grantee are the primary beneficiaries and which is a grantor trust treated as owned by the Grantee under Subchapter J of the Internal Revenue Code, upon the following terms: (A) the Company receives, prior to such transfer, a true copy of the trust agreement and an opinion from Grantee's counsel (1) that the trust will be treated as a grantor trust owned by the Grantee under Subchapter J of the Internal Revenue Code at all times until the restrictions on such stock lapse or the stock is forfeited under the terms of its grant, (2) that the terms of the trust provide that upon the forfeiture of the restricted stock under the terms of its grant or the earlier termination of the trust for whatever reason, ownership of the restricted stock shall revert to the Grantee or to the Company, (3) that the trustee of such trust may not, prior to the lapsing of restrictions on such stock, sell, transfer, assign, pledge, or otherwise encumber or dispose of shares of restricted stock except to the Company or to the Grantee, subject to the restrictions provided for in this Plan, and (4) that, until the restrictions lapse, the trustee is not authorized to incur liabilities on behalf of the trust, other than to the beneficiaries of the trust; and (B) the Grantee and the trustee of the trust shall execute stock powers in blank to be held in the custody of the Company; and (C) the Corporate Secretary of the Company may, in his discretion, enforce the foregoing transfer restrictions by maintaining physical custody of the certificate or certificates representing such shares of restricted stock, by placing a restrictive legend on such certificates, by requiring the Grantee and the trustee to execute other documents as a pre-condition to such transfer, or otherwise. (c) Termination of Employment. If, before the restrictions on shares of restricted stock lapse, the Grantee ceases to be employed by the Company or a subsidiary of the Company for any reason (including death or disability), the shares of restricted stock that continue to be restricted shall be forfeited and the Grantee or his representative shall sign any document and take any other action required to assign said restricted shares back to the Company. For purposes of this Plan, unless the Committee determines otherwise at the time of grant, an employee who becomes employed by Sprint Spectrum L.P., Global One, or Alcatel, N.V. (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Entities without becoming employed by the Company or its subsidiaries. (d) Consideration. Each Grantee shall, as consideration for the grant of restricted stock, agree in writing to remain in the employ of the Company or of one of its subsidiaries, at the pleasure of the Company or of such subsidiary, for the period of time until the restrictions on the restricted stock lapse. Nothing contained in the Plan or in any Agreement shall confer upon any Grantee any right with respect to continuance of employment by the Company or its subsidiaries, nor interfere in any way with the right of the Company or its subsidiaries to terminate the Grantee's employment or change the Grantee's compensation at any time. (e) Interest in Competitor. In the event that any Grantee, without the consent of the Compensation Committee, renders services to, or owns any interest in (other than any nonsubstantial interest, as determined by the Compensation Committee) any business that is in competition with the Company or with any business in which the Company has a substantial interest, as determined by the Compensation Committee, any restricted stock shall automatically be forfeited. The decision of the Compensation Committee on any such matters shall be final and binding upon all concerned. (f) Rights as Stockholder. Except as set forth in the Plan, a Grantee will have all rights of a stockholder with respect to shares of restricted stock, including the right to vote the shares of stock and the right to dividends on the stock. The shares of restricted stock will be registered in the name of the Grantee and the certificates evidencing such shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the award and shall be held in escrow by the Company. The Grantee shall execute a stock power or powers assigning the shares of restricted stock back to the Company, which stock powers shall be held in escrow by the Company and used only in the event of the forfeiture of any of the shares of restricted stock. A certificate evidencing unrestricted shares of common stock shall be issued to the Grantee promptly after the restrictions lapse on any restricted shares. (g) Stock Withholding Election. When taxes are withheld upon the lapse of restrictions on restricted stock (the date on which such restrictions lapse hereinafter referred to as the "Tax Date"), the Grantee may elect to make payment for the withholding of federal, state and local taxes, including Social Security and Medicare ("FICA") taxes, up to the Grantee's marginal tax rate, by one or both of the following methods: (i) delivering part or all of the payment in previously-owned shares (which shall be valued at fair market, as defined herein, on the Tax Date) which shares, if acquired from the Company, must have been held for at least six months; or (ii) requesting the Company to withhold from those shares that would otherwise be received upon the lapse of restrictions, a number of shares having a fair market value (as defined herein) on the Tax Date equal to the amount to be withheld. The amount of tax withholding to be satisfied by withholding shares is limited to the minimum amount of taxes, including FICA taxes, required to be withheld under federal, state and local law. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. If no timely election is made, cash must be delivered to satisfy all tax withholding requirements. Section 7. Change in Stock, Adjustments, Etc. In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or a dividend payable in capital stock, outstanding shares of restricted stock shall be treated the same as other outstanding shares of common stock and appropriate adjustment shall be made by the Compensation Committee in the number and kind of shares that may be granted under the Plan and that may be granted by the CEO under the Plan. The grant of restricted stock pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate, or sell or transfer all or any part of its business or assets. Section 8. Duration, Amendment and Termination. The Board of Directors of the Company may at any time terminate the Plan or make such amendments thereof as it shall deem advisable and in the best interests of the Company; provided, however, that no such termination or amendment shall, without the consent of the individual to whom any restricted stock shall theretofore have been granted, affect or impair the rights of such individual with respect to such restricted stock; and provided further, that any such amendment shall be consistent with the provisions of the Program, as it may be amended from time to time. No restricted stock shall be granted under the Plan after April 18, 1999. Section 9. Effectiveness of Plan. This Plan shall be effective as of February 17, 1990. Section 10. Date of Granting of Restricted Stock. The granting of restricted stock pursuant to the Plan shall take place on the date the Compensation Committee or the CEO decides to grant the restricted stock. As soon as practicable but no later than twenty (20) days after the granting of the restricted stock, the Company shall notify the employee of the grant and, within sixty (60) days of the granting of the restricted stock, the Company shall submit to the employee an Agreement duly executed by and on behalf of the Company, and a stock power or powers with respect to the restricted stock, with the request that the employee execute the Agreement and stock powers within sixty (60) days after the mailing by the Company of the notice to the employee. The employee shall execute the written Agreement and stock powers within said 60-day period. EX-10 5 EXECUTIVE DEFERRED COMPENSATION PLAN Exhibit 10(k) Executive Deferred Compensation Plan (as amended through December 10, 1996) ARTICLE I PURPOSE The purpose of the Sprint Corporation Executive Deferred Compensation Plan (hereinafter referred to as the "Plan") is to provide funds for retirement or death for executive employees (and their beneficiaries) of Sprint Corporation and its subsidiaries. It is intended that the Plan will aid in retaining and attracting employees of exceptional ability by providing such employees with a means to supplement their standard of living at retirement. ARTICLE II DEFINITIONS For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account Transfer Request. "Account Transfer Request" means a written notice, in a form prescribed by the Company, by a Participant to transfer all or any portion of one Deferred Benefit Account to another Deferred Benefit Account as provided for in paragraph 6.7. 2.2 Beneficiary. "Beneficiary" means the person, persons or entity designated by the Participant, or as provided in Article VIII, to receive any benefits payable under the Plan. Any Participant Beneficiary Designation shall be made in a written instrument filed with the Company and shall become effective only when received, accepted and acknowledged in writing by the Company. 2.3 Board. "Board" means the Board of Directors of the Company. 2.4 Cellular. "Cellular" means Sprint Cellular Company, however renamed, or any successor thereto. 2.5 Cellular Insider. "Cellular Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of Cellular. 2.6 Cellular Share Unit. "Cellular Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of common stock of Cellular after the distribution thereof by the Company to the Company's shareholders. 2.7 Committee. "Committee" means Deferred Compensation Committee appointed to review the Plan decisions pursuant to Article III. 2.8 Company. "Company" means Sprint Corporation, or any successor thereto. 2.9 Compensation. "Compensation" means the Base Salary, Annual Incentive Compensation and Long-Term Incentive Compensation payable to a Participant during a Plan Year other than a distribution under this plan. (a) Base Salary. "Base Salary" means all regular cash remuneration for services, other than such items as Annual Incentive Compensation, payable by the Employer to a Participant in cash during a Plan Year, but before reduction for amounts deferred pursuant to this Plan or any other Plan of the Employer. (b) Annual Incentive Compensation. "Annual Incentive Compensation" means any annual cash incentive compensation payable by the Employer to a Participant in a Plan Year. (c) Long-Term Incentive Compensation. "Long-Term Incentive Compensation" means any incentive compensation earned over a period of at least two years. 2.10 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant on his retirement, death, disability, or termination of employment as calculated in Article VII hereof. 2.11 Deferred Benefit Account. "Deferred Benefit Account" means the accounts maintained on the books of account of the Employer for each Participant pursuant to Article VI. Separate Deferred Benefit Accounts shall be maintained for each Participant. More than one Deferred Benefit Account shall be maintained for each Participant to reflect (a) Termination and Retirement Interest Yields, (b) separate deferral elections, and (c) Account A, Account B, Account C, Account AA, Account BB, and Account CC elections. For Account AA two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect the difference in Interest Yields as provided in Article VI, paragraph 6.4. For Account BB two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect, in the event of a transfer from Account AA to Account BB pursuant to paragraph 6.7, the difference in values of the two sub- accounts of Account AA transferred to Account BB. For Account CC two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect the crediting of Cellular Share Units with respect to Share Units in the respective sub-accounts of the Account BB with respect to which the Cellular Share Units were credited pursuant to Section 6.3(b). A Participant's Deferred Benefit Accounts shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. Unless the context requires otherwise, "Deferred Benefit Account" shall mean the aggregate balance of all accounts of a Participant. 2.12 Determination Date. "Determination Date" means the date on which the amount of a Participant's Deferred Benefit Account is determined as provided in Article VI hereof. The last day of each calendar month shall be a Determination Date. 2.13 Disability. "Disability" or "Disabled Participant" means a physical or mental condition of a Participant resulting in a determination of disability for purposes of receiving benefits under the Employer Long-Term Disability Insurance Plan. 2.14 Distribution Agreement. "Distribution Agreement" means the agreement entered into by the Company, Cellular, and Centel Corporation for the purpose of providing for the distribution by the Company of its stock in Cellular to the Company's stockholders. 2.15 Distribution Dividend Rate. "Distribution Dividend Rate" means the Dividend Rate as defined in the Distribution Agreement. 2.16 Distribution Time. "Distribution Time" is defined in the Distribution Agreement. 2.17 Early Retirement Date. "Early Retirement Date" means the date on which the Participant actually terminates employment following the first day of the month coincidental with or next following a Participant's attainment of age fifty-five (55), but before his Normal Retirement Date. 2.18 Employer. "Employer" means Sprint Corporation, any successor to the business thereof or any affiliate or subsidiary designated by the Board. 2.19 Internal Revenue Code. "Internal Revenue Code" means Internal Revenue Code of 1986, as amended or supplemented from time to time. References to any section of the Internal Revenue Code shall be to that section as it is renumbered, amended, supplemented or re-enacted. 2.20 Interest Yield. "Interest Yield" means with respect to any calendar month the Termination Interest Yield or the Retirement Interest Yield as defined below: (a) Termination Interest Yield. The "Termination Interest Yield" means (1) in the case of balances in Account AA, the composite yield on Moody's Seasoned Corporate Bond Yield Index for the preceding calendar month as determined from Moody's Bond Record published by Moody's Investors Services, Inc. (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Company, and (2) in the case of balances in Account A, the greater of (i) the prime rate in effect at Citibank, N.A. at the opening of business on the first business day of the month, or if said bank, for any reason, no longer publishes its prime rate, the prime rate similarly determined of another major bank selected by the Company and (ii) six percent per annum. (b) Retirement Interest Yield. The "Retirement Interest Yield" means (1) in the case of balances in Account AA, three percentage points over the Termination Interest Yield, and (2) in the case of balances in Account A, the Termination Interest Yield. 2.21 Normal Retirement Age. "Normal Retirement Age" means the time at which a Participant attains age sixty - -five (65). 2.22 Normal Retirement Date. "Normal Retirement Date" means the first day of the month coincidental with or next following a Participant's Normal Retirement Age. 2.23 Participant. "Participant" means any individual who is designated by the Company in accordance with paragraph 4.1 to participate in this Plan and who elects to participate by filing a Participation Agreement as provided in Article IV. 2.24 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed by a Participant before the beginning of the first period in which the Participant's Compensation is to be deferred pursuant to the Plan and the Participation Agreement. A new Participation Agreement shall be filed by the Participant for each separate Base Salary deferral election and for each Annual Incentive Compensation and Long-Term Incentive Compensation deferral election not accompanying a Base Salary deferral election. 2.25 Plan. "Plan" means the Sprint Corporation Executive Deferred Compensation Plan as set forth in this document. This Plan is the successor to, and comprises an amendment and revision of, the United Telecommunications, Inc. 1985 Executive Deferred Compensation Plan adopted February 12, 1985. 2.26 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.27 Plan Year. "Plan Year" means a twelve month period commencing May 1st and ending the following April 30th. The first Plan Year shall commence on May 1, 1985. 2.28 Retirement Plan. "Retirement Plan" means the Sprint Retirement Pension Plan, as amended from time to time. 2.29 Share Unit. "Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of common stock of the Company. 2.30 Spouse. "Spouse" means a Participant's wife or husband who was lawfully married to the Participant upon the Participant's retirement, death or severance from service. 2.31 Sprint Insider. "Sprint Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of the Company. 2.32 Transition Date. "Transition Date" means May 1, 1990. ARTICLE III ADMINISTRATION 3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be administered by the Committee. The Committee shall consist of not more than five persons appointed by the Board. The Committee may be a consolidated Committee administering other benefit plans of the Company in addition to this Plan. The Committee shall have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. The Committee may appoint a Benefit Administrative Committee and a Plan Administrator. The Committee may delegate its duties for the day-to-day operations of the Plan to the Plan Administrator and other duties to the Benefit Administrative Committee. Members of the Committee, the Benefit Administrative Committee and the Plan Administrator may be Participants under this Plan. 3.2 Claim for Benefits. Any claim for benefits under this Plan shall be made in writing to the Plan Administrator. If a claim for benefits is wholly or partially denied, the Plan Administrator shall so notify the Participant or Beneficiary within 90 days after receipt of the claim. The notice of denial shall be written in a manner calculated to be understood by the Participant or Beneficiary and shall contain (a) the specific reason or reasons for denial of the claim, (b) specific references to the pertinent Plan provisions upon which the denial is based, (c) a description of any additional material or information necessary to perfect the claim together with an explanation of why such material or information is necessary and (d) an explanation of the claims review procedure. The decision or action of the Plan Administrator shall be final, conclusive and binding on all persons having any interest in the Plan, unless a written appeal is filed as provided in Section 3.3 hereof. 3.3 Review of Claim. Within 60 days after the receipt by the Participant or Beneficiary of notice of denial of a claim, the Participant or Beneficiary may (a) file a request with the Benefit Administrative Committee that it conduct a full and fair review of the denial of the claim, (b) review pertinent documents and (c) submit questions and comments to the Committee in writing. 3.4 Decision After Review. Within 60 days after the receipt of a request for review under Section 3.3, the Committee shall deliver to the Participant or Beneficiary a written decision with respect to the claim, except that if there are special circumstances (such as the need to hold a hearing) which require more time for processing, the 60-day period shall be extended to 120 days upon notice to the Participant or Beneficiary to that effect. The decision shall be written in a manner calculated to be understood by the Participant or Beneficiary and shall (a) include the specific reason or reasons for the decision and (b) contain a specific reference to the pertinent Plan provisions upon which the decision is based. ARTICLE IV PARTICIPATION 4.1 Participation. Participation in the Plan shall be limited to executives having a job grade level of E14 or above, or any other employees designated by the Committee, who elect to participate in the Plan by filing a Participation Agreement with the Company. Except as provided below, a Participation Agreement must be filed before the March 31st immediately preceding the Plan Year in which the Participant's participation under the agreement will commence, and the election to participate shall be effective on the first day of the Plan Year following receipt by the Company of a properly completed and executed Participation Agreement; provided, however, that if March 31st falls on a Saturday, Sunday or holiday, the filing date for the Participation Agreement shall be no later than the next business day after March 31st. A Participant in the Plan, who is also a participant in the Employer's 1975 Executive Deferred Compensation Plan, may elect to transfer to this Plan all, and not less than all, of the dollar value of his Account A and the dollar value of his Account B under the 1975 Plan. Such election shall be made by delivering to the Company a properly executed Participation Agreement; such an election must be made when the Participant is first eligible for the 1985 Plan. 4.2 Minimum and Maximum Deferral and Length of Participation. A Participant may elect in any Participation Agreement to defer a portion of his Compensation. The minimum and maximum amounts that may be deferred under any single Participation Agreement shall be in $100 units and shall be as follows:
Minimum Maximum Deferral Deferral With respect $300 per 50% of Base to initial month Salary Base Salary Deferrals With respect $100 per 50% of Base to month Salary Subsequent Base Salary Deferrals With respect 25% of 100% of to Annual Annual Annual Incentive Incentive Incentive Compensation Compensation Compensation With respect 25% of Long- 100% of Long- to Long-Term Term Term Incentive Incentive Incentive Compensation Compensation Compensation
(a) With respect to Base Salary deferrals, the dollar amount of deferral elected in each Participation Agreement shall be the amount of Base Salary that will be deferred in each month subject to the Participation Agreement. Each Participation Agreement shall apply to the Participant's Base Salary payable over a period (1) for Participation Agreements first effective before the Transition Date, of either four or eight Plan Years, or (2) for Participation Agreements first effective on or after the Transition Date, one Plan Year (or, in either case, until the Participant's retirement, whichever occurs first), commencing with the Plan Year immediately following the Plan Year in which the respective Participation Agreement is filed. The fixed dollar amount of Base Salary deferral applicable over a deferral period shall not be changed by virtue of a change in Base Salary alone. (b) With respect to Annual Incentive Compensation or Long-Term Incentive Compensation deferrals, the deferral percentage selected in each Participation Agreement shall apply only to the Participant's Annual Incentive Compensation or Long-Term Incentive Compensation paid in the Plan Year immediately following receipt of the respective Participation Agreement. (c) From time to time, the Company may increase or decrease the minimum and maximum deferrals set forth above as well as the period for which the deferrals are effective by giving reasonable written notice to the affected Participants. Such changes shall be effective for all Participation Agreements filed thereafter. (d) A Participant's election to defer Compensation shall be irrevocable upon the filing of the respective Participation Agreement; provided, however, that the deferral of Compensation under any Participation Agreement may be suspended or amended as provided in paragraphs 7.5 or 9.1. 4.3 Additional Participation Agreements. A Participant may enter into additional Participation Agreements by filing a Participation Agreement with the Company before April 15th of any calendar year, stating the amount that the Participant elects to have deferred. Such additional agreements shall be effective as to Compensation paid in Plan Years beginning after the last day of the Plan Year in which the respective agreement is filed with the Company. Each additional Participation Agreement is subject to all of the provisions and requirements set forth in paragraph 4.2, including without limitation, the provisions relating to minimum and maximum deferral amounts and duration of the agreements; provided, that the minimum Base Salary deferral for each additional Participation Agreement shall be $1,200 per year. In addition, the aggregate amount of Base Salary that a Participant may have deferred under this Plan out of his Base Salary for any single Plan Year under all applicable Participation Agreements shall not exceed 50% of his Base Salary, excluding Incentive Compensation. In the event a Participant elects to defer Compensation for a new period, the new election shall be treated as an arrangement for which a separate Deferred Benefit Account shall be maintained and separate Deferred Benefits shall be payable. ARTICLE V DEFERRED COMPENSATION 5.1 Elective Deferred Compensation. The amount of Compensation that a Participant elects to defer in the Participation Agreement executed by the Participant, with respect to each Plan Year of participation in the Plan, shall be credited by the Company to the Participant's Deferred Benefit Account throughout each Plan Year as the Participant is paid the non-deferred portion of Compensation for such Plan Year. The amount credited to a Participant's Deferred Benefit Account shall equal the amount deferred. To the extent that the Employer is required to withhold any taxes or other amounts from the employees' deferred wages pursuant to any state, federal or local law, such amounts shall be taken out of the portion of the Participant's Compensation which is not deferred under this Plan. 5.2 Additional Payments. The Company also intends that supplemental payments shall be made at death, disability or termination of employment, as the case may be, for any reduction in benefits due to deferrals of Compensation under this Plan in respect of any of the Employer's life insurance or disability plans or Employees Stock Purchase Plan now in existence or adopted after the effective date of this Plan. 5.3 Vesting of Deferred Benefit Account. A Participant shall be 100% vested in his/her Deferred Benefit Account. ARTICLE VI DEFERRED BENEFIT ACCOUNT 6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of each Determination Date, shall consist of the balance of the Participant's Deferred Benefit Account as of the immediately preceding Determination Date, plus the Participant's elective deferred compensation withheld since the immediately preceding Determination Date pursuant to paragraph 5.1 and plus amounts credited to the Participant's Deferred Benefit Account pursuant to paragraphs 6.4 and 6.5. The Deferred Benefit Account of each Participant shall be reduced by the amount of all distributions, if any, made from such Deferred Benefit Account since the preceding Determination Date. 6.2 Type of Deferral. A Participant may elect to have any portion of the amount deferred credited to either Account A (fixed income return) or to Account B (Share Units). The initial election shall be made by a properly executed Participation Agreement. With respect to a Participation Agreement first effective before the Transition Date, an election to defer any amount to Account A shall be treated as an election to defer to Account AA, except as set forth below. An election to change the apportionment of deferred amounts between Accounts A and B may be made by a Participant filing with the Plan Administrator a revised Participation Agreement indicating such change on or before April 15th of each calendar year. The revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreement. The revised Participation Agreement shall be effective for Plan Years beginning after the date it is filed. Deferrals in such Plan Years shall be credited in accordance with the election of the revised Participation Agreement, provided, however, that an election to allocate a portion of deferrals to Account A in excess of the portion allocated in the Participation Agreement to be deferred into the fixed income account as of May 1, 1989, shall be deemed to be an election by the Participant to allocate to Account AA a portion of deferrals equal to the portion so allocated to the fixed income account on May 1, 1989, and to allocate to Account A the portion in excess of such portion. 6.3 Creation of Accounts AA, BB, C, and CC. (a) Accounts AA and BB. As of the start of business on the Transition Date, all amounts standing to the credit of each Participant in Account A shall be transferred to an Account AA. As of the start of business on the Transition Date, amounts standing to the credit of each Participant in Account B that are attributable to prior transfers from Account A into Account B shall be transferred to an Account BB. The amount of such transfers shall be an amount equal to the sum of the dollar amount of all transfers from Account A to Account B during the period beginning on the effective date of the Participation Agreement and ending on the Transition Date. For all purposes of this Plan, except as otherwise noted in this Plan, Account AA shall be treated in the same manner as Account A, and Account BB shall be treated in the same manner as Account B. Compensation earned by employees on or after the Transition Date subject to deferral under a Participation Agreement first effective before the Transition Date shall be credited to Accounts AA and B (in accordance with the Participant's election to allocate such deferrals to Accounts A or B, respectively, in such Participation Agreements) for such Participation Agreement. (b) Accounts C and CC. On the Determination Date first following the Distribution Time, there shall be credited to Accounts C and CC, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of Cellular Share Units determined as follows: (1) one Cellular Share Unit in Account C for each Distribution Dividend Rate number of Share Units in Account B for such Participant for such Plan Year as of the Distribution Time; and (2) one Cellular Share Unit in the Retirement Deferred Benefit Account of Account CC for each Distribution Dividend Rate number of Share Units in the Retirement Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Distribution Time; and. (3) one Cellular Share Unit in the Termination Deferred Benefit Account of Account CC for each Distribution Dividend Rate number of Share Units in the Termination Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Distribution Time. 6.4 Maintenance of Accounts A and AA. As of each Determination Date, the Participant's Deferred Benefit Accounts A and AA shall be increased by the amount of interest earned since the preceding Determination Date. Interest on Accounts A and AA shall be based upon the Interest Yield. For Account AA, a Retirement Deferred Benefit Account shall be maintained and increased at the rate specified by the Retirement Interest Yield and a Termination Deferred Benefit Account shall be maintained and increased at the rate specified by the Termination Interest Yield. Interest shall be credited on the mean average of the balances of the Deferred Benefit Account on the Determination Date (before crediting the interest) and on the last preceding Determination Date, but after the Deferred Benefit Account has been adjusted for any contributions or distributions to be credited or deducted for each such day. 6.5 Maintenance of Share Unit Accounts. (a) Maintenance of Accounts B and BB. (1) Conversion between Dollar Amounts and Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts B or BB, it shall be converted into Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of Share Units shall be converted into a dollar amount by multiplying such number of Share Units by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Sub-accounts to be Maintained for Purposes of Computing Retirement and Termination Benefits. Two sub-accounts shall be maintained for Account BB: (i) a Retirement Deferred Benefit Account which shall include the transfer from Account B into Account BB described in paragraph 6.3(a) plus amounts transferred from the Account AA Retirement Deferred Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(a); and (ii) a Termination Deferred Benefit Account which shall include the transfer from Account B into Account BB described in paragraph 6.3(a) plus amounts transferred from the Account AA Termination Deferred Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(a). (3) Dividends. When a dividend is declared and paid by the Company on its common stock, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (4) [Deleted] (5) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Share Units credited to a Participant's Accounts B and BB as may be necessary to give effect to such change in the Company's capital structure. (6) Conversion of Share Units to Dollars on Dis tribution. Share Units in Accounts B and BB shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the twelve calendar months immediately preceding the date of distribution. If a Participant elects payment in other than a lump sum, Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts B and BB in accordance with paragraphs 6.5(a)(3), 6.5(a)(4), and 6.5(a)(5). For such purposes, a Participant that is a Sprint Insider immediately before the event that entitles the Participant to distribution shall be deemed a Sprint Insider during the period of distribution. (b) Maintenance of Accounts C and CC. (1) Conversion between Dollar Amounts and Cellular Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts C or CC, it shall be converted into Cellular Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Cellular Share Units is to be subtracted from a Participant's Deferred Benefit Accounts C or CC, such number of Cellular Share Units shall be converted into a dollar amount by multiplying such number of Cellular Share Units by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Sub-accounts to be Maintained for Purposes of Computing Retirement and Termination Benefits. Two sub-accounts shall be maintained for Account CC: (i) a Retirement Deferred Benefit Account which shall include the value of the Cellular Share Units credited pursuant to paragraph 6.3(b)(2) plus other additions pursuant to this paragraph 6.5(b) and (ii) a Termination Deferred Benefit Account which shall include the value of the Cellular Share Units credited pursuant to paragraph 6.3(b)(3) plus other additions pursuant to this paragraph 6.5(b). (3) Dividends to non-Cellular Insiders. For all Participants other than Cellular Insiders, when a dividend is declared and paid by Cellular on its common stock, an amount shall be credited to the Participant's Accounts C and CC as though the same dividend had been paid on the Cellular Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Cellular Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (4) Dividends to Cellular Insiders. For Participants that are Cellular Insiders, when a cash dividend is declared and paid by Cellular on its common stock, an amount equal to such dividend shall be credited to the Participant's Account A or Account AA with respect to Cellular Share Units in Accounts C or CC, respectively as of the Determination Date immediately preceding the declaration of the dividend. (5) Effect of Recapitalization. In the event of a stock dividend, stock split or other corporate reorganization involving Cellular's common stock, the Company shall make equitable adjustment to the number of Cellular Share Units credited to a Participant's Accounts C and CC as may be necessary to give effect to such change in Cellular's capital structure. (6) Conversion of Cellular Share Units to Dollars on Distribution. Cellular Share Units in Accounts C and CC shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Cellular Share Unit shall be the average closing price of Cellular's common stock on the New York Stock Exchange on the last trading day for each of (i) the 12 calendar months immediately preceding the date of such distribution or (ii) the smaller number of calendar months elapsed from the Distribution Time to such distribution. If a Participant elects payment in other than a lump sum, Cellular Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts C and CC in accordance with paragraphs 6.5(b)(3), 6.5(b)(4), and 6.5(b)(5). For such purposes, a Participant that is a Cellular Insider immediately before the event that entitles the Participant to distribution shall be deemed a Cellular Insider during the period of distribution. 6.6 Statement of Accounts. The Company shall submit to each Participant, within 120 days after the close of each Plan Year, a statement in such form as the Company deems desirable, setting forth the balance to the credit of such Participant in his Deferred Benefit Accounts A, B, and C and in his Deferred Benefit Accounts AA, BB, and CC (showing separate calculations for each Interest Yield), in each case, as of the last day of the preceding Plan Year. 6.7 Transfers Between Accounts. Within the limitations of this paragraph 6.7, a Participant may elect, by executing an Account Transfer Request: (1) to transfer all or any portion of his Account A to Account B, (2) to transfer all or any portion of his Account B to Account A, (3) to transfer all or any portion of his Account AA to Account BB, (4) to transfer all or any portion of his Account BB to Account AA, (5) to transfer all or any portion of his Account C to Account A, (6) to transfer all or any portion of his Account C to Account B, (7) to transfer all or any portion of his Account CC to Account AA, and (8) to transfer all or any portion of his Account CC to Account BB. Such election shall be effective on the last day of the calendar month in which the Plan Administrator timely receives the Participant's executed Account Transfer Request. Transfers may not be made more than four times in any Plan Year, and no such transfer may be made unless a period of at least three months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current transfer. ARTICLE VII BENEFITS 7.1 Benefit for Normal or Early Retirement and Termination After Age 55. Subject to paragraph 7.6 below, upon a Participant's (i) retirement after reaching the Normal Retirement Date, or (ii) retirement after reaching the Early Retirement Date, or (iii) termination of employment after attaining age 55, he shall be entitled to a Deferral Benefit equal to the amount of his Retirement Deferred Benefit Account determined under paragraph 6.1 hereof as of the Determination Date coincident with or immediately following such event. 7.2 Termination of Employment Before Age 55. Upon any termination of service of the Participant before age 55 for reasons other than death or Disability, the Employer shall pay to the Participant, as compensation earned for services rendered before his termination of service, a Deferral Benefit equal to the amount of his Termination Deferred Benefit Account determined under paragraph 6.1 hereof. The Termination Deferred Benefit Account of a Participant whose employment has terminated shall be paid in a single sum to the terminated Participant within 30 days following termination of employment, if the aggregate balance of the Deferred Benefit Account(s) of such Participant is $20,000 or less. If such aggregate balance of a Participant's Deferred Benefit Account(s) is more than $20,000, payment shall commence pursuant to the Participant's election in the Participation Agreement. 7.3 Death. If a Participant dies after the commencement of payments of his Deferral Benefit, his Beneficiary shall continue to receive the remaining installments of his Deferred Benefit Account in accordance with the Participant's election pursuant to paragraph 7.6. If a Participant dies while employed, before any payments of a Deferral Benefit, the aggregate amounts deferred under all Participation Agreements shall be determined as follows: (a) In the case of deferrals pursuant to a Participation Agreement first effective before the Transition Date: (1) Deferrals of Incentive Compensation shall be the Retirement Deferred Benefit Account value thereof. (2) Deferrals of Base Salary pursuant to Participation Agreements requiring a total deferral of less than $15,000 per year allocated to Accounts A and AA pursuant to the Participation Agreement as revised on the date of the Participant's death shall be the greater of (i) the Retirement Deferred Benefit Account value thereof or (ii) ten times the amount of the elected annual Base Salary deferral. (3) Deferrals of Base Salary pursuant to Participation Agreements requiring a total deferral of $15,000 or more per year allocated to Accounts A and AA pursuant to the Participation Agreement as revised on the date of the Participant's death shall be determined as follows: (i) that portion of the deferral which totals $15,000 per year shall be the greater of (x) the Retirement Deferred Benefit Account value thereof and (y) ten times the amount of the elected annual Base Salary deferral, and (ii) the portion of such deferral which is in excess of $15,000 per year shall be the Retirement Deferred Benefit Account value of such excess. (4) Deferrals allocated to Accounts B and BB shall be the Retirement Deferred Benefit Account value thereof. (b) In the case of deferrals pursuant to a Participation Agreement first effective on or after the Transition Date, the aggregate amount of all deferrals shall be the Retirement Deferred Benefit Account value of Accounts A and B. The Deferral Benefit shall be payable as provided for in paragraph 7.6. The Deferral Benefit provided above shall be in lieu of all other benefits under this Plan. 7.4 Disability. In the event of Disability while employed by the Employer, before the completion of all deferrals provided for under a Participation Agreement, the Employer shall credit to the disabled Participant's Deferred Benefit Account an amount equal to the amount of the Participant's Agreement to defer during such period of Disability, but not beyond the period elected. In the event of Disability before termination of employment or the Normal Retirement Date, the disabled Participant, unless he otherwise elects under this paragraph, shall be entitled to the amount in his Retirement Deferred Benefit Account (rather than his Termination Deferred Benefit Account) determined under paragraph 6.1 as of the Determination Date next following such Disability, with payments to commence upon attainment of the Participant's Normal Retirement Date in the form specified in paragraph 7.6(a)(2) and/or 7.6(a)(3) over a 15 year period. Before payments commence under the preceding sentence, a Disabled Participant may elect, subject to Committee approval upon good cause shown: (i) to accelerate commencement of the payments to any earlier date, but not sooner than 60 days after the onset of Disability and/or (ii) to change the form of payment permitted under paragraph 7.6(a). 7.5 Suspension of Participation; Failure to Continue Participation. The Committee, in its sole discretion, may suspend the deferral of a Participant's Compensation upon the advanced written request of a Participant on account of financial hardship suffered by that Participant. A Participant must file any request for such suspension on or before the 15th day preceding the regular payment date on which the suspension is to take effect. The Committee, in its sole discretion, shall determine the amount, if any, that will not be deferred by the Participant as a result of the financial hardship. The suspension of any deferrals under this paragraph shall not affect amounts deferred with respect to periods before the effective date of the suspension. A Participant whose deferrals are suspended may not execute a subsequent Participation Agreement that would take effect before the beginning of the third Plan Year following the close of the Plan Year in which the suspension first took effect. In the event the Participant ceases to remain a member of the class of employees who are eligible to participate in this Plan, the Participant may elect to suspend the amount of any remaining deferral commitment in the same manner as described for other suspensions in this paragraph, except that Committee approval shall not be required. 7.6 Form of Benefit Payment. (a) Upon the happening of an event described in paragraphs 7.1, 7.2, 7.3 or 7.4 above, the Employer shall pay to the Participant or his Beneficiary the amount specified in one of the following forms as elected by the Participant in the Participation Agreement filed by the Participant: (1) a lump sum payment at a time designated in the Participation Agreement but no later than the Participant's Normal Retirement Date. (2) with respect to balances in Accounts A and AA, an annual payment of a fixed amount that shall amortize the Deferred Benefit Account balance in equal annual payments of principal and interest over a period from 2 to 20 years. For purposes of determining the amount of the annual payment, the assumed rate of interest on Accounts A and AA shall be the average of the applicable Interest Yield as of each Determination Date for the 60 months preceding the initial annual installment payment. (3) with respect to balances in Accounts B and BB, an annual payment over a period from 2 to 20 years, each such payment having a value, as determined pursuant to paragraph 6.5(a)(6), of the number of Share Units equal to (i) the number of Share Units in the accounts on the Determination Date immediately following the event described in paragraph 7.1, 7.2, 7.3 or 7.4, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account B or BB, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(3) or 6.5(a)(4) hereof. Such Share Unit dividends shall be valued in the same manner as previously described, and all such Share Units accruing after a distribution from Accounts B or BB is made shall be paid to the Participant with the next distribution from the account. (4) with respect to balances in Accounts C and CC, an annual payment over a period from 2 to 20 years, each such payment having a value, as determined pursuant to paragraph 6.5(b)(6), of the number of Cellular Share Units equal to (i) the number of Cellular Share Units in the accounts on the Determination Date immediately following the event described in paragraph 7.1, 7.2, 7.3 or 7.4, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account C or CC, Cellular Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(3) or 6.5(b)(4) hereof. Such Cellular Share Unit dividends shall be valued in the same manner as previously described, and all such Cellular Share Units accruing after a distribution from Accounts C or CC is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which his benefits shall be paid by filing a revised Participation Agreement indicating such change at least 13 months before the date upon which the payments to be made are determined. Such revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and the duration of Participation Agreements. No such revised Participation Agreement shall change the amount elected to be deferred in the original Participation Agreement, nor the time elected for commencement of benefit payments. (c) In the absence of a Participant's election under subparagraph 7.6(a), benefits shall be paid in the form specified in subparagraph 7.6(a)(2), 7.6(a)(3), and 7.6(a)(4) over a 15 year period, except as provided in paragraph 7.2. In the event of a Disabled Participant, payment shall be in the form described in paragraph 7.4. 7.7 Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder any taxes required to be withheld from an employee's wages for the federal or any state or local government. 7.8 Commencement of Payments. Unless otherwise provided, payments under this Plan shall begin within 60 days following receipt of notice by the Plan Administrator of an event which entitles a Participant (or a Beneficiary) to payments under this Plan, or at such earlier date as may be determined by the Company pursuant to the terms of the Plan. All payments shall be made as of the first day of the month. 7.9 Termination of SpinCo Group Employees. For purposes of this Plan, any Participant who, within the meaning of the Distribution Agreement, is a SpinCo Group Employee immediately after the Distribution Time shall be treated as terminated on the Distribution Time. ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of his death before complete distribution to the Participant of the benefits due him under the Plan. 8.2 Amendments. Any Beneficiary Designation may be changed by a participant by the written filing of such change on a form prescribed by the Company. The filing of a new Beneficiary Designation form will cancel all Beneficiary Designations previously filed. 8.3 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's designated Beneficiary shall be deemed to be the person or persons surviving him in the first of the following classes in which there is a survivor, share and share alike: (a) The surviving Spouse; (b) The Participant's children, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share their parent would have taken if living; (c) The Participant's personal representative (executor or administrator). 8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely discharge the Employer's obligations under this Plan. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment. The Board may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease or restrict any Deferred Benefit Account at the time of such amendment. 9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan with respect to new elections to defer if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company. The Board may also terminate the Plan in its entirety at any time, and upon any such termination, each Participant (a) who is then receiving a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the then remaining balance in his Deferred Benefit Account, and (b) who has not received a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the balance in his Deferred Benefit Account. ARTICLE X MISCELLANEOUS 10.1 Unsecured General Creditor. Participants and their Beneficiaries shall have no legal or equitable rights, interest or claims in any property or assets of the Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ('Policies'). Such Policies or other assets of the Employer shall not be held under any trust for the benefit of Participants or their Beneficiaries or held in any way as collateral security for the fulfilling of the obligations of the Employer under this Plan. Any and all of the Employer's assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 10.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, before actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.3 Not a Contract of Service. The terms and conditions of this Plan shall not be deemed to constitute a contract of service between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time. 10.4 Protective Provisions. A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. 10.5 Applicable Law. The Plan, and any Participation Agreement related thereto, shall be governed by the laws of the State of Kansas, without regard to the principles of conflicts of law. 10.6 For purposes of this Plan, an employee who becomes employed by Sprint Spectrum L.P., Global One, or Alcatel, N.V. (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Enitites without becoming employed by the Company or its subsidiaries. EX-10 6 MANAGEMENT INCENTIVE STOCK OPTION PLAN Exhibit (10)(l) MANAGEMENT INCENTIVE STOCK OPTION PLAN (As Amended April 18, 1995, August 8, 1995, August 12, 1996 and February 11, 1997) 1. Establishment and Purpose. Sprint Corporation, a Kansas corporation (the "Company"), hereby establishes a stock option plan to be named the Management Incentive Stock Option Plan (the "Plan") The purpose of the Plan is to permit employees of the Company and its subsidiaries who are eligible to receive annual incentive compensation to receive nonqualified stock options in lieu of a portion of the target incentive under the Company's management incentive plans ("MIPs"), thereby encouraging the employees to focus on the growth and profitability of the Company and the performance of its common stock. Subject to approval of the Company's stockholders, the Plan provides for options to be granted beginning March 15, 1995, and ending April 18, 2005. Stock options granted prior to or as of April 18, 2005, may extend beyond that date. 2. Administration. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors (the "Committee"). The Company shall grant options under the Plan in accordance with determinations made by the Committee pursuant to the provisions of the Plan. The Committee from time to time may adopt (and thereafter amend and rescind) such rules and regulations for carrying out the Plan and take such action in the administration of the Plan, not inconsistent with the provisions of the Plan, as it shall deem proper. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any option or restricted shares of common stock granted or issued pursuant to the Plan, in the manner and to the extent it shall deem desirable to effect the terms of the Plan. The interpretation and construction of any provisions of the Plan by the Committee shall, unless otherwise determined by the Board of Directors of the Company, be final and conclusive. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. The Corporate Secretary shall act as Plan Administrator carrying out the day-to-day administration of the Plan unless the Committee appoints another officer or employee of the Company as Plan Administrator. 3. Eligibility. The Committee will determine each year whether options will be granted in such year, whether participation will be elective or automatic and the amount of incentive compensation to be given up for each stock option. Any salaried employee of the Company and its subsidiaries shall be eligible to be selected for participation in the MIPs. The Committee will, in its discretion, determine the employees who participate in the MIPs and, therefore, who will be eligible for options, the dates on which options shall be granted, and any conditions on the exercise of the options. No option may be granted to any individual who immediately after the option grant owns directly or indirectly stock possessing more than five percent (5%) of the total combined voting power or value of all classes of stock of the Company or any subsidiary. 4. Common Stock Subject to the Plan. The shares of common stock of the Company, $2.50 par value, to be issued upon the exercise of a nonqualified option to purchase common stock granted in lieu of MIP payout may be made available from the authorized but unissued common stock of the Company, shares of common stock held in the treasury, or common stock purchased on the open market or otherwise. Approval of the Plan by the Stockholders of the Company shall constitute authorization to use such shares for the Plan subject to the discretion of the Board or as such discretion may be delegated to the Committee. Subject to the provisions of the following paragraph, the total number of shares for which options may be granted under the Plan each year shall be 0.9% of the total outstanding shares of common stock of the Company as of the first day of such year; provided, however, that such number shall be increased in any year by the number of shares available in previous years for which options have not been granted. If and when an option granted under the Plan is terminated without having been exercised in full, the unpurchased or forfeited shares shall become available for grant to other employees. The number of shares subject to the Plan may be appropriately adjusted by the Committee in the circumstances outlined in Section 5(k). 5. Stock Options; Terms and Conditions. Each option will represent the right to purchase a specific number of shares of common stock of the Company and shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable: a. Consideration for and Number of Options. Each option shall be granted in lieu of a portion of the optionee's cash payout under the MIPs. The Committee shall determine the number of shares or the manner of calculating the number of shares available for each option each year, subject to the total number of shares available under the Plan for such year, and the amount or the method of determining the amount of annual incentive compensation to be given up by each participant in return for an option, taking into consideration appropriate factors in making such determinations, such as interest rates, volatility of the market price of common stock of the Company and the term of the option, provided, however that shares subject to options granted to any individual employee during any calendar year shall not exceed a total of 500,000 shares. b. Participation in the Plan. Participation in the Plan may be voluntary or automatic, as determined by the Committee. The rules and procedures for voluntary participation, when applicable, shall be established and implemented by the Plan Administrator. c. Exercise Price. The price at which each share covered by an option may be purchased shall be one hundred percent (100%) of the fair market value of the Company's common stock on the date the option is granted. Fair market value shall be deemed to be the average of the high and low prices of the Company's common stock for composite transactions as published by major newspapers for the date the option is granted or, if no sale of the Company's common stock shall have been made on that day, the next preceding day on which there was a sale of such stock. d. Vesting. Unless the Committee determines otherwise, stock option grants shall provide that the total number of shares subject to an option shall become exercisable December 31 in the year of the date of grant. e. Term of Option. Options shall not be exercisable after the expiration of ten (10) years from the date of grant. f. Payment of Exercise Price. Options shall be exercisable only upon payment to the Company of the full purchase price of the shares with respect to which options are exercised. Payment for the shares shall be either in United States dollars, payable in cash or by check, or by surrender of stock certificates representing like common stock of the Company having an aggregate fair market value, determined as of the date of exercise, equal to the number of shares with respect to which such options are exercised multiplied by the exercise price per share. The fair market value of common stock on the date of exercise of options shall be determined in the same manner as the fair market value of common stock on the date of grant of options is determined. Certain optionees may use restricted stock as payment for the exercise price in accordance with Section 6 hereof. In that event, fair market value of the shares of restricted stock will be determined as if the shares were not restricted. In lieu of the delivery of physical certificates, the optionee may deliver shares in payment of the exercise price by attesting, on a form established for such purpose by the Secretary, to the ownership, either outright or through ownership of a broker account, of a sufficient number of shares held for a period of at least six months to pay the exercise price. The attestation must be notarized and signed by the optionee's spouse if the spouse is a joint owner of the shares with respect to which such attestation is made and must be accompanied by such documentation as the Corporate Secretary may consider necessary to evidence actual ownership of such shares. g. Manner of Exercise. A completed exercise form and the exercise price, whether in the form of cash or stock, must be delivered to the Plan Administrator in order to exercise an option. An option shall be deemed exercised on the date such exercise form and payment are received by the Plan Administrator. h. Time for Exercise. Each option expires if it has not been exercised within its term. Once an option has expired for any reason, it can no longer be exercised. If employment with the Company or a subsidiary of the Company is terminated, the optionee may exercise options which are exercisable on the date of termination of employment until the earlier of (1) the date on which the option expires and (2) the end of the applicable time period below: (i) retirement: five years after retirement date. (ii) disability (qualifying for long- term disability benefits under the Company's Basic Long-Term Disability Plan): five years after qualification date. (iii) death: one year after death for the estate or designated beneficiary to exercise the decedent's options. (iv) involuntary termination other than for cause: the date on which the option expires. (v) voluntary termination: three months from the date of termination of employment. If an optionee's employment is terminated for a reason constituting good cause, any outstanding options granted under the Plan and held by such optionee at such time will automatically terminate. For this purpose, "good cause" shall mean conduct by the optionee which reflects adversely on his or her honesty, trustworthiness or fitness as an employee, or the optionee's willful engagement in conduct which is demonstrably and materially injurious to the Company. If an optionee becomes associated with, becomes employed by, renders services to, or owns any interest in (other than a nonsubstantial interest, as determined by the Committee) any business in competition with the Company, all outstanding options whether vested or unvested shall automatically terminate and shares of restricted stock received upon the exercise of an option pursuant to Section 6 hereof which continue to be restricted shall be forfeited. For purposes of this Plan, an employee who becomes employed by Sprint Spectrum L.P., Global One, or Alcatel, N.V. (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Entities without becoming employed by the Company or its subsidiaries. i. Restricted Stock. Certain optionees may elect to deliver restricted shares or receive restricted shares in connection with an exercise of an option, as provided in Section 6 hereof. j. Beneficiary Designations. An optionee may designate a beneficiary or beneficiaries to exercise unexpired options and to own shares issued upon any such exercise after the optionee's death without order of any probate court or otherwise. A beneficiary so designated may exercise an option upon presentation to the Company of evidence satisfactory to the Corporate Secretary of (1) the beneficiary's identity and (2) the death of the optionee. An optionee may change any beneficiary designation at anytime before his death but may not do so by testamentary designation in his will or otherwise. Beneficiary designations must be made in writing on a form provided by the Plan Administrator. Beneficiary designations shall become effective on the date that the form, properly completed, signed and notarized, is received by the Plan Administrator. k. Change in Stock, Adjustments. In the event that the outstanding shares of common stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number of shares or kind of shares or other securities of the Company or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split up, combination of shares, or a dividend payable in capital stock (including a spin-off), appropriate adjustment shall be made by the Committee in the number of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the optionee's proportionate interest shall be maintained as before the occurrence of such event, and such adjustment of outstanding options shall be made without change of the total price applicable to unexercised options and with a corresponding adjustment in the exercise price per share. l. Limited Transferability. Options may not be transferred, levied, garnished, executed upon, subjected to a security interest, or assigned to any person other than the optionee, except that the optionee may transfer an option to a trust of which the optionee is the sole beneficiary during his lifetime. Upon the death of the optionee, the trustee of such trust may exercise any options to which the trustee has legal title on or before the expiration date of such options, and shares issued pursuant to such exercise shall be issued to the trustee. Documents evidencing the transfer of any option and the identity of the trustee shall be in such form as may be required by the Secretary of the Company. 6. Restricted Stock. Certain optionees, as determined by the Committee, may elect to receive restricted shares upon payment for the exercise of an option in the form of unrestricted common stock. The optionee will receive the same number of unrestricted shares as the number of shares surrendered to pay the exercise price, while the shares received in excess of the number surrendered to pay the exercise price may be restricted. Such optionees may also elect to deliver restricted shares of the Company's common stock in payment of the exercise price notwithstanding restrictions on transferability to which such shares are subject. The Company shall be authorized to issue restricted shares of common stock upon such exercises of stock options, subject to the following conditions: a. The optionee shall elect a vesting period for the restricted common stock to be received upon exercise of the option of between six (6) months and ten (10) years, subject to rules and procedures established by the Plan Administrator, but in no event may an optionee elect a vesting period shorter than the period provided in paragraph (d) of this Section 6. At any time on or before the 13th calendar month preceding the date on which restrictions on shares of restricted stock would otherwise lapse, the optionee may elect to extend the vesting period on all but not a portion of such shares by six months or any multiple of six months. b. The optionee who receives restricted stock may not sell, transfer, assign, pledge or otherwise encumber or dispose of shares of restricted stock until such time as all restrictions on such stock have lapsed except: (i) to the Company in payment of the exercise price of a stock option issued by the Company under any employee stock option plan adopted by the Company that provides for payment of the exercise price in the form of restricted stock, provided that such payment is made in accordance with the terms of such plan; or (ii) to a trust of which the optionee, the optionee's spouse, or descendants of the optionee are the primary beneficiaries and which is a grantor trust treated as owned by the optionee under Subchapter J of the Internal Revenue Code, upon the following terms: (A) the Company receives, prior to such transfer, a true copy of the trust agreement and an opinion from optionee's counsel (1) that the trust will be treated as a grantor trust owned by the optionee under Subchapter J of the Internal Revenue Code at all times until the restrictions on such stock lapse or the stock is forfeited under the terms of its grant, (2) that the terms of the trust provide that upon the forfeiture of the restricted stock under the terms of its grant or the earlier termination of the trust for whatever reason, ownership of the restricted stock shall revert to the optionee or to the Company, (3) that the trustee of such trust may not, prior to the lapsing of restrictions on such stock, sell, transfer, assign, pledge, or otherwise encumber or dispose of shares of restricted stock except to the Company or to the optionee, subject to the restrictions provided for in this Plan, and (4) that, until the restrictions lapse, the trustee is not authorized to incur liabilities on behalf of the trust, other than to the beneficiaries of the trust; and (B) the optionee and the trustee of the trust shall execute stock powers in blank to be held in the custody of the Company; and (C) the Corporate Secretary of the Company may, in his discretion, enforce the foregoing transfer restrictions by maintaining physical custody of the certificate or certificates representing such shares of restricted stock, by placing a restrictive legend on such certificates, by requiring the optionee and the trustee to execute other documents as a pre-condition to such transfer, or otherwise. c. An optionee who elects to receive restricted common stock upon an exercise shall have the right to satisfy tax withholding obligations in the manner provided in Section 8 hereof. d. Restricted common stock received in such an exercise or from an election to receive a Long-Term Incentive Plan payout in restricted stock, or any Restricted Stock Award granted pursuant to the Long-Term Stock Incentive Program, shall be eligible for use in payment of the exercise price of a stock option, so long as all the shares received as a result of such an exercise are restricted for a period at least as long as, and with terms at least as restrictive as the terms of, the restricted common stock used in payment. e. The shares of restricted common stock received in an exercise of a stock option that continue to be restricted shall be forfeited in the event that vesting conditions are not satisfied, subject to the discretion of the Committee, except in the case of death, disability, normal retirement, or involuntary termination for reasons other than cause, in which case all restrictions lapse; provided, however, that in no event shall restrictions lapse if the restrictions on shares used to pay for the exercise have not lapsed under the same conditions. If restricted shares are forfeited, the optionee or his representative shall sign any document and take any other action required to assign said restricted shares back to the Company. f. The optionee will have all the rights of a stockholder with respect to shares of restricted stock received upon the exercise of an option, including the right to vote the shares of stock and the right to dividends on the stock. Unless the Plan Administrator establishes alternative procedures, the shares of restricted stock will be registered in the name of the optionee and the certificates evidencing such shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the award and shall be held in escrow by the Company. The optionee shall execute a stock power or powers assigning the shares of restricted stock back to the Company, which stock powers shall be held in escrow by the Company and used only in the event of the forfeiture of any of the shares of restricted stock. A certificate evidencing unrestricted shares of common stock shall be issued to the optionee promptly after the restrictions lapse on any restricted shares. g. The Plan Administrator shall have the discretion and authority to establish any rules in connection with the use of restricted stock, including but not limited to regulating the timing of the lapse of restrictions within the six- month to ten-year period and prescribing election forms as the Plan Administrator deems necessary or desirable for the orderly administration of such exercises. 7. Reload Options. The Committee may provide that optionees have the right to a reload option, which shall be subject to the following terms and conditions: a. Grant of the Reload Option; Number of Shares; Price. Subject to subsections (b) and (c) of this Section 7 and to the availability of shares to be optioned under the Plan, if an optionee has an option (the "original option") with reload rights and pays for the exercise of the original option by surrendering common stock of the Company, the optionee shall receive a new option ("reload option") for the number of shares so surrendered (or, if applicable, the number of shares provided for in paragraph (h) of this Section 7) at an exercise price equal to the fair market value of the stock on the date of the exercise of the original option. b. Minimum Purchase Required. A reload option will be granted only if the exercise of the original option is an exercise of at least 25% of the total number of shares granted under the original option (or an exercise of all the shares remaining under the original option if less than 25% of the shares remain to be exercised). c. Other Requirements. A reload option will not be granted: (1) if the market value of the common stock of the Company on the date of exercise of the original option is less than the exercise price of the original option; (2) if the optionee is no longer an employee of the Company or its subsidiary; or (3) if the original option is exercised less than one year prior to the expiration of the original option. d. Term of Option. The reload option shall expire on the same date as the original option. e. Type of Option. The reload option shall be a nonqualified option. f. No Additional Reload Options. The reload options shall not include any right to a second reload option. g. Date of Grant, Vesting. The date of grant of the reload option shall be the date of the exercise of the original option. The reload options shall be exercisable in full beginning one year from date of grant; provided, however, that all shares purchased upon the exercise of the original option (except for any shares withheld for tax withholding obligations) shall not be sold, transferred or pledged within six months from the date of exercise of the original option. In no event shall a reload option be exercised after the original option expires as provided in subsection (d) of this Section 7. h. Stock Withholding; Grants of Reload Options. If the other requirements of this Section 7 are satisfied, and if shares are withheld or shares surrendered for tax withholding, a reload option will be granted for the number of shares surrendered as payment for the exercise of the original option plus the number of shares surrendered or withheld to satisfy tax withholding. In connection with reload options for officers who are subject to Section 16 of the Securities Exchange Act of 1934, the Committee may at any time impose any limitations which, in the Committee's sole discretion, are necessary or desirable in order to comply with Section 16(b) of the Securities Exchange Act of 1934 and the rules and regulations thereunder, or in order to obtain any exemption therefrom. i. Other Terms and Conditions. Except as otherwise provided in this Section 7, all the provisions of the Plan shall apply to reload options. 8. Stock Withholding Election. When taxes are withheld in connection with the exercise of a stock option by delivering shares of stock in payment of the exercise price, or an exercise of an SAR for stock, or upon the lapse of restrictions on restricted stock received upon the exercise of an option (the date on which such exercise occurs or such restrictions lapse hereinafter referred to as the "Tax Date"), the optionee may elect to make payment for the withholding of federal, state and local taxes, including Social Security and Medicare ("FICA") taxes, up to the optionee's marginal tax rate, by one or both of the following methods: (i) delivering part or all of the payment in previously-owned shares (which shall be valued at fair market, as defined herein, on the Tax Date) which shares, if acquired from the Company, must have been held for at least six months; (ii) requesting the Company to withhold from those shares that would otherwise be received upon exercise of the option, upon exercise of an SAR for stock, or upon the lapse of restrictions, a number of shares having a fair market value (as defined herein) on the Tax Date equal to the amount to be withheld. The amount of tax with-holding to be satisfied by withholding shares from the option exercise is limited to the minimum amount of taxes, including FICA taxes, required to be withheld under federal, state and local law. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. If no timely election is made, cash must be delivered to satisfy all tax withholding requirements. 9. Miscellaneous. a. Amendment. The Company reserves the right to amend the Plan at any time by action of the Board of Directors provided that no such amendment may materially and adversely affect any outstanding stock options without the consent of the respective participants, and provided that, without the approval of the stockholders, no such amendment may increase the total number of shares reserved for the purposes of the Plan. b. Effectiveness of Plan. This Plan shall be effective as of February 18, 1995, subject to approval of Stockholders of the Company prior to February 18, 1996. c. Rights in Securities. All certificates for shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No optionee or optionee's beneficiary, executor or administrator, legatees or distributees, as the case may be, will be, or will be deemed to be, a holder of any shares subject to an option unless and until a stock certificate or certificates for such shares are issued to such person or persons under the terms of the Plan. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 5(k) hereof. d. Date of Grant. The grant of an option shall be effective no earlier than the date the Committee decides to grant the option, except that grants of reload options shall be effective as provided in Section 7g hereof. e. Application of Funds. The proceeds received by the Company from the sale of stock subject to option are to be added to the general funds of the Company and used for its corporate purposes. f. No Obligation to Exercise Option. Granting of an option shall impose no obligation on the optionee to exercise such option. EX-10 7 RETIREMENT PLAN FOR DIRECTORS Exhibit (10)(u) SPRINT CORPORATION RETIREMENT PLAN FOR DIRECTORS (as amended through December 10, 1996) 1. Name and Purpose The name of the Plan is the Sprint Corporation Retirement Plan for Directors ("Plan"). The purpose of the Plan is to provide any Director of Sprint who is not concurrently an employee of Sprint or any subsidiary of Sprint with continuing compensation for services rendered as a retired Director and thereby assist Sprint in the realization of its long-term strategies and objectives. It is intended that a person retired under this Plan will be available to provide advice and counsel from time to time on such matters as the Chairman of the Board shall request. 2. Definitions "Sprint" means Sprint Corporation, a Kansas Corporation, or any successor to a substantial portion of its business. "Credited Service" means all whole years of service as an Eligible Director of Sprint, including service as an Eligible Director prior to the Effective Date of the Plan and service as a Director of Centel Corporation prior to March 9, 1994. Service while a Director but not an Eligible Director will not be deemed to be service for any purpose under this Plan. Service as a Director of a subsidiary of Sprint will not be deemed to be service for any purpose under this Plan, except for service as a Director of Centel Corporation prior to the merger between Sprint and Centel Corporation effective March 9, 1993. "Director" means any member of the Board of Directors of Sprint. "Eligible Director" means any Director who is not concurrently employed by Sprint or any subsidiary of Sprint. "Effective Date" means March 1, 1982. "Participant" means any Eligible Director whose service has terminated and who has otherwise qualified to commence to receive a benefit under the terms of this Plan. "Plan" means the Sprint Corporation Retirement Plan for Directors. "Plan Administrator" means the General Counsel of Sprint or any other officer designated by the Chairman of the Board. "Retainer" means the annual fee established by the Board of Directors of Sprint and paid monthly for service as a Director, but excludes any meeting fee, expense reimbursement, or any other compensation received by a Director unless such compensation is specifically included as a part of the Retainer by action of the Board. "Termination of Service" means cessation of service as a Director. 3. Eligibility for Benefits Except as provided in the following sentence, each Director who has accumulated five or more years of Credited Service shall be entitled to benefits as provided under the Plan upon his or her termination of service as a Director. No Director who has not accumulated five or more years of Credited Service as of December 10, 1996, shall be entitled to a benefit under the Plan. 4. Plan Benefits The monthly benefit payable under the Plan to any Participant whose Termination of Service occurs prior to April 1, 1989, shall be equal to one-twelfth of one-half of the Retainer in effect for Eligible Directors. Any increase in the Retainer subsequent to Termination of Service of any such Participant shall apply in the determination of prospective monthly payments for such Participant. The monthly benefit payable under the Plan to any Participant whose Termination of Service occurs on or after April 1, 1989, shall be equal to one-twelfth of the Retainer in effect for Eligible Directors at the time Termination of Service of such Participant occurs. There shall be no adjustment in the benefit payable to any Participant whose Termination of Service occurs on or after April 1, 1989 if the Retainer is changed after his or her Termination of Service. The benefit shall be paid to the Participant on or before the last day of each month commencing with the month following his or her Termination of Service. No benefit shall be paid hereunder to any Director terminated for cause. 5. Duration of Benefits The monthly payments provided by this Plan shall continue until the first to occur of: (a) the number of monthly payments made equals the number of months of service by the Participant as an Eligible Director; or (b) 120 monthly payments have been made; or (c) the last day of the month following the death of the Participant. No benefit shall be paid under this Plan in any month in which a Participant is employed by or serving as a Director of any company if such service constitutes or would in the opinion of the General Counsel of Sprint be deemed to constitute a conflict of interest or other legal impediment of such a nature as would preclude such Participant from concurrently serving as a Director of Sprint. 6. Suspension of Benefits If a Participant returns to service as a Director or becomes an employee of Sprint or is or becomes a Director or employee of any subsidiary of Sprint, payment of benefits under this Plan shall be immediately suspended and shall commence again on the last day of the month following the month in which such service terminates. Following such termination, the amount of each monthly payment for a Participant whose Termination of Service occurred prior to April 1, 1989, shall be equal to one-twelfth of one-half of the Retainer in effect for Eligible Directors at the time payments under this Plan are resumed, and the amount of each monthly payment for a Participant whose Termination of Service occurred on or after April 1, 1989, shall be equal to one-twelfth of the Retainer at the time such Participant's most recent Termination of Service occurred. Monthly payments shall continue until the first to occur of (a) the number of monthly payments made, including payments prior to the Participant's return to service, equals the number of months of service by the individual as an Eligible Director: or (b) 120 such monthly payments, including payments prior to the Participant's return to service have been made; or (c) the last day of the month following the death of the Participant. 7. Funding No promise under this Plan shall be secured by any specific asset of Sprint, nor shall any asset of Sprint be designated as attributable to or be allocated to the satisfaction of any such promise. Each benefit payment shall be made from Sprint's general revenues. 8. Administration The Plan Administrator shall have full power and authority to administer the Plan, including the power to promulgate rules of Plan administration, the power to settle any disputes as to rights or benefits arising from the Plan, the power to appoint agents and delegate his duties, and the power to make such decisions or take such action as the Plan Administrator, in his sole discretion, deems necessary or advisable to aid in the proper administration of the Plan. 9. Alienation of Benefits No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt thereat shall be void. No such benefit payment shall, prior to receipt thereof by any Participant, be in any manner liable for or subject to such Participant's debt, alimony, child support, contract, liability, engagement, or tort. 10. Withholding Taxes The Company shall deduct from the amount of any payment hereunder any tax required to be withheld by applicable law. 11. Governing Law This Plan shall be governed and construed by the laws of the State of Kansas. 12. Amendment, Modification, Or Termination Of The Plan The Board of Directors may, at any time, terminate or, in any respect, amend or modify the Plan, but such action shall not affect the rights of any Participant then receiving benefits under the Plan. EX-10 8 AGREEMENT REGARDING SPECIAL COMPENSATION AND POST EMPLOYMENT RESTRICTIVE COVENANTS Exhibit (10)(w) AGREEMENT REGARDING SPECIAL COMPENSATION AND POST EMPLOYMENT RESTRICTIVE COVENANTS THIS AGREEMENT made this 9th day of November, 1993, by and between SPRINT/UNITED MANAGEMENT COMPANY, a Kansas corporation and subsidiary of Sprint Corporation ("Employer"), and GARY D. FORSEE ("Executive"). W I T N E S S E T H: WHEREAS, Employer and its parent and affiliates are engaged in the telecommunications business; WHEREAS, Executive has expertise, experience and capability in the business of Employer and the telecommunications business in general; WHEREAS, Executive has been, and/or now is serving Employer as Senior Vice President, Staff Operations; WHEREAS, Employer desires to enter into this Agreement to provide severance and other benefits for Executive and obtain Executive's agreements regarding confidentiality and post- employment restrictive covenants for Employer; and WHEREAS, Executive is willing to provide such agreements to Employer. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which consideration is mutually acknowledged by the parties, it is hereby agreed as follows: 1. Recitals. The recitals hereinbefore set forth constitute an integral part of this Agreement, evidencing the intent of the parties in executing this Agreement, and describing the circumstances surrounding its execution. Said recitals are by express reference made a part of the covenants hereof, and this Agreement shall be construed in light thereof. 2. Duties and Responsibilities. The duties and responsibilities of Executive are and shall continue to be of an executive nature as shall be required by Employer in the conduct of its business. Executive's powers and authority shall include all those presently delegated to him or such other duties and responsibilities as from time to time may be assigned to him. Executive recognizes, that during his employment hereunder, he owes an undivided duty of loyalty to Employer, and agrees to devote his entire business time and attention to the performance of said duties and responsibilities and to use his best efforts to promote and develop the business of Employer. 3. Employment Term. Executive's employment may be terminated by either party in accordance with Sections 5, 6, 7, or 8 herein. 4. Compensation and Benefits. During employment, Executive shall be entitled to receive a base annual salary, shall be reimbursed for reasonable expenses incurred and accounted for in accordance with the policies and procedures of Employer, and shall be entitled to vacation pay and other benefits applicable to employees generally, each as may from time to time be established, amended or terminated. In addition, upon execution of this Agreement, Executive shall be awarded five thousand (5,000) shares of restricted stock as set forth in a restricted stock agreement of even date herewith, attached hereto and incorporated herein (the "Restricted Stock Agreement"), shall be entitled to the Special Compensation set forth in Section 6 hereof in accordance with the terms of this Agreement, and shall be entitled, subject to approval of the Organization and Compensation Committee, to participation in the Key Management Benefit Plan in accordance with the terms of said plan. 5. Termination by Employer: Special Compensation. At any time, Employer may terminate Executive's employment for any reason. If Executive's termination is other than pursuant to Section 6, Executive shall, subject to the other provisions of this Section 5, be entitled to the following Special Compensation (as that term is defined in this Section 5) in lieu of any benefits available under any and all Employer separation plans or policies. If Executive's termination is pursuant to Sections 5, 6 or 7, Executive's obligations under Sections 11, 12, 13, and 14 hereof shall continue. For purposes of this Agreement, "Special Compensation" shall consist of : (a) to continue to receive for a period of eighteen (18) months from the date of termination (the "Severance Period") biweekly compensation at the rate equal to the biweekly amount of his base annual salary in effect at the date of termination of employment; (b) to receive a bonus, based on actual performance results, up to the target amount, under the Management Incentive Plan ("MIP") throughout the Severance Period provided that the amount, if any, payable under such Plan for the award period including the last day of the Severance Period shall be pro rated based upon the number of months of the Severance Period that fall within the award period and the total number of months in such award period; (c) to receive an award under the Long Term Incentive Plan, pro rated based on the Executive's last day worked, exclusive of any Severance Period, determined in accordance with the terms of said Plan; (d) acceleration of vesting of restricted stock in accordance with the relevant provisions of the Restricted Stock Agreement; (e) to continue to receive throughout the Severance Period any executive medical, dental, life, and qualified or nonqualified retirement benefits which the Executive was receiving or was entitled to receive at the time of termination, except that long term disability and short term disability benefits cease on the last day worked; (f) outplacement counseling by a firm selected by Employer to continue until Executive becomes employed; and (g) to continue to receive throughout the Severance Period all applicable executive perquisites (including automobile allowance, long distance services and all miscellaneous services) except country club membership dues and accrual of vacation. Employer shall pay or cause to be paid the amounts payable under paragraph (a) above in equal installments, bi-weekly in arrears, and the amount payable under paragraphs (b) and (c) in accordance with the terms of the Plans. All payments pursuant to this Section shall be subject to applicable federal and state income and other withholding taxes. In addition to the Special Compensation described above, Executive shall also be entitled to any vacation pay for vacation accrued by Executive in the calendar year of termination but not taken at the time of termination. In the event Executive becomes employed full time during the Severance Period, Executive's entitlement to continuation of the benefits described in paragraph (e) shall immediately cease, however, Executive shall retain any rights to continue medical insurance coverage under the COBRA continuation provisions of the group medical insurance plan by paying the applicable premium therefor. The payments and benefits provided for in this Section shall be in addition to all other sums then payable and owing to Executive hereunder and, except as expressly provided herein, shall not be subject to reduction for any amounts received by Executive for employment or services provided after termination of employment hereunder, and shall be in full settlement and satisfaction of all of Executive's claims and demands. In all events, Executive's right to receive severance and/or other benefits pursuant to this Section shall cease immediately in the event Executive is re-employed by Employer or an affiliate or Executive breaches his Confidential Information Covenant (as defined in Section 11 hereof), or breaches Sections 12, 13 or 14 hereof. In all cases, Employer's rights under Section 15 shall continue. 6. Voluntary Resignation by Executive; Termination for Cause; Total Disability Upon termination of Executive's employment by either Voluntary Resignation, Termination for Cause (as those terms are defined in this Section 6), or Total Disability, as that term is defined in the Long Term Disability Plan, Executive shall have no right to compensation, severance pay or other benefits described herein but Executive's obligations under Sections 11, 12, 13 and 14 hereof shall continue. (a) Voluntary Resignation by Executive. At any time, Executive has the right, by written notice to Employer, to terminate his services hereunder ("Voluntary Resignation"), effective as of thirty (30) days after such notice. (b) Termination for Cause by Employer. At any time, Employer has the right to terminate Executive's employment. Termination upon the occurrence of any of the following shall be deemed termination for cause ("Termination for Cause"): (i) Conduct by the Executive which reflects adversely on the Executive's honesty, trustworthiness or fitness as an Executive, or (ii) Executive's willful engagement in conduct which is demonstrably and materially injurious to the Employer. For Termination for Cause, written notice of the termination of Executive's employment by Employer shall be served upon Executive and shall be effective as of the date of such service. Such notice given by Employer shall specify the act or acts of Executive underlying such termination. (c) Total Disability. Upon the total disability of the Executive, as that term is defined in the Long Term Disability Plan, Executive shall have no right to compensation or severance pay described herein but shall be entitled to long term disability and other such benefits afforded under the applicable policies and plans. 7. Resignation Following Constructive Discharge. If at any time, except in connection with a termination pursuant to Section 5, 6, or 8 Executive is Constructively Discharged (as that term is defined in this Section 7) then Executive shall have the right, by written notice to Employer within sixty (60) days of such Constructive Discharge, to terminate his services hereunder, effective as of thirty (30) days after such notice. Executive shall in such event be entitled to the compensation and benefits as if such employment were terminated pursuant to Section 5 of this Agreement. For purposes of this Agreement, the Executive shall be "Constructively Discharged" upon the occurrence of any one of the following events: (a) Executive is removed from his position with Employer other than as a result of Executive's appointment to positions of equal or superior scope and responsibility; or (b) Executive's targeted total compensation is reduced by more than 10% (other than across-the-board reductions similarly affecting all officers of the Long Distance Division of Employer). 8. Effect of Change in Control. In the event that within one year of a Change in Control (as that term is defined in this Section 8) Executive's employment is terminated: (a) by the Employer other than pursuant to Section 6 hereof, or, (b) by Executive pursuant to Section 7 hereof, then Executive shall be entitled to the Special Compensation described in Section 5 and shall be bound by Section 11, but shall not have any continuing obligations under Sections 12, 13, and 14, except as otherwise required by common law or statute. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) other than a trustee or other fiduciary holding securities under an employee benefit plan of Sprint Corporation ("Sprint") or any of its affiliates, and other than Sprint or a corporation owned, directly or indirectly, by the stockholders of Sprint in substantially the same proportions as their ownership of stock of Sprint, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Sprint representing 20% or more of the combined voting power of Sprint's then outstanding securities, or (ii) during any period of two consecutive years (not including any period prior to the date of this Agreement), incumbent members cease for any reason to constitute a majority of the members of the Board of Directors of Sprint. A member of the Board of Directors of Sprint shall be an "incumbent member" if such individual is as of the date of this Agreement or at the beginning of the applicable two consecutive year period a member of the Board of Directors of Sprint, and any new director after the date of this Agreement (other than a director designated by person who has entered into an agreement to effect a transaction described in subparagraph (i) above) whose election to the Board or nomination for election by the stockholders of Sprint was approved by a vote of at least two- thirds (2/3) of the directors still in office who either were directors as of the date hereof or as of the first day of the applicable two consecutive year period or whose election or nomination for election was previously so approved. 9. Dispute Resolution. All disputes arising under this Agreement, other than those disputes relating to Executive's alleged violations of Sections 11 through 14 herein, shall be submitted to arbitration by the American Arbitration Association of Kansas City, Missouri. Costs of arbitration shall be borne equally by the parties. The decision of the arbitrators shall be final and there shall be no appeal from any award rendered. Any award rendered may be entered as a judgment in any court of competent jurisdiction. In any judicial enforcement proceeding, the losing party shall reimburse the prevailing party for its reasonable costs and attorneys' fees for enforcing its rights under this Agreement, in addition to any damages or other relief granted. This Section 9 does not apply to any action by Employer to enforce Sections 11 through 14 of this Agreement and does not in any way restrict Employer's rights under Section 15 herein. 10. Enforcement. In the event Employer shall fail to pay any amounts due to Executive under this Agreement as they come due, Employer agrees to pay interest on such amounts at a rate of prime plus two percent (2%) per annum. Employer agrees that Executive and any successor shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorney fees and costs of litigation. 11. Confidential Information. Executive acknowledges that during the course of his employment he has learned or will learn or develop Confidential Information (as that term is defined in this Section 11). Executive further acknowledges that unauthorized disclosure or use of such Confidential Information, other than in discharge of Executive's duties, will cause Employer irreparable harm. For purposes of this Section, Confidential Information means trade secrets (such as technical and non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process) and other proprietary information concerning the products, processes or services of Employer or its parent, and/or affiliates, including but not limited to: computer programs; unpatented inventions, discoveries or improvements; marketing, manufacturing, or organizational research and development; business plans; sales forecasts; personnel information, including the identity of other employees of Employer, their responsibilities, competence, abilities, and compensation; pricing and financial information; current and prospective customer lists and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property, which information: (a) has not been made generally available to the public; and (b) is useful or of value to the current or anticipated business, or research or development activities of Employer or of any customer or supplier of Employer, or (c) has been identified to Employee as confidential by Employer, either orally or in writing. Except in the course of his employment and in the pursuit of the business of Employer or any of its subsidiaries or affiliates, Executive shall not, during the course of his employment, or for a period of eighteen (18) months following termination of his employment for any reason, directly or indirectly, disclose, publish, communicate or use on his behalf or another's behalf, any proprietary information or data of Employer or any of its subsidiaries or affiliates. Executive acknowledges that Employer operates and competes nationally, and that Employer will be harmed by unauthorized disclosure or use of Confidential Information regardless of where such disclosure or use occurs, and that therefore this confidentiality agreement is not limited to any single state or other jurisdiction. 12. Non-Competition. Executive acknowledges that use or disclosure of Confidential Information described in Section 11 is likely if Executive were to perform telecommunications functions relating to long distance services on behalf of a competitor of Employer. Therefore, Executive shall not, for eighteen (18) months following termination of employment for any reason (the "Non-Compete Period"), accept any position, including but not limited to a position in the long distance operations of AT&T or MCI, where the performance of duties in that position will involve managing, controlling, participating in, investing in, acting as consultant or advisor to, rendering services for, or otherwise assisting any person or entity in the long distance business and performing functions relating to long distance services, including all forms of interexchange, interstate, intrastate, interlata and international communications. Executive acknowledges that Employer operates and competes nationally, and that therefore this non-competition agreement is not limited to any single state or other jurisdiction. This section shall not prevent Executive from using general skills and experience developed during employment with Employer or other employers; or from accepting a position of employment with another company, firm, or other organization which competes with Employer, if its business is diversified and Executive is employed in a part of the business that is not related to long distance Services and provided that such position does not require or permit the disclosure or use of Confidential Information. 13. Inducement of Other Employees. For a eighteen (18) month period following termination of employment, Executive will not directly or indirectly solicit, induce or encourage any employee or agent of Employer to terminate his relationship with Employer. 14. Return of Employer's Property. All notes, reports, sketches, plans, published memoranda or other documents created, developed, generated or held by Executive during employment, concerning or related to Employer's business, and whether containing or relating to Confidential Information or not, are the property of Employer and will be promptly delivered to Employer upon termination of Executive's employment for any reason whatsoever. During the course of employment, Executive shall not remove any of the above property containing Confidential Information, or reproductions or copies thereof, or any apparatus from Employer's premises without authorization. 15. Remedies. Executive acknowledges that the restraints and agreements herein provided are fair and reasonable, that enforcement of the provisions of Sections 11, 12, 13 and 14 will not cause him undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect Employer and its legitimate and proprietary business interests and property from irreparable harm. Executive acknowledges that failure to comply with the terms of this Agreement will cause irreparable damage to Employer. Therefore, Executive agrees that, in addition to any other remedies at law or in equity available to Employer for Executive's breach or threatened breach of this Agreement, Employer is entitled to specific performance or injunctive relief, without bond, against Executive to prevent such damage or breach, and the existence of any claim or cause of action Executive may have against Employer will not constitute a defense thereto. Executive further agrees to pay reasonable attorney fees and costs of litigation incurred by Employer in any proceeding relating to the enforcement of the Agreement or to any alleged breach thereof in which Employer shall prevail in whole or in part. In the event of a breach or a violation by Executive of any of the covenants and provisions of this Agreement, the running of the Non-Compete Period (but not of Executive's obligation thereunder), shall be tolled during the period of the continuance of any actual breach or violation. 16. Confidentiality of Agreement. As a specific condition to Executive's right to Special Compensation or other benefits described herein, Executive agrees that he will not disclose or discuss: the existence of this Agreement; the Special Compensation provided hereunder; or any other terms of the Agreement except: (1) to members of his immediate family; (2) to his financial advisor or attorney but then only to the extent necessary for them to assist him; or (3) as required by law or to enforce legal rights. 17. Entire Understanding. This Agreement constitutes the entire understanding between the parties relating to Executive's employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters, except for the terms and provisions of the Key Management Benefit Plan and any other employee benefit or other compensation plans (or any agreements or awards thereunder) referred to in or contemplated by this Agreement and except for the SPRINT UNITED EMPLOYEE AGREEMENT REGARDING PROPERTY RIGHTS AND BUSINESS PRACTICES which the Executive has signed and by which Executive continues to be bound. 18. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Executive's executors, administrators, legal representatives, heirs and legatees and the successors and assigns of Employer. 19. Partial Invalidity. The various provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations. Should any provision of this Agreement be determined to be void and unenforceable, in whole or in part, it shall not be deemed to affect or impair the validity of any other provision or part thereof, and such provision or part thereof shall be deemed modified to the extent required to permit enforcement. Without limiting the generality of the foregoing, if the scope of any provision contained in this Agreement is too broad to permit enforcement to its full extent, but may be made enforceable by limitations thereon, such provision shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly. 20. Strict Construction. The language used in this Agreement will be deemed to be the language chosen by Employer and Executive to express their mutual intent and no rule of strict construction shall be applied against any person. 21. Waiver. The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach. 22. Notices. Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; or (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested, addressed, in any case to the party at the following address(es) or telecopy numbers: If to Executive: Gary D. Forsee Sprint Communications Company, L.P. 8140 Ward Parkway Kansas City, MO 64114 If to Employer and/or Company: Sprint Corporation 2330 Shawnee Mission Parkway Westwood, KS 66205 Attention: Corporate Secretary or to such other address(es) or telecopy number(s) as any party may designate by Written Notice in the aforesaid manner. 23. Governing Law. This Agreement shall be governed by, and interpreted, construed and enforced in accordance with, the laws of the State of Kansas. 24. Gender and Number. Wherever from the context it appears appropriate, each term stated in either the singular of plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter. 25. Headings. The headings of the Sections of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed at Westwood, Kansas, on the date above set forth. GARY D. FORSEE SPRINT/UNITED MANAGEMENT COMPANY /s/ Gary D. Forsee By: /s/ B. Watson Authorized Officer AMENDMENT The Agreement Regarding Special Compensation and Post Employment Restrictive Covenants (the "Special Agreement") between Sprint/United Management Company and Gary D. Forsee (the "Executive") is hereby amended as follows, effective January 3, 1994: 1. The first sentence of Section 8 shall be changed by adding the word "or" at the end of item (b) and by adding the following item (c): (c) by Executive if Executive is required to be based anywhere other than the Kansas City metropolitan area or the Dallas, Texas metropolitan area except for required travel on business to an extent substantially consistent with Executive's business travel obligations immediately prior to the Change in Control; 2. Section 12 shall be changed by: (a) deleting from the second sentence of the first paragraph the words "the performance of duties in that position will involve", and substituting in lieu thereof the words "Executive dedicates his time and efforts principally to"; and (b) changing the last sentence of the Section to read: This section shall not prevent Executive from using general skills and experience developed during employment with Employer or other employers; or from accepting a position of employment with another company, firm, or other organization which competes with Employer, if its business is diversified and Executive is employed in a part of the business that is not related principally to long distance services and provided that such position does not require or permit the disclosure or use of Confidential Information. Except as amended herein, the terms of the Special Agreement shall remain in effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed at Westwood, Kansas, as of the date above set forth. EXECUTIVE SPRINT/UNITED MANAGEMENT COMPANY /s/ Gary D. Forsee By: /s/ B. Watson 1/10/94 Title: SVP - HR Amendment No. 2 This amendment (the "Amendment") is made as of the 12th day of August, 1996, by and between Sprint/United Management Company, a Kansas Corporation and a wholly- owned subsidiary of Sprint ("Employer") and Gary D. Forsee ("Executive"). Recitals 1. Employer and Executive entered into an Agreement Regarding Special Compensation and Post Employment Covenants, dated November 9, 1993 (the "Agreement"). 2. Employer and Executive amended the Agreement as of January 3, 1994. 3. Employer desires to expand the scope of Executive's covenants not to compete under the Agreement. 4. Employer is issuing to Executive additional shares* of restricted stock in consideration for Executives agreement to amend the Agreement. Now, therefore, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties agree as follows. 1. Section 12 of the Agreement is amended by adding the following language to the end of the last sentence of the first paragraph: ", together with related services such as information services." 2. In all other respects, the parties ratify and affirm the Agreement as previously amended. In Witness Whereof, the parties have executed this Amendment as of the 12th day of August, 1996. Sprint/United Management Corporation /s/ Gary D. Forsee By: /s/ B. Watson Gary D. Forsee Authorized Officer * 15,000 shares EX-10 9 DIRECTORS' DEFERRED FEE PLAN Exhibit (10)(x) Directors' Deferred Fee Plan (as amended through December 10, 1996) ARTICLE I PURPOSE The purpose of the Sprint Corporation Directors' Deferred Fee Plan (hereinafter referred to as the "Plan") is to provide funds upon termination of service or death for Directors (and their beneficiaries) of Sprint Corporation and its subsidiaries. It is intended that the Plan will aid in retaining and attracting Directors of exceptional ability by providing such Directors with a means to supplement their standard of living. ARTICLE II DEFINITIONS For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account Transfer Request. "Account Transfer Request" means a written notice, in a form prescribed by the Company, by a Participant to transfer all or any portion of one Deferred Benefit Account to another Deferred Benefit Account as provided for in paragraph 6.7. 2.2 Beneficiary. "Beneficiary" means the person, persons, or entity designated by the Participant, as provided in Article VIII, to receive any benefits payable under the Plan. Any Participant Beneficiary Designation shall be made in a written instrument filed with the Company and shall become effective only when received, accepted, and acknowledged in writing by the Company. 2.3 Board "Board" means the Board of Directors of the Company. 2.4 Cellular. "Cellular" means Sprint Cellular Company, however renamed, or any successor thereto. 2.5 Cellular Insider. "Cellular Insider" means, as of any time when the determination thereof is relevant, any Participant subject to liability under Section 16 of the Securities Exchange Act of 1934 with respect to trading in the equity securities of Cellular. 2.6 Cellular Share Unit. "Cellular Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of common stock of Cellular after the distribution thereof by the Company to the Company's shareholders. 2.7 Committee. "Committee" means the Organization and Compensation Committee of the Board. 2.8 Company. "Company" means Sprint Corporation, or any successor thereto. 2.9 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant on his death or termination of service as a Director, as calculated in Article VII hereof. 2.10 Deferred Benefit Account. "Deferred Benefit Account" means the accounts maintained on the books of account of the Company for each Participant pursuant to Article VI. Separate Deferred Benefit Accounts shall be maintained for each Participant. More than one Deferred Benefit Account shall be maintained for each Participant to reflect (a) separate deferral elections made pursuant to separately executed Participation Agreements as provided in paragraph 4.3, and (b) Account A, Account B, Account C, Account AA, Account BB, and Account CC elections made by each Participant in each such Participation Agreement. A Participant's Deferred Benefit Account shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. 2.11 Determination Date. "Determination Date" means the date on which the amount of a Participant's Deferred Benefit Account is determined as provided in Article VI hereof. The last day of each calendar month shall be a Determination Date. 2.12 Director. "Director" means a member of the Board of Directors of the Company or its subsidiaries who is not an employee of the Company or its subsidiaries. 2.13 Distribution Agreement. "Distribution Agreement" means the agreement entered into by the Company, Cellular, and Centel Corporation for the purpose of providing for the distribution by the Company of its stock in Cellular to the Company's stockholders. 2.14 Distribution Dividend Rate. "Distribution Dividend Rate" means the Dividend Rate as defined in the Distribution Agreement. 2.15 Distribution Time. "Distribution Time" is defined in the Distribution Agreement. 2.16 Fee. "Fee" means any cash compensation paid to a Director for his services as a Director other than a distribution under this Plan. 2.17 Interest Yield. "Interest Yield" means, with respect to any calendar month, (a) in the case of balances in Account AA, three percentage points over the composite yield on Moody's Seasoned Corporate Bond Yield Index for the preceding calendar month as determined from Moody's Bond Record published by Moody's Investors Services, Inc. (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Company, (b) in the case of balances in Account A, the greater of (i) the prime rate in effect at Citibank, N.A., at the opening of business on the first business day of the month, or if said bank, for any reason, no longer publishes its prime rate, the prime rate similarly determined of another major bank selected by the Company and (ii) six percent per annum. 2.18 Participant. "Participant" means any Director who elects to participate by filing a Participation Agree ment as provided in Article IV. 2.19 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed by a Participant before the beginning of the first period in which the Participant's Fees are to be deferred pursuant to the Plan. A new Participation Agreement shall be filed by the Participant for each separate fee deferral election. 2.20 Plan. "Plan" means the Sprint Corporation Directors' Deferred Fee Plan as set forth in this document. This Plan is the successor to, and comprises an amendment and revision of, the United Telecommunications, Inc., 1985 Directors' Deferred Fee Plan adopted February 12, 1985. 2.21 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.22 Plan Year. "Plan Year" means a twelve-month period commencing May 1st and ending the following April 30th. The first Plan Year shall commence on May 1, 1985. 2.23 Share Unit. "Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of common stock of the Company. 2.24 Spouse. "Spouse" means a Participant's wife or husband who was lawfully married to the Participant upon the Participant's death or severance from service. 2.25 Transition Date. "Transition Date" means May 1, 1990. ARTICLE III ADMINISTRATION 3.1 Plan Administrator; Company and Committee; Duties. This Plan shall be administered by the Plan Administrator. Decisions of the Plan Administrator may be reviewed by the Company through the Committee. Members of the Committee may be Participants under this Plan. The Company shall also have the authority to make, amend interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan as may arise in connection with the Plan. 3.2 Binding Effect of Decisions. The decision or action of the Company in respect to any question aris ing out of or in connection with the administration, interpretation, and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan unless a written appeal is received by the Company within sixty days of the disputed action. The appeal will be reviewed by the Committee, and its decision shall be final, conclusive, and binding on the Participant and on all persons claiming by, through, or under the Participant. ARTICLE IV PARTICIPATION 4.1 Participation. Participation in the Plan shall be limited to Directors, under age 70, who elect to participate in the Plan by filing a Participation Agreement with the Company. Except as provided below, a Participation Agreement must be filed before the March 31st immediately preceding the Plan Year in which the Participant's participation under the agreement will commence, and the election to participate shall be effective on the first day of the Plan Year following receipt by the Company of a properly completed and executed Participation Agreement; provided, however, that if March 31st falls on a Saturday, Sunday or holiday, the filing date for the Participation Agreement shall be no later than the next business day after March 31st. With respect to an individual becoming a Director during a Plan Year who thereby becomes eligible to participate herein, an initial Participation Agreement may be filed within 30 days of the Company's notification to him of his eligibility to participate, and such election to participate shall be effective on the first day of the month following the Company's receipt thereof, except that elections not received by the Company before the 15th day of any calendar month shall be effective no earlier than the first day of the second month following the month of receipt. 4.2 Amount of Deferral and Length of Participation. A Participant may elect in any Participation Agreement to defer up to 100% of the Fees that are expected at the time of election to be earned over a period of (1) for Participation Agreements first effective before the Transition Date, either 4 or 8 Plan Years, (2) for Participation Agreements first effective on or after the Transition Date, one Plan Year, and (3) for Participation Agreements first effective on or after May 1, 1997, the Plan Year for which the Participation Agreement relates and all subsequent Plan Years until changed by the Participant's filing of a new Participant Agreement, provided, the minimum amount of Fees that may be deferred shall, in each case, be $5,000 per year or 100% of Fees payable, whichever is less. (a) The deferral percentage in each Participation Agreement shall be applied to the Participant's Fees as they are payable during the period of election. (b) A Participant's election to defer his Fees shall be irrevocable upon the filing of the respective Participation Agreement; provided, however, that the deferral of Fees under any Participation Agreement may be suspended or amended as provided in paragraphs 7.3 or 9.1. 4.3 Additional Participation Agreements. A Participant may enter into additional Participation Agreements by filing a Participation Agreement with the Company before April 15th of any calendar year, stating the amount that the Participant elects to have deferred. Such additional agreements shall be effective as to Fees paid in Plan Years beginning after the last day of the Plan Year in which the respective agreement is filed with the Company. Each additional Participation Agreement is subject to all of the provisions and requirements set forth in paragraph 4.2. In the event a Participant elects to defer Fees pursuant to a new Participation Agreement, the new election shall be treated as an arrangement for which a separate Deferred Benefit Account shall be maintained and separate Deferral Benefits shall be payable. ARTICLE V DEFERRED FEES 5.1 Elective Deferred Fees. The amount of Fees that a Participant elects to defer in the Participation Agreement executed by the Participant, with respect to each Plan Year of participation in the Plan, shall be credited by the Company to the Participant's Deferred Benefit Account throughout each Plan Year as the Participant is paid. The amount credited to a Participant's Deferred Benefit Account shall equal the amount deferred. To the extent that the Company is required to withhold any taxes or other amounts from the Directors' deferred Fees pursuant to any state, federal or local law, such amounts shall be taken out of the Participant's Fees. 5.2 Vesting of Deferred Benefit Account. A Participant shall be 100% vested in the Deferred Benefit Account. ARTICLE VI DEFERRED BENEFIT ACCOUNT 6.1 Determination of Account. Each Participant's Deferred Benefit Account, as of each Determination Date, shall consist of the balance of the Participant's Deferred Benefit Account as of the immediately preceding Determination Date plus the Participant's elective deferred Fees withheld since the immediately preceding Determination Date pursuant to paragraph 5.1 and plus amounts credited to the Participant's Deferred Benefit Account pursuant to paragraphs 6.4 and 6.5. The Deferred Benefit Account of each Participant shall be reduced by the amount of all distributions, if any, made from such Deferred Benefit Account since the preceding Determination Date. 6.2 Type of Deferral. A Participant may elect to have any portion of the amount deferred credited to either Account A (fixed income return) or to Account B (Share Units). The initial election shall be made by a properly executed Participation Agreement. With respect to a Participation Agreement first effective before the Transition Date, an election to defer any amount to Account A shall be treated as an election to defer to Account AA, except as set forth below. An election to change the apportionment of deferred amounts between Accounts A and B may be made by a Participant filing with the Plan Administrator a revised Participation Agreement indicating such change on or before April 15th of each calendar year. The revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreement. The revised Participation Agreement shall be effective for Plan Years beginning after the date it is filed. Deferrals in such Plan Years shall be credited in accordance with the election of the revised Participation Agreement, provided, however, that with respect to Participation Agreements first effective before the Transition Date, an election to allocate a portion of deferrals to Account A in excess of the portion allocated in the Participation Agreement to be deferred into the fixed income account as of May 1, 1989, shall be deemed to be an election by the Participant to allocate to Account AA a portion of deferrals equal to the portion so allocated to the fixed income account on May 1, 1989, and to allocate to Account A the portion in excess of such portion. 6.3 Creation of Accounts AA, BB, C, and CC. (a) Accounts AA and BB. As of the start of business on the Transition Date, all amounts standing to the credit of each Participant in Account A shall be transferred to an Account AA. As of the start of business on the Transition Date, amounts standing to the credit of each Participant in Account B that are attributable to prior transfers from Account A into Account B shall he transferred to an Account BB. The amount of such transfers shall be an amount equal to the sum of the dollar amount of all transfers from Account A to Account B during the period beginning on the effective date of the Participation Agreement and ending on the Transition Date. For all purposes of this Plan, except as otherwise noted in this Plan, Account AA shall be treated in the same manner as Account A, and Account BB shall be treated in the same manner as Account B. Fees earned by Directors on or after the Transition Date subject to deferral under a Participation Agreement first effective before the Transition Date shall be credited to Accounts AA and B (in accordance with the Participant's election to allocate such deferrals to Accounts A or B, respectively, in such Participation Agreements) for such Participation Agreement. (b) Accounts C and CC. On the Determination Date first following the Distribution Time, there shall be credited to an Account C and CC, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of Cellular Share Units determined as follows: (1) one Cellular Share Unit in Account C for each Distribution Dividend Rate number of Share Units in Account B for such Participant for such Plan Year as of the Distribution Time; and (2) one Cellular Share Unit in Account CC for each Distribution Dividend Rate number of Share Units in Account BB for such Participant for such Plan Year as of the Distribution Time. 6.4 Maintenance of Accounts A and AA. As of each Determination Date, the Participant's Deferred Benefit Accounts A and AA shall be increased by the amount of interest earned since the preceding Determination Date based on the Interest Yield. Interest shall be credited on the average of the balances of the Deferred Benefit Account on the Determination Date (before crediting the interest) and on the last preceding Determination Date, but after the Deferred Benefit Account has been adjusted for any contributions or distributions to be credited or deducted for each such day. 6.5 Maintenance of Share Unit Accounts. Accounts B and BB and Accounts C and CC shall maintain balances in Share Units and Cellular Share Units, respectively. (a) Maintenance of Accounts B and BB. (1) Conversion between Dollar Amounts and Share Units in Accounts B and BB. When an amount is to be added to a Participant's Deferred Benefit Accounts B or BB, it shall be converted into Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of Share Units shall be converted into a dollar amount by multiplying such number of Share Units by the closing price of the Company's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Dividends on Share Units. When a dividend is declared and paid by the Company on its common stock, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (3) [Deleted] (4) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Share Units credited to a Participant's Accounts B and BB as may be necessary to give effect to such change in the Company's capital structure. (5) Conversion of Share Units to Dollars on Dis tribution. Share Units in Accounts B and BB shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the 12 calendar months immediately preceding the date of distribution. If a Participant elects payment in other than a lump sum, Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts A, AA, B, and BB in accordance with paragraphs 6.5(a)(2), 6.5(a)(3), and 6.5(a)(4). (b) Maintenance of Accounts C and CC. (1) Conversion between Dollar Amounts and Cellular Share Units in Accounts C and CC. When an amount is to be added to a Participant's Deferred Benefit Accounts C or CC, it shall be converted into Cellular Share Units, or fractions thereof, by dividing the amount to be credited by the market value of a share of Cellular's common stock on the Determination Date. When a number of Cellular Share Units is to be subtracted from a Participant's Deferred Benefit Accounts C or CC, such number of Cellular Share Units shall be converted into a dollar amount by multiplying such number of Cellular Share Units by the closing price of Cellular's common stock as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Dividends on Cellular Share Units. With respect to balances in Accounts C and CC, when a dividend is declared and paid by Cellular on its common stock, an amount shall be credited to the Participant's Accounts C and CC as though the same dividend had been paid on the Cellular Share Units in such accounts as of the Determination Date immediately preceding the declaration of the dividend, and such amount shall be converted to Cellular Share Units. Such amount shall be valued as of the Determination Date immediately preceding the declaration of the dividend. (3) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the Company's common stock, the Company shall make equitable adjustment to the number of Cellular Share Units credited to a Participant's Accounts C and CC as may be necessary to give effect to such change in the Employer's capital structure. (4) Conversion of Cellular Share Units to Dollars on Distribution. Cellular Share Units in Accounts C and CC shall be converted to an equivalent dollar amount before any distribution thereof to a Participant pursuant to Article VII. For purposes of distribution, the value of a Share Unit shall be the average closing price of the Company's common stock on the New York Stock Exchange on the last trading day of each of the (i) 12 calendar months immediately preceding the date of distribution or (ii) the smaller number of calendar months elapsed from the Distribution Time to such distribution. If a Participant elects payment in other than a lump sum, Cellular Share Units shall be so converted to a dollar amount with respect to each payment made in the distribution. During the period of distribution, dividends and other equitable adjustments shall be credited to the Participant's Accounts A, AA, C, and CC in accordance with paragraphs 6.5(b)(2) and 6.5(a)(3). 6.6 Statement of Accounts. The Company shall submit to each Participant, within 120 days after the close of each Plan Year, a statement in such form as the Company deems desirable, setting forth the balance to the credit of such Participant in his Deferred Benefit Accounts A and AA, B and BB, and C and CC, in each case as of the last day of the preceding Plan Year. 6.7 Transfer Between Accounts. Within the limitations of this paragraph 6.7, a Participant may elect, by executing an Account Transfer Request: (1) to transfer all or any portion of his Account A to Account B, (2) to transfer all or any portion of his Account B to Account A, (3) to transfer all or any portion of his Account AA to Account BB, (4) to transfer all or any portion of his Account BB to Account AA, (5) to transfer all or any portion of his Account C to Account A, (6) to transfer all or any portion of his Account C to Account B, (7) to transfer all or any portion of his Account CC to Account AA, and (8) to transfer all or any portion of his Account CC to Account BB. Such election shall be effective on the last day of the calendar month in which the Plan Administrator timely receives the Participant's executed Account Transfer Request. Transfers may not be made more than four times in any Plan Year, and no such transfer may be made unless a period of at least three months shall have elapsed from the effective date of the most recent such transfer (whether it occurred in the current Plan Year or not) to the effective date of the current transfer. ARTICLE VII BENEFITS 7.1 Termination of Service as Director. Subject to paragraph 7.4 below, upon any termination of service of the Participant for reasons other than his death, the Company shall pay to the Participant a Deferral Benefit equal to the amount of his Deferred Benefit Account determined under paragraph 6.1 thereof. 7.2 Death. If a Participant dies after the commencement of payments of his Deferral Benefit, his Beneficiary shall continue to receive the remaining balance of his Deferred Benefit Account in accordance with the Participant's election pursuant to paragraph 7.4. If a Participant dies before any payments of a Deferral Benefit, the amounts deferred under each Participation Agreement shall be determined separately as follows: (a) deferrals allocated to Accounts A, B, BB, C, and CC shall be the Deferred Benefit Account values thereof and (b) deferrals allocated to Account AA shall be the greater of (i) the Deferred Benefit Account value thereof and (ii) ten times the amount of the elected annual fee deferral allocated to Account AA pursuant to the Participation Agreement as revised on the date of the Participant's death, subject to such conditions relating to the Participant's health as the Company may impose. The Deferral Benefit shall be payable as provided for in paragraph 7.4. The Deferral Benefit provided above shall be in lieu of all other benefits under this Plan. 7.3 Suspension of Participation; Failure to Continue Participation. The Committee, in its sole discretion, may suspend the deferral of a Participant's Fees upon the advanced written request of a Participant on account of financial hardship suffered by that Participant. A Participant must file any request for such suspension on or before the 15th day preceding the regular payment date on which the suspension is to take effect. The Committee, in its sole discretion, shall determine the amount, if any, that will not be deferred by the Participant as a result of the financial hardship. The suspension of any deferrals under this paragraph shall not affect amounts deferred with respect to periods before the effective date of the suspension. A Participant whose deferrals are suspended may not execute a subsequent Participation Agreement that would take effect before the beginning of the third Plan Year following the close of the Plan Year in which the suspension first took effect. 7.4 Form of Benefit Payment (a) Upon the happening of an event described in paragraphs 7.1 or 7.2 above, the Company shall pay to the Participant or his Beneficiary the amount specified therein in one of the following forms as elected by the Participant in the Participation Agreement filed by the Participant: (1) a lump sum payment at a time designated in the Participation Agreement but no later than the applicable Company's mandatory termination date for Directors. (2) with respect to balances in Accounts A and AA, an annual payment of a fixed amount that shall amortize the Deferred Benefit Account balance in equal annual payments of principal and interest over a period from 2 to 20 years. For purposes of determining the amount of the annual payment, the assumed rate of interest on Accounts A and AA shall be the average of the applicable Interest Yield as of each Determination Date for the 60 months preceding the initial annual installment payment. (3) with respect to balances in Accounts B and BB, an annual payment over a period from 2 to 20 years. Each payment shall be the value, as determined pursuant to paragraph 6.5(a)(5), of the number of Share Units equal to (i) the number of Share Units in the accounts on the Determination Date immediately following the event described in paragraphs 7.1 or 7.2, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account B or BB, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(2) or 6.5(a)(3) hereof. Such Share Unit dividends shall be valued in the same manner as previously described, and all such Share Units accruing after a distribution from Accounts B or BB is made shall be paid to the Participant with the next distribution from the account. (4) With respect to balances in Accounts C and CC, an annual payment over a period from 2 to 20 years. Each payment shall be the value, as determined pursuant to paragraph 6.5(b)(4), of the number of Cellular Share Units equal to (i) the number of Cellular Share Units in the accounts on the Determination Date immediately following the event described in paragraphs 7.1 or 7.2, divided by (ii) the number of annual installments elected. During the period that a Participant is receiving a distribution from Account C or CC, Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(2) hereof. Such Cellular Share Unit dividends shall be valued in the same manner as previously described, and all such Cellular Share Units accruing after a distribution from Accounts C or CC is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which his benefits shall be paid by filing a revised Participation Agreement indicating such change at least 13 months before the date upon which the initial payment to be made is determined. Such revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which they relate for purposes of complying with the provisions of paragraphs 4.2 and 4.3 relating to the minimum and maximum deferrals and duration of the Participation Agreements. No such revised Participation Agreement shall change the amount elected to be deferred in the original Participation Agreement nor the time elected for commencement of benefit payments. (c) In the absence of a Participant's election under subparagraph 7.4(a), benefits shall be paid in the form specified in subparagraphs 7.4(a)(2), 7.4(a)(3), and 7.4(a)(4) over a 15 year period. 7.5 Commencement of Payments. Unless otherwise provided, payments under this Plan shall begin within 60 days following receipt of notice by the Company of an event that entitles a Participant (or a Beneficiary) to payments under this Plan, or at such earlier date as may be determined by the Company pursuant to the terms of the Plan. All payments shall be made as of the first day of the month. ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of his death before complete distribution to the Participant of the benefits due him under the Plan. 8.2 Amendments. Any Beneficiary Designation may be changed by a Participant by the written filing of such change on a form prescribed by the Company. The filing of a new Beneficiary Designation form will cancel all Beneficiary Designations previously filed. 8.3 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's designated Beneficiary shall be deemed to be the person or persons surviving him in the first of the following classes in which there is a survivor, share and share alike: (a) The surviving Spouse; (b) The Participant's children, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share their parent would have taken if living; (c) The Participant's personal representative (executor or administrator). 8.4 Effect of Payment. The payment to the deemed Beneficiary shall completely discharge the Company's obligations under this Plan. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment. The Board may at any time amend the Plan in whole or in part; provided, however, that no amendment shall be effective to decrease or restrict any Deferred Benefit Account at the time of such amendment. 9.2 Employer's Right to Terminate. The Board may at any time terminate the Plan with respect to new elections to defer if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company. The Board may also terminate the Plan in its entirety at any time, and upon any such termination, each Participant (a) who is then receiving a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the then remaining balance in his Deferred Benefit Account, and (b) who has not received a Deferral Benefit shall be paid in a lump sum, or over such period of time as determined by the Company, the balance in his Deferred Benefit Account. ARTICLE X MISCELLANEOUS 10.1 Unsecured General Creditor. Participants and their Beneficiaries shall have no legal or equitable rights, claims, or interests in any property or assets of the Company, nor shall they be Beneficiaries of, or have any rights, claims, or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or that may be acquired by the Company ("Policies"). Such Policies or other assets of the Company shall not be held under any trust for the benefit of Participants or their Beneficiaries or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets and Policies shall be and remain the general, unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 10.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, before actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.3 Not a Contract of Service. The terms and conditions of this Plan shall not be deemed to constitute a contract of service between the Company and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Company except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company. 10.4 Protective Provisions. A Participant will cooperate with the Company by furnishing any and all information requested by the Company, in order to facilitate the payment of benefits hereunder, by taking such physical examinations as the Company may deem necessary, and by taking such other action as may be requested by the Company. 10.5 Applicable Law. The Plan, and any Participation Agreement related thereto, shall be governed by the laws of the State of Kansas, without regard to the principles of conflicts of law. APPENDIX Current non-employee Directors of Sprint who had not accumulated at least 5 years of service as a Board member as of December 10, 1996 and any new Directors of Sprint are not entitled to benefits under the Retirement Plan for Directors; in lieu of participation in the Retirement Plan for Directors, these Directors are entitled to a one-time grant of 2,500 unvested share units to be credited into the share unit account of the Directors Deferred Fee Plan (the "Plan"). The share units, together with additional share units resulting from dividend credits, will vest at the rate of 50% on the fifth anniversary of the Director's election as a Director and 10% per year on the sixth through tenth anniversaries of such election. The share units may not be transferred to any other investment option under the Plan. The value of the share units will be distributed in accordance with the payout provisions of the Plan. In the event of the death of the Director or termination of Board service, only the value of those share units that have vested at that time will be paid out of the Plan. EX-11 10 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT (11) SPRINT CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE
- ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- (in millions, except per share data) PRIMARY EARNINGS PER SHARE Income from continuing operations $ 1,190.9 $ 946.1 $ 899.2 Preferred stock dividends (1.3) (2.6) (2.7) - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- 1,189.6 943.5 896.5 Discontinued operations, net (2.6) 14.5 (8.5) Extraordinary items (4.5) (565.3) -- - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Earnings applicable to common stock $ 1,182.5 $ 392.7 $ 888.0 -- ------------ -- ------------ -- ----------- Weighted average number of common shares (1) 426.0 350.1 348.7 -- ------------ -- ------------ -- ----------- Primary earnings per share Continuing operations $ 2.79 $ 2.69 $ 2.57 Discontinued operations -- 0.04 (0.02) Extraordinary items (0.01) (1.61) -- - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total $ 2.78 $ 1.12 $ 2.55 -- ------------ -- ------------ -- ----------- FULLY DILUTED EARNINGS PER SHARE Income from continuing operations, net of preferred stock dividends $ 1,189.6 $ 943.5 $ 896.5 Convertible preferred stock dividends 0.5 0.5 0.6 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- 1,190.1 944.0 897.1 Discontinued operations, net (2.6) 14.5 (8.5) Extraordinary items (4.5) (565.3) -- - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Earnings as adjusted for purposes of computing fully diluted earnings per share $ 1,183.0 $ 393.2 $ 888.6 -- ------------ -- ------------ -- ----------- Weighted average number of common shares 426.0 350.1 348.7 Additional dilution for common stock equivalents and dilutive securities 1.3 2.7 1.3 - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total 427.3 352.8 350.0 -- ------------ -- ------------ -- ----------- Fully diluted earnings per share Continuing operations $ 2.78 $ 2.68 $ 2.56 Discontinued operations -- 0.04 (0.02) Extraordinary items (0.01) (1.61) -- - ------------------------------------------------------------------- -- ------------ -- ------------ -- ----------- Total $ 2.77 $ 1.11 $ 2.54 -- ------------ -- ------------ -- ----------- (1) Weighted average number of common shares outstanding has been adjusted for dilutive common stock equivalents using the treasury stock method.
EX-12 11 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT (12) SPRINT CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------- (in millions) Earnings Income from continuing operations before taxes $ 1,911.9 $ 1,480.4 $ 1,387.9 $ 813.1 $ 842.7 Capitalized interest (104.0) (57.0) (7.5) (7.3) (10.4) Equity in losses of less than 50 percent owned entities 262.2 31.4 -- -- -- - ------------------------------------------------------------------------------------------------------------------- Subtotal 2,070.1 1,454.8 1,380.4 805.8 832.3 ------------------------------------------------------------------ Fixed charges Interest charges 300.7 317.7 308.2 374.3 434.8 Interest factor of operating rents 119.2 120.1 111.5 117.4 113.2 Pre-tax cost of preferred stock dividends of subsidiaries 0.4 0.7 0.9 1.6 2.1 - ------------------------------------------------------------------------------------------------------------------- Total fixed charges 420.3 438.5 420.6 493.3 550.1 ------------------------------------------------------------------ Earnings, as adjusted $ 2,490.4 $ 1,893.3 $ 1,801.0 $ 1,299.1 $ 1,382.4 ------------------------------------------------------------------ Ratio of earnings to fixed charges 5.93 (1) 4.32 (2) 4.28 2.63 (3) 2.51 ------------------------------------------------------------------ (1) Earnings as computed for the ratio of earnings to fixed charges includes the nonrecurring charge related to litigation of $60 million recorded in 1996. Excluding this charge, the ratio of earnings to fixed charges would have been 6.07 for 1996. (2) Earnings as computed for the ratio of earnings to fixed charges includes the nonrecurring restructuring charge of $88 million recorded in 1995. Excluding this charge, the ratio of earnings to fixed charges would have been 4.52 for 1995. (3) Earnings as computed for the ratio of earnings to fixed charges includes the nonrecurring merger, integration and restructuring costs of $293 million recorded in 1993. Excluding these costs, the ratio of earnings to fixed charges would have been 3.23 for 1993. NOTE: The above ratios have been computed by dividing fixed charges into the sum of (a) income from continuing operations before taxes less capitalized interest and equity losses of less than 50 percent owned entities included in income and (b) fixed charges. Fixed charges consist of interest on all indebtedness (including amortization of debt issuance expenses), the interest component of operating rents and the pre-tax cost of preferred stock dividends of subsidiaries.
EX-21 12 SUBSIDIARIES OF REGISTRANT EXHIBIT (21) SPRINT CORPORATION SUBSIDIARIES OF REGISTRANT Sprint Corporation is the parent. The subsidiaries of Sprint Corporation are as follows:
Ownership Interest Held Jurisdiction of By Its Incorporation or Immediate Parent Name Organization - ---------------------------------------------------------------------- --------------------------- ----------------- Carolina Telephone and Telegraph Company North Carolina 100 Subsidiaries: Carolina Telephone Long Distance, Inc. North Carolina 100 NOCUTS, Inc. Pennsylvania 100 SC One Company Kansas 100 Centel Corporation Kansas 91.4(1) Subsidiaries: Centel Capital Corporation Delaware 100 Centel Cellular Company of Mexico Delaware 100 Subsidiary: Telefonia Celular del Norte, S.A. de C.V. Mexico 20 Centel Credit Company Delaware 100 Centel Directory Company Delaware 100 Subsidiary: The CenDon Partnership Illinois Partnership 50 Centel-Texas, Inc. Texas 100 Subsidiary: Central Telephone Company of Texas Texas 100 Central Telephone Company Delaware 97.7(2) Subsidiaries: Central Telephone Company of Illinois Illinois 100 Central Telephone Company of Virginia Virginia 100 Sprint-Florida, Incorporated Florida 100 Subsidiaries: United Telephone Communications Systems, Incorporated Florida` 100 United Telephone Long Distance, Incorporated Florida 100 C FON Corporation Delaware 100 DirectoriesAmerica, Inc. Kansas 100 Subsidiary: Sprint Publishing & Advertising, Inc. Kansas 100 - ---------------------------- (1) Sprint Corporation owns all of the common stock. The voting preferred stock is held by 11 Sprint subsidiaries. (2) Centel Corporation owns all of the common stock. EXHIBIT (21) SUBSIDIARIES OF REGISTRANT (continued) Ownership Interest Held Jurisdiction of By Its Incorporation or Immediate Name Organization Parent - ---------------------------------------------------------------------- --------------------------- ---------------- Sprint Corporation Subsidiaries (continued) Florida Telephone Corporation Florida 100 Subsidiaries: Sprint Metropolitan Networks, Inc. Florida 100 Sprint Payphone Services, Inc. Florida 100 Sprint TELECENTERS Inc. Florida 100 Vista-United Telecommunications Florida 49 LD Corporation Kansas 100 North Supply Company Ohio 100 Subsidiaries: Northstar Transportation, Inc. Kansas 100 North Supply Chile, S.A. Chile 18 North Supply Company of Lenexa Delaware 100 North Supply International, Ltd. Kansas 100 NSC Advertising, Inc. Kansas 100 Sprint Products Group, Inc. Kansas 100 Sprint Asian American, Inc. Kansas 100 Subsidiary: Asian American Communications, L.L.C. Kansas 25.5 Sprint Capital Corporation Delaware 100 SprintCom, Inc. Kansas 100 Sprint Communications of Michigan, Inc. Michigan 100 Sprint Healthcare Systems, Inc. Kansas 100 Sprint International Holding, Inc. Kansas 100 Sprint Mid-Atlantic Telecom, Inc. North Carolina 100 Sprint/United Management Company Kansas 100 Sprint Ventures, Inc. Kansas 100 UCOM, Inc. Missouri 100 Subsidiaries: Sprint Communications Company L.P. Delaware Partnership 34 Subsidiaries: Asian American Communications, L.L.C. Kansas 23.5 Call-Net Enterprises, Inc. Canada 25 Sprint Communications Company of New Hampshire, Inc. New Hampshire 100 Sprint Communications Company of Virginia, Inc. Virginia 100 Sprint Licensing, Inc. Kansas 100 USST of Texas, Inc. Texas 100 EXHIBIT (21) SUBSIDIARIES OF REGISTRANT (continued) Ownership Interest Held Jurisdiction of By Its Incorporation or Immediate Parent Name Organization - ---------------------------------------------------------------------- --------------------------- ----------------- UCOM, Inc. Subsidiaries (continued) Sprint Enterprises, L.P. Delaware Partnership 32 Subsidiaries: Sprint Spectrum Holding Company, L.P. Delaware Partnership 40 Subsidiaries: American PCS, L.P. Delaware Partnership 49 Cox Communication PCS, L.P. Delaware Partnership 49 NewTelco, L.P. Delaware Partnership 99(3) Sprint Spectrum L.P. Delaware Partnership 99(3) Subsidiaries: Sprint Spectrum Equipment Company, L.P. Delaware Partnership 99(4) Sprint Spectrum Finance Corporation Delaware 100 Sprint Spectrum Realty Company, L.P. Delaware Partnership 99(4) WirelessCo, L.P. Delaware Partnership 99(4) MinorCo, L.P. Delaware Partnership 40 Subsidiaries: NewTelco, L.P Delaware Partnership (5) Sprint Spectrum Equipment Company, L.P. Delaware Partnership (5) Sprint Spectrum L.P. Delaware Partnership (5) Sprint Spectrum Realty Company, L.P. Delaware Partnership (5) WirelessCo, L.P. Delaware Partnership (5) PhillieCo, L.P. Delaware Partnership 47 Sprint Global Venture, Inc. Kansas (6) Subsidiaries: Global One Communications Europe, L.L.C. Delaware 33 Global One Communications GBN Holding, Ltd. Ireland 50 Global One Communications Holding, B.V. Netherlands 33 Global One Communications, L.L.C. Delaware 50 Global One Communications Operations, Ltd. Ireland 33 Global One Communications Service, B.V. Netherlands 33 Global One Communications World Holding, B.V. Netherlands 50 Global One Communications World Operations, Ltd. Ireland 50 Global One Communications World Service, B.V. Netherlands 50 UC PhoneCo, Inc. Kansas 100 Subsidiary: Sprint Enterprises, L.P. Delaware Partnership 17 - ---------------------------------- (3) Sprint Spectrum Holding Company, L.P. holds the general partnership interest of greater than 99%. (4) Sprint Spectrum L.P. holds the general partnership interest of greater than 99%. (5) MinorCo, L..P. holds a limited and preferred partnership interest of less than 1%. (6) Ucom, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1% of the common stock. EXHIBIT (21) SUBSIDIARIES OF REGISTRANT (continued) Ownership Interest Held Jurisdiction of By Its Incorporation or Immediate Parent Name Organization - ---------------------------------------------------------------------- --------------------------- ----------------- Sprint Corporation Subsidiaries (continued) United Telephone Company of the Carolinas South Carolina 100 Subsidiaries: SC Two Company Kansas 100 United Telephone Long Distance, Inc. South Carolina 100 United Telephone Company of Eastern Kansas Delaware 100 Subsidiary: Sprint/United Midwest Management Services Company Kansas 20 Subsidiary: United Teleservices, Inc. Kansas 100 United Telephone Company of Indiana, Inc. Indiana 100 Subsidiary: SC Four Company Kansas 100 United Telephone Company of Kansas Kansas 100 Subsidiary: Sprint/United Midwest Management Services Company Kansas 80 United Telephone Company of Minnesota Minnesota 100 United Telephone Company of Missouri Missouri 100 Subsidiary: SC Eight Company Kansas 100 United Telephone Company of New Jersey, Inc. New Jersey 100 United Telephone Company of the Northwest Oregon 100 United Telephone Company of Ohio Ohio 100 Subsidiaries: SC Five Company Kansas 100 United Telephone Communications Services of Ohio, Inc. Ohio 100 United Telephone Long Distance, Inc. Ohio 100 Subsidiary: Sprint Alarm Monitoring Services, Inc. Ohio 100 United Telephone Long Distance of Indiana, Inc. Indiana 100 United Telephone Company of Pennsylvania, The Pennsylvania 100 Subsidiaries: SC Six Company Kansas 100 United Telephone Long Distance, Inc. Pennsylvania 100 Valley Network Partnership Virginia Partnership 20 United Telephone Company of Southcentral Kansas Arkansas 100 United Telephone Company of Texas, Inc. Texas 100 Subsidiary: SC Seven Company Kansas 50 United Telephone Company of the West Delaware 100 United Telephone-Southeast, Inc. Virginia 100 Subsidiaries: SC Three Company Kansas 100 United Telephone Long Distance, Inc. Tennessee 100 UTLD, Inc. Virginia 100 Valley Network Partnership Virginia Partnership 20 EXHIBIT (21) SUBSIDIARIES OF REGISTRANT (continued) Ownership Interest Held Jurisdiction of By Its Incorporation or Immediate Parent Name Organization - ---------------------------------------------------------------------- --------------------------- ----------------- Sprint Corporation Subsidiaries (continued) US Telecom, Inc. Kansas 100 Subsidiaries: ASC Telecom, Inc. Kansas 100 LCF, Inc. California 100 SC Seven Company Kansas 50 Sprint Communications Company L.P. Delaware Partnership 59 Sprint Enterprises, L.P. Delaware Partnership 33 Sprint Global Venture, Inc. Kansas (6) Sprint Iridium, Inc. Kansas 100 Subsidiary: Iridium U.S., L.P. Delaware Partnership 27 United Telecommunications, Inc. Delaware 100 US Telecom of New Hampshire, Inc. New Hampshire 100 UST PhoneCo, Inc. Kansas 100 Subsidiary: Sprint Enterprises, L.P. Delaware Partnership 18 Utelcom, Inc. Kansas 100 Subsidiaries: Private TransAtlantic Telecommunications System, Inc. Delaware 100 Subsidiary: Private Trans-Atlantic Telecommunications System (N.J.), Inc. New Jersey 100 Sprint Communications Company L.P. Delaware Partnership 4 Sprint Global Venture, Inc. Kansas (6) Sprint International Incorporated Delaware 100 Subsidiaries: Consortium Communications International, Inc. New York 100 Sprint Bulgaria Limited Bulgaria 50 Sprint FON Inc. Delaware 100 Sprint Global Venture, Inc. Kansas 86 Sprint International Caribe, Inc. Puerto Rico 100 Sprint International Communications Corporation Delaware 100 Subsidiaries: Alcatel Data Networks SA France 49 Sprint Communications Company L.P. Delaware Partnership 2 Sprint Global Venture, Inc. Kansas 13 Sprint International Construction Company Delaware 100 Sprint International France S.A. France 100 Sprint Israel Cellular, Inc. Delaware 100 Sprint R.P. Telekom Sp. z o.o. Poland 50 Sprint Telecommunications France Inc. Delaware 100 Sprint Telecommunications Services GmbH Germany 100 Sprint Telecommunications (UK) Limited Delaware 100 - ------------------------------------------ (6) Ucom, Inc., US Telecom, Inc., and Utelcom, Inc. each holds less than 1% of the common stock.
EX-23 13 CONSENT OF INDEPENDENT AUDITORS EXHIBIT (23) SPRINT CORPORATION CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-3, No. 33-34567; Form S-3, No. 33-48689; Form S-3, No. 33-58488; Form S-3, No. 33-64564; Form S-8, No. 33-35173; Form S-8, No. 33-44255; Form S-8, No. 33-38761; Form S-8, No. 33-21662; Form S-8, No. 33-28544; Form S-8, No. 33-31802; Form S-8, No. 2-97322; Form S-8, No. 2-71704; Form S-8, No. 2-62061; Form S-8, No. 33-59316; Form S-8, No. 33-59318; Form S-8, No. 33-59322; Form S-8, No. 33-59324; Form S-8, No. 33-59326; Form S-8, No. 33-59328; Form S-8, No. 33-53695; Form S-8, No. 33-57785; Form S-8, No. 33-57911; Form S-8, No. 33-59349; Form S-8, No. 33-65147; and Form S-8, No. 33-65149) of Sprint Corporation and in the related Prospectuses of our report dated February 4, 1997, with respect to the consolidated financial statements and schedule of Sprint Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1996. /s/ERNST & YOUNG LLP ERNST & YOUNG LLP Kansas City, Missouri March 7, 1997 EX-27 14 FDS 12/31/96 -- EXHIBIT 27(A)
5 1000 YEAR DEC-31-1996 DEC-31-1996 1,150,600 0 2,580,900 117,400 0 4,352,800 21,410,800 10,946,700 16,953,000 3,314,200 2,981,500 11,800 0 1,091,300 7,428,600 16,953,000 0 14,044,700 0 8,619,700 0 0 196,700 1,911,900 721,000 1,190,900 (2,600) (4,500) 0 1,183,800 2.78 2.77
EX-27 15 RESTATED FDS 12/31/95 -- EXHIBIT 27(B)
5 1000 YEAR DEC-31-1995 DEC-31-1995 124,200 0 1,649,500 125,800 0 3,619,400 19,915,900 10,200,100 15,195,900 5,142,100 3,253,000 32,500 0 872,900 3,769,700 15,195,900 0 12,765,100 0 7,971,300 0 0 260,700 1,480,400 534,300 946,100 14,500 (565,300) 0 395,300 1.12 1.11
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