-----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, GVzf51AdYI9pTBfxd+sjS3ZGlLFrJ34dF06jP6+2Nk1S+R7tPp4agu9qMPid4sjr gBuqZs8nVpkcch+k4YglUw== 0000101830-04-000260.txt : 20040510 0000101830-04-000260.hdr.sgml : 20040510 20040510112034 ACCESSION NUMBER: 0000101830-04-000260 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040510 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-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04721 FILM NUMBER: 04791511 BUSINESS ADDRESS: STREET 1: PO BOX 11315 CITY: KANSAS CITY STATE: MO ZIP: 64112 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: PO BOX 11315 CITY: KANSAS CITY STATE: MO ZIP: 64112 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-Q/A 1 spr10q_1q04.txt SPRINT CORPORATION FORM 10-Q/A 1Q04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 ------------------------------------------------- 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 1-04721 --------------------------------------------------------- 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 7997, Shawnee Mission, Kansas 66207-0997 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (913) 624-3000 ---------------------------- - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file these reports), and (2) has been subject to these filing requirements for the past 90 days. Yes X No ----------- ------- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No ----------- ------- COMMON SHARES OUTSTANDING AT April 30, 2004: FON COMMON STOCK Series 1 1,333,945,270 Series 2 92,372,664 EXPLANATORY NOTE Sprint Corporation hereby amends its Quarterly Report on Form 10-Q for the period ended March 31, 2004 (the "Form 10-Q") as set forth in this quarterly report on Form 10-Q/A (the "Form 10-Q/A"). This Form 10-Q/A includes amendments to the following: o Signature Page o Exhibit 31(a) o Exhibit 31(b) o Exhibit 32(a) o Exhibit 32(b) Each of these pages has been updated to reflect that the officers signed this document and their certifications on May 7, 2004. All other items of the Form 10-Q are simply restated herein and have not been amended.
TABLE OF CONTENTS Page Reference Part I - Financial Information Item 1. Sprint Corporation Financial Statements Consolidated Financial Statements Consolidated Statements of Operations 1 Consolidated Statements of Comprehensive Income 2 Consolidated Balance Sheets 3 Consolidated Statements of Cash Flows 5 Consolidated Statement of Shareholders' Equity 6 Condensed Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures about Market Risk 33 Item 4. Controls and Procedures 34 Part II - Other Information Item 1. Legal Proceedings 35 Item 2. Changes in Securities 35 Item 3. Defaults Upon Senior Securities 36 Item 4. Submission of Matters to a Vote of Security Holders 37 Item 5. Other Information 38 Item 6. Exhibits and Reports on Form 8-K 38 Signature 40 Exhibits (12) Computation of Ratios of Earnings to Fixed Charges (31) (a) Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) (b) Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) (32) (a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Part I. Item 1. SPRINT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (millions, except per share data) - --------------------------------------------- --- ------------- -- -------------- -- ------------------------------- Quarters Ended March 31, 2004 2003 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net Operating Revenues $ 6,707 $ 6,339 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Operating Expenses Costs of services and products 3,083 2,839 Selling, general and administrative 1,637 1,650 Depreciation 1,243 1,236 Restructuring and asset impairments 30 10 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Total operating expenses 5,993 5,735 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Operating Income 714 604 Interest expense (320) (366) Premium on early retirement of debt - (19) Other, net (26) (61) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Income from continuing operations before income taxes 368 158 Income tax expense (146) (61) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Income from Continuing Operations 222 97 Discontinued operation, net - 1,313 Cumulative effect of change in accounting principle, net - 258 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net Income 222 1,668 Preferred stock dividends paid (2) (2) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Earnings Applicable to Common Stock $ 220 $ 1,666 -- ------------- --- ------------- Diluted Earnings per Common Share Continuing operations $ 0.15 $ 0.07 Discontinued operation - 0.93 Cumulative effect of change in accounting principle, net - 0.18 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total $ 0.15 $ 1.18 -- ------------- --- ------------- Diluted weighted average common shares 1,436.1 1,411.5 -- ------------- --- ------------- Basic Earnings per Common Share Continuing operations $ 0.15 $ 0.07 Discontinued operation - 0.93 Cumulative effect of change in accounting principle, net - 0.18 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total $ 0.15 $ 1.18 -- ------------- --- ------------- Basic weighted average common shares 1,424.2 1,407.6 -- ------------- --- ------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
SPRINT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (millions) - --------------------------------------------- ----------------- ----------------- -- ------------- --- ------------- Quarters Ended March 31, 2004 2003 - --------------------------------------------- ----------------- ----------------- -- ------------- --- ------------- Net Income $ 222 $ 1,668 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Other Comprehensive Income Unrealized holding losses on securities (21) (1) Income tax benefit 8 - - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net unrealized holding losses on securities during the period (13) (1) Reclassification adjustment for gains on securities included in net income (2) (1) Income tax expense 1 1 - ------------------------------------------------- ------------- -- -------------- -- ------------- --- ------------- Net reclassification adjustment for gains included in net income (1) - Foreign currency translation adjustments - 2 Unrealized gains (losses) on qualifying cash flow hedges 17 (2) Income tax benefit (expense) (6) 1 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Net unrealized gains (losses) on qualifying cash flow hedges during the period 11 (1) - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total other comprehensive loss (3) - - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Comprehensive Income $ 219 $ 1,668 -- ------------- --- ------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
SPRINT CORPORATION CONSOLIDATED BALANCE SHEETS (millions) - ------------------------------------------------------------------------------------------------------------------------- March 31, December 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------- (Unaudited) Assets Current assets Cash and equivalents $ 2,728 $ 2,424 Accounts receivable, net of allowance for doubtful accounts of $260 and $276 2,927 2,876 Inventories 513 582 Deferred tax asset - 26 Prepaid expenses 310 279 Other 428 424 - ------------------------------------------------------------------------------------------------------------------------- Total current assets 6,906 6,611 Gross property, plant and equipment 54,317 54,247 Accumulated depreciation (27,676) (26,971) - ------------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 26,641 27,276 Intangibles Goodwill 4,401 4,401 Spectrum licenses 3,381 3,385 Other intangibles 31 32 - ------------------------------------------------------------------------------------------------------------------------- Total intangibles 7,813 7,818 Accumulated amortization (3) (3) - ------------------------------------------------------------------------------------------------------------------------- Net intangibles 7,810 7,815 Other assets 1,099 1,148 - ------------------------------------------------------------------------------------------------------------------------- Total $ 42,456 $ 42,850 ----------------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
SPRINT CORPORATION CONSOLIDATED BALANCE SHEETS (continued) (millions, except per share data) - ------------------------------------------------------------------------------------------------------------------------- March 31, December 31, 2004 2003 - ------------------------------------------------------------------------------------------------------------------------- (Unaudited) Liabilities and Shareholders' Equity Current liabilities Short-term borrowings and current maturities of long-term debt $ 1,621 $ 594 Accounts payable 2,118 2,197 Accrued interconnection costs 522 503 Accrued taxes 374 407 Advance billings 598 572 Accrued restructuring costs 111 117 Payroll and employee benefits 472 683 Accrued interest 312 378 Other 909 1,025 - ------------------------------------------------------------------------------------------------------------------------- Total current liabilities 7,037 6,476 Noncurrent liabilities Long-term debt and capital lease obligations 15,822 16,841 Equity unit notes 1,725 1,725 Deferred income taxes 1,904 1,789 Postretirement and other benefit obligations 1,313 1,572 Other 1,004 976 - ------------------------------------------------------------------------------------------------------------------------- Total noncurrent liabilities 21,768 22,903 Redeemable preferred stock 247 247 Shareholders' equity Common stock FON, par value $2.00 per share, 3,000.0 shares authorized, 1,425.6 and 904.3 shares issued and outstanding 2,851 1,809 PCS, par value $1.00 per share, 4,000.0 shares authorized, 0 and 1,035.4 shares issued and outstanding - 1,035 Capital in excess of par or stated value 10,151 10,084 Retained earnings 1,126 1,017 Accumulated other comprehensive loss (724) (721) - ------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 13,404 13,224 - ------------------------------------------------------------------------------------------------------------------------- Total $ 42,456 $ 42,850 ----------------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
SPRINT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (millions) - ------------------------------------------------------------------ ----------------- ----------------- ---------------- Quarters Ended March 31, 2004 2003 - ------------------------------------------------------------------ ----------------- ----------------- ---------------- Operating Activities Net income $ 222 $ 1,668 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operation, net - (1,313) Cumulative effect of change in accounting principle, net - (258) Depreciation 1,243 1,236 Deferred income taxes 145 736 Changes in assets and liabilities: Accounts receivable, net (51) 138 Inventories and other current assets 19 (107) Accounts payable and other current liabilities (381) (1,315) Noncurrent assets and liabilities, net (202) 200 Other, net 49 73 - ------------------------------------------------------------------------------------ --- ------------- -- ------------- Net cash provided by operating activities of continuing operations 1,044 1,058 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Investing Activities Capital expenditures (689) (547) Investments in and loans to other affiliates, net (2) (12) Investments in debt securities (108) - Proceeds from debt securities 142 - Other, net 5 3 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Net cash used by investing activities of continuing operations (652) (556) - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Financing Activities Payments on debt (22) (1,555) Proceeds from common stock issued 33 2 Dividends paid (115) (114) Other, net 16 10 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Net cash used by financing activities of continuing operations (88) (1,657) - ------------------------------------------------------------------------------------ --- ------------- -- ------------- - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Cash from discontinued operations - 2,215 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Increase in Cash and Equivalents 304 1,060 Cash and Equivalents at Beginning of Period 2,424 1,035 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Cash and Equivalents at End of Period $ 2,728 $ 2,095 --- ------------- -- ------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
SPRINT CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (millions) Quarter Ended March 31, 2004 - ------------------------------------------------------------------------------------------------------------------------ Capital in Accumulated FON PCS Excess of Other Common Common Par or Retained Comprehensive Stock Stock Stated Value Earnings Loss Total - ------------------------------------------------------------------------------------------------------------------------ Beginning 2004 balance $ 1,809 $ 1,035 $ 10,084 $ 1,017 $ (721) $ 13,224 Net income - - - 222 - 222 Common stock dividends - - - (113) - (113) Preferred stock dividends - - (2) - - (2) FON Series 1 common stock issued 5 - 57 - - 62 PCS Series 1 common stock issued - 2 6 - - 8 Conversion of PCS common stock into FON common stock 1,037 (1,037) - - - - Other, net - - 6 - (3) 3 - ------------------------------------------------------------------------------------------------------------------------ March 2004 balance $ 2,851 $ - $ 10,151 $ 1,126 $ (724) $ 13,404 -------------------------------------------------------------------------------------- Shares Outstanding - ------------------------------------------------------------ Beginning 2004 balance 904.3 1,035.4 FON Series 1 common stock issued 2.9 - PCS Series 1 common stock issued - 1.4 Conversion of PCS common stock into FON common stock 518.4 (1,036.8) - ------------------------------------------------------------ March 2004 balance 1,425.6 - -------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
PART I. Item 1. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Sprint Corporation (Unaudited) The information in this Form 10-Q has been prepared according to Securities and Exchange Commission (SEC) rules and regulations. In our opinion, the consolidated interim financial statements reflect all adjustments, consisting only of normal recurring accruals, needed to fairly present Sprint Corporation's consolidated financial position, results of operations, cash flows and comprehensive income. Certain information and footnote disclosures normally included in consolidated financial statements prepared according to accounting principles generally accepted in the United States have been condensed or omitted. As a result, you should read these financial statements along with Sprint Corporation's 2003 Form 10-K. Operating results for the 2004 year-to-date period do not necessarily represent the results that may be expected for the year ending December 31, 2004. - -------------------------------------------------------------------------------- 1. Basis of Consolidation and Presentation - -------------------------------------------------------------------------------- Consolidation and Comparative Presentation The consolidated financial statements include the accounts of Sprint, its wholly owned subsidiaries and subsidiaries it controls. Investments in entities in which Sprint exercises significant influence, but does not control, are accounted for using the equity method. See Note 3 for additional information. The consolidated financial statements are prepared using accounting principles generally accepted in the United States. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no effect on the net results of operations or shareholders' equity as previously reported. Classification of Operations Sprint is a global communications company and a leader in integrating long-distance, local service, and wireless communications. Sprint is also one of the largest carriers of Internet traffic using its tier one Internet Protocol network, which provides connectivity to any point on the Internet either through its own network or via direct connections with other backbone providers. Sprint's business is divided into three segments: the PCS wireless division, the global markets division, and the local division. Change in Depreciable Life As of January 1, 2004, Sprint re-evaluated the depreciable lives of certain network assets. The depreciable life of certain high-capacity transmission equipment was extended from eight years to twelve years. This extension in life decreased the 2004 first quarter depreciation expense in the global markets division by approximately $25 million. - -------------------------------------------------------------------------------- 2. Recombination of Tracking Stock - -------------------------------------------------------------------------------- On April 23, 2004, Sprint recombined its two tracking stocks. Each share of PCS common stock automatically converted into 0.5 shares of FON common stock. As of April 23, 2004, the FON Group and the PCS Group no longer exist, and FON common stock represents all of the operations and assets of Sprint, including the PCS wireless division, the global markets division and the local division. This event is reflected in the presentation of these financial statements. FON common stock and PCS common stock were intended to reflect the financial results and economic value of the FON and PCS Groups. However, they were classes of common stock of Sprint, not of the group they were intended to track. Accordingly, FON and PCS shareholders were each subject to the risks related to an equity investment in Sprint and all of Sprint's businesses, assets and liabilities. Shares of FON common stock and PCS common stock did not represent a direct legal interest in the assets and liabilities allocated to either group, but rather represented a direct equity interest in Sprint's assets and liabilities as a whole. Earnings Per Share All per share amounts have been restated, for all periods presented, to reflect the recombination of the FON common stock and PCS common stock as of the earliest period presented at an identical conversion ratio (0.50). The conversion ratio was also applied to dilutive PCS securities (mainly stock options, ESPP, convertible preferred stock and restricted stock units) to determine diluted weighted average shares on a consolidated basis. Following is previously reported earnings per share information for the FON Group and the PCS Group:
Quarter Ended March 31, 2003 FON Group PCS Group -------------------------------------------------------------------------------------- (millions, except earnings per share data) Income (Loss) from Continuing Operations $ 279 $ (182) Discontinued operation, net 1,313 - Cumulative effect of change in accounting principle, net 258 - ----------------- ----------------- Net Income (Loss) 1,850 (182) Preferred stock dividends (paid) received 2 (4) ----------------- ----------------- Earnings (Loss) Applicable to Common Stock $ 1,852 $ (186) ----------------- ----------------- Diluted Earnings (Loss) per Common Share(1) Continuing operations $ 0.31 $ (0.18) Discontinued operation 1.46 - Cumulative effect of change in accounting principle, net 0.29 - ----------------- ----------------- Total $ 2.06 $ (0.18) ----------------- ----------------- Diluted weighted average common shares 899.5 1,022.1 ----------------- ----------------- Basic Earnings (Loss) per Common Share Continuing operations $ 0.31 $ (0.18) Discontinued operation 1.47 - Cumulative effect of change in accounting principle, net 0.29 - ----------------- ----------------- Total $ 2.07 $ (0.18) ----------------- ----------------- Basic weighted average common shares 896.6 1,022.1 ----------------- ----------------- (1) As the effects of including the dilutive PCS securities are antidilutive, they are not included in the diluted weighted average common shares outstanding for the PCS Group, nor are they included in the calculation of diluted earnings per share.
Shareholders' Equity The conversion of PCS common stock into FON common stock resulted in an increase in FON common stock outstanding of 518.4 million shares as of March 31, 2004. Although Sprint's Articles of Incorporation continue to authorize PCS common stock following the conversion of PCS common stock, no shares of PCS common stock may be issued. - -------------------------------------------------------------------------------- 3. Investments - -------------------------------------------------------------------------------- At March 31, 2004, Sprint carried $483 million in investment asset value: $110 million was included in "Current assets--other" and $373 million in "Other assets" on the Consolidated Balance Sheets. At December 31, 2003, Sprint carried $548 million in investment asset value: $125 million was included in "Current assets--other" and $423 million in "Other assets" on the Consolidated Balance Sheets. The material investment types and amounts include: Investments in Debt Securities During the second half of 2003, Sprint invested in marketable debt securities. Interest on these investments is reinvested and recognized in "Other, net" in the Consolidated Statements of Operations. Sprint recognized approximately $2 million of interest income on these investments in the 2004 first quarter. Accumulated unrealized holding gains (losses) were immaterial in the 2004 first quarter. At March 31, 2004, investments in marketable debt securities totaled $505 million of which $110 million was included in "Current assets - Other" and $159 million, with maturities of less than five years, was included in "Other assets" on the Consolidated Balance Sheets. The remaining $236 million have original or remaining maturities at purchase of less than 90 days and were included in "Cash and equivalents." At December 31, 2003, investments in marketable debt securities totaled $503 million of which $125 million was included in "Current assets - Other" and $177 million was included in "Other assets" on the Consolidated Balance Sheets. The remaining $201 million had original or remaining maturities at purchase of less than 90 days and were included in "Cash and equivalents." Investments in Equity Securities The cost of investments in marketable equity securities, primarily made up of EarthLink common stock, was $132 million and $134 million at the end of the 2004 first quarter and 2003 year-end, respectively. Accumulated unrealized holding gains were $23 million (net of $15 million tax) and $38 million (net of $23 million tax) at the end of the 2004 first quarter and 2003 year-end, respectively. Both gains and losses were included in "Accumulated other comprehensive income" on the Consolidated Balance Sheets. At the end of the 2004 first quarter, Sprint held 18.9 million shares of EarthLink common stock, which were reflected in "Other assets" on the Consolidated Balance Sheets. These shares were hedged with variable prepaid forward contracts, maturing from November 2004 to November 2005. See Note 10 for additional information. Equity Method Investments At the end of the 2004 first quarter and at year-end 2003, investments accounted for using the equity method consisted primarily of Sprint's investment in Virgin Mobile, USA, LLC. These investments were reflected in "Other assets" on the Consolidated Balance Sheets. Certain other equity method investments were carried at zero value. Virgin Mobile, USA Sprint's investment in Virgin Mobile, USA was $31 million at the end of the 2004 first quarter and $41 million at year-end 2003. This joint venture with the Virgin Group was originally entered into in the 2001 fourth quarter to market wireless services, principally to youth and pre-pay segments. Virgin Mobile, USA launched services in June 2002. In the 2002 second quarter, Sprint entered into a new agreement with Virgin Group for funding of Virgin Mobile, USA. Under the terms of the agreement, Sprint agreed to fund up to $150 million, with the majority in the form of discounted network services and the remainder in cash, and the Virgin Group agreed to fund up to $150 million in cash. As of March 31, 2004, Sprint had satisfied 100% of this cash funding commitment and approximately 80% of the network services contribution. Additionally, in the 2003 third quarter, Sprint's board of directors authorized additional cash funding for the joint venture in the amount of $30 million, of which $22 million had been provided to the joint venture as of March 31, 2004. In the 2003 third quarter, a Sprint subsidiary agreed to guarantee a $20 million term-loan facility entered into by Virgin Mobile, USA to fund working capital needs. The facility expires on December 31, 2004. If required to perform, Sprint would acquire Virgin Mobile, USA's subscriber base. The fair value of this guarantee was recorded in "Current liabilities - Other" on the Consolidated Balance Sheets in the amount of $5 million. In the 2004 first quarter, Sprint's board of directors authorized additional funding of approximately $22 million in the form of loans to the joint venture. This line of credit remains undrawn. Combined, unaudited, summarized financial information (100% basis) of entities accounted for using the equity method was as follows:
Quarters Ended March 31, ---------------------------------- 2004 2003 ------------------------------------------------------------------------ (millions) Results of operations Net operating revenues $ 295 $ 231 ---------------------------------- Operating loss $ (30) $ (14) ---------------------------------- Net loss $ (46) $ (31) ---------------------------------- Equity in net losses of affiliates $ (12) $ (18) ----------------------------------
- -------------------------------------------------------------------------------- 4. Asset Retirement Obligations - -------------------------------------------------------------------------------- Sprint adopted Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations, on January 1, 2003. This standard provides accounting guidance for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction or development and (or) normal operation of that asset. According to the standard, the fair value of an asset retirement obligation (ARO liability) should be recognized in the period in which (1) a legal obligation to retire a long-lived asset exists and (2) the fair value of the obligation based on retirement cost and settlement date is reasonably estimable. Upon initial recognition of the ARO liability, the related asset retirement cost should be capitalized by increasing the carrying amount of the related long-lived asset. Sprint's network is primarily located on owned and leased property and utility easements. In the global markets division and the local division, a majority of the leased property has no requirement for remediation at retirement. The leased property of the PCS wireless division has potential remediation requirements. Sprint expects to maintain its property as a necessary component of infrastructure required to maintain operations or FCC licensing. Sprint estimates the liability presently required associated with the ultimate satisfaction of those requirements to be immaterial. Adoption of SFAS No. 143 affected the cost of removal historically recorded by the local division. Consistent with regulatory requirements and industry practice, the local division historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an ARO liability. Upon adoption of SFAS No. 143, Sprint recorded a reduction in its historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the Consolidated Statements of Operations of $258 million. - -------------------------------------------------------------------------------- 5. Restructuring and Asset Impairment - -------------------------------------------------------------------------------- Sprint Transformation In the 2003 fourth quarter, Sprint recognized charges from its organizational redesign initiatives. The restructuring is a company wide effort to create a more customer focused organization (Sprint Transformation - 2003). This decision resulted in pre-tax charges of $59 million in the 2003 fourth quarter and $24 million in the 2004 first quarter consisting of severance costs associated with work force reductions. In the 2004 first quarter, Sprint continued its transformation initiatives in an effort to create a more efficient cost structure (Sprint Transformation - 2004). These decisions resulted in a $4 million pre-tax charge in the 2004 first quarter for severance costs associated with work force reductions. In connection with its transformation efforts, Sprint expects the aggregate pre-tax charges not to exceed $90 million. Additional charges for employee termination costs will be recorded in subsequent periods and will impact all of Sprint's divisions. The severance charges are associated with the involuntary separation of approximately 2,550 employees. As of March 31, 2004, approximately 1,750 of the employee separations had been completed. Other Restructuring Activity In the 2003 fourth quarter, Sprint announced the termination of the development of a new billing platform (PCS Billing Platform Termination). These decisions resulted in pre-tax charges of $351 million in the 2003 fourth quarter. The charge for asset impairments was $339 million and the remaining $12 million was accrued for other contractual obligations. In the 2003 second quarter, Sprint announced the wind-down of its web hosting business. Restructurings of other global markets division operations also occurred in the continuing effort to create a more efficient cost structure (Global Markets Web Hosting Wind-down). These decisions resulted in pre-tax charges of $376 million in 2003 and $2 million in the 2004 first quarter. The aggregate charge for asset impairments was $316 million, the aggregate charge for employee terminations was $16 million and the remaining $46 million was accrued for facility lease terminations. In connection with the wind-down of the web hosting business, Sprint will record additional charges for facility lease terminations, customer migration, employee termination, and other wind-down costs in subsequent periods. The severance charges are associated with the involuntary employee separation of approximately 600 employees. As of March 31, 2004, approximately 500 of the employee separations had been completed. Sprint expects the aggregate pre-tax charge to be approximately $440 million. Sprint expects to pay the majority of severance and other exit costs in the next three months. This activity is summarized as follows:
- -------------------------------------- --- ------------------- -- ----------------------------- --- ---------------- 2004 Activity ----------------------------- December 31, 2003 Restructuring Cash March 31, 2004 Liability Balance Charge Payments Liability Balance - -------------------------------------- --- ------------------- -- -------------- -- ----------- --- ---------------- (millions) Restructuring Events Sprint Transformation - 2004 Severance $ - $ 4 $ - $ 4 Sprint Transformation - 2003 Severance 54 24 24 54 PCS Billing Platform Termination Other exit costs 12 - 10 2 Global Markets Web Hosting Wind-down Severance 6 1 1 6 Other exit costs 45 1 1 45 - -------------------------------------- --- ------------------- -- -------------- -- ----------- --- ---------------- Total $ 117 $ 30 $ 36 $ 111 --- ------------------- -- -------------- -- ----------- --- ----------------
Other Asset Impairments In the 2003 first quarter, Sprint recorded a charge for asset impairment of $10 million. This charge was associated with the termination of a software development project. - -------------------------------------------------------------------------------- 6. Stock-based Compensation - -------------------------------------------------------------------------------- Effective January 1, 2003, Sprint adopted SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, using the prospective method. Upon adoption Sprint began expensing the fair value of stock-based compensation for all grants, modifications or settlements made on or after January 1, 2003. The following table illustrates the effect on net income and earnings per share of stock-based compensation included in net income and the effect on net income and earnings per share for grants issued on or before December 31, 2002, had Sprint applied the fair value recognition provisions of SFAS 123.
Quarters Ended March 31, - -------------- - ------------- 2004 2003 ---------------------------------------------------- - -------------- - ------------- (millions, except per share data) Net income, as reported $ 222 $ 1,668 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 13 - Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (28) (34) ---------------------------------------------------- - -------------- - ------------- Pro forma net income $ 207 $ 1,634 - -------------- - ------------- Earnings per common share: Basic - as reported $ 0.15 $ 1.18 - -------------- - ------------- Basic - pro forma $ 0.14 $ 1.16 - -------------- - ------------- Diluted - as reported $ 0.15 $ 1.18 - -------------- - ------------- Diluted - pro forma $ 0.14 $ 1.16 - -------------- - -------------
Sprint recognized pre-tax charges of $21 million in the 2004 first quarter and $1 million in the 2003 first quarter related to stock-based grants issued after December 31, 2002 and grants of restricted stock made in 2002 and previous years. - -------------------------------------------------------------------------------- 7. Employee Benefit Information - -------------------------------------------------------------------------------- The net periodic benefit cost consisted of the following:
Pension Benefits Other Benefits ------------------------------ ------------------------------ Quarters Ended Quarters Ended March 31, March 31, --------------------------------------------------------------- 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------- Service cost $ 36 $ 32 $ 4 $ 4 Interest cost 62 58 15 16 Expected return on plan assets (76) (69) (1) (1) Amortization of transition (asset) (1) (1) - - obligation Amortization of prior service cost 4 4 (12) (11) Amortization of net loss 21 8 8 8 - ---------------------------------------------------------------------------------------------------------------- Net benefit expense $ 46 $ 32 $ 14 $ 16 -----------------------------------------------------------------
Sprint contributed $300 million to the pension trust on January 27, 2004. This is the only contribution expected to be made during the year. In the 2004 first quarter, Sprint amended certain retiree medical plans to standardize the plan design effective January 1, 2005, eliminating differences in benefit levels. These amendments decreased the accumulated postretirement benefit obligation (APBO) related to other postretirement benefits by approximately $35 million, and decreased the 2004 net benefit expense by $5 million, of which approximately $1 million was recognized in the 2004 first quarter. As a result of these amendments, Sprint also recognized the effects of the Medicare Prescription Drug, Improvement and Modernization Act (the Act) signed into law on December 8, 2003. The Act contains a subsidy to employers who provide prescription drug coverage to retirees that is actuarially equivalent to Medicare Part D. Analysis of Sprint's retiree prescription drug claims data determined that Sprint's retiree prescription drug benefit was actuarially equivalent. In estimating the effects of the Act, estimates of participation rates and per capita claims costs were not changed. The effect of recognizing the federal subsidy related to the Act was a $3 million reduction in the net benefit cost in the 2004 first quarter and a $73 million reduction in the APBO. - -------------------------------------------------------------------------------- 8. Litigation, Claims and Assessments - -------------------------------------------------------------------------------- In March 2004, eight purported class action lawsuits relating to the recombination of the tracking stocks were filed against Sprint and its directors by PCS common stockholders. Seven of the lawsuits were consolidated in the District Court of Johnson County, Kansas. The eighth, pending in New York, has been voluntarily stayed. The lawsuits allege breach of fiduciary duty in connection with the recombination and seek monetary damages. A number of putative class action cases that allege Sprint failed to obtain easements from property owners during the installation of its fiber optic network have been filed in various courts. Several of these cases sought certification of nationwide classes, and in one case, a nationwide class was certified. However, a nationwide settlement of these claims was recently approved by the U.S. District Court for the Northern District of Illinois, which has enjoined all other similar cases. Objectors have appealed the preliminary approval order and injunction to the Seventh Circuit Court of Appeals. In 2001, Sprint accrued for the estimated settlement costs of these suits. In July 2002, the Federal Communications Commission (FCC) released a declaratory ruling in a matter referred to it by the federal district court for the Western District of Missouri in Sprint's suit against AT&T Corporation for the collection of terminating access charges. The FCC ruled that although nothing prohibited wireless carriers from charging for access to their networks, interexchange carriers were not required to pay such charges absent a contractual obligation to do so. This decision was affirmed by the D.C. Circuit Court of Appeals. Management believes adequate provisions have been recorded in the results of operations. In April and May 2003, three putative class action lawsuits were filed in the U.S. District Court for the District of Kansas by individual participants in the Sprint Retirement Savings Plan and the Centel Retirement Savings Plan for Bargaining Unit Employees against Sprint Corporation, the committees that administer the two plans, and various current and former officers of Sprint. In November 2003, a consolidated amended complaint was filed, naming additional officers and directors and Fidelity Management, the plan trustee, as defendants. In December 2003, two additional complaints, making identical allegations, were filed. These lawsuits have been consolidated before a single judge. The lawsuits allege that defendants breached their fiduciary duties to the plans and violated the ERISA statutes by including FON and PCS stock among the more than thirty investment options offered to plan participants. The lawsuits seek to recover any decline in the value of FON and PCS stock during the class period. Various other suits, proceedings and claims, including purported class actions, typical for a business enterprise, are pending against Sprint. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with Sprint's beliefs, Sprint expects that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on the financial condition or results of operations of Sprint or its business segments. - -------------------------------------------------------------------------------- 9. Income Taxes - -------------------------------------------------------------------------------- The differences that caused Sprint's effective income tax rates to vary from the 35% federal statutory rate for income taxes related to continuing operations were as follows:
Quarters Ended March 31, ------------------------------------ 2004 2003 ------------------------------------------------------------ --- -------------- -- -------------- (millions) Income tax expense at the federal statutory rate $ 129 $ 55 Effect of: State income taxes, net of federal income tax effect 12 8 Other, net 5 (2) ------------------------------------------------------------ --- -------------- -- -------------- Income tax expense $ 146 $ 61 --- -------------- -- -------------- Effective income tax rate 39.7% 38.6% --- -------------- -- --------------
- -------------------------------------------------------------------------------- 10. Accounting for Derivative Instruments - -------------------------------------------------------------------------------- Risk Management Policies Sprint's derivative instruments include interest rate swaps, stock warrants, variable prepaid forward contracts, credit forward contracts, and foreign currency forward and option contracts. Sprint's derivative transactions are used principally for hedging purposes and comply with board-approved policies. Senior finance management receives frequent status updates of all outstanding derivative positions. Sprint enters into interest rate swap agreements to manage exposure to interest rate movements and achieve an optimal mixture of floating and fixed-rate debt while minimizing liquidity risk. Interest rate swap agreements that are designated as fair value hedges effectively convert Sprint's fixed-rate debt to a floating rate through the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreement without an exchange of the underlying principal amount. Interest rate swap agreements designated as cash flow hedges reduce the impact of interest rate movements on future interest expense by effectively converting a portion of its floating-rate debt to a fixed rate. In certain business transactions, Sprint is granted warrants to purchase the securities of other companies at fixed rates. These warrants are supplemental to the terms of the business transactions and are not designated as hedging instruments. Sprint enters into variable prepaid forward contracts which reduce the variability in expected cash flows related to a forecasted sale of the underlying equity securities held as available for sale. Sprint enters into fair value hedges through credit forward contracts which hedge changes in fair value of certain debt issues. Sprint's foreign exchange risk management program focuses on reducing transaction exposure to optimize consolidated cash flow. Sprint enters into forward and option contracts in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint's primary transaction exposure results from net payments made to and received from overseas telecommunications companies for completing international calls made by Sprint's domestic customers and the operation of its international subsidiaries. Interest Rate Swaps The interest rate swaps met all the required criteria under derivative accounting rules for the assumption of perfect effectiveness resulting in no recognition of changes in their fair value in earnings during the life of the swap. Sprint held only fair-value hedges during 2003 and the 2004 first quarter. Sprint recorded a $26 million increase in the 2004 first quarter resulting from changes in the fair value of the interest rate swaps. The increase in value for these swaps has been recorded in "Other non-current assets" on the Consolidated Balance Sheets. As the swaps have been deemed perfectly effective, an offset was recorded to the underlying long-term debt. Stock Warrants The stock warrants are not designated as hedging instruments and changes in the fair value of these derivative instruments are recognized in earnings during the period of change. Sprint's net derivative losses on stock warrants were immaterial in both the 2004 and 2003 first quarters. Net Purchased Equity Options The net purchased equity options embedded in variable prepaid forward contracts are designated as cash flow hedges. Sprint recorded an $11 million after-tax increase to other comprehensive income in the 2004 first quarter resulting from gains on these cash flow hedges. The changes in other comprehensive income are included in "Net unrealized gains (losses) on qualifying cash flow hedges" in the Consolidated Statements of Comprehensive Income. Credit Forward Contracts Sprint held fair value hedges in credit forward contracts during the 2003 first quarter to hedge changes in fair value of certain debt issues. As there is high correlation between the credit forward contracts and the debt issues being hedged, fluctuations in the value of the credit forward contracts are generally offset by changes in the fair value of the debt issues. A nominal amount was recorded in Sprint's Consolidated Statements of Operations in the 2003 first quarter on this investment. The contracts matured in the 2003 third quarter. Foreign Currency Forward and Option Contracts Foreign currency forward and option contracts held during the periods were not designated as hedges as defined in SFAS No. 133 and changes in the fair value of these derivative instruments are recognized in earnings during the period of change. The activity associated with these contracts was immaterial in both periods presented. Concentrations of Credit Risk Sprint's accounts receivable are not subject to any concentration of credit risk. Sprint controls credit risk of its interest rate swap agreements and foreign currency contracts through credit approvals, dollar exposure limits and internal monitoring procedures. 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 to these agreements. - -------------------------------------------------------------------------------- 11. Discontinued Operation - -------------------------------------------------------------------------------- In the 2003 first quarter, Sprint sold its directory publishing business to R.H. Donnelley for $2.23 billion in cash. The sale closed on January 3, 2003. In the 2003 first quarter, Sprint recognized a pretax gain of $2.13 billion, $1.31 billion after-tax. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, Sprint has presented the directory publishing business as a discontinued operation in the consolidated financial statements. Included in "Discontinued Operations, net" in the 2003 first quarter Consolidated Statements of Operations was $5 million of previously reported "Net operating revenues" and "Income from continuing operations before income taxes." - -------------------------------------------------------------------------------- 12. Other Financial Information - -------------------------------------------------------------------------------- Supplemental Cash Flows Information Sprint's net cash paid (received) for interest and income taxes was as follows:
Quarters Ended March 31, -- ------------- -- ------------- 2004 2003 --------------------------------------------------- -- ------------- -- ------------- (millions) Interest (net of capitalized interest) $ 380 $ 419 -- ------------- -- ------------- Income taxes $ (1) $ 9 -- ------------- -- -------------
Sprint's non-cash activities included the following:
Quarters Ended March 31, -- ------------- -- ------------- 2004 2003 --------------------------------------------------- -- ------------- -- ------------- (millions) Common stock issued under Sprint's employee benefit stock plans $ - $ 6 -- ------------- -- ------------- Settlement of shareholder suit $ 5 $ - -- ------------- -- -------------
- -------------------------------------------------------------------------------- 13. Segment Information - -------------------------------------------------------------------------------- Sprint is divided into three main lines of business: the PCS wireless division, the global markets division and the local division. Other consists primarily of wholesale distribution of telecommunications products. Sprint manages its segments to the operating income level of reporting. Items below operating income are held at a corporate level. The reconciliation from operating income to net income is shown on the face of the Consolidated Statements of Operations. Segment financial information was as follows:
- ---------------------------------------------------------------------------------------------------------------- PCS Global Corporate Quarters Ended Wireless Markets Local and March 31, Division Division Division Other(1) Eliminations(2) Consolidated - ---------------------------------------------------------------------------------------------------------------- (millions) 2004 Net operating revenues $ 3,437 $ 1,912 $ 1,506 $ 196 $ (344) $ 6,707 Affiliated revenues 4 169 56 115 (344) - Operating income (loss) 257 11 446 (8) 8 714 2003 Net operating revenues $ 2,947 $ 2,046 $ 1,532 $ 187 $ (373) $ 6,339 Affiliated revenues 3 193 52 125 (373) - Operating income (loss) 140 4 462 (10) 8 604 - ---------------------------------------------------------------------------------------------------------------- (1) In the 2003 first quarter, Sprint closed the sale of its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Operations of the directory publishing business are reported as a discontinued operation for all periods presented. See Note 11 for additional information. (2) Revenues eliminated in consolidation consist principally of local access charged to the global markets division by the local division, equipment purchases from the wholesale distribution business, interexchange services provided to the local division, long-distance services provided to the PCS wireless division for resale to PCS customers and for internal business use, Caller ID services provided by the local division to the PCS wireless division and handset purchases from the PCS wireless division. Net operating revenues by product and services were as follows: - ---------------------------------------------------------------------------------------------------------------------- PCS Global Quarters Ended Wireless Markets Local March 31, Division Division Division Other(1) Eliminations(2),(3) Consolidated - ---------------------------------------------------------------------------------------------------------------------- (millions) 2004 Voice $ - $ 1,186 $ 1,147 $ - $ (196) $ 2,137 Data - 452 195 - (19) 628 Internet - 223 - - (3) 220 Wireless services 3,437 - - - (3) 3,434 Other - 51 164 196 (123) 288 ---------------------------------------------------------------------------------- Total net operating revenues $ 3,437 $ 1,912 $ 1,506 $ 196 $ (344) $ 6,707 ---------------------------------------------------------------------------------- 2003 Voice $ - $ 1,293 $ 1,183 $ - $ (242) $ 2,234 Data - 462 173 - - 635 Internet - 243 - - - 243 Wireless services 2,947 - - - (3) 2,944 Other - 48 176 187 (128) 283 ---------------------------------------------------------------------------------- Total net operating revenues $ 2,947 $ 2,046 $ 1,532 $ 187 $ (373) $ 6,339 ---------------------------------------------------------------------------------- (1) In the 2003 first quarter, Sprint closed the sale of its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Operations of the directory publishing business are reported as a discontinued operation for all periods presented. See Note 11 for additional information. (2) Revenues eliminated in consolidation consist principally of local access charged to the global markets division by the local division, equipment purchases from the wholesale distribution business, interexchange services provided to the local division, long-distance services provided to the PCS wireless division for resale to PCS customers and for internal business use, Caller ID services provided by the local division to the PCS wireless division and handset purchases from the PCS wireless division. (3) Prior to the 2003 second quarter, elimination information for the global markets division was not tracked at a specific products and services level. All eliminations were considered voice revenues.
- -------------------------------------------------------------------------------- 14. Subsequent Events - -------------------------------------------------------------------------------- Dividend Declaration On April 20, 2004, Sprint's board of directors declared a dividend of 12.5 cents per share on the FON common stock to shareholders of record at the close of business, June 9, 2004. The dividend will be paid June 30, 2004. Debt Extinguishment In May 2004, Sprint repurchased $750 million aggregate principal amount of its 6.0% equity unit senior notes, scheduled to mature August 17, 2006, from a single noteholder. Upon completion of this transaction, $975 million aggregate principal amount of these notes remains outstanding. Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Forward-looking Information - -------------------------------------------------------------------------------- Sprint includes certain estimates, projections and other forward-looking statements in its reports and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forward-looking statements. These statements reflect management's judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer growth and retention, pricing, operating costs, the timing of various events and the economic environment. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: o extent and duration of any economic downturn; o the effects of vigorous competition in the markets in which Sprint operates; o the costs and business risks associated with providing new services and entering new markets; o adverse change in the ratings afforded our debt securities by ratings agencies; o the ability of the PCS wireless division to continue to grow a significant market presence; o the ability of the PCS wireless division to continue to improve profitability; o the ability of the global markets division and the local division to improve cash flow generation; o the effects of mergers and consolidations within the telecommunications industry and unexpected announcements or developments from others in the telecommunications industry; o the uncertainties related to the outcome of bankruptcies affecting the telecommunications industry; o the impact of financial difficulties of third-party affiliates on the PCS wireless division's network coverage; o the uncertainties related to Sprint's investments in networks, systems and other businesses; o the uncertainties related to the implementation of Sprint's business strategies, including our initiative to realign services to enhance the focus on business and consumer customers; o the impact of new, emerging and competing technologies on Sprint's business; o unexpected results of litigation filed against Sprint; o the impact of wireless local number portability (WLNP) on the PCS wireless division's growth and churn rates, revenues and expenses; o the risk of equipment failure, natural disasters, terrorist acts, or other breaches of network or information technology security; o the possibility of one or more of the markets in which Sprint competes being impacted by changes in political or other factors such as monetary policy, legal and regulatory changes including the impact of the Telecommunications Act of 1996 (Telecom Act), or other external factors over which Sprint has no control; and o other risks referenced from time to time in Sprint's filings with the Securities and Exchange Commission (SEC). The words "estimate," "project," "intend," "expect," "believe," "target" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout Management's Discussion and Analysis. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Sprint is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this report or unforeseen events. Sprint provides a detailed discussion of risk factors in various SEC filings, including its 2003 Form 10-K, and you are encouraged to review these filings. - -------------------------------------------------------------------------------- Overview - -------------------------------------------------------------------------------- Sprint is a global communications company and a leader in integrating long-distance, local service, and wireless communications. Sprint is also one of the largest carriers of Internet traffic using its tier one Internet Protocol network, which provides connectivity to any point on the Internet either through its own network or via direct connections with other backbone providers. Sprint is the nation's third-largest provider of long distance services, based on revenues, and operates nationwide, all-digital long distance and tier one Internet Protocol networks. Sprint currently serves approximately 7.9 million access lines in its franchise territories in 18 states. Additionally, Sprint provides local service using its facilities, leased facilities or unbundled network elements provided by other carriers in a total of 36 states and the District of Columbia. Sprint is selling into the cable telephony market through arrangements with cable companies that resell Sprint long distance service and use Sprint back office systems and network assets in support of their local telephone service provided over cable facilities. Sprint also operates a 100% digital PCS wireless network with licenses to provide service to the entire United States population, including Puerto Rico and the U.S. Virgin Islands, using a single frequency band and a single technology. The PCS wireless division, together with third party affiliates, operates PCS systems in over 300 metropolitan markets, including the 100 largest U.S. metropolitan areas. The PCS wireless division service, including third party affiliates, reaches a quarter billion people. The PCS wireless division, combined with our wholesale and affiliate partners, served more than 21 million customers at the end of the 2004 first quarter. Sprint operates in an industry that has been and continues to be subject to consolidation and dynamic change. Therefore, Sprint routinely reassesses its business strategies. Due to changes in telecommunications, including bankruptcies, over-capacity and the current economic environment, Sprint continues to assess the implications on its operations. Any such assessment may impact the valuation of its long-lived assets. As part of its overall business strategy, Sprint regularly evaluates opportunities to expand and complement its business and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on its business, financial condition, liquidity or results of operations. In the 2003 first quarter, Sprint sold its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Business Transformation Currently, Sprint's operations are divided into three lines of business: the PCS wireless division, the global markets division and the local division. In the 2003 fourth quarter, Sprint undertook an initiative to realign internal resources. This effort was implemented to enhance the customer-facing focus on the needs and preferences of two distinct consumer types - businesses and individuals. This effort is expected to enable Sprint to more effectively and efficiently use its portfolio of assets to create customer-focused communications solutions. During 2004, Sprint intends to continue to measure its activities using its current business segments, and begin to measure certain activities under this customer-focused approach. Throughout 2004, management anticipates continuing to make decisions using the current segmentation taking into consideration the re-aligned customer-focused approach. In conjunction with the realignment initiative, Sprint commenced efforts to improve Sprint's productivity through: o Consolidating systems and eliminating redundancies o Automation o Process re-engineering o E-enablement o Organizational redesign and streamlining These efforts could result in restructuring charges and asset impairments in subsequent quarters. Elimination of Tracking Stocks On April 23, 2004, Sprint recombined its two tracking stocks. Each share of PCS common stock automatically converted into 0.5 shares of FON common stock. As of April 23, 2004, the FON Group and the PCS Group no longer exist, and FON common stock represents all of the operations and assets of Sprint, including the PCS wireless division, the global markets division and the local division. FON common stock and PCS common stock were intended to reflect the financial results and economic value of the FON and PCS Groups. However, they were classes of common stock of Sprint, not of the group they were intended to track. Accordingly, FON and PCS shareholders were each subject to the risks related to an equity investment in Sprint and all of Sprint's businesses, assets and liabilities. Shares of FON common stock and PCS common stock did not represent a direct legal interest in the assets and liabilities allocated to either group, but rather represented a direct equity interest in Sprint assets and liabilities as a whole. - -------------------------------------------------------------------------------- Results of Operations - -------------------------------------------------------------------------------- Consolidated Net operating revenues increased 6% to $6.7 billion in the 2004 first quarter compared to $6.3 billion in the same 2003 period reflecting growth in the PCS wireless division's revenues partially offset by declining long distance voice revenues in the global markets division. Income from continuing operations increased to $222 million in the 2004 first quarter compared to $97 million in the 2003 first quarter and includes the after-tax impacts of the items discussed below. In the 2004 first quarter, income from continuing operations included a $19 million charge related to severance costs associated with Sprint's transformation and the wind-down of its web hosting business, as well as $9 million in advisory fees associated with the recombination of the tracking stocks. In the 2003 first quarter, income from continuing operations included a $32 million charge to settle derivative action and securities class action litigation, a $12 million charge reflecting the premiums paid on debt tender offers, and a $6 million charge associated with the termination of a software development project. - -------------------------------------------------------------------------------- Segmental Results of Operations - -------------------------------------------------------------------------------- PCS Wireless Division The PCS wireless division operates a 100% digital PCS wireless network with licenses to provide service to the entire United States population, including Puerto Rico and the U.S. Virgin Islands, using a single frequency band and a single technology. The PCS wireless division, together with third party affiliates, operates PCS systems in over 300 metropolitan markets, including the 100 largest U.S. metropolitan areas. The PCS wireless division's service, together with third party affiliates, reaches a quarter billion people. The PCS wireless division combined with our wholesale and affiliate partners served more than 21 million customers at the end of the 2004 first quarter. The PCS wireless division provides nationwide service through a combination of: o operating its own digital network in major U.S. metropolitan areas using code division multiple access (CDMA), which is a digital spread-spectrum wireless technology that allows a large number of users to access a single frequency band by assigning a code to all transmission bits, sending a scrambled transmission of the encoded information over the air and reassembling the speech and data into its original format, o affiliating with other companies that use CDMA, mainly in and around smaller U.S. metropolitan areas, o roaming on other providers' analog cellular networks using multi-mode and multi-band handsets, and o roaming on other providers' digital networks that use CDMA. Sprint PCS customers can use their phones through roaming agreements in countries other than the United States, including areas of: o Asia Pacific, including China, Guam, Hong Kong and New Zealand, o Canada and Mexico, o Central and South America, including Argentina, Bolivia, Chile, Colombia, Ecuador, Guatemala, Paraguay and Uruguay, and o Most major Caribbean Islands. Sprint's third generation (3G) capability allows more efficient utilization of the network when voice calls are made using 3G-enabled handsets. It also provides enhanced data services. The service, marketed as "PCS Vision(TM)," allows consumer and business customers to use their Vision-enabled PCS devices to exchange instant messages, exchange personal and corporate e-mail, take, send and receive pictures, play games with full-color graphics and polyphonic sounds and browse the Internet wirelessly with speeds up to 144 kbps (with average speeds of 50 to 70 kbps). The PCS wireless division supplements its own network through affiliation arrangements with other companies that use CDMA. Under these arrangements, these companies offer PCS services using Sprint's spectrum under the Sprint brand name on CDMA networks built and operated at their own expense. Several of these affiliates are experiencing financial difficulties and are evaluating or have completed restructuring activities. Two affiliates have filed for bankruptcy protection and one of them continues to pursue claims against Sprint in the bankruptcy court. One other affiliate has filed suit against us. Several of the affiliates are disputing and refusing to pay amounts owed to Sprint. Reserves have been established that are expected to provide for the ultimate resolution of these disputes, and Sprint is in negotiations with some of the affiliates regarding restructuring its relationship with them. Sprint has reached agreements with several of its affiliates, including two of the largest who have completed restructuring activities. Sprint has amended the existing agreements to provide for a simplified pricing mechanism, as well as refining and changing various business processes. The amended agreements cover nearly 50% of the customers served by all affiliates. The agreements provide simplified and predictable long-term pricing for service bureau fees and stability to the rates charged for inter-area service fees. In addition, the agreements settled all significant outstanding disputes. The PCS wireless division may incur additional expenses to ensure that service is available to its customers in the areas served by its affiliates. If any of the PCS wireless division affiliates cease operations, the PCS wireless division may incur roaming charges in areas where service was previously provided by the affiliates and costs to meet FCC buildout and renewal requirements, as well as experience lower revenues. The PCS wireless division also provides wireless services to companies that resell wireless services to their customers on a retail basis under their own brand. These companies bear the costs of acquisition, billing and customer service. In the 2003 third quarter, Sprint executed a five year wholesale agreement with Qwest Communications (Qwest) whereby Qwest wireless subscribers will use Sprint's national PCS network and have access to Sprint-branded PCS Vision data services. Qwest will continue to provide sales and service support to its wireless customers, including the promotion and sale of handsets and price plans, as well as provide customer service, including billing and account information. Sprint will serve as the exclusive provider to Qwest of wireless services for resale in the markets served by the PCS wireless division. Qwest began adding new customers in the 2004 first quarter. The transition of existing customers will begin in the 2004 second quarter and is expected to be complete by year-end. The PCS wireless division also includes its investment in Virgin Mobile, USA, a joint venture to market wireless services, principally to youth and pre-pay segments.
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ---------------------------------- ------------------------------- 2004 2003 $ % - ---------------------------------------------- ---------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues $ 3,437 $ 2,947 $ 490 16.6% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 1,744 1,448 296 20.4% Selling, general and administrative 778 741 37 5.0% Depreciation 654 608 46 7.6% Restructuring and asset impairment 4 10 (6) (60.0)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total operating expenses 3,180 2,807 373 13.3% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating income $ 257 $ 140 $ 117 83.6% -- ------------- -- -------------- -- ------------- Capital expenditures $ 412 $ 187 $ 225 120.3% -- ------------- -- -------------- -- -------------
The PCS wireless division markets its products through multiple distribution channels, including its own retail stores as well as other retail outlets. Equipment sales to one retail chain and the service revenues generated by sales to its customers accounted for 21.4% of net operating revenues in the 2004 first quarter compared to 22.8% for the same 2003 period.
Net Operating Revenues Quarters Ended March 31, ---------------------------------- 2004 2003 ------------------------------------------------------------------------ Customers (millions) 16.3 15.0 ---------------------------------- Average monthly service revenue per user (ARPU) $ 61 $ 59 ---------------------------------- Customer churn rate 2.9% 3.1% ----------------------------------
Average monthly service revenue per user (ARPU) is calculated by dividing wireless service revenues by weighted average monthly wireless subscribers to measure revenue on a per user basis. This is a measure which uses GAAP as the basis for the calculation. ARPU, which is used by most wireless companies, is a method of valuing the recurring activity by measuring revenue on a per user basis. Analysts and investors primarily use ARPU to compare relative value across the wireless industry. Net operating revenues include service revenues and revenues from sales of handsets and accessory equipment. Service revenues consist of monthly recurring charges, usage charges and miscellaneous fees such as directory assistance, operator-assisted calling, handset insurance and late payment charges. Service revenues increased 14.2% in the 2004 first quarter period from the same 2003 period reflecting an increase in the number of customers, increased revenues from data services, customer elections to add services to their base plans and increased fees. These increases were partially offset by lower overage charges from usage-based plans. Average monthly usage in the 2004 first quarter was approximately 15 hours per month, an increase of more than three hours when compared to the 2003 first quarter. At the end of the period 38% of the customer base was subscribing to data services compared to approximately 25% at the end of the 2003 first quarter. The PCS wireless division had 414,000 post-paid retail additions in the 2004 first quarter, ending the period with approximately 16.3 million customers compared to approximately 15.0 million customers at the end of the 2003 first quarter. Resellers added 420,000 customers in the first quarter of 2004, which increased their customer base to 2.0 million, principally due to Virgin Mobile, USA. The PCS wireless division third party affiliates added 138,000 customers in the first quarter of 2004. This brings the total number of customers served on the PCS and affiliate networks, including post-paid retail, affiliate and wholesale customers, to more than 21.3 million at the end of the 2004 first quarter. In the 2004 first quarter, more than half of new post-paid retail customers chose to include PCS Vision in their service package. Customer churn is calculated by dividing the customers who discontinued PCS service by the weighted average subscribers for the period. This is an operational measure which is used by most wireless companies as a method of estimating the life of the customer. Analysts and investors primarily use churn to compare relative value across the wireless industry. The customer churn rate in the 2004 first quarter was 2.9% compared to 3.1% for the same 2003 period. Improvement was due to effective customer retention programs, as well as credit management policies. This improvement was partially offset by an increase in voluntary churn due in part to the institution of WLNP in the 2003 fourth quarter. Revenues from sales of handsets and accessories, including new customers and upgrades, were approximately 11.0% of net operating revenues in the 2004 first quarter compared to 9.1% for the same 2003 period. The increase was mainly due to higher customer additions and higher retail prices, which was partially offset by higher rebates. As part of the PCS wireless division's marketing plans, handsets, net of rebates, are normally sold at prices below the PCS wireless division's cost. Other service revenues consist primarily of net revenues retained from Sprint PCS customers residing in PCS affiliate territories and revenues from the sale of PCS services to companies that resell those services to their customers on a retail basis. Other revenues represented 3.5% of net operating revenues in the 2004 first quarter compared to 2.5% for the same 2003 period. These increases mainly reflect net additions to the affiliate and wholesale customer base. Costs of Services and Products The PCS wireless division's costs of services and products mainly include handset and accessory costs, switch and cell site expenses, customer service costs and other network-related costs. These costs increased 20% in the 2004 first quarter from the same 2003 period. These increases were primarily due to network support of a larger customer base, higher minutes of use and expanded market coverage. Equipment costs also increased due to higher gross additions and handset upgrades as well as a decline in availability of refurbished handsets. These increases were somewhat offset by scale benefits resulting from the increased customer base and decreases in information technology expense. Handset and equipment costs were 41% of total costs of services and products in the 2004 first quarter compared to 40% for the same 2003 period. Costs of services and products were 50.7% of net operating revenues in the 2004 first quarter compared to 49.1% for the same 2003 period. Selling, General and Administrative Selling, General and Administrative (SG&A) expense mainly includes marketing costs to promote products and services, as well as related salary and benefit costs. SG&A expense increased 5% in the 2004 first quarter from the same 2003 period reflecting an increase in marketing, sales and distribution costs primarily driven by higher gross post-paid retail additions and an increase in the number of our own retail stores. This increase was offset by a decline in bad debt expense due to a better credit class mix, leading to lower write-offs and higher recovery. SG&A expense was 22.6% of net operating revenues in the 2004 first quarter compared to 25.1% for the same 2003 period. Bad debt expense as a percentage of net revenues was 1.1% in the 2004 first quarter compared to 3.0% in the same 2003 period. Reserve for bad debt as a percent of outstanding accounts receivable was 6.8% at the end of the 2004 first quarter and 7.3% at year-end 2003. This improvement was mainly driven by lower involuntary churn and improved cash collections. Depreciation Estimates and assumptions are used both in setting depreciable lives and testing for recoverability. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation expense consists mainly of depreciation of network assets. Depreciation expense increased 8% in the 2004 first quarter from the same 2003 period due to an increase in the network asset investment during 2003 and the 2004 year-to-date period. Depreciation expense was 19.0% of net operating revenues in the 2004 first quarter compared to 20.6% for the same 2003 period. Restructuring and Asset Impairment In the first quarter of 2004, the PCS wireless division recorded a $4 million restructuring charge representing severance associated with Sprint's transformation to a customer-focused organizational design. In the first quarter of 2003, the PCS wireless division recorded a charge of $10 million associated with the termination of a software development project. Global Markets Division The global markets division provides a broad suite of communications services targeted to domestic business and residential customers, multinational corporations and other communications companies. These services include domestic and international voice; data communications using various protocols, such as Internet Protocol (IP) and frame relay (a data service that transfers packets of data over Sprint's network), and managed network services. Additionally, the global markets division provides local service using Sprint's facilities, leased facilities or unbundled network elements provided by other carriers in a total of 36 states and the District of Columbia. The global markets division is selling into the cable telephony market through arrangements with cable companies that resell Sprint long distance service and use Sprint back office systems and network assets in support of their local telephone service provided over cable facilities. In addition, the global markets division provides consulting services and international data communications. The global markets division also includes the operating results of the wireless high speed data and cable TV service operations of the broadband fixed wireless companies using Multichannel Multipoint Distribution Services (MMDS) technology. Sprint is focusing its efforts in the use of MMDS technology on a broad range of alternative strategies. Sprint is continuing to optimize its spectrum portfolio, is monitoring technology and industry developments, and is involved in efforts to achieve favorable regulatory rulings with respect to this spectrum.
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ---------------------------------- ------------------------------- 2004 2003 $ % - ---------------------------------------------- ---------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues Voice $ 1,186 $ 1,293 $ (107) (8.3)% Data 452 462 (10) (2.2)% Internet 223 243 (20) (8.2)% Other 51 48 3 6.3% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total net operating revenues 1,912 2,046 (134) (6.5)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 1,053 1,106 (53) (4.8)% Selling, general and administrative 516 575 (59) (10.3)% Depreciation 320 361 (41) (11.4)% Restructuring and asset impairment 12 - 12 NM - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total operating expenses 1,901 2,042 (141) (6.9)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating income $ 11 $ 4 $ 7 NM -- ------------- -- -------------- -- ------------- Capital Expenditures $ 56 $ 61 $ (5) (8.2)% -- ------------- -- -------------- -- ------------- NM = Not meaningful
Net Operating Revenues Net operating revenues decreased 6.5% in the 2004 first quarter from the same 2003 period. The overall revenue decrease is in large part due to the decline in voice revenues. Voice Revenues Voice revenues decreased 8% in the 2004 first quarter from the same 2003 period due to a decline in consumer voice revenues resulting from wireless, e-mail and instant messaging substitution, aggressive competition from Regional Bell Operating Companies (RBOCs) for consumer and small business customers and aggressive pricing by traditional interexchange carriers and the RBOCs for enterprise customers. Minute volume increased 9% in the 2004 first quarter compared to the 2003 first quarter. Data Revenues Data revenues decreased 2% in the 2004 first quarter from the same 2003 period. The decrease is driven by declines in frame relay, private line services and ATM partially offset by an increase in managed network services. Internet Revenues Internet revenues decreased 8% in the 2004 first quarter from the same 2003 period. The decline was mainly driven by a decrease in dial IP and web hosting services, somewhat offset by an increase in dedicated IP. Sprint made the decision to exit the web hosting business in the 2003 second quarter. Other Revenues Other revenues increased 6% in the 2004 first quarter from the same 2003 period. The increase was primarily due to higher equipment sales. Costs of Services and Products Costs of services and products include interconnection costs paid to local phone companies, other domestic service providers and foreign phone companies to complete calls made by the division's domestic customers, costs to operate and maintain our long distance networks, and costs of equipment sales. These costs decreased 5% in the 2004 first quarter from the same 2003 period. The decrease was due to FCC-mandated access rate reductions, favorable carrier access settlements, and initiatives to reduce access unit costs. Costs of services and products for the global markets division were 55.1% of net operating revenues in the 2004 first quarter compared to 54.1% for the same period a year ago. Selling, General and Administrative SG&A expenses decreased 10% in the 2004 first quarter from the same 2003 period. The decline was due to reduced bad debt provisions, restructuring efforts, and general cost controls. SG&A expense was 27.0% of net operating revenues in the 2004 first quarter compared to 28.1% for the same period a year ago. SG&A includes charges for estimated bad debt expense. The reserve for bad debts requires management's judgment and is based on customer specific indicators, as well as historical trending, industry norms, regulatory decisions and recognition of current market indicators about general economic conditions. Bad debt expense as a percentage of net revenues was 1.3% in the 2004 first quarter compared to 2.4% for the same 2003 period. This reduction reflects an improvement in collections, aging and recoveries of previously written-off accounts. Reserve for bad debt as a percent of outstanding accounts receivable was 9.8% at the end of the 2004 first quarter and 11.0% at year-end 2003. Depreciation Estimates and assumptions are used both in setting depreciable lives and testing for recoverability. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation expense decreased 11% in the 2004 first quarter from the same period a year ago primarily driven by a decreased asset base due to the asset impairments associated with the wind-down of the web hosting business which occurred in the 2003 second quarter, as well as the extension of the depreciable life of certain high-capacity transmission equipment from eight years to twelve years due to slower anticipated evolution of technology and limited physical deterioration. This extension in life decreased the 2004 first quarter depreciation expense in the global markets division by approximately $25 million. Depreciation expense was 16.7% of net operating revenues in the 2004 first quarter compared to 17.6% for the same 2003 period. Restructuring and Asset Impairment In the 2004 first quarter, the global markets division recorded a $12 million restructuring charge representing severance associated with Sprint's transformation to a customer-focused organizational design and the wind-down of the web hosting business. Local Division The local division consists mainly of regulated local phone companies serving approximately 7.9 million access lines in 18 states. The local division provides local voice and data services, including digital subscriber line (DSL), for customers within its franchise territories, access by phone customers and other carriers to the local division's local network, nationwide long distance services to residential customers in its franchise territories, sales of telecommunications equipment, and other services within specified calling areas to residential and business customers. The local division provides wireless services to customers in its franchise territories through agency relationships. DSL enables high speed transmission of data over existing copper telephone lines.
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ----------------------------------- ------------------------------- 2004 2003 $ % - --------------------------------------------- ----------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues Voice $ 1,147 $ 1,183 $ (36) (3.0)% Data 195 173 22 12.7% Other 164 176 (12) (6.8)% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Total net operating revenues 1,506 1,532 (26) (1.7)% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 451 487 (36) (7.4)% Selling, general and administrative 327 318 9 2.8% Depreciation 268 265 3 1.1% Restructuring 14 - 14 NM - --------------------------------------------- --- ------------- -- -------------- -- ------------- Total operating expenses 1,060 1,070 (10) (0.9)% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Operating income $ 446 $ 462 $ (16) (3.5)% --- ------------- -- -------------- -- ------------- Operating margin 29.6% 30.2% --- ------------- -- -------------- Capital expenditures $ 209 $ 281 $ (72) (25.6)% --- ------------- -- -------------- -- -------------
Net Operating Revenues Net operating revenues decreased 2% in the 2004 first quarter from the same 2003 period. The decline was driven by lower voice revenue primarily due to fewer access lines and lower consumer long distance services. Equipment sales also contributed to the decrease. The local division ended the 2004 first quarter with approximately 7.9 million switched access lines, a 2% decrease during the past 12 months. The reduction in access lines was driven by wireless and broadband substitution, losses to competitive local providers, and the economic environment. The reduction in access lines is expected to continue, although Sprint expects its ongoing rate of line loss to be less than the loss rates experienced by other major urban carriers. On a voice-grade equivalent basis, which includes both traditional switched services and high capacity lines, voice-grade equivalents grew 6% during the past 12 months. This growth reflects growth in DSL as well as many business customers switching from individual lines to high capacity dedicated circuits. Voice Revenues Voice revenues, derived from local exchange services, long distance revenue and switched access revenue, decreased 3% in the 2004 first quarter from the same 2003 period due to a decrease in access lines, lower consumer long distance revenue and the discontinuation of cost recovery related to local number portability. Data Revenues Data revenues are mainly derived from DSL, local data transport services, and special access. Data revenues increased 13% in the 2004 first quarter compared to a year ago driven by strong growth in DSL lines. Other Revenues Other revenues decreased 7% in the 2004 first quarter from the same 2003 period principally driven by lower equipment sales. The decrease in equipment sales was primarily the result of a planned shift in focus to selling higher margin products. Costs of Services and Products Costs of services and products include costs to operate and maintain the local network and costs of equipment sales. These costs decreased 7% in the 2004 first quarter compared to the same 2003 period. This decrease was mainly driven by general expense controls and lower costs associated with equipment sales, somewhat offset by higher pension costs. Costs of services and products were 29.9% of net operating revenues in the 2004 first quarter compared to 31.8% for the same period a year ago. Selling, General and Administrative SG&A expense increased 3% in the 2004 first quarter compared to the same 2003 period. The increase was primarily due to higher pension costs and stock-based compensation offset by lower bad debt expense and general expense controls. SG&A expense was 21.7% of net operating revenues in the 2004 first quarter compared to 20.8% for the same period a year ago. SG&A includes charges for estimated bad debt expense. The reserve for bad debts requires management's judgment and is based on customer specific indicators, as well as historical trending, industry norms, regulatory decisions and recognition of current market indicators about general economic conditions. Bad debt expense as a percentage of net revenues was 1.3% in the 2004 first quarter compared to 1.6% in the same period a year ago resulting from improvements in collections and aging. Reserve for bad debt as a percent of outstanding accounts receivable was 8.8% at the end of the 2004 first quarter and 8.5% at year-end 2003. Depreciation Estimates and assumptions are used in setting depreciable lives and testing for recoverability. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation expense increased 1% in the 2004 first quarter compared to the same 2003 period. Depreciation expense was 17.8% of net operating revenues in the 2004 first quarter compared to 17.3% for the same period a year ago. Restructuring and Asset Impairment In the 2004 first quarter, the local division recorded a $14 million restructuring charge representing severance associated with Sprint's transformation to a customer-focused organizational design. - -------------------------------------------------------------------------------- Nonoperating Items - -------------------------------------------------------------------------------- Interest Expense Sprint's effective interest rate on long-term debt was 6.9% in the 2004 first quarter compared to 7.0% in the 2003 first quarter. Interest costs on short-term borrowings and interest costs on deferred compensation plans have been excluded so as not to distort the effective interest rate on long-term debt. See "Liquidity and Capital Resources" for more information on Sprint's financing activities. Premium on Early Retirement of Debt In March 2003, Sprint completed a tender offer to purchase $442 million principal amount of current senior notes before their scheduled maturity. The notes had an interest rate of 5.7% and a maturity date of November 15, 2003. A premium of $6 million was paid as part of the tender offer. Also in March 2003, Sprint completed a tender offer to purchase $635 million principal amount of its long-term senior notes before their scheduled maturity. The notes had an interest rate of 5.9% and a maturity date of May 1, 2004. A premium of $13 million was paid as part of the tender offer. Other, net Other, net consisted of the following:
Quarters Ended March 31, ---------------------------------- 2004 2003 ------------------------------------------------------------------------ (millions) Dividend and interest income $ 9 $ 14 Equity in net losses of affiliates (12) (18) Losses from disposal of Property, plant and equipment - (1) Amortization of debt costs (6) (7) Royalties 4 3 Litigation settlement - (50) Tracking stock recombination (15) - Other, net (6) (2) ------------------------------------------------------------------------ Total $ (26) $ (61) ----------------------------------
Equity in net losses of affiliates was driven by Sprint's investment in Virgin Mobile, USA, in all periods presented. Royalties are payments made to Sprint by Call-Net equaling 2.5% of Call-Net gross revenues from telecommunication services. In the 2003 first quarter, Sprint recorded a $50 million charge to settle shareholder litigation. In the 2004 first quarter, Sprint recorded $15 million in advisory fees relating to the tracking stock recombination. Income Taxes See Note 9 of Condensed Notes to Consolidated Financial Statements for information about the differences that caused the effective income tax rates to vary from the federal statutory rate for income taxes related to continuing operations. Discontinued Operation, Net In the 2002 third quarter, Sprint reached a definitive agreement to sell its directory publishing business to R.H. Donnelley for $2.23 billion in cash. The sale closed on January 3, 2003. In the 2003 first quarter, Sprint recognized a pretax gain of $2.13 billion, $1.31 billion after-tax gain. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, Sprint has presented the directory publishing business as a discontinued operation in the consolidated financial statements. Cumulative Effect of Change in Accounting Principle, Net In the 2003 first quarter, Sprint adopted SFAS No. 143, Accounting for Asset Retirement Obligations. Upon adoption of SFAS No. 143, Sprint recorded a reduction in the local division's depreciation reserves to remove previously accrued costs of removal. Historically, the local division accrued costs of removal in its depreciable rate, a practice consistent with regulatory requirements and others in the industry. These costs of removal do not meet the standard's definition of an asset retirement obligation liability. This one-time benefit of approximately $420 million resulted in a cumulative effect of change in accounting principle credit, net of tax, in the Consolidated Statements of Operations of $258 million. - -------------------------------------------------------------------------------- Financial Condition - -------------------------------------------------------------------------------- Sprint's consolidated assets of $42.5 billion decreased $394 million in the 2004 first quarter. Cash and equivalents increased $304 million as operating cash flows exceeded capital expenditures and dividend payments. Net property, plant, and equipment decreased $635 million. Capital expenditures were more than offset by depreciation expense in the 2004 year-to-date period. - -------------------------------------------------------------------------------- Liquidity and Capital Resources - -------------------------------------------------------------------------------- Sprint's board of directors exercises discretion regarding the liquidity and capital resource needs of Sprint's business segments. This includes the ability to prioritize the use of capital and debt capacity, to determine cash management policies and to make decisions regarding the timing and amount of capital expenditures. Operating Activities Sprint's operating cash flows of $1.0 billion decreased $14 million in the 2004 first quarter from the same 2003 period. The 2004 decrease was mainly due to a $300 million contribution to the pension trust in the 2004 first quarter, offset by growth in the PCS wireless division. Investing Activities Sprint's cash flows used by investing activities, which consisted mainly of capital expenditures, totaled $652 million in the 2004 first quarter compared to $556 million a year ago. The PCS wireless division's capital expenditures were incurred to increase capacity and coverage. Global markets division capital expenditures were incurred mainly to maintain network reliability and upgrade capabilities for providing new products and services. The local division incurred capital expenditures to accommodate voice grade equivalent growth, expand capabilities for providing enhanced services, convert our network from circuit to packet switching, and continue the build-out of high-speed DSL services and to meet federal, state and local regulatory requirements and replace network and support assets. The overall increase in capital expenditures in 2004 was driven mainly by the PCS wireless division. Financing Activities Sprint's cash flows used by financing activities totaled $88 million in the 2004 first quarter and $1.7 billion in the year ago period. Financing activities include a $22 million reduction of debt in the 2004 first quarter compared with a reduction of $1.6 billion in the same 2003 period. The debt reduction in the 2003 first quarter was mainly due to the tender for the 2003 and 2004 senior notes and the prepayment of the global markets division accounts receivable securitization. Sprint paid cash dividends of $116 million in the 2004 first quarter compared with $114 million in the 2003 first quarter. Capital Requirements Sprint's 2004 investing activities, mainly consisting of capital expenditures, are expected to total approximately $4.0 billion. These expenditures are primarily for increased network capacity and coverage. They also include investments for growth in demand for enterprise services, broadband initiatives and the phased transition from circuit to packet switching. Sprint continues to review capital expenditure requirements closely and will adjust spending and capital investment in concert with growth. Dividend payments are expected to approximate $670 million in 2004 including the impact of the recombination of the tracking stocks in April 2004. Sprint expects overall cash from operations to be $6.5 billion in 2004. Liquidity In recent years, Sprint has used the long-term bond market as well as other financial markets to fund its needs. As a result of its improved liquidity position, Sprint currently does not expect to borrow funds through the capital markets in 2004 to fund capital expenditures and operating requirements. In June 2003, Sprint entered into a new revolving credit facility with a syndicate of banks. The $1.0 billion facility is unsecured, with no springing liens, and is structured as a 364-day credit line with a subsequent one-year, $1.0 billion term-out option. Sprint does not intend to draw against this facility. Sprint had standby letters of credit serving as a backup to various obligations of approximately $124 million as of March 31, 2004. Sprint has a PCS wireless division accounts receivable asset securitization facility that provides Sprint with up to $500 million of additional liquidity. The facility, which expires in 2005, is subject to annual renewals and does not include any ratings triggers that would allow the lenders involved to terminate the facility in the event of a credit rating downgrade. The maximum amount of funding available is based on numerous factors and will fluctuate each month. Sprint has not drawn against the facility and more than $212 million was available as of March 31, 2004. Sprint has a global markets division accounts receivable asset securitization facility that provides Sprint with up to $700 million of additional liquidity. The facility, which expires in 2005, is subject to annual renewals and does not include any ratings triggers that would allow the lenders involved to terminate the facility in the event of a credit rating downgrade. The maximum amount of funding available is based on numerous factors and will fluctuate each month. In February 2003, Sprint prepaid all outstanding borrowings under this facility. As of March 31, 2004, Sprint had more than $497 million total funding available under the facility. The undrawn loan facilities described above would charge interest rates equal to LIBOR or Prime Rate plus a spread that varies depending on Sprint's credit ratings. Debt maturities, including capital lease obligations, for the remainder of 2004 total approximately $570 million. Sprint's $2.7 billion cash balance at March 31, 2004, existing financing agreements, and expected 2004 cash flow from operations more than fund these requirements. Any borrowings Sprint may incur are ultimately limited by certain debt covenants. On March 31, 2004, Sprint's most restrictive debt covenant would allow an additional $6.7 billion of debt. Sprint is currently in compliance with all debt covenants associated with its borrowings. Fitch Ratings (Fitch) currently rates Sprint's long-term senior unsecured debt at BBB with a stable outlook. Standard and Poor's Corporate Ratings (Standard and Poor's) currently rates Sprint's long-term senior unsecured debt at BBB- with a stable outlook. In June 2003, Moody's Investors Service (Moody's) raised Sprint's outlook to stable. Moody's currently rates Sprint's long-term senior unsecured debt at Baa3. Sprint's ability to fund its capital needs is ultimately impacted by the overall capacity and terms of the bank, term-debt and equity markets. Given the volatility in the markets, Sprint continues to monitor the markets closely and to take steps to maintain financial flexibility and a reasonable capital structure cost. Sprint currently plans to access the markets only for extension, replacement or renewal of current credit arrangements. Off-Balance Sheet Financing Sprint does not participate in, nor secure, financings for any unconsolidated, special purpose entities. - -------------------------------------------------------------------------------- Financial Strategies - -------------------------------------------------------------------------------- General Risk Management Policies Sprint selectively enters into interest rate swap agreements to manage its exposure to interest rate changes on its debt. Sprint also enters into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint seeks to minimize counterparty credit risk through stringent credit approval and review processes, the selection of only the most creditworthy counterparties, continual review and monitoring of all counterparties, and thorough legal review of contracts. Sprint also controls exposure to market risk by regularly monitoring changes in foreign exchange and interest rate positions under normal and stress conditions to ensure they do not exceed established limits. Sprint's derivative transactions are used principally for hedging purposes and comply with Board-approved policies. Senior management receives frequent status updates of all outstanding derivative positions. Interest Rate Risk Management Fair Value Hedges Sprint enters into interest rate swap agreements to manage exposure to interest rate movements and achieve an optimal mixture of floating and fixed-rate debt while minimizing liquidity risk. The interest rate swap agreements designated as fair value hedges effectively convert Sprint's fixed-rate debt to a floating rate by receiving fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal amount. During 2003, Sprint entered into interest rate swap agreements, which were designated as fair value hedges. Cash Flow Hedges Sprint enters into interest rate swap agreements designated as cash flow hedges to reduce the impact of interest rate movements on future interest expense by effectively converting a portion of its floating-rate debt to a fixed-rate. As of March 31, 2004, Sprint had no outstanding interest rate cash flow hedges. Other Derivatives In certain business transactions, Sprint is granted warrants to purchase the securities of other companies at fixed rates. These warrants are supplemental to the terms of the business transaction and are not designated as hedging instruments. During 2003, Sprint entered into variable prepaid forward contracts to monetize equity securities held as available for sale. The derivatives have been designated as cash flow hedges to reduce the variability in expected cash flows related to the forecasted sale of the underlying equity securities. Foreign Exchange Risk Management Sprint's foreign exchange risk management program focuses on reducing transaction exposure to optimize consolidated cash flow. Sprint's primary transaction exposure results from payments made to and received from overseas telecommunications companies for completing international calls made by Sprint's domestic customers and from the operation of its international subsidiaries. These international operations were not material to the consolidated financial position at March 31, 2004 or results of operations or cash flows for the quarter ended March 31, 2004. Sprint has not entered into any significant foreign currency forward and option contracts or other derivative instruments to reduce the effects of adverse fluctuations in foreign exchange rates. As a result, Sprint was not subject to material foreign exchange risk. PART I. Item 3 Item 3. Quantitative and Qualitative Disclosures about Market Risk The risk inherent in Sprint's market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. Sprint is susceptible to certain risks related to changes in interest rates and foreign currency exchange rate fluctuations. Sprint does not purchase or hold any derivative financial instruments for trading purposes. Interest Rate Risk The communications industry is a capital intensive, technology driven business. Sprint is subject to interest rate risk primarily associated with its borrowings. Sprint selectively enters into interest rate swap agreements to manage its exposure to interest rate changes on its debt. Approximately 92% of Sprint's outstanding debt at March 31, 2004 is fixed-rate debt, excluding interest rate swaps. While changes in interest rates impact the fair value of this debt, there is no impact to earnings and cash flows because Sprint intends to hold these obligations to maturity unless market conditions are favorable. As of March 31, 2004, Sprint held fair value interest rate swaps with a notional value of $1 billion. These swaps were entered into as hedges of the fair value of a portion of our senior notes. These interest rate swaps have maturities ranging from 2008 to 2012. On a semiannual basis, Sprint pays a floating rate of interest equal to the six-month LIBOR, plus a fixed spread, which averaged 4.1% as of March 31, 2004, and received an average interest rate equal to the coupon rates stated on the underlying senior notes of 7.2%. Assuming a one percentage point increase in the prevailing forward yield curve, the fair value of the interest rate swaps and the underlying senior notes would change by $54 million. These interest rate swaps met all the requirements for perfect effectiveness under derivative accounting rules; therefore, there is no impact to earnings and cash flows for any fair value fluctuations. Sprint performs interest rate sensitivity analyses on its variable-rate debt including interest rate swaps. These analyses indicate that a one percentage point change in interest rates would have an annual pre-tax impact of $14 million on the Statements of Operations and Consolidated Statements of Cash Flows at March 31, 2004. While Sprint's variable-rate debt is subject to earnings and cash flows impacts as interest rates change, it is not subject to changes in fair values. Sprint also performs a sensitivity analysis on the fair market value of its outstanding debt. A 10% decrease in market interest rates would cause a $533 million increase in fair market value of its debt to $20 billion. This analysis includes the hedged debt, but excludes Sprint's equity unit notes. Foreign Currency Risk Sprint also enters into forward and option contracts in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint uses foreign currency derivatives to hedge its foreign currency payable related to settlement of international telecommunications access charges and the operation of international subsidiaries. The dollar equivalent of Sprint's net foreign currency payables from international settlements was $40 million and net foreign currency receivables from international operations was $25 million at March 31, 2004. The potential immediate pre-tax loss to Sprint that would result from a hypothetical 10% change in foreign currency exchange rates based on these positions would be approximately $1 million. PART I. Item 4 Item 4. Controls and Procedures In response to adoption of the Sarbanes-Oxley Act of 2002, Sprint formalized its disclosure controls and procedures. In connection with the preparation of this Form 10-Q and as of March 31, 2004, Sprint's Chief Executive Officer and Chief Financial Officer directed Sprint's internal auditors to update their review of the effectiveness of these disclosure controls and procedures and report their conclusions. The Chief Executive Officer and Chief Financial Officer also met with other members of management, as well as members of the financial accounting and legal departments, to discuss and evaluate Sprint's disclosures and the effectiveness of the disclosure controls and procedures. Based on these discussions and the report of the internal auditors, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the disclosure controls and procedures were effective as of March 31, 2004 and enabled Sprint to disclose all material financial and non-financial information affecting its businesses as required by the rules governing this report. No changes were made in Sprint's internal controls over financial reporting during the 2004 first quarter that have materially affected or are reasonably likely to materially affect Sprint's financial reporting. PART II. Other Information PART II. - Other Information Item 1. Legal Proceedings All of the purported class action lawsuits relating to the recombination of the tracking stocks filed in the District Court of Johnson County, Kansas that were reported in Sprint's 2003 Annual Report on Form 10-K have been consolidated in the District Court of Johnson County, Kansas. Two additional lawsuits were filed in Johnson County, Kansas and have also been consolidated. The previously reported lawsuit filed in the Supreme Court of the State of New York has been voluntarily stayed by the plaintiff. The plaintiff's withdrew their request for a preliminary injunction. The lawsuits allege breach of fiduciary duty in connection with the recombination and seek monetary damages. Various other suits, proceedings and claims, including purported class actions, typical for a business enterprise, are pending against Sprint. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with Sprint's beliefs, Sprint expects that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on the financial condition or results of operations of Sprint or its business segments. Item 2. Changes in Securities Bylaws Amendment On April 20, 2004, Sprint's board of directors amended Sprint's bylaws to specifically provide for continuation of indemnification for actions that occur before any amendment to or repeal of the indemnification provision contained in the bylaws. The amendment also clarifies and confirms that serving on an employee benefit plan committee is serving at the request of the corporation and therefore any committee member is entitled to indemnification under the bylaws. In addition, the board of directors amended Sprint's bylaws, effective April 23, 2004, to remove provisions relating to the Capital Stock Committee. The Capital Stock Committee was a committee of independent members of the board of directors that interpreted and supervised the implementation of the board's policies to address tracking stock issues. Shareholder Rights Plan Amendment In connection with the recombination of the tracking stocks, the board of directors amended Sprint's Rights Agreement, effective April 23, 2004. The PCS group rights were converted into FON group rights, based on the conversion ratio, and the FON group rights were redesignated merely as "rights". The rights are now the same for all holders of Sprint common stock. These rights are the same as the FON group rights in existence before April 23, 2004. Articles Amendment In connection with the amendment to the Rights Agreement, the board of directors amended Sprint's Articles of Incorporation by adopting modified terms for the Preferred Stock-Sixth Series, which is the preferred stock that the holders of rights are entitled to purchase under certain circumstances if certain takeover events occur. The Preferred Stock - Sixth Series was the preferred stock that the holders of FON group rights were entitled to purchase if certain takeover events had occurred before the recombination of the tracking stocks. In addition, the board of directors authorized the elimination of the Preferred Stock - Eighth Series, which was the preferred stock that the holders of PCS group rights were entitled to purchase if certain takeover events had occurred before the recombination of the tracking stocks. Sale of Unregistered Equity Securities The settlement of the derivative action filed in 2000 by Amalgamated Bank, an institutional shareholder, included an award of attorney's fees to plaintiff's counsel in the form of 250,000 shares of FON common stock and 500,000 shares of PCS common stock. The settlement was approved by the court in December 2003, and the shares were issued in January 2004. Sprint reserved for these shares in the 2003 first quarter. The shares of common stock were not registered under the Securities Act of 1933. The common stock was exempt from registration under the Securities Act by the provisions of Section 3(a)(10) of the Securities Act.
Issuer Purchases of Equity Securities --- ------------- -- -------------- -- ------------- ----------------- Total Maximum Number Number of (or Approximate Shares Dollar Value) Purchased of Shares that as Part of May Yet Be Total Average Publicly Purchased Number of Price Paid Announced Under the Shares Per Plans or Plans or Period Purchased(1) Share(2) Programs Programs --- ------------- -- -------------- -- ------------- ----------------- January 1 through January 31 FON Stock - - - - PCS Stock - - - - February 1 through February 29 FON Stock 5,991 $ 17.700 - - PCS Stock 6,383 $ 8.850 - - March 1 through March 31 FON Stock 156,730 $ 17.555 - - PCS Stock 157,520 $ 8.805 - - (1) All acquisitions of equity securities during the 2004 first quarter were the result of the operation of the terms of Sprint's shareholder approved equity compensation plans (the Management Incentive Stock Option Plan and the 1997 Long-Term Stock Incentive Program) and the terms of the equity grants pursuant to those plans, as follows: the forfeiture of restricted stock; the surrender of restricted stock to pay required minimum income, Medicare and FICA tax withholding on the vesting of restricted stock; and the delivery of previously owned shares owned by the grantee to pay additional income tax withholding on (i) the vesting of restricted stock, (ii) the delivery of shares underlying restricted stock units, and (iii) the exercise of options. Excludes shares used for the exercise price of options and required minimum tax withholding on the exercise of options and the delivery of shares underlying restricted stock units when only the net shares were issued. (2) Excludes forfeited restricted stock since the purchase price was zero. The purchase price of a share of stock used for tax withholding is the amount of withholding paid per share used for that purpose, which is the market price of the stock on the date of vesting of the restricted stock, the delivery date of the stock underlying restricted stock units, and the date of the exercise of the option.
No options may be granted pursuant to the Management Incentive Stock Option Plan after April 18, 2005. No awards may be granted pursuant to the 1997 Long-Term Stock Incentive Program after April 15, 2007. Options, restricted stock awards and restricted stock unit awards outstanding on those dates may continue to be outstanding after those dates. Sprint cannot estimate how many shares will be acquired in the manner described in footnote (1) to the table above through operation of these plans. Item 3. Defaults Upon Senior Securities There were no reportable events during the quarter ended March 31, 2004. Item 4. Submission of Matters to a Vote of Security Holders On April 20, 2004, Sprint held its annual meeting of shareholders. In addition to the election of four directors to serve a term of one year, the shareholders ratified the appointment of KPMG LLP as independent auditors of Sprint for 2004. The shareholders did not approve four shareholder proposals. The following votes were cast for each of the following nominees for director or were withheld with respect to such nominees: For Withheld Gordon M. Bethune 1,118,424,077 8,619,249 E. Linn Draper, Jr. 1,119,191,385 27,851,941 Deborah A. Henretta 1,119,101,182 27,942,144 Linda Koch Lorimer 903,478,590 243,564,736 The following votes were cast with respect to the proposal to ratify the appointment of KPMG LLP as independent auditors of Sprint for 2004: For 1,104,672,293 Against 23,537,370 Abstain 18,833,820 The following votes were cast with respect to a shareholder proposal requesting the Sprint board to adopt an executive compensation policy that all future stock option grants to senior executives be indexed to an industry peer group stock performance index. For 308,500,915 Against 658,961,361 Abstain 23,390,075 Broker Non-Votes 156,190,973 The following votes were cast with respect to a shareholder proposal requesting the Sprint board to (1) establish a cap on the total compensation that may be paid to the CEO in a given year equal to 50 times the average compensation paid to employees not exempt from coverage under the Fair Labor Standards Act in the prior year and (2) report to shareholders on the policy before the 2005 annual shareholders' meeting. For 90,250,278 Against 879,936,280 Abstain 20,670,932 Broker Non-Votes 156,185,834 The following votes were cast with respect to a shareholder proposal urging the Sprint board to amend the bylaws, effective upon expiration of current employment contracts, to require that an independent director be chairman of the board of directors. For 346,806,821 Against 622,117,140 Abstain 21,932,429 Broker Non-Votes 156,186,935 The following votes were cast with respect to a shareholder proposal requesting the Sprint board to establish an independent committee to prepare a report evaluating the risk of damage to Sprint's brand name and reputation in the United States resulting from its offshoring initiative and make copies of the report available to shareholders upon request. For 90,348,634 Against 803,327,826 Abstain 97,175,145 Broker Non-Votes 156,191,721 Item 5. Other Information Ratios of Earnings to Fixed Charges Sprint's ratio of earnings to fixed charges was 1.80 in the 2004 first quarter and 1.32 in the 2003 first quarter. The ratio of earnings to fixed charges was computed by dividing fixed charges into the sum of earnings, after certain adjustments, and fixed charges. Earnings include income from continuing operations before income taxes plus net losses in equity method investees, less capitalized interest. Fixed charges include interest on all debt of continuing operations, including amortization of debt issuance costs, and the interest component of operating rents. Debt Extinguishment In May 2004, Sprint repurchased $750 million aggregate principal amount of its 6.0% equity unit senior notes, scheduled to mature August 17, 2006, from a single noteholder. Upon completion of this transaction, $975 million aggregate principal amount of these notes remains outstanding. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this report: (3) Articles of Incorporation and Bylaws: (a) Restated Articles of Incorporation, dated as of December 9, 2003 (b) Certificate of Designation, Preferences and Rights of Preferred Stock-Sixth Series, dated as of April 23, 2004 (c) Certificate of Elimination of Designations of Preferred Stock-Eighth Series, dated as of April 23, 2004 (d) Amended and Restated Bylaws (4) Instruments defining the Rights of Sprint's 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 Exhibits 3(a), 3(b) and 3(c). (b) Provision regarding Kansas Control Share Acquisition Act is in Article II, Section 5 of the Bylaws. Provisions regarding Stockholders' Meetings are set forth in Article III of the Bylaws. See Exhibit 3(d). (c) Second Amended and Restated Rights Agreement between Sprint Corporation and UMB Bank, n.a., as Rights Agent, dated as of March 16, 2004 and effective as of April 23, 2004 (filed as Exhibit 1 to Amendment No. 5 to Sprint Corporation's Registration Statement on Form 8-A relating to Sprint's Rights, filed April 12, 2004, and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements (a) Executive Deferred Compensation Plan, as amended. (b) Directors' Deferred Fee Plan, as amended. (c) Amended and Restated Centel Directors Deferred Compensation Plan. (d) Management Incentive Stock Option Plan, as amended. (e) 1997 Long-Term Stock Incentive Program, as amended. (f) Form of Election relating to 2003 Executive restricted stock unit awards. (12) Computation of Ratios of Earnings to Fixed Charges (31) (a) Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a). (b) Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a). (32) (a) Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Sprint will furnish to the Securities and Exchange Commission, upon request, a copy of the instruments defining the rights of holders of long-term debt that does not exceed 10% of the total assets of Sprint. (b) Reports on Form 8-K Sprint filed a Current Report on Form 8-K dated February 3, 2004, in which it reported that it announced fourth quarter and full-year results. The news release, which was furnished as an exhibit to the Current Report, included the following information: Sprint Corporation Consolidated Statements of Operations Sprint Corporation Consolidated Balance Sheets Sprint Corporation Condensed Consolidated Cash Flow Information Sprint Corporation Reconciliation of Non-GAAP Liquidity Measures Sprint Corporation FON Group Operating Statistics Sprint Corporation PCS Group Operating Statistics Sprint Corporation--FON Group--Local Division Selected Information Sprint filed a Current Report on Form 8-K dated February 28, 2004, in which it reported that its board of directors had approved the recombination of PCS common stock and FON common stock effective April 23, 2004. The notice to shareholders was included as an exhibit to the Current Report. Sprint filed a Current Report on Form 8-K dated February 29, 2004, in which it reported that it had announced that its board of directors had approved the recombination of PCS common stock and FON common stock. The news release was furnished as an exhibit to the Current Report. Sprint filed a Current Report on Form 8-K dated March 2, 2004, in which it reported that it had announced the appointment of two new independent directors, Gordon M. Bethune, Chairman of the Board and Chief Executive Officer of Continental Airlines, Inc., and Deborah A. Henretta, President of Proctor & Gamble's global baby care division, to the Sprint board of directors. Sprint filed a Current Report on Form 8-K dated April 5, 2004, in which it reported that it had been advised of the plaintiffs' decision to withdraw their request for a preliminary injunction in the lawsuits relating to the recombination of Sprint's PCS and FON tracking stocks. Sprint filed a Current report on Form 8-K dated April 20, 2004, in which it reported that it announced 2004 first quarter results. The news release, which was furnished as an exhibit to the Current Report, included the following information: Sprint Corporation Consolidated Statements of Operations Sprint Corporation Consolidated Balance Sheets Sprint Corporation Condensed Consolidated Cash Flow Information Sprint Corporation Reconciliation of Non-GAAP Liquidity Measures Sprint Corporation Operating Statistics Sprint Corporation Reconciliation of Earnings Per Share Sprint Corporation Selected Information SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPRINT CORPORATION (Registrant) By /s/ John P. Meyer ----------------------------------- John P. Meyer Senior Vice President -- Controller Principal Accounting Officer Dated: May 7, 2004 EX-3 2 exh3a.txt 3-A RESTATED ARTICLES Exhibit 3(a) RESTATED ARTICLES OF INCORPORATION OF SPRINT CORPORATION Original Articles of Incorporation Filed Under the Name of United Utilities, Inc. November 15, 1938 Duly Adopted by the Board of Directors in Accordance with the Provisions of K.S.A. Section 17-6605 These Restated Articles only restate and integrate and do not further amend the provisions of the Corporation's Articles of Incorporation as previously amended and supplemented, and there is no discrepancy between the Articles of Incorporation as amended and the provisions of these Restated Articles. First The name of the Corporation is SPRINT CORPORATION. Second This Corporation is organized for profit, and the purpose for which it is formed is to engage in any lawful act or activity for which corporations may be organized under the Kansas General Corporation Code (the "General Corporation Code"). Third The Corporation's registered office is located at 200 S.W. 30th Street, Topeka, Shawnee County, Kansas 66611; Corporation Service Company is the registered agent at said address. Fourth The Corporation shall have perpetual existence. Fifth Section 1. Number of Directors. The number of Directors shall not be less than eight nor more than 20 as may be determined from time to time by the affirmative vote of the majority of the Board of Directors. Section 2. Election of Directors. (a) Subject to clause (b) below, the holders of Corporation Common Stock shall have the right to elect that number of Directors equal to the excess of (x) the total number of Directors over (y) the number of Directors, if any, that the holders of Preferred Stock, voting separately by class or series, are entitled to elect in accordance with the provisions of ARTICLE SIXTH of these Articles of Incorporation. (b) So long as Section 310 remains in effect, under no circumstances shall an Alien Director elected by the holders of Corporation Common Stock be qualified to serve as a Director if the number of Aliens who would then be serving as members of the Board of Directors, including such elected Alien, would constitute more than the maximum number of Aliens permitted by Section 310 on the Board of Directors. (c) Whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these Articles of Incorporation applicable thereto. Section 3. Term of Office. (a) Each Director elected at or after the 2004 annual meeting of stockholders of this Corporation shall be elected for a one-year term. Directors elected before the 2004 annual meeting of stockholders of this Corporation shall serve the remaining duration of their three-year terms. A Director shall hold office until the annual meeting for the year in which his or her term expires and until a successor has been elected and qualified to serve, except in case of the Director's prior death, resignation, retirement, disqualification or removal from office. (b) Any vacancy on the Board of Directors (whether resulting from an increase in the total number of Directors, the departure of one of the Directors or otherwise) may be filled by the affirmative vote of a majority of the Directors elected by the same class or classes of stockholders which would be entitled to elect the Director who would fill such vacancy if the annual meeting of stockholders of this Corporation were held on the date on which such vacancy occurred, provided that at any time when there is only one such Director so elected and then serving, such Director may fill such vacancy and, provided further, that at any time when there are no such Directors then serving, the stockholders of the class or classes entitled to elect the Director who will fill such vacancy shall have the right to fill such vacancy. (c) Any Director who fills a vacancy not resulting from an increase in the number of Directors shall have the same remaining term as that of his or her predecessor. Section 4. Rights, Powers, Duties, Rules and Procedures; Amendment of Bylaws. (a) Except to the extent prohibited by law or as set forth in these Articles of Incorporation or the Bylaws, the Board of Directors shall have the right (which, to the extent exercised, shall be exclusive) to establish the rights, powers, duties, rules and procedures that from time to time shall govern the Board of Directors and each of its members, including, without limitation, the vote required for any action by the Board of Directors, and that from time to time shall affect the Directors' power to manage the business and affairs of this Corporation. Except to the extent required by law or as set forth in these Articles of Incorporation or the Bylaws, no Bylaw shall be adopted by stockholders which shall impair or impede the implementation of the foregoing. (b) The Board of Directors is expressly authorized and empowered, in the manner provided in the Bylaws of this Corporation, to adopt, amend and repeal the Bylaws of this Corporation in any respect to the full extent permitted by the General Corporation Code not inconsistent with the laws of the General Corporation Code or with these Articles of Incorporation. Section 5. Removal. A Director (other than a Director elected by the holders of any class or series of Preferred Stock having the right, voting separately by class or series, to elect Directors) may be removed only for cause. No Director so removed may be reinstated for so long as the cause for removal continues to exist. Such removal for cause may be effected only by the affirmative vote of the holders of a majority of the votes represented by the shares of the class or classes of stockholders which were entitled to elect such Director. Section 6. Definitions. Certain capitalized terms used in this ARTICLE FIFTH without definition have the meanings set forth in Section 10 of ARTICLE SIXTH. Sixth Section 1.1. Authorized Shares. The total number of shares of capital stock which may be issued by this Corporation is 7,020,000,000, and the designation of each class or series, the number of authorized shares of each class or series and the par value of the shares of each class or series, are as follows:
Designation Class Series No. of Shares Par Value The "Series 1 FON Stock" FON Common Stock Series 1 2,500,000,000 $2.00 per share The "Series 2 FON Stock" FON Common Stock Series 2 500,000,000 $2.00 per share The "Series 1 PCS Stock" PCS Common Stock Series 1 3,000,000,000 $1.00 per share The "Series 2 PCS Stock" PCS Common Stock Series 2 1,000,000,000 $1.00 per share The "Preferred Stock" Preferred Stock See Section 20,000,000 No par value 13 below
2 Section 1.2. Representation of Equity Value. The aggregate common equity value of the Corporation and each Business Group shall, at any time, be represented as follows: (i) The total common equity value of the Corporation shall be represented by the sum of the outstanding shares of (A) the FON Stock and (B) the PCS Stock. (ii) The total common equity value of the FON Group shall be represented by the outstanding shares of the FON Stock. (iii) The total common equity value of the PCS Group shall be represented by the sum of (A) the outstanding shares of the PCS Stock and (B) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest. Section 2. General Provisions Relating to All Stock. 2.1. Preemptive Rights; Cumulative Voting. No holder of shares of capital stock of any class or series of this Corporation or holder of any security or obligation convertible into shares of capital stock of any class or series of this Corporation shall have any preemptive right whatsoever to subscribe for, purchase or otherwise acquire shares of capital stock of any class or series of this Corporation, whether now or hereafter authorized; provided that this provision shall not (i) prohibit this Corporation from granting, contractually or otherwise, to any such holder, the right to purchase additional securities of this Corporation or (ii) otherwise limit or otherwise modify any rights of any such holder pursuant to any such contract or other agreement. Stockholders of this Corporation shall not be entitled to cumulative voting of their shares in elections of Directors. 2.2. Redemption of Shares Held by Aliens. Notwithstanding any other provision of these Articles of Incorporation to the contrary, outstanding shares of Corporation Common Stock Beneficially Owned by Aliens may be redeemed by this Corporation, by action duly taken by the Board of Directors (with the approval of a majority of the Continuing Directors (as defined in ARTICLE SEVENTH) at a meeting at which at least seven Continuing Directors are present, except that no such approval of the Continuing Directors shall be required if: (i) the Fair Price Provisions have been deleted in their entirety, or (ii) the transaction in question is not a "Business Combination" within the meaning of the Fair Price Provisions, to the extent necessary or advisable, in the judgment of the Board of Directors, for this Corporation or any of its Subsidiaries to comply with the requirements of Section 310. The terms and conditions of such redemption shall be as follows, subject in any case to any other rights of a particular Alien or of this Corporation pursuant to any contract or agreement between such Alien and this Corporation: (a) except as provided in Section 2.2(f), the redemption price of the shares to be redeemed pursuant to this Section 2.2 shall be equal to the Market Price of such shares on the third Business Day prior to the date notice of such redemption is given pursuant to Section 2.2(d), provided that, except as provided in Section 2.2(f), such redemption price as to any Alien who purchased such shares of Corporation Common Stock after November 21, 1995 and within one year prior to the Redemption Date shall not (unless otherwise determined by the Board of Directors) exceed the purchase price paid by such Alien for such shares; (b) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (c) if less than all of the shares Beneficially Owned by Aliens are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the Board of Directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the Board of Directors to be equitable; (d) this Corporation shall give notice of the Redemption Date at least 30 days prior to the Redemption Date to the record holders of the shares selected to be redeemed (unless waived in writing by any such holder) by delivering a written notice by first class mail, postage pre-paid, to the holders of record of the shares selected to be redeemed, addressed to such holders at their last address as shown upon the stock transfer books of this Corporation 3 (each such notice of redemption specifying the date fixed for redemption, the redemption price, the place or places of payment and that payment will be made upon presentation and surrender of the certificates representing such shares), provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; (e) on the Redemption Date, unless this Corporation shall have defaulted in paying or setting aside for payment the cash or Redemption Securities payable upon such redemption, any and all rights of Aliens in respect of shares so redeemed (including without limitation any rights to vote or participate in dividends), shall cease and terminate, and from and after such Redemption Date such Aliens shall be entitled only to receive the cash or Redemption Securities payable upon redemption of the shares to be redeemed; and (f) such other terms and conditions as the Board of Directors shall determine to be equitable, provided that, if any shares of Series 2 PCS Stock (or Series 2 FON Stock, if applicable) are redeemed pursuant to this Section 2.2, the redemption price of any such shares redeemed shall be the Market Price of a share of Series 1 PCS Stock (or Series 1 FON Stock, if applicable) on the Redemption Date. Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of shares to be redeemed received such notice, and failure to give such notice by mail, or any defect in such notice, to holders of shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares. 2.3. Beneficial Ownership Inquiry. (a) This Corporation may by written notice require a Person that is a holder of record of Corporation Common Stock or that this Corporation knows to have, or has reasonable cause to believe has, Beneficial Ownership of Corporation Common Stock, to certify that, to the knowledge of such Person: (i) no Corporation Common Stock as to which such Person has record ownership or Beneficial Ownership is Beneficially Owned by Aliens; or (ii) the number and class or series of shares of Corporation Common Stock owned of record or Beneficially Owned by such Person that are owned of record or Beneficially Owned by Persons that are Aliens are as set forth in such certificate. (b) With respect to any Corporation Common Stock identified by such Person in response to Section 2.3(a)(ii) above, this Corporation may require such Person to provide such further information as this Corporation may reasonably require in order to implement the provisions of Section 2.2 of ARTICLE SIXTH. (c) For purposes of applying Section 2.2 of ARTICLE SIXTH with respect to any Corporation Common Stock, if any Person fails to provide the certificate or other information to which this Corporation is entitled pursuant to this Section 2.3, this Corporation in its sole discretion may presume that the Corporation Common Stock in question is, or is not, Beneficially Owned by Aliens. 2.4. Factual Determinations. The Board of Directors shall have the power and duty to construe and apply the provisions of Sections 2.2 and 2.3 of ARTICLE SIXTH and, with respect to shares of Corporation Common Stock, to make all determinations necessary or desirable to implement such provisions, including but not limited to: (a) the number of shares of Corporation Common Stock that are Beneficially Owned by any Person; (b) whether a Person is an Alien; (c) the application of any other definition of these Articles of Incorporation to the given facts; and (d) any other matter relating to the applicability or effect of Section 2.2 of ARTICLE SIXTH. 2.5. Loss of Voting Rights. If (a) there is a breach by FT, DT, any Qualified Subsidiary or any Strategic Investor of any of the provisions of Sections 3.1(a) or 3.2(b) (as it relates to matters described in Section 3.1(a)) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement or Strategic Investor Standstill Agreement, (b) there is a willful breach in any material respect by FT, DT, any Qualified Subsidiary or any Strategic Investor of any provision of Section 3.1 (other than Section 3.1(a)) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement or Strategic Investor Standstill Agreement, or (c) a Government Affiliate or Related Company (each as defined in the Standstill Agreement) takes an action which 4 if taken by FT or DT would violate Sections 3.1 or 3.2(b) (as it relates to matters other than those described in Section 3.1(a)) of the Standstill Agreement, then FT and its Qualified Subsidiaries (except in the case of a breach arising from the action of a Government Affiliate of Germany, a Related Company of DT or a Strategic Investor in a Qualified Subsidiary of DT in which FT is not an investor) and DT and its Qualified Subsidiaries (except in the case of a breach arising from the action of a Government Affiliate of France, a Related Company of FT or a Strategic Investor in a Qualified Subsidiary of FT in which DT is not an investor) shall not be entitled to vote any of their shares of capital stock of this Corporation with respect to any matter or proposal arising from, relating to or involving, such breach or action, and no such purported vote on such matter shall be effective or shall be counted. Section 3. Voting Powers. Section 3.1. General. Except as otherwise provided by law or as expressly set forth in ARTICLE FIFTH or in this ARTICLE SIXTH, each share of Corporation Common Stock shall be entitled to vote, as provided in ARTICLE SIXTH, Section 3.2, on all matters in respect of which the holders of Corporation Common Stock are entitled to vote, and, except as otherwise provided by the terms of any outstanding series of Preferred Stock, the holders of Corporation Common Stock shall vote together with the holders of all other classes or series of capital stock which have general voting power on all such matters as a single class; provided, however, that (i) holders of FON Stock, voting together as a single class in accordance with Section 3.2(b), shall be entitled to vote upon a proposed amendment to these Articles of Incorporation if such amendment would (A) increase or decrease the aggregate number of authorized shares of FON Stock, (B) increase or decrease the par value of the shares of FON Stock or (C) alter or change the powers, preferences or special rights of the shares of FON Stock so as to affect them adversely, and (ii) holders of PCS Stock, voting together as a single class in accordance with Section 3.2(c), shall be entitled to vote upon a proposed amendment to these Articles of Incorporation if such amendment would (A) increase or decrease the aggregate number of authorized shares of PCS Stock, (B) increase or decrease the par value of shares of PCS Stock or (C) alter or change the powers, preferences or special rights of the shares of PCS Stock so as to affect them adversely. The Board of Directors is authorized to adopt resolutions requiring the approval of any class or series of capital stock, alone or together with any other class or series of capital stock, as a condition precedent, or condition subsequent, to the approval, adoption, authorization or consummation of any action, transaction or any other matter by or involving the Corporation, and no provision contained in the Restated Articles of Incorporation shall be interpreted to limit or restrict such authority in any way. Section 3.2. Number of Votes. (a) On each matter to be voted on by the holders of Corporation Common Stock voting together as a single class, (i) each outstanding share of Series 1 FON Stock is entitled to one vote; (ii) each outstanding share of Series 1 PCS Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of a vote) (the "PCS Per Share Vote") equal to the number of votes determined by multiplying one by the ratio of the Average Trading Price of one share of Series 1 PCS Stock to the Average Trading Price of one share of Series 1 FON Stock computed as of the tenth Trading Day preceding the record date for determining the stockholders entitled to vote, expressed as a decimal fraction rounded to the nearest three decimal places; (iii) each outstanding share of Series 2 PCS Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of one vote) equal to ten percent of the applicable PCS Per Share Vote as determined in accordance with Section 3.2(a)(ii); and (iv) each outstanding share of Series 2 FON Stock is entitled to ten percent of one vote. (b) On each matter to be voted on by the holders of FON Stock, voting together as a single class, each outstanding share of Series 1 FON Stock and Series 2 FON Stock is entitled to one vote. 5 (c) On each matter to be voted on by the holders of the PCS Stock, voting together as a single class, each outstanding share of Series 1 PCS Stock and Series 2 PCS Stock is entitled to one vote. (d) In addition to the foregoing provisions of this Section 3, (i) if shares of only one class or series of Corporation Common Stock are outstanding on the record date for determining the holders of Corporation Common Stock entitled to vote on any matter, then each share of that class or series shall be entitled to one vote and (ii) if any class or any series of Corporation Common Stock votes as a single class with respect to any matter, each share of that class or series shall, for purposes of such vote, be entitled to one vote on such matter. Section 4. Liquidation Rights. If any voluntary or involuntary liquidation, dissolution or winding up of this Corporation occurs, then after payment or provision for payment of the debts and other liabilities of this Corporation, including the liquidation preferences of any series of Preferred Stock, the holders of Corporation Common Stock shall be entitled to receive the remaining assets of the Corporation, regardless of the Business Group to which such assets are attributed in accordance with Section 10 of this ARTICLE SIXTH, divided among such holders in accordance with the per share "Liquidation Units" attributable to each such class or series of stock as follows: (i) each share of Series 1 FON Stock and Series 2 FON Stock is hereby attributed one "Liquidation Unit"; and (ii) each share of PCS Stock is hereby attributed the number of "Liquidation Units" determined by multiplying one by the PCS Ratio. The per share "Liquidation Units" of each such class or series of stock are subject to adjustment as determined by the Board of Directors to be appropriate to reflect equitably (i) any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of such class or series of stock or (ii) any dividend or other distribution of shares of such class or series of stock to holders of shares of such class or series of stock. Neither the merger nor consolidation of this Corporation, nor the Transfer of all or part of its assets, shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. Notwithstanding the foregoing, any transaction or series of related transactions which results in the distribution of all or substantially all of the assets of the PCS Group (excluding any portion of such assets retained by the Corporation or distributed to holders of FON Stock in respect of the FON Group Intergroup Interest Fraction) to the holders of the outstanding PCS Stock by way of the distribution of equity interests in one or more entities that collectively hold, directly or indirectly, all or substantially all of the assets of the PCS Group (including, without limitation, the PCS Group Subsidiary) shall not constitute a voluntary or involuntary liquidation, dissolution or winding up of the Corporation for purposes of this Section 4 but shall be subject to ARTICLE SIXTH, Section 7.2. Section 5. Dividends. Dividends shall be declared and paid only out of net income or surplus of this Corporation and may be declared and paid upon each class and series of Corporation Common Stock, upon the terms with respect to each such class and series, and subject to the limitations provided for in this Section 5 and in Section 13, as the Board of Directors may determine. 5.1. Generally. Dividends on Corporation Common Stock may be declared and paid only out of the funds of the Corporation legally available therefor. 5.1.1. The holders of the Series 1 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share basis to those payable on the Series 2 FON Stock. Dividends on the Series 1 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 FON Stock or 6 Series 1 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, respectively. 5.1.2. The holders of shares of Series 2 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per share basis to those payable on the Series 1 FON Stock. Dividends on the Series 2 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, respectively. 5.1.3. The holders of the Series 1 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share basis to those payable on the Series 2 PCS Stock. Dividends on the Series 1 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 PCS Stock. 5.1.4. The holders of shares of Series 2 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per share basis to those payable on the Series 1 PCS Stock. Dividends on the Series 2 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 PCS Stock. 5.2. Separate Declaration of Dividends. The Board of Directors, in accordance with the applicable provisions of Section 5.1, may at any time declare and pay dividends (i) exclusively on the FON Stock, (ii) exclusively on the PCS Stock or (iii) on the FON Stock,, on the one hand, and the PCS Stock, on the other, in equal or unequal per share amounts, notwithstanding the amount of dividends previously declared on each class or series of stock, the respective voting or liquidation rights of each class or series of stock or any other factor. 5.3. Share Distributions. Subject to ARTICLE SIXTH, Section 5 and except as permitted by ARTICLE SIXTH, Sections 7.1 and 7.2, the Board of Directors may declare and pay dividends or distributions of shares of Corporation Common Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Corporation Common Stock) on shares of Corporation Common Stock or shares of Preferred Stock only as follows: (A) dividends or distributions of shares of (i) Series 1 FON Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 FON Stock) and (ii) Series 2 FON Stock (or Convertible 7 Securities convertible into or exchangeable or exercisable for Shares of Series 2 FON Stock) on shares of (i) Series 1 FON Stock and (ii) Series 2 FON Stock, respectively, as well as on Preferred Stock attributed to the Sprint FON Group exclusively in accordance with ARTICLE SIXTH, Section 13; (B) dividends or distributions of shares of (i) Series 1 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 PCS Stock) and (ii) Series 2 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 2 PCS Stock) on shares of (i) Series 1 PCS Stock and (ii) Series 2 PCS Stock, respectively, and Preferred Stock attributed to the PCS Group exclusively in accordance with ARTICLE SIXTH, Section 13; (C) dividends or distributions of shares of (i) Series 1 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 PCS Stock) and (ii) Series 2 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 2 PCS Stock) on (x) shares of (i) Series 1 FON Stock and (ii) Series 2 FON Stock, respectively, or (y) shares of FON Preferred Stock, but in any such case only if immediately prior to such dividend or distribution the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than or equal to the sum of (1) the amount of any decrease in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest required by paragraph (B) of the definition of such term in ARTICLE SIXTH, Section 10 as a result of such dividend or distribution, plus (2) the number of shares of PCS Stock issuable upon conversion, exchange or exercise of any Convertible Securities to be so issued or any other outstanding Convertible Securities that have been issued as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13; and (D) dividends or distributions of shares of PCS Preferred Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Preferred Stock) on shares of FON Stock or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13, but in any such case only if immediately prior to such dividend or distribution the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than or equal to the sum of (1) the amount of any decrease in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest required by paragraph (B) of the definition of such term in ARTICLE SIXTH, Section 10 as a result of such dividend or distribution plus (2) the number of shares of PCS Stock issuable upon conversion, exchange or exercise of any Convertible Securities that have been issued as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13. For purposes of this Section 5.3, any outstanding Convertible Securities that are convertible into or exchangeable or exercisable for any other Convertible Securities which are themselves convertible into or exchangeable or exercisable for FON Stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) or PCS Stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) shall be deemed to have been converted, exchanged or exercised in full for such Convertible Securities. Section 6. No Dilution or Impairment; Certain Tender Offers. (a) No reclassification, subdivision or combination of the outstanding shares of Series 2 FON Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 1 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 FON Stock as were represented by the shares of Series 1 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (b) No reclassification, subdivision or combination of the outstanding shares of Series 1 FON Stock shall be effected directly or indirectly (including without limitation any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 FON Stock is reclassified, 8 subdivided or combined on an equal per share basis so that the holders of the Series 2 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 FON Stock as were represented by the shares of Series 2 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (c) No reclassification, subdivision or combination of the outstanding shares of Series 2 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 1 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 PCS Stock as were represented by the shares of Series 1 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (d) No reclassification, subdivision or combination of the outstanding shares of Series 1 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 2 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 PCS Stock as were represented by the shares of Series 2 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (e) Without limiting the generality of the foregoing, in the case of any consolidation or merger of this Corporation with or into any other entity (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of the Series 1 FON Stock or Series 1 PCS Stock) or any reclassification of the Series 1 FON Stock or Series 1 PCS Stock into any other form of capital stock of this Corporation, whether in whole or in part, each holder of Series 2 FON Stock or Series 2 PCS Stock, as the case may be, shall, after such consolidation, merger or reclassification, have the right (but not the obligation), by notice delivered to this Corporation or any successor thereto within 90 days after the consummation of such consolidation, merger or reclassification, to convert each share of Series 2 FON Stock or Series 2 PCS Stock, as the case may be, held by such holder into the kind and amount of shares of stock and other securities and property which such holder would have been entitled to receive upon such consolidation, merger, or reclassification if such holder had converted its shares of Series 2 FON Stock or Series 2 PCS Stock into Series 1 FON Stock or Series 1 PCS Stock, respectively, immediately prior to such merger, consolidation or reclassification. This Corporation shall not effect, directly or indirectly, any such reclassification, subdivision or combination of outstanding shares of Series 1 FON Stock or Series 1 PCS Stock unless it delivers to the holders of Series 2 FON Stock and Series 2 PCS Stock written notice of its intent to take such action at least ten Business Days before taking such action. (f) Exclusionary Tender Offers. If the Board of Directors shall determine not to oppose a tender offer by a Person other than a Cable Holder for Voting Securities of this Corporation representing not less than 35 percent of the Voting Power of this Corporation, and the terms of such tender offer do not permit the holders of Series 2 PCS Stock to sell an equal or greater percentage of their shares as the holders of Series 1 PCS Stock are permitted to sell taking into account any proration, then each holder of Series 2 PCS Stock shall have the right (but not the obligation) to deliver to this Corporation a written notice requesting conversion of certain shares of Series 2 PCS Stock designated by such holder of Series 2 PCS Stock into Series 1 PCS Stock, upon which delivery each share of Series 2 PCS Stock so designated in such notice shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock, provided that (i) unless the Series 2 PCS Stock shall have otherwise been converted into Series 1 PCS Stock pursuant to ARTICLE SIXTH, Section 7.5 upon or prior to the consummation or abandonment of the transaction contemplated by such tender offer, immediately following the 9 consummation of such transaction or the delivery by this Corporation to each holder of Series 2 PCS Stock of a notice that such transaction has been abandoned, each share of Series 1 PCS Stock held by a holder of Series 2 PCS Stock shall automatically reconvert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 2 PCS Stock, and (ii) only those shares of Series 2 PCS Stock related to shares of Series 1 PCS Stock that were not so reconverted shall be deemed for any purpose under these Articles of Incorporation to have been converted into Series 1 PCS Stock, pursuant to this subparagraph (f) and the Series 2 PCS Stock so reconverted shall be deemed to have been at all times outstanding shares of Series 2 PCS Stock, provided, that if the Series 2 PCS Stock has been converted into or redeemed for Series 2 FON Stock pursuant to ARTICLE SIXTH, Section 7, then the terms "Series 2 FON Stock" and "Series 1 FON Stock" shall be deemed to replace the terms "Series 2 PCS Stock" and "Series 1 PCS Stock," respectively, in this subparagraph (f). (g) Issuer Tender Offers. The Corporation shall not conduct an issuer tender offer (as defined on November 23, 1998 in Rule 13e- 4 under the Exchange Act) with respect to the Series 1 PCS Stock or the Series 1 FON Stock unless (i) such tender offer provides for the participation of the holders of Series 2 PCS Stock, on the one hand, or Series 2 FON Stock, on the other hand, on an equal basis with the Series 1 PCS Stock or the Series 1 FON Stock, respectively, and (ii) the Corporation accepts for repurchase the number of shares tendered by the holders of Series 1 PCS Stock and Series 2 PCS Stock, on the one hand, or Series 1 FON Stock and Series 2 FON Stock, on the other, in proportion to the number of shares of each such class and series tendered; provided that the terms of this subparagraph (g) shall not prevent the Corporation from administering in good faith an "odd-lot" program in connection with such issuer tender offer and shall not apply to customary acquisitions of Corporation Common Stock made by the Corporation on the open market for purposes of maintaining stock option plans of the Corporation. Section 7. Conversion or Redemption of PCS Stock. Except as otherwise provided in Sections 2.2 and 6(f), shares of PCS Stock are (i) subject to conversion or redemption, as the case may be, upon the terms provided in this Section 7 with respect to each class and (ii) otherwise not subject to conversion or redemption. 7.1. Conversion or Redemption of PCS Stock. (A) If the Corporation and/or its subsidiaries makes a Disposition, in one transaction or a series of related transactions, of all or substantially all of the properties and assets attributed to the PCS Group to one or more persons or entities (other than (w) the Disposition by the Corporation of all or substantially all of its properties and assets in one transaction or a series of related transactions in connection with the dissolution or the liquidation and winding up of the Corporation and the distribution of assets to stockholders pursuant to Section 4, (x) the redemption of the PCS Stock for the stock of the PCS Group Subsidiary pursuant to Section 7.2, (y) to any person or entity controlled (as determined by the Board of Directors) by the Corporation or (z) pursuant to a Related Business Transaction), then the Corporation shall, on or prior to the 85th Trading Day after the date of consummation of such Disposition (the "PCS Group Disposition Date"), either (I) pay a dividend on the PCS Stock or (II) redeem some or all of the PCS Stock or convert PCS Stock into Series 1 FON Stock and Series 2 FON Stock, as applicable (or another class or series of common stock of the Corporation), in accordance with the following subparagraphs (1) and (2) of this paragraph (A) and, to the extent applicable, in accordance with Section 7.4, as the Board of Directors shall have selected among such alternatives: (1) provided that there are funds of the Corporation legally available therefor: (a) pay to the holders of the shares of PCS Stock a dividend, as the Board of Directors shall have declared in accordance with Section 5.1 of ARTICLE SIXTH, in cash and/or in securities (other than a dividend of Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value as of the PCS Group Disposition Date in the aggregate equal to the product of the Outstanding PCS Fraction as of the record date for determining holders entitled to receive such dividend multiplied by the Fair Value of the Net Proceeds of such Disposition; or (b) (i) subject to the last sentence of this paragraph (A), if such Disposition involves all (not merely substantially all) of the properties and assets attributed to the PCS Group, redeem as of the Redemption Date provided by Section 7.4(C) all outstanding shares of PCS Stock in exchange for cash and/or securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value as of the PCS Group Disposition Date in the aggregate equal to the product of the Outstanding PCS Fraction as of such Redemption 10 Date multiplied by the Fair Value of the Net Proceeds of such Disposition (such aggregate amount to be allocated to shares of Series 1 PCS Stock and Series 2 PCS Stock in the ratio of the number of shares of each such series outstanding to the other series (so that the amount of consideration paid for the redemption of each share of Series 1 PCS Stock and Series 2 PCS Stock is the same)); or (ii) subject to the last sentence of this paragraph (A), if such Disposition involves substantially all (but not all) of the properties and assets attributed to the PCS Group, redeem as of the Redemption Date provided by Section 7.4(D) the number of whole shares of PCS Stock (which may be all of such shares outstanding) as have in the aggregate an average Market Value during the period of ten consecutive Trading Days beginning on the sixteenth Trading Day immediately succeeding the PCS Group Disposition Date closest to the product of the Outstanding PCS Fraction as of the date such shares are selected for redemption multiplied by the Fair Value as of the PCS Group Disposition Date of the Net Proceeds of such Disposition, in exchange for cash and/or securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value in the aggregate equal to such product (such aggregate amount to be allocated to shares of Series 1 PCS Stock and Series 2 PCS Stock in the ratio of the number of shares of each such series outstanding to the other series (so that the amount of consideration paid for the redemption of each share of Series 1 PCS Stock and Series 2 PCS Stock is the same)); or (2) convert each outstanding share of Series 1 PCS Stock and Series 2 PCS Stock as of the Conversion Date provided by Section 7.4(E) into a number of fully paid and nonassessable shares of Series 1 FON Stock and Series 2 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of another class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of such conversion required by Section 7.4(E)) equal to 110% of the ratio, expressed as a decimal fraction rounded to the nearest five decimal places, of the average Market Value of one share of Series 1 PCS Stock over the period of ten consecutive Trading Days beginning on the sixteenth Trading Day following the PCS Group Disposition Date to the average Market Value of one share of Series 1 FON Stock (or such other class or series of common stock) over the same ten Trading Day period. Notwithstanding the foregoing provisions of this paragraph (A), the Corporation may redeem PCS Stock as provided by subparagraph (1)(b)(i) or (1)(b)(ii) of this paragraph (A) only if the amount to be paid in redemption of such stock is less than or equal to the sum of (i) the amount available for the payment of dividends on such shares to be redeemed in accordance with Section 5 of ARTICLE SIXTH measured as of the Redemption Date and (ii) the amount determined to be capital in respect of the shares to be redeemed in accordance with applicable corporation law as of the Redemption Date. (B) For purposes of this Section 7.1: (1) as of any date, "substantially all of the properties and assets" attributed to the PCS Group means a portion of such properties and assets that represents at least 80% of the Fair Value of the properties and assets attributed to the PCS Group as of such date; (2) in the case of a Disposition of the properties and assets attributed to the PCS Group in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; and (3) the Board of Directors may pay any dividend or redemption price referred to in Section 7.1(A) in cash, securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property, regardless of the form or nature of the proceeds of the Disposition; provided that if such payment is made in Voting Securities (other than Corporation Common Stock or other common equity securities of the Corporation) of the Corporation or another entity, holders of Series 2 PCS Stock shall receive Voting Securities with Voting Power equivalent on a per share basis to such shares received by holders of Series 1 PCS Stock. 11 (C) If the payment of the dividend or the redemption price with respect to the PCS Stock provided for by Section 7.1(A)(1) occurs prior to November 23, 2001, then the Board of Directors may convert each share of Series 1 PCS Stock and Series 2 PCS Stock remaining outstanding, but only as of a Conversion Date (determined as provided by Section 7.4(E) hereof) prior to the first anniversary of the payment of such dividend or redemption price, into a number of fully paid and nonassessable shares of Series 1 FON Stock and Series 2 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of such conversion required by Section 7.4(E)) equal to 110% of the Optional Conversion Ratio as of the fifth Trading Day prior to the date of the notice of such conversion required by Section 7.4(E).. (D) At any time following November 23, 2001, the Board of Directors may convert each outstanding share of Series 1 PCS Stock and Series 2 PCS Stock, as of the Conversion Date provided by Section 7.4(E), into the number of fully paid and nonassessable shares of Series 1 FON Stock and Series 2 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of conversion required by Section 7.4(E)) equal to, on the Conversion Date, (i) if following November 23, 2001 but prior to November 23, 2002, 110% of the Optional Conversion Ratio as of the fifth Trading Day prior to the date of the notice of such conversion required by Section 7.4(E), or (ii) if on or after November 23, 2002, at such conversion ratio (if any) as the Board of Directors determines to be fair to holders of the PCS Stock, taken as a separate class, and holders of FON Stock, taken as a separate class.. 7.2. Redemption of PCS Stock for Subsidiary Stock. At any time the Board of Directors may redeem all of the outstanding shares of PCS Stock, on a Redemption Date of which notice is delivered in accordance with Section 7.4(F), in exchange for the number of shares of common stock of one or more wholly-owned subsidiaries of the Corporation (collectively, the "PCS Group Subsidiary") that collectively hold directly or indirectly all of the assets and liabilities attributed to the PCS Group (and no other assets or liabilities of the Corporation or any subsidiary thereof) equal to the product of the Outstanding PCS Fraction and the number of shares of common stock of such PCS Group Subsidiary to be outstanding immediately following such exchange of shares (including any shares of such PCS Group Subsidiary which will be retained by the Corporation in respect of the FON Group Intergroup Interest Fraction), such PCS Group Subsidiary shares to be delivered to the holders of shares of PCS Stock on the Redemption Date and to be divided among the holders of PCS Stock pro rata in accordance with the number of shares of PCS Stock held by each on such Redemption Date, each of which shares of common stock of such PCS Group Subsidiary shall be, upon such delivery, fully paid and nonassessable; provided, however, that (i) no such redemption pursuant to this Section 7.2 may occur prior to November 23, 2000 unless such redemption is approved by the affirmative vote of the holders of a majority of shares of PCS Stock, voting together as a single class in accordance with ARTICLE SIXTH, Section 3.2(c) and (ii) holders of shares of Series 2 PCS Stock outstanding immediately prior to the Redemption Date shall receive on a per share basis, pursuant to such redemption, shares of common stock of such PCS Group Subsidiary with Voting Power equivalent on a per share basis to such shares received by holders of Series 1 PCS Stock; and provided further, that no such redemption pursuant to this Section 7.2 may occur unless (i) the redemption is tax-free to the holders of PCS Stock or (ii) such other arrangement exists for the benefit of the holders of PCS Stock redeemed such that, net of all taxes related to such redemption and to such other arrangement itself which are realized by such stockholders, such stockholders will be in a position that is substantially equivalent economically to the position such stockholders would be in after a tax-free distribution described in the immediately preceding clause (i). 7.3. Treatment of Convertible Securities. After any Conversion Date or Redemption Date on which all outstanding shares of any class or series of PCS Stock are converted or redeemed, any share of such class or series of PCS Stock that is issued on conversion, exchange or exercise of any Convertible Securities shall, immediately upon issuance pursuant to such conversion, exchange or exercise and without any notice from or to, or any other action on the part of, the Corporation or its Board of Directors or the holder of such Convertible Security: 12 (A) if the shares of such class or series of PCS Stock outstanding on such Conversion Date were converted into shares of another class or series of Corporation Common Stock (or another class or series of common stock of the Corporation) pursuant to subparagraph (A)(2) or paragraph (C) or (D) of Section 7.1, be converted into the amount of cash and/or the number of shares of the kind of capital stock and/or other securities or property of the Corporation that the number of shares of such class or series of PCS Stock issued upon such conversion, exchange or exercise would have received had such shares been outstanding on such Conversion Date; or (B) if the shares of such class or series of PCS Stock outstanding on such Redemption Date were redeemed pursuant to Section 7.1(A)(1)(b) or Section 7.2, be redeemed, to the extent of funds of the Corporation legally available therefor, for $.01 per share in cash for each share of such class or series of PCS Stock issued upon such conversion, exchange or exercise. The provisions of this Section 7.3 shall not apply to the extent that other adjustments in respect of such conversion, exchange or redemption of a class or series of PCS Stock are otherwise made pursuant to the provisions of such Convertible Securities. 7.4. Notice and Other Provisions. (A) Not later than the tenth Trading Day following the consummation of a Disposition referred to in Section 7.1(A), the Corporation shall announce publicly by press release (1) the Net Proceeds of such Disposition, (2) the number of shares outstanding of the PCS Stock, (3) the number of shares of PCS Stock into or for which Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (4) the Outstanding PCS Fraction on the date of such notice. Not earlier than the 26th Trading Day and not later than the 30th Trading Day following the consummation of such Disposition, the Corporation shall announce publicly by press release which of the actions specified in Section 7.1(A) it has irrevocably determined to take in respect of such Disposition. (B) If the Corporation determines to pay a dividend on shares of PCS Stock pursuant to Section 7.1(A)(1)(a), the Corporation shall, not later than the 30th Trading Day following the consummation of the Disposition referred to in such Section, cause notice to be given to each holder of PCS Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) the record date for determining holders entitled to receive such dividend, which shall be not earlier than the 40th Trading Day and not later than the 50th Trading Day following the consummation of such Disposition, (2) the anticipated payment date of such dividend (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property to be paid as such dividend in respect of the outstanding shares of PCS Stock, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction on the date of such notice, (6) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive such dividend only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (C) If the Corporation determines to redeem PCS Stock pursuant to Section 7.1(A)(1)(b)(i), the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Redemption Date, cause notice to be given to each holder of shares of PCS Stock and to each holder of Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) a statement that all shares of PCS Stock outstanding on the Redemption Date shall be redeemed, (2) the Redemption Date (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property in which the redemption price for the shares to be redeemed is to be paid, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction on the date of such notice, (6) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation waives such requirement), are to be surrendered for delivery of cash and/or securities or other property, (7) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which such 13 outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (8) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to participate in such redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date referred to in clause (2) of this sentence and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities and (9) a statement to the effect that, except as otherwise provided by paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Redemption Date. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (D) If the Corporation determines to redeem PCS Stock pursuant to Section 7.1(A)(1)(b)(ii), the Corporation shall, not later than the 30th Trading Day following the consummation of the Disposition referred to in such subparagraph, cause notice to be given to each holder of shares of PCS Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth (1) a date, not earlier than the 40th Trading Day and not later than the 50th Trading Day following the consummation of the Disposition in respect of which such redemption is to be made, on which shares of PCS Stock shall be selected for redemption, (2) the anticipated Redemption Date (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property in which the redemption price for the shares to be redeemed is to be paid, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction on the date of such notice, (6) the number of shares of PCS Stock outstanding and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be eligible to participate in such selection for redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence, and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities and (8) a statement that the Corporation will not be required to register a transfer of any shares of PCS Stock for a period of 15 Trading Days next preceding the date referred to in clause (1) of this sentence. Promptly following the date referred to in clause (1) of the preceding sentence, but not earlier than 40 Trading Days nor later than 50 Trading Days following the consummation of such Disposition, the Corporation shall cause a notice to be given to each holder of record of shares of PCS Stock to be redeemed setting forth (1) the number of shares of PCS Stock held by such holder to be redeemed, (2) a statement that such shares of PCS Stock shall be redeemed, (3) the Redemption Date, (4) the kind and per share amount of cash and/or securities or other property to be received by such holder with respect to each share of PCS Stock to be redeemed, including details as to the calculation thereof, (5) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of such cash and/or securities or other property, (6) if applicable, a statement to the effect that the shares being redeemed may no longer be transferred on the transfer books of the Corporation after the Redemption Date and (7) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of the Redemption Date. Such notices shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (E) If the Corporation determines to convert the PCS Stock pursuant to Section 7.1(A)(2), Section 7.1(C) or Section 7.1(D), as the case may be, the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Conversion Date, cause notice to be given to each holder of shares of PCS Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth (1) a statement that all outstanding shares of PCS Stock shall be converted, (2) the Conversion Date (which, in the case of a conversion after a Disposition, shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the per share number of shares of Series 1 FON Stock (or Series 2 14 FON Stock, if applicable) or another class or series of common stock of the Corporation, as the case may be, to be received with respect to each share of PCS Stock, including details as to the calculation thereof, (4) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of Series 1 FON Stock (or Series 2 FON Stock, if applicable) or another class or series of common stock of the Corporation, as the case may be, (5) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (6) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Conversion Date and (7) in the case of notice to holders of such Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive shares of common stock upon such conversion only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to such Conversion Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7.4 if such holder thereafter converts, exchanges or exercises such Convertible Securities. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (F) If the Corporation determines to redeem shares of PCS Stock pursuant to Section 7.2, the Corporation shall cause notice to be given to each holder of shares of PCS Stock to be redeemed, and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such class of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) a statement that all shares of PCS Stock outstanding on the Redemption Date shall be redeemed in exchange for shares of common stock of the PCS Group Subsidiary, (2) the Redemption Date, (3) the Outstanding PCS Fraction on the date of such notice, (4) the place or places where certificates for shares of PCS Stock to be redeemed, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of the PCS Group Subsidiaries, (5) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Redemption Date, (6) the number of shares of PCS Stock outstanding and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (7) in the case of notice to holders of Convertible Securities, a statement to the effect that a holder of Convertible Securities shall be entitled to receive shares of common stock of the PCS Group Subsidiary upon redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities. Such notice shall be sent by first-class mail, postage prepaid, not less than 30 Trading Days nor more than 45 Trading Days prior to the Redemption Date to each such holder at such holder's address as the same appears on the transfer books of the Corporation. If any shares of Series 2 PCS Stock are outstanding immediately prior to the Redemption Date, then the notice provided to each holder of Series 2 PCS Stock, pursuant to this Section 7.4(F) will also indicate that such holders of shares of Series 2 PCS Stock outstanding immediately prior to the Redemption Date shall receive on a per share basis, pursuant to such redemption, shares of common stock of such PCS Group Subsidiary with Voting Power equivalent to such shares received by holders of Series 1 PCS Stock. (G) If less than all of the outstanding shares of PCS Stock are to be redeemed pursuant to Section 7.1(A)(1), then the shares to be redeemed by the Corporation shall be selected from among the holders of shares of PCS Stock outstanding at the close of business on the record date for such redemption on a pro rata basis among each class or series of PCS Stock (including pro rata among all holders of Series 2 PCS Stock) or, if Series 2 PCS Stock is no longer outstanding, by lot or such other method as may be determined by the Board of Directors of the Corporation to be equitable. (H) The Corporation shall not be required to issue or deliver fractional shares of any capital stock or of any other securities to any holder of PCS Stock upon any conversion, redemption, dividend or other distribution pursuant to this Section 7. If more than one share of PCS Stock shall be held at the same time by the same holder, the Corporation may aggregate the number of shares of any capital stock that shall be issuable or any other securities or property that shall be distributable to such holder upon any conversion, redemption, dividend or other distribution (including any fractional shares). If there are fractional shares of any capital stock or of any other securities remaining to be issued or distributed to the holders of PCS Stock, the Corporation shall, if such fractional shares are not issued or distributed to the holder, pay cash in respect of such fractional shares in an amount equal to the Fair Value thereof on the fifth Trading Day prior to the date such payment is to be made (without interest). For purposes of the preceding sentence only, "Fair Value" of any fractional share means (A) in the case of any fraction of a share of capital stock of the Corporation, the product of such fraction and the Market Value of one share of such capital stock and (B) in the case of any other fractional security, such value as is determined by the Board of Directors. 15 (I) No adjustments in respect of dividends shall be made upon the conversion or redemption of any shares of PCS Stock; provided, however, that if the Conversion Date or Redemption Date, as the case may be, with respect to any shares of PCS Stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto, the holders of such shares of PCS Stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on or with respect to such shares on the date set for payment of such dividend or other distribution, in each case without interest, notwithstanding the subsequent conversion or redemption of such shares. (J) Before any holder of PCS Stock shall be entitled to receive any cash payment and/or certificates or instruments representing shares of any capital stock and/or other securities or property to be distributed to such holder with respect to such shares of PCS Stock pursuant to this Section 7, such holder shall surrender at such place as the Corporation shall specify certificates for such shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation shall as soon as practicable after receipt of certificates representing such shares of PCS Stock deliver to the person for whose account such shares of PCS Stock were so surrendered, or to such person's nominee or nominees, the cash and/or the certificates or instruments representing the number of whole shares of the kind of capital stock and/or other securities or property to which such person shall be entitled as aforesaid, together with any payment in respect of fractional shares contemplated by Section 7.4(H), in each case without interest. If less than all of the shares of PCS Stock represented by any one certificate are to be redeemed or converted, then the Corporation shall issue and deliver a new certificate for the shares of PCS Stock not redeemed. (K) From and after any applicable Conversion Date or Redemption Date, as the case may be, all rights of a holder of shares of PCS Stock that were converted or redeemed shall cease except for the right, upon surrender of the certificates representing such shares of PCS Stock as required by Section 7.4(J), to receive the cash and/or the certificates or instruments representing shares of the kind of capital stock and/or other securities or property for which such shares were converted or redeemed, together with any payment in respect of fractional shares contemplated by Section 7.4(H) and rights to dividends as provided in Section 7.4(I), in each case without interest. Subject to the next sentence, any holder of a certificate that immediately prior to the applicable Conversion Date or Redemption Date represented shares of PCS Stock shall not be entitled to receive any dividend or other distribution or interest payment with respect to shares of any kind of capital stock or other security or instrument for which PCS Stock was converted or redeemed until the surrender as required by this Section 7 of such certificate in exchange for a certificate or certificates or instrument or instruments representing such capital stock or other security. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable on any class of capital stock of the Corporation as of a record date after the Conversion Date or Redemption Date, but that were not paid by reason of the foregoing, with respect to the number of whole shares of the kind of capital stock represented by the certificate or certificates issued upon such surrender. From and after a Conversion Date or Redemption Date, the Corporation shall, however, be entitled to treat the certificates for PCS Stock that have not yet been surrendered for conversion or redemption as evidencing the ownership of the number of whole shares of the kind or kinds of capital stock of the Corporation for which the shares of PCS Stock represented by such certificates shall have been converted or redeemed, notwithstanding the failure to surrender such certificates. (L) The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of any shares of capital stock and/or other securities upon conversion or redemption of shares of PCS Stock pursuant to this Section 7. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of any shares of capital stock and/or other securities in a name other than that in which the shares of PCS Stock so converted or redeemed were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (M) Neither the failure to mail any notice required by this Section 7.4 to any particular holder of PCS Stock or of Convertible Securities nor any defect therein shall affect the sufficiency of any notice given to any other holder of outstanding shares of PCS Stock or of Convertible Securities or the validity of any such conversion or redemption. (N) The Board of Directors may establish such rules and requirements to facilitate the effectuation of the transactions contemplated by this Section 7 as the Board of Directors shall determine to be appropriate. 16 7.5 Automatic Conversion of Series 2 PCS Stock and Series 2 FON Stock. (a) Below One Percent Voting Power. If the total number of Converted Votes represented by the aggregate number of issued and outstanding shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be, is below one percent of the outstanding Voting Power of the Corporation for more than 90 consecutive days (the date on which such 90-day period ends, the "Conversion Trigger Date"), then each outstanding share of Series 2 PCS Stock or Series 2 FON Stock will automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock or Series 1 FON Stock, respectively, such conversion to take place on the 90th day following the Conversion Trigger Date.. (b) Certain Transfers. Upon any Transfer of shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be (other than a Transfer to a Cable Holder) each such share so Transferred shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock or Series 1 FON Stock, respectively, as of the date of such Transfer. (c) Exchange of Stock Certificates; Effect of Automatic Conversion of All Series 2 PCS Stock, etc. (i) Immediately upon the conversion of shares of Series 2 PCS Stock (or, if applicable, Series 2 FON Stock) into shares of Series 1 PCS Stock (or, if applicable, Series 1 FON Stock), pursuant to this Section 7 (such shares so converted hereinafter referred to as the "Converted Series Shares"), the rights of the holders of such Converted Series Shares, as such, shall cease and the holders thereof shall be treated for all purposes as having become the record owners of the shares of Series 1 PCS Stock or Series 1 FON Stock, as the case may be, issuable upon such conversion (the "Newly Issued Shares"), provided that such Persons shall be entitled to receive when paid any dividends declared on the Converted Series Shares as of a record date preceding the time the Converted Series Shares were converted (the "Series Conversion Time") and unpaid as of the Series Conversion Time. If the stock transfer books of this Corporation shall be closed at the Series Conversion Time, such Person or Persons shall be deemed to have become such holder or holders of record of the Newly Issued Shares at the opening of business on the next succeeding day on which such stock transfer books are open. (ii) As promptly as practicable after the Series Conversion Time, upon the delivery to this Corporation of the certificates formerly representing Converted Series Shares, this Corporation shall deliver or cause to be delivered, to or upon the written order of the record holder of such certificates, a certificate or certificates representing the number of duly issued, fully paid and nonassessable Newly Issued Shares into which the Converted Series Shares formerly represented by such certificates have been converted in accordance with the provisions of this Section 7.5. (iii) This Corporation shall pay all United States federal, state or local documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Newly Issued Shares upon the conversion of Converted Series Shares pursuant to this Section 7.5, provided that this Corporation shall not be required to pay any tax which may be payable in respect of any registration of Transfer involved in the issue or delivery of Newly Issued Shares in a name other than that of the registered holder of shares converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to this Corporation the amount of any such tax or has established, to the satisfaction of this Corporation, that such tax has been paid. (iv) This Corporation shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Series 1 PCS Stock, authorized but unissued Series 1 FON Stock, issued Series 1 PCS Stock held in its treasury and issued Series 1 FON Stock held in its treasury, for the purpose of effecting the conversion of the Series 2 PCS Stock or Series 2 FON Stock, as the case may be, contemplated hereby, the full number of shares of Series 1 PCS Stock and Series 1 FON Stock then deliverable upon the conversion of all outstanding shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be, and the full number of shares of Series 2 PCS Stock the Cable Holders are permitted to acquire under the Restructuring Agreement and the Cable Holder Standstill Agreements. Section 8. Deleted. 17 Section 9. Application of the Provisions of ARTICLE SIXTH. 9.1. Certain Determinations of the Board of Directors. In addition to the determinations regarding Preferred Stock to be made by the Board of Directors as provided by Section 13.6, the Board of Directors shall make such determinations (i) with respect to the assets and liabilities to be attributed to the Business Groups (in accordance with the definitions of "PCS Group" and "Sprint FON Group" set forth in ARTICLE SIXTH, Section 10), (ii) with respect to the application of the provisions of this ARTICLE SIXTH to transactions to be engaged in by the Corporation and (iii) as may be or become necessary or appropriate to the exercise of the powers, preferences and relative, participating, optional and other special rights of the classes or series of Corporation Common Stock, including, without limiting the foregoing, the determinations referred to in the following paragraphs (A), (B), (C) and (D) of this Section 9.1. A record of any such determination shall be filed with the Secretary of the Corporation to be kept with the records of the actions of the Board of Directors. (A) Upon any acquisition by the Corporation or its subsidiaries of any assets or business, or any assumption of liabilities, outside of the ordinary course of business of the Sprint FON Group or the PCS Group, as the case may be, the Board of Directors shall determine whether such assets, business and liabilities (or an interest therein) shall be for the benefit of the Sprint FON Group or the PCS Group or that an interest therein shall be partly for the benefit of the Sprint FON Group and partly for the benefit of the PCS Group and, accordingly, shall be attributed to the Sprint FON Group or the PCS Group, or partly to each, in accordance with the definitions of "PCS Group," "Sprint FON Group," and "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" set forth in Section 10 of ARTICLE SIXTH. (B) Upon any issuance of any shares of PCS Stock at a time when the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is more than zero, the Board of Directors shall determine, based on the use of the proceeds of such issuance and any other relevant factors, whether all or any part of the shares of PCS Stock so issued should reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest and the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest shall be adjusted accordingly. (C) Upon any issuance by the Corporation or any subsidiary thereof of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock, if at the time such Convertible Securities are issued the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than zero, the Board of Directors shall determine whether, upon conversion, exchange or exercise thereof, the issuance of shares of PCS Stock pursuant thereto shall, in whole or in part, reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, taking into consideration the use of the proceeds of such issuance of Convertible Securities in the business of the Sprint FON Group or the PCS Group and any other relevant factors. (D) Upon any redemption or repurchase by the Corporation or any subsidiary thereof of shares of any Preferred Stock of any class or series or of other securities or debt obligations of the Corporation, if some of such shares, other securities or debt obligations were attributed to the Sprint FON Group and some of such shares, other securities or debt obligations were attributed to the PCS Group, the Board of Directors shall determine which, if any, of such shares, other securities or debt obligations redeemed or repurchased shall be attributed to the Sprint FON Group and which, if any, of such shares, other securities or debt obligations shall be attributed to the PCS Group and, accordingly, how many of the shares of such series of Preferred Stock or of such other securities, or how much of such debt obligations, that remain outstanding, if any, continue to be attributed to the Sprint FON Group or to the PCS Group. 9.2. Sources of Dividends and Distributions; Uses of Proceeds of Share Issuances. Notwithstanding the attribution of properties or assets of the Corporation to the Sprint FON Group or the PCS Group as provided in the definitions of such terms in Section 10 of ARTICLE SIXTH, the Board of Directors (i) may cause dividends or distributions or other payments to the holders of any class of Corporation Common Stock or any class or series of Preferred Stock to be made out of the properties or assets attributed to any Business Group, subject, however, to any contrary term of any series of Preferred Stock fixed in accordance with Section 13 of ARTICLE SIXTH, and (ii) may cause the proceeds of issuance of any shares of Corporation Common Stock or any class or series of Preferred Stock, to whichever Business Group attributed in accordance with Section 13 of ARTICLE SIXTH, to be used in the business of, and to be attributed to, either the Sprint FON Group or the PCS Group in accordance with the definitions of "PCS 18 Group," "Sprint FON Group," and "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" in Section 10 of ARTICLE SIXTH. 9.3. Certain Determinations Not Required. Notwithstanding the foregoing provisions of this Section 9, the provisions of Section 10 of ARTICLE SIXTH or any other provision of this ARTICLE SIXTH, at any time when there are not outstanding both (i) one or more shares of FON Stock or Convertible Securities convertible into or exchangeable or exercisable for FON Stock and (ii) one or more shares of PCS Stock or Convertible Securities convertible into or exchangeable or exercisable for PCS Stock, the Board of Directors need not (A) attribute any of the assets or liabilities of the Corporation or any of its subsidiaries to the Sprint FON Group or the PCS Group, (B) make any determination required in connection therewith, or (C) make any of the determinations otherwise required by this ARTICLE SIXTH, and in such circumstances the holders of the shares of FON Stock or PCS Stock outstanding, as the case may be, shall (unless otherwise specifically provided by the Articles of Incorporation of the Corporation) be entitled to all the voting powers, preferences, optional or other special rights of such classes of Corporation Common Stock without differentiation between the FON Stock and the PCS Stock and any provision of this ARTICLE SIXTH to the contrary shall no longer be in effect or operative and the Board of Directors may cause the Articles of Incorporation of the Corporation to be amended as permitted by law to delete such provisions as are no longer operative or of further effect. 9.4. Emergency Use of Business Group Assets. Notwithstanding the foregoing provisions of this Section 9 or any other provision of ARTICLE SIXTH, the Board of Directors may transfer assets or properties from one Business Group to another on such other basis as the Board of Directors shall determine, consistent with its fiduciary duties to the Corporation and the holders of all classes and series of the Corporation's common stock, provided that the Board of Directors determines (i) that such transfer on such basis should be made to prevent or mitigate material adverse consequences that would fundamentally affect the transferee Business Group, (ii) that the benefit of such transfer on such basis to the transferee Business Group is to materially exceed any adverse effect of such transfer to the transferor Business Group, and (iii) that such transfer on such basis is in the best interest of the Corporation as a whole after giving fair consideration to the potentially divergent interests of the holders of the separate classes of Corporation Common Stock. 9.5. Board Determinations Binding. Subject to applicable law, any determinations made in good faith by the Board of Directors of the Corporation under any provision of this Section 9 or otherwise in furtherance of the application of this ARTICLE SIXTH shall be final and binding on all stockholders. Section 10. Definitions. For purposes of ARTICLE FIFTH and ARTICLE SIXTH of these Articles of Incorporation, the following terms have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless the context otherwise requires. As used in this Section 10, a "contribution" or "transfer" of assets or properties from one Business Group to another refers to the reattribution of such assets or properties from the contributing or transferring Business Group to the other Business Group and correlative phrases have correlative meanings. "Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, such Person. "Alien" means "aliens," "their representatives," "a foreign government or representatives thereof" or "any corporation organized under the laws of a foreign country" as such terms are used in Section 310(b)(4) of the Communications Act of 1934, as amended, or as hereafter may be amended, or any successor provision of law. "Applicable Law" has the meaning set forth in the Stockholders' Agreement. "Associate" has the meaning ascribed to such term in Rule 12b- 2 under the Exchange Act. "Average Trading Price" of a share of any class or series of capital stock of the Corporation on any day means the average Closing Price of such capital stock determined over the 20 Trading Days immediately preceding the date of such determination; provided that for purposes of this definition only, in determining the "Closing Price" of a share of any class or series of capital stock for such 20 Trading Day period, (i) the "Closing Price" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (ii)(B) of this definition) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend or distribution and (ii) 19 the "Closing Price" of any share of capital stock on any day prior to (A) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class of capital stock occurring during such period or (B) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or series of capital stock, shall be appropriately adjusted, as determined by the Board of Directors, to reflect such subdivision, combination, dividend or distribution. "Beneficial Owner" (including, with its correlative meanings, "Beneficially Own" and "Beneficial Ownership"), with respect to any securities, means any Person which: (a) has, or any of whose Affiliates or Associates has, directly or indirectly, the right to acquire (whether such right is exercisable immediately or only after the passage of time) such securities pursuant to any agreement, arrangement or understanding (whether or not in writing), including, without limitation, upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; (b) has, or any of whose Affiliates or Associates has, directly or indirectly, the right to vote or dispose of (whether such right is exercisable immediately or only after the passage of time) or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act but including all such securities which a Person has the right to acquire beneficial ownership of whether or not such right is exercisable within the 60-day period specified therein) such securities, including pursuant to any agreement, arrangement or understanding (whether or not in writing); or (c) has, or any of whose Affiliates or Associates has, any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of any securities which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate thereof), provided that prior to the conversion thereof (other than during the 90-day period following the Conversion Trigger Date set forth in ARTICLE SIXTH, Section 7.5(a)), a holder of Series 2 PCS Stock or Series 2 FON Stock shall not be deemed to beneficially own the shares of Series 1 PCS Stock or Series 1 FON Stock issuable upon conversion thereof. "Board of Directors" means the board of directors of this Corporation. "Business Day" means any day other than a day on which commercial banks in The City of New York, Paris, France, or Frankfurt am Main, Germany, are required or authorized by law to be closed. "Business Group" means, as of any date, the Sprint FON Group or the PCS Group, as the case may be. "Bylaws" means the Bylaws of this Corporation as amended or supplemented from time to time. "Cable Holder" means any of: (i) Tele-Communications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, or Cox Communications, Inc., a Delaware corporation, (ii) any Affiliate of an entity identified in clause (i) of this definition, (iii) any successor (by operation of law or otherwise) of an entity identified in clauses (i) or (ii) of this definition so long as such successor remains an Affiliate of an entity identified in clause (i) or (ii), (iv) any entity controlled by two or more entities identified in clauses (i) through (iii) of this definition or this clause (iv) even if such entity is not considered an Affiliate of any individual entity so identified and (v) for purposes of ARTICLE SIXTH, Section 7.5(b) only, with respect to any Transfer of shares of Series 2 PCS Stock, the transferee of such shares if (A) at the time of such Transfer, the transferor was a Cable Holder under any of the clauses (i) through (iv) of this definition, (B) after giving effect to such Transfer, the transferee was an Associate of the transferor, (C) immediately prior to such Transfer, the transferee was identified in writing by the 20 transferor as a "Cable Holder" under this clause (v), and (D) the transferor and transferee satisfied the conditions set forth in Section 2.4 of the applicable Cable Holder Standstill Agreements. "Cable Holder Standstill Agreements" means the Standstill Agreements, dated as of May 26, 1998, entered into between this Corporation and each of certain Cable Holders, and any Standstill Agreements in the form thereof entered into from time to time between this Corporation and certain transferee Affiliates and Associates of such Cable Holders. "Closing Price" means, with respect to a security on any day, the last sale price, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on The New York Stock Exchange, Inc. or, if such security is not listed or admitted to trading on such exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the security is listed or admitted to trading or, if the security is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use, or, if on any such date such security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the security selected in good faith by the Board of Directors. If the security is not publicly held or so listed or publicly traded, "Closing Price" means the Fair Market Value of such security. "Continuing Director" has the meaning set forth in the Fair Price Provisions. "Control" means, with respect to a Person or Group, any of the following: (a) ownership by such Person or Group of Votes entitling it to exercise in the aggregate more than 35 percent of the Voting Power of the entity in question; or (b) possession by such Person or Group of the power, directly or indirectly, (i) to elect a majority of the board of directors (or equivalent governing body) of the entity in question; or (ii) to direct or cause the direction of the management and policies of or with respect to the entity in question, whether through ownership of securities, by contract or otherwise. "Conversion Date" means the date fixed by the Board of Directors as the effective date for the conversion of shares of PCS Stock into shares of FON Stock as shall be set forth in the notice to holders of shares of PCS Stock and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock required pursuant to Section 7.4(E). "Converted Series Shares" has the meaning set forth in Section 7.5(c) of ARTICLE SIXTH. "Converted Votes" means, on any particular day, (i) in the case of a share of Series 2 PCS Stock, the applicable PCS Per Share Vote a share of Series 1 PCS Stock would have had if the computation described in Section 3.2(a)(ii) had occurred on such day and (ii) in the case of a share of Series 2 FON Stock, one vote per share. "Convertible Securities" at any time means any securities of the Corporation or of any subsidiary thereof (other than shares of Corporation Common Stock), including warrants and options, outstanding at such time that by their terms are convertible into or exchangeable or exercisable for or evidence the right to acquire any shares of any class or series of Corporation Common Stock, whether convertible, exchangeable or exercisable at such time or a later time or only upon the occurrence of certain events, pursuant to antidilution provisions of such securities or otherwise. "Corporation Common Stock" means the Series 1 FON Stock, the Series 2 FON Stock, the Series 1 PCS Stock, and the Series 2 PCS Stock. "Director" means a member of the Board of Directors. "Disposition" means a sale, transfer, assignment or other disposition (whether by merger, consolidation, sale or contribution of assets or stock or otherwise) of properties or assets. 21 "DT" means Deutsche Telekom AG, an Aktiengesellschaft formed under the laws of Germany. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the United States Securities and Exchange Commission promulgated thereunder. "Fair Market Value" means, with respect to any asset, shares or other property, the cash price at which a willing seller would sell and a willing buyer would buy such asset, shares or other property in an arm's-length negotiated transaction without undue time restraints, as determined in good faith by a majority of the Independent Directors. "Fair Price Provisions" means ARTICLE SEVENTH of these Articles of Incorporation, and any successor provision thereto. "Fair Value" means, in the case of equity securities or debt securities of a class that has previously been Publicly Traded for a period of at least 15 months, the Market Value thereof (if such value, as so defined, can be determined) or, in the case of an equity security or debt security that has not been Publicly Traded for at least such period, means the fair value per share of stock or per other unit of such other security, on a fully distributed basis, as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors; provided, however, that in the case of property other than securities, the "Fair Value" thereof shall be determined in good faith by the Board of Directors based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine to be appropriate in accordance with good business practice. Any such determination of Fair Value shall be described in a statement filed with the records of the actions of the Board of Directors. "FCC" means the Federal Communications Commission. "FON Group Intergroup Interest Fraction" as of any date means a fraction the numerator of which is the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on such date and the denominator of which is the sum of (A) such Number Of Shares Issuable With Respect To The FON Group Intergroup Interest and (B) the aggregate number of shares of PCS Stock outstanding on such date. A statement setting forth the FON Group Intergroup Interest Fraction as of the record date for any dividend or distribution on the PCS Stock, as of the end of each fiscal quarter of the Corporation and as of any date otherwise required under these Articles of Incorporation or by the Board of Directors shall be filed by the Secretary of the Corporation in the records of the Board of Directors of the Corporation not later than fifteen Business Days after such date. "FON Preferred Stock" means Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13. "FON Stock" means the Series 1 FON Stock and the Series 2 FON Stock. "France" means the Republic of France, including French Guiana, Guadeloupe, Martinique and Reunion, and its territories and possessions. "FT" means France Telecom SA, a societe anonyme formed under the laws of France. "Germany" means the Federal Republic of Germany. "Governmental Authority" means any federation, nation, state, sovereign, or government, any federal, supranational, regional, state or local political subdivision, any governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission or other similar dispute resolving panel or body, and any other entity exercising executive, legislative, judicial, regulatory or administrative functions of a government. "Group" means any group within the meaning of Section 13(d)(3) of the Exchange Act. "Independent Director" means any member of the Board of Directors who (a) is not an officer or employee of this Corporation or any of its Subsidiaries, (b) is not a former officer of this Corporation or any of its Subsidiaries, (c) 22 does not, in addition to such person's role as a Director, act on a regular basis, either individually or as a member or representative of an organization, serving as a professional adviser, legal counsel or consultant to this Corporation or its Subsidiaries, if, in the opinion of the Nominating Committee of the Board of Directors of this Corporation (the "Nominating Committee") or the Board of Directors if a Nominating Committee is not in existence, such relationship is material to this Corporation or the organization so represented or such person, and (d) does not represent, and is not a member of the immediate family of, a person who would not satisfy the requirements of the preceding clauses (a), (b) and (c) of this sentence. A person who has been or is a partner, officer or director of an organization that has customary commercial, industrial, banking or underwriting relationships with this Corporation or any of its Subsidiaries, that are carried on in the ordinary course of business on an arms-length basis and who otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the first sentence of this definition, may qualify as an Independent Director, unless, in the opinion of the Nominating Committee or the Board of Directors if a Nominating Committee is not in existence, such person is not independent of the management of this Corporation or any of its Subsidiaries, or the relationship would interfere with the exercise of independent judgment as a member of the Board of Directors. A person who otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the first sentence of this definition and who, in addition to fulfilling the customary director's role, also provides additional services directly for the Board of Directors and is separately compensated therefor, would nonetheless qualify as an Independent Director. Notwithstanding anything to the contrary contained in this definition, each Director as of the date of the filing (filed April 28, 2000) of these Articles of Incorporation who is not an executive officer of this Corporation shall be deemed to be an Independent Director hereunder. "Investment Agreement" means the Investment Agreement, dated as of July 31, 1995, among FT, DT and this Corporation (and all exhibits and schedules thereto), as amended or supplemented from time to time. "Lien" means any mortgage, pledge, security interest, adverse claim, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or similar Applicable Law of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation. "Market Capitalization" means, with respect to this Corporation at any date, the sum of the average Market Price over the immediately preceding 20 Business Days of each share of outstanding capital stock of this Corporation, securities convertible into such capital stock and options, warrants or other rights to acquire such capital stock. "Market Price" means with respect to a security on any date, the Closing Price of such security on the Trading Day immediately prior to such date. The Market Price shall be deemed to be equal to, (i) in the case of a share of Series 2 FON Stock, the Market Price of a share of Series 1 FON Stock and (ii) in the case of a share of Series 2 PCS Stock, the Market Price of a share of Series 1 PCS Stock. The Market Price of (x) any options, warrants, rights or other securities convertible into or exercisable for Series 2 FON Stock shall be equal to the Market Price of options, warrants, rights or other securities convertible into or exercisable for Series 1 FON Stock upon the same terms and otherwise containing the same terms as such options, warrants, rights or other securities convertible into or exercisable for Series 2 FON Stock, and (y) any options, warrants, rights or other securities convertible into or exercisable for Series 2 PCS Stock shall be equal to the Market Price of options, warrants, rights or other securities convertible into or exercisable for Series 1 PCS Stock upon the same terms and otherwise containing the same terms as such options, warrants, rights or other securities convertible into or exercisable for Series 2 PCS Stock. "Market Value" of a share of any class or series of capital stock of the Corporation on any day means the average of the high and low reported sales prices regular way of a share of such class or series on such day (if such day is a Trading Day, and if such day is not a Trading Day, on the Trading Day immediately preceding such day) or, in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way of a share of such class or series on such Trading Day, in either case as reported on the New York Stock Exchange Composite Tape or, if the shares of such class or series are not listed or admitted to trading on such Exchange on such Trading Day, on the principal national securities exchange in the United States on which the shares of such class or series are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange on such Trading Day, on the National Market tier of The Nasdaq Stock Market or, if the shares of such class or series are not listed or admitted to trading on any national securities exchange or quoted on such National Market System on such Trading Day, the average of the closing bid and asked prices of a share of such class or series in the over-the-counter 23 market on such Trading Day as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors or, if such closing bid and asked prices are not made available by any such New York Stock Exchange member firm on such Trading Day, the Fair Value of a share of such class or series; provided that, for purposes of determining the Market Value of a share of any class or series of capital stock for any period, (i) the "Market Value" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (ii)(B) of this definition) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend or distribution and (ii) the "Market Value" of any share of capital stock on any day prior to (A) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class of capital stock occurring during such period or (B) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or series of capital stock shall be appropriately adjusted, as determined by the Board of Directors, to reflect such subdivision, combination, dividend or distribution. "Master Transfer Agreement" means the Master Transfer Agreement, dated as of January 21, 2000, between and among the Corporation, FT, DT and the other parties named therein. "Net Proceeds" means, as of any date with respect to any Disposition of any of the properties and assets attributed to the PCS Group, an amount, if any, equal to what remains of the gross proceeds of such Disposition after payment of, or reasonable provision is made as determined by the Board of Directors for, (A) any taxes payable by the Corporation (or which would have been payable but for the utilization of tax benefits attributable to the Sprint FON Group) in respect of such Disposition or in respect of any resulting dividend or redemption pursuant to ARTICLE SIXTH, Section 7.1(A)(1)(a) or (b), (B) any transaction costs, including, without limitation, any legal, investment banking and accounting fees and expenses and (C) any liabilities (contingent or otherwise) of or attributed to the PCS Group, including, without limitation, any liabilities for deferred taxes or any indemnity or guarantee obligations of the Corporation incurred in connection with the Disposition or otherwise, and any liabilities for future purchase price adjustments and any preferential amounts plus any accumulated and unpaid dividends in respect of Preferred Stock attributed to the PCS Group. For purposes of this definition, any properties and assets attributed to the PCS Group remaining after such Disposition shall constitute "reasonable provision" for such amount of taxes, costs and liabilities (contingent or otherwise) as the Board of Directors determines can be expected to be supported by such properties and assets. "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" means, as of November 23, 1998, a number equal to 220,000,000 less the sum of (i) 43,118,018, (ii) one-half of the number of shares of Common Stock, par value $2.50 per share, outstanding immediately prior to November 23, 1998, and (iii) one- half of the number of shares of Common Stock, par value $2.50 per share, held as treasury shares by the Corporation immediately prior to November 23, 1998; provided, however, that such number shall from time to time thereafter be: (A) adjusted, as determined by the Board of Directors to be appropriate to reflect equitably any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the PCS Stock or any dividend or other distribution of shares of PCS Stock to holders of shares of PCS Stock or any reclassification of PCS Stock; (B) decreased (but to not less than zero), if before such decrease such number is greater than zero, by action of the Board of Directors by (1) the number of shares of PCS Stock issued or sold by the Corporation that, immediately prior to such issuance or sale, were included (as determined by the Board of Directors pursuant to paragraph (C) of this definition) in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (2) the number of shares of PCS Stock issued upon conversion, exchange or exercise of Convertible Securities that, immediately prior to the issuance or sale of such Convertible Securities, were included in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (3) the number of shares of PCS Stock issued by the Corporation as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or shares of FON Preferred Stock, as the case may be, (4) the number of shares of PCS Stock issued upon the conversion, exchange or exercise of any Convertible Securities issued by the Corporation as a dividend 24 or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or shares of FON Preferred Stock, as the case may be, (5) the quotient of (a) the aggregate Fair Value of any PCS Preferred Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Preferred Stock) issued by the Corporation as a dividend or other distribution (including in connection with any classification or exchange of shares) to holders of FON Stock or shares of FON Preferred Stock, as the case may be, divided by (b) the Market Value of one share of PCS Stock as of the date of issuance of such PCS Preferred Stock (or Convertible Securities), or (6) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the aggregate Fair Value as of the date of contribution of properties or assets (including cash) transferred from the PCS Group to the Sprint FON Group in consideration for a reduction in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest divided by (b) the Market Value of one share of PCS Stock as of the date of such transfer; and (C) increased by (1) the number of outstanding shares of PCS Stock repurchased by the Corporation for consideration that had been attributed to the Sprint FON Group, (2) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the Fair Value of properties or assets (including cash) theretofore attributed to the Sprint FON Group that are contributed, by action of the Board of Directors, to the PCS Group in consideration of an increase in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, divided by (b) the Market Value of one share of PCS Stock as of the date of such contribution and (3) the number of shares of PCS Stock into or for which Convertible Securities are deemed converted, exchanged or exercised pursuant to the penultimate sentence of the definition of "Sprint FON Group"; provided, further, that the Board of Directors may make such subsequent changes to the calculations made pursuant to subparagraphs (A), (B) and (C) immediately above as may be required for purposes of accurately determining such number. "Optional Conversion Ratio" as of any date means the ratio of the Average Trading Price of a share of Series 1 PCS Stock to the Average Trading Price of a share of Series 1 FON Stock; provided, that such ratio would be determined over a 60-Trading Day period if the 20-Trading Day period normally used to determine the Average Trading Price is less than 90% of such ratio as determined over a 60-Trading Day period. "Outstanding PCS Fraction," as of any date, means the fraction the numerator of which shall be the number of shares of PCS Stock outstanding on such date and the denominator of which shall be the sum of (i) the number of shares of PCS Stock outstanding on such date, and (ii) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on such date. A statement setting forth the Outstanding PCS Fraction as of the record date for the payment of any dividend or distribution on PCS Stock and as of the end of each fiscal quarter of the Corporation shall be filed by the Secretary of the Corporation in the records of the actions of the Board of Directors not later than fifteen Business Days after such date. "PCS" means a radio communications system of the type authorized under the rules for broadband personal communications services designated as Subpart E of Part 24 of the FCC's rules or similar Applicable Laws of any other country, including the network, marketing, distribution, sales, customer interface and operations functions relating thereto. "PCS Group" means, as of any date from and after November 23, 1998: (A) the interest on such date of the Corporation and any of its subsidiaries in any of the following Persons or any of their respective subsidiaries (including any successor thereto by merger, consolidation or sale of all or substantially all of its assets, whether or not in connection with a Related Business Transaction) (the "PCS Group Companies") and the corresponding interests in their respective assets and liabilities and the businesses conducted by such entities: SWV Six, Inc.; SWV One, Inc.; SWV Two, Inc.; SWV Three, Inc.; SWV Four, Inc.; SWV Seven, Inc.; SWV Eight, Inc.; SWV One Telephony Partnership; SWV Two Telephony Partnership; SWV Three Telephony Partnership; Sprint Enterprises, L.P.; MinorCo, L.P.; Sprint Spectrum Holding Company, L.P.; American PCS, L.P.; Cox Communications PCS, L.P.; NewTelco, L.P.; Sprint Spectrum L.P.; American Personal Communications Holdings, Inc.; American PCS Communications, LLC; APC PCS, LLC; APC Realty and Equipment Company, LLC; Sprint Spectrum Finance Corporation; Sprint Spectrum Equipment Company, L.P.; Sprint Spectrum Realty Company, L.P.; WirelessCo, L.P.; SWV Five, Inc.; PhillieCo Partners I, L.P.; PhillieCo Partners II, L.P.; PhillieCo Sub, L.P.; PhillieCo., 25 L.P.; PhillieCo Equipment & Realty Company, L.P.; SprintCom, Inc.; SprintCom Equipment Company L.P.; PCS Leasing Co., L.P.; Cox PCS Assets, L.L.C.; and Cox PCS License, L.L.C.; (B) all assets and liabilities of the Corporation and its subsidiaries attributed by the Board of Directors to the PCS Group, whether or not such assets or liabilities are or were also assets or liabilities of any of the PCS Group Companies; (C) all properties and assets transferred to the PCS Group from the Sprint FON Group (other than a transaction pursuant to paragraph (D) of this definition) after November 23, 1998 pursuant to transactions in the ordinary course of business of both the Sprint FON Group and the PCS Group or otherwise as the Board of Directors may have directed as permitted by this ARTICLE SIXTH; (D) all properties and assets transferred to the PCS Group from the Sprint FON Group in connection with an increase in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest; and (E) the interest of the Corporation or any of its subsidiaries in any business or asset acquired and any liabilities assumed by the Corporation or any of its subsidiaries outside of the ordinary course of business and attributed to the PCS Group, as determined by the Board of Directors as contemplated by Section 9.1(A) of ARTICLE SIXTH; provided that (1) from and after the payment date of any dividend or other distribution with respect to shares of PCS Stock (other than a dividend or other distribution payable in shares of PCS Stock, with respect to which adjustment shall be made as provided in the definition of "Number Of Shares Issuable In Respect Of The FON Group Intergroup Interest," or in securities of the Corporation attributed to the PCS Group, for which provision shall be made as set forth in clause (2) of this proviso), the PCS Group shall no longer include an amount of assets or properties previously attributed to the PCS Group of the same kind as so paid in such dividend or other distribution with respect of shares of PCS Stock as have a Fair Value on the record date for such dividend or distribution equal to the product of (a) the Fair Value on such record date of the aggregate of such dividend or distribution to holders of shares of PCS Stock declared multiplied by (b) a fraction the numerator of which is equal to the FON Group Intergroup Interest Fraction in effect on the record date for such dividend or distribution and the denominator of which is equal to the Outstanding PCS Fraction in effect on the record date for such dividend or distribution (and in such eventuality such assets as are no longer included in the PCS Group shall be attributed to the Sprint FON Group in accordance with the definition of "Sprint FON Group"), and (2) if the Corporation shall pay a dividend or make some other distribution with respect to shares of PCS Stock payable in securities of the Corporation that are attributed to the PCS Group for purposes of this ARTICLE SIXTH (other than PCS Stock), there shall be excluded from the PCS Group an interest in the PCS Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of PCS Stock multiplied by the fraction specified in clause 1(b) of this proviso (determined as of the record date for such distribution) (and such interest in the PCS Group shall be attributed to the Sprint FON Group) and, to the extent interest is or dividends are paid on the securities so distributed, the PCS Group shall no longer include a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of the securities equivalent to such interest in the PCS Group deemed held by the Sprint FON Group if the securities equivalent to such interest were outstanding (and in such eventuality such assets as are no longer included in the PCS Group shall be attributed to the Sprint FON Group in accordance with the definition of "Sprint FON Group"). The Corporation may also, to the extent a dividend or distribution on the PCS Stock has been paid in Convertible Securities that are convertible into or exchangeable or exercisable for PCS Stock, cause such Convertible Securities as are deemed to be held by the Sprint FON Group in accordance with the third-to-last sentence of the definition of "Sprint FON Group" and clause (2) of the proviso to the immediately preceding sentence to be deemed to be converted, exchanged or exercised as provided in the penultimate sentence of the definition of "Sprint FON Group," in which case such Convertible Securities shall no longer be deemed to be held by the Sprint FON Group. "PCS Group Disposition Date" has the meaning set forth in Section 7.1(A) of ARTICLE SIXTH. 26 "PCS Group Subsidiary" has the meaning set forth in Section 7.2 of ARTICLE SIXTH. "PCS Per Share Vote" has the meaning set forth in Section 3.2 of ARTICLE SIXTH. "PCS Preferred Stock" means Preferred Stock to the extent attributed to the PCS Group in accordance with ARTICLE SIXTH, Section 13. "PCS Ratio" means the ratio of the Average Trading Price of one share of Series 1 PCS Stock to the Average Trading Price of one share of Series 1 FON Stock determined, in each such case, as of the 21st Trading Day following the commencement of regular way trading of both the Series 1 PCS Stock and the Series 1 FON Stock. "PCS Stock" means the Series 1 PCS Stock and the Series 2 PCS Stock. "Person" means an individual, a partnership, an association, a joint venture, a corporation, a business, a trust, any entity organized or existing under Applicable Law, an unincorporated organization or any Governmental Authority. "Preferred Stock" has the meaning set forth in Section 1 of ARTICLE SIXTH. "Publicly Traded" with respect to any security means (i) registered under Section 12 of the Securities Exchange Act of 1934, as amended (or any successor provision of law), and (ii) listed for trading on the New York Stock Exchange or the American Stock Exchange (or any national securities exchange registered under Section 7 of the Securities Exchange Act of 1934, as amended (or any successor provision of law), that is the successor to either such exchange) or quoted in the National Association of Securities Dealers Automation Quotation System (or any successor system). "Qualified Subsidiary" has the meaning set forth in the Investment Agreement. "Qualified Subsidiary Standstill Agreement" has the meaning set forth in the Investment Agreement. "Recapitalization" means the reclassification of, among other things, certain outstanding shares of Sprint capital stock to be effected pursuant to the terms set forth in the Restructuring Agreement . "Redemption Date" means the date fixed by the Board of Directors for the redemption of (i) any shares of capital stock of this Corporation pursuant to ARTICLE SIXTH, Section 2.2 or (ii) shares of PCS Stock as shall be set forth in the notice to holders of shares of PCS Stock and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock required pursuant to ARTICLE SIXTH, Section 7.4. "Redemption Securities" means any debt or equity securities of this Corporation, any of its Subsidiaries, or any combination thereof having such terms and conditions as shall be approved by the Board of Directors and which, together with any cash to be paid as part of the redemption price pursuant to Section 2.2(b) of ARTICLE SIXTH of these Articles of Incorporation, in the opinion of an investment banking firm of recognized national standing selected by the Board of Directors (which may be a firm which provides other investment banking, brokerage or other services to this Corporation), have a Market Price, at the time notice of redemption is given pursuant to Section 2.2(d) of ARTICLE SIXTH of these Articles of Incorporation, at least equal to the redemption price required to be paid by such Section 2.2(a). "Related Business Transaction" means any Disposition of all or substantially all the properties and assets attributed to the PCS Group in a transaction or series of related transactions that result in the Corporation receiving in consideration of such properties and assets primarily equity securities (including, without limitation, capital stock, debt securities convertible into or exchangeable for equity securities or interests in a general or limited partnership or limited liability company, without regard to the voting power or other management or governance rights associated therewith) of any entity which (i) acquires such properties or assets or succeeds (by merger, formation of a joint venture or otherwise) to the business conducted with such properties or assets or controls such acquiror or successor and (ii) which the Board of Directors determines is primarily engaged or proposes to engage primarily in one or more businesses similar or complementary to the businesses conducted by such Business Group prior to such Disposition. 27 "Restructuring Agreement" means the Restructuring and Merger Agreement dated as of May 26, 1998, by and among certain Cable Holders, this Corporation and the other parties listed therein, as amended or supplemented from time to time. "Section 310" means Section 310 of the Communications Act of 1934, as amended (or any successor provision of law). "Series 1 FON Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 1 PCS Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 2 FON Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 2 PCS Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Shares" means (a) shares of Corporation Common Stock, Preferred Stock or any other Voting Securities of this Corporation, (b) securities of this Corporation convertible into Voting Securities of this Corporation and (c) options, warrants or other rights to acquire such Voting Securities. "Sprint FON Group" means, as of any date from and after November 23, 1998: (A) the interest of the Corporation or any of its subsidiaries on such date in all of the assets, liabilities and businesses of the Corporation or any of its subsidiaries (and any successor companies), other than any assets, liabilities and businesses attributed in accordance with this Section 10 to the PCS Group; (B) a proportionate undivided interest in each and every business, asset and liability attributed to the PCS Group equal to the FON Group Intergroup Interest Fraction as of such date; (C) all properties and assets transferred to the Sprint FON Group from the PCS Group (other than pursuant to paragraph (D) or (F) of this definition) after November 23, 1998 pursuant to transactions in the ordinary course of business of both the Sprint FON Group and the PCS Group or otherwise as the Board of Directors may have directed as permitted by this ARTICLE SIXTH; (D) all properties and assets transferred to the Sprint FON Group from the PCS Group in connection with a reduction of the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest; (E) the interest of the Corporation or any of its subsidiaries in any business or asset acquired and any liabilities assumed by the Corporation or any of its subsidiaries outside the ordinary course of business and attributed to the Sprint FON Group, as determined by the Board of Directors as contemplated by Section 9.1(A) of ARTICLE SIXTH; and (F) from and after the payment date of any dividend or other distribution with respect to shares of PCS Stock (other than a dividend or other distribution payable in shares of PCS Stock, with respect to which adjustment shall be made as provided in the definition of "Number Of Shares Issuable With Respect Of The FON Group Intergroup Interest," or in securities of the Corporation attributed to the PCS Group, for which provision shall be made as set forth in the third to last sentence of this definition), an amount of assets or properties previously attributed to the PCS Group of the same kind as were paid in such dividend or other distribution with respect to shares of PCS Stock as have a Fair Value on the record date for such dividend or distribution equal to the product of (1) the Fair Value on such record date of such dividend or distribution to holders of shares of PCS Stock declared on a per share basis multiplied by (2) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest (determined as of the record date for such dividend or distribution); provided that from and after any transfer of any assets or properties from the Sprint FON Group to the PCS Group, the Sprint FON Group shall no longer include such assets or properties so transferred (other than as reflected in respect of such a transfer by the FON Group Intergroup Interest Fraction, as provided by paragraph (B) of this definition). 28 If the Corporation shall pay a dividend or make some other distribution with respect to shares of PCS Stock payable in securities of the Corporation that are attributed to the PCS Group for purposes of this ARTICLE SIXTH (other than PCS Stock), the Sprint FON Group shall be deemed to hold an interest in the PCS Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of PCS Stock on a per share basis multiplied by the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest (determined as of the record date for such distribution) and, to the extent interest is or dividends are paid on the securities so distributed, the Sprint FON Group shall include, and there shall be transferred thereto out of the PCS Group, a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of such securities so deemed to be held by the Sprint FON Group if such securities were outstanding. The Corporation may also, to the extent the securities so paid as a dividend or other distribution to the holders of PCS Stock are Convertible Securities and at the time are convertible into or exchangeable or exercisable for shares of PCS Stock, treat such Convertible Securities as are so deemed to be held by the Sprint FON Group to be deemed to be converted, exchanged or exercised, and shall do so to the extent such Convertible Securities are mandatorily converted, exchanged or exercised (and to the extent the terms of such Convertible Securities require payment of consideration for such conversion, exchange or exercise, the Sprint FON Group shall then no longer include an amount of the kind of properties or assets required to be paid as such consideration for the amount of Convertible Securities deemed converted, exchanged or exercised (and such properties or assets shall be attributed to the PCS Group)), in which case, from and after such time, the securities into or for which such Convertible Securities so deemed to be held by the Sprint FON Group were so considered converted, exchanged or exercised shall be deemed held by the Sprint FON Group (as provided in clause (3) of paragraph (C) of the definition of "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest") and such Convertible Securities shall no longer be deemed to be held by the Sprint FON Group. A statement setting forth the election to effectuate any such deemed conversion, exchange or exercise of Convertible Securities so deemed to be held by the Sprint FON Group and the properties or assets, if any, to be attributed to the PCS Group in consideration of such conversion, exchange or exercise (if any) shall be filed in the records of the actions of the Board of Directors and, upon such filing, such deemed conversion, exchange or exercise shall be effectuated. "Standstill Agreement" means the Amended and Restated Standstill Agreement, dated as of November 23, 1998, among FT, DT and this Corporation, as amended or supplemented from time to time, and any replacement standstill agreement or agreements entered into pursuant to Section 5.17 of the Master Transfer Agreement. "Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement, dated as of November 23, 1998, among FT, DT and this Corporation (and all exhibits thereto), as amended or supplemented from time to time. "Strategic Investor" has the meaning set forth in the Investment Agreement. "Subsidiary" means, with respect to any Person (the "Parent"), any other Person in which the Parent, one or more direct or indirect Subsidiaries of the Parent, or the Parent and one or more of its direct or indirect Subsidiaries (a) have the ability, through ownership of securities individually or as a group, ordinarily, in the absence of contingencies, to elect a majority of the directors (or individuals performing similar functions) of such other Person, and (b) own more than 50% of the equity interests. "Total Market Capitalization" of any class or series of common stock on any date means the product of (i) the Market Value of one share of such class or series of common stock on such date and (ii) the number of shares of such class or series of common stock outstanding on such date. "Trading Day" means, with respect to any security, any day on which the principal national securities exchange on which such security is listed or admitted to trading or The Nasdaq Stock Market, if such security is listed or admitted to trading thereon, is open for the transaction of business (unless such trading shall have been suspended for the entire day) or, if such security is not listed or admitted to trading on any national securities exchange or The Nasdaq Stock Market, any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. 29 "Transfer" means any act pursuant to which, directly or indirectly, the ownership of the assets or securities in question is sold, transferred, conveyed, delivered or otherwise disposed, but shall not include (a) any grant of Liens, (b) any conversion or exchange of any security of this Corporation pursuant to a merger or other business combination involving this Corporation, (c) any transfer of ownership of assets to the surviving entity, pursuant to any merger or other business combination, or (d) any foreclosure or other execution upon any of the assets of this Corporation or any of its Subsidiaries. "Vote" means, with respect to any entity, the ability to cast a vote at a stockholders', members' or comparable meeting of such entity with respect to the election of directors, managers or other members of such entity's governing body, or the ability to cast a general partnership or comparable vote, provided that with respect to this Corporation, the term "Vote" means the ability to exercise general voting power (as opposed to the exercise of special voting or disapproval rights such as those set forth in this ARTICLE SIXTH) with respect to matters other than the election of directors at a meeting of the stockholders of this Corporation. "Voting Power" means, with respect to any entity as at any date, the aggregate number of Votes outstanding as at such date in respect of such entity. "Voting Securities" means, with respect to an entity, any capital stock or debt securities of such entity if the holders thereof are ordinarily, in the absence of contingencies, entitled to a Vote, even though the right to such Vote has been suspended by the happening of such a contingency, and in the case of this Corporation, shall include, without limitation, the Corporation Common Stock. "Weighted Average Price" means the weighted average per unit price paid by the purchasers of any capital stock, debt instrument or security of this Corporation; provided, that the price paid by the purchasers of Series 2 PCS Stock acquired on November 23, 1998 is the Average Trading Price of a share of Series 1 PCS Stock as of the 21st Trading Day following the commencement of regular way trading in connection with the Recapitalization. In determining the price of shares of Corporation Common Stock issued upon the conversion or exchange of securities or issued upon the exercise of options, warrants or other rights, the consideration for such shares shall be deemed to include the price paid to purchase the convertible security or the warrant, option or other right, plus any additional consideration paid upon conversion or exercise. If any portion of the price paid is not cash, the Independent Directors (acting by majority vote) shall determine in good faith the Fair Market Value of such non-cash consideration. If any new shares of Corporation Common Stock are issued together with other shares or securities or other assets of this Corporation for consideration which covers both the new shares and such other shares, securities or other assets, the portion of such consideration allocable to such new shares shall be determined in good faith by the Independent Directors (acting by majority vote), in each case as certified in a resolution sent to all holders of Series 2 PCS Stock or Series 2 FON Stock, as the case may be. Section 11. Deleted. Section 12. Deleted. Section 13. General Provisions Relating to Preferred Stock. 13.1. The Preferred Stock may be issued from time to time in one or more series, each of such series to have such voting powers (full or limited or without voting powers) designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed herein, or in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. 13.2. Authority is hereby granted to the Board of Directors, subject to the provisions of this ARTICLE SIXTH, to create one or more series of Preferred Stock and, with respect to each series, to fix or alter as permitted by law, by resolution or resolutions providing for the issue of such series: (a) the number of shares to constitute such series and the distinctive designation thereof; 30 (b) the dividend rate on the shares of such series, the dividend payment dates, the periods in respect of which dividends are payable ("dividend periods") whether such dividends shall be cumulative, and if cumulative, the date or dates from which dividends shall accumulate; (c) whether or not the shares of such series shall be redeemable, and, if redeemable, on what terms, including the redemption prices which the shares of such series shall be entitled to receive upon the redemption thereof; (d) whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (e) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and the conversion price or prices or rate or rates, or the rate or rates at which such exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided in such resolution or resolutions; (f) the voting power, if any, of the shares of such series; and (g) such other terms, conditions, special rights and protective provisions as the Board of Directors may deem advisable. 13.3. No dividend shall be declared and set apart for payment on any series of Preferred Stock in respect of any dividend period unless there shall likewise be or have been paid, or declared and set apart for payment, on all shares of Preferred Stock of each other series entitled to cumulative dividends at the time outstanding which rank equally as to dividends with the series in question, dividends ratably in accordance with the sums which would be payable on the said shares through the end of the last preceding dividend period if all dividends were declared and paid in full. 13.4. If upon any dissolution of the Corporation, the assets of the Corporation distributable among the holders of any one or more series of Preferred Stock which are (i) entitled to a preference over the holders of the Corporation Common Stock upon such dissolution, and (ii) rank equally in connection with any such distribution, shall be insufficient to pay in full the preferential amount to which the holders of such shares shall be entitled, then such assets, or the proceeds thereof, shall be distributed among the holders of each such series of the Preferred Stock ratably in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. 13.5. In the event that the Preferred Stock of any series shall be redeemable, then, at the option of the Board of Directors, the Corporation may at such time or times as may be specified by the Board of Directors as provided in Section 13.2(c) of this ARTICLE SIXTH redeem all, or any number less than all, of the outstanding shares of such series at the redemption price thereof and on the other terms fixed herein or by the Board of Directors as provided in said Section 13.2(c) (the sum so payable upon any redemption of Preferred Stock being herein referred to as the "redemption price"). 13.6. Attribution of Preferred Stock to Groups. As of November 23, 1998, the outstanding shares of Preferred Stock- First Series and Preferred Stock-Second Series shall be attributed entirely to the Sprint FON Group. Upon any issuance of any shares of Preferred Stock of any series after November 23, 1998, the Board of Directors shall attribute for purposes of this ARTICLE SIXTH the shares so issued entirely to the Sprint FON Group or entirely to the PCS Group or partly to the Sprint FON Group and partly to the PCS Group in such proportion as the Board of Directors shall determine and, further, in case of the issuance of shares of Preferred Stock that are exchangeable or exercisable for PCS Stock, if at the time such shares of Preferred Stock are issued the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest shall be greater than zero, then the Board of Directors shall also determine what portion (which may be some, all or none) of such shares of Preferred Stock shall reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, taking into consideration the use of the proceeds of such issuance of shares of Preferred Stock in the business of the Sprint FON Group or the PCS Group and any other relevant factors. Upon any redemption or repurchase of shares of Preferred Stock, the Board of Directors shall determine the proper attribution thereof in accordance with Section 9.1(D) of ARTICLE SIXTH. Notwithstanding any such attribution of 31 shares of Preferred Stock to the Sprint FON Group or the PCS Group, any dividends or distributions or other payments which are made by the Corporation on such shares of Preferred Stock may be made, and as required by the preferences and relative, participating, optional or other special rights thereof shall be made, out of any of the properties or assets of the Corporation, regardless of the Business Group to which such properties or assets are attributed in accordance with the definitions of "Sprint FON Group" and "PCS Group" set forth in Section 10, except as otherwise provided by the resolution of the Board of Directors fixing the preferences and relative, participating, optional or other special rights of a series of Preferred Stock. 13.7. Intentionally Omitted. 13.8. Intentionally Omitted. 13.9. Intentionally Omitted. PREFERRED STOCK - SIXTH SERIES (1) Designation and Amount. The shares of such Series shall be designated as "Preferred Stock-Sixth Series, Junior Participating" (hereafter "Sixth Series") and the number of shares constituting such series shall be one million five hundred thousand (1,500,000). (2) Dividends. (A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ("Preferred Stock"), or any similar stock ranking prior and superior to the shares of the Sixth Series with respect to dividends, the holders of shares of the Sixth Series, in preference to the holders of Common Stock and any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the shares of the Sixth Series (collectively with such Common Stock, "Junior Stock"), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") in an amount (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) the product of the FON Group Multiple (as defined below) times the aggregate per share amount of all cash dividends, plus the product of the FON Group Multiple times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of FON Group Common Stock, or a subdivision of the outstanding shares of FON Group Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the FON Group Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Sixth Series. (B) As used herein, the FON Group Multiple shall initially be 2,000. In the event the Corporation shall (i) declare any dividend on FON Group Common Stock payable in shares of such stock, (ii) subdivide the outstanding FON Group Common Stock, or (iii) combine the outstanding FON Group Common Stock into a smaller number of shares, then in each such case the FON Group Multiple shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of FON Group Common Stock outstanding immediately after such event and the denominator of which is the number of shares of FON Group Common Stock that were outstanding immediately prior to such event. (C) The Corporation shall declare a dividend or distribution on the Sixth Series as provided above in paragraph (A) of this Section (2) immediately after it declares a dividend or distribution on the FON Group Common Stock (other than a dividend payable in shares of FON Group Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the FON Group Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, the minimum quarterly dividend of $100.00 on the Sixth Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. 32 (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Sixth Series from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Sixth Series, unless the date of issue of such shares of Sixth Series is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Sixth Series entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Sixth Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (3) Voting Rights. Except as prescribed by law and in addition to the rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the Corporation, as amended, the holders of the shares of the Sixth Series shall be entitled to vote at any annual or special meeting of the stockholders of the Corporation, for each share of Sixth Series, a number of votes equal to the product of the FON Group Multiple then in effect times the highest number of votes that any share of FON Group Common Stock entitles its holder to vote at such meeting of stockholders of the Corporation. The holders of the shares of the Sixth Series shall be entitled to exercise such voting rights with the holders of Series 1 FON Stock, without distinction as to class, at any annual or special meeting of stockholders for the election of directors and on any other matter submitted to a vote of the stockholders of the Corporation at such meeting. Except as otherwise provided herein, in the Articles of Incorporation of the Corporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or otherwise required by law, the holders of the shares of the Sixth Series and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (4) Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the shares of the Sixth Series as provided in Section (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Sixth Series outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends (except a dividend payable in FON Group Common Stock and/or any other Junior Stock) on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Junior Stock; (ii) declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Sixth Series, except dividends paid ratably on the shares of the Sixth Series and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares ranking on a parity (either as to dividends or upon dissolution, liquidation or winding up) with the shares of the Sixth Series, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of such parity stock in exchange for shares of Junior Stock; or (iv) purchase or otherwise acquire for consideration any shares of the Sixth Series, or any shares of stock ranking on a parity with the shares of the Sixth Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. 33 (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section (4), purchase or otherwise acquire such shares at such time and in such manner. (5) Reacquired Shares. Any shares of the Sixth Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or as otherwise required by law. (6) Liquidation, Dissolution or Winding Up. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of the Sixth Series shall be entitled to receive, in preference to the holders of Junior Stock, the greater of (a) $1,000.00 per share, plus accrued and unpaid dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share equal to the product of the FON Group Multiple then in effect times the aggregate amount to be distributed per share to holders of FON Group Common Stock. (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Sixth Series shall not receive any distributions except for distributions made ratably on the Sixth Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Sixth Series shall at the same time be similarly exchanged or changed in an amount per share equal to the product of the FON Group Multiple then in effect times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of FON Group Common Stock is changed or exchanged. (8) Ranking. The shares of the Sixth Series shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. The shares of the Sixth Series shall rank on a parity with the Corporation's Preferred Stock-Series Eighth, Junior Participating, as to the payment of dividends and the distribution of assets. Nothing herein shall preclude the Board of Directors of the Corporation from creating any additional series of Preferred Stock or any similar stock ranking on a parity with or prior to the shares of the Sixth Series as to the payment of dividends or distribution of assets. (9) Fractional Shares. Shares of the Sixth Series may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of the Sixth Series. (10) Definitions. For purposes of this amended and restated Certificate of Designation, Preferences and Rights of Sixth Series, unless the context otherwise requires: (A) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, and/or Series 1 PCS Stock, and/or Series 2 PCS Stock, in each case as the context requires. (B) "FON Group Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, in each case as the context requires. (C) "FON Group Multiple" shall have the meaning set forth in Section 2(B). (D) "Series 1 FON Stock" shall mean the FON Common Stock - Series 1, par value $2.00 per share, of the Corporation. 34 (E) "Series 2 FON Stock" shall mean the FON Common Stock - Series 2, par value $2.00 per share, of the Corporation. (F) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series 1, par value $1.00 per share, of the Corporation. (G) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series 2, par value $1.00 per share, of the Corporation. 13.10 Preferred Stock--Seventh Series Convertible. 13.10.1 Amount, Rank and Designation. The amount of shares to constitute the Seventh Series of Preferred Stock shall be 300,000 shares. The designation thereof shall be "Preferred Stock--Seventh Series, Convertible" (hereinafter "Seventh Series"). Shares of the Seventh Series shall rank junior as to dividends and upon liquidation to shares of any other Preferred Stock designated as senior to the Seventh Series as to dividends or upon liquidation, dissolution or winding up ("Senior Stock"), and shall have a preference over the shares of the Corporation Common Stock and any other class or series of Junior Stock. 13.10.2. Dividends. Holders of record of shares of the Seventh Series will be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available for the payment of dividends, cumulative cash dividends ("Preferred Dividends") payable at the rate of $6.73 per share quarterly in arrears on each September 30, December 31, March 31 and June 30 (each a "Dividend Payment Date") or, if any such date is not a business day (as defined herein), the Preferred Dividends due on such Dividend Payment Date shall be paid on the next succeeding business day. Preferred Dividends on the Seventh Series shall be cumulative and shall accumulate from the date of original issuance of the Seventh Series. Preferred Dividends shall be payable to holders of record as they appear on the stock register of the Corporation, net of any amounts required to be withheld for or with respect to taxes, on such record dates, not more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Preferred Dividends payable on the Seventh Series for any period less than a full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any period less than one month. Preferred Dividends shall accrue on a daily basis whether or not there are funds of the Corporation legally available for the payment of such dividends and whether or not such Preferred Dividends are declared. Accrued but unpaid Preferred Dividends shall accumulate as of the Dividend Payment Date on which they first become payable, but no interest shall accrue on accumulated but unpaid Preferred Dividends. Before any dividends on the Corporation Common Stock or any other class or series of stock of the Corporation ranking junior to the Seventh Series as to dividends shall be paid or declared and set apart for payment, the holders of shares of the Seventh Series shall be entitled to receive the full accumulated cash dividends for all quarterly dividend periods ending on or before the date on which any dividend on any such class or series of stock ranking junior to the Seventh Series as to dividends is declared or is to be paid. 13.10.3. Conversion. (a) Each holder of shares of Seventh Series may at such holder's option at any time convert any or all of such holder's shares of Seventh Series into (i) if such holder is a Cable Holder, shares of Series 2 PCS Stock, and (ii) if such holder is not a Cable Holder, shares of Series 1 PCS Stock. All references herein to shares of Series 2 PCS Stock issuable upon conversion of shares of Seventh Series shall be deemed to refer to shares of Series 1 PCS Stock if the holder of such Seventh Series is not a Cable Holder. Such shares of Seventh Series shall be convertible into a number of fully paid and nonassessable whole shares of Series 2 PCS Stock as is equal to the aggregate Liquidation Preference of the shares of Seventh Series surrendered for conversion divided by the Initial Conversion Price (as adjusted from time to time, the "Conversion Price"). In case of the redemption of any shares of the Seventh Series, such right of conversion shall cease and terminate as to the shares duly called for redemption at the close of business on the date fixed for redemption, unless the Corporation defaults in the payment of the redemption price plus all accrued and unpaid dividends. If the Corporation defaults with respect to such payment, the right to convert the shares designated for redemption shall terminate at the close of business on the business day next preceding the date that 35 such default is cured. Upon conversion the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on the Seventh Series surrendered for conversion. (b) Holders of shares of Seventh Series at the close of business on a record date for any payment of declared Preferred Dividends shall be entitled to receive the Preferred Dividends payable on those shares of Seventh Series on the corresponding Dividend Payment Date notwithstanding the conversion pursuant to this section of those shares of Seventh Series following such record date and before the close of business on such Dividend Payment Date. Except as provided in the preceding sentence, upon any conversion of shares of Seventh Series, the Corporation shall make no payment of or allowance of unpaid Preferred Dividends, whether or not in arrears, on such shares of Seventh Series, or for previously declared dividends or distributions on the shares of Series 2 PCS Stock issued upon conversion. (c) Conversion of shares of Seventh Series may be effected by delivering certificates evidencing such shares of Seventh Series, together with written notice of conversion stating the number of shares to be converted and a proper assignment of such certificates to the Corporation or in blank, to the office of the transfer agent for the Seventh Series or to any other office or agency maintained by the Corporation for that purpose and otherwise in accordance with conversion procedures established by the Corporation. Each conversion shall be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements shall have been satisfied. The Corporation shall as promptly as practicable after any conversion pursuant to this section issue and deliver to the converting holder a certificate or certificates representing the number of whole shares of Series 2 PCS Stock into which such shares of Seventh Series were converted. Upon conversion of less than the entire number of the shares of Seventh Series represented by any certificate, the Corporation shall issue and deliver to the converting holder a new certificate representing the number of shares of Seventh Series not converted. The Corporation shall effect such conversion as soon as practicable; provided that the Corporation shall not be required to convert shares of Seventh Series, and no surrender of shares of Seventh Series shall be effective for that purpose, while the stock transfer books of the Corporation for the Series 2 PCS Stock are closed for any reason, but the surrender of shares of Seventh Series for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Seventh Series were surrendered, and at the Conversion Price in effect on the date of such surrender. (d) No fraction of a share of Series 2 PCS Stock shall be issued upon any conversion. In lieu of the fraction of a share to which the holder of shares of the Seventh Series surrendered for conversion would otherwise be entitled, such holder shall receive, as soon as practicable after the date of conversion, an amount in cash equal to the same fraction of the market value of a full share of Series 1 PCS Stock. For the purposes of this subparagraph, the market value of a share of Series 1 PCS Stock shall be the Closing Price of such a share on the day immediately preceding the date upon which such shares of Seventh Series are surrendered for conversion. (e) The Conversion Price in effect at any time shall be subject to adjustment as follows: (i) If the Corporation shall at any time after the filing of these Articles of Incorporation: (A) pay a dividend on the PCS Stock in shares of PCS Stock, (B) subdivide the outstanding shares of PCS Stock into a greater number of shares, (C) combine the outstanding shares of PCS Stock into a smaller number of shares, (D) pay a dividend on the PCS Stock in shares of its capital stock (other than PCS Stock), or (E) issue any shares of its capital stock by reclassification of the shares of PCS Stock (other than any reclassification by way of merger or binding share exchange that is subject to Section 13.10.3(e)(viii)), then the Conversion Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that if the holder elects to convert shares of Seventh Series after such time, the holder thereof shall be entitled to receive the aggregate number of shares of PCS Stock which, if such conversion had occurred immediately prior to such time, he would have owned upon such conversion and been entitled to receive by virtue of such dividend, subdivision, combination 36 or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. Subject to Section 13.10.3(e)(vi) for a dividend or distribution, the adjustment shall become effective immediately after the record date for the dividend or distribution, and for a subdivision, combination or reclassification, the adjustment shall become effective immediately after the effective date of the subdivision, combination or reclassification. (ii) If the Corporation shall issue rights or warrants to the holders of the PCS Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of PCS Stock (or Convertible Securities) at a price per share (or having a conversion price per share, after adding thereto an allocable portion of the Conversion Price of the right or warrant to purchase such Convertible Securities, computed on the basis of the maximum number of shares of PCS Stock issuable upon conversion of such Convertible Securities) less than the Current Market Price per share on the Determination Date, the Conversion Price shall be adjusted by multiplying the conversion price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of PCS Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of PCS Stock so offered (or the aggregate initial conversion price of the Convertible Securities so offered, after adding thereto the aggregate conversion price of the rights or warrants to purchase such Convertible Securities) to holders of PCS Stock (and to holders of Convertible Securities referred to in the following paragraph if the distribution to which this paragraph (ii) applies is also being made to such holders) would purchase at such Current Market Price, and of which the denominator shall be the number of shares of PCS Stock outstanding on such record date plus the number of additional shares of PCS Stock so offered for subscription or purchase (or into which the Convertible Securities so offered are initially convertible). The adjustment contemplated by this paragraph (ii) shall be made successively whenever any such rights or warrants are issued and shall become effective immediately after the close of business on such record date; however, to the extent that shares of PCS Stock (or Convertible Securities) have not been issued when such rights or warrants expire (or, in the case of rights or warrants to purchase Convertible Securities which have been exercised, if all of the shares of PCS Stock issuable upon conversion of such Convertible Securities have not been issued prior to the expiration of the conversion right thereof), the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares (or Convertible Securities) actually issued upon the exercise of such rights or warrants (or the conversion of such Convertible Securities). For purposes of this paragraph (ii) the number of shares of PCS Stock outstanding on any record date shall be deemed to include the maximum number of shares of PCS Stock the issuance of which would be necessary to effect the full exercise, exchange or conversion of all Convertible Securities outstanding on such record date which are then exercisable, exchangeable or convertible at a price (before giving effect to any adjustment to such price for the distribution to which this paragraph (ii) is being applied) equal to or less than the Current Market Price per share of PCS Stock on the applicable Determination Date, if all of such Convertible Securities were deemed to have been exercised, exchanged or converted immediately prior to the opening of business on such record date. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined by the Board of Directors of the Corporation. (iii) If the Corporation shall distribute to the holders of PCS Stock evidences of its indebtedness or assets or subscription rights or warrants (excluding (x) dividends or distributions referred to in Section 13.10.3(e)(i) and distributions of rights or warrants referred to in Section 13.10.3(e)(ii) and (y) cash dividends or other cash distributions, unless such cash dividends or cash distributions are Extraordinary Cash Dividends), the Conversion 37 Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, of which the numerator shall be the number of shares of PCS Stock outstanding on such record date multiplied by the Current Market Price on the Determination Date, less the fair market value (as determined by the Board of Directors of the Corporation) on such record date of the evidences of indebtedness, assets (including Extraordinary Cash Dividends), subscription rights or warrants to be distributed to the holders of PCS Stock (and to the holders of Convertible Securities referred to below if the distribution to which this paragraph (iii) applies is also being made to such holders), and of which the denominator shall be the number of shares of PCS Stock outstanding on such record date multiplied by such Current Market Price. For purposes of this paragraph (iii), the number of shares of PCS Stock outstanding on any record date shall be deemed to include the maximum number of shares of PCS Stock the issuance of which would be necessary to effect the full exercise, exchange or conversion of all Convertible Securities outstanding on such record date which are then exercisable, exchangeable or convertible at a price (before giving effect to any adjustment to such price for the distribution to which this paragraph (iii) is being applied) equal to or less than the Current Market Price per share of PCS Stock on the applicable Determination Date, if all of such Convertible Securities were deemed to have been exercised, exchanged or converted immediately prior to the opening of business on such record date. For purposes of this paragraph (iii), the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the PCS Stock the amount of which, together with the aggregate amount of cash dividends on the PCS Stock to be aggregated with such cash dividend in accordance with the following provisions of this paragraph, equals or exceeds the threshold percentage set forth below in the following sentence. If, upon the date prior to the Ex-Dividend Date with respect to a cash dividend on the PCS Stock, the aggregate of the amount of such cash dividend together with the amounts of all cash dividends on the PCS Stock with Ex-Dividend Dates occurring in the 365 consecutive day period ending on the date prior to the Ex-Dividend Date with respect to the cash dividend to which this provision is being applied (other than any such other cash dividends with Ex-Dividend Dates occurring in such period for which a prior adjustment to the Conversion Price was previously made under this paragraph (iii)) equals or exceeds on a per share basis 5% of the average of the Closing Prices during the period beginning on the date after the first such Ex-Dividend Date in such period and ending on the date prior to the Ex-Dividend Date with respect to the cash dividend to which this provision is being applied (except that if no other cash dividend has had an Ex-Dividend Date occurring in such period, the period for calculating the average of the Closing Prices shall be the period commencing 365 days prior to the date immediately prior to the Ex-Dividend Date with respect to the cash dividend to which this provision is being applied), such cash dividend together with each other cash dividend with an Ex-Dividend Date occurring in such 365-day period that is aggregated with such cash dividend in accordance with this paragraph shall be deemed to be an Extraordinary Cash Dividend. The adjustment pursuant to the foregoing provisions of this paragraph (iii) shall be made successively whenever any distribution to which this paragraph (iii) applies is made, and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. (iv) If this Section 13.10.3(e) requires adjustments to the Conversion Price under more than one of clause (D) of the first sentence of paragraph (i), paragraph (ii) or paragraph (iii), and the record dates for the distribution giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of paragraph (i), second the provisions of paragraph (iii) and, third, the provisions of paragraph (ii). (v) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent thereof; provided, 38 however, that any adjustments which by reason of this paragraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 13.10.3(e) shall be made to the nearest cent or to the nearest one- hundredth of a share, as the case may be. (vi) In any case in which this Section 13.10.3(e) shall require that an adjustment in the Conversion Price be made effective as of the record date for a specified event, the Corporation may elect to defer until the occurrence of such event (x) issuing to the holder of the Seventh Series the Shares, if any, issuable upon such conversion over and above the Shares, if any, issuable upon such conversion on the basis of the Conversion Price in effect prior to such adjustment, if the Seventh Series is converted after such record date, and (y) paying to the holder cash or its check in lieu of any fractional interest to which the holder would be entitled pursuant to Section 13.10.3(d); provided, however, that the Corporation shall deliver to the holder a due bill or other appropriate instrument evidencing the holder's right to receive such additional Shares and such cash upon the occurrence of the event requiring such adjustment. (vii) If the Corporation consolidates with or merges into, or transfers (other than by mortgage or pledge) its properties and assets substantially as an entirety to, another Person or the Corporation is a party to a merger or binding share exchange which reclassifies or changes its outstanding PCS Stock, or the PCS Stock is converted into another class or series of capital stock of the Corporation, the Corporation (or its successor in such transaction) or the transferee of such properties and assets shall make appropriate provision so that the holder's certificate representing shares of Seventh Series shall thereafter be convertible, upon the terms and conditions specified in the certificates, for the kind and amount of securities, cash or other assets receivable upon such transaction by a holder of the number of shares of PCS Stock purchasable upon conversion of the holder's Seventh Series immediately before the effective date of such transaction (assuming, to the extent applicable, that such holder of PCS Stock failed to exercise any rights of election with respect thereto, and received per Share the kind and amount of securities, cash or other assets received per share of PCS Stock by a plurality of the nonelecting shares of PCS Stock); and in any such case, if necessary, the provisions set forth in this Section 13.10.3(e) with respect to the rights and interests thereafter of the holder of the Seventh Series shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any such other securities or assets thereafter deliverable on the conversion of the holder's Seventh Series. The subdivision or combination of the PCS Stock at any time outstanding into a greater or lesser number of shares of PCS Stock shall not be deemed to be a reclassification of the PCS Stock for the purposes of this subsection. The Corporation shall not effect any such consolidation, merger, transfer or binding share exchange unless prior to or simultaneously with the consummation thereof the successor (if other than the Corporation) resulting from such consolidation or merger or the Person purchasing such assets or other appropriate Person shall assume, by written instrument, the obligation to deliver to the holders of the Seventh Series such securities, cash or other assets as, in accordance with the foregoing provisions, the holder may be entitled to purchase and the other obligations in this Section 13.10. The Corporation may make such reductions in the Conversion Price, in addition to those required by paragraphs (i), (ii) and (iii) of this Section 13.10.3(e), as it shall in its sole discretion determine to be advisable. (viii) Subject to Section 13.10.3(e)(v) and to the remaining provisions of this Section 13.10.3(e)(viii), in the event that a holder of Seventh Series would be entitled to receive upon conversion thereof pursuant to this Section 13.10.3(e) any Redeemable Capital Stock and the Corporation redeems, exchanges or otherwise acquires all of the outstanding shares or other units of such Redeemable Capital Stock (such event being a "Redemption Event"), then, from and after the effective date of such Redemption Event, the holders of shares of Seventh Series then outstanding shall be entitled to receive upon conversion of such shares, in lieu of shares or units of such Redeemable Capital Stock, the kind and amount of 39 shares of stock and other securities and property receivable upon the Redemption Event by a holder of the number of shares or units of such Redeemable Capital Stock into which such shares of Seventh Series could have been converted immediately prior to the effective date of such Redemption Event (assuming, to the extent applicable, that such holder failed to exercise any rights of election with respect thereto and received per share or unit of such Redeemable Capital Stock the kind and amount of stock and other securities and property received per share or unit by a plurality of the non-electing shares or units of such Redeemable Capital Stock), and (from and after the effective date of such Redemption Event) the holders of the Seventh Series shall have no other conversion rights under these provisions with respect to such Redeemable Capital Stock. Notwithstanding the foregoing, if the redemption price for the shares of such Redeemable Capital Stock is paid in whole or in part in Redemption Securities, and the Mirror Preferred Stock Condition is met, the Seventh Series shall not be convertible into such Redemption Securities and, from and after the applicable redemption date, the holders of any shares of Seventh Series that have not been exchanged for Mirror Preferred Stock and Exchange Preferred Stock shall have no conversion rights under these provisions except for any conversion right that may have existed immediately prior to the effective date of the Redemption Event with respect to any shares of stock (including the PCS Stock) or other securities or property other than the Redeemable Capital Stock so redeemed. The Corporation shall use all commercially reasonable efforts to ensure that the Mirror Preferred Stock Condition is satisfied. The "Mirror Preferred Stock Condition" will be satisfied in connection with a redemption of any Redeemable Capital Stock into which the Seventh Series is then convertible if appropriate provision is made so that the holders of the Seventh Series have the right to exchange their shares of Seventh Series on the effective date of the Redemption Event for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock of the issuer of the Redemption Securities. The sum of the initial liquidation preferences of the shares of Exchange Preferred and Mirror Preferred Stock delivered in exchange for a share of Seventh Series will equal the Liquidation Preference of a share of Seventh Series on the effective date of the Redemption Event. The Mirror Preferred Stock will have an aggregate initial liquidation preference equal to the product of the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the quotient of (x) the product of the amount of shares of the Redeemable Capital Stock for which each share of Seventh Series is then convertible to be redeemed (determined immediately prior to the effective date of the Redemption Event) and the average of the daily Closing Prices of the Redeemable Capital Stock for the period of ten consecutive trading days ending on the third trading day prior to the effective date of the Redemption Event, divided by (y) the sum of the amount determined pursuant to clause (x), plus the fair value of the shares of stock or other securities or property (other than the Redeemable Capital Stock being redeemed) that would have been receivable by a holder of Seventh Series upon conversion thereof immediately prior to the effective date of the Redemption Event (such fair value to be determined in the case of stock or other securities with a Closing Price in the same manner as provided in clause (x) and otherwise by the Board of Directors in the exercise of its judgment). The shares of Exchange Preferred Stock will have an aggregate initial liquidation preference equal to the difference between the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the aggregate initial liquidation preference of the Mirror Preferred Stock. No shares of Exchange Preferred Stock will be issued in exchange for the Seventh Series if the shares of Exchange Preferred Stock would have no Liquidation Preference as a result of the above formula. (ix) If the Corporation effects a Spin Off, the Corporation shall make appropriate provision so that the holders of the Seventh Series have the right to exchange their shares of Seventh Series on the effective date of the Spin Off for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock of the issuer of the Spin Off Securities. The sum of the initial liquidation preference of the shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in exchange for a share of Seventh Series will equal the Liquidation Preference of a share of Seventh Series on the effective date of the Spin Off. The 40 Mirror Preferred Stock will have an aggregate liquidation preference equal to the product of the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the quotient of (x) the product of the number (or fraction) of Spin Off Securities that would have been receivable upon such Spin Off by a holder of the number of shares of PCS Stock issuable upon conversion of a share of Seventh Series immediately prior to the effective date of the Spin Off and the average of the daily Closing Prices of the Spin Off Securities for the period of ten consecutive trading days commencing on the tenth trading day following the effective date of the Spin Off, divided by (y) the sum of the amount determined pursuant to clause (x), plus the fair value of the shares of PCS Stock and other securities or property (other than Spin Off Securities) that would have been receivable by a holder of a share of Seventh Series in the Spin Off following conversion thereof immediately prior to the effective date of the Spin Off (such fair value to be determined in the case of PCS Stock or other securities with a Closing Price in the same manner as provided in clause (x) and otherwise by the Board of Directors in the exercise of its judgment). The shares of Exchange Preferred Stock will have an aggregate initial liquidation preference equal to the difference between the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the aggregate initial liquidation preference of the Mirror Preferred Stock. No shares of Exchange Preferred Stock will be issued in exchange for the Seventh Series if the shares of Exchange Preferred Stock would have no Liquidation Preference as a result of the above formula. From and after the effective date of such Spin Off, the holders of any shares of Seventh Series that have not been exchanged for Mirror Preferred Stock and Exchange Preferred Stock as provided above shall have no conversion rights under these provisions with respect to such Spin Off Securities. (f) The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of PCS Stock on the conversion of Seventh Series; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any registration of transfer involved in the issue or delivery of shares of PCS Stock in a name other than that of the registered holder of Seventh Series converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. 13.10.4. Liquidation Rights. Subject to prior payment of preferred amounts to which any Senior Stock is entitled, in the event of any liquidation, dissolution or winding up of the Corporation the holders of the Seventh Series will be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any distribution of the assets shall be made to the holders of the Corporation Common Stock or any other class or series of stock ranking junior to the Seventh Series upon liquidation, the sum of U.S. $1,000 per share (the "Liquidation Preference"), plus in each case any accumulated unpaid dividends (whether or not declared), to the date of final distribution. If upon any liquidation, dissolution or winding up of the Corporation the amounts payable with respect to the Seventh Series and any other Parity Stock are not paid in full, the holders of the Seventh Series and such Parity Stock will share ratably in any distribution of assets in proportion to the full preferential amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of Seventh Series shall not be entitled to any further participation in any distribution of assets by the Corporation. A consolidation or merger of the Corporation with or into one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger), or a sale, lease or exchange of all or substantially all of the assets of the Corporation shall not be deemed to be a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation. Notice of a liquidation, dissolution or winding up of the Corporation shall be filed at each office or agency maintained for the purpose of conversion of the Seventh Series, and shall be mailed to the holders of Seventh Series at their last addresses as they shall appear on the stock register of the Corporation, at least 20 business days before any such action, stating the date on which any such action is expected to become effective. The failure to give or receive the notice required by this Section or any defect therein shall not affect the legality or validity of any such action. 13.10.5. Redemption. 41 (a) General. Except as provided below and in Section 13.10.5(h), the Seventh Series shall not be redeemed by the Corporation prior to November 23, 2001. The Corporation may at its option redeem the Seventh Series in whole or in part after November 23, 2001, at any time or from time to time, upon at least thirty days' prior notice, at a redemption price equal to the Liquidation Preference per share of Seventh Series, plus any accumulated unpaid dividends (whether or not declared) up to but excluding such redemption date. In connection with a Spin Off or a Redemption Event, the Corporation may, at its option, redeem the Seventh Series in whole after November 23, 2000, and before November 23, 2001, upon at least thirty days prior notice, at a redemption price equal to the Premium Price per share of Seventh Series, plus any accumulated unpaid dividends (whether or not declared) up to but excluding such redemption date, which redemption shall be deemed effective immediately prior to the consummation of the Spin Off or the Redemption Event. If less than all the outstanding Seventh Series is to be redeemed, the shares to be redeemed shall be selected pro rata as nearly as practicable or by lot, or by such other method as may be determined by the Board of Directors to be equitable, without regard to whether the shares to be redeemed are convertible into Series 1 PCS Stock or Series 2 PCS Stock. Shares so redeemed shall be cancelled and upon such cancellation shall be deemed to be authorized and unissued shares of Preferred Stock, without par value, of the Corporation but shall not be reissued as shares of the same series. (b) Mandatory Redemption. To the extent permitted by law, the Corporation shall redeem, on November 23, 2008 (or, if such day is not a business day, on the first business day thereafter) (subject to extension as provided in the last sentence of this Section 13.10.5(b), the "Mandatory Redemption Date"), all remaining shares of Seventh Series then outstanding, at the redemption price of $1,000 for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the Mandatory Redemption Date. Prior to authorizing or making such redemption with respect to the Seventh Series, the Corporation, by resolution of the Board of Directors shall, to the extent of funds legally available therefor, declare a dividend on the Seventh Series payable on the Mandatory Redemption Date in an amount equal to any accrued and unpaid dividends on the Seventh Series as of such date and, if the Corporation does not have sufficient legally available funds to declare and pay all dividends accrued at the time of such redemption, any remaining accrued and unpaid dividends shall be added to the redemption price. After paying any accrued and unpaid dividends pursuant to the foregoing sentence, if the funds of the Corporation legally available for redemption of shares of the Seventh Series then required to be redeemed are insufficient to redeem the total number of such shares then outstanding, those funds which are legally available shall be used to redeem the maximum possible number of shares of the Seventh Series. At any time and from time to time thereafter, when additional funds of the Corporation are legally available to discharge its obligation to redeem all of the outstanding shares of Seventh Series required to be redeemed pursuant to this section (the "Mandatory Redemption Obligation"), such funds shall be immediately used to discharge such Mandatory Redemption Obligation until the balance of such shares have been redeemed. If and so long as the Mandatory Redemption Obligation shall not be fully discharged, (x) dividends on any remaining outstanding shares of Seventh Series shall continue to accrue and be added to the dividend payable pursuant to the second preceding sentence and (y) the Corporation shall not declare or pay any dividend or make any distribution on any Parity Stock or Junior Stock. With respect to any Exchange Preferred Stock or Mirror Preferred Stock, the Mandatory Redemption Date shall be the later to occur of (i) November 23, 2008, and (ii) the fifth anniversary of the date of issuance of such Exchange Preferred Stock or Mirror Preferred Stock. (c) Notice. The Corporation will provide notice of any redemption of shares of Seventh Series to holders of record of the Seventh Series to be redeemed not less than 30 nor more than 60 days prior to the date fixed for such redemption. Such notice shall be provided by first-class mail postage prepaid, to each holder of record of the Seventh Series to be redeemed, at such holder's address as it appears on the stock transfer books of the Corporation. Each such mailed notice shall state, as appropriate, the following: (i) the redemption date; (ii) the number of shares of Seventh Series to be redeemed and, if fewer than all the shares held by any holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the Redemption Price; 42 (iv) the place or places where certificates for such shares are to be surrendered for redemption; (v) the amount of full cumulative dividends per share of Seventh Series to be redeemed accrued and unpaid up to but excluding such redemption date, and that dividends on shares of Seventh Series to be redeemed will cease to accrue on such redemption date unless the Corporation shall default in payment of the Redemption Price plus such full cumulative dividends accrued and unpaid thereon; (vi) the name and location of any bank or trust company with which the Corporation will deposit redemption funds pursuant to subsection (e) below; (vii) the then effective Conversion Price (as determined under Section 13.10.3); and (viii) that the right of holders to convert shares of Seventh Series to be redeemed will terminate at the close of business on the business day next preceding the date fixed for redemption (unless the Corporation shall default in the payment of the Redemption Price and such full cumulative dividends accrued and unpaid thereon). Any notice that is mailed as set forth above shall be conclusively presumed to have been duly given, whether or not the holder of shares of Seventh Series receives such notice, and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Seventh Series. (d) Mechanics of Redemption. Upon surrender in accordance with the aforesaid notice of the certificate for any shares so redeemed (duly endorsed or accompanied by appropriate instruments of transfer if so required by the Corporation), the holders of record of such shares shall be entitled to receive the redemption price, without interest, plus full cumulative dividends thereon accrued and unpaid up to but excluding such redemption date out of funds legally available therefor. If fewer than all the shares represented by any such certificate are redeemed, a new certificate representing the unredeemed shares shall be issued without cost to the holder thereof. (e) Redemption Funds. On the date of any redemption being made pursuant to this Section, the Corporation shall, and at any time after notice of such redemption shall have been mailed and before the date of redemption the Corporation may, deposit for the benefit of the holders of shares of Seventh Series to be redeemed the funds necessary for such redemption with a bank or trust company in the City of New York having a capital and surplus of at least $1 billion, with instructions to such bank or trust company to pay the full redemption amounts as provided herein to the holders of shares of Seventh Series upon surrender of certificates for such shares; provided, however, that the making of such deposit shall not release the Corporation from any of its obligations hereunder. Any moneys so deposited by the Corporation and unclaimed at the end of two years from the date designated for such redemption shall revert to the general funds of the Corporation and, upon demand, such bank or trust company shall pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of Seventh Series so redeemed shall look only to the Corporation for the payment of the full redemption amounts, as provided herein. (f) Rights After Redemption. Notice of redemption having been given as aforesaid, upon the deposit pursuant to subsection (e) of the full redemption amounts as provided herein in respect of all shares of Seventh Series then to be redeemed, notwithstanding that any certificates for such shares shall not have been surrendered in accordance with subsection (d), from and after the date of redemption designated in the notice of redemption: (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of such shares of Seventh Series shall cease and terminate, excepting only the right to receive the full redemption amounts as provided herein without interest thereon. If the funds deposited are not sufficient for redemption of the shares of the Seventh Series that were to be redeemed, then no certificates evidencing such shares shall be deemed surrendered and such shares shall remain outstanding and the rights of holders of shares of Seventh Series shall continue to be those of holders of shares of the Seventh Series. 43 (g) Restrictions on Redemption and Purchase. Any provision of this Section to the contrary notwithstanding, in the event that any quarterly dividend payable on the Seventh Series shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Parity Stock or Junior Stock unless all outstanding shares of Seventh Series are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Seventh Series or any Parity Stock or Junior Stock except (i) by conversion into or exchange for stock ranking junior as to dividends or (ii) in accordance with a purchase or exchange offer made by the Corporation to all holders of record of Seventh Series and such Parity Stock upon the same terms as to holders of any series and, in the case of offers relating to more than one series, upon such terms as between such series as the Board of Directors or, to the extent permitted by applicable law, any authorized committee thereof, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series of stock, will result in fair and equitable treatment as between such series, which determination shall be conclusive. (h) The Corporation shall redeem the Seventh Series in whole or in part in accordance with and to the extent required by Section 6.6 of the Restructuring Agreement. With respect to any such redemption, (i) the provisions of Section 13.10.5(c) and Section 13.10.5(e) shall not apply and (ii) the restriction on rights in Section 13.10.5(f) shall apply from the time of the closing of the IPO or other primary offering contemplated by Section 6.6 of the Restructuring Agreement. 13.10.6. Advance Notice of Certain Transactions. If the Corporation: (i) takes any action which would require any adjustment to the Conversion Price or the number of shares issuable upon a Conversion; (ii) is a party to a consolidation, merger or binding share exchange, or transfers all or substantially all of its assets to another person or entity, and any stockholders of the Corporation must approve the transaction; or (iii) voluntarily or involuntarily dissolves, liquidates or winds up, then, in any such event, the Corporation shall give to the holders of the Seventh Series, at least 10 days prior to any record date or other date set for definitive action if there shall be no record date, a notice stating the record date for, the anticipated effective date of such action or event and, if applicable, whether the Corporation will adjust the Conversion Price or the number of shares issuable upon a Conversion. Notwithstanding the foregoing, notice shall be given no later than the time any required notice of such action or event is given to the holders of PCS Stock. 13.10.7. Reservation of Shares. The Corporation shall at all times keep available and reserved for the purpose of issuance upon conversion of shares of Seventh Series the number of shares of its Series 1 PCS Stock and the number of shares of its Series 2 PCS Stock required for conversion of the outstanding and any reserved shares of the Seventh Series. The Corporation shall take all corporate and other actions necessary to ensure that all shares of PCS Stock issuable on conversion of Seventh Series will upon issuance be duly and validly authorized and issued, fully paid and nonassessable. 13.10.8. Certain Protective Provisions. If at any time the full cumulative dividends on shares of the Seventh Series have not been paid or declared and set aside for payment for the current and all past quarterly dividend periods, the Corporation (a) will not declare, or pay, or set apart for payment any dividends or make any distribution, on any class or series of Parity Stock or Junior Stock; (b) will not redeem, purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise acquire, any shares of any class or series of Parity Stock or Junior Stock; provided that notwithstanding the foregoing, the Corporation may at any time redeem, purchase or otherwise acquire shares of Junior Stock in exchange for, or out of the net cash proceeds from the substantially simultaneous sale of, other shares of Junior Stock; and (c) will not redeem pursuant to redemption rights in the terms of such stock any Parity Stock unless at the same time it redeems all the shares of the Seventh Series. 13.10.9. Voting Rights. Except as otherwise required by law, each outstanding share of the Seventh Series shall be entitled to vote on all matters in respect of which the holders of the common stock of the Corporation are entitled to vote, and the holders of the Seventh Series shall vote together with the holders of all other classes or series of capital stock that have general voting power on all such matters as a single class; provided, however, that the affirmative vote or consent of two-thirds of the votes to which the holders of the outstanding shares of the Seventh Series are entitled shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any or the provisions of the Articles of Incorporation or of any amendment thereto (including any certificate of designation or any similar document relating to any series of preferred stock) of the Corporation, which would materially and adversely affect the voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh 44 Series; provided, however, that neither (i) the creation, issuance, or increase in the amount of authorized shares of, any series of preferred stock nor (ii) the consummation of any transaction described in Section 13.10.3 in which the voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh Series are addressed as contemplated by such Section will (in either such case) be deemed to materially and adversely affect such voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh Series. On each matter to be voted on by the holders of the Seventh Series, each outstanding share of the Seventh Series is entitled to a number of votes equal to the number of votes that could be cast with respect to such matter by the holder of that number of the series of PCS Stock into which such share of Seventh Series could be converted if the requirements for conversion under Section 13.10.3(c) had been satisfied by such voting party on the record date for determining the shareholders of the Corporation who are entitled to vote with respect to such matter. 13.10.10. Definitions. As used in this Section 13.10 only: (a) the term "Affiliate" has the meaning given to such term in the Restructuring Agreement; (b) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; (c) the term "Cable Holder" means any of (i) TeleCommunications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, or Cox Communications, Inc., a Delaware corporation, (ii) any Affiliate of an entity identified in clause (i) of this definition, (iii) any successor by operation of law of an entity identified in clauses (i) or (ii) of this definition, or (iv) any entity controlled by two or more entities identified in clauses (i) through (iii) of this definition or this clause (iv) even if such entity is not considered an Affiliate of any individual entity so identified; (d) the term "close of business" means 5:00 p.m. local New York City time on a business day; (e) the term "Closing Price" for a security, on any day, means the last sale price, regular way, per share of such security as reported on the New York Stock Exchange on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, of such security on the New York Stock Exchange, in either case as reported on the New York Stock Exchange Composite Transactions Tape, or if such security is not then listed or admitted to trading on such exchange, on the principal national securities exchange on which such security is then listed or admitted to trading, or if such security is not then listed or admitted to trading on any national securities exchange, as quoted through the National Market tier of The Nasdaq Stock Market; (f) "Convertible Securities" means any or all options, warrants, securities and rights which are convertible into or exercisable or exchangeable for PCS Stock at the option of the holder thereof, or which otherwise entitle the holder thereof to subscribe for, purchase or otherwise acquire PCS Stock. (g) "Current Market Price", on the Determination Date for any issuance of rights or warrants or any distribution in respect of which the Current Market Price is being calculated, means the average of the daily Closing Prices of the Series 1 PCS Group Common Stock for the shortest of: (i) the period of 30 consecutive Trading Days commencing 45 Trading Days before such Determination Date; (ii) the period commencing on the date next succeeding the first public announcement of the issuance of rights or warrants or the distribution in respect of which the Current Market price is being calculated and ending on the last full Trading Day before such Determination Date; and (iii) the period, if any, commencing on the date next succeeding the Ex-Dividend Date with respect to the next preceding issuance of rights or warrants or distribution for which an adjustment is required by the provisions of clause (D) of the first sentence of Section 13.10.3(e)(i), 45 Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii), and ending on the last full Trading Day before such Determination Date. If the record date for an issuance of rights or warrants or a distribution for which an adjustment is required by the provisions of clause (D) of the first sentence of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii) (the "preceding adjustment event") precedes the record date for the issuance or distribution in respect of which the Current Market Price is being calculated and the Ex- Dividend Date for such preceding adjustment event is on or after the Determination Date for the issuance or distribution in respect of which the Current Market Price is being calculated, then the Current Market Price shall be adjusted by deducting therefrom the fair market value (on the record date for the issuance or distribution in respect of which the Current Market Price is being calculated), as determined in good faith by the Board of Directors, of the capital stock, rights, warrants, assets or evidences of indebtedness issued or distributed in respect of each share of Series 1 PCS Group Common Stock in such preceding adjustment event. Further, in the event that the Ex-Dividend Date (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which clauses (A), (B), (C) or (D) of the first sentence of Section 13.10.3(e)(i) applies occurs during the period applicable for calculating the Current Market Price, then the Current Market Price shall be calculated for such period in a manner determined in good faith by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Closing Prices of the Series 1 PCS Group Common Stock during such period. For purposes of this Section 13.10, the Current Market Price of a share of Series 2 PCS Group Common Stock as of any Determination Date shall be the Current Market Price of a share of Series 1 PCS Group Common Stock as of such Determination Date; (h) "Determination Date" for any issuance of rights or warrants or any distribution to which Section 13.10.3(e)(i) or 13.10.3(e)(ii) applies means the earlier of (i) the record date for the determination of stockholders entitled to receive the rights or warrants or the distribution to which such Section applies and (ii) the Ex-Dividend Date for such right, warrants or distribution; (i) "Exchange Preferred Stock" means a series of convertible preferred stock of the Corporation having terms, conditions, designations, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof that are identical, or as nearly so as is practicable in the judgment of the Board of Directors, to those of the Seventh Series for which such Exchange Preferred Stock is exchanged, except that (i) the liquidation preference will be determined as provided in Section 13.10.3(e)(vii) or Section 13.10.3(e)(viii), as applicable, (ii) the running of any time periods pursuant to the terms of the Seventh Series shall be tacked to the corresponding time periods in the Exchange Preferred Stock and (iii) the Exchange Preferred Stock will not be convertible into, and the holders will have no conversion rights thereunder with respect to, (x) in the case of a redemption of Redeemable Capital Stock, the Redeemable Capital Stock redeemed, or the Redemption Securities issued, in the Redemption Event, and (y) in the case of a Spin Off, the Spin Off Securities; (j) "Ex-Dividend Date" shall mean the date on which "ex- dividend" trading commences for a dividend, an issuance of rights or warrants or a distribution to which any of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii) applies in the over-the-counter market or on the principal exchange on which the Series 1 PCS Stock is then quoted or listed; (k) the term "Initial Conversion Price" shall be an amount equal to $15.3733. (l) "IPO" has the meaning given to such term in the Restructuring Agreement; (m) the term "IPO Price" means the price per share of Series 1 PCS Stock in the IPO; (n) the term "Junior Stock" means any stock ranking junior as to dividends or upon liquidation, dissolution or winding up to the Seventh Series; 46 (o) the term "Lien" means any mortgage, pledge, security interest, adverse claim, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or similar applicable law of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation; (p) the term "Mirror Preferred Stock" means convertible preferred stock issued by (i) in the case of a redemption of Redeemable Capital Stock, the issuer of the applicable Redemption Securities, and (b) in the case of a Spin Off, the issuer of the applicable Spin Off Securities and having terms, designations, conditions, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof that are identical, or as nearly so as is practicable in the judgment of the Board of Directors, to those of the Seventh Series for which such Mirror Preferred Stock is exchanged, except that (i) the liquidation preference will be determined as provided in Section 13.10.3(e)(vii) or Section 13.10.3(e)(viii), as applicable, (ii) the running of any time periods pursuant to the terms of the Seventh Series shall be tacked to the corresponding time periods in the Mirror Preferred Stock and (iii) the Mirror Preferred Stock shall be convertible into the kind and amount of Redemption Securities or Spin Off Securities, as applicable, and other securities and property that the holder of a share of Seventh Series in respect of which such Mirror Preferred Stock is issued pursuant to the terms hereof would have received (x) in the case of the redemption of Redeemable Capital Stock, upon such redemption had such share of Seventh Series been converted immediately prior to the effective date of the Redemption Event and (y) in the case of a Spin Off, in such Spin Off had such share of Seventh Series been converted immediately prior to the record date for such Spin Off; (q) the term "Parity Stock" means any stock ranking on a parity as to dividends or upon liquidation, dissolution or winding up with the Seventh Series; (r) the term "PCS Stock" means the Series 1 PCS Stock and the Series 2 PCS Stock; (s) the term "Premium Price," which shall be measured as of the effective date of the redemption referred to in Section 13.10.5(a), means the greater of (i) 110% of the Liquidation Preference and (ii) 110% of the product of (A) the number of shares of PCS Stock (or other securities) into which a share of Seventh Series is convertible as of such redemption date multiplied by (B) the average of the Closing Prices for the Series 1 PCS Stock (or, if the Seventh Series is then convertible into a different publicly traded security of the Corporation, then the average of the Closing Prices of such publicly traded security) for the 30 consecutive Trading Days ending on the 5th Trading Day prior to such redemption date. (t) the term "record date" means such date as from time to time fixed by the Board of Directors with respect to the receipt of dividends, the receipt of a redemption price upon redemption or the taking of any action or exercise of any voting rights; (u) the term "Redeemable Capital Stock" means a class or series of capital stock of the Corporation that provides by its terms a right in favor of the Corporation to call, redeem, exchange or otherwise acquire all of the outstanding shares or units of such class or series; (v) the term "Redemption Securities" means, with respect to the redemption of any Redeemable Capital Stock, stock of a Subsidiary of the Corporation that is distributed by the Corporation in payment, in whole or in part, of the redemption price of such Redeemable Capital Stock; (w) the term "Restructuring Agreement" means that Restructuring and Merger Agreement, dated as of May 26, 1998, among the Corporation, Tele-Communications, Inc., Comcast Corporation, Cox Communications, Inc. and certain of their respective Affiliates; (x) the term "Series 1 PCS Stock" means the PCS Common Stock--Series 1, par value $1.00 per share, of the Corporation; 47 (y) the term "Series 2 PCS Stock" means the PCS Common Stock--Series 2, par value $1.00 per share, of the Corporation; (z) Deleted; (aa) the term "Spin Off" means the distribution of stock of a Subsidiary of the Corporation as a dividend to all holders of PCS Stock. (bb) the term "Spin Off Securities" means stock of a Subsidiary of the Corporation that is distributed to holders of PCS Stock in a Spin Off. (cc) the term "Subsidiary" means, with respect to any person, any corporation, limited liability company, partnership or other legal entity more than 50% of whose outstanding voting securities or membership, partnership or other ownership interests, as the case may be, are directly or indirectly owned by such person. (dd) the term "Trading Day" means a day on which the principal national securities exchange on which the Series 1 PCS Stock is listed or admitted to trading, or The Nasdaq Stock Market, as applicable, if the Series 1 PCS Stock is not listed or admitted to trading on any national securities exchange, is open for the transaction of business (unless such trading shall have been suspended for the entire day) or, if the Series 1 PCS Stock is not listed or admitted to trading on any national securities exchange or The Nasdaq Stock Market, any Business Day; and (ee) the term "Transfer" means any act pursuant to which, directly or indirectly, the ownership of the assets or securities in question is sold, transferred, conveyed, delivered or otherwise disposed, but shall not include (a) any grant of Liens or (b) any conversion or exchange of any security of this Corporation pursuant to a merger or other business combination involving this Corporation. PREFERRED STOCK-EIGHTH SERIES (1) Designation and Amount. The shares of such Series shall be designated as "Preferred Stock-Eighth Series, Junior Participating" (hereafter "Eighth Series") and the number of shares constituting such series shall be one million two hundred fifty thousand (1,250,000). (2) Dividends. (A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ("Preferred Stock"), or any similar stock ranking prior and superior to the shares of the Eighth Series with respect to dividends, the holders of shares of the Eighth Series, in preference to the holders of Common Stock and any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the shares of the Eighth Series (collectively with such Common Stock, "Junior Stock"), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") in an amount (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) the product of the PCS Group Multiple (as defined below) times the aggregate per share amount of all cash dividends, plus the product of the PCS Group Multiple times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of PCS Group Common Stock, or a subdivision of the outstanding shares of PCS Group Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the PCS Group Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Eighth Series. (B) As used herein, the PCS Group Multiple shall initially be 2,000. In the event the Corporation shall (i) declare any dividend on PCS Group Common Stock payable in shares of PCS Group Common Stock, (ii) subdivide the outstanding PCS Group Common Stock, or (iii) combine the outstanding PCS Group 48 Common Stock into a smaller number of shares, then in each such case the PCS Group Multiple shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of PCS Group Common Stock outstanding immediately after such event and the denominator of which is the number of shares of PCS Group Common Stock that were outstanding immediately prior to such event. (C) The Corporation shall declare a dividend or distribution on the Eighth Series as provided above in paragraph (A) of this Section (2) immediately after it declares a dividend or distribution on the PCS Group Common Stock (other than a dividend payable in shares of PCS Group Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the PCS Group Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, the minimum quarterly dividend of $100.00 on the Eighth Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Eighth Series from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Eighth Series, unless the date of issue of such shares of Eighth Series is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Eighth Series entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Eighth Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (3) Voting Rights. Except as prescribed by law and in addition to the rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the Corporation, as amended, the holders of the shares of the Eighth Series shall be entitled to vote at any annual or special meeting of the stockholders of the Corporation, for each share of Eighth Series, a number of votes equal to the product of the PCS Group Multiple then in effect times the highest number of votes that each share of PCS Group Common Stock entitles its holder to vote at such meeting of stockholders of the Corporation. The holders of the shares of the Eighth Series shall be entitled to exercise such voting rights with the holders of Series 1 PCS Stock, without distinction as to class, at any annual or special meeting of stockholders for the election of directors and on any other matter submitted to a vote of the stockholders of the Corporation at such meeting. Except as otherwise provided herein, in the Articles of Incorporation of the Corporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or otherwise required by law, the holders of the shares of the Eighth Series and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (4) Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the shares of the Eighth Series as provided in Section (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Eighth Series outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends (except a dividend payable in PCS Group Common Stock and/or any other Junior Stock) on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Junior Stock; (ii) declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Eighth Series, except dividends paid ratably on the shares of the Eighth Series and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the 49 shares of the Eighth Series, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of such parity stock in exchange for shares of Junior Stock; or (iv) purchase or otherwise acquire for consideration any shares of the Eighth Series, or any shares of stock ranking on a parity with the shares of the Eighth Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section (4), purchase or otherwise acquire such shares at such time and in such manner. (5) Reacquired Shares. Any shares of the Eighth Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or as otherwise required by law. (6) Liquidation, Dissolution or Winding Up. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of the Eighth Series shall be entitled to receive, in preference to the holders of Junior Stock, the greater of (a) $1,000.00 per share, plus accrued dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share equal to the product of the PCS Group Multiple then in effect times the aggregate amount to be distributed per share to holders of PCS Group Common Stock. (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Eighth Series shall not receive any distributions except for distributions made ratably on the Eighth Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of PCS Group Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Eighth Series shall at the same time be similarly exchanged or changed in an amount per share equal to the product of the PCS Group Multiple then in effect times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of PCS Group Common Stock is changed or exchanged. (8) Ranking. The shares of the Eighth Series shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. The shares of the Eighth Series shall rank on a parity with the Corporation's Preferred Stock-Series Sixth, Junior Participating, as to the payment of dividends and the distribution of assets. Nothing herein shall preclude the Board of Directors of the Corporation from creating any additional series of Preferred Stock or any similar stock ranking on a parity with or prior to the shares of the Eighth Series as to the payment of dividends or distribution of assets. (9) Fractional Shares. Shares of the Eighth Series may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of the Eighth Series. 50 (10) Definitions. For purposes of this Certificate of Designation, Preferences and Rights of Eighth Series, unless the context otherwise requires: (A) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, and/or Series 1 PCS Stock, and/or Series 2 PCS Stock, in each case as the context requires. (B) "PCS Group Common Stock" shall mean Series 1 PCS Stock, and/or Series 2 PCS Stock, in each case as the context requires. (C) "PCS Group Multiple" shall have the meaning set forth in Section 2(B). (D) "Series 1 FON Stock" shall mean the FON Common Stock - Series 1, par value $2.00 per share, of the Corporation. (E) "Series 2 FON Stock" shall mean the FON Common Stock - Series 2, par value $2.00 per share, of the Corporation. (F) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series 1, par value $1.00 per share, of the Corporation. (G) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series 2, par value $1.00 per share, of the Corporation. Seventh 1. In addition to any affirmative vote required by law or these Articles of Incorporation, and except as expressly provided in Section 2 of this ARTICLE SEVENTH, the affirmative vote of the holders of eighty (80) percent of the outstanding shares of the Corporation entitled to vote in an election of Directors shall be required for the approval or authorization of any Business Combination (as hereinafter defined). 2. The provisions of Section 1 of this ARTICLE SEVENTH shall not be applicable if: A. The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined); provided, however, that such approval shall only be effective if obtained at a meeting of Directors at which at least seven Continuing Directors are present; or B. The Business Combination is a merger or consolidation and the cash or Fair Market Value (as hereinafter defined) of the property, securities or other consideration to be received per share by the stockholders of each class of stock of the Corporation in the Business Combination, if applicable, is not less than the highest per share price paid by the Interested Stockholder (as hereinafter defined), with appropriate adjustments for stock splits, stock dividends and like distributions, in the acquisition by the Interested Stockholder of any of its holdings of each class of the Corporation's capital stock. 3. For purposes of this ARTICLE SEVENTH: A. The term "Business Combination" means: (i) any merger or consolidation of the Corporation or any subsidiary of the Corporation with (a) any Interested Stockholder or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as defined on October 1, 1982 in Rule 12b- 2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of an Interested Stockholder; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any subsidiary of the Corporation that have an aggregate Fair Market Value of $1,000,000 or more; 51 (iii) the issuance or transfer by the Corporation or any subsidiary of the Corporation (in one transaction or a series of transactions) of any securities of the Corporation or any subsidiary of the Corporation to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. B. The term "Continuing Director" means any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director if the successor is unaffiliated with the Interested Stockholder and is recommended or elected to succeed a Continuing Director by a majority of Continuing Directors, provided that such recommendation or election shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present. C. The term "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-listed stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of Continuing Directors, provided that such determination shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present; or (ii) in the case of property or securities other than cash or stock, the fair market value of such property or securities on the date in question as determined in good faith by a majority of Continuing Directors, provided that such determination shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present. D. The term "Interested Stockholder" means and includes, as of the date of any proposed Business Combination, any individual, corporation, partnership or other person or entity which, together with its "Affiliates" and "Associates" (as defined on October 1, 1982 in Rule 12b-2 under the Exchange Act), "Beneficially Owns" (as defined on October 1, 1982 in Rule 13d-3 under the Exchange Act) in the aggregate ten percent or more of the outstanding shares of the Corporation entitled to vote in an election of Directors, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity. 52 Eighth 1. Prevention of "Greenmail." Any direct or indirect purchase or other acquisition by this Corporation of any Equity Security (as hereinafter defined) of any class at a price above Market Price (as hereinafter defined) from any Interested Securityholder (as hereinafter defined) who has beneficially owned any Equity Security of the class to be purchased for less than two years prior to the date of such purchase or any agreement in respect thereof shall, except as hereinafter expressly provided, require the affirmative vote of the holders of at least a majority of the voting power of the then outstanding shares of capital stock of this Corporation entitled to vote generally in the election of directors (the "Voting Stock"), excluding Voting Stock beneficially owned by such Interested Securityholder, voting together as a single class (it being understood that for the purposes of this ARTICLE EIGHTH, each share of the Voting Stock shall have the number of votes granted to it pursuant to ARTICLE SIXTH of these Articles of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange, or otherwise, but (i) no such affirmative vote shall be required with respect to any purchase, redemption or other acquisition by this Corporation of capital stock from FT, DT, or any Qualified Subsidiary pursuant to the provisions of these Articles of Incorporation, (ii) no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of a tender or exchange offer by this Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations), and (iii) no such affirmative vote shall be required with respect to any purchase, redemption, conversion or other acquisition by this Corporation of Series 2 FON Stock or PCS Stock (as defined in ARTICLE SIXTH) from a holder thereof pursuant to the provisions of these Articles of Incorporation. 2. Certain Definitions. For the purposes of this ARTICLE EIGHTH: A. A "person" means any individual, firm, corporation or other entity. B. "Interested Securityholder" means any person (other than the Corporation or any corporation of which a majority of any class of Equity Security is owned, directly or indirectly, by the Corporation) who or which: (i) is the beneficial owner, directly or indirectly, of 5% or more of the class of securities to be acquired; or (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 5% or more of the class of securities to be acquired; or (iii) is an assignee or has otherwise succeeded to any shares of the class of securities to be acquired which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Securityholder, if such assignment or succession shall have occurred in the course of a transaction or transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. C. A person shall be a "beneficial owner" of any security of any class of the Corporation: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) any right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding 53 for the purpose of acquiring, holding, voting or disposing of any security of any class of the Corporation. D. For the purposes of determining whether a person is an Interested Securityholder pursuant to paragraph B of this Section 2, the relevant class of securities outstanding shall be deemed to comprise all such securities deemed owned through application of paragraph C of this Section 2, but shall not include other securities of such class which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on October 1, 1982. F. "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on January 1, 1985. G. "Market Price" means the highest closing sale price during the thirty-day period immediately preceding the date in question, of a share of any Equity Security on the Composite Tape for New York Stock Exchange issues or, if such Equity Security is not quoted on the Composite Tape or is not listed on such Exchange, on the principal United States security exchange registered under the Securities Exchange Act of 1934, as amended, on which such Equity Security is listed, or, if such Equity Security is not listed on any such exchange, the highest closing bid quotation with respect to a share of such Equity Security during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such Equity Security. 3. Compliance. The Board of Directors of the Corporation shall have the power to determine the application of, or compliance with, this ARTICLE EIGHTH, including, without limitation: (i) whether a person is an Interested Securityholder; (ii) whether a person is a beneficial owner of any Equity Security; and (iii) the Market Price of any Equity Security. Any decision or action taken by the Board of Directors arising out of or in connection with the construction, interpretation and effect of this ARTICLE EIGHTH shall lie within its absolute discretion and shall be conclusive and binding, except in circumstances involving bad faith. Ninth No Director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty by such Director as a Director; provided, however, that this ARTICLE NINTH shall not eliminate or limit the liability of a Director to the extent provided by applicable law (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 51 of the General Corporation Code of the State of Kansas, or (iv) for any transaction from which the Director derived an improper personal benefit. No amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect on the liability or alleged liability of any Director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal. IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of said Corporation this 9th day of December 2003. /s/ Claudia S. Toussaint Claudia S. Toussaint, Vice President /s/ Michael T. Hyde Michael T. Hyde, Assistant Secretary 54 STATE OF KANSAS ) )ss. COUNTY OF JOHNSON ) Be it remembered that before me, a Notary Public in and for the aforesaid county and state, personally appeared: Claudia S. Toussaint, Vice President, and Michael T. Hyde, Assistant Secretary, of Sprint Corporation, a corporation, who are known to me to be the same persons who executed the foregoing Restated Articles of Incorporation, and duly acknowledged the execution of the same this 9th day of December 2003. My Commission Expires: LORA E. BURTON /s/ Lora E. Burton NOTARY PUBLIC Notary Public in and for said STATE OF KANSAS County and State My Appt. Exp. 10/31/2006 55 EX-3 3 exh3b.txt 3-B CERTIFICATE OF DESIGNATION Exhibit 3(b) CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK-SIXTH SERIES OF SPRINT CORPORATION We, Claudia S. Toussaint, Vice President, and Michael T. Hyde, Assistant Secretary, of Sprint Corporation, a corporation organized and existing under the laws of the State of Kansas (the "Corporation"), do hereby certify that pursuant to authority expressly vested in the Board of Directors of the Corporation by the provisions of the Articles of Incorporation, as amended, and in accordance with the provisions of K.S.A. Section 17-6401, as amended, the Board of Directors of said Corporation, at a special meeting of the Board of Directors held on the 28th day of February 2004, adopted the following resolution amending and restating the series of Preferred Stock designated as Preferred Stock-Sixth Series, Junior Participating: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation by the provisions of its Articles of Incorporation, as amended and restated, the Certificate of Designation, Preferences and Rights of Preferred Stock-Sixth Series, originally adopted by the Board of Directors on June 9, 1997, as amended and restated, is hereby further amended and restated to read in its entirety as follows: PREFERRED STOCK-SIXTH SERIES (1) DESIGNATION AND AMOUNT. The shares of such Series shall be designated as "Preferred Stock-Sixth Series, Junior Participating" (hereafter "Sixth Series") and the number of shares constituting such series shall be increased from 1,500,000 to 2,125,000. (2) DIVIDENDS. (A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ("Preferred Stock"), or any similar stock ranking prior and superior to the shares of the Sixth Series with respect to dividends, the holders of shares of the Sixth Series, in preference to the holders of Common Stock and any shares of stock ranking junior (as to dividends) to the shares of the Sixth Series (collectively with such Common Stock, "Junior Stock"), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") in an amount (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) subject to the provision for adjustment hereinafter set forth, 2,000 A-1 times the aggregate per share amount of all cash dividends, plus 2,000 times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Sixth Series. (B) In the event the Corporation shall (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of the Sixth Series were entitled immediately before such event under clause (b) of paragraph (A) of this Section 2 shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event. (C) The Corporation shall declare a dividend or distribution on the Sixth Series as provided above in paragraph (A) of this Section (2) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, the minimum quarterly dividend of $100.00 on the Sixth Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Sixth Series from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Sixth Series, unless the date of issue of such shares of Sixth Series is before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Sixth Series entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Sixth Series in an amount less A-2 than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of the Sixth Series entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 10 days before the date fixed for the payment thereof. (3) VOTING RIGHTS. Except as prescribed by law and in addition to the rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the Corporation, as amended and restated, and subject to the provision for adjustment hereinafter set forth, the holders of the shares of the Sixth Series shall be entitled to 2,000 votes for each share held. In the event the Corporation shall (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of the Sixth Series were entitled immediately before such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event. Except as otherwise provided herein, in the Articles of Incorporation of the Corporation, as amended and restated, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or otherwise required by law, the holders of the shares of the Sixth Series and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (4) CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the shares of the Sixth Series as provided in Section (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Sixth Series outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends (except a dividend payable in Common Stock and/or any other Junior Stock) on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Junior Stock; (ii) declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Sixth Series, except dividends paid ratably on the shares of the Sixth Series and all such parity stock on which A-3 dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares ranking on a parity (either as to dividends or upon dissolution, liquidation or winding up) with the shares of the Sixth Series, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of such parity stock in exchange for shares of Junior Stock; or (iv) purchase or otherwise acquire for consideration any shares of the Sixth Series, or any shares of stock ranking on a parity (either as to dividends or upon dissolution, liquidation or winding up) with the shares of the Sixth Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section (4), purchase or otherwise acquire such shares at such time and in such manner. (5) REACQUIRED SHARES. Any shares of the Sixth Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or as otherwise required by law. (6) LIQUIDATION, DISSOLUTION OR WINDING UP. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of the Sixth Series shall be entitled to receive, in preference to the holders of stock ranking junior (as to the amount payable upon liquidation, dissolution or winding up) to the Sixth Series, the greater of (a) $1,000.00 per share, plus accrued and unpaid dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share, subject to A-4 the provision for adjustment hereinafter set forth, equal to 2,000 times the aggregate amount to be distributed per share to holders of Common Stock. In the event the Corporation shall (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of the Sixth Series were entitled immediately before such event pursuant to clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event. (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of stock ranking on a parity (as to the amount payable upon liquidation, dissolution or winding up) with the Sixth Series shall not receive any distributions except for distributions made ratably on the Sixth Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (7) CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Sixth Series shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 2,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of the Sixth Series were entitled immediately before such event pursuant to the preceding sentence with respect to the exchange or change of shares of the Sixth Series shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately before such event. (8) RANKING. The shares of the Sixth Series shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Nothing herein shall preclude the Board of Directors of the Corporation from creating any additional series of Preferred Stock or any similar A-5 stock ranking on a parity with or prior to the shares of the Sixth Series as to the payment of dividends or distribution of assets. (9) FRACTIONAL SHARES. Shares of the Sixth Series may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of the Sixth Series. (10) DEFINITIONS. For purposes of these designations, unless the context otherwise requires: (A) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, in each case as the context requires. (B) "Series 1 FON Stock" shall mean the FON Common Stock - Series 1, par value $2.00 per share, of the Corporation. (C) "Series 2 FON Stock" shall mean the FON Common Stock - Series 2, par value $2.00 per share, of the Corporation. IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of said Corporation this 23rd day of April, 2004. /s/ Claudia S. Toussaint __________________________________ Claudia S. Toussaint ATTEST: Vice President /s/ Michael T. Hyde _____________________________ Michael T. Hyde Assistant Secretary A-6 EX-3 4 exh3c.txt 3-C CERTIFICATE OF ELIMINATION Exhibit 3(c) CERTIFICATE OF ELIMINATION OF DESIGNATIONS OF PREFERRED STOCK-EIGHTH SERIES OF SPRINT CORPORATION Pursuant to K.S.A. Section 17-6401 SPRINT CORPORATION, a corporation organized and existing under the laws of the State of Kansas (the "Corporation"), in accordance with the provisions of K.S.A. Section 17-6401, as amended, hereby certifies as follows: 1. That the voting powers, designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions of the Corporation's Preferred Stock-Eighth Series were provided for in a resolution adopted by the Board of Directors of the Corporation on June 29, 1998 pursuant to the authority expressly vested in it by the provisions of the Corporation's Articles of Incorporation, as amended. The Corporation subsequently filed in the Office of the Secretary of State of Kansas a Certificate of Designation setting forth said resolution. 2. That no shares of said Preferred Stock-Eighth Series are outstanding and no shares will be issued. 3. That, at a duly called meeting of the Board of Directors of the Corporation, the following resolution was adopted: RESOLVED, that none of the authorized shares of the Preferred Stock-Eighth Series of the Corporation are outstanding and none of such shares will be issued, and that the officers of the Corporation be, and each of them hereby is, authorized and directed to file a Certificate of Elimination of such Preferred Stock-Eighth Series of the Corporation setting forth this resolution with the Secretary of State of Kansas for the purpose of eliminating from the Articles of Incorporation, as amended and restated, of the Corporation all reference to the Preferred Stock-Eighth Series of the Corporation. 4. That, accordingly, all references to the Preferred Stock-Eighth Series of the Corporation be, and they hereby are, eliminated from the Articles of Incorporation, as amended and restated, of the Corporation. IN WITNESS WHEREOF, SPRINT CORPORATION has caused this Certificate to be signed by Claudia S. Toussaint, Vice President, and attested to by Michael T. Hyde, Assistant Secretary, as of this 23rd day of April, 2004. SPRINT CORPORATION /s/ Claudia S. Toussaint ___________________________ Claudia S. Toussaint Vice President ATTEST: /s/ Michael T. Hyde __________________________ Michael T. Hyde Assistant Secretary 2 EX-3 5 exh3d.txt 3-D AMENDED BY-LAWS Exhibit 3(d) AMENDED AND RESTATED SPRINT CORPORATION BYLAWS ARTICLE I Name and Location Section 1. The name of the Corporation shall be the name set forth in the Articles of Incorporation. Section 2. The principal office of the Corporation is located at 6200 Sprint Parkway, Overland Park, Kansas. Section 3. Other offices for the transaction of business of the Corporation may be located at such place in Kansas or elsewhere as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II Capital Stock Section 1. All certificates of stock shall be signed by the Chairman of the Board of Directors, the President or a Vice President and by the Secretary or an Assistant Secretary, and sealed with the corporate seal or a facsimile thereof. Any or all of the signatures may be a facsimile. Section 2. Transfers of stock shall be made on the books of the Corporation upon the surrender of the old certificate properly endorsed, and said old certificate shall be cancelled before a new certificate is issued. Section 3. A new certificate of stock may be issued in the place of any certificate theretofore issued, alleged to have been lost or destroyed, and the Corporation may, in its discretion, require the owner of the lost or destroyed certificate, or its legal representative, to give a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any certificate. Section 4. No holder of shares of any class of this Corporation, or holder of any securities or obligations convertible into shares of any class of this Corporation, shall have any preemptive right whatsoever to subscribe for, purchase or otherwise acquire shares of this Corporation of any class, whether now or hereafter authorized; provided, however, that nothing in this SECTION 4 of Article II shall prohibit the Corporation from granting, contractually or otherwise, to any such holder, the right to purchase additional securities of the Corporation. Section 5. The Kansas Control Share Acquisition Act, K.S.A. Sections 17-1286 through 17-1298, does not apply to control share acquisitions of shares of the Corporation. 1 ARTICLE III Stockholders' Meetings Section 1. The annual meeting of the stockholders of the Corporation shall be held on the third Tuesday of April in each year or such other date and at such location, either within or without the State of Kansas, as may from time to time be determined by the Board of Directors and stated in the notice of the meeting. At such meeting the stockholders shall elect directors in the manner provided in the Articles of Incorporation of the Corporation. The stockholders may transact such other business at such annual meeting as may properly come before the meeting. Section 2. A special meeting of the stockholders or the holders of any one or more classes of the capital stock of the Corporation entitled to vote as a class or classes with respect to any matter, as required by law or as provided in the Articles of Incorporation, may be called only by, and may be at any time and place determined by, the Chairman of the Board, the President or the Board of Directors. Section 3. Notice of the time and place of all annual meetings of stockholders and of the time, place and purpose of all special meetings of stockholders shall be sent not less than ten (10) nor more than sixty (60) days before the date set for such meeting, to each stockholder of record. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation shall be effective if given by a form of electronic transmission consented to by the stockholder to whom notice is given. Section 4. Nominations of persons for election to the Board of the Corporation at an annual meeting of the stockholders may be made by or at the direction of the Board of Directors or may be made at an annual meeting of stockholders by any stockholder of the Corporation who is entitled to vote for the election of Directors at the meeting in compliance with the notice procedures set forth in this SECTION 4 of ARTICLE III. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal office of the Corporation not less than one hundred twenty (120) days nor more than one hundred fifty (150) days before the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be so delivered and received not earlier than the 150th day before such annual meeting and not later than the close of business on the later of the 120th day before such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as Director of the Corporation. No person shall be eligible for election as a Director of the Corporation at an annual meeting of the stockholders unless such person has been nominated in accordance with the procedures set forth herein. If the facts warrant, the Chairman of the annual meeting shall determine and declare to the meeting that a nomination does not satisfy the requirements set forth in the preceding sentence and the 2 defective nomination shall be disregarded. Nothing in this SECTION 4 of Article III shall be construed to affect the requirements for proxy statements of the Corporation under Regulation 14A of the Exchange Act. Section 5. At any annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the annual meeting by a stockholder. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal office of the Corporation not less than one hundred twenty (120) days nor more than one hundred fifty (150) days before the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be delivered and received not earlier than the 150th day before such annual meeting and not later than the close of business on the later of the 120th day before such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made. Such stockholder's notice to the Secretary shall set forth (a) as to each matter the stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder, (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder and (iii) any material interest of the stockholder in such business. No business shall be conducted at an annual meeting of the stockholders unless proposed in accordance with the procedures set forth herein. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedure and such business shall not be transacted. To the extent this SECTION 5 of Article III shall be deemed by the Board of Directors or the Securities and Exchange Commission, or finally adjudged by a court of competent jurisdiction, to be inconsistent with the right of stockholders to request inclusion of a proposal in the Corporation's proxy statement for its annual meeting pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, such rule shall prevail. Section 6. At any special meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a special meeting of stockholders, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedures and such business shall not be transacted. Section 7. The Chairman of the Board of Directors, or in his absence or inability to act, the President, or in his absence or inability to act, a Vice President shall preside as Chairman of the meeting at all stockholders' meetings. The Chairman of the meeting shall have authority on his own motion to adjourn the meeting without the approval of the stockholders who are present in person or represented by proxy and entitled to vote. The Board of Directors of the Corporation may, to the extent not prohibited by law, adopt such rules and regulations for the conduct of the meeting of stockholders as it deems appropriate. Except to the extent inconsistent with the rules and regulations adopted by the Board of Directors, the Chairman of the meeting of stockholders shall have the right and authority to prescribe 3 rules, regulations and procedures and to do all acts as, in the judgment of the Chairman, are appropriate for the proper conduct of the meeting. Section 8. Except as otherwise provided in the Articles of Incorporation of the Corporation, at each meeting of the stockholders, each stockholder shall be entitled to cast one vote for each share of voting stock standing of record on the books of the Corporation, in the stockholder's name, and may cast such vote either in person or by proxy. Section 9. Except as otherwise provided in the Articles of Incorporation of the Corporation, each stockholder shall have the right to vote, in person or by proxy, a number of votes equal to the number of shares of stock owned by the stockholder for each Director to be elected. Stockholders shall not be entitled to cumulative voting of their shares in elections of Directors. Section 10. At any meeting held for the purpose of electing directors, the presence in person or by proxy of the holders of at least a majority of the then outstanding voting shares of the Corporation shall be required and be sufficient to constitute a quorum for the election of directors. At a meeting held for any purpose other than the election of directors, shares representing a majority of the votes entitled to be cast on such matter, present in person or represented by proxy, shall constitute a quorum. In the absence of the required quorum at any meeting of stockholders, a majority of such holders present in person or by proxy shall have the power to adjourn the meeting, from time to time, without notice (except as required by law) other than an announcement at the meeting, until a quorum shall be present. Section 11. At each of the annual stockholders' meetings, one of the executive officers of the Corporation shall submit a statement of the business done during the preceding year, together with a report of the general financial condition of the Corporation. Section 12. A stockholder may appoint a proxy to vote for the stockholder by submission of (i) an appointment form signed by the stockholder or the stockholder's attorney-in-fact, or (ii) an electronic or telephonic transmission that contains or is accompanied by information from which it can be reasonably verified that the transmission was authorized by the stockholder or by the stockholder's attorney-in-fact. An appointment of proxy is effective when an appointment form or an electronic or telephonic transmission is received by the person authorized to tabulate votes for the Corporation. The proxy has the same power to vote as that possessed by the stockholder, unless the appointment form or electronic or telephonic transmission contains an express limitation on the power to vote or direction as to how to vote the shares on a particular matter, in which event, the Corporation must tabulate the votes in a manner consistent with that limitation or direction. ARTICLE IV Directors Section 1. The business and affairs of the Corporation shall be managed by or under the direction of a Board consisting of such number of Directors as is determined from time to time in accordance with the provisions of the Articles of Incorporation of the Corporation. Section 2. Each Director upon election shall qualify by fulfilling any prerequisite to qualification that may be set forth in the Articles of Incorporation of the Corporation. Section 3. Special meetings of the Board of Directors may be called at any time or place by the Chairman of the Board or by the President, and in the absence or inability of either of them to act, by a 4 Vice President, and may also be called by any two members of the Board. By unanimous consent of the Directors, special meetings of the Board may be held without notice, at any time and place. Section 4. Notice of all regular and special meetings of the Board of Directors, the Executive Committee, or any committee established pursuant to SECTION 11 of ARTICLE IV (an "Other Committee") shall be provided to each Director or member of such committee, as the case may be, by the Secretary or an Assistant Secretary or by the Chairman of the Board, or, in the case of the Executive Committee or Other Committee, by the secretary or the chairperson of the committee, by a means reasonably calculated to be received at least seven (7) days before the time fixed for such meeting; however, notice of special meetings of the Board of Directors, the Executive Committee, or any Other Committee may be given by telephone, telegraph, telefax, telex or electronic transmission to each Director or member of such committee, as the case may be, at least twenty-four (24) hours before the time fixed for such meeting, or on such shorter notice as the person or persons calling the meeting may reasonably deem necessary or appropriate under the circumstances. Participation by Directors in any regular or special meeting of the Board of Directors shall be in person unless otherwise provided in the notice of the meeting or otherwise determined by the Chairman of the Board of Directors or the Board of Directors, in which case, participation by means of conference telephone or similar communications equipment which allows all persons participating in such meeting to hear each other shall constitute presence in person at such meeting. Section 5. Except as otherwise provided in the Articles of Incorporation of the Corporation, a quorum for the transaction of business at any meeting of the Directors or any committee of the Directors shall consist of a majority of the members of the Board or of the committee, but the Directors present, although less than a quorum, shall have the power to adjourn the meeting from time to time or to some future date to the extent not prohibited by law. Section 6. At least annually, the Directors shall elect the officers of the Corporation and fix the salaries of the Chief Executive Officer and other officers which the Board of Directors determines are key to the Corporation's business. Section 7. The Board of Directors from time to time, as they may deem proper, shall have authority to appoint a general manager, counsel or attorneys and other employees for such length of time and upon such terms and conditions and at such salaries as they may deem necessary and/or advisable. Section 8. The members of the Board of Directors shall receive compensation for their services in such amount as may be reasonable and proper and consistent with the time and service rendered. The members of the Board of Directors shall receive the reasonable expenses necessarily incurred in the attendance of meetings and in the transaction of business for the Corporation. Section 9. (a) Indemnification. (1) Actions Other Than Those by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a Director, officer, or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with 5 such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation (or such other corporation or organization), and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful. (2) Action by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a Director, officer, or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation (or such other corporation or organization) and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation (or such other corporation or organization) unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (3) Successful Defense of Action. Notwithstanding, and without limitation of, any other provision of this SECTION 9 of Article IV, to the extent that a Director, officer, or employee of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (1) or (2) of this SECTION 9(a) of Article IV, or in defense of any claim, issue or matter therein, such Director, officer, or employee shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (4) Determination Required. Any indemnification under paragraph (1) or (2) of this SECTION 9(a) of Article IV (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, or employee is proper in the circumstances because such Director, officer, or employee has met the applicable standard of conduct set forth in said paragraph. Such determination shall be made (i) by a majority vote of the Directors who were not parties to the action, suit or proceeding, or (ii) by a committee of disinterested Directors, or (iii) if a quorum or a committee of disinterested Directors is not obtainable, or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (iv) by the stockholders. (5) Advance of Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of a satisfactory undertaking by or on behalf of the Director, officer, or employee to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this SECTION 9(a) of Article IV. 6 (b) Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of SECTION 9(a) of Article IV. The risks insured under any insurance policies purchased and maintained on behalf of any person as aforesaid or on behalf of the Corporation shall not be limited in any way by the terms of this SECTION 9 of Article IV and to the extent compatible with the provisions of such policies, the risks insured shall extend to the fullest extent permitted by law, common or statutory. (c) Nonexclusivity; Duration. The indemnifications and rights provided by, or granted pursuant to, this SECTION 9 of Article IV shall not be deemed exclusive of any other indemnifications, rights or limitations of liability to which any person may be entitled under any Bylaw, agreement, vote of stockholders or disinterested Directors, or otherwise, either as to action in such person's official capacity or as to action in another capacity while holding office, and they shall continue although such person has ceased to be a Director, officer, or employee and shall inure to the benefit of such person's heirs, executors and administrators. The authorization to purchase and maintain insurance set forth in section 9(b) of Article IV shall likewise not be deemed exclusive. (d) Vesting of Rights. The rights granted by this SECTION 9 of Article IV are vested in each person entitled to indemnification as a bargained-for, contractual condition of the person's serving or having served as a director, officer or employee of the Corporation or serving or having served at the request of the Corporation as a director, officer or employee of any other enterprise and, while this SECTION 9 of Article IV may be amended or repealed, no amendment or repeal may release, terminate or adversely affect the rights of any person under this SECTION 9 of Article IV with respect to any act taken or the failure to take any act by any person before the amendment or repeal or with respect to any action, suit or proceeding with respect to such act or failure to act filed after the amendment or repeal. (e) Definitions. For purposes of this SECTION 9 of Article IV, references to: (1) "other enterprises" or "other enterprise" includes, without limitation, any other corporation, limited liability company, partnership, joint venture, trust or employee benefit plan; (2) "director, officer or employee of any other enterprise" includes, without limitation, any person performing similar functions or fiduciary functions with respect to any other enterprise, whether incorporated or unincorporated; (3) "fines" includes any excise taxes assessed against a person with respect to an employee benefit plan; (4) "serving at the request of the Corporation" includes any service as a director, officer or employee which imposes duties on, or involves services by, the director, officer or employee with respect to an employee benefit plan, its participants, or beneficiaries (including, without limitation, serving as a trustee for an employee benefit plan, serving as a member of an employee benefit plan committee, or serving in any other fiduciary capacity with respect to an employee benefit plan); and a person who acted in good faith and in a manner the person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan is considered to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this SECTION 9 of Article IV. 7 (f) Severability. If any provision of this SECTION 9 of Article IV or the application of any provision of this SECTION 9 of Article IV to any person or circumstance is held invalid, illegal or unenforceable for any reason, the remaining provisions of this SECTION 9 of Article IV and the application of the provisions to other persons or circumstances will not be affected thereby and, to the fullest extent possible, the court finding any provision invalid, illegal or unenforceable is directed to modify and construe the provision so as to render it valid and enforceable as against all persons or entities and to give the maximum possible protection to persons subject to indemnification within the bounds of validity, legality and enforceability. Without limiting the generality of the foregoing, if any director, officer or employee of the Corporation, or any person who is or was serving at the request of the Corporation as a director, officer or employee of any other enterprise, is entitled under any provision of this SECTION 9 of Article IV to indemnification by the Corporation for some or a portion of the judgments, amounts paid in settlement, attorneys' fees, excise taxes or penalties, fines or other expenses actually and reasonably incurred by the person in connection with any threatened, pending or completed action, suit or proceeding (including, without limitation, the investigation, defense, settlement or appeal of any action, suit or proceeding), whether civil, criminal, administrative, investigative or appellate, but not, for the total amount, the Corporation will indemnify the person for the portion to which the person is entitled. Section 10. The Chief Executive Officer of the Corporation, together with no more than five additional Directors, shall constitute an Executive Committee of the Board of Directors. The Executive Committee between regular meetings of the Board of Directors shall manage the business and property of the Corporation and shall have the same power and authority as the Board of Directors; provided, however, the Executive Committee shall not act (other than to make recommendations) in those cases where it is provided by law or by the Articles of Incorporation of the Corporation that any vote or action in order to bind the Corporation shall be taken by the Board of Directors. Section 11. The Board of Directors may form any committee other than the Executive Committee described in the preceding Section. Any committee so formed, to the extent provided in the resolution of the Board of Directors pursuant to which it was formed or in the Bylaws or pursuant to the statutes of Kansas, shall have and may exercise all the powers and authority of the Board of Directors. Participation by Directors in any committee meeting, including the Executive Committee meetings, shall be in person unless otherwise provided in the notice of the committee meeting or otherwise determined by the committee Chairman, in which case, participating by means of conference telephone or similar communications equipment which allows all persons participating in the meeting to hear each other shall constitute presence in person at such meeting. Each committee, including the Executive Committee, shall keep a record of its proceedings. ARTICLE V Officers Section 1. The officers of this Corporation shall be a Chairman of the Board of Directors, a President, as many Vice Presidents as the Board of Directors may from time to time deem advisable and one or more of which may be designated Executive Vice President or Senior Vice President, a Secretary, a Treasurer, and such Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time deem advisable, and such other officers as the Board of Directors may from time to time deem advisable and designate. The Chairman of the Board of Directors shall be a member of and be elected by the Board of Directors. All other officers shall be elected by the Board of Directors. Section 2. The Chairman of the Board of Directors shall preside at all meetings of the Directors and stockholders at which the Chairman is present and shall have such other duties, power and authority 8 as may be prescribed by the Board of Directors from time to time. The Board of Directors may designate the Chairman of the Board as the Chief Executive Officer of the Corporation with all of the powers otherwise conferred upon the President of the Corporation under these Bylaws, or it may, from time to time, divide the responsibilities, duties and authority for the general control and management of the Corporation's business and affairs between the Chairman of the Board and the President. Section 3. Unless the Board of Directors otherwise provides, the President shall be the Chief Executive Officer of the Corporation with such general executive powers and duties of supervision and management as are usually vested in such office and shall perform such other duties as are authorized by the Board of Directors. If the Chairman of the Board is designated as the Chief Executive Officer of the Corporation, the President shall perform such duties as may be delegated by the Board of Directors and as are conferred by law exclusively upon such office. Section 4. A Vice President shall have all the power and authority usually enjoyed by a person holding the office of Vice President. In case of absence of the President or upon vacancy in the office of President, a Vice President, as designated by the Chairman of the Board of Directors, shall have the right and power to perform all duties and exercise all authority of the President. Section 5. The Secretary shall oversee the issuance of notices of all Directors' and stockholders' meetings, and shall attend as appropriate and oversee the preparation and retention of the minutes of the same; shall have charge of all corporate books, records and papers; shall be custodian of the corporate seal; may attest with his signature, which may be a facsimile signature if authorized by the Board of Directors, and may impress with the corporate seal all written contracts of the Corporation; and shall perform all other duties as are incident to the office. Any Assistant Secretary may perform all duties of the Secretary and such other duties as may be required. Section 6. The Treasurer shall have custody of all money and securities of the Corporation and shall along with the Chief Financial Officer, Controller or appropriate officer of Finance, keep regular books of account and shall submit them to the Directors for their examination and approval annually; and semi- annually, or when directed by the Board of Directors, the Treasurer along with the Chief Financial Officer, Controller or appropriate officer of Finance shall submit to each Director a statement of the condition of the business and accounts of the Corporation; and shall perform all such other duties as are incident to the office. Any Assistant Treasurer may perform all the duties of the Treasurer and such other duties as may be required. Section 7. Any officer or employee of the Corporation shall give such bond for the faithful performance of his duties in such sum, as and when the Board of Directors may direct. ARTICLE VI Amendments Section 1. Except as otherwise provided in the Articles of Incorporation of the Corporation, the Bylaws may be amended, altered or repealed by the Board of Directors, subject to the power of stockholders to amend, alter or repeal the Bylaws; or the Bylaws shall be amended in such other manner as may from time to time be authorized by the laws of the State of Kansas. 9 ARTICLE VII Corporate Seal Section 1. The corporate seal of this Corporation shall have inscribed thereon the name of the Corporation and its state of incorporation and the words, "Seal--Incorporated 1938". (Capitalized terms not otherwise defined in the Bylaws have the meanings ascribed to them in the Articles of Incorporation.) 10 EX-10 6 exh10a.txt 10-A EXEC DEF COMP Exhibit 10(a) Executive Deferred Compensation Plan 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 Amendment of Payment Election Form. "Amendment of Payment Election Form" means a written notice, in a form prescribed by the Company, filed with the Company by a Participant to change the manner in which such Participant's Deferral Benefits are to be paid. 2.3 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. 2.4 Board. "Board" means the Board of Directors of the Company. 2.5 Committee. "Committee" means the Deferred Compensation Committee appointed to review the Plan decisions pursuant to Article III. 2.6 Company. "Company" means Sprint Corporation, or any successor thereto. 2.7 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 cash incentive compensation, if any, earned over a period of at least two years and paid to a Participant in a Plan Year. 2.8 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant or the Participant's Beneficiary on the Participant's retirement, death, disability, or termination of employment as calculated in Article VII hereof. 2.9 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 D, Account AA, Account BB, and Account DD 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. 2 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 or Account DD to Account BB pursuant to paragraph 6.7, the difference in values of the two sub-accounts of Account AA or Account DD transferred to Account BB. For Account DD two sub-accounts (a Retirement Deferred Benefit Account and a Termination Deferred Benefit Account) shall be maintained to reflect the crediting of PCS Share Units corresponding to the respective sub-accounts of Account BB pursuant to Section 6.3(b) and to reflect, in the event of a transfer from Account AA or Account BB to Account DD pursuant to paragraph 6.7, the difference in values of the two sub-accounts of Account AA or Account BB transferred to Account DD. 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. 2.10 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. 2.11 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. 2.12 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. 2.13 Employer. "Employer" means Sprint Corporation, any successor to the business thereof or any affiliate or subsidiary designated by the Board. 3 2.14 FON Share Unit. " FON Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of FON Common Stock, Series 1, of the Company. 2.15 Internal Revenue Code. "Internal Revenue Code" means the 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. 2.16 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. 2.17 Normal Retirement Age. "Normal Retirement Age" means the time at which a Participant attains age sixty-five (65). 2.18 Normal Retirement Date. "Normal Retirement Date" means the first day of the month coincidental with or next following a Participant's Normal Retirement Age. 2.19 Participant. "Participant" means any individual who is designated by the Company in accordance with paragraph 4.1 to participate in this 4 Plan and who elects to participate by filing a Participation Agreement as provided in Article IV. 2.20 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed with the Company by a Participant before the beginning of the 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 deferral election and, if applicable, each Long-Term Incentive Compensation deferral election not accompanying a Base Salary deferral election. 2.21 PCS Share Unit. "PCS Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of PCS Common Stock, Series 1, of the Company. 2.22 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. 2.23 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.24 Plan Year. "Plan Year" means a twelve month period commencing May 1st and ending the following April 30th. The first Plan Year commenced May 1, 1985. 2.25 Recapitalization Date. "Recapitalization Date" means November 23, 1998. 2.26 Retirement Plan. "Retirement Plan" means the Sprint Retirement Pension Plan, as amended from time to time. 2.27 Share Units. "Share Units" means the Share Units credited to Accounts B and BB prior to the recapitalization of the Company's Common Stock on the Recapitalization Date. 5 2.28 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. 2.29 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. 2.30 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 6 Section 3.3. 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. Participation Agreements must be filed no later than the March 31st immediately preceding the Plan Year in which the Participant Agreement is to take effect, 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. 4.2 Minimum and Maximum Deferral and Length of Participation. A Participant may elect in any Participation Agreement to defer a portion of the Participant's 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: 7 Minimum Maximum Deferral Deferral With respect to $300 per 50% of Base Base Salary month Salary Deferrals With respect 25% of Annual 100% of to Annual Incentive Annual Incentive Compensation Incentive Compensation Compensation With respect 25% of Long- 100% of Long- to Long-Term Term Incentive Term Incentive Incentive 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 in the Plan Year immediately following the Plan Year in which the Participation Agreement is filed (or until the Participant's retirement, whichever occurs first). 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 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 8 Agreement may be suspended or amended as provided in paragraphs 7.5 or 9.1. 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 relating to 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 Amounts Under Savings Plan and Retirement Plan. (a) Savings Plan. Except for Participants who are Sprint Insiders, to the extent a Participant's deferral of Compensation under this Plan causes a reduction in the Company's contribution for the Participant under the Sprint Retirement Savings Plan, the Company shall credit the amount of any such reduction to the Participant's Deferred Benefit Accounts B and D in the ratio determined pursuant to guidelines adopted by the Committee or the Board. For Sprint Insiders, such reduction shall be credited to Account A. (b) Retirement Plan. A Participant shall receive a Pension Make-Up Benefit from the Supplemental Executive Retirement Plan if the deferral of compensation under this Plan causes a reduction in the Participant's benefit under the Retirement Plan. (c) Elimination of Savings Plan Credit. No additional amounts provided under 5.2(a) will be credited after the Plan Year ending April 30, 2004. 9 5.3 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. 5.4 Vesting of Deferred Benefit Account. A Participant shall be 100% vested in the Participant's 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 Account A (fixed income return), to Account B (FON Share Units) or to Account D (PCS Share Units). The election shall be made by a properly executed Participation Agreement. Deferrals in a Plan Year shall be credited in accordance with the election of the applicable Participation Agreement. 6.3 Creation of Accounts AA, BB, D, and DD. (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 were 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 were attributable to prior transfers from Account A into Account B were transferred to an Account BB. The amount of such transfers was 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. 10 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. (b) Accounts D and DD. As of the Recapitalization Date, there was credited to Accounts D and DD, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of PCS Share Units determined as follows: (1) one-half of a PCS Share Unit in Account D for each Share Unit in Account B for such Participant for such Plan Year as of the Recapitalization Date; and (2) one-half of a PCS Share Unit in the Retirement Deferred Benefit Account of Account DD for each Share Unit in the Retirement Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Recapitalization Date; and (3) one-half of a PCS Share Unit in the Termination Deferred Benefit Account of Account DD for each Share Unit in the Termination Deferred Benefit Account of Account BB for such Participant for such Plan Year as of the Recapitalization Date. For all purposes of this Plan except as otherwise noted in this Plan, Account DD shall be treated in the same manner as Account D. 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. 11 6.5 Maintenance of Share Unit Accounts. Accounts B and BB and Accounts D and DD shall maintain balances in FON Share Units and PCS Share Units, respectively. (a) Maintenance of Accounts B and BB. (1) Conversion of Share Units into FON Share Units. As of the Recapitalization Date, each Share Unit in Accounts B and BB was converted into a FON Share Unit. (2) Conversion between Dollar Amounts and FON 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 FON Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the FON Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of FON Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of FON Share Units shall be converted into a dollar amount by multiplying such number of Share Units by the closing price of the FON Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (3) 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 amounts transferred from the Account DD Retirement 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 amounts transferred from the Account DD Termination Deferred Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(a). 12 (4) Dividends. When a dividend is declared and paid by the Company on its FON Common Stock, Series 1, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the FON Share Units in such accounts as of the Determination Date immediately preceding the record date for the dividend, and such amount shall be converted to FON Share Units. Such amount shall be valued as of the Determination Date immediately following the payment of the dividend. (5) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the FON Common Stock, Series 1, the Company shall make equitable adjustment to the number of FON 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 Distribution. FON 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 FON Share Unit shall be the average closing price of the FON Common Stock, Series 1, on the New York Stock Exchange on the last trading day of each of (i) the 12 calendar months immediately preceding the date of distribution or (ii) the smaller number of calendar months (including part of a month) elapsed from the Recapitalization Date to such distribution. If a Participant elects payment in other than a lump sum, FON 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)(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. 13 (b) Maintenance of Accounts D and DD. (1) Conversion between Dollar Amounts and PCS Share Units in Accounts D and DD. When an amount is to be added to a Participant's Deferred Benefit Accounts D or DD, it shall be converted into PCS Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the PCS Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of PCS Share Units is to be subtracted from a Participant's Deferred Benefit Accounts D or DD, such number of PCS Share Units shall be converted into a dollar amount by multiplying such number of PCS Share Units by the closing price of PCS Common Stock, Series 1, 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 DD: (i) a Retirement Deferred Benefit Account which shall include the value of the PCS Share Units credited pursuant to paragraph 6.3(b)(2), plus amounts transferred from the Account AA Retirement Benefit Account, if any, plus amounts transferred from the Account BB Retirement Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(b) and (ii) a Termination Deferred Benefit Account which shall include the value of the PCS Share Units credited pursuant to paragraph 6.3(b)(3), plus amounts transferred from the Account AA Termination Benefit Account, if any, plus amounts transferred from the Account BB Termination Benefit Account, if any, plus other additions pursuant to this paragraph 6.5(b). (3) Dividends. When a dividend is declared and paid by the Company on its PCS Common Stock, Series 1, an amount shall be credited to the Participant's Accounts D and DD as though the same dividend had been paid on the PCS Share Units in such accounts as of the Determination Date immediately preceding the record date for the dividend, and such amount shall be converted to PCS Share Units. Such 14 amount shall be valued as of the Determination Date immediately following the payment of the dividend. (4) Effect of Recapitalization. In the event of a stock dividend, stock split or other corporate reorganization involving PCS Common Stock, Series 1, the Company shall make equitable adjustment to the number of PCS Share Units credited to a Participant's Accounts D and DD as may be necessary to give effect to such change in the Company's capital structure. In the event a corporate reorganization results in the conversion of PCS Share Units into FON Share Units, all FON Share Units held in Accounts D and DD following the reorganization shall be transferred to the Accounts B and BB, respectively. The Accounts D and DD shall then be eliminated. (5) Conversion of PCS Share Units to Dollars on Distribution. PCS Share Units in Accounts D and DD 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 PCS Share Unit shall be the average closing price of PCS Common Stock, Series 1, 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 (including part of a month) elapsed from the Recapitalization Date to such distribution. If a Participant elects payment in other than a lump sum, PCS 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 D and DD in accordance with paragraphs 6.5(b)(3) and 6.5(b)(4). 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. 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 the Participant's Deferred Benefit 15 Accounts A, B, and D and in the Participant's Deferred Benefit Accounts AA, BB, and DD (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 the Participant's Account A to Account B or Account D, (2) to transfer all or any portion of the Participant's Account B to Account A or Account D, (3) to transfer all or any portion of the Participant's Account D to Account A or Account B, (4) to transfer all or any portion of the Participant's Account AA to Account BB or Account DD, (5) to transfer all or any portion of the Participant's Account BB to Account AA or Account DD, and (6) to transfer all or any portion of the Participant's Account DD to Account AA or 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, the Participant shall be entitled to a Deferral Benefit equal to the amount of the Participant's Retirement Deferred Benefit Account determined under paragraph 6.1 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 the Participant's termination of service, a Deferral Benefit equal to the amount of the Participant's Termination Deferred Benefit Account determined under paragraph 6.1. The Termination Deferred Benefit Account of a Participant whose employment has terminated shall be paid in a single sum to the 16 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 or in the Amendment of Payment Election Form. 7.3 Death. If a Participant dies after the commencement of payments of the Participant's Deferral Benefit, the Participant's Beneficiary shall continue to receive the remaining installments of the Participant's Deferred Benefit Account in accordance with the Participant's election pursuant to paragraph 7.6. If a Participant dies before any payments of a Deferral Benefit, the amounts to which the Participant's Beneficiary is entitled 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 that required a total deferral of less than $15,000 per year allocated to Accounts A and AA during the last Plan Year of deferrals pursuant to such Participation Agreement 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 that required a total deferral of $15,000 or more per year allocated to Accounts A and AA during the last Plan Year of deferrals pursuant to such Participation Agreement 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. 17 (4) Deferrals allocated to Accounts B and BB shall be the Retirement Deferred Benefit Account value thereof. (5) Deferrals allocated to Accounts D and DD 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, B and D. 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 deferred by the Participant under the Participation Agreement during such period of Disability, but not beyond the end of the Plan Year to which the Participation Agreement applies. In the event of Disability before termination of employment or the Normal Retirement Date, the disabled Participant, unless the Participant otherwise elects under this paragraph, shall be entitled to the amount in the Participant's Retirement Deferred Benefit Account (rather than the Participant's 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 18 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 the Participant's Beneficiary the amount (at a time designated by the Participant in the Participation Agreement, but commencing no later than the Participant's Normal Retirement Date) specified in one of the following forms as elected by the Participant, either in the Participation Agreement or the Amendment of Payment Election Form filed by the Participant: (1) a lump sum payment. (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 19 paragraph 6.5(a)(6), of the number of FON Share Units equal to (i) the number of FON 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, FON Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(4). Such FON Share Unit dividends shall be valued in the same manner as previously described, and all such FON 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 D and DD, 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)(5), of the number of PCS Share Units equal to (i) the number of PCS 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 D or DD, PCS Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(3). Such PCS Share Unit dividends shall be valued in the same manner as previously described, and all such PCS Share Units accruing after a distribution from Accounts D or DD is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which such Participant's benefits shall be paid by filing an Amendment of Payment Election Form indicating such change at least 13 months before the date upon which the payments to be made are determined. No such Amendment of Payment Election Form shall change the amount elected to be deferred in the Participation Agreement to which it relates, 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 20 provided in paragraph 7.2. In the event of a Disabled Participant, payment shall be in the form described in paragraph 7.4. (d) If a Participant's Beneficiary dies before payment of the Participant's Deferred Benefits are complete, payments will continue to be made to the estate of the Beneficiary in accordance with the Participant's election pursuant to this paragraph 7.6. 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. ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as the Participant's Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of the Participant's death before complete distribution to the Participant of the benefits due the Participant 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 the Participant in the first of the following classes in which there is a survivor, share and share alike: 21 (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 Beneficiary or the Beneficiary's estate shall completely discharge the Employer's obligations relating to the Participant 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 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 the Participant's 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 the Participant's 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 22 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 the Participant's 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 the Participant 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. 23 10.6 Affiliated Entities. For purposes of this Plan, a Participant who becomes employed by Global One (an "Affiliated Entity") shall not be considered to have terminated employment with the Company or a subsidiary of the Company until the Participant's employment is terminated with all Affiliated Entities without becoming employed by the Company or its subsidiaries. 24 Appendix A Summary of Amendments to the Executive Deferred Compensation Plan Sprint's Executive Deferred Compensation Plan (the "Sprint EDCP") was amended effective January 1, 2001 to merge the executive deferred compensation plan maintained by Sprint Spectrum, L.P. (the "PCS EDCP") with and into Sprint EDCP. In addition, the Sprint EDCP was amended to preserve certain features of the PCS EDCP with respect to participants' account balances under that plan, as follows: 1. Form and Timing of Distributions. The form of benefit and timing of distribution elected by participants in the PCS EDCP, as well as the requirement that distribution will be made in a lump sum upon termination of employment, continues to apply with respect to the account balances attributable to the PCS EDCP. 2. Hardship Distributions. Provisions for hardship distributions under the PCS EDCP continue to apply with respect to the account balances attributable to the PCS EDCP. 3. Provisions for Disability. Provisions calling for benefits to commence for disabled participants at age 55, or sooner under certain circumstances, continue to apply with respect to the account balances attributable to the PCS EDCP. EX-10 7 exh10b.txt 10-B DIRECTOR DEF COMP Exhibit 10(b) Directors' Deferred Fee Plan 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. 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 Amendment of Payment Election Form. "Amendment of Payment Election Form" means a written notice, in a form prescribed by the Company, filed with the Company by a Participant to change the manner in which such Participant's Deferral Benefits are to be paid. 2.3 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. 2.4 Board "Board" means the Board of Directors of the Company. 2.5 Committee. "Committee" means the Organization, Compensation and Nominating Committee of the Board. 2.6 Company. "Company" means Sprint Corporation, or any successor thereto. 2.7 Deferral Benefit. "Deferral Benefit" means the benefit payable to a Participant on the Participant's death or termination of service as a Director, as calculated in Article VII hereof. 2.8 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, (b) Account A, Account B, Account D, Account AA, Account BB, and Account DD elections made by each Participant in each such Participation Agreement, and (c) One Time Grants. 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 or the Participant's Beneficiary pursuant to this Plan. A Participant's Deferred Benefit Account shall not constitute or be treated as a trust fund of any kind. 2.9 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. 2.10 Director. "Director" means a member of the Board of Directors of the Company who is not an employee of the Company or its subsidiaries. 2.11 Fee. "Fee" means any cash compensation paid to a Director for his services as a Director other than a distribution under this Plan. 2.12 FON Share Unit. "FON Share Unit" means a measure of participation under the Plan having a value based on the market value of one share of FON Common Stock, Series 1, of the Company. 2.13 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, and (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, 2 the prime rate similarly determined of another major bank selected by the Company and (ii) six percent per annum. 2.14 New Director. "New Director" means a Director who had not accumulated at least five years of service as a Director as of December 10, 1996 and any Director who is first elected after such date. Each New Director is entitled to a One Time Grant. 2.15 One Time Grant, "One Time Grant" means a one time grant to New Directors of FON Share Units credited into Account B and PCS Share Units credited into Account D. The number of FON Share Units and the number of PCS Share Units to be granted to each New Director are determined by the Committee. 2.16 Participant. "Participant" means any New Director and any Director who elects to participate by filing a Participation Agreement as provided in Article IV. 2.17 Participation Agreement. "Participation Agreement" means the agreement, in a form prescribed by the Company, filed by a Participant before the beginning of the 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. 2.18 PCS Share Unit. "PCS Share Unit" means a measure of participation under the Plan having a value based on the market value of a share of PCS Common Stock, Series 1, of the Company. 2.19 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. 2.20 Plan Administrator. "Plan Administrator" means the person appointed by the Company to represent the Company in the administration of this Plan. 2.21 Plan Year. "Plan Year" means a twelve-month period commencing May 1st and ending the following April 30th. The first Plan Year commenced May 1, 1985. 2.22 Recapitalization Date. "Recapitalization Date" means November 23, 1998. 3 2.23 Share Units. "Share Units" means the Share Units credited to Accounts B and BB prior to the recapitalization of the Company's Common Stock on the Recapitalization Date. 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 New Directors and Directors, under age 70, who elect to participate in the Plan by filing a Participation Agreement with the Company. Except as provided below, an initial Participation Agreement must be filed no later than 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 4 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 in the Plan, an initial Participation Agreement may be filed within 30 days of the Company's notification to the Director of the Director's 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 in 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 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. If a Participant desires to change the percentage of Fees deferred or desires to cease deferring Fees, the Participant must file a new Participation Agreement. Such new Participation Agreement must be filed no later than the March 31st immediately preceding the Plan Year in which the new Participation Agreement is to take effect, or if March 31st falls on a Saturday, Sunday or holiday, the next business day after March 31st. The new Participation Agreement shall be effective as to Fees paid in Plan Years beginning after the last day of the Plan Year in which the agreement is filed with the Company. Any previously filed Participation Agreement will no longer apply to the deferral of fees. Only one Participation Agreement will be in effect for new deferrals in each Plan Year. In the event a Participant elects to defer Fees pursuant to a new 5 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, except to the extent that the Company is required to withhold any taxes or other amounts related to the Participant's deferred fees pursuant to any federal, state or local law. In the event withholding is required, the amount required to be withheld shall first be taken from the Participant's fees that have not been deferred. If these fees are not sufficient to meet the withholding obligation, the remainder will be taken from the amount deferred. 5.2 Vesting of Deferred Benefit Account. Participants shall be 100% vested in their Deferred Benefit Accounts, except for the Account B and Account D resulting from a One Time Grant. The FON Share Units and PCS Share Units granted as part of a One Time Grant will vest at the rate of 50% on the fifth anniversary of the Participant's election as a Director and 10% per year on the sixth through tenth anniversaries of such election. The FON Share Units and PCS Share Units resulting from dividend credits on such FON Share Units and PCS Share Units will vest at the same time as such FON Share Units and PCS Share Units vest. Any FON Share Units and PCS Share Units that have not vested at the time of the Participant's termination of service as a Director shall be forfeited. 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 6 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 Account A (fixed income return), to Account B (FON Share Units) or to Account D (PCS Share Units). The initial election shall be made by a properly executed Participation Agreement. An election to change the apportionment of deferred amounts between Accounts A, B and D may be made by a Participant filing with the Plan Administrator a revised Participation Agreement indicating such change on or before March 31 of each calendar year. The revised Participation Agreement shall be deemed a continuation of the initial Participation Agreement to which it relates. 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. 6.3 Creation of Accounts AA, BB, D, and DD. (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 were 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 were attributable to prior transfers from Account A into Account B were transferred to an Account BB. The amount of such transfers was 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. (b) Accounts D and DD. As of the Recapitalization Date, there was credited to an Account D and DD, created for each Participant having a positive balance in an Account B or BB with respect to any Plan Year, a number of PCS Share Units determined as follows: 7 (1) one-half of a PCS Share Unit in Account D for each Share Unit in Account B for such Participant for such Plan Year as of the Recapitalization Date; and (2) one-half of a PCS Share Unit in Account DD for each Share Unit in Account BB for such Participant for such Plan Year as of the Recapitalization Date. 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 D and DD shall maintain balances in FON Share Units and PCS Share Units, respectively. (a) Maintenance of Accounts B and BB. (1) Conversion of Share Units into FON Share Units. As of the Recapitalization Date, each Share Unit in Accounts B and BB was converted into a FON Share Unit. (2) Conversion between Dollar Amounts and FON 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 FON Share Units, or fractions thereof, by dividing the amount to be credited by the closing price of the FON Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of FON Share Units is to be subtracted from a Participant's Deferred Benefit Accounts B or BB, such number of FON Share Units shall be converted into a dollar amount by multiplying such number of FON Share Units by the closing price of the FON Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. 8 (3) Dividends on FON Share Units. When a dividend is declared and paid by the Company on its FON Common Stock, Series 1, an amount shall be credited to the Participant's Accounts B and BB as though the same dividend had been paid on the FON Share Units in such accounts as of the Determination Date immediately preceding the record date for the dividend, and such amount shall be converted to FON Share Units. Such amount shall be valued as of the Determination Date immediately following the payment of the dividend. (4) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the FON Common Stock, Series 1, the Company shall make equitable adjustment 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 FON Share Units to Dollars on Distribution. FON 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 FON Share Unit shall be the average closing price of the FON Common Stock, Series 1, on the New York Stock Exchange on the last trading day of each of (i) the 12 calendar months immediately preceding the date of distribution or (ii) the smaller number of calendar months (including part of a month) elapsed from the Recapitalization Date to such 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) and 6.5(a)(4). (b) Maintenance of Accounts D and DD. (1) Conversion between Dollar Amounts and PCS Share Units in Accounts D and DD. When an amount is to be added to a Participant's Deferred Benefit Accounts D or DD, it shall be converted into PCS Share Units, or fractions 9 thereof, by dividing the amount to be credited by the closing price of the PCS Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. When a number of PCS Share Units is to be subtracted from a Participant's Deferred Benefit Accounts D or DD, such number of PCS Share Units shall be converted into a dollar amount by multiplying such number of PCS Share Units by the closing price of the PCS Common Stock, Series 1, as reported by the New York Stock Exchange on the last trading day on or before the Determination Date. (2) Dividends on PCS Share Units. When a dividend is declared and paid by the Company on its PCS Common Stock, Series 1, an amount shall be credited to the Participant's Accounts D and DD as though the same dividend had been paid on the PCS Share Units in such accounts as of the Determination Date immediately preceding the record date for the dividend, and such amount shall be converted to PCS Share Units. Such amount shall be valued as of the Determination Date immediately following the payment of the dividend. (3) Effect of Recapitalization. In the event of a stock dividend, stock split, or other corporate reorganization involving the PCS Common Stock, Series 1, the Company shall make equitable adjustment to a Participant's Accounts D and DD as may be necessary to give effect to such change in the Company's capital structure. In the event a corporate reorganization results in the conversion of PCS Share Units into FON Share Units, all FON Share Units held in Accounts D and DD following the reorganization shall be transferred to the Accounts B and BB, respectively. The Accounts D and DD shall then be eliminated. (4) Conversion of PCS Share Units to Dollars on Distribution. PCS Share Units in Accounts D and DD 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 PCS Share Unit shall be the average closing price of the PCS Common Stock, Series 1, on the New York Stock Exchange on the last trading day of each of (i) the 12 calendar months 10 immediately preceding the date of distribution or (ii) the smaller number of calendar months (including part of a month) elapsed from the Recapitalization Date to such distribution. If a Participant elects payment in other than a lump sum, PCS 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 D, and DD in accordance with paragraphs 6.5(b)(2) and 6.5(b)(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 the Participant's Deferred Benefit Accounts A and AA, B and BB, and D and DD, 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 the Participant's Account A to Account B or Account D, (2) to transfer all or any portion of the Participant's Account B to Account A or Account D, (3) to transfer all or any portion of the Participant's Account D to Account A or Account B, (4) to transfer all or any portion of the Participant's Account AA to Account BB or Account DD, (5) to transfer all or any portion of his Account BB to Account AA or Account DD, and (6) to transfer all or any portion of his Account DD to Account AA or Account BB. Such election shall be effective on the last day of the calendar month in which the Plan Administrator 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. No part of the Account B or the Account D resulting from a One Time Grant may be transferred to any other account. 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 11 than the Participant's death, the Company shall pay to the Participant a Deferral Benefit equal to the amount of the Participant's Deferred Benefit Account determined under paragraph 6.1 thereof, but excluding any unvested FON Share Units or PCS Share Units. 7.2 Death. If a Participant dies after the commencement of payments of the Participant's Deferral Benefit, the Participant's Beneficiary shall continue to receive the remaining balance of the Participant's 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 to which the Participant's Beneficiary is entitled shall be determined as follows: (a) Accounts A, B, BB, D, and DD shall be the Deferred Benefit Account values thereof excluding any unvested FON Share Units or PCS Share Units, and (b) 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. If a Participant's Beneficiary dies before payments of the Participant's Deferral Benefit are complete, payments will continue to be made to the estate of the beneficiary in accordance with the Participant's election pursuant to 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 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 12 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 the Participant's Beneficiary the amount specified therein (at a time designated in the Participation Agreement, but commencing no later than the Company's mandatory termination date for Directors) in one of the following forms as elected by the Participant, either in the Participation Agreement or the Amendment of Payment Election Form filed by the Participant: (1) a lump sum payment. (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 FON Share Units equal to (i) the number of FON 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, FON Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(a)(3). Such FON Share Unit dividends shall be valued in the same manner as previously described, and the value of all such FON 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. 13 (4) With respect to balances in Accounts D and DD, 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 PCS Share Units equal to (i) the number of PCS 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 D or DD, PCS Share Unit dividends will be added to the Accounts in accordance with subparagraph 6.5(b)(2) hereof. Such PCS Share Unit dividends shall be valued in the same manner as previously described, and the value of all such PCS Share Units accruing after a distribution from Accounts D or DD is made shall be paid to the Participant with the next distribution from the account. (b) A Participant may change the form in which the Participant's benefits shall be paid by filing an Amendment of Payment Election Form indicating such change at least 13 months before the date upon which the initial payment to be made is determined. No such Amendment of Payment Election Form shall change the amount elected to be deferred in the Participation Agreement to which it relates, 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 Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are made, the Company shall withhold from payments made hereunder any taxes required to be withheld from a Director's fees for the federal or any state or local government. 7.6 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. 14 ARTICLE VIII BENEFICIARY DESIGNATION 8.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as the Participant's Beneficiary or Beneficiaries (both principal as well as contingent) to whom payment under this Plan shall be paid in the event of the Participant's death before complete distribution to the Participant of the benefits due the Participant 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 the Participant 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 Participant's Beneficiary or the Beneficiaries' estate shall completely discharge the Company's obligations relating to the Participant 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 Right to Terminate. The Board may at any time terminate the Plan with respect to new elections to defer if, in its judgment, the 15 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 the Participant's 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 the Participant's 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 or its subsidiaries, 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 and its subsidiaries 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 such assets and Policies shall be and remain the general, unpledged, unrestricted assets of the Company and its subsidiaries. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company 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 16 Company and the Participant, and the Participant (or the Participant's 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 as a Director. 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. 17 EX-10 8 exh10c.txt 10-C CENTEL DIR DEF COMP Exhibit 10(c) CENTEL DIRECTORS DEFERRED COMPENSATION PLAN Amended and Restated as of April 16, 2004 SECTION 1. Plan. Centel Corporation, a Kansas corporation, hereby establishes this "Centel Directors Deferred Compensation Plan". SECTION 2. Definitions. The following words have the respective meanings stated below unless a different meaning is plainly required by the context: (a) "Beneficiary" means any person other than a Director who is entitled to receive distributions under this Plan pursuant to Section 5. (b) "Board" means the Board of Directors of the Company. (c) "Committee" means the committee which administers this Plan as provided in Section 8. (d) "Common Stock account" means the account that was credited with Units prior to the reclassification of Sprint Common Stock into FON Common Stock and PCS Common Stock on November 23, 1998. (e) "Company" means Centel Corporation, a Kansas corporation, and its successors. (f) Prior to March 9, 1993, "Director" means an individual who is (1) serving as a member of a Board or who has been nominated to serve as a member of a Board and (2) receives compensation for such service other 2 than as employee of the Company or a Subsidiary. Beginning March 9, 1993, "Director" means an individual serving as a member of the Board of Directors of Sprint who was a Director of the Company on March 8, 1993. (g) "FON Common Stock" means shares of FON Common Stock, Series 1, of Sprint, par value $2.00 per share. (h) "FON Unit" means the equivalent under this Plan of one share of FON Common Stock. (i) "Market Value" of FON Common Stock or PCS Common Stock on any date means the closing price of the FON Common Stock or PCS Common Stock, as the case may be, on that day on the Composite Transactions Tape, as subsequently reported in The Wall Street Journal, or, if no sale of such stock shall have been made on that date, such closing price on the next preceding date on which there was a sale. (j) "PCS Common Stock" means shares of PCS Common Stock, Series 1, of Sprint, par value $1.00 per share. As of the Recombination Date, the PCS Common Stock is to be combined with the FON Common tock and each Share of PCS Common Stock will be converted to one half share of FON Common Stock and the PCS Common Stock will be eliminated. (k) "PCS Unit" means the equivalent under this Plan of one share of PCS Common Stock. As of the Recombination Date, each PCS unit will be converted to one half FON Unit and the PCS Unit will be eliminated. 3 (l) "Plan" means the plan set forth in this instrument, and known as the "Centel Directors Deferred Compensation Plan". (m) "Recombination Date" means April 23, 2004, or such later date upon which the recombination of the FON Common Stock and the PCS Common Stock occurs. (n) "Sprint" means Sprint Corporation, a Kansas corporation, and its successors. (o) "Sprint Common Stock" means the common stock of Sprint, par value $2.50 per share, prior to its recapitalization into FON Common Stock and PCS Common Stock on November 23, 1998. Each share of Sprint Common Stock was reclassified into one share of FON Common Stock and one-half of a share of PCS Common Stock. (p) "Subsidiary" means any corporation fifty percent or more of the voting stock of which is owned, directly or indirectly, by the Company. (q) "Unit" means the equivalent under this Plan of one share of Sprint Common Stock, prior to the reclassification of such common stock into FON Common Stock and PCS Common Stock on November 23, 1998. (r) "Value" of a FON Unit on any date means the Market Value on such date of one share of FON Common Stock. "Value" of a PCS Unit on any date means the Market Value on such date of one share of PCS Common Stock. 4 (s) "360 Common Stock account" means the account that was credited with units representing the common stock of Alltel Corporation before the remaining balance was transferred into the FON Tracking Stock Account and the PCS Tracking Stock account on November 30, 1999. The percentage of the 360 Common Stock account transferred to each account was based on the relative prices and trading volumes of FON Common Stock and PCS Common Stock for a period of time following the reclassification of the Sprint Common Stock. SECTION 3. Participation. Beginning March 9, 1993, no new deferrals of compensation may be made under this Plan. All amounts deferred and accrued under this Plan will be unsecured liabilities of the Company or a Subsidiary and will not be funded with any specific assets of the Company or any Subsidiary. SECTION 4. Accounts. (a) Prime rate account. Interest equivalents will be credited on the balance in a Director's prime rate account at the end of each calendar quarter that ends before the commencement of distribution of the Director's prime rate account pursuant to Section 5(b), Section 5(c), Section 5(d) or Section 5(f), whichever occurs first, and (1) at the end of the month in which the Director's termination of service as a Director ("Termination") occurs if such month is not the last month in a quarter and if distribution is made 5 following such Termination pursuant to Section 5(c), or (2) as of the Common Distribution Date (as defined in Section 5(b)) if distribution does not commence until after the Common Distribution Date. For the purpose of crediting interest, (1) interest will be computed at the prime rate of interest in effect at Citicorp, N.A., New York, New York during such period, and (2) the balance accrued in a Director's prime rate account during any period will be the average of the balances in the Director's account at the beginning of each month during the period. (b) FON Tracking Stock account. FON Units were credited to each Director's FON Tracking Stock account at the rate of one FON Unit for each Unit credited to such Director's Common Stock account at the close of business on November 23, 1998, to reflect the reclassification of the Sprint Common Stock. FON Units were credited to each Director's FON Tracking Stock account as of November 30, 1998, in an amount representing 90.17144% of the balance in such Director's 360 Common Stock account as of that date. The FON Units credited to each Director's FON Tracking Stock Account were doubled to reflect the two-for-one stock split of the FON Common Stock in the 1999 second quarter. On each record date for determination of shareowners entitled to receive a dividend on the outstanding shares of FON Common Stock, there will be 6 credited to each FON Tracking Stock account that number of additional FON Units equal to the number of shares (and fraction of a share to the nearest one-hundredth) of FON Common Stock which could have been purchased at the Market Value of FON Common Stock on that date with the amount, if paid in cash, or the value, if paid in property (other than shares of FON Common Stock), of the dividend to be paid on a number (to the nearest one- hundredth) of shares of FON Common Stock equal to the number of FON Units (to the nearest one-hundredth) in that account on such record date. Upon Termination, the Director's FON Tracking Stock account will be transferred into the Director's prime rate account as follows: (1) the FON Tracking Stock account will be valued (the "FON Account Value") at the Market Value of the FON Common Stock on the last day of business in the month that the Termination occurs; (2) an amount equal to the FON Account Value will be credited to the prime rate account; and (3) interest equivalents will be credited on the balance in the prime rate account pursuant to the terms specified in Section 4(a). The FON Tracking Stock includes FON units transferred to the FON Tracking Stock account from the PCS Tracking Stock as the result of the recombination of the PCS Common Stock and FON Common Stock. As of the Recombination Date the name of the FON Tracking Stock Account becomes the FON Stock Account. 7 (c) PCS Tracking Stock account. PCS Units were credited to each Director's PCS Tracking Stock account at the rate of one-half of a PCS Unit for each Unit credited to such Director's Common Stock account at the close of business on November 23, 1998, to reflect the reclassification of Sprint Common Stock. PCS Units were credited to each Director's PCS Tracking Stock account as of November 30, 1998, in an amount representing 9.82856% of the balance in such Director's 360 Common Stock account as of that date. The PCS Units credited to each Director's PCS Tracking Stock account were doubled to reflect the two-for-one stock split of the PCS Common Stock in the 2000 first quarter. On each record date for determination of shareowners entitled to receive a dividend on the outstanding shares of PCS Common Stock, there will be credited to each PCS Tracking Stock account that number of additional PCS Units equal to the number of shares (and fraction of a share to the nearest one-hundredth) of PCS Common Stock which could have been purchased at the Market Value of PCS Common Stock on that date with the amount, if paid in cash, or the value, if paid in property (other than shares of PCS Common Stock), of the dividend to be paid on a number (to the nearest one-hundredth) of shares of PCS Common Stock equal to the number of PCS Units (to the nearest one-hundredth) in that account on such record date. Upon Termination, 8 the Director's PCS Tracking Stock account will be transferred into the Director's prime rate account as follows: (1) the PCS Tracking Stock account will be valued (the "PCS Account Value") at the Market Value of PCS Common Stock on the last day of business in the month that the Termination occurs; (2) an amount equal to the PCS Account Value will be credited to the prime rate account; and (3) interest equivalents will be credited on the balance in the prime rate account pursuant to the terms specified in Section 4(a). As of the Recombination Date, all PCS Units held in the PCS Tracking Stock Account are converted to FON Units at the ratio of one half FON Unit for each PCS Unit and the resulting FON Units are to be transferred to the FON Stock Account and the PCS Tracking Stock Account is eliminated. (d) Transfers between Accounts. Within the limitations of this Section 4(d), a Director may elect, by executing and filing with the Company an Account Transfer Request, to (1) transfer all or any portion of his or her PCS Tracking Stock account to his or her prime rate account or to his or her FON Tracking Stock account, (2) transfer all or any portion of his or her FON Tracking Stock account to his or her prime rate account or to his or her PCS Tracking Stock account, or (3) transfer all or any portion of his or her prime rate account to his or her FON Tracking Stock account 9 or to his or her PCS Tracking Stock account. Such election shall be effective on the last day of the calendar month in which the Company receives the executed Account Transfer Request. The value of FON Units or PCS Units being transferred shall be determined by multiplying the number of FON Units or PCS Units being transferred (to the nearest one- hundredth) by the Market Value of one share of FON Common Stock or PCS Tracking Stock, as the case may be, on the effective date of the transfer. If the transfer is being made from the FON Tracking Stock account or the prime rate account to the PCS Tracking Stock account, the value of the FON Units being transferred as above determined or the amount being transferred from the prime rate account will be divided by the Market Value of one share of the PCS Common Stock on the effective date of transfer to determine the number of PCS Units (to the nearest one-hundredth) to be credited to the PCS Tracking Stock account. If the transfer is being made from the PCS Tracking Stock account or the prime rate account to the FON Tracking Stock account, the value of the PCS Units being transferred as above determined or the amount being transferred from the prime rate account will be divided by the Market Value of one share of the FON Common Stock on the effective date of transfer to determine the number of FON Units (to the nearest one-hundredth) 10 to be credited to the FON Tracking Stock account. Effective as of the Recombination Date, the PCS Tracking Stock Account is eliminated and no transfers to or from the PCS Tracking Stock Account will be allowed after that time. SECTION 5. Distributions. (a) Except as provided in Section 5(b), the timing and manner of each distribution to a Director under the Plan shall be made pursuant to such Director's Valid Election, as defined in the following sentence. A "Valid Election" means an election by the Director which (i) is irrevocable except as provided in Section 5(g), (ii) is made in writing pursuant to such rules as the Committee may determine, and (iii) provides for a distribution pursuant to paragraphs (c) or (d). (b) If a Director does not submit a Valid Election, upon the Director's Termination, the amount accrued in the Director's prime rate account will be distributed to the Director in a lump sum as soon as practicable after January 31 of the calendar year following the calendar year in which the Director's Termination occurs (such January 31 is referred to herein as the "Common Distribution Date"). 11 (c) If the Director submits a Valid Election prior to the first day of the calendar year in which such Director's Termination occurs, distributions shall be paid under the Plan commencing after the date of the Director's Termination as follows: (i) in a lump sum either as soon as practicable after the Director's Termination or as soon as practicable after the Common Distribution Date, as specified in the Valid Election; or (ii) in equal annual installment payments over a period from two (2) to twenty (20) years commencing as soon as practicable after the Director's Termination or as soon as practicable after the Common Distribution Date, as specified in the Valid Election. For purposes of determining the amount of each equal annual installment, the assumed rate of interest shall be the average of the rates calculated in accordance with Section 4(a) for the 20 quarters preceding the date on which the distribution commences. (d) If the Director submits a Valid Election on or after the first day of the calendar year in which such Director's Termination occurs but prior to December 31 of the calendar year in which such 12 Director's Termination occurs, pursuant to the terms of such Valid Election distributions shall be paid under the Plan commencing no earlier than the Common Distribution Date using one of the following methods: (i) in a lump sum as soon as practicable after the Common Distribution Date; or (ii) in equal annual installment payments over a period specified in the Valid Election from two (2) to twenty (20) years commencing as soon as practicable after the Common Distribution Date. For purposes of determining the amount of each equal annual installment, the assumed rate of interest shall be the average of the rates calculated in accordance with Section 4(a) for the 20 quarters preceding the Common Distribution Date. (e) All distributions of amounts accrued in a Director's deferred compensation account will be paid exclusively in cash. (f) In the event of a Director's death, any amounts to which the Director is entitled hereunder will be distributed to the Beneficiary(ies) entitled thereto: 13 (i) if installment payments have commenced pursuant to Section 5(c)(ii) or Section 5(d)(ii), either (1) as a continuation of the installment payments, or (2) in a lump sum equal to the present value of the remaining installments determined using the same interest rate assumption used in calculating the amount of the installments, as provided in a Valid Election; (ii) if no distribution has taken place pursuant to Section 5(c) or Section 5(d), either (1) in equal annual installments over a period from two (2) to twenty (20) years, using the same interest rate assumption set forth in Section 5(c)(ii) to calculate the amount of each installment, or (2) in a lump sum, as provided in a Valid Election; or (iii)if no provision is made in a Valid Election filed with the Company or if all of the Beneficiaries designated by a Director predecease the Director, in a lump sum payment to the estate of the 14 deceased Director as soon as practicable following the death of the Director. (g) Notwithstanding any provision to the contrary hereunder, at any time, the Director may change a Valid Election by electing to accelerate the date(s) of payment specified in such prior election, subject to the following circumstances: (i) the Committee in its sole discretion consents to the change in Valid Election, and (ii) the amounts that are subject to such accelerated payment date(s) shall be reduced by 6%. Subject to the preceding sentence, the calculation of the amount of the accelerated payment(s) and the calculation of such reduction shall be made in the sole discretion of the Committee. SECTION 6. Anti-Dilution. In the event of any change in capitalization which affects the FON Common Stock or the PCS Common Stock, such as a stock dividend, a stock distribution, a stock split-up or a subdivision or combination of shares, such adjustments, if any, as the Board in its discretion deems appropriate to reflect such 15 change shall be made with respect to the number of FON Units in each FON Tracking Stock account or the number of PCS Units in each PCS Tracking Stock account, as the case may be. SECTION 7. Beneficiaries. (a) A Director may, by filing a Beneficiary Designation with the Company during the Director's lifetime, designate (1) a Beneficiary or Beneficiaries to whom distribution of the Director's deferred compensation accounts will be made in the event of the Director's death prior to the full receipt of the Director's interests under this Plan, and (2) the proportions to be distributed to each such designated Beneficiary if there be more than one. Any such designation may be revoked or changed by the Director at any time and from time to time by filing a new Beneficiary Designation with the Company. If a designated Beneficiary dies after the Director but prior to distribution of all that designated Beneficiary's proportionate share of the Director's interest under this Plan, the then remaining balance of such share will be distributed in a lump sum payment to the estate of the designated Beneficiary. (b) If the Company, after reasonable inquiry, is unable within one year to determine whether any designated Beneficiary did in fact survive the event that entitled such Beneficiary to receive distribution 16 under this Plan, it will be conclusively presumed that such Beneficiary did in fact die prior to such event. SECTION 8. Committee. This Plan will be administered by a Committee which is the Employee Benefits Committee. Except as otherwise expressly provided in this Plan, the Committee shall have full power and authority, within the limits provided by this Plan: (a) to construe this Plan and make equitable adjustments for any mistakes or errors made in the administration of this Plan; (b) to determine all questions arising in the administration of this Plan, including the power to determine the rights of Directors participating in this Plan and their Beneficiaries and the amount of their respective interests; (c) to adopt such rules and regulations as it may deem reasonably necessary for the proper and efficient administration of this Plan consistent with its purposes; (d) to enforce this Plan in accordance with its terms and with the rules and regulations adopted by the Committee; and (e) to do all other acts which in its judgment are necessary or desirable for the proper and advantageous administration of this Plan. The Committee shall act by the vote or concurrence of a majority of its members and shall maintain a written record 17 of its decisions and actions. All decisions and actions of the Committee pursuant to the provisions of this Plan shall be final and binding upon all persons affected thereby. No member of the Committee shall have any personal liability to anyone, either as such member or as an individual, for anything done or omitted to be done in good faith in carrying out the provisions of this Plan. The Employee Benefits Committee will consist of at least five members. The chairpersons of the Employee Benefits Committee will be the vice president of Sprint who has responsibility for benefits and the senior vice president of the Company who has responsibility for corporate financial services and organizational transition. The chairpersons of the Employee Benefits Committee will appoint the remaining members of the Employee Benefits Committee. The chairpersons of the Employee Benefits Committee may remove a member and appoint another member at any time, with or without cause, upon written notice to the member being replaced. A chairperson may resign from the Employee Benefits Committee by giving 15 day written notice to the Secretary of the Company. A resignation from the Employee Benefits Committee is not a resignation of such person's position of employment with Sprint, notwithstanding the plan's description of chairperson based upon employment responsibilities with Sprint. Upon a resignation by a chairperson, or in the event the corporate position described for the chairperson does not exist, remains 18 unfilled, or if the individual filling the position is unwilling or cannot perform the role of chairperson, the Board will appoint a chairperson. A member other than a chairperson may resign by giving written notice to a chairperson. SECTION 9. Non-Alienation. No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit under this Plan shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefits except such claims as may be made by the Company or any Subsidiary. SECTION 10. Notice. Any notice authorized or required to be given to the Company under this Plan shall be deemed given upon delivery in writing, signed by the person giving the notice, to the Secretary of the Company or such other officer as may be designated by the Board. SECTION 11. Plan Modifications. The Board of the Company may at any time terminate this Plan or may, from time to time, amend any provision of this Plan in such manner and to such extent as it may, in its discretion, deem to be advisable. The Committee may also amend the Plan for the purpose of legislative or regulatory compliance or administration of the Plan. In the event this Plan is terminated, any amount remaining in any Director's account 19 will be distributed in such manner as is determined by the Committee in its sole discretion. SECTION 12. Applicable Law. This Plan shall be governed by the law of the State of Kansas. EX-10 9 exh10d.txt 10-D MISOP Exhibit 10(d) MANAGEMENT INCENTIVE STOCK OPTION PLAN 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. With respect to any option or restricted stock issued under the Plan, the Committee may determine when the option may become exercisable or the restrictions on restricted stock shall lapse, as the case may be, whenever, in the judgement of the committee, doing so would be in the best interest of the Corporation. 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. The Corporate Secretary may condition the exercise of any option on the optionee's filing with the Company a representation in such form as the Corporate Secretary considers appropriate at the time of the exercise to insure the optionee's, the grantee's, or the Company's compliance with (1) the terms of the option, (2) the terms of any policies of the Company, or (3) any laws or regulations, in each case as they may be potentially affected by the exercise of the option or the disposition of the shares of common stock acquired in its exercise. 3. Eligibility. The Committee will determine each year whether options will be granted in such year, whether participation will be elective or automatic, which class or classes of common stock will be subject to purchase by participants (which may different for different groups of employees) 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 any class of publicly traded common stock of the Company to be issued upon the exercise of a nonqualified option to purchase such 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 each class of common stock of the Company (including, with respect to the PCS Stock, both Series 1 and Series 2 PCS Stock) 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, and provided further that the total number of shares for which options may be granted will not be increased by 0.9% of the total outstanding shares of any class of common stock as of the first day of 2004 or the first day of 2005. If and when an option granted under the Plan is forfeited, cancelled, expired, or otherwise terminated without having been exercised in full, the remaining shares shall again become available for grant under the Plan. The number and kind 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 class and 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 Class and Number of Options. Each option shall be granted in lieu of a portion of the optionee's payout under the MIPs or in lieu of other incentive compensation as determined by the Committee. The Committee shall determine the class 2 and the number of shares or the manner of determining the class and number of shares available for each option, subject to the total number of shares available under the Plan for such year, and the amount or the method of determining the consideration 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 the class 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 1,250,000 shares of FON Stock (as defined in the Company's articles of incorporation). 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. Unless the Committee determines otherwise, 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 subject to purchase under the option on the date the option is granted, but in no event at a price lower than the fair market value of one share of such stock. 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: (i) with respect to options issued in lieu of annual management incentive compensation, that the total number of shares subject to an option shall become exercisable December 31 in the year of the date of grant and (ii) with respect to options issued in lieu of or as part of long-term incentive compensation ("LTIP Options") that the total number of shares subject to the option shall become exercisable in full on the third December 31 following the grant date. Unless the Committee provides otherwise, if the grantee of an LTIP Option terminates employment by reason of the grantee's death, total disability, or normal retirement (except in the case of mandatory retirement of any outside director, with respect to options outstanding at least 1 year1 on retirement), the LTIP Option shall become exercisable in full on the grantee's termination date. Unless the Committee provides otherwise, if the grantee of any other option terminates employment before the option becomes exercisable for any reason other than termination for good cause, the option shall be forfeited and any incentive compensation foregone to acquire the options shall be restored to the grantee as if an election to acquire options were not made. 3 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 the same class of 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. 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 Seasoned Shares (at defined in the 1990 Stock Option Plan). The attestation must be notarized and signed by the optionee's spouse if the spouse is a joint owner of the shares with respect to which such attestation is made and must be accompanied by such documentation as the Corporate Secretary may consider necessary to evidence actual ownership of such shares. g. Manner of Exercise. A completed exercise form and the exercise price, whether in the form of cash or stock, must be delivered to the Plan Administrator in order to exercise an option. An option shall be deemed exercised on the date such exercise form and payment are received by the Plan Administrator. h. Time for Exercise. Each option expires if it has not been exercised within its term. Once an option has expired for any reason, it can no longer be exercised. If the grantee's employment with the Company or a subsidiary of the Company is terminated, the optionee may exercise options that are exercisable on the date of termination of employment until the earlier of (1) the date on which the option expires and (2) the end of the applicable period below, beginning on the grantee's: (i) retirement: five years after the grantee's retirement date. (ii) disability (qualifying for long-term disability benefits under the Company's Basic Long-Term Disability Plan): five years after the grantee's qualification date. (iii)death: one year after the grantee's death for the estate or designated beneficiary to exercise the decedent's options. 4 (iv) involuntary termination other than for cause: the date on which the option expires. (v) voluntary termination: three months from the grantee's date of termination of employment. If a grantee's employment is terminated for a reason constituting good cause, any outstanding options granted under the Plan shall automatically terminate. "Good cause" means conduct by the grantee that reflects adversely on the grantee's honesty, trustworthiness or fitness as an employee, or the grantee's willful engagement in conduct which is demonstrably and materially injurious to the Company. If a grantee becomes associated with, becomes employed by, renders services to, or owns any interest in (other than an insubstantial interest, as determined by the Committee) any business in competition with the Company, all outstanding options granted to the grantee whether vested or unvested shall automatically terminate and shares of restricted stock received upon the exercise of an option pursuant to Section 6 hereof that continue to be restricted shall be forfeited. For purposes of this Plan, an employee who becomes employed by certain non- subsidiary affiliates designated by the Committee (each, together with their subsidiaries, an "Affiliated Entity"), shall not, except with respect to incentive stock options, be considered to have terminated employment with the Company or a subsidiary of the Company until his employment is terminated with all Affiliated Entities without becoming re-employed by the Company or its subsidiaries. i. Restricted Stock. Certain grantees may elect to receive restricted shares in connection with an exercise of an option by the grantee, as provided in Section 6 hereof. j. Beneficiary Designations. The grantee of an option may designate a beneficiary or beneficiaries to exercise unexpired options held by the grantee and to own shares issued upon any such exercise after the grantee's death without order of any probate court or otherwise. A beneficiary so designated may exercise an option upon presentation to the Company of evidence satisfactory to the Corporate Secretary of (1) the beneficiary's identity and (2) the death of the grantee. A grantee may change any beneficiary designation of options held by the grantee at anytime before his death but may not do so by testamentary designation in his will or otherwise. Beneficiary designations must be made in writing on a form provided by the Corporate Secretary. Beneficiary designations shall become effective on the date that the form, properly completed, signed and notarized, is received by the Secretary. Any designation of a beneficiary with respect to any option shall be deemed canceled upon the transfer of such option to a trust in accordance with the terms of the Plan. k. Change in Stock, Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off, or other change in the corporate structure affecting the shares, such 5 adjustment shall be made in the aggregate number and class of shares that may be delivered under the Plan, in the number and class of shares that may be subject to an option granted to any individual in any year under the Plan, and in the number, class, and option price of shares subject to outstanding options granted under the Plan, as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any option shall always be a whole number. l. Limitations on Transfer. Options may not be transferred, levied, garnished, executed upon, subjected to a security interest, or assigned to any person other than the grantee, except that the grantee may transfer an option to a trust of the kind described in Section 6(b). Any such trust as transferee of an option may not (1) dispose of shares received in an exercise of such options until such shares are validly registered or exempt from registration under any applicable exemption from registration under the Securities Act of 1933, as amended, in the opinion of the Corporate Secretary or (2) while continuing to hold options issued under this plan, be amended to change beneficiaries to persons other than those permissible under Section 6(b). Documents evidencing the transfer of any option and the identity of the transferee shall be in such form as may be required by the Corporate Secretary. 6. Restricted Stock. Certain grantees, as determined by the Committee, may elect to receive restricted shares upon payment for the exercise of an option in the form of unrestricted common stock. The grantee will receive the same number of unrestricted shares as the number of shares surrendered to pay the exercise price, while the shares received in excess of the number surrendered to pay the exercise price may be restricted. The Company shall be authorized to issue restricted shares of common stock upon such exercises of stock options, subject to the following conditions: a. The grantee shall elect a vesting period for the restricted common stock to be received upon exercise of the option of between 6 months and 10 years, subject to rules and procedures established by the Plan Administrator. At any time on or before the 13th calendar month preceding the date on which restrictions on shares of restricted stock would otherwise lapse, the grantee may elect to extend the vesting period on all but not a portion of such shares by six months or any multiple of six months. b. The grantee who receives restricted stock may not sell, transfer, assign, pledge or otherwise encumber or dispose of shares of restricted stock until such time as all restrictions on such stock have lapsed except to a trust of which the grantee, the grantee's spouse, or descendants (by blood, adoption, or marriage) of the grantee are the primary beneficiaries and which is a grantor trust treated as owned by the grantee under Subchapter J of the Internal Revenue Code, upon the following terms: (A) the Company receives, prior to such transfer, a true copy of the trust agreement and an opinion from grantee's counsel (1) that 6 the trust will be treated as a grantor trust owned by the grantee under Subchapter J of the Internal Revenue Code at all times until the restrictions on such stock lapse or the stock is forfeited under the terms of its grant, (2) that the terms of the trust provide that upon the forfeiture of the restricted stock under the terms of its grant or the earlier termination of the trust for whatever reason, ownership of the restricted stock shall revert to the grantee or to the Company, (3) that the trustee of such trust may not, prior to the lapsing of restrictions on such stock, sell, transfer, assign, pledge, or otherwise encumber or dispose of shares of restricted stock except to the Company or to the grantee, subject to the restrictions provided for in this Plan, and (4) that, until the restrictions lapse, the trustee is not authorized to incur liabilities on behalf of the trust, other than to the beneficiaries of the trust; and (B) the grantee and the trustee of the trust shall execute stock powers in blank to be held in the custody of the Company; and (C) the Corporate Secretary of the Company may, in his discretion, enforce the foregoing transfer restrictions by maintaining physical custody of the certificate or certificates representing such shares of restricted stock, by placing a restrictive legend on such certificates, by requiring the grantee and the trustee to execute other documents as a pre-condition to such transfer, or otherwise. c. A grantee who elects to receive restricted common stock upon an exercise shall have the right to satisfy tax withholding obligations in the manner provided in Section 8 hereof. d. 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 for good cause, in which case all restrictions lapse. If restricted shares are forfeited, the grantee or his representative shall sign any document and take any other action required to assign said restricted shares back to the Company. e. The grantee will have all the rights of a stockholder with respect to shares of restricted stock received upon the exercise of an option, including the right to vote the shares of stock and the right to dividends on the stock. Unless the Plan Administrator establishes alternative procedures, the shares of restricted stock will be registered in the name of the grantee and the certificates evidencing such shares shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the award and shall be held in escrow by the Company. The grantee shall execute a stock power or powers assigning the shares of restricted stock back to the Company, which stock powers shall be held in escrow by the Company and used only in the event of the forfeiture of any of the shares of restricted stock. A certificate 7 evidencing unrestricted shares of common stock shall be issued to the grantee promptly after the restrictions lapse on any restricted shares. f. The Plan Administrator shall have the discretion and authority to establish any rules in connection with 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 to purchase shares of any class of common stock (the "original option") with reload rights and pays for the exercise of the original option by surrendering common stock of the same class, the optionee shall receive a new option ("reload option") to purchase the number and class 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 class of stock on the date of the exercise of the original option. If, in the judgment of the Company's Corporate Secretary, the number of shares available on the exercise of the original options falls below a number sufficient to provide for the grant of reload options and for other purposes under the Plan, the Company's Corporate Secretary may authorize the issuance of reload options from any other plan of the Company's under which sufficient shares are authorized but not issued. b. Minimum Purchase Required. A reload option will be granted only if the exercise of the original option is an exercise of at least 25% of the total number of shares granted under the original option (or an exercise of all the shares remaining under the original option if less than 25% of the shares remain to be exercised). c. Other Requirements. A reload option: (1) will not be granted if the market value of the common stock of the Company on the date of exercise of the original option is less than the exercise price of the original option; (2) will not be granted if the grantee is not, on the exercise date, an employee of Sprint or a Sprint subsidiary; (3) will not be granted if the original option is exercised less than one year before the expiration of the original option; and (4) with respect to options transferred by the grantee to another person in accordance with this Plan, reload options shall be granted to the grantee upon a stock-for-stock exercise by the optionee to the same extent as if the grantee had exercised the option in a similar manner. d. Term of Option. The reload option shall expire on the same date as the original option. 8 e. Type of Option. The reload option shall be a nonqualified option to purchase shares of the same class of shares as the original 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, except in a Permitted Disposition (as defined in the 1990 Stock Option Plan). The reload option shall become exercisable in full if the optionee terminates employment by reason of the grantee's death, disability, or normal retirement. 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 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 of the same class (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 or upon the lapse of restrictions, a number of shares having a fair market value (as defined 9 herein) on the Tax Date equal to the amount to be withheld. The amount of tax withholding to be satisfied by withholding shares from the option exercise is limited to the minimum amount of taxes, including FICA taxes, required to be withheld under federal, state and local law. Such election is irrevocable after the Tax Date. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. If no timely election is made, cash must be delivered to satisfy all tax withholding requirements. If the exercise of an option by an optionee other than the grantee after transfer of the option pursuant to this plan from the grantee to the optionee results in a withholding obligation on the part of the grantee, the grantee may elect to satisfy his withholding obligation by delivery of shares to the Company as permitted in clause (i) above. 9. Acceleration on a Change in Control a. With respect to any LTIP Option outstanding for at least one year or any restricted shares issued under the Plan the options shall (subject to the 280G limitations applicable under the 1990 Stock Option Plan) become exercisable in full and the restrictions shall lapse, as the case may be, upon a change in control of the Company. b. For purposes of this Plan, a "change in control of the Company" shall be deemed to have occurred whenever a "Change in Control" occurs for purposes of the Company's 1990 Stock Option Plan, as amended from time to time. 10. Miscellaneous. a. Amendment. The Company reserves the right to amend the Plan at any time by action of the Board of Directors provided that no such amendment may materially and adversely affect any outstanding stock options without the consent of the optionee, and provided that, without the approval of the stockholders, no such amendment may increase the total number of shares reserved for the purposes of the Plan. b. Effectiveness of Plan. This Plan shall be effective as of February 18, 1995, subject to approval of Stockholders of the Company prior to February 18, 1996. c. Rights in Securities. All certificates for shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No optionee or optionee's 10 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 7(g) 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. 11 EX-10 10 exh10e.txt 10-E LTIP Exhibit 10(e) 1997 LONG-TERM STOCK INCENTIVE PROGRAM Section 1. Purpose. The purposes of the Sprint 1997 Long-Term Stock Incentive Program (the "Plan") are to encourage Directors of Sprint Corporation (the "Company") and officers and selected key employees of the Company and its Affiliates to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity, thus enhancing the value of the Company for the benefit of stockholders, and to enhance the ability of the Company and its Affiliates to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. Section 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any Person that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. (b) "Award" shall mean any Option, Restricted Stock Award, Performance Share, Performance Unit, Dividend Equivalent, Other Stock Unit Award, or any other right, interest, or option relating to Shares granted pursuant to the provisions of the Plan. (c) "Award Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award granted hereunder and signed by both the Company and the Participant. (d) "Board" shall mean the Board of Directors of the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" means the Compensation Committee of the Board, composed of not less than two directors each of whom is a Non-Employee Director. (g) "Company" shall mean Sprint Corporation. (h) "Non-Employee Director" shall have the meaning provided for in Rule 16b-3(b)(3) under the Exchange Act, 17 CFR ss.240.16b-3(b)(3), as amended. (i) "Dividend Equivalent" shall mean any right granted pursuant to Section 14(h) hereof. (j) "Employee" shall mean any employee of the Company or of any Affiliate. (k) "Executive Officer" shall mean an officer of the Company that is subject to the liability provisions of Section 16 of the Exchange Act. (l) "Fair Market Value" shall mean, with respect to any property, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee; except that the "Fair Market Value" of a share of common stock of the Company for purposes of Section 11 shall mean the average of the high and low prices of the common stock for composite transactions, as published by major newspapers, for the date in question or, if no trade of the common stock shall have been made on that date, the next preceding date on which there was a trade of common stock. (m) "Grant Date" shall mean the date as of which an Award is made to a Participant. For an Option, the Grant Date cannot be a date earlier than the date of the action granting the Option. (n) "Incentive Stock Option" shall mean an Option granted under Section 6 hereof that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. (o) "Normal Retirement" with respect to any Employee, shall mean Retirement at or later than an age qualifying as "normal retirement" under the Company's defined benefit pension plan, whether or not the person is a participant in that plan and, with respect to any Outside Director, termination of service as an Outside Director at the mandatory retirement age or term limit for members of the Board under its policies, as amended from time to time, even if the Outside Director serves on the board of an Affiliate. (p) "Non-Qualified Stock Option" shall mean an Option granted to a Participant under Section 6 hereof that is not intended to be an Incentive Stock Option. (q) "Option" shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. (r) "Other Stock Unit Award" shall mean any right granted to a Participant by the Committee pursuant to Section 9 hereof. (s) "Outside Director" shall mean a member of the Board who is not an Employee of the Company or of any Affiliate. (t) "Participant" shall mean an Employee or Outside Director who is selected to receive an Award under the Plan. (u) "Performance Award" shall mean any Award of Performance Shares or Performance Units pursuant to Section 8 hereof. 2 (v) "Performance Period" shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. (w) "Performance Share" shall mean any grant pursuant to Section 8 hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. (x) "Performance Unit" shall mean any grant pursuant to Section 8 hereof of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. (y) "Person" shall mean any individual, corporation, partnership, association, joint- stock company, trust, unincorporated organization, or government or political subdivision thereof. (z) "Resignation with Good Reason" shall mean resignation of a Participant after a Change in Control for the reasons specified in the Participant's employment agreement, or in the event a Participant has no employment agreement, or the employment agreement has no provision for resignation with good reason following a Change in Control, "Resignation with Good Reason" shall mean resignation of a Participant following the occurrence, after a Change in Control, of any one or more of the following events or circumstances without that Participant's prior written consent unless each of the events or circumstances are corrected in all material respects: (i) a substantial adverse change in the nature or status of the Participant's duties from those in effect immediately before the Change in Control, any reduction in job grade or any substantial adverse alteration of the Participant's title from that in effect immediately before the Change in Control; (ii) a reduction in the Participant's base salary as in effect immediately before the Change in Control, except for across-the- board salary reductions similarly affecting all officers of the Company and all officers of any person in control of the Company; (iii)the failure, without the Participant's consent, to pay to the Participant any portion of the Participant's current compensation within seven days of the date it is due, except pursuant to an across-the- board compensation deferral similarly affecting all officers of the Company and all officers of any person in control of the Company; (iv) (A) the relocation of the Company's principal executive offices to a location outside the metropolitan area in which such offices are located immediately before the Change in Control; or (B) the Company's 3 requiring the Participant to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with Participant's present business travel obligations; or (C) the Company's requiring the Participant to travel to an extent substantially inconsistent with the Participant's business travel obligations as in effect immediately before the Change in Control; (v) a substantial and involuntary change in the physical conditions under or in which the Participant is expected to perform the Participant's duties, other than a change similarly affecting all officers of the Company and all officers of any person in control of the Company; (vi) the Company's failure to continue in effect any compensation plan in which the Participant participated immediately before the Change in Control and that is material to the Participant's total compensation, including but not limited to the Management Incentive Plan or any substitute plans adopted before the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to the terminated plan, or the Company's failure to continue the Participant's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Participant's participation relative to other Participants, as existed at the time of the Change in Control; (vii)the Company's failure to continue to provide the Participant with benefits substantially similar in the aggregate to those the Participant enjoyed under any of the Company's benefit plans in which the Participant was participating at the time of the Change in Control; the taking of any action by the Company that would directly or indirectly materially reduce any of such benefits or deprive the Participant of any material fringe benefit enjoyed by Participant at the time of the Change in Control; or the failure by the Company to provide the Participant with the number of paid vacation days to which the Participant is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; unless, in any of the foregoing events in this clause (viii), an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such benefits; (viii) the Company's failure to obtain a satisfactory agreement from any successor to assume and agree to perform any employment agreement between the Participant and the Company in effect at the time of the Change in Control; or (ix) the Company's attempt to terminate the Participant's employment without complying with the procedures set forth in any employment agreement between the Participant and the Company in effect as of the Change in Control. (aa) "Restricted Stock" shall mean any Share issued with restrictions on the holder's right to sell, transfer, pledge, or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the right to vote such Share, and the right 4 to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate. (bb) "Restricted Stock Award" shall mean an award of Restricted Stock under Section 7 hereof. (cc) "Retirement" shall mean, in the case of an Employee, termination of employment by an Employee who is entitled to receive payment of pension benefits in accordance with the Sprint Retirement Pension Plan or the Employee's employer's defined benefit pension plan, if any, immediately after the Employee's Termination Date and, in the case of an Outside Director, termination of service as an Outside Director after five years of service as an Outside Director. (dd) "Seasoned Shares" means with respect to any Person, shares of common stock of the Company (i) acquired by such Person from the Company and owned by such Person for a period of at least six months; or (ii) acquired by such Person other than from the Company. (ee) "Senior Officer" shall mean any Employee holding the office of Vice President or higher with the Company. (ff) "Shares" shall mean shares of Series 1 FON common stock of the Company, $2.00 par value (the "FON Stock"), and such other securities of the Company as the Committee may from time to time determine. Before the Recombination, Shares included FON Stock and Series 1 PCS Stock (the "PCS Stock") (gg) "Stockholders Meeting" shall mean the annual meeting of stockholders of the Company in each year. (hh) "Termination Date" shall mean (i) with respect to any Employee, the date on which the Employee ceases to be employed by the Company, or any Affiliate, and ceases to receive severance benefits under any applicable plan for the payment of severance benefits by the employing entity, or (ii) with respect to any Outside Director, the date on which the Outside Director's service as a director ends. (ii) "Termination for Cause" shall mean, in the case of an Employee, an involuntary termination of employment because (i) the Employee has materially breached the Company's Code of Ethics, or the code of ethics of the employer; (ii) the Employee has materially breached the Sprint Employee Agreement Regarding Property Rights and Business Practices (as it may be amended and renamed from time to time); (iii) the Employee has engaged in acts or omissions constituting dishonesty, intentional breach of a fiduciary obligation, or intentional acts of wrongdoing or misfeasance; or (iv) the Employee has acted intentionally and in bad faith in a manner that results in a material detriment to the assets, business, or prospects of the employer. 5 In determining whether any particular Employee was Terminated for Cause, the characterization of the reason for termination used for purposes of other employee benefit plans of the Company or the Employee's employer shall apply to this Plan. In the case of an Outside Director, "Termination for Cause" means removal for cause from service as a director. (jj) "Total Disability" shall mean, in the case of an Employee, termination of employment under circumstances that would make the Employee eligible to receive benefits under the employer's long-term disability plan and, in the case of Outside Directors, termination of service as an Outside Director under circumstances that would make the Outside Director eligible to receive Social Security disability benefits. (kk) "1989 Plan" shall mean the Long-Term Stock Incentive Program adopted by the Company's stockholders in 1989, as amended. (ll) "total outstanding Shares" means, with respect to the FON common stock, the total shares outstanding of FON Stock and Series 2 FON common stock. (mm) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time and as interpreted and implemented by the rules and regulations issued thereunder. Section 3. Administration. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Participants to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; provided, however, that Shares subject to Options granted to any individual Participant during any calendar year shall not exceed a total of 7,500,000 shares of FON Stock; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, or canceled or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares and other property and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant; (vii) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (viii) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Decisions of the Committee shall be final, conclusive and binding upon all persons, including the Company, any Participant, any stockholder, and any employee of the Company or of any Affiliate. 6 The Corporate Secretary shall have the discretion and authority to establish any and all procedures, forms, and rules of a ministerial nature that the Corporate Secretary considers necessary or desirable for the orderly administration of the Plan and shall have other administrative responsibilities as set forth elsewhere in the Plan. The Committee shall appoint an administrator of the Plan for purposes of interpreting and administering the provisions of Section 11 of the Plan. For purposes of this section, shares granted pursuant to the last sentence of Section 4(a) shall be counted in the year granted, not in the year first exercisable. Section 4. Shares Subject to the Plan. (a) Subject to adjustment as provided in Section 4(b), the total number of Shares available for grant under the Plan in a calendar year shall be nine tenths of one percent (0.9%) of the total outstanding Shares as of the first day of calendar year 1997, plus a number of Shares equal to the number of Shares available for grant under the 1989 Plan as of the close of business on the date of the 1997 Stockholders Meeting, for calendar year 1997, and one and one-half percent (1.5%) of the total outstanding Shares as of the first day of each such year for which the Plan is in effect beginning with calendar year 1998 and ending with calendar year 2007 plus 10,000,000 shares of FON Stock; provided that such number shall be increased in any year by the number of Shares available for grant hereunder in previous years but not covered by Awards granted hereunder in such years; and provided further, that no more than 10,000,000 shares of FON Stock shall be cumulatively available for the grant of Incentive Stock Options under the Plan. In addition, any Shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for grants under the Plan. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Shares subject to any Award granted hereunder or the Award itself are forfeited, cancelled, expired, or otherwise terminated without the issuance of such Shares or of other consideration in lieu of such Shares pursuant to the terms of the Award, the Shares subject to such Award, to the extent of any such forfeiture, cancellation, expiration, or termination, shall again be available for grant under the Plan. The number of shares with respect to which Options are granted in any calendar year may exceed the total number of Shares available for grant under the Plan in such year (taking into account all other Awards granted in such year), provided that the terms of the Options provide that they may only be exercised to the extent of the number of Shares available for grant at the time of exercise, and provided further that this sentence shall not be construed to increase the total number of shares reserved for issuance pursuant to the Plan. (b) In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off, or other change in the corporate structure affecting the Shares, such adjustment shall be made in the aggregate number and class of Shares which may be delivered under the Plan, in the number and class of shares that may be subject to an option granted to any individual in any year under the Plan, in the number, class and option price of Shares subject to outstanding 7 Options granted under the Plan, and in the value of, or number or class of Shares subject to, Awards granted under the Plan as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of Shares subject to any Award shall always be a whole number. Section 5. Eligibility. Any Employee or Outside Director shall be eligible to be selected as a Participant. Section 6. Stock Options. Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option granted to a Participant under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable: (a) Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee in its sole discretion; provided that such exercise price shall not be less than the Fair Market Value of the Share on the date of the grant of the Option. (b) Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option shall be exercisable after the expiration of ten years from the date the Option is granted. (c) Exercisability. Options shall be exercisable at such time or times as determined by the Committee at or subsequent to grant. Unless otherwise determined by the Committee at or subsequent to grant, no Incentive Stock Option shall be exercisable until the first anniversary date of the granting of the Incentive Stock Option. (d) Method of Exercise. Subject to the other provisions of the Plan and any applicable Award Agreement, any Option may be exercised by the Participant in whole or in part at such time or times, and the Participant may pay the exercise price in such form or forms, including, without limitation, payment by delivery of cash, Shares or other consideration (including, where permitted by law and the Committee, Awards) having a Fair Market Value on the exercise date equal to the total exercise price, or by any combination of cash, Shares and other consideration, as the Committee may permit. (e) Incentive Stock Options. In accordance with rules and procedures established by the Committee, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Stock Options held by any Participant that are exercisable for the first time by such Participant during any calendar year under the Plan (and under any other benefit plans of the Company or of any parent or subsidiary corporation of the Company) shall not exceed $100,000 or, if different, the maximum limitation in effect at the time of grant under Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder. The terms of any Incentive Stock Option granted hereunder shall comply in all respects with the provisions of 8 Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder. (f) Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the shares to be issued upon an Option's exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right so to provide after the time of grant, or the Committee may provide that the Participant may elect to receive Restricted Stock upon an Option's exercise. (g) Standard Terms of Options. Unless the Committee, or a Senior Officer or committee of Senior Officers under Section 14(j), specifies otherwise, the terms set forth in this Section 6(g) shall apply to all Options granted under this Plan. Any Option Award Agreement that incorporates the terms of the Plan by reference shall be deemed to have incorporated the terms set forth in this Section 6(g) to the extent that these terms are not in conflict with those terms explicitly set forth in the Option Award Agreement. (i) Each Option shall be a Non-Qualified Stock Option. (ii) The Grant Date of each Option shall be the date of the Committee's action granting the Option, or the date of the action by the Senior Officer or committee of Senior Officers under Section 14(j). (iii)The Exercise Price of each Option shall be the Fair Market Value of one Share of the class of common stock subject to the Option on the Grant Date. (iv) The Option Period of each Option shall end on the close of business on the tenth anniversary of the Option's Grant Date. The Option shall not be exercisable after its Option Period. (v) Each Option shall become exercisable with respect to 25% of the number of Shares subject to the Option on each of the first four anniversaries of the Grant Date if, on such anniversary date, the Participant shall have been continuously employed by the Company or an Affiliate, or continuously served as an Outside Director, from the Grant Date. (vi) Each Option may be exercised after the Participant's Termination Date only with respect to the number of Shares that were exercisable on the Participant's Termination Date (including Options exercisable under Section 6(g)(vii)). A Participant may exercise an Option before the expiration of the Option Period with respect to those shares during a limited period beginning on the Participant's Termination Date and ending (1) on the fifth anniversary of the Participant's Termination Date, if the Participant's service as an Outside Director or employment terminated by reason of the Participant's Retirement or Total Disability; (2) on the first anniversary of the Participant's Termination Date if the Participant's employment or service as an Outside Director terminated by reason of the Participant's death; (3) on the day three months following the Participant's Termination Date if the Participant terminated employment or service as an Outside Director voluntarily, for a reason other than Retirement, or involuntarily for a reason not constituting Termination for Cause. 9 If a Participant's employment or service as an Outside Director has been Terminated for Cause, the Participant shall forfeit all outstanding Options immediately on the Participant's Termination Date. An Option granted pursuant to the last sentence of Section 4(a) that was not exercisable on the Participant's Termination Date solely because the number of shares covered by the Option exceeded the number of shares available for issuance may be exercised during the period described above to the extent that shares become available for issuance during such period. (vii)Each Option shall become exercisable immediately following the Participant's Termination Date if the reason for termination was the Participant's (1) death or Total Disability; or (2) Normal Retirement and, for Participants other than Outside Directors, the Option's Grant Date was at least one year before the Participant's Termination Date. (viii) Except with respect to Options Granted to Executive Officers, each Option shall become immediately exercisable in full upon a Change in Control if (1) the Change in Control occurs at least one year after the Option's Grant Date and (2) the Participant has been an Outside Director or Employee continuously from the Option's Grant Date to the date of the Change in Control. With respect to Options Granted to Executive Officers, each Option shall become immediately exercisable in full upon the Executive Officer's involuntary termination that is not a Termination for Cause, or upon the Executive Officer's Resignation with Good Reason, following a Change in Control if (1) the Change in Control occurs at least one year after the Option's Grant Date and (2) the Participant has been an Employee continuously from the Option's Grant Date to the date of the Change in Control. If the acceleration of exercisability under this Section 6(g)(viii), together with all other payments or benefits contingent on the Change in Control within the meaning of Code Section 280G, results in any portion of such payments or benefits not being deductible by the Company as a result of the application of Code Section 280G, the benefits shall be reduced until the entire amount of the benefits is deductible. The reduction shall be effected by the exclusion of grants of Options or other Awards, or portions thereof, in the order elected by Participant until no portion of such benefits is rendered non-deductible by application of Code Section 280G. (ix) Upon the death of a Participant, all Options held by the Participant on the Participant's date of death, to the extent exercisable under their terms, may be exercised by (i) the executor or administrator of the Participant's estate, (ii) the Person or Persons to whom the Participant's rights under the Options pass by the Participant's will or the laws of descent and distribution, or (iii) the beneficiary or beneficiaries designated by the Participant in accordance with Section 14(a). Section 7. Restricted Stock. 10 (a) Issuance. Restricted Stock Awards may be issued hereunder to Participants, for such consideration as the Committee may determine, not less than the minimum consideration required by applicable law, either alone or in addition to other Awards granted under the Plan. The provisions of Restricted Stock Awards need not be the same with respect to each recipient. (b) Registration. Any Restricted Stock issued hereunder may be evidenced in such manner as the Committee in its sole discretion shall deem appropriate, including, without limitation, book- entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock awarded under the Plan, such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award or shall be held in escrow by the Company until all restrictions on the Restricted Stock have lapsed. (c) Forfeiture. Except as otherwise determined by the Committee at the time of grant, upon termination of employment for any reason during the restriction period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and reacquired by the Company; provided that in the event of a Participant's retirement, permanent disability, other termination of employment or death, or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant's shares of Restricted Stock. (d) Standard Terms of Restricted Stock. Unless the Committee, or a Senior Officer or committee of Senior Officers under Section 14(j), specifies otherwise, the terms set forth in this Section 7(d) shall apply to all shares of Restricted Stock granted under this Plan. Any Award Agreement relating to a grant of Restricted Stock that incorporates the terms of the Plan by reference shall be deemed to have incorporated the terms set forth in this Section 7(d) to the extent that these terms are not in conflict with those terms explicitly set forth in the Award Agreement. (i) The Grant Date of each share of Restricted Stock shall be the date of the Committee's action granting the shares, or the date of the action by the Senior Officer or committee of Senior Officers under Section 14(j). (ii) Except as provided in Section 7(d)(iii), no restricted stock shall become free of restrictions before the first anniversary date of the granting of the Restricted Stock. The Participant may extend the period of restriction on such shares (by any period or any multiple of that period determined by the Corporate Secretary) by election made at least 13 months before the date on which restrictions on shares of Restricted Stock would otherwise lapse. (iii)The restrictions on each share of Restricted Stock shall lapse immediately following the Participant's Termination Date if the reason for termination was the Participant's death or Total Disability. For grants of Restricted Stock to Employees, restrictions on each share shall also lapse immediately following (1) the date on which the Employee 11 attains age 65, but only if the Restricted Stock has been outstanding for at least one year, or (2) the first anniversary of the Grant Date if the Employee is age 65 or older on that anniversary date. For grants of Restricted Stock to Outside Directors, restrictions on each share shall also lapse immediately following the date the Outside Director fails to be elected or fails to be re-nominated to the Board, or the date of the Outside Director's Normal Retirement. If, before the restrictions on shares of Restricted Stock lapse, the Participant ceases to be employed by the Company or an Affiliate for any other reason, the shares of Restricted Stock shall be forfeited and the Participant or his representative shall sign any document and take any other action required to assign the Restricted Stock back to the Company. (iv) Except with respect to shares of Restricted Stock granted to Executive Officers, the restrictions on each share shall lapse immediately upon a Change in Control if (1) the Change in Control occurs at least one year after the Grant Date for the shares and (2) the Participant has been an Outside Director or Employee continuously from the Share's Grant Date to the date of the Change in Control. With respect to shares of Restricted Stock Granted to Executive Officers, the restrictions on each share shall lapse immediately upon the Executive Officer's involuntary termination that is not a Termination for Cause, or upon the Executive Officer's Resignation with Good Reason, following a Change in Control if (1) the Change in Control occurs at least one year after the Share's Grant Date and (2) the Participant has been an Employee continuously from the Share's Grant Date to the date of the Change in Control. If the acceleration of vesting under this Section 7(d)(iv), together with all other payments or benefits contingent on the Change in Control within the meaning of Code Section 280G, results in any portion of such payments or benefits not being deductible by the Company as a result of the application of Code Section 280G, the benefits shall be reduced until the entire amount of the benefits is deductible. The reduction shall be effected by the exclusion of grants of shares of Restricted Stock or other Awards, or portions thereof, in the order elected by Participant until no portion of such benefits is rendered non-deductible by application of Code Section 280G. (v) If cash dividends are paid on Restricted Stock, Participants who hold Restricted Stock on the dividend record date will receive, on the dividend payment date, the cash dividend. If non-cash dividends are paid on the Restricted Stock, and the Participant holds the Restricted Stock on the dividend record date, the Participant's vesting date of the non-cash dividend will be the same as the Restricted Stock to which the non-cash dividend was attributable. (vi) On the vesting date, the Company will withhold from those shares of Restricted Stock that otherwise would be received upon the lapse of restrictions, a number of whole shares having a fair market value equal to the amount of FICA, Medicare, or any other required withholding then due, unless the Participant elects to pay the withholding obligation in cash or by delivering to the Corporate Secretary Seasoned Shares. 12 Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. Section 8. Performance Awards. Performance Awards may be issued hereunder to Participants, for such consideration as the Committee may determine, not less than the minimum consideration required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Except as provided in Section 12, Performance Awards will be paid only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, other property or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance levels to be achieved for each Performance Period and the amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis. Section 9. Other Stock Unit Awards. (a) Stock and Administration. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property ("Other Stock Unit Awards") may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of property as the Committee shall determine. Subject to the provisions of the Plan, the Committee shall, subject to Section 3, have sole and complete authority to determine the Employees or Outside Directors to whom and the time or times at which such Awards shall be made, the number of Shares to be granted pursuant to such Awards, and all other conditions of the Awards. The provisions of Other Stock Unit Awards need not be the same with respect to each recipient. (b) Terms and Conditions. Subject to the provisions of this Plan and any applicable Award Agreement, Shares subject to Awards made under this Section 9 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses. Shares granted under this Section 9 may be issued for such consideration as the Committee may determine, not less than the minimum consideration required by applicable law. Shares purchased pursuant to a purchase right awarded under this Section 9 shall be purchased for such consideration as the Committee shall in its sole discretion determine, which shall not be less than the Fair Market Value of such Shares as of the date such purchase right is awarded. 13 (c) Standard Terms of Other Stock Unit Awards. Unless the Committee, or a Senior Officer or committee of Senior Officers under Section 14(j), specifies otherwise, the terms set forth in this Section 9(c) shall apply to all shares of Other Stock Unit Awards granted under this Plan. Any Award Agreement relating to a grant of Other Stock Unit Awards that incorporates the terms of the Plan by reference shall be deemed to have incorporated the terms set forth in this Section 9(c) to the extent that these terms are not in conflict with those terms explicitly set forth in the Award Agreement. (i) The Grant Date of each Other Stock Unit Award shall be the date of the Committee's action granting the Award, or the date of the action by the Senior Officer or committee of Senior Officers under Section 14(j). (ii) The Company will deliver the shares of stock underlying the Other Stock Unit Award on a delivery date elected by the Participant, which may only be on or after the vesting date. Except as provided in Section 9(c)(iii), no Other Stock Unit Award shall vest before the first anniversary date of the granting of the Other Stock Unit Award. The Participant may extend the date on which the delivery of shares underlying the Other Stock Unit Award would otherwise occur (by any period or any multiple of that period determined by the Corporate Secretary) by an election made at least 13 months before the then current delivery date. (iii)The vesting date for Other Stock Unit Awards shall accelerate immediately following the Participant's Termination Date if the reason for termination was the Participant's death or Total Disability. For grants of Other Stock Unit Awards to Employees, the vesting date shall accelerate immediately following (1) the date on which the Employee attains age 65, but only if the Other Stock Unit Award has been outstanding for at least one year, or (2) the first anniversary of the Grant Date if the Employee is age 65 or older on that anniversary date. For grants of Other Stock Unit Awards to Outside Directors, the vesting date shall accelerate immediately following the date the Outside Director fails to be elected or fails to be re-nominated to the Board, or the date of the Outside Director's Normal Retirement. If the Participant's delivery date is the same as the original vesting date, the delivery date will also accelerate to that date. (iv) Except with respect to Other Stock Unit Award Granted to Executive Officers, the Award shall vest immediately upon a Change in Control if (1) the Change in Control occurs at least one year after the Grant Date for the Award and (2) the Participant has been an Outside Director or Employee continuously from the Award's Grant Date to the date of the Change in Control. If the Participant's delivery date is the same as the original vesting date, the delivery date will also accelerate to that date. With respect to shares of Other Stock Unit Award Granted to Executive Officers, the Award shall vest immediately upon the Executive Officer's involuntary termination that is not a Termination for Cause, or upon the Executive Officer's Resignation with Good Reason, following a Change in Control if (1) the Change in Control occurs at least one year after the Award's Grant Date and (2) the Participant has been an Employee continuously from the Award's Grant 14 Date to the date of the Change in Control. If the Participant's delivery date is the same as the original vesting date, the delivery date will also accelerate to that date. If the acceleration of vesting under this Section 9(c)(iv), together with all other payments or benefits contingent on the Change in Control within the meaning of Code Section 280G, results in any portion of such payments or benefits not being deductible by the Company as a result of the application of Code Section 280G, the benefits shall be reduced until the entire amount of the benefits is deductible. The reduction shall be effected by the exclusion of grants of Other Stock Unit Awards or other Awards, or portions thereof, in the order elected by Participant until no portion of such benefits is rendered non-deductible by application of Code Section 280G. (v) If cash dividends are paid on the underlying class of stock attributable to an Other Stock Unit Award, Participants who hold Other Stock Unit Awards on the dividend record date will receive, on the dividend payment date, a cash payment equal to the amount of dividend paid. If non-cash dividends are paid on the underlying class of stock, and the Participant holds the Other Stock Unit Award on the dividend record date, the Participant's vesting date and the delivery date of the non-cash dividend will be the same as the Other Stock Unit Award to which the underlying stock is attributable. (vi) If the Participant elects a delivery date after the vesting date, on the vesting date the Participant must pay any FICA, Medicare, or any other required withholding then due. In that event, the Company will withhold from those shares under the Other Stock Unit Award, a number of whole shares having a Fair Market Value equal to the amount of FICA, Medicare, or any other required withholding then due, unless the Participant elects to pay the withholding obligation in cash or by delivering to the Corporate Secretary seasoned Shares. On the delivery date, the Company will withhold from those shares otherwise deliverable under the Other Stock Unit Award, a number of whole shares having a Fair Market Value equal to the amount of FICA, Medicare, or any other required withholding then due, unless the Participant elects to pay the withholding obligation in cash or by delivering to the Corporate Secretary Seasoned Shares. Any fractional share amount and any additional withholding not paid by the withholding or surrender of shares must be paid in cash. Section 10. [Deleted] Section 11. Outside Directors' Shares Outside Directors may elect, on an annual basis, to purchase shares of any class of common stock of the Company from the Company in lieu of receiving all or part (in 10% increments) of their annual retainer, meeting fees and committee meeting fees in cash. The purchase price of such shares shall be the Fair Market Value of the stock for the last trading day of the quarter in which the retainer, meeting fees, and committee meeting fees are earned. 15 Commencing May 1, 1997, the annual retainer, meeting fees and committee meeting fees payable to each Outside Director for service on the Board may, at the election of the Outside Director (the "Annual Election"), be payable to a trust in shares of any class of common stock of the Company. The Annual Election: (i) shall be irrevocable in respect of the one-year period to which it pertains (the "Plan Year") and shall specify the applicable percentage (in increments of 10%) of such annual retainer and meeting fees that such Outside Director wishes to direct to the trust; (ii) must be received in writing by the administrator of the Plan by the established enrollment deadline of any year in which this Plan is in effect in order to cause the next succeeding Plan Year's annual retainer and fees to be subject to the provisions of this Plan; and (iii) must specify whether the ultimate distribution of the shares of common stock to the Outside Directors will be paid, following the Outside Director's death or termination of Board service, in a lump sum or in equal annual payments over a period of two to twenty years. The shares shall be purchased from the Company at the Fair Market Value of the stock for the last trading day of the quarter in which the fees are earned and shall be credited by the trustee to the account of the Outside Director. The certificates for common stock shall be issued in the name of the trustee of the trust and shall be held by such trustee in trust for the benefit of the Outside Directors; provided, however, that each Outside Director shall be entitled to vote the shares. The trustee shall retain all dividends (which shall be reinvested in shares of the same class of common stock) and other distributions paid or made with respect thereto in the trust. The shares credited to the account of an Outside Director shall remain subject to the claims of the Company's creditors, and the interests of the Outside Director in the trust may not be sold, hypothecated or transferred (including, without limitation, transferred by gift or donation) while such shares are held in the trust. If the Outside Director elects to receive a lump sum distribution, the trustee of the trust shall distribute such shares of common stock free of restrictions within 60 days after the Outside Director's Termination Date or a later date elected by the Outside Director (no later than the mandatory retirement age of the Outside Director). If the Outside Director elects to receive a lump sum distribution, the Outside Director may, by delivering notice in writing to the administrator of the Plan no later than December 31 of the year before the year in which the Outside Director terminates service as a Director, elect to receive any portion or all of the common stock in the form of cash determined by reference to the Fair Market Value of the common stock as of the termination date. Any such notice to the administrator must specify whether the distribution will be entirely in cash or whether the distribution will be in a combination of common stock and cash (in which case the applicable percentage must be specified). In the case of termination of the Outside Director's service as a result of his death, payment of the Outside Director's account shall be in shares of common stock and not in cash. If an Outside Director elects to receive payments in installments, the distribution will commence within 60 days after the Outside Director's Termination Date and will be made in shares of common stock and not in cash. Notwithstanding anything to the contrary contained 16 herein, any fractional shares of common stock shall be distributed in cash to the Outside Director. Section 12. Change in Control. (a) In order to maintain the Participants' rights in the event of any Change in Control of the Company, as hereinafter defined, the Committee may, in its sole discretion, as to any Award, either at the time an Award is made hereunder or any time thereafter, take any one or more of the following actions: (i) provide for the acceleration of any time periods relating to the exercise or realization of any such Award so that such Award may be exercised or realized in full on or before a date fixed by the Committee; (ii) provide for the purchase of any such Award, upon the Participant's request, for an amount of cash equal to the excess of the Fair Market Value of the property that could have been received upon the exercise of such Award or realization of the Participant's rights had such Award been currently exercisable or payable over the amount which would have been paid, if any, by the Participant for such property; (iii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iv) cause any such Award then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after such Change in Control. The Committee may, in its discretion, include such further provisions and limitations in any agreement documenting such Awards as it deems equitable and in the best interests of the Company. (b) Unless the Committee determines otherwise with respect to any Award, a "Change in Control" means the occurrence of any of the following events: (i) the acquisition, directly or indirectly, by any "person" or "group" (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules thereunder, including, without limitation, Rule 13d-5(b)) of "beneficial ownership" (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors ("voting securities") of the Company that represent 30% or more of the combined voting power of the Company's then outstanding voting securities, other than (A) an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or (B) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or (C) an acquisition of voting securities pursuant to a transaction described in clause (iii) below that would not be a Change in Control under clause (iii); 17 (ii) a change in the composition of the Board that causes less than a majority of the directors of the Company to be directors that meet one or more of the following descriptions: (A) a director who has been a director of the Company for a continuous period of at least 24 months, or (B) a director whose election or nomination as director was approved by a vote of at least two-thirds of the then directors described in clauses (ii)(A), (B), or (C) by prior nomination or election, but excluding, for the purpose of this subclause (B), any director whose initial assumption of office occurred as a result of an actual or threatened (y) election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or group other than the Board or (z) tender offer, merger, sale of substantially all of the Company's assets, consolidation, reorganization, or business combination that would be a Change in Control under clause (iii) on consummation thereof, or (C) who were serving on the Board as a result of the consummation of a transaction described in clause (iii) that would not be a Change in Control under clause (iii); (iii)the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets or (z) the acquisition of assets or stock of another entity, in each case, other than in a transaction (A) that results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "Successor Entity")) directly or indirectly, at least 50% of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction, and (B) after which more than 50% of the members of the board of directors of the Successor Entity were members of the Board at the time of the Board's approval of the agreement providing for the transaction or other action of the Board approving the transaction (or whose election or nomination was approved by a 18 vote of at least two-thirds of the members who were members of the Board at that time), and (C) after which no person or group beneficially owns voting securities representing 30% or more of the combined voting power of the Successor Entity; provided, however, no person or group shall be treated for purposes of this clause (C) as beneficially owning 30% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company before the consummation of the transaction; or (iii) a liquidation or dissolution of the Company. For purposes of clarification, (x) a change in the voting power of the Company voting securities based on the relative trading values of the Company's then outstanding securities as determined pursuant to the Company's Articles of Incorporation or (y) an acquisition of the Company securities by the Company that, in either case, by itself (or in combination only with the other event listed in this sentence) causes the Company's voting securities beneficially owned by a person or group to represent 30% or more of the combined voting power of the Company's then outstanding voting securities is not to be treated as an "acquisition" by any person or group for purposes of clause (i) above. For purposes of clause (i) above, the Company makes the calculation of voting power as if the date of the acquisition were a record date for a vote of the Company's shareholders, and for purposes of clause (iii) above, the Company makes the calculation of voting power as if the date of the consummation of the transaction were a record date for a vote of the Company's shareholders. (c) If an Award provides for acceleration under Section 12(a), the provisions of Section 6(g)(viii), Section 7(d)((iv), or Section 9(c)((iv), as the case may be, shall apply to the Award. Section 13. Amendments and Termination. The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under an Award theretofore granted, without the Participant's consent, or that without the approval of the Stockholders would, except as is provided in Section 4(b) of the Plan, increase the total number of Shares reserved for the purposes of the Plan. Notwithstanding the foregoing, the Board may terminate the Plan even if the effect would be to cancel unexercisable Options granted pursuant to the last sentence of Section 4(a) for which shares have not, at the time of such termination, become available for grant. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any Participant without the Participant's consent. The Committee may also substitute new Awards for Awards previously granted to Participants, including without limitation previously granted Options having higher option prices. 19 Section 14. General Provisions. (a) No Award shall be assignable or transferable by a Participant otherwise than by will or by the laws of descent and distribution, except that Restricted Stock may be used in payment of the exercise price of a stock option issued by the Company and may be otherwise transferred in a manner that protects the interests of the Company as the Committee may determine; provided that, if so determined by the Committee, each Participant may, in the manner established by the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant and to receive the Shares or other property issued upon such exercise. (b) The term of each Award shall be for such period from the date of its grant as may be determined by the Committee; provided that in no event shall the term of any Incentive Stock Option exceed a period of ten (10) years from the date of its grant. (c) No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants under the Plan. (d) The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a fully executed copy thereof to the Company, and otherwise complied with the then applicable terms and conditions. (e) The Committee shall be authorized to make adjustments in performance award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event the Company shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate. (f) The Committee shall have full power and authority to determine whether, to what extent and under what circumstances any Award shall be canceled or suspended. In particular, but without limitation, all outstanding Awards to any Participant shall be canceled if the Participant, without the consent of the Committee, while employed by the Company or an Affiliate 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 or any one or more Senior Officers or committee of Senior 20 Officers to whom the authority to make such determination is delegated by the Committee. (g) All certificates for Shares delivered under the Plan pursuant to any Award 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. (h) Subject to the provisions of this Plan and any Award Agreement, the recipient of an Award may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, interest or dividends, or interest or dividend equivalents, with respect to the number of shares covered by the Award, as determined by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. (i) Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, recipients of Awards under the Plan shall not be required to make any payment or provide consideration other than the rendering of services. (j) The Committee may delegate to one or more Senior Officers or a committee of Senior Officers the right to grant Awards to Employees who are not officers or Directors of the Company and to cancel or suspend Awards to Employees who are not officers or Directors of the Company. (k) The Company shall be authorized to withhold from any Award granted or payment due under the Plan the amount of withholding taxes due with respect to an Award or payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Company shall also be authorized to accept the delivery of Shares by a Participant in payment for the withholding of taxes. (l) Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (m) The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Kansas and applicable Federal law. (n) If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, 21 materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect. Section 15. Effective Date of Plan. The Plan shall be effective as of April 15, 1997. Section 16. Term of Plan. No Award shall be granted pursuant to the Plan after April 15, 2007, but any Award granted on or before such date may extend beyond that date. 22 EX-10 11 exh10f.txt 10-F RSU Exhibit 10(f) One-time election to receive cash dividends for 2003 Restricted Stock Unit (RSU) grant By checking the box below, I hereby elect to change my dividend payment method for my 2003 RSU grant from Reinvested Dividend Equivalents(1) to Pay-Through Dividend Equivalents(2): Number of RSUs Pay-Through Award Date Awarded on Dividend Grant Date(3) Equivalent Election FON PCS _____________ _______ _______ _____________ If I fail to elect Pay-Through Dividend Equivalents above, I elect to continue to be subject to Reinvestment Dividend Equivalents until the shares are delivered to me. This election will be effective beginning with the second quarter 2004 dividend. I understand that on March 31, 2004, my then current dividend payment election will remain in effect and I will not be able to subsequently change the 2003 RSU dividend payment method. -------------------------- -------------------------- Date - ------------------------------- 1 Reinvested Dividend Equivalents means on each date on which Sprint pays an ordinary cash dividend on shares of stock underlying an RSU, the number of shares represented by each RSU will be increased by a number of whole or fractional shares equal to (a) the cash dividend per share paid on the underlying stock (b) divided by the fair market value of one share of the underlying stock on the dividend payment date. 2 Pay-Through Dividend Equivalents means on each date on which Sprint pay an ordinary cash dividend on shares of stock underlying an RSU on the dividend payment date, Sprint will pay to Executive a cash payment equal to the cash dividend per share paid on the underlying stock. 3 This election will apply to all RSUs granted, additional FON RSUs resulting from reinvestment of Reinvestment Dividend Equivalents as to the effective date of this election and additional FON shares you will receive upon the automatic conversion of PCS RSUs into FON RSUs due to the tracking stock recombination at the 0.5 conversion ratio effective April 23, 2004. EX-12 12 exh12.txt RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT (12) COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Sprint Corporation (Unaudited) Quarters Ended, March 31, ------------------------------- 2004 2003 - -------------------------------------------------------------------------------------------------------------------- (millions) Earnings Income from continuing operations before income taxes $ 368 $ 158 Capitalized interest (25) (20) Net losses in equity method investees 12 18 - -------------------------------------------------------------------------------------------------------------------- Subtotal 355 156 - -------------------------------------------------------------------------------------------------------------------- Fixed charges Interest charges 351 394 Interest factor of operating rents 92 96 - -------------------------------------------------------------------------------------------------------------------- Total fixed charges 443 490 - -------------------------------------------------------------------------------------------------------------------- Earnings, as adjusted $ 798 $ 646 ------------------------------- Ratio of earnings to fixed charges 1.80 1.32 ------------------------------- Note: The ratios of earnings to fixed charges were computed by dividing fixed charges into the sum of earnings (after certain adjustments) and fixed charges. Earnings include income (loss) from continuing operations before income taxes, plus net losses in equity method investees, less capitalized interest. Fixed charges include interest on all debt of continuing operations, including amortization of debt issuance costs, and the interest component of operating rents.
EX-31 13 exh31a.txt CEO 302 CERTIFICATION EXHIBIT 31(a) CERTIFICATION I, Gary D. Forsee, Chairman and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sprint Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 7, 2004 /s/ Gary D. Forsee ------------------------------------------ Gary D. Forsee Chairman and Chief Executive Officer EX-31 14 exh31b.txt CFO 302 CERTIFICATION EXHIBIT 31(b) CERTIFICATION I, Robert J. Dellinger, Executive Vice President and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sprint Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 7, 2004 /s/ Robert J. Dellinger ---------------------------------- Robert J. Dellinger Executive Vice President and Chief Financial Officer EX-32 15 exh32a.txt CEO 906 CERTIFICATION EXHIBIT 32(a) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report of Sprint Corporation (the "Company") on Form 10-Q for the period ending March 31, 2004, as filed with the Securities and Exchange Commission (the "Report"), I, Gary D. Forsee, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 7, 2004 /s/ Gary D. Forsee ------------------------------------ Gary D. Forsee Chairman and Chief Executive Officer EX-32 16 exh32b.txt CFO 906 CERTIFICATION EXHIBIT 32(b) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report of Sprint Corporation (the "Company") on Form 10-Q for the period ending March 31, 2004, as filed with the Securities and Exchange Commission (the "Report"), I, Robert J. Dellinger, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 7, 2004 /s/ Robert J. Dellinger ---------------------------- Robert J. Dellinger Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----