UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrantx | ||
Filed by a party other than the Registrant¨ |
Check the appropriate box:
¨ Preliminary Proxy Statement | ||
¨ Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
x Definitive Proxy Statement | ||
¨ Definitive Additional Materials | ||
¨ Soliciting Material Pursuant to Rule 14a-12 |
SPRINT NEXTEL CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transactions applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11(set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount previously paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing party: |
(4) | Date filed: |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 200812, 2009
We will hold the annual meeting of shareholders of Sprint Nextel Corporation on Tuesday, May 13, 200812, 2009 at 10:00 a.m. EasternCentral time at The Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20190 (703-709-1234)Overland Park Convention Center, 6000 College Boulevard, Overland Park, Kansas 66211 (913-339-3000).
The purpose of the annual meeting is to consider and take action on the following:
1. | Election of |
2. | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for |
3. | Approval of an amendment to the 1988 Employees Stock Purchase Plan to increase the authorized number of shares available for purchase; |
4. | Vote on |
Any other business that properly comes before the meeting. |
ThisLike last year, we are taking advantage of new Securities and Exchange Commission rules that allow us to furnish proxy materials to you via the Internet. Unless you have already requested to receive a printed set of proxy materials, you will receive a Notice Regarding the Availability of Proxy Material, or Notice. The Notice contains instructions on how to access proxy materials and vote your shares via the Internet or, if you prefer, to request a printed set of proxy materials at no additional cost to you. We believe that this new approach will provideprovides a convenient way for you to access your proxy materials and vote your shares, while lowering our printing and delivery costs and reducing the environmental impact associated with our annual meeting.
Shareholders of record as of March 14, 200813, 2009 can vote at the annual meeting. On or about March 31, 2008,2009, we will mail the Notice or, for shareholders who have already requested to receive a printed set of proxy materials, this proxy statement, the accompanying proxy card and the annual report on Form 10-K for the year ended December 31, 2007.2008. Please vote before the annual meeting in one of the following ways:
1. | By Internet—You can vote over the Internet atwww.proxyvote.com by entering the control number found on your Notice or proxy card; |
2. | By Telephone—You can vote by telephone by calling 1-800-690-6903 and entering the control number found on your Notice or proxy card; or |
3. | By Mail—If you received your proxy materials by mail, you can vote by signing, dating and mailing the proxy card in the pre-paid enclosed envelope. |
Your vote is very important. Please vote before the meeting using one of the methods above to ensure that your vote will be counted. Your proxy may be revoked at any time before the vote at the annual meeting by following the procedures outlined in the accompanying proxy statement.
By order of the Board of Directors, |
James H. Hance, Jr. |
Chairman of the Board of Directors |
Overland Park, Kansas
March 27, 200830, 2009
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Voting by Our Employees Participating in the Sprint Nextel 401(k) Plan | ||
Delivery of Proxy Materials to Households Where Two or More Shareholders Reside | 6 | |
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Potential Payments Upon Termination of Employment or Change of Control | ||
Proposal 2—Ratification of Independent Registered Public Accounting Firm | ||
Proposal 3—Approval of an Amendment to the 1988 Employees Stock Purchase Plan | 69 | |
Proposal 4—Shareholder Proposal Concerning Special Shareholder Meetings | ||
Proposal 5—Shareholder Proposal Concerning Political Contributions | 74 | |
A-1 | ||
General Information About Proxies and Voting
These proxy materials are delivered in connection with the solicitation by our board of directors of proxies to be voted at our annual meeting of shareholders, which will be held at The Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20190Overland Park Convention Center, 6000 College Boulevard, Overland Park, Kansas 66211 at 10:00 a.m. EasternCentral time on Tuesday, May 13, 2008.12, 2009. On or about March 31, 2008,2009, we mailed to our shareholders entitled to vote at the meeting the Notice or, for shareholders who have already requested to receive printed materials, this proxy statement and the form of proxy. Our principal executive offices are located at 6200 Sprint Parkway, Overland Park, Kansas 66251.
At the annual meeting, shareholders will be asked to:
elect nineten directors to serve for a term of one year (Item 1 on the proxy card);
ratify the appointment of KPMG LLP as our independent registered public accounting firm for 20082009 (Item 2 on the proxy card);
vote on an amendment to the 1988 Employees Stock Purchase Plan to increase the authorized number of shares available for purchase (Item 3 on the proxy card);
vote on a shareholder proposal concerning special shareholder meetings, if presented at the meeting (Item 34 on the proxy card);
vote on a shareholder proposal concerning political contributions, if presented at the meeting (Item 5 on the proxy card); and
take action on any other business that properly comes before the meeting and any adjournment or postponement of the meeting.
Record Date; Shareholders Entitled to Vote
The close of business on March 14, 200813, 2009 has been fixed as the record date for the determination of shareholders entitled to notice of, and to vote at, the 20082009 annual meeting or any adjournments or postponements of the 20082009 annual meeting.
As of the record date, the following shares were outstanding and entitled to vote:
Designation | Outstanding | Votes per Share | Outstanding | Votes per Share | ||||
Series 1 common stock | 2,774,213,326 | 1.0000 | 2,790,132,789 | 1.0000 | ||||
Series 2 common stock | 74,831,333 | 0.1000 | 74,831,333 | 0.1000 |
The relative voting power of our different series of voting stock is set forth in our articles of incorporation.
A complete list of shareholders entitled to vote at the 20082009 annual meeting will be available for examination by any shareholder at 2001 Edmund Halley Drive, Reston, Virginia 20191,6200 Sprint Parkway, Overland Park, Kansas 66251, for purposes pertaining to the 20082009 annual meeting, during normal business hours for a period of ten days before the annual meeting, and at the time and place of the annual meeting.
In order to carry on the business of the meeting, we must have a quorum. A quorum requires the presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast at the meeting. We count
abstentions and broker “non-votes” as present and entitled to vote for purposes of determining a quorum. A broker “non-vote” occurs when a shareholder fails to provide voting instructions to his or her broker for shares held in “street name.” Under those circumstances, a shareholder’s broker may be authorized to vote for the shareholder on some routine items, but is prohibited from voting on other items. Those items for which a shareholder’s broker cannot vote result in broker “non-votes.”
Required Vote to Elect the Directors (Proposal 1; Item 1 on the Proxy Card)
Each of the nineten nominees for director will be elected as a director if the votes cast for each such nominee exceed the number of votes against that nominee, assuming that there is a quorum represented at the annual meeting. A summary of our majority voting standard appears on page 24 under “Proposal 1—Election of Directors—Board Committees and Director Meetings—The Nominating and Corporate Governance Committee—Majority Voting.”
Required Vote to Ratify the Appointment of our Independent Registered Public Accounting Firm (Proposal 2; Item 2 on the Proxy Card)
The affirmative vote of a majority of votes cast in person or by proxy by holders of our common stock entitled to vote on the matter is required to ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2008.2009.
Required Vote to Approve the Shareholder ProposalAmendment to the 1988 Employees Stock Purchase Plan (Proposal 3; Item 3 on the Proxy Card)
The affirmative vote of a majority of votes cast in person or by proxy by holders of our common stock entitled to vote on the matter is required to approve the management proposal concerning an amendment to the 1988 Employees Stock Purchase Plan.
Required Vote to Approve the Shareholder Proposals (Proposals 4 and 5; Items 4 and 5 on the Proxy Card)
The affirmative vote of a majority of votes cast in person or by proxy by holders of our common stock entitled to vote on the matter is required to approve the shareholder proposal,proposals, if presented at the annual meeting.
Treatment of Abstentions, Not Voting and Incomplete Proxies
If a shareholder marks the “Abstain” box, it will have no effect on the vote for Proposal 1, but it will have the same effect as a vote against Proposals 2 and 3.through 5. If a shareholder does not return a proxy, it will have no effect on the vote for the proposals. Broker non-votes for non-routine proposals will also have no effect on the vote for the proposals. Except for broker non-votes, if a proxy is returned without indication as to how to vote, the stock represented by that proxy will be considered to be voted in favor of Proposals 1, 2 and 2,3, and voted against Proposal 3.Proposals 4 and 5.
Giving a proxy means that you authorize the persons named in the proxy card to vote your shares at the 20082009 annual meeting in the manner directed. You may vote by proxy or in person at the meeting. To vote by proxy, you may use one of the following methods if you are a registered holder (that is, you hold our stock in your own name):
• | By Internet—You can vote over the Internet atwww.proxyvote.com by entering the control number found on your Notice or proxy card; |
By Telephone—You can vote by telephone by calling 1-800-690-6903 and entering the control number found on your Notice or proxy card; or
By Mail—If you received your proxy materials by mail, you can vote by signing, dating and mailing the proxy card in the pre-paid enclosed envelope.
We request that shareholders vote as soon as possible. When the proxy is properly returned, the shares of stock represented by the proxy will be voted at the 20082009 annual meeting in accordance with the instructions contained in the proxy.
Except for broker non-votes, if any proxy is returned without indication as to how to vote, the stock represented by the proxy will be considered to be voted in favor of Proposals 1, 2 and 2,3, and voted against Proposal 3.Proposals 4 and 5. Unless a shareholder checks the box on the proxy card to withhold discretionary authority, the proxies may use their discretion to vote on other matters introduced at the 20082009 annual meeting.
If a shareholder’s shares are held in “street name” by a broker or other nominee, the shareholder should check the voting form used by that firm to determine whether the shareholder may provide voting instructions to the broker or other nominee by telephone or the Internet.
Every shareholder’s vote is important. Accordingly, you should vote via the Internet or by telephone; sign, date and return the enclosed proxy card if you received it by mail; or provide instructions to your broker or other nominee whether or not you plan to attend the annual meeting in person.
Revocability of Proxies and Changes to a Shareholder’s Vote
A shareholder has the power to revoke his or her proxy or change his or her vote at any time before the proxy is voted at the annual meeting. You can revoke your proxy or change your vote in one of four ways:
by sending a signed notice of revocation to our corporate secretary to revoke your proxy;
by sending to our corporate secretary a completed proxy card bearing a later date than your original proxy indicating the change in your vote;
• | by logging on towww.proxyvote.com in the same manner you would to submit your proxy electronically or calling 1-800-690-6903, and in each case following the instructions to revoke or change your vote; or |
by attending the annual meeting and voting in person, which will automatically cancel any proxy previously given, or by revoking your proxy in person, but attendance alone will not revoke any proxy that you have given previously.
If you choose any of the first three methods, you must take the described action no later than the beginning of the 20082009 annual meeting. Once voting on a particular matter is completed at the annual meeting, you will not be able to revoke your proxy or change your vote as to that matter. If your shares are held in street name by a broker, bank or other financial institution, you must contact that institution to change your vote.
This solicitation is made on behalf of our board of directors, and we will pay the cost and expenses of printing and mailing this proxy statement and soliciting and obtaining the proxies, including the cost of reimbursing brokers, banks and other financial institutions for forwarding proxy materials to their customers. Proxies may be solicited, without extra compensation, by our officers and employees by mail, telephone, fax, personal interviews or other methods of communication. We have engaged the firm of Georgeson Shareholder Communications, Inc. to assist us in the distribution and solicitation of proxies and will pay Georgeson a fee of $25,000$9,000 plus out-of-pocket expenses for its services.
Voting by Our Employees Participating in the Sprint Nextel 401(k) Plan
If you are an employee of Sprint Nextel who has a right to vote shares acquired through your participation in our 401(k) plan, you are entitled to instruct the trustee, Fidelity Management Trust Company, how to vote the shares allocated to your account. The trustee will vote those shares as you instruct. You will receive voting information that covers any shares held in your 401(k) plan account, as well as any other shares registered in your own name.
If you do not instruct the trustee how to vote your shares, the 401(k) plan provides for the trustee to vote those shares in the same proportion as the shares for which it receives instructions from all other participants. To allow sufficient time for the trustee to vote, your voting instructions must be received by the trustee by May 8, 2008.7, 2009.
Delivery of Proxy Materials to Households Where Two or More Shareholders Reside
Rules of the Securities and Exchange Commission, or SEC, allow us to deliver multiple Notices in a single envelope or a single copy of an annual report and proxy statement to any household where two or more shareholders reside if we believe the shareholders are members of the same family. This rule benefits shareholders by reducing the volume of duplicate information they receive at their households. It also benefits us by reducing our printing and mailing costs.
We mailed Notices in a single envelope, or a single set of proxy materials, as applicable, to each household this year unless the shareholders in these households provided instructions to the contrary in response to a notice previously mailed to them. However, for shareholders who previously requested a printed set of the proxy materials, we mailed each shareholder in a single household a separate proxy card or voting instruction form. If you prefer to receive your own copy of the proxy materials for this or future annual meetings and you are a registered holder, you may request a duplicate set by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251 or by email atshareholder.relations@sprint.com, or by calling 913-794-1091, and we will promptly furnish such materials. If a broker or other nominee holds your shares, you may instruct your broker to send duplicate mailings by following the instructions on your voting instruction form or by contacting your broker.
If you share a household address with another shareholder, and you receive duplicate mailings of the proxy materials this year, you may request that your household receive a single set of proxy materials in the future. If you are a registered holder, please contact Sprint Nextel Shareholder Relations.Relations using one of the contact methods described above. If a broker or other nominee holds your shares, you should follow the instructions on your voting instruction form or contact your broker.
If you hold some shares as a registered holder or through our 401(k) plan, and other shares in the name of a broker or other nominee, we must send you proxy materials for each account. To avoid receiving duplicate sets of proxy materials, you may consolidate accounts or consent to electronic delivery as described in the following section.
Electronic Delivery of the Proxy Materials
We are able to distribute the annual report and proxy statement to shareholders in a fast and efficient manner via the Internet. This reduces the amount of paper delivered to a shareholder’s address and eliminates the cost of sending these documents by mail. You may elect to view all future annual reports and proxy statements on the Internet instead of receiving them by mail. Alternatively, you may elect to receive all future annual reports and proxy statements by mail instead of viewing them via the Internet. To make an election, please log on towww.proxyvote.com and enter your control number.
If you have enrolled for electronic delivery, you will receive an email notice of shareholder meetings. The email will provide links to our annual report and our proxy statement. These documents are in PDF format so you will need Adobe Acrobat® Reader to view these documents on-line, which you can download for free by visiting www.adobe.com. The email will also provide a link to a voting web site and a control number to use to vote via the Internet.
Your votes are kept confidential from our directors, officers and employees, subject to certain specific and limited exceptions. One exception occurs if you write opinions or comments on your proxy card. In that case, a copy of the proxy card is sent to us.
Shareholders, their guests and persons holding proxies from shareholders may attend the annual meeting. Seating, however, is limited and will be available on a first-come, first-served basis. If you plan to attend the meeting, please bring proof of ownership to the meeting. A brokerage account statement showing that you owned our stock on March 14, 200813, 2009 is acceptable proof.
Conference Call and Audio Webcast
Shareholders may listen live by phone or audio webcast to our annual meeting. The dial-in numbers for the conference call will be posted atwww.sprint.com/investors/shareholders/annualmeetingbefore the meeting. Lines are limited and will be available on a first-come, first-served basis. Shareholders may access the audio webcast of our annual meeting at the same web address. This is an audio-only webcast with no video or other materials.
Security Ownership of Certain Beneficial Owners
The following table provides information about the only known beneficial owners of five percent or more of our voting common stock based on our stock outstanding at March 14, 2008.13, 2009.
For purposes of the table below, beneficial ownership is determined based on Rule 13d-3 of the Securities Exchange Act of 1934, which states that a beneficial owner is any person who directly or indirectly has or shares voting and/or investment/dispositive power. According to a Schedule 13G filed on February 11, 2008 by The Growth Fund of America, Inc., or GFA, GFA has sole voting power with respect to all of the shares and sole dispositive power with respect to none of the shares listed by its name in the table below. All shares held by GFA are subject to the sole dispositive power of either Capital Research Global Investors, or CRGI, or Capital World Investors, or CWI. Accordingly, shares held by GFA over which CRGI or CWI has sole dispositive power are included in the respective totals for CRGI and CWI.
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Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent | |||||
Common Stock | AXA Financial, Inc. 1290 Avenue of the Americas New York, New York 10104 | 234,347,139 shares | (1) | 8.4 | % | |||
Dodge & Cox 555 California Street, 40th Floor San Francisco, CA 94104 | 195,440,413 shares | (2) | 7.0 | % | ||||
Capital Research Global Investors 333 South Hope Street | 183,444,340 shares | (3) | 6.6 | % | ||||
Bank of New York Mellon Corporation One Wall Street, 31st Floor New York, New York 10286 | 181,190,287 shares | (4) | 6.5 | % | ||||
Barclay’s Global Investors, NA 400 Howard Street San Francisco, California 94105 | 160,430,126 shares | (5) | 5.7 | % |
(1) | According to a Schedule |
(2) | According to a Schedule 13G filed with the SEC on February 11, |
(3) | According to a Schedule |
(4) | According to a Schedule 13G filed with the SEC on February 17, 2009 by The Bank of New York Mellon Corporation, MBC Investments Corporation, Neptune LLC, Mellon International Holding S.AR.L., Mellon International Ltd., Newton Management Ltd. and Newton Investment Management Ltd. According to the Schedule 13G, Bank of New York Mellon Corporation is the beneficial owners of, and has sole voting power with respect to 168,536,609 shares, and sole dispositive power with respect to 180,242,370 shares. |
(5) | According to a Schedule 13G filed with the SEC on February 5, 2009 by Barclays Global Investors, NA, Barclays Global Fund Advisors, Barclays Global Investors, LTD, Barclays Global Investors Japan Limited, Barclays Global Investors Canada Limited, Barclays Global Investors Australia Limited and Barclays Global Investors (Deutschland) AG. According to the Schedule 13G, these investors aggregately are the beneficial owners of, and have sole voting power with respect to 137,918,524 shares, and sole dispositive power with respect to all of the shares. |
Security Ownership of Directors and Executive Officers
The following table states the number of shares of our series 1 common stock beneficially owned as of March 14, 200813, 2009 by each current director, current named executive officer and all current directors and executive officers as a group. Except as otherwise indicated, each individual named has sole investment and voting power with respect to the shares owned.
Name of Beneficial Owner | Shares Owned | Shares Covered by Exercisable Options and RSUs to be Delivered(1) | Shares Represented by RSUs(2) | Percentage of Common Stock | Shares Owned | Shares Covered by Exercisable Options and RSUs to be Delivered(1) | Shares Represented by RSUs(2) | Percentage of Common Stock | ||||||||||||
Keith J. Bane | 7,908 | 26,581 | 0 | * | ||||||||||||||||
Mark E. Angelino | 7,579 | (3) | 305,984 | 0 | * | |||||||||||||||
William G. Arendt | 98,260 | (3) | 300,357 | 26,756 | * | |||||||||||||||
Robert R. Bennett | 23,776 | 5,221 | 0 | * | 28,997 | 14,815 | 0 | * | ||||||||||||
Gordon M. Bethune | 12,294 | 5,221 | 0 | * | 17,515 | 14,815 | 0 | * | ||||||||||||
Frank M. Drendel | 111,139 | 227,029 | 0 | * | ||||||||||||||||
Robert H. Brust | 2,985 | 0 | 469,484 | * | ||||||||||||||||
Keith O. Cowan | 125,429 | 538,939 | 558,144 | * | ||||||||||||||||
Steven L. Elfman | 89,326 | 228,666 | 361,599 | * | ||||||||||||||||
Larry C. Glasscock | 1,000 | 3,649 | 0 | * | 33,946 | 14,815 | 0 | * | ||||||||||||
James J. Hance, Jr. | 33,234 | 5,221 | 0 | * | 38,455 | 14,815 | 0 | * | ||||||||||||
Daniel R. Hesse | 0 | 0 | 718,907 | * | 486,210 | 1,853,886 | 1,254,498 | * | ||||||||||||
V. Janet Hill | 13,907 | 177,694 | 0 | * | 19,128 | 187,288 | 0 | * | ||||||||||||
Irvine O. Hockaday, Jr. | 95,437 | 54,816 | 0 | * | 126,902 | 50,717 | 0 | * | ||||||||||||
Linda Koch Lorimer | 46,035 | 44,054 | 0 | * | ||||||||||||||||
Frank Ianna | 5,000 | 8,609 | 0 | * | ||||||||||||||||
Robert L. Johnson | 71,712 | 495,988 | 161,377 | * | ||||||||||||||||
Leonard J. Kennedy | 4,044 | (3) | 620,077 | 61,155 | * | |||||||||||||||
Sven-Christer Nilsson | 0 | 10,144 | 0 | * | ||||||||||||||||
William R. Nuti | 0 | 10,965 | 0 | * | ||||||||||||||||
Rodney O’Neal | 0 | 3,649 | 0 | * | 3,649 | 14,815 | 0 | * | ||||||||||||
William H. Swanson | 28,564 | 5,221 | 0 | * | ||||||||||||||||
Kathryn A. Walker | 132,888 | 629,457 | 257,062 | (3) | * | |||||||||||||||
Barry J. West | 0 | 770,856 | 0 | * | ||||||||||||||||
Ralph V. Whitworth | 53,076,834 | (4) | 2,226 | 0 | 1.9 | % | ||||||||||||||
Paul N. Saleh | 403,556 | (3) | 0 | 191,110 | * | |||||||||||||||
Directors and Executive Officers as a group (21 persons) | 53,664,063 | 3,605,063 | 1,621,887 | 1.9 | % | |||||||||||||||
Directors and Executive Officers as a group (22 persons) | 1,660,298 | 5,198,872 | 3,318,147 | * |
* | Indicates ownership of less than 1%. |
(1) | Represents shares that may be acquired upon the exercise of stock options exercisable, and shares of stock that underlie restricted stock units to be delivered, on or within 60 days after March |
(2) | Represents unvested restricted stock units with respect to which we will issue the underlying shares of our common stock after the units vest. There are no voting rights with respect to these restricted stock units. These amounts do not include any restricted stock units covered by footnote 1. |
(3) |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC and the New York Stock Exchange, or NYSE, initial reports of beneficial ownership and reports of changes in beneficial ownership of our common stock and other equity securities. These people are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file, and we make these reports available atwww.sprint.com/investors/sec.
To our knowledge, based solely on a review of the copies of these reports furnished to us and written representations that no other reports were required, during 20072008 all Section 16(a) filing requirements applicable to our directors, executive officers and beneficial owners of more than 10% of our equity securities were met, except for: one late Form 4 filing in February 2007 for an acquisition of share units in connection with our Deferred Compensation Plan by Linda Koch Lorimer, an outside director, one late Form 4 filing in March 2007 for a disposition of shares by Barry J. West, Chief Technology Officer & President—4G Mobile Broadband and one late Form 4 filing in December 2007 for an acquisition of shares by Larry C. Glasscock, an outside director.met.
Proposal 1. Election of Directors
(Item 1 on Proxy Card)
We currently have 1311 seats on our board. Keith J. Bane, Frank M. Drendel, Linda Koch Lorimer and William H. Swanson areIrvine O. Hockaday, Jr. is not standing for re-election. The board has reduced the number of seats on our board to nineten effective as of the time of our annual meeting. The board’s objective is to increase the number of board seats and add new directors who meet the director selection criteria and have the skills and attributes that meet the current needs of the board. There is an ongoing director search underway.
Each of the nineten nominees, if elected, will serve one year until the 20092010 annual meeting and until a successor has been elected and qualified. The persons named in the accompanying proxy will vote for the election of the nominees named below unless a shareholder directs otherwise. Each nominee has consented to be named and to continue to serve if elected. If any of the nominees becomes unavailable for election for any reason, the proxies will be voted for the other nominees and for any substitutes.
Robert R. Bennett, age | ||
Gordon M. Bethune, age | ||
Larry C. Glasscock,age | ||
James H. Hance, Jr., age |
Daniel R. Hesse, age | ||
V. Janet Hill, age | ||
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Sven-Christer Nilsson, age 64. Owner and Founder, Ripasso AB, Ängelholm, Sweden, a private business advisory company. Mr. Nilsson serves as an advisor and board member for companies throughout the world. He previously served in various executive positions for The Ericsson Group from 1982 through 1999, including as its President and Chief Executive Officer from 1998 through 1999. Mr. Nilsson is a director of | ||
William R. Nuti, age 45. Chairman of the Board, Chief Executive Officer and President of NCR Corporation, a |
Rodney O’Neal, age | ||
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Our boardBoard of directorsDirectors recommends that you voteforthe election of the nineten nominees for director in this Proposal 1.
DirectorsDirector Not Standing for Re-Election
The following information is given with respect to Messrs. Bane, Drendel and Swanson and Ms. Lorimer,Irvine O. Hockaday, Jr. who areis not standing for re-election at our annual meeting. Messrs. Bane, Drendel and Swanson and Ms. LorimerMr. Hockaday will continue to serve on our board until the annual meeting.
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The following table provides compensation information for our current and former directors who served during 2007.2008. Because Mr. Whitworth’sIanna’s service did not commence until February 2008.March 2009, he is not listed in the table below. Compensation information for Mr. Hesse, our President and Chief Executive Officer, and Gary D. Forsee, our former Chairman, President and Chief Executive Officer, can be found in the “Executive Compensation” section of this proxy statement.
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(4) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($)(5) | Total ($) | Fees Earned or Paid in Cash (1)($) | Stock Awards (2)($) | Option Awards (2)($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation (3)($) | Total ($) | ||||||||||||||||
Keith J. Bane | 127,000 | 107,771 | — | — | — | 6,065 | 240,836 | |||||||||||||||||||||||
Robert R. Bennett | 148,000 | 138,662 | — | — | — | — | 286,662 | 136,000 | 129,516 | — | — | — | — | 265,516 | ||||||||||||||||
Gordon M. Bethune | 109,000 | 135,852 | — | — | — | 213 | 245,065 | 129,375 | 132,015 | — | — | — | 3,369 | 264,759 | ||||||||||||||||
Frank M. Drendel | 102,000 | 107,771 | — | — | — | 541 | 210,312 | |||||||||||||||||||||||
Larry C. Glasscock(2) | 46,167 | 32,685 | — | — | — | — | 78,852 | |||||||||||||||||||||||
Larry C. Glasscock | 132,000 | (4) | 125,864 | — | — | — | — | 257,864 | ||||||||||||||||||||||
James H. Hance, Jr. | 164,625 | 161,730 | — | — | — | 4,180 | 330,535 | 299,000 | 131,899 | — | — | — | 5,137 | 436,036 | ||||||||||||||||
V. Janet Hill | 128,000 | 107,771 | — | — | — | 489 | 236,260 | 121,000 | 129,516 | — | — | — | 174 | 250,690 | ||||||||||||||||
Irvine O. Hockaday, Jr. | 202,375 | (3) | 134,078 | — | — | — | 5,503 | 341,956 | 114,000 | (4) | 132,015 | — | — | — | 5,179 | 251,194 | ||||||||||||||
Linda Koch Lorimer | 117,000 | (3) | 134,078 | — | — | — | 474 | 251,552 | ||||||||||||||||||||||
Rodney O’Neal(2) | 45,167 | 32,685 | — | — | — | — | 77,852 | |||||||||||||||||||||||
William H. Swanson | 156,000 | (3) | 131,974 | — | — | — | 480 | 288,454 | ||||||||||||||||||||||
Sven-Christer Nilsson(5) | 13,667 | 32,765 | — | — | — | — | 46,432 | |||||||||||||||||||||||
William R. Nuti(6) | 53,833 | 55,389 | — | — | — | — | 109,222 | |||||||||||||||||||||||
Rodney O’Neal | 117,000 | 125,864 | — | — | — | — | 242,864 | |||||||||||||||||||||||
Former Directors | ||||||||||||||||||||||||||||||
Keith J. Bane(7) | 55,250 | 44,508 | — | — | — | 2,194 | 101,952 | |||||||||||||||||||||||
Frank M. Drendel(7) | 41,250 | 44,508 | — | — | — | 985 | 86,743 | |||||||||||||||||||||||
Linda Koch Lorimer(7) | 43,250 | (4) | 47,007 | — | — | — | 879 | 91,136 | ||||||||||||||||||||||
William H. Swanson(7) | 56,875 | (4) | 47,007 | — | — | — | 5,890 | 109,772 | ||||||||||||||||||||||
Ralph V. Whitworth(8) | 99,583 | 21,659 | — | — | — | — | 119,437 |
(1) | Includes annual retainer fees; |
(2) | Represents the compensation costs of |
On May 13, 2008, we issued 14,815 restricted stock units, or RSUs, to each of our outside directors serving on the board at the time in connection with their annual RSU grant for 2008. The grant date fair market value of the 2008 RSU grant to each of our outside directors is $134,224, which is the product of the per share grant date fair market value multiplied by the number of RSUs granted. To determine the grant date fair market value, we used the trading price of our common stock at the close of market on the May 13, 2008 grant date. |
The number of RSUs granted to each of our outside directors was calculated by dividing the director’s annual RSU grant value of $100,000 by $6.75, which was the 30-calendar day stock price average for our common stock beginning on March 27, 2008 and ending on April 25, 2008. |
Any new outside director joining the board receives a grant of prorated RSUs upon his or her appointment. The methodology for determining the number of potential RSUs awarded is described on page 17 under “—Restricted Stock Units.” Three directors received a grant of prorated RSUs upon joining the board in 2008. On February 11, 2008, the board’s Compensation Committee granted 2,226 RSUs to Mr. Whitworth. |
On June 9, 2008, the board’s Compensation Committee granted 10,965 RSUs to Mr. Nuti. On November 5, 2008, the board’s Compensation Committee granted 10,144 RSUs to Mr. Nilsson, with such grant becoming effective as of November 10, 2008, which was the effective date of Mr. Nilsson’s board appointment. |
As of December 31, 2008, the outside directors held stock awards in the form of RSUs as set forth in the following table: |
Name | Aggregate Number of Sprint Nextel RSUs Outstanding at December 31, 2008 | |
Robert R. Bennett | 14,815 | |
Gordon M. Bethune | 14,815 | |
Larry C. Glasscock | 14,815 | |
James H. Hance, Jr. | 14,815 | |
V. Janet Hill | 14,815 | |
Irvine O. Hockaday, Jr. | 14,815 | |
Sven-Christer Nilsson | 10,144 | |
William R. Nuti | 10,965 | |
Rodney O’Neal | 14,815 | |
Former Directors | ||
Keith J. Bane | — | |
Frank M. Drendel | — | |
Linda Koch Lorimer | — | |
William H. Swanson | — | |
Ralph V. Whitworth | — |
Although we issued no cash dividends in 2008, it is our policy that any cash dividend equivalents on the RSUs granted to the outside directors are reinvested into RSUs, which vest when the underlying RSUs vest. The aggregate number of RSUs disclosed in this table includes the dividend accruals on the underlying RSUs, if any. This table reflects the number of stock awards outstanding as of December 31, 2008 attributable to compensation paid by us to our directors. |
As of December 31, 2008, the outside directors held outstanding option awards, all of which are vested, as set forth in the following table: |
Name | Aggregate Number of Shares Underlying Sprint Nextel Option Awards Outstanding at December 31, 2008 | |
Robert R. Bennett | — | |
Gordon M. Bethune | — | |
Larry C. Glasscock | — | |
James H. Hance, Jr. | — | |
V. Janet Hill | 172,473 | |
Irvine O. Hockaday, Jr. | 44,118 | |
Sven-Christer Nilsson | — | |
William R. Nuti | — | |
Rodney O’Neal | — | |
Former Directors | ||
Keith J. Bane | — | |
Frank M. Drendel | — | |
Linda Koch Lorimer | 33,356 | |
William H. Swanson | — | |
Ralph V. Whitworth | — |
This table includes options granted to Mr. Hockaday and Ms. Lorimer under Sprint’s 1997 Long-Term Stock Incentive Program in February 2002. Options granted to Mrs. Hill were granted under the Nextel incentive equity plan prior to the Sprint-Nextel merger. Since the merger, we have not issued stock options to our outside directors as part of our outside director compensation program. |
(3) | Consists of tax gross-up payments made in 2008 for certain benefits provided in 2007, tax gross-up payments made in 2009 for certain benefits provided in 2008 and charitable matching contributions in 2008 of $2,500 made with respect to Mr. Bethune and $5,000 made with respect to each of Messrs. Hance, Hockaday and Swanson. Our Sprint Foundation matching gift program and other benefits are described below on page 17. Beginning in 2006, no tax gross-ups are provided on the value of communications services and equipment utilized by our outside board members. |
(4) | Messrs. Glasscock, Hockaday and Swanson participated in our Directors’ Shares Plan in |
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Name | Aggregate Number of Sprint Nextel RSUs Outstanding at December 31, 2007 | Aggregate Number of Embarq RSUs Outstanding at December 31, 2007 | ||
Keith J. Bane | 5,221 | — | ||
Robert R. Bennett | 5,221 | — | ||
Gordon M. Bethune | 9,008 | 198 | ||
Frank M. Drendel | 5,221 | — | ||
Larry C. Glasscock | 3,649 | — | ||
James H. Hance, Jr. | 9,008 | 197 | ||
V. Janet Hill | 5,221 | — | ||
Irvine O. Hockaday, Jr. | 9,008 | 198 | ||
Linda Koch Lorimer | 9,008 | 198 | ||
Rodney O’Neal | 3,649 | — | ||
William H. Swanson | 9,008 | 198 |
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(6) | Mr. Nuti joined our board on June 9, 2008. |
(7) | Messrs. Bane, Drendel and |
(8) | Mr. |
Our outside directors are directors who are not employees of our company. The compensation of our outside directors is partially equity-based and is designed to comply with ourCorporate Governance Guidelines, which provide that the guiding principles behind our outside director compensation practices are: (1) alignment with shareholder interests, (2) preservation of outside director independence and (3) preservation of the fiduciary duties owed to all shareholders. Our outside directors are directors who are not employees of our company.
Mr. Hance, our Chairman, received a prorated portion of the $75,000 Lead Independent Director annual retainer for the period beginning October 8, 2007 (when the Lead Independent Director position was combined with the Chairman position) and ending December 31, 2007. In February 2008, our board approved the payment of a $150,000 annual retainer to Mr. Hance, as described below, which is being paid to him in lieu of the former Lead Independent Director retainer. Our outside directors are also reimbursed for direct expenses relating to their activities as members of our board of directors.
Annual Retainers, Additional Retainers and Meeting Fees
Our outside directors are each paid $70,000 annually plus meeting fees and the following additional retainers:
For 2007, the Lead Independent Director was entitled to receiveChairman receives an additional annual retainer of $75,000; effective January 1, 2008, the Chairman is entitled to receive an additional annual retainer of $150,000; the Lead Independent Director retainer has been eliminated;
the Chair of the Audit Committee receives an additional annual retainer of $20,000;
the Chair of the Human Capital and Compensation Committee or HC&CC, receives an additional annual retainer of $15,000; and
the Chairs of the Finance Committee and the Nominating and Corporate Governance Committee each receive an additional annual retainer of $10,000.
For each meeting attended, we pay our outside directors the following fees:
$2,000 for in-person board and committee meetings; and
$1,000 for board and committee meetings held telephonically.
As discussed above, our directors are entitled to participate in our Deferred Compensation Plan, a nonqualified and unfunded plan under which our outside directors can defer receipt of all or part of their annual and additional retainer fees and meeting fees into various investment funds and stock indices, including a fund that tracks our common stock. In 2007,2008, Ms. Lorimer participated in our Deferred Compensation Plan. Also, as discussed above, our directors may participate in our Directors’ Shares Plan, under which they can elect to use all or part of their annual and additional retainer fees and meeting fees to purchase shares of our common stock in lieu of receiving cash payments. Our outside directors can also elect to defer receipt of these shares. In 2007, 2008,
Messrs. Glasscock, Hockaday and Swanson participated in our Directors’ Shares Plan. On an annual basis, our outside directors are given the opportunity to either enroll in or discontinue their participation in one or both of these plans.
Restricted Stock Units
Each of our outside directors receives ana targeted annual grant of $100,000 in RSUs representing shares of our common stock. Generally, the RSUs are granted each year aton the date of the annual meeting of shareholders and each grant vests in full upon the subsequent annual meeting. On June 26, 2007, our board revised the director compensation program to provide anyAny new outside board member joining the board on or after June 26, 2007 withreceives a grant of prorated RSUs upon his or her appointment that vestvests in full upon the subsequent annual meeting. The dollar value of the outside directors’ targeted annual grant ($100,000) is prorated for the time period between the date of the director’s initial appointment to the board and the date of the subsequent annual meeting. The prorated RSU grant is intended to offer a more competitive compensation package to our outside directors, immediately align the interests of outside directors with our shareholders’ interests, and be more consistent with the manner in which the cash retainers are paid.paid upon an outside director joining the board.
Stock Ownership Guidelines
Our director stock ownership guidelines require our outside directors to hold equity or equity interests in our common stock with a value of at least $140,000, which is two times the annual retainer fee. Each outside director is expected to meet this ownership level by the second anniversary of the director’s initial election or appointment to the board. Our director stock ownership guidelines provide the board with flexibility to grant exceptions based on its consideration of individual circumstances. AllAs of December 31, 2008, of our current outside directors who have served on our board for two or more years, areone was in compliance with our director stock ownership guidelines and five were not in compliance with our director stock ownership guidelines due to the reduction in our share price that occurred during 2008. The same stock and stock equivalents that count towards the stock ownership guidelines for our executive officers (as described below under “Executive Compensation—Compensation Discussion and Analysis”) are used to determine our outside directors’ compliance with the director stock ownership guidelines.
In addition, active outside directors are required to retain for a period of at least 12 months all shares or share equivalents (e.g., options or RSUs) received from us, except for shares (i) sold for the payment of taxes as a result of shares becoming available to the outside director or (ii) delivered to pay for the acquisition of additional shares through the exercise of a stock option or otherwise. The 12-month period begins on the date any restrictions or vesting periods have lapsed on the shares or share equivalents (including stock options). The outside directors are subject to this holding period until they leave our board.
Other Benefits
We believe that it serves the interests of our company and our shareholders to enable our outside directors to utilize our communications services. Accordingly, each outside director mayis entitled to receive up to twoan unlimited number of wireless units, and one connection cardincluding accessories, and the related wireless service, wireline long distance services and internationallong distance calling cards.cards with a maximum limit of $12,000 per year. Outside directors may also receive specialized equipment, such as a repeater or AIRAVETM device, on an as-needed basis, with equipment valued at greater than $1,000 requiring Compensation Committee approval. In addition to the value of the communications service, the value of any additional services and features (e.g.(e.g., ringers, call tones, directory assistance), and the lease value of the wireless devices, replacements and associated accessories are included in the value of the communications benefit. The value of any communications benefits realized by a director is subject to federal, state or local income taxes, which taxes are paid by the director. There may be other circumstances in which units are provided to board members (such as demonstration, field testing and training units)units, or units for use while traveling internationally); these units must be returned or they will be converted to a consumer account and applied toward the wireless units under this communications benefit once the units reach production.
Under our charitable matching gifts program, the Sprint Foundation matches contributions made to qualifying organizations on a dollar-for-dollar basis, up to the annual donor maximum of $5,000. The annual maximum contribution per donor, per organization is $2,500. As described in the director compensation table, Messrs. Bethune, Hance, Hockaday and HockadaySwanson were the only outside directors for whom the Sprint Foundation provided matching charitable contributions in 2007.2008.
Except as described in this paragraph, weWe currently do not offer retirement benefits to outside directors. Ms. Lorimer isdirectors, and none of our onlycurrent outside director who isdirectors are eligible to receive benefits under a pre-existing retirement plan originally adopted by our board of directors in 1982. The board amended thethat retirement plan in 1996 to eliminate the
retirement benefit for any outside director who did not have five years of credited service as of the date of the amendment. Ms. Lorimer was deemed as having over five years of credited service at the time the retirement benefit was eliminated as a result of her years of service on the board of Centel Corporation, with which we merged in 1993. Following her departure from our board, Ms. Lorimer will receive monthly benefit payments equal to the monthly fee (not including meeting fees or additional retainers) being paid to outside directors at the time of her retirement. The monthly retirement benefit would be $5,833 while the current $70,000 annual retainer remains in effect, and the number of monthly benefit payments to Ms. Lorimer will be 120 payments.
Our board and senior management devote considerable time and attention to corporate governance matters. We maintain a comprehensive set of corporate governance initiatives that include the following:
maintaining a Corporate Governance and Ethics organization that is functionally independent from our other operating units and is designed to provide an enhanced level of transparency into the company for all of our stakeholders;
refinement of our policies and goals with respect to the determination of executive compensation programs, including increasing emphasis on performance-based equity compensation, as further described below under “Executive Compensation—Compensation Discussion and Analysis;”
implementing a majority vote standard in an uncontested election of directors;
implementing an executive compensation clawback policy, which is discussed on page 40;
implementing a policy regarding independent executive consultants, which is discussed on page 27;
conducting annual board, committee and director self evaluations;
declassification of the board;
adherence to strict independence standards for directors that meet or exceed NYSE listing standards;
requiring the outside directors to hold executive sessions without management present, no less than three times a year, at or in conjunction with regularly-scheduled board meetings;
requiring the Audit Committee, the Finance Committee, the HC&CCCompensation Committee and the Nominating and Corporate Governance Committee to be composed entirely of independent directors;
• | publication on our website of ourCorporate Governance Guidelines and charters for all standing committees of the board, which detail important aspects of our governance policies and practices; |
maintaining limits on the number of other public company boards and audit committees on which our directors canmay serve;
maintaining a policy that prohibits our independent registered public accounting firm from providing professional services, including tax services, to any employee or board member or any of their immediate family members that would impair the independence of our independent registered public accounting firm;
maintaining stock ownership guidelines for vice presidents and above and outside directors; and
maintaining limits on payments made in any future severance agreement with any officer at the level of senior vice president or above as further described below under “Executive Compensation—Compensation Discussion and Analysis.”
We value the views of our shareholders and other interested parties. Consistent with this approach, our board has established a system to receive, track and respond to communications from shareholders and other
interested parties addressed to our board or to our outside directors. A statement regarding our board
communications policy is available atwww.sprint.com/governance.Any shareholder or other interested party who wishes to communicate with our board or our outside directors may write to Board Communications Designee, Sprint Nextel Corporation, 2001 Edmund Halley Drive, Mailstop VARESPO513-503, Reston, VA 20191,6200 Sprint Parkway, Overland Park, KS 66251, KSOPHF0302-3B424, or send an email toboardinquiries@sprint.com. Our board has instructed the Board Communications Designee to examine incoming communications to determine whether the communications are relevant to our board’s roles and responsibilities. The Board Communications Designee will review all appropriate communications and report on the communications to the chair of or the full Nominating and Corporate Governance Committee, the Chairman of our full board, or the outside directors, as appropriate. The Board Communications Designee will take additional action or respond to letters in accordance with instructions from the relevant board source. Communications relating to accounting, internal accounting controls, or auditing matters will be referred promptly to members of the Audit Committee in accordance with our policy on communications with the board of directors.
James H. Hance, Jr. currently serves as our Chairman. As detailed in ourCorporate Governance Guidelines, the responsibilities and authority of our Chairman are designed to facilitate the board’s oversight of management and ensure the appropriate flow of information between the board and management, and include the following:
determining an appropriate schedule for board meetings and seeking to ensure that the outside directors can perform their duties responsibly;responsibly while not interfering with the operations of the company;
setting agendas for board meetings, with the understanding that agenda items requested on behalf of the outside directors will be included on the agenda;
determining the quality, quantity and timeliness of the flow of information from management that is necessary for the outside directors to perform their duties effectively and responsibly, with the understanding that the outside directors will receive any information requested on their behalf by the Chairman;
coordinating, developing the agenda for, chairing and moderating meetings of the outside directors;
acting as principal liaison between outside directors and the Chief Executive Officer, or CEO, on sensitive issues and, when necessary, ensure the full discussion of those sensitive issues at board meetings;
providing input to the HC&CCCompensation Committee regarding the CEO performance and meet, along with the chair of the HC&CC,Compensation Committee, with the CEO to discuss the board’s evaluation;
• | assisting the Nominating and Corporate Governance Committee, the board and our company’s officers in assuring compliance with and implementation of theCorporate Governance Guidelines, and providing input to the Nominating and Corporate Governance Committee on revisions to the guidelines; and |
providing input to the Nominating and Corporate Governance Committee regarding the appointment of chairs and members of the Audit Committee, the HC&CC,Compensation Committee, the Executive Committee, the Finance Committee and the Nominating and Corporate Governance Committee.
The Chairman and the other directors may, from time to time, with the CEO’s knowledge and in most instances with members of management present, meet with outside parties on issues of importance to all shareholders.
A current copy of ourCorporate Governance Guidelinesand the charters for all standing committees of the board are available atwww.sprint.com/governance.They may also be obtained by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251 or by email atshareholder.relations@sprint.com.
Our board has adopted a definition of director independence that in several areas exceeds the listing standards of the NYSE. OurCorporate Governance Guidelines require that at least two-thirds of our board be independent. Under ourCorporate Governance Guidelines, our board will determine affirmatively whether a director is “independent” on an annual basis and disclose these determinations in our annual proxy statement. That determination is set forth below. A director will not be independent unless the board, considering all relevant circumstances, determines that the director does not have a material relationship with us, including any of our consolidated subsidiaries. A director will not be independent if:
during the preceding five years, the director or an immediate family member (as defined below) of the director was employed by our company;
during any 12-month period in the last three years, the director or an immediate family member of the director received more than $100,000$120,000 per year in direct compensation from us, other than excluded compensation (as defined below);
during the preceding five years, the director or an immediate family member ofyears: (1) the director was affiliated with or employed by an independent registered public accounting firm that is or was the internal or external auditor of our company; (2) the director has an immediate family member who is a current partner of such firm; (3) the director has an immediate family member who is a current employee of such firm and personally works on our audit; or (4) the director or an immediate family member was a partner or employee of such firm and personally worked on our audit within that time;
during the preceding five years, an executive officer of our company served on the compensation committee of the board of another company that concurrently employed the director or an immediate family member of the director as an executive officer;
an executive officer of our company serves on the board of a company that employs the director or an immediate family member of the director as an executive officer;
during the current or previous fiscal year, the director or an immediate family member of the director accepted any payments (other than those arising from investments in our securities, excluded compensation, or other non-discretionary compensation) from us in excess of $45,000;
the director is an employee of, or an immediate family member of the director is an executive officer of, any company to which we made, or from which we received, payments (other than those arising solely from investments in our securities) that during any of the preceding three fiscal years exceeded the greater of 2% of the other company’s consolidated gross revenues or $1,000,000; or
the director is a partner in or controlling shareholder or executive officer of any organization to which we made, or from which we received, payments (other than those arising solely from investments in our securities) that during any of the preceding three fiscal years exceeded the greater of 3% of the recipient’s (i.e., our company’s or the other organization’s) consolidated gross revenues or $200,000.
Our board may determine that a director who does not meet the standards in the fifth, sixth or eighth bullet points above nevertheless is independent. Following any such determination, our board will disclose a detailed explanation of its determination in our annual proxy statement. In no event will our board make such determination for a director for more than two consecutive years.
Our board uses the following definitions to determine director independence:
“excluded compensation” means director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service;
“executive officer” has the meaning set forth in Rule 303A.02 of the NYSE, as amended from time to time; and
“immediate family member” means any person included in such term as it is defined in Rule 303A.02 of the NYSE or the rules and regulations of the SEC.
In determining the independence of the outside directors, our board considered whether our outside directors, their immediate family members, and the companies with which they are employed as an executive officer (if applicable) have any relationships with our company that would prevent them from meeting the independence standards listed above, as well as the listing standards of the NYSE. In performing its review, our board considered the responses provided by the outside directors in their director questionnaires and determined that the following director nominees for re-election at the 20082009 Annual Meeting have no material relationship with our company and are independent using the definition described above: Mrs. Hill and Messrs. Bennett, Bethune, Glasscock, Hance, Hockaday, O’NealIanna, Nilsson, Nuti and Whitworth.O’Neal. Based on these standards, each of our outside directors who are standing for re-election are independent directors. The Audit Committee, the Finance Committee, the HC&CCCompensation Committee, and the Nominating and Corporate Governance Committee are composed entirely of independent directors.
Board Committees and Director Meetings
Board Meetings
During 2007,2008, our board of directors held six regular meetings and 14 special17 meetings. Our board of directors has the following standing committees: an Audit Committee, a Finance Committee, an HC&CC,a Compensation Committee, an Executive Committee and a Nominating and Corporate Governance Committee. Directors are expected to devote sufficient time to prepare properly for and attend meetings of our board, its committees and executive sessions, and to attend our annual meeting of shareholders. All directors attended at least 75% of the meetings of the board and board committees on which they served during 2007,2008, and eight12 of the ten13 directors who served on our board at the time of our 20072008 annual meeting attended that annual meeting.
Meetings of Outside Directors
In addition to board and committee meetings, our outside directors met 14eight times in 20072008 without management present. Our Lead Independent Director chaired the meetings of our outside directors, and following the appointment of our Chairman on October 8, 2007, he has chaired these meetings.
The Audit Committee
The primary purpose of the Audit Committee is to assist our board in fulfilling its oversight responsibilities with respect to:
the integrity of our financial statements and related disclosures, as well as related accounting and financial reporting processes;
our compliance with legal and regulatory requirements;
our independent registered public accounting firm’s qualifications, independence, audit and review scope, and performance;
the audit scope and performance of our internal audit function; and
our ethics and compliance program.
The Audit Committee also has sole authority for the appointment, retention, termination, compensation, evaluation and oversight of our independent registered public accounting firm. The committee’s principal responsibilities in serving these functions are described in the Audit Committee Charter that was adopted by our board of directors and is annually reviewed and revised as necessary.
Current copies of the Audit Committee Charter and our code of ethics,The Sprint Nextel Code of Conduct, both of which comply with SEC rules and the NYSE corporate governance standards, are available atwww.sprint.com/governance.Copies of the Audit Committee Charter andThe Sprint Nextel Code of Conductmay also be obtained by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251, or by email atshareholder.relations@sprint.com.
The Sprint Nextel Code of Conductdescribes the ethical and legal responsibilities of directors and employees of our company and our subsidiaries, including senior financial officers and executive officers. All of our directors and employees (including all senior financial officers and executive officers) are required to comply withThe Sprint Nextel Code of Conduct.In support of the ethics code, we have provided employees with a number of avenues for the reporting of potential ethics violations or similar concerns or to seek guidance on ethics matters, including a 24/7 telephone helpline. The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, including the confidential, anonymous submission by our employees of any concerns regarding questionable accounting or auditing matters to the Ethics Helpline at 1-800-788-7844, by mail to the Audit Committee, c/o Sprint Nextel Corporation, 2001 Edmund Halley Drive, Mailstop VARESPO513-503, Reston, VA 20191,6200 Sprint Parkway, Overland Park, KS 66251, KSOPHF0302-3B424, or by email toboardinquiries@sprint.com. Our Chief Ethics Officer reports regularly to the Audit Committee and annually to the entire board on our Ethics and Compliance program.
The Chair of the Audit Committee is Mr. Hance. The other members are Messrs. Bane, Bennett and Glasscock. Each of the members is financially literate and able to devote sufficient time to serving on the Audit Committee. Our board has determined that each of the Audit Committee members is an independent director under the independence requirements established by our board and the NYSE corporate governance standards. Our board has also determined that Messrs. Bennett, Glasscock and Hance each possess the qualifications of an “audit committee financial expert” as defined in SEC rules. The Audit Committee met seventen times in 2007.2008.
The Finance Committee
The primary functions of the Finance Committee include:
reviewing and approving our financing activities consistent with the authorization levels set forth in our fiscal policy;
reviewing and making recommendations to the board on our capital structure, annual budgets, enterprise risk management program, fiscal policy, investment policy and other significant financial initiatives; and
reviewing and approving proposed acquisitions, dispositions, mergers, joint ventures and similar transactions consistent with the authorization levels set forth in our fiscal policy.
The committee’s principal responsibilities in serving these functions are described in the Finance Committee Charter that was adopted by our board of directors and is annually reviewed and revised as necessary.
The Chair of the Finance Committee is Mr. Bennett. The other members are Messrs. Bane, Glasscock Hance, Swanson and Whitworth.Hance. Each member of the Finance Committee satisfies the independence requirements established by our board and the independence requirements of the NYSE corporate governance standards. The Finance Committee met 1218 times in 2007. 2008.
A current copy of the charter for the Finance Committee is available atwww.sprint.com/governance. It may also be obtained by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251, or by email atshareholder.relations@sprint.com.
The Human Capital and Compensation Committee
The primary functions of the HC&CCCompensation Committee include:
developing and overseeing ourdischarging the board’s responsibilities relating to compensation programs and practices for executives generally and for the direct reports of our CEOexecutives in general and the individuals designated as executive officers under Section 16 of the Securities Exchange Act of 1934, which we callour principal senior officers in particular;
evaluating the performance of our CEO and reviewing management’s assessment of the performance of principal senior officers;
setting the annual compensation levels for our CEO and other principal senior officers;
with input from the Nominating and Corporate Governance Committee, making recommendations to the boardreporting on outside director compensation;
making recommendations to the board on incentive compensation plans and equity-based compensation plans that are subject to board approval, including the adoption of those plans and any amendments to those plans;
reviewing and approving executive compensation disclosures made in our annual proxy statement in accordance with applicable rules and annual report on Form 10-K;regulations; and;
determining, approving and acknowledging awards under incentive compensation and equity-based compensation plans, including amendments to the awards under any such plans, and reviewing and monitoring awards under such plans;
reviewing and approving any proposed employment agreement (and any amendments) with principal senior officers;
with input from the Nominating and Corporate Governance Committee, annually reviewing with management plans for the orderly development and succession of senior executive officers; andofficers.
The committee’s principal responsibilities in serving these functions are described in the Compensation Committee Charter that was adopted by our board of directors and is annually reviewing compliance with our executive stock ownership guidelinesreviewed and director stock ownership guidelines.
revised as necessary. Additional information regarding the HC&CC’sCompensation Committee’s processes and procedures can be found below in “Executive Compensation—Compensation Discussion and Analysis.” Generally, the committee’s primary processes for establishing and overseeing outside director compensation and the role of company personnel and compensation consultants are similar to those regarding executive compensation. Any appropriate changes to outside director compensation are made following recommendation to the board by the HC&CC, with input from the Nominating and Corporate GovernanceCompensation Committee. In accordance with its charter, the HC&CCCompensation Committee may delegate authority to subcommittees or any committee member when appropriate.
The Chair of the HC&CCCompensation Committee is Mr. Swanson.Bethune. The other members are Mrs. Hill Ms. Lorimer and Messrs. Bethune, O’NealNuti and Whitworth.O’Neal. Each member of the HC&CCCompensation Committee satisfies the independence requirements established by our board and the independence requirements of the NYSE corporate governance standards. The HC&CCCompensation Committee met ten14 times in 2007.2008.
A current copy of the charter for the HC&CCCompensation Committee is available atwww.sprint.com/governance.It may also be obtained by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251, or by email atshareholder.relations@sprint.com. The charter was adopted by our board of directors and is annually reviewed and revised as necessary.
Compensation Committee Interlocks and Insider Participation
Messrs. Bethune, O’Neal and Swanson, Mrs. Hill and Ms. Lorimer served on the HC&CCCompensation Committee during 2007.2008. There were no compensation committee interlocks or insider participation during 2007.2008.
The Executive Committee
The primary function of the Executive Committee is to exercise powers of the board on matters of an urgent nature that arise between regularly scheduled board meetings.
The Chair of the Executive Committee is Mr. Hesse. The other members are Messrs. Bennett, Bethune, Hance Hockaday and Swanson.Hockaday. The Executive Committee did not meet in 2007.2008.
The Nominating and Corporate Governance Committee
The primary function of the Nominating and Corporate Governance Committee is to ensure that our company has effective corporate governance policies and procedures and an effective board and board review process. In fulfilling this function, the committee:
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assists the board by identifying individuals qualified to become directors;
evaluates and makes recommendationsrecommends to the board onfor approval the director nominees to fill board vacancies between annual meetings of the shareholders as well as nominees (including nominees proposed by shareholders) for election at the next annual meeting of the shareholders;
evaluates and makes recommendationsrecommends to the board on a director’s retirement, an offer to resign due to a change in circumstances, or a resignation tendered as a resultfor approval the chairs and members of a director’s failure to receive the required number of votes for re-election;
evaluateseach board committee; and makes recommendations to the board on the appointment of directors to board committees and the selection of board committee chairs;
develops, reviews and makes recommendationsrecommends to the board on corporate governance policies and practices designed to benefit our shareholders;shareholders.
provides input toThe committee’s principal responsibilities in serving its primary function are described in the HC&CC on outside director compensationNominating and the orderly developmentCorporate Governance Committee Charter that was adopted by our board of directors and succession of senior executive officers;is annually reviewed and revised as necessary.
oversees the annual board, board committee and director self evaluation process.
In evaluating prospective candidates or current board members for nomination, the Nominating and Corporate Governance Committee considers all factors it deems relevant, including, but not limited to, the candidate’s: (1) character, including reputation for personal integrity and adherence to high ethical standards,standards; (2) judgment,judgment; (3) knowledge and experience in leading a successful company, business unit or other institution,institution; (4) independence from our company,company; (5) ability to contribute diverse views and perspectives,perspectives; (6) business acumenacumen; and (7) ability and willingness to devote the time and attention necessary to be an effective director — all in the context of an assessment of the needs of the board at that point in time.
The Nominating and Corporate Governance Committee reviews with the board the appropriate characteristics and background needed for directors. This review is undertaken not only in considering new candidates for board membership, but also in determining whether to nominate existing directors for another term. The Nominating and Corporate Governance Committeecommittee determines the current director selection criteria and conducts searches for prospective directors whose skills and attributes reflect these criteria. To assist in the recruitment of new members to our board, the Nominating and Corporate Governance Committeecommittee employs one or more third-party search firms. All approvals of nominations are determined by the full board.
It is the policy of the Nominating and Corporate Governance Committee also to consider candidates recommended by shareholders. These recommendations should be sent to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Sprint Nextel Corporation, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251. To be timely, your recommendation must be received by our Corporate Secretary between December 15, 200813, 2009 and January 13, 2009.12, 2010. Your recommendation must include the following for each candidate you intend to recommend:
name, age, business address and residence address;
principal occupation or employment;
the class and number of shares of our stock beneficially owned;
a description of all arrangements or understandings relating to the nomination between or among you, each nominee, and any other person or persons;
the signed consent of each nominee to serve as a director if so elected;
any other information that is required by law to be disclosed in connection with solicitations of proxies for the election of directors; and
• | a statement signed by the nominee that indicates whether the nominee, if elected as a director, intends to comply with ourCorporate Governance Guidelines. |
The notice must also include your name and address and the class and number of shares of our stock that you own.
Majority Voting
On February 27, 2007, our board approved amendments to ourOur bylaws to provide that each nominee for director in an uncontested election will be elected if the votes cast for that nominee exceed the votes cast against that nominee. Votes cast do not include abstentions and broker
non-votes. The date for determining if an election is contested or uncontested has been set at 14 days before we file our definitive proxy statement. This requirement is intended to help us determine for our proxy statement whether director nominees will be elected under a majority or plurality standard prior to soliciting proxies.
In connection with the amendments to our bylaws establishing a majority vote standard for the election of directors in uncontested elections, our board also amended ourOurCorporate Governance Guidelinesto provide that an incumbent nominee who fails to receive a majority ofreceives fewer votes cast“for” than “against” in an uncontested election is expected to tender promptly his or her resignation. The Nominating and Corporate Governance Committeecommittee will recommend, and the board will determine, whether or not to accept the tendered resignation within 90 days of the certification of the shareholder vote with respect to the director election. Our board’s decision will be publicly disclosed.
In connection with the board’s three-year independent director evaluation in February 2006, the board agreed to permit the rights issuable pursuant to our rights plan to expire in June 2007 in accordance with the plan. We currently do not have a shareholder rights plan in place.
The Chair of the Nominating and Corporate Governance Committee is Mr. Hockaday. The other members are Mrs. Hill Ms. Lorimer and Messrs. Bethune, Ianna, Nilsson and O’Neal. Each member of the Nominating and Corporate Governance Committee satisfies the independence requirements established by our board and the independence requirements of the NYSE corporate governance standards. The Nominating and Corporate Governance Committee met sixeight times in 2007.2008.
A current copy of the charter for the Nominating and Corporate Governance Committee and ourCorporate Governance Guidelinesare available atwww.sprint.com/governance. They may also be obtained by writing to Sprint Nextel Shareholder Relations, 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251 or by email atshareholder.relations@sprint.com. TheLike the Nominating and Corporate Governance Committee charter, and theCorporate Governance Guidelines were adopted by our board of directors and are annually reviewed and revised as necessary.
The Transition Committee
In 2007, our board appointed a special Transition Committee, whose primary function was to oversee the search for a replacement CEO in connection with Mr. Forsee’s departure.
The Chair of the Transition Committee was Mr. Hockaday. The other members were Messrs. Bennett, Hance and Swanson. The Transition Committee met 14 times in 2007 until Mr. Hesse was appointed President and CEO in December 2007, at which time the Transition Committee’s function was complete.
The Audit Committee has reviewed and discussed our audited consolidated financial statements with management. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, relating to the auditors’ judgment about the quality of our accounting principles, judgments and estimates, as applied in our financial reporting.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1 (Independence Discussionsregarding the independent registered public accounting firm’s communications with Audit Committees) that relates to the firm’saudit committee concerning independence, from our company and our subsidiaries and has discussed with the independent registered public accounting firm its independence.
The Audit Committee met with senior management periodically during 20072008 to consider the adequacy of our internal controls and discussed these matters with our independent registered public accounting firm and with appropriate financial personnel. The Audit Committee also discussed with senior management our disclosure controls and procedures and the certifications by our CEO and our Chief Financial Officer, which are required by the SEC for certain of our filings with the SEC. The Audit Committee met privately with the independent registered public accounting firm, our internal auditors and other members of management, each of whom has unrestricted access to the Audit Committee.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the board that our audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 20072008 for filing with the SEC.
The Audit Committee
James H. Hance, Jr., Chair
Keith J. Bane
Robert R. Bennett
Larry C. Glasscock
Human Capital and Compensation Committee Report
The HC&CCCompensation Committee has reviewed and discussed Sprint Nextel’s Compensation Discussion and Analysis with management. Based on these reviews and discussions, the HC&CCCompensation Committee recommended to the board that Sprint Nextel’s Compensation Discussion and Analysis be included in this proxy statement.
The Human Capital and Compensation
Committee
William H. Swanson, Chair
Gordon M. Bethune, Chair
V. Janet Hill
Linda LorimerWilliam R. Nuti
Rodney O’Neal
Ralph V. Whitworth
Compensation Discussion and Analysis
This compensation discussion and analysis describes the compensation program for our named executive officers for 2007.2008.
Our named executive officers are: Daniel R. Hesse, President and CEO; Robert H. Brust, Chief Financial Officer, or CFO; Keith O. Cowan, President – Strategic Planning and Corporate Initiatives and Acting President – CDMA; Steven L. Elfman, President, Network Operations and Wholesale; Robert L. Johnson, Chief Service Officer; Paul N. Saleh, our former Chief Financial Officer; Barry J. West, Chief Technology Officer and President—4G Mobile Broadband; Timothy E. Kelly,CFO; William G. Arendt, our former Chief Marketing Officer; Kathryn A. Walker, Chief Network Officer;Acting CFO and Gary D. Forsee,Controller and former Senior Vice President and Controller; Leonard J. Kennedy, our former Chairman,General Counsel; and Mark E. Angelino, our former President and CEO. Effective January 1, 2008, we terminated the employment of Mr. Forsee without cause.– Sales & Distribution. On January 25, 2008, we terminated the employment of Messrs. Saleh and Kelly without cause.Angelino. On November 14, 2008, we terminated the employment of Mr. Arendt. On December 19, 2008, we terminated the employment of Mr. Kennedy. Based on SEC rules, we are required to include the former executive officers Messrs. Saleh, Arendt, Kennedy and Angelino as named executive officers in this proxy statement.
Objectives of our Executive Compensation Program
The compensation program for our named executive officers consists of a comprehensive package including a base salary and short- and long-term incentive opportunities. We also provide employee benefits. Our compensation program is designed to:
retain our executive officers and attract qualified and experienced executives who can contribute to our growth with the ultimate objective of improving shareholder value;
motivate our executives to achieve critical operating and financial objectives;
align the interests of our executives with those of our shareholders by having a significant portion of the compensation package consist of equity-based awards, which serves to encourage our executives to think and act like owners of our company;
encourage our executive officers to focus on and balance our short- and long-term business strategy in their day-to-day decision making and thereby mitigate the possibility that they undertake excessively risky business strategies to maximize short-term reward;
promote our tax, accounting and financial objectives; and
adhere to corporate governance best practices.
Our incentive plans tie executive remuneration to our performance, striking a balance between our short- and long-term performance, and between remuneration for achieving operating and financial objectives and producing a return for our shareholders. Target opportunities under our short- and long-term incentive plans comprise the substantial majority of the compensation packages of each of our executives, which we believe serves to motivate properly each ofnamed executive officers, motivating them to achieve our objectives.
Use of Compensation Consultants and Management Involvement
The HC&CCCompensation Committee annually retains a compensation consultant. The HC&CCCompensation Committee charter provides that, at least once every three years, it will retain a compensation consultant to report on whether our current compensation programs and arrangements provide an appropriate level of (1) compensation and retention incentive to principal senior officers, and (2) compensation to the non-employee members of the board of directors.
For 20072008 and 2008,year-to-date 2009, the HC&CCCompensation Committee has retained Frederic W. Cook & Co., Inc. as its independent compensation consultant. Frederic W. Cook & Co. provides no services to us other than advisory services for executive and director compensation and works with management only at the request and under the direction of the HC&CC. On March 12,Compensation Committee. In 2008, to ensure independence, the HC&CCCompensation Committee adopted a policy on executive compensation consultants that codifies this relationship. Frederic W. Cook & Co. has reviewed the compensation components and levels for our named executive officers and advised the HC&CCCompensation Committee on the appropriateness of our compensation programs, including our incentive and equity-based compensation plans, retention incentives and any proposed employment agreements, as these matters arose during the year. Frederic W. Cook & Co. also provides recommendations on new compensation plans, programs and arrangements, including those for Mr. Hesse, and assists with the design and drafting and provides an opinion on the reasonableness of such plans, programs or arrangements. Representatives of Frederic W. Cook & Co. attend HC&CCCompensation Committee meetings at the HC&CC’sCompensation Committee’s request and make themselves available to provide guidance to the HC&CCCompensation Committee on a variety of compensation issues as they arise. The primary point of contact at Frederic W. Cook & Co. communicates with the chair of the HC&CCCompensation Committee frequently and interacts frequently with all HC&CCthe Compensation Committee members independent of management.
Frederic W. Cook & Co. prepares the benchmarking data with respect to an annual peer group compensation survey and reviews the appropriateness of such data. Frederic W. Cook & Co. also reviews our process for determining, and the compensation decisions made with respect to, comparisons of our named executive officers and the officers of those companies included in our peer group and market benchmarking surveys.
Personnel in our human resources department support the work of the HC&CCCompensation Committee and its consultants. In addition, our CEO periodically discusses with the HC&CC matters regarding the design of compensation programs and the compensation levels of our other named executive officers and certain key personnel.personnel with the Compensation Committee.
Use of Peer Group and Market Survey Benchmarking Data
The primary data considered by the HC&CCCompensation Committee in determining the elements of annual compensation is the peer group data and the market survey data. As a benchmarking process and in order for the HC&CCCompensation Committee to understand how our current compensation structure aligns with the external market,
the Compensation Committee compared the median and 75th75th percentile compensation level for each element of compensation of executives from groups of telecommunications and high-technology companies with the compensation of each of our named executive officers. For 2007,2008, we derived this data from two sources: a market data assessment of a peer group of companies conducted by Frederic W. Cook & Co. and market survey data compiled by Towers Perrin.
Peer Group Data
The peer group was developed by Frederic W. Cook & Co. determined a median and 75th percentile compensation levelapproved by the Compensation Committee. To ensure that competitive data reasonably represents the external market in which we compete for each element of compensationtalent, companies are selected for the named executive officers of each of the following peer group based on similarity of companies:their business model and product offerings, as well as comparability from a size perspective. Size is assessed on a variety of bases, including annual revenue, market capitalization, net income and number of employees. The following table illustrates the companies included in the peer group in 2008:
Alltel Corporation | Qwest Communications International Inc. | |||
AT&T Inc. | The DIRECTV Group, Inc. | |||
Time Warner Inc. | ||||
Verizon Communications Inc. | ||||
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Frederic W. Cook & Co. reviewed the compensation provided for the named executive officers of each of the peer group companies and provided the Compensation Committee with a summary of the market data, including the median and the 25th and 75th percentiles for each element of compensation.
When possible, Frederic W. Cook & Co. used the compensation of a peer group named executive officer with the same title or function as each of our named executive officers. In some cases, the titles of the named executive officers of our peer group companies did not closely match the titles or responsibilities of our named executive officers and, in these situations, Frederic W. Cook & Co. used the hierarchical pay compensation information of the executive officer with the same ranking in the peer group company’s proxy statement. For example, the compensation of our third highest paid named executive officer would be compared with the compensation of the third highest executive officer of the applicable peer group company. Because the data used in this analysis was based on compensation paid two years previously, the compensation amounts were adjusted for the estimated increase in the cost of labor for comparabilitylabor.
For purposes of benchmarking market rates and considering changes to the compensation recommended for the current year.
For 2008,of our named executive officers in 2009, we removed BellSouthAlltel Corporation (now known as AT&T) and Lucent TechnologiesVerizon Communications Inc. (now known as Alcatel Lucent)), each of which had been acquired,acquired. Additionally, Sun Microsystems, Texas Instruments and Xerox were added Hewlett-Packard Company due to its similar business model.the peer group of companies. These additional companies were included in the peer group to expand the comparison group and, thereby, improve the statistical reliability of the data.
Market Survey Data
We obtained survey data from Towers Perrin survey data that included the median and 75th75th percentile compensation levels for each element of compensation for key executive positions of a group of telecommunications and high-technology companies that elect to participate in their surveys. The telecommunications and high-technology focus was intended to ensure that the companies included within the data sample represented those with similar business and financial models to ours and with which we most closely compete for top talent. The companies included in the 20072008 market survey were as follows:
Accenture Ltd. | Electronic Data Systems Corporation | Qwest Communications International Inc. | ||
AT&T Inc. | Hewlett-Packard Company | Time Warner Inc. | ||
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| Motorola, Inc. | |||
Verizon Communications Inc. | ||||
Cox Communications, Inc. | Nortel Networks Corporation |
This Towers Perrin survey aggregated the data of the participating telecommunications and high-technology companies. Where titles of our named executive officers do not match those of the officers of this composite group, we used the compensation for a position with a similar job function for purposes of our analysis. Because the data used in this analysis was based on compensation paid for the prior year, the compensation amounts were adjusted for the estimated increase in the cost of labor for comparability to the recommended compensation for the current year.
For 2008, we removed BellSouth Corporation and Cingular Wireless LLC (now known as AT&T) and Lucent Technologies Inc. (now known as Alcatel Lucent), each of which had been acquired or merged.labor.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code or IRC, limits to $1 million the amount of non-performance-based remuneration that we may deduct from our taxable income in any tax year with respect to our Chief Executive OfficerCEO and the three other most highly compensated executive officers, other than the Chief Financial Officer,CFO, at the end of the year. Base salary, certain equity-based awards and perquisites and other personal benefits are not considered performance-based remuneration. A company, however, may deduct from its taxable income without regard to the $1 million limit the full value of all performance-based compensation under sectionSection 162(m), such as annual cash incentive compensation and stock option awards, if certain requirements are met, including that the maximum number of stock options that may be awarded and the maximum amount of other performance-based remuneration that may be payable to any one executive officer have been disclosed to and approved by shareholders prior to the award or payment. Our shareholders have approved limits on the
number of stock options and performance-based equity awards (such as RSUs subject to vesting or adjustment based on achievement of management objectives) to any one executive officer during a calendar year and the amount of other performance-based remuneration payable pursuant to awards to any one executive officer during a calendar year.
The HC&CCCompensation Committee considers Section 162(m) deductibility in designing our compensation program and incentive-based compensation plans. In general, we design our short-term and long-term incentives plans to be compliant with the performance-based compensation rules of Section 162(m), thereby ensuring full deductibility. However, in certain circumstances, the HC&CCCompensation Committee has determined it necessary in order to retain executives in and attract candidates for senior level positions to offer compensation packages in which the non-performance-based elements exceed the $1 million Section 162(m) limit.
In 2008 for Section 162(m) purposes under our short-term incentive compensation (or STIC) plan, the second through fourth quarters payouts were intended to be treated as performance-based compensation. With respect to our long-term incentive compensation (or LTIC) plan, the 2008 stock option awards and the performance unit and resulting RSU awards granted under our LTIC plan under the enhanced near-term incentive compensation opportunity (or ENTI), other than the performance unit and RSU awards to Mr. Hesse for the second and third quarters, were intended to be treated as performance-based compensation under Section 162(m). The 2008 time-based RSU award component of the LTIC plan does not satisfy the requirements to be considered performance-based compensation under Section 162(m).
Elements of Compensation
The HC&CCCompensation Committee annually reviews the compensation packages of our named executive officers and other key personnel, as presented in the form of “tally sheets,sheets.” thatThese tally sheets set forth all components of compensation, a summary of the outstanding equity holdings of each named executive officer as of year end and the value of such holdings under various assumed share prices, the present value of retirement benefits and other benefit plans and programs and perquisites. The tally sheets also set forth the estimated value that each of our named executive officer would realize upon separation from our company under various scenarios including: normal retirement; voluntary termination of employment with and without good reason; involuntary termination of employment with and without cause; termination of employment in connection with a change in control; and death or disability. The HC&CCCompensation Committee uses these tally sheets in connection with its consideration ofwhen considering adjustments to base salaries and awards of equity-based or other remuneration, and in establishing incentive plan opportunity levels. Although the HC&CCCompensation Committee reviews and considers the amounts realizable by our named executive officers under different termination scenarios, as well as the current stock and equity-based award holdings, value received upon vesting of previously awarded equity-based awards and exercise of in-the-money previously awarded stock options, these are not primary considerations in the assessment and determination of annual compensation for our named executive officers.
The following comprise the primary elements of the 20072008 compensation program for our named executive officers:
Element | Form of Compensation | Purpose | Performance | |||
Base Salary | Cash | Provides competitive, fixed compensation to attract and retain exceptional executive | ||||
Short-Term Incentive | Cash | Creates a strong financial incentive for achieving or exceeding critical operating and financial | adjusted operating income before depreciation and amortization, or OIBDA; post-paid wireless churn; net additions; and calls to For the Second Quarters 2008: |
Element | Form of Compensation | Purpose | Performance | |||
Long-Term Incentive | Non-qualified stock options and time-based RSUs, as well as performance-based RSUs granted under the ENTI. | term returns for our shareholders and aligns executive interests with those of shareholders, as well as enhancing executive retention. | With respect to performance-based RSUs the ENTI, adjusted cash | |||
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A summary of the primary elements of compensation with respect to each of our named executive officers for 20072008 is set forth in the table below.below:
Annual Base Salary | 2007 Short-Term Incentive Compensation Plan | 2007 Long- Term Incentive Compensation Plan – Target Opportunity | Integration Overachievement Plan | ||||||||||||||
Target Opportunity | Actual Payout | Target Opportunity | Actual Payout | ||||||||||||||
Daniel R. Hesse | $ | 1,200,000 | N/A | N/A | N/A | N/A | N/A | ||||||||||
Paul N. Saleh | $780,000 | $ | 975,000 | $ | 628,875 | $ | 5,875,000 | $ | 1,000,000 | $0 | |||||||
Barry J. West | $ | 469,356 | $ | 469,356 | $ | 303,016 | N/A | $ | 425,000 | $0 | |||||||
Timothy E. Kelly | $572,001 | $ | 600,601 | $ | 375,976 | $ | 3,554,375 | $ | 550,000 | $0 | |||||||
Kathryn A. Walker | $520,000 | $ | 520,000 | $ | 330,356 | $ | 2,350,000 | $ | 750,000 | $0 | |||||||
Gary D. Forsee | $ | 1,500,000 | $ | 2,550,000 | $ | 1,516,740 | $ | 10,000,000 | $2,500,000 | $0 |
Base Salary(1) | 2008 Short-Term Incentive Compensation Plan | 2008 Long- Term Incentive Compensation Plan – Target Opportunity | ||||||||||
Target Opportunity | Actual Payout | |||||||||||
Daniel R. Hesse | $ | 1,200,000 | $ | 2,040,000 | $ | 2,651,388 | $ | 10,000,000 | ||||
Robert H. Brust | $ | 642,308 | $ | 867,750 | $ | 1,121,933 | $ | N/A | ||||
Keith O. Cowan | $ | 725,000 | $ | 906,250 | $ | 1,177,854 | $ | 5,000,000 | ||||
Steven L. Elfman | $ | 412,500 | $ | 535,641 | $ | 687,198 | $ | 3,000,000 | ||||
Robert L. Johnson | $ | 460,000 | $ | 460,000 | $ | 597,862 | $ | 1,280,000 | ||||
Former Executive Officers: | ||||||||||||
Paul N. Saleh | $ | 75,000 | $ | 67,031 | $ | 70,852 | $ | N/A | ||||
William G. Arendt | $ | 329,000 | $ | 253,999 | $ | 351,093 | $ | 640,384 | ||||
Leonard J. Kennedy | $ | 515,000 | $ | 423,523 | $ | 558,472 | $ | 1,565,334 | ||||
Mark E. Angelino | $ | 49,760 | $ | 37,357 | $ | 48,553 | $ | N/A |
(1) | The base salary includes prorated amounts for Messrs. Brust, Elfman, Saleh, Arendt, Kennedy and Angelino based on length of employment. The annual salary of Messrs. Brust and Elfman is set forth below. |
The amounts indicated for each named executive officer under the column entitled “2008 Long-Term Incentive Compensation Plan—Target Opportunity” represents the target amount granted rather than the actual amount earned under the program. Actual amounts earned, if any, may be above or below the indicated value and depend on a variety of factors including whether the executive meets the applicable vesting requirements, changes in our share price, and, in the case of the ENTI, whether the applicable performance goals are attained.
Mr. HesseBrust commenced employment with us on December 17, 2007. Consequently, he was not a participantMay 1, 2008. In lieu of participating in the 2007 short-term or long-term incentive compensation2008 and 2009 LTIC plans, or the integration overachievement plan.Mr. Brust received a sign-on equity award valued at $6,000,000, which is detailed below in (2) and (3). To attract Mr. Hesse, and in consideration forBrust, his forfeiture of certain cash and equity incentive compensation from his prior employer upon joining our company, Mr. Hesse’s employment agreement provided for: (1) a $2,650,000$1,650,000 cash sign-on bonus,bonus—(a) 250,000 of which was payable in 2008, (b) $700,000 of which was payable as soon as practicable after December 31, 2008, and (c) the final $700,000 of which is payable as soon as practicable after December 31, 2009; (2) a sign-on option award to purchase 3,275,000677,201 shares of our common stock that vest in three equal installments, of which two-thirds had an exercise price above our market price50% on the date of grantMay 1, 2010 and 50% on May 1, 2011; and (3) 718,907469,484 sign-on RSU awards, which had an aggregate value of $10,000,000award, that vest 50% on the date of grantMay 1, 2010 and vest in three equal annual installments.50% on May 1, 2011 . For additional information regarding Mr. Hesse’sBrust’s compensation, see “—Summary Compensation Table” and “—Grants of Plan-Based Awards.”
In lieu of participating in our 2007 long-term incentive compensation plan, Mr. West received $500,000 of cash compensation under the terms of his employment agreement. For additional information regarding Mr. West’s compensation, see “—Summary Compensation Table.”
Other elements of the compensation program for our named executive officers consist of:
retention programs;
employee benefit plans and retirement programs;
limited personal benefits and perquisites; and
a deferred compensation program.
Base Salary
Because base salary is not performance-based remuneration, it serves as a minimum payment to executive officers. We determined the base salary of each of theour named executive officers other than Mr. Hesse, based on a number of factors, including the:
nature, responsibilities and reporting relationships of the position;
salary levels for incumbents in comparable positions at peer companies, as well as other executives within our organization; and
experience and tenure of the executive.
The HC&CC considered it necessary and appropriate to set a base salary for Messrs. Hesse and Forsee above the $1 million Section 162(m) limit.
We periodically make adjustments to the base salaries of executive officers based on the factors listed above, as well as our performance and that of the executive officer. In early 2008, the HC&CCCompensation Committee completed its annual review of the base salaries of our named executive officers who were employed by us at that time. As of February 11, 2008,25, 2009, the base salary of each of our named executive officers remained unchanged from 20072008 and is as follows:
Mr. Hesse—$1,200,000;
Mr. West—Brust—$469,356; 1,000,000;
Mr. Cowan—$725,000;
Mr. Elfman—$650,000; and
Ms. Walker—Mr. Johnson—$520,000.460,000.
Annual Short-Term Incentive Compensation PlanPlans
Each of our named executive officers other than Mr. Hesse, participated in our annual short-term incentive compensation, or STIC plan for 2007,2008, which provides for the payment of cash compensation if specified financial and operational objectives have been satisfied.are achieved. The STIC plan is an important part of how we reward our employees, and we believe that indicates our commitment to producing solid financial results.
WeIn 2008, we established target opportunities under the STIC plan for 2007 for each named executive officer as a multiple of his or her base salary. To hold those employees with the highest levels of responsibility accountable for our performance, we vary incentive target opportunities under the STIC plan in proportion with each named executive officer’s role and responsibilities.
The employment agreement of Mr. ForseeHesse provided for a target opportunity under the 20072008 STIC plan of not less than 170% of base salary which was negotiated in connection with the Sprint-Nextel merger.and an annual payment of not more than 200% of his target opportunity. We determined the target opportunities under the STIC plan of each of the other named executive officers based on his or her job responsibilities and a number of other factors, including the short-term incentive compensation levels paid to employees with comparable responsibilities by the companies in the benchmarking analyses. We also considered the target opportunities of each named executive officer as compared with the levels for other members of our senior management team.
Because we were engaged in restructuring and turnaround initiatives in 2008, the Compensation Committee adopted a quarterly performance measurement approach that was intended to provide flexibility in the selection of performance goals and targets. This approach ensured that target performance objectives were set at levels sufficiently difficult to justify the payouts and also enabled the Compensation Committee to consider progress against our turnaround initiatives throughout the year.
In early 2007,2008, the HC&CCCompensation Committee established financial and operational objectives against which our actual performance was to be compared as a basis for determining the amount of payments made under the STIC plan and provided for significant payoutsthe first quarter 2008 if our performance met or exceeded these objectives. For 2007,The Compensation Committee believed that the HC&CC
established three financialperformance objectives set for the first quarter 2008 would emphasize our achievement of certain critical near-term objectives necessary for a turnaround by providing incentives for the senior management team and operational objectivesother plan participants to focus executives’ attention on areas(1) the customer experience as measured by wireless post-paid churn and calls from subscribers to customer care, (2) profitability as measured by adjusted OIBDA and (3) increasing our focus on iDEN customer additions.
In March 2008, the Compensation Committee established performance objectives for the second through fourth quarters of 2008. The Compensation Committee believed that we believe are importantthe performance objectives set for the second through fourth quarters of 2008 would focus our organization on achieving certain critical near-term objectives necessary for a turnaround by providing incentives for the senior management team and other plan participants to achieving strategic results: growth of revenues(1) improve the customer experience as measured by wireless post-paid churn and ourreducing the calls from subscribers to customer base; cost-efficient use of resources;care, and improved customer experience. Additionally, Mr. Forsee assigned each executive a functional objective(2) improve profitability as measured by adjusted OIBDA and cash generation.
In focusing on these objectives during 2008, the Compensation Committee hoped to focus attention on his or her respective area of responsibility (i.e., finance, 4G mobile broadband operations, marketing and network). The HC&CC was informed ofposition us to stabilize negative subscriber trends in future periods.
For the functional objectives. The HC&CC weighted each objective in relation tofirst quarter 2008, the importance of each objective in light of our strategic goals.
The three financial and operationalfour performance objectives and their respective weightings are as follows:
Objective | Weighting | Target | Threshold | Actual | ||||
Adjusted OIBDA—or adjusted operating income before depreciation and amortization and special items—for 2007 | 30% | $11.0 – $11.5 billion | $10.7 billion | $10.8 billion | ||||
Post-paid wireless churn—a measure of retention of our post-paid wireless subscribers—for 2007 | 30% | 2.00% – 2.05% | 2.2% | 2.2% | ||||
Net service revenue for 2007 | 20% | $37.5 – $38.4 billion | $37.05 billion | $37.6 billion |
The functional objectives,were (1) adjusted OIBDA—or adjusted operating income before depreciation and amortization and special items, which was weighted at 30%; (2) service calls from subscribers to customer care, which was weighted at 30%; (3) post-paid wireless churn, which was weighted at 20%, are as follows:; and (4) net iDEN subscriber additions, which was weighted at 20%. For the adjusted OIBDA objective, for the first quarter of 2008, the target was set at $1.88 to $1.98 billion, with a threshold set at $1.78 billion. For that quarter, we reported actual adjusted OIBDA at $2.009 billion. We do not include the performance goals for service calls from subscribers to customer care. We set the service calls to customer care target at a level that was challenging but obtainable. We also do not include the performance goals for post-paid wireless churn. We set the post-paid wireless churn target at a level that was challenging but obtainable. In addition, we do not include the performance goals for net iDEN subscriber additions. We set the net iDEN subscriber additions target at a level that was challenging but obtainable.
For the second quarter of 2008, the four performance objectives and their respective weightings were (1) adjusted OIBDA, which was weighted at 20%; (2) service calls from subscribers to customer care, which was weighted at 20%; (3) post-paid wireless churn, which was weighted at 40%; and (4) free cash flow, which was weighted at 20%. For the adjusted OIBDA objective, for the second quarter of 2008, the target was set at $1.65 to $1.738 billion, with a threshold set at $1.575 billion. For that quarter, we reported actual adjusted OIBDA at $2.096 billion. For the free cash flow objective, for the second quarter of 2008, the target was set at ($12) to $5 million, with a threshold set at ($87) million. For that quarter, we reported actual free cash flow at ($8) million. We do not include the performance goals for service calls from subscribers to customer care. We set the service calls to customer care target at a level that was challenging but obtainable, and, for the second quarter, the target level was set at a level that was 9% below the first quarter target, which we believed was challenging to obtain. We also do not include the performance goals for post-paid wireless churn. We set the post-paid wireless churn target at a level that was challenging but obtainable, and, for the second quarter, the target level was set with the belief that the objective was more challenging to obtain than the first quarter.
For the third quarter of 2008, the four performance objectives and their respective weightings were (1) adjusted OIBDA, which was weighted at 20%; (2) service calls from subscribers to customer care, which was weighted at 20%; (3) post-paid wireless churn, which was weighted at 40%; and (4) free cash flow, which was weighted at 20%. For the adjusted OIBDA objective, for the third quarter of 2008, the target was set at $1.55 to $1.65 billion, with a threshold set at $1.51 billion. For that quarter, we reported actual adjusted OIBDA at $1.824 billion. For the free cash flow objective, for the third quarter of 2008, the target was set at $215 to $265 million, with a threshold set at $175 million. For that quarter, we reported actual free cash flow at $1.059 billion. We do not include the performance goals for service calls from subscribers to customer care. We set the service calls to customer care target at a level that was challenging but obtainable, and, for the third quarter, the target level was set at a level that was 13% below the second quarter target, which we believed was challenging to obtain. We also do not include the performance goals for post-paid wireless churn. We set the post-paid wireless churn target at a level that was challenging but obtainable, and, for the third quarter, the target level was set with the belief that the objective was more challenging to obtain than the second quarter. For the fourth quarter of 2008, the four performance objectives and their respective weightings were (1) adjusted OIBDA, which was weighted at 20%; (2) service calls from subscribers to customer care, which was weighted at 20%; (3) post-paid wireless churn, which was weighted at 40%; and (4) free cash flow, which was weighted at 20%. For the adjusted OIBDA objective, for the fourth quarter of 2008, the target was set at $1.6 to $1.8 billion, with a threshold set at $1.375 billion. For that quarter, we reported actual adjusted OIBDA at $1.735 billion. For the free cash flow objective, for the fourth quarter of 2008, the target was set at $350 to $550 million, with a threshold set at $213 million. For that quarter, we reported actual free cash flow at $536 million. We do not include the performance goals for service calls from subscribers to customer care. We set the service calls to customer care target at a level that was challenging but obtainable, and, for the fourth quarter, the target level was set at a level that was 5% below the third quarter target, which we believed was challenging to obtain. We also do not include the performance goals for post-paid wireless churn. We set the post-paid wireless churn target at a level that was challenging but obtainable, and, for the fourth quarter, the target level was set with the belief that the objective was more challenging to obtain than the third quarter. |
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The STIC plan provided that payouts to each named executive officer were determined using three variables:
the named executive officer’s target opportunity;
our actual performance compared with each performance objective; and
the relative weightings of each performance objective.
The STIC plan provided for a range of payouts above and below each named executive officer’s targeted opportunity so long as our actual results exceeded minimum threshold levels. To further our goal of tying a significant portion of each named executive officer’s total annual compensation to our business performance, the plan provided that we would make a STIC payment equal to the named executive officer’s targeted opportunity only if our actual results met the targeted objectives. Similarly, the plan provided for a payment in excess of a named executive officer’s targeted opportunity if our actual performance exceeded the targeted objectives. The plan also provided that, if our actual performance was below the target objectives but exceeded the minimum threshold levels, we would make a payment that was below the named executive officer’s targeted opportunity. Named executive officers were not eligible for payouts under the plan if our actual performance did not meet the minimum threshold level for any of the targeted objectives.
For 2007, the STIC plan capped the amountfirst quarter of payout at 200% of targeted opportunities with respect to post-paid wireless churn and net service revenue objectives and at 120% for functional objectives, but, for each named executive officer other than Mr. Forsee, the maximum amount of payout was unlimited with respect to the2008, our adjusted OIBDA objective. The terms ofand calls from subscribers to customer care performance exceeded the employment agreement with Mr. Forsee provided that actual payouts under the STIC plan were limited to 200% of his targeted opportunity. Although not used in 2007, the STIC plan also provided for an individual performance factor that may be used to increase the final payout up to an additional 120% of the calculated payout based on the individual’s performance.
The HC&CC designed the STIC plan to meet the IRC Section 162(m) performance-based requirements. To enable payments under the STIC plan to be deemed performance-based for purposes of Section 162(m), the HC&CC limited the maximum amount that any named executive officer may receive under the plan to a small fraction of a percentage of our adjusted operating income. As indicated below, the HC&CC exercised this discretion to make payments under the STIC plan at levels below this limit.
For 2007,target level, our net service revenueiDEN subscriber additions met the target level and our adjusted OIBDA and post-paid wireless churn met the threshold level but did not meet the target level. Consequently, eachFor the second quarter of 2008, our adjusted OIBDA, calls from subscribers to customer care and post-paid wireless churn exceeded our target, and our free cash flow met the target level. For the third quarter of 2008, our adjusted OIBDA and free cash flow exceeded the target
level, and our post-paid wireless churn met the threshold level but did not meet the target level. Our calls from subscribers to customer care performance met the target level. For the fourth quarter of 2008, our calls from subscribers to customer care exceeded the target level, our adjusted OIBDA and free cash flow met the target level, and our post-paid wireless churn did not meet the target threshold.
For the second, third and fourth quarters of 2008, the Compensation Committee established Section 162(m) objectives for the named executive officer receivedofficers potentially subject to Section 162(m) at a payoutsmall fraction of a percentage of our adjusted operating income excluding amortization in the second and third quarter, and our adjusted operating income less depreciation in the fourth quarter. The Compensation Committee exercised their discretion to make payments under the STIC plan that was less than hisat levels below the limits achieved under the Section 162(m) objective in those quarters.
Under the terms of our incentive compensation plans, the Compensation Committee retains the discretion to reduce the size of any award or her target opportunitypayout. In 2008, the Compensation Committee exercised its discretion and varied duereduced the payout made to all employees participating in the STIC Plan in the first quarter 2008 with respect to the functional objective component. Eachcalls to customer care metric.In making the determination to reduce the payout underwith respect to this metric, the 2007Compensation Committee considered when our costs savings realized from improvements in the calls to customer care metric will be realized and how the metric has improved with each successive implementation of the unified billing platform across the customer base which contributed significantly to exceeding this metric.
For the 2008 STIC plan, the aggregate payout percentage, as compared to targeted opportunity for our current named executive officers was belowapproximately 130%. With respect to our former named executive officers, the IRC Section 162(m) maximum amount established by the HC&CC. Theaggregate payout percentages as compared to targeted opportunity were as follows:
Saleh—64.5%106%;
West—64.6% Arendt—138%;
Kelly—62.6%;
Walker—63.5% Kennedy—132%; and Angelino—130%. The payout percentages for the former named executive officers vary depending on their respective dates of departure.
Forsee—59.5%.
Long-Term Incentive Compensation Plan
Each of our named executive officers other than Messrs. Hesse and West, participated in our long-term incentive compensation, or LTIC plan for 2007,2008, under which we award equity-based incentive compensation.
We determined Typically, the target opportunities under the LTIC plan of each named executive officer, except Mr. Forsee, based on his or her job responsibilities and a number of other factors,Compensation Committee grants equity awards to eligible employees, including the long-term incentive compensation levels paid to employees with comparable responsibilities by the companies in our benchmarking analyses, the individual’s performance, the importance of the individual’s function to our business, and the risk of losing the services of the executive. The HC&CC did not provide any adjustments for individual performance in 2007. We also considered the target opportunities of each named executive officer as compared with the levels of other members of our senior management team. The employment agreement of Mr. Forsee provided for a target opportunity under the 2007 LTIC plan of $10 million, which was negotiated in connection with the Sprint-Nextel merger.
To create an appropriate balance between rewarding our named executive officers, for achieving critical financialat its February meeting. In 2008, however, equity awards were granted at the meeting on March 26, 2008 because the Compensation Committee delayed completing its review of our incentive compensation arrangements until the 2008 strategy and operating results and creating value for the shareholders, andsupporting metrics were complete. Equity grants to ensure that the program supports our retention objectives, the LTIC plan provides that one-half of each participant’s targeted opportunity be made in the form of non-qualified stock options to purchase our common stock and the other half be made in performance-based RSUs. By subjecting both the stock options and RSU awards granted under the plan to time-based vesting schedules, we support our retention objectives and emphasize the importance of enhancing our performance and increasing shareholder return. In addition, eachcertain newly hired employees, including named executive officer generally realizes remuneration from stock option awards only if he or she remains employed with us during the vesting period and the price of our common stock appreciates after the date of grant, which supports our goal of tying remuneration to shareholder return.
We calculated the number of shares of common stock underlying the stock options that each LTIC plan participant was awarded in 2007 by dividing one-half of his or her targeted opportunity by the value of an option, as determined using the Black-Scholes option valuation model. The Black-Scholes model incorporates into the determination of the value of a stock option the expected term of the option, the risk-free rate of return and the fair market value, dividend yield, and assumed future price volatility of the stock that underlies the option. For determining the number of shares of common stock underlying the stock options that each LTIC plan participant was awarded, we used the same assumptions that we use to determine share-based compensation expense in our consolidated financial statements, except that, for the fair market value assumption, we used a 30-day average trading price of our common stock, which resulted in the compensation expense computed pursuant to SFAS 123R varying slightly from the portion of the LTIC plan targeted opportunity related to stock option grants.
These options, which we granted on February 27, 2007, vest ratably in equal amounts on the first, second and third anniversaries of the grant date and have an exercise price equal to the fair market value of a share of our common stockofficers, are made on the date of the grant, which we determined using the average of the high and low of the trading price on the date of grant.
We determined the number of RSUs that each LTIC plan participant initially was awarded in 2007 by dividing one-half of his or her targeted opportunity by the average fair market value of our common stock over a consecutive 30-calendar day period, which we believe mitigated the volatility inherent in our stock if the price on any single day were used. We issued these RSUs on February 27, 2007. Each RSU award vests on the later of the third anniversary of the date of award and the date that the financial results tied to the performance objectives are approved by the HC&CC. Each RSU award is eligible to receive dividend-equivalent payments as and to the extent that we declare dividends with respect to our common stock, although the plan provides that no such payments are made until after any performance adjustments have been made.
For each employee eligible to participate in the 2007 LTIC plan who also participated in our 2006 LTIC plan, the HC&CC approved grants of additional performance-based RSU awards to recognize the efforts of the eligible plan participants and to promote our retention efforts. This grant was made to each of our named executive officers, other than Messrs. Hesse, Forsee and West. We granted these RSU awards in an amount equal to 35% of the RSU portion of each participant’s target opportunity. These RSU awards are subject to the same performance criteria and other terms of our 2007 LTIC plan.
The LTIC plan provides that each initial award of RSUs is subject to an adjustment in amounts ranging from 0% to 200% based on our actual performance compared to established performance objectives. With respect to the performance-based RSU awards, the HC&CC established two financial objectives to focus executives’ attention on two areas that we believe are important to achieving long-term strategic results: improved profitability and generation of cash from our operations. These objectives, each weighted as 50%, are as follows:
consolidated adjusted OIBDA margin of our core operations for 2009; and
cumulative free cash flow from operations for 2007 through 2009.
We believe that the performance objective targets for our LTIC plan should be confidential as making them available publicly would likely cause competitive harm. If competitors were aware of our targeted cash flows and margins, it would provide them insight into our business, and, with respect to our margins, our pricing practices. It is our objective to set challenging but reasonably achievable target performance goals, and since the merger, we have had only one long-term plan, the LTIC plan for 2006, under which plan participants received a payout of 16.8% of target.
The HC&CC designed the LTIC plan to allow for the stock options granted under the plan to comply with the IRC Section 162(m) performance-based requirements. To motivate our named executive officers to achieve and exceed the financial and operating performance objectives, the HC&CC determined that it was in our best
interest to design the RSU award not to comply with the Section 162(m) performance-based requirements. Consequently, the value of the RSU awards under the plan was not subject to the individual limit approved by our shareholders.hire.
2008 Compensation Determinations
Short-Term Incentive Compensation Plan
In February 2008, the HC&CC established a plan related to the first quarter of 2008, or First Quarter 2008 STIC plan. Traditionally, early in the applicable year, the HC&CC adopts a short-term incentive compensation plan that relates to the entire calendar year in question. This year, because Mr. Hesse joined our company on December 17, 2007, and, as a result, our senior management team began a review of our operations and an assessment of our strategies and future business plans, the HC&CC initially adopted the First Quarter 2008 STIC plan and then at a subsequent meeting in mid-March 2008 adopted a plan for the second, third and fourth quarters of 2008, or the Remainder of 2008 STIC plan. The First Quarter 2008 plan and the Remainder of 2008 STIC plan are collectively considered the 2008 STIC plan. Each calendar quarter of 2008 is a Quarterly Performance Period.
The 2008 STIC plan contains a different set of performance objectives and weightings for the First Quarter 2008 STIC plan than for the Remainder of 2008 STIC plan. The First Quarter 2008 STIC plan provides for a payment of incentive compensation based on the achievement of the financial or operating metrics established for each of the following performance objectives: (1) adjusted OIBDA, weighted at 30%; (2) calls from subscribers to customer care representatives, weighted at 30%; (3) wireless post-paid churn, weighted at 20%; and (4) net iDEN subscriber additions, weighted at 20%. These objectives reflect our desire to focus our executive officers’ attention on cost efficient use of our resources and improved operating performance, improved customer experience and retaining subscribers of our iDEN-based services.
The Remainder of 2008 STIC plan provides that, for each of the three Quarterly Performance Periods, a payment of incentive compensation will be based on the achievement of the financial or operating metrics established for each of the following performance objectives: (1) wireless post-paid churn, weighted at 40%; (2) adjusted OIBDA, weighted at 20%; (3) free cash flow, weighted at 20%; and (4) calls from subscribers to customer care representatives, weighted at 20%. These objectives reflect our desire to focus the attention of our executive officers on improved customer experience, cost efficient use of our resources, improved operating performance and generation of free cash flow.
Payment under the 2008 STIC plan for each Quarterly Performance Period will be determined based on our results using three variables: (1) one quarter of each individual’s annual incentive target opportunity, which is based on a percentage of the individual’s base salary; (2) our performance during the applicable period compared with the financial or operating metric established for each performance objective; and (3) relative weightings for each performance objective.
For the First Quarter 2008 STIC plan, each of the performance objectives will have a threshold, target and maximum level of payment opportunity, with the maximum payment opportunity equal to 200% of the individual’s target opportunity.
Each performance objective for the Remainder of 2008 STIC plan will have a threshold, target and maximum level of payment opportunity, with the maximum payment opportunity equal to 250% of the individual’s target opportunity, other than Mr. Hesse, whose employment agreement provides that actual payouts under the 2008 STIC plan are limited to 200% of his targeted opportunity.
The actual incentive amounts paid to each participant for each applicable Quarterly Performance Period will be based on our actual results during the applicable period in relation to the financial or operating metric established for each performance objective, Also, payments will be limited to a maximum under an adjusted operating income objective for executive officers who are subject to the deduction limit of IRC Section 162(m).
Mr. Hesse’s employment agreement provides for a target opportunity under the 2008 STIC plan of not less than 170% of base salary—or $2,040,000 for 2008—with actual payouts under the 2008 STIC plan limited to 200% of his targeted opportunity. The annual target opportunity for Ms. Walker is equal to 100% of her base salary—or $520,000 for 2008—and for Mr. West is equal to 100% of his base salary—or $469,356 for 2008.
Enhanced Near-Term Incentive Compensation OpportunityOpportunity.
Given our need to focus on achieving certain critical near-term objectives necessary for a turnaround of our performance, as discussed further below, the HC&CCCompensation Committee designed part of the 2008 LTIC plan to provide incentives for our senior management teamnamed executive officers and other plan participants to reduce wireless post-paid churn and improve the customer experience, use our resources efficiently and maximize free cash flow. To further the focus of senior management on these critical objectives, for those employees who are eligible to participate in the 2008 LTIC plan as part of the 2008 LTIC plan design, the HC&CCCompensation Committee allocated one half of each participant’s 2008 LTIC plan targeted opportunity, which we refer to as the ENTI, to be in the form of dollar denominated performance units, or Performance Units, payable in RSU awards, based on our actual performance in the second, third and fourth quarters of 2008 using the same performance objectives underas the Remainder ofsecond, third and fourth quarter 2008 STIC plan.
The 50% portion of each 2008 LTIC plan participant’s targeted objective to be made in the form of Performance Units will bewere equally allocated to each of the second, third and fourth quarters of 2008.2008 under the ENTI. The Performance Units will bewere payable based on our actual performance during the applicable period as compared to the financial or operating metric established for each performance objective and relative weightings for each performance objective of the Remainder of 2008 STIC plan for each of the three Quarterly Performance Periods.quarterly performance periods in 2008 established with respect to the STIC plan discussed above under “—Short-Term Incentive Compensation Plans.”
Each performance objective for the applicable Quarterly Performance Period will havequarterly performance period had a threshold, target and maximum level of payment opportunity, with the maximum payment opportunity equal to 250% of the individual’sparticipant’s target opportunity. To calculate each incentive award amount, an eligible employee’sparticipant’s incentive target opportunity will bewas multiplied by the weightings and the payout results for each performance objective, and,objective. In order to comply with the performance-based requirements under Section 162(m), for certainour named executive officers, other than Mr. Hesse will bein the second and third quarters of 2008, the payout for Section 162(m) purposes was limited to a maximum payout under an adjusted operating income objective intended to comply with IRC Section 162(m).objective. For 2008, the payout earned under the performance objectives described in the previous paragraph did not exceed this maximum payout.
All payouts of Performance Units will bewere in the form of RSU awards that vest six months from the end of the applicable Quarterly Performance Period.quarterly performance period. We will determinedetermined the number of RSUs in which each Performance Unit willwould convert by dividing the value ofpayout under the applicable Performance Units by the fair market value of our common stock.stock on the date of grant.
All RSU awards granted with respect to the Performance Units will be made pursuant to our 2007 Omnibus Incentive Plan, and are eligible to receive dividend equivalent payments, as and to the extent declared with respect to our common stock.
For each named executive officer, other than Mr. Hesse, these Performance Unit awards are intended to qualify as performance-based compensation under Section 162(m) and, accordingly, all related compensation is expected to be deductible for federal income tax purposes. The HC&CC did not intend Mr. Hesse’s Performance Unit awards to be qualified performance-based compensation under Section 162(m). Under limits approved by our shareholders under the 2007 Omnibus Incentive Plan, qualified performance-based cash-denominated awards, such as the Performance Unit awards and payments under the Remainder of 2008 STIC plan, would be subject to an individual limit of $7.5 million. The HC&CC did not consider it appropriate for this limit to apply to Mr. Hesse’s compensation related to his Performance Unit awards and determined that the need to provide incentives to focus on critical near-term objectives outweighed the potential tax savings.
Long-Term Incentive Compensation PlanCompensation.
Under the 2008 LTIC plan, the 50% portion of each plan participant’s targeted opportunity that remains following the allocation to the Performance Units will beunder the ENTI discussed above were made in a combination of non-qualified stock options and RSU awards, weighted equally based on grant date expected fair value.value on the date of grant. The HC&CCCompensation Committee made the allocation between stock options and RSU awards to reward our executive officers to the extent that they createcreated value for the shareholders and to ensure that the program supports our retention objectives.
The stock options will vest ratably in equal amounts on February 11, 2009, February 11, 2010 and February 11, 2011 and have an exercise price equal to the closing price of a share of our common stock on the date of the grant. The RSU awards, which are designed to enhance our retention of executive officers, will vest entirely on February 11, 2011.
2009 Compensation Determinations
2009 Short-Term Incentive Compensation Plan
In January 2009, the Compensation Committee established the performance objectives and other terms of our STIC plan for 2009. The HC&CC designed2009 STIC plan provides for a payment of incentive compensation based on the 2008LTICachievement of the following specified performance objective during 2009:
adjusted OIBDA, weighted at 50%;
post-paid churn, weighted at 20%;
post-paid net subscriber additions, weighted at 20%; and
calls from subscribers to customer care, weighted at 10%.
As compared to second through fourth quarters of 2008, the performance objectives for our 2009 STIC plan have changed by eliminating free cash flow as an objective and substituting it with post-paid net subscriber additions. Also, the objectives are weighted at different rates as compared to allow2008 because of our current business focus for 2009. The Compensation Committee believes that these changes are important in order to place a strong emphasis on the most critical objectives to drive turnaround and improve our performance in 2009.
For 2009, the Compensation Committee has established two six-month performance periods. The biannual approach was adopted in lieu of the quarterly approach used in 2008 because, although we believe we are making progress against key turnaround initiatives, the Compensation Committee wanted to maintain flexibility to revisit the performance schedule at mid-year. This flexibility enables the setting of goals that are sufficiently challenging to justify and support the costs associated with payout at various levels of performance and also protects against the possibility of a compensation windfall or deficit during a period in which the economic
environment is highly volatile. The first period is from January 1, 2009 through June 30, 2009, and the second is from July 1, 2009 through December 31, 2009. Each performance period has discrete performance objectives, and employees generally must be employed on December 31, 2009 in order to be eligible to receive compensation for both periods.
The award payment under the 2009 STIC plan will be determined based on our results using three variables:
the individual’s annual incentive target opportunity, which is based on a percentage of his or her base salary;
our performance compared with each of the performance objectives mentioned above; and
relative weightings for each performance objective.
Each of the performance objectives will have a threshold, target and maximum level of payment opportunity. The minimum payment opportunity is equal to 25% of the individual’s target opportunity, a target opportunity of 100% and a maximum payment opportunity is equal to 200% of the individual’s target opportunity. The determination of payments for the stock options granted under the plan to comply with IRC Section 162(m) performance-based requirements. The RSU component does not satisfy the requirements to be considered performance-based compensation under Section 162(m).
To properly motivate our named executive officers to achieve and exceed the financial and operating performance objectives, the HC&CC determined that it was in our best interest to design the RSU award notis intended to comply with the performance-based requirements under Section 162(m) performance-based requirements. Consequently, the value of the RSU awards under the plan was not subject to the individual limit approved by our shareholders.Internal Revenue Code.
Because Mr. Hesse’s employment agreement provides for an annual long-terma target opportunity under the STIC plan of not less than 170% of base salary—or $2,040,000 for 2009. Mr. Brust’s employment agreement provides for a target opportunity under the STIC plan of not less than 130% of base salary—or $1,300,000 for 2009. Mr. Cowan’s employment agreement provides for a target opportunity under STIC plan of not less than 125% of base salary—or $906,250 for 2009. Mr. Elfman’s employment agreement provides for a target opportunity under STIC plan of not less than 125% of base salary—or $812,500 for 2009. Mr. Johnson’s employment agreement provides for a target opportunity under the STIC plan of not less than 100% of base salary—or $460,000 for 2009.
The actual incentive opportunity withamounts paid under the 2009 STIC plan will be based on our actual results during 2009 in relation to the established performance objectives, and these payments may be greater or less than the target amounts that have been established.
2009 Long-Term Incentive Compensation Plan
In January 2009, the Compensation Committee established the 2009 performance objective and other terms of our LTIC plan. In light of the current economic conditions, in February 2009, the Compensation Committee decided that participants, including our senior management, should have at least a $10 million target15% reduction in their LTI awards for 2009. As compared to the 2008 LTIC plan, the 2009 plan varies in several areas. The 2009 LTIC plan shifted away from the ENTI to a three year Performance Unit award, as well as stock option awards in order to maximize shares available under the 2007 Omnibus Incentive Plan. In addition, although we dropped the free cash flow objective from the STIC plan for 2009, we have added it as the objective under the 2009 LTIC plan for the first year’s performance period, which is discussed in more detail below.
Subject to the 15% reduction described above, seventy-five percent of the value for 2008, $5 million of hiseach participant’s targeted opportunity will be allocatedin the form of non-qualified stock option grants, the number of which will be based on the value of each option determined using the Black-Scholes valuation model. The exercise price of each option was the closing price of our common stock on the grant date, and the options will vest ratably in equal amounts on February 25, 2010, February 25, 2011, February 25, 2012, and February 25, 2013.
Subject to Performance Units under the enhanced near-term opportunity15% reduction described above, the remaining 25% of the 2008 LTIC plan and the remaining $5 million will be allocated to grantsvalue of stock options and RSU awards. Because Ms. Walker’s target opportunity is $2 million, $1 million of hereach participant’s targeted opportunity will be made in the form of a Performance Unit award. The value of each Performance Unit is $1.00. The Performance Unit award is allocated equally to Performance Units under the enhanced near-term opportunityeach of the 2008 LTIC plan2009, 2010, and 2011 performance periods, and is payable in cash or unrestricted shares at the remaining $1 millionend of 2011. If paid out in shares of our common stock, the number of shares awarded will be allocated to grants of stock options and RSU awards. Because Mr. West will not participate indetermined by dividing the 2008 LTIC plan due to consideration that he will receive under his employment agreement, as amended on December 31, 2007, he will not be entitled to grants of Performance Units under the enhanced near-term opportunity of the 2008 LTIC plan, stock options or RSU awards.
Integration Overachievement Plan
Each of our named executive officers, other than Mr. Hesse, participated in our Integration Overachievement Plan, which was adoptedpayout amount by the HC&CC followingaverage high and low stock price on the Sprint-Nextel merger to promotedate the Compensation Committee approves the form of payment.
The Performance Unit payout will be based on our achievement of merger integration synergiesspecified results in each annual performance period. The performance objective for year one is free cash flow and results aimed at increasing shareholder value. The plan provided for incentive payments at specificincludes a threshold of 25%, a target amounts in 2008achievement level of 100% and a maximum achievement level of 200% based on the achievement of certain objectives following completionthose specified results. If the threshold performance goals are not attained, all of the 2006-2007Performance Units will be forfeited. The Compensation Committee may change the objective for the second and third annual performance period.
periods. The HC&CC determinedpayouts may be greater or less than the targeted opportunitytarget amounts that will be established. Except for each named executive officer based on each officer’s base salary and his or her role and expected impact in achieving the synergies that we anticipated realizing fromPerformance Unit award to Mr. Hesse, which is allocated to the integration of Sprint and Nextel and their respective operations.
Actual payouts could range from 0% to 150%2011 calendar year performance period, the design of the targeted opportunities based on our actual adjusted OIBDA margin for 2007 comparedplan is intended to the adjusted OIBDA margin objective of 30.1% that the HC&CC determined in February 2007, togethercomply with the following additional factors that the HC&CC may consider: our actual 2007 OIBDA; incremental free cash flow in 2006 and 2007 attributable to merger synergies; costs that we have incurred to achieve merger synergies; and the performance of our common stock relative to the Dow Jones U.S. Telecommunications Stock Index. We believed that our adjusted OIBDA margin and these additional factors were indicators of achievementperformance-based requirements under Section 162(m) of the expected benefits from merger integration and results aimed at increasing shareholder value. Because our adjusted OIBDA margin for 2007 of 28.8% was less than the
objective, and our actual performance did not compare favorably with the additional factors considered by the HC&CC, there was no payout under the Integration Overachievement Plan, which has since terminated and has not been replaced by any comparable plan.
The Integration Overachievement Plan did not meet the Section 162(m) performance-based requirements.Internal Revenue Code.
Retention Programs
The HC&CCCompensation Committee periodically evaluates whether we are at risk of losing the services of any of our named executive officers and other key personnel who we believe are critical to the success of our business. To ensure that we retain the employment of our named executive officers and other key personnel who we believe may be at particular risk of voluntarily terminating employment, with us, the HC&CCCompensation Committee from time to time awards cash bonuses, RSUs or stock options to further our retention objectives and promote a commonality of interests with shareholders. In determining to whom to make such an award, and the number of RSUs or stock options to be awarded, the HC&CCCompensation Committee considers the current stock and equity-based award holdings of each named executive officer and other key personnel under consideration. RSU awards made for retention purposes do not comply with the Section 162(m) performance-based requirements.
During 2007,2008, the HC&CCCompensation Committee awarded Mr. Saleh 159,163Arendt 20,824 RSUs that were scheduled to vest on June 25, 2010.9, 2009. This award vested upon Mr. Saleh’sArendt’s involuntary termination without cause on January 25,November 14, 2008 and is included in the Grants of Plan-Based Awards table. During 2008, the Compensation Committee also awarded Mr. Kennedy 29,462 RSUs that were scheduled to vest on June 9, 2009. This award vested upon Mr. Kennedy’s involuntary termination without cause on December 19, 2008, and is included in the Grants of Plan-Based Awards table. During 2008, the Compensation Committee also awarded Mr. Johnson 26,316 RSUs that are scheduled to vest June 9, 2009.
Employee Benefit Plans and Programs
Our compensation program includes a comprehensive array of health and welfare benefits. Our named executive officers participate in the same benefit programs, plans and arrangements that are provided to all of our eligible employees. We pay all of the costs for some of these benefit plans, and participants contribute a portion of the cost for other benefit plans.
Retirement Programs
Our retirement program includes a 401(k) plan. UnderFor 2008, under the Sprint Nextel 401(k) Plan, we match 100% of eachmatched participant’s contributions up to 5% of his or hereligible compensation regardless of the achievement of performance targets. For 2009, under the 401(k) Plan, we will match participant’s contributions up to 4% of eligible compensation from January 1, 2009 to March 6, 2009 and will not match participant’s contributions to the plan after March 6, 2009 unless we meet certain performance targets. The Compensation Committee made the determination that if we exceed our adjusted OIBDA target in 2009, as discussed under “2009 Compensation Determinations—2009 Short-Term Incentive Compensation Plan,” then 10% of the over achievement would be distributed to participants on a matching basis up to a maximum of 4% of their eligible compensation. The match for 2009, including any discretionary amount, will be made in the first quarter of 2010. The 401(k) planPlan provides the participants, with our help, the ability to add to their retirement benefits and the opportunity to build financial security for their future.
Those of our named executive officers who were employed with us prior to the Sprint-Nextel merger are entitled to receive retirement benefits under our traditional defined benefit pension plan and our supplemental executive retirement plan, or SERP. Following the Sprint-Nextel merger, we froze benefits under the pension plan and SERP. Plan participants who meet vesting requirements maintain their accrued benefit as of December 31, 2005 under the pension plan and SERP, but do not accrue additional benefits under either plan.
Under the terms of Mr. Forsee’s employment agreement, he is eligible to receive an annual retirement benefit equal to five percent of his covered compensation (generally, annual base salary plus actual annual incentive pay earned) for each calendar year of service beginning with 2003, up to a maximum of 65% of his covered compensation. This benefit will be offset by pension benefits payable to him by any former employer and by us under our traditional defined benefit pension plan and the SERP. Retirement benefits earned pursuant to Mr. Forsee’s employment agreement become payable, without reduction, on January 1, 2008. Effective January 1, 2008, Mr. Forsee began receiving about $84,325 per month payable for the remainder of his life.
Deferred Compensation
Our named executive officers are entitled to participate in the Sprint Nextel Deferred Compensation Plan, a nonqualified and unfunded plan under which they may defer to future years the receipt of certain compensation that would otherwise be paid to them in the year in which it was earned. The plan provides our named executive
officers the ability to increase their financial securitydefer income in addition to the 401(k) plan.Plan. Under the plan for 2008, we matchmatched contributions made by participantsour named executive officers in an amount up to 5% of eligible earnings above the applicable annual limit, which for 20072008 was $225,000,$230,000, to compensate highly-compensated employees for limitations placed on our 401(k) planPlan by federal tax law. Participants elect to allocate deferred and matching contributions among one or more hypothetical investment options, which include one option that tracks our common stock and other options that track broad bond and equity indices. Although Mr. Forsee was eligible to participate in the plan, he was not eligible to participate in the plan’s matching feature due to the retirement benefits that he was eligible to receive under his employment agreement. Messrs. Forsee, Saleh and KellyHesse participated in this plan during 2007.
Prior to2008. For 2009, none of the Sprint-Nextel merger, ournamed executive officers were eligible to participateare participating in our Executivethe Deferred Compensation Plan, or EDCP. Contributions no longer may be made to the EDCP, but it provides for two hypothetical investment options —one that is interest bearing and one that tracks the performance of our common stock —to which prior contributions credited to bookkeeping accounts may be allocated. The interest bearing account accrues interest at a per annum rate equal to the greater of Citibank’s prime rate in effect at the beginning of each month or 6%. Earnings on EDCP interest bearing accounts are considered above-market under applicable securities laws if they exceed a specified federal long-term rate.Plan.
The amount of matching contributions made by us to participating named executive officers and any above market earnings are included in the “All Other Compensation” column of the Summary Compensation Table.
Personal Benefits and Perquisites
We provide very few personal benefits and perquisites to our named executive officers. The few personal benefits and perquisites that we do provide are summarized in the footnotes to the Summary Compensation Table below, and consist primarily of occasional non-business use of our corporate aircraft, primarily for our Chief Executive OfficerCEO and Chief Financial Officer,CFO, and communications equipment installed in residences. The Compensation Committee established an overall security program for Mr. Hesse, our CEO, for our benefit. Under the security program, we currently provide Mr. Hesse with residential security systems and equipment, and he is required to use our aircraft for non-business as well as business travel. Mr. Hesse is permitted to have his family accompany him on the corporate aircraft for business and non-business travel. Mr. Brust, our CFO, has a provision in his employment agreement that allows the personal use of our corporate aircraft, which was part of a comprehensive compensation package negotiated with Mr. Brust. The Compensation Committee determined that this provision was necessary in order to attract Mr. Brust, who had a very specific skill set that we desired, to work for us following his retirement from Eastman Kodak Company, where he gained valuable experience working with a challenged company.
Executive Severance Policy
In 2003,The Compensation Committee decided, in its judgment, that severance to our boardnamed executive officers is needed to mitigate the risks associated with leaving their former employer or position and assuming the challenges of directors adopted ana new position, in addition to providing financial protection and transition to new employment opportunities. Under our executive severance policy. Under the policy, the board will seek shareholder approval for any future severance agreement or arrangement with a senior executive that provides (a) severance pay in excess of two times the senior executive’s base salary plus bonus and (b) continuation of group health, life insurance and other benefits up toin excess of 24-months following the executive’s termination. The policy permits (a)(x) accelerated vesting of RSUs, stock options and any other equity-based awards or (b)(y) continued vesting during the severance period of any such awards. The policy also requires that we seek shareholder approval of any future severance agreement or arrangement that provides for the reimbursement of excise taxes imposed under IRC Section 4999 to a senior level executive. Under the terms of Mr. Forsee’s employment agreement, entered into prior to the adoption of this policy, he was entitled to reimbursement of excise taxes related to severance payments made in connection with a change in control.
For additional information regarding severance benefits to which our named executive officers are entitled, see “—Potential Payments Upon Termination of Employment or Change of Control.”
Change in Control
The Sprint Nextel Change in Control Severance Plan, which became effective January 1, 2007, provides severance benefits to a select group of senior management, including Messrs. Hesse, Saleh, WestCowan, Elfman and Kelly and Ms. Walker,Johnson, in the event of a qualified termination of employment in connection with a transaction that results in a change in control of us. The plan is designed to increase the willingness of participants to remain with us notwithstanding the employment uncertainties related to a possible change in control of us. Mr. Forsee was not named as a participant in the plan because the HC&CC believed that his employment agreement provided appropriate benefits in the event of
If a transaction that resultscould result in a change in control.control was under consideration, we expect that our named executive officers would face uncertainties about how the transaction may affect their continued employment with us, which we believe would distract their attention from their day-to-day responsibilities. In the event of any transaction that would result in a change in control is proposed or under consideration, we believe it is in our shareholders’ best interest if our named executive officers remain employed with us. These arrangements accomplish this goal by providing each named executive officer with a meaningful severance benefit in the event that a change in control occurs and, within a specified period of time after the change in control, the named executive officers’ employment is involuntarily terminated without “cause” or voluntarily terminated for “good reason.” Any benefit received by an officer under a change-in-control agreement would be reduced to the extent of any severance benefit he may earn under any other applicable program or severance policy so that there would be no duplication of benefits.
Although the HC&CCCompensation Committee considers the estimated value an executive would realize upon termination in connection with a change in control, the HC&CCCompensation Committee does not rely heavily upon that information in deciding the elements of annual compensation for our named executive officers. Continued retention and management objectivity in very limited and unusual circumstances is the primary purpose of these change in control arrangements, and retention and motivation to achieve performance goals in a normal operating environment are the focus in establishing elements of annual compensation. For additional information regarding benefits upon a change in control of us to which our named executive officers are entitled, see “—Potential Payments Upon Termination of Employment or Change of Control.”
Clawback Policy
In 2007, our board implemented a “clawback” policy. The policy provides that, in addition to any other remedies available to us under applicable law, we may recover (in whole or in part) any bonus, incentive payment, commission, equity-based award or other compensation received by certain executives, including our named executive officers, if the board or any committee of the board determines that such bonus, incentive payment, commission, equity-based award or other compensation is or was based on any financial results or operating metricsobjectives that were impacted by the officer’s knowing or intentional fraudulent or illegal conduct, and our board or a committee of the board determines that recovery is appropriate.
Stock Ownership Guidelines
In August 2005, we adopted stock ownership guidelines for our executive officers, other members of our senior management team and our outside directors. The board believes ownership by executives of a meaningful financial stake in our company serves to align executives’ interests with those of our shareholders. Our guidelines require that our Chief Executive OfficerCEO hold shares of our common stock with a value equal to five times his base salary, and that the other named executive officers currently employed by us hold shares of our common stock with a value equal to three times their respective base salaries. Eligible shares and share equivalents counted toward ownership include:
common or preferred stock;stock, including those purchased through our Employee Stock Purchase Plan;
restricted stock and RSUs, including performance-based RSUs;or restricted stock units;
intrinsic value of vested, in-the-money stock options; and
share units held in our 401(k) plan and various deferred compensation plans.
Persons subject to the stock ownership guidelines have five years to achieve the ownership requirement beginning on the later of January 1, 2006 and the date on which the person becomes subject to the ownership guidelines. As of December 31, 2007, each of our named executive officers, except for2008, Messrs. Hesse, Cowan and West, had attained his or her respectiveJohnson are on track to achieve the five year ownership goal in advancetarget, but none have met 100% of the five-year deadline.stock ownership requirement. Messrs. Brust and Elfman were hired in 2008 and will have five years to meet their ownership requirement beginning in 2009.
The table below summarizes the compensation of our named executive officers that is attributable to the fiscal years ended December 31, 2008, 2007 and 2006. The named executive officers are our chief executive officerChief Executive Officer and president,President, our chief financial officer,Chief Financial Officer, and our three other most highly compensated executive officers ranked by their total compensation in the table below. In addition, our former Chairman, CEOChief Financial Officer, former Acting Chief Financial Officer, former General Counsel and Corporate Secretary, and former President, whose employment ended in 2007, isSales and Distribution are included. On January 25, 2008, we terminated the employment of Messrs. Saleh and Kelly without cause.
Each of our named executive officers has an employment agreement with us. With respect to Messrs. Saleh, Arendt and West,Kennedy, who were employed by Nextel prior to the Sprint-Nextel merger, we assumed the obligations under their respective employment agreements in connection with the merger.
For more information regarding our compensation philosophy and a discussion of the elements of our compensation program, see “—Compensation Discussion and Analysis.” For additional information on how our Compensation Committee views annual equity compensation, see “Supplement to the Summary Compensation Table” on page 44, which shows the value of stock and option awards granted to our named executive officers in 2008 based on grant date fair value and intrinsic value.
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All other Compensation ($)(6) | Total ($) | |||||||||
Daniel R. Hesse | 2007 | 23,077 | 2,650,000 | 125,448 | 195,771 | — | — | — | 2,994,296 | |||||||||
Chief Executive Officer and President | ||||||||||||||||||
Paul N. Saleh | 2007 | 775,385 | — | 2,435,164 | 3,073,579 | 628,875 | — | 35,394 | 6,948,397 | |||||||||
Chief Financial Officer | 2006 | 750,000 | 900,000 | 1,122,067 | 3,378,557 | 157,500 | — | 88,237 | 6,396,361 | |||||||||
Barry J. West | 2007 | 462,531 | 2,400,000 | 347,951 | 2,317,968 | 303,016 | — | 13,209 | 5,844,675 | |||||||||
Chief Technology Officer | 2006 | 425,000 | 480,000 | 372,765 | 2,195,766 | 71,400 | — | 28,991 | 3,573,922 | |||||||||
Timothy E. Kelly | 2007 | 572,001 | — | 2,444,087 | 1,458,003 | 375,976 | 12,503 | 33,570 | 4,896,140 | |||||||||
President—Customer Management | 2006 | 547,893 | 667,001 | 1,337,855 | 1,116,442 | 97,020 | — | 38,117 | 3,804,328 | |||||||||
Kathryn A. Walker | 2007 | 516,935 | — | 2,144,069 | 1,117,305 | 330,356 | 8,789 | 11,322 | 4,128,776 | |||||||||
Chief Network Officer | ||||||||||||||||||
Former Executive Officer: | �� | |||||||||||||||||
Gary D. Forsee | 2007 | 1,529,915 | — | 9,015,783 | 14,423,840 | 1,516,740 | 5,223,245 | 8,297,106 | 40,006,629 | |||||||||
Former Chairman, Chief Executive Officer and President | 2006 | 1,436,783 | — | 10,070,270 | 8,374,256 | — | 1,165,216 | 254,910 | 21,301,435 |
Name and Principal Position | Year | Salary (1)($) | Bonus (2)($) | Stock Awards (3)($) | Option Awards (3)($) | Non-Equity Incentive Plan Compensation (4)($) | All other Compensation (5)($) | Total ($) | ||||||||
Daniel R. Hesse | 2008 | 1,200,000 | — | 9,246,053 | 5,816,704 | 2,651,388 | 287,228 | 19,201,373 | ||||||||
Chief Executive Officer and President Joined 12-17-07 | 2007 | 23,077 | 2,650,000 | 125,448 | 195,771 | — | — | 2,994,296 | ||||||||
Robert H. Brust | 2008 | 642,308 | 950,000 | 836,725 | 788,880 | 1,121,933 | 609,530 | 4,949,376 | ||||||||
Chief Financial Officer Joined 5-1-08 | ||||||||||||||||
Keith O. Cowan | 2008 | 725,000 | 500,000 | 4,177,370 | 1,644,200 | 1,177,854 | 95,057 | 8,319,481 | ||||||||
President, Strategic Planning and Corporate Initiatives and Acting President, CDMA | ||||||||||||||||
Steven L. Elfman | 2008 | 412,500 | — | 2,130,722 | 872,160 | 687,198 | 214,804 | 4,317,384 | ||||||||
President, Network Operations and Wholesale Joined 5-4-08 | ||||||||||||||||
Robert L. Johnson | 2008 | 460,000 | 115,000 | 1,582,869 | 839,897 | 597,862 | 12,410 | 3,608,038 | ||||||||
Chief Service Officer | ||||||||||||||||
Former Executive Officers: | ||||||||||||||||
Paul N. Saleh | 2008 | 171,251 | — | 5,712,894 | 3,552,540 | 70,852 | 4,137,848 | 13,645,385 | ||||||||
Former Chief Financial Officer | 2007 | 775,385 | — | 2,435,164 | 3,073,579 | 628,875 | 35,394 | 6,948,397 | ||||||||
Departed 1-25-08 | 2006 | 750,000 | 900,000 | 1,122,067 | 3,378,557 | 157,500 | 88,237 | 6,396,361 | ||||||||
William G. Arendt | 2008 | 365,635 | 150,000 | 1,103,410 | 759,079 | 351,093 | 1,380,084 | 4,109,301 | ||||||||
Former Acting Chief Financial Officer Departed 11-14-08 | ||||||||||||||||
Leonard J. Kennedy | 2008 | 574,423 | — | 2,449,760 | 1,549,084 | 558,472 | 1,996,422 | 7,128,161 | ||||||||
Former General Counsel and Corporate Secretary Departed 12-19-08 | ||||||||||||||||
Mark E. Angelino | 2008 | 103,667 | — | 2,444,448 | 1,406,929 | 48,553 | 2,189,436 | 6,193,033 | ||||||||
Former President, Sales and Distribution Departed 1-25-08 |
(1) | Includes any portion of base salary earned in a fiscal year that the named executive officer elected to have deferred under our deferred compensation plan. See the Nonqualified Deferred Compensation table on page 51 for information regarding contributions to our deferred compensation plan. |
(2) | Represents a sign-on bonus for Mr. |
In 2007, represents a sign-on bonus for Mr. Hesse. |
In 2006 represents a retention payment to |
(3) | Represents the compensation costs recognized for financial reporting purposes for RSU, deferred share and stock option awards in a fiscal year, determined under SFAS 123R, rather than an amount paid to or realized by the named executive officer. Under SFAS 123R, the fair market value of a stock award is determined as of the date of grant, and that amount is amortized over all periods during which the named executive officer is required to provide service to us in exchange for the award—that is, the vesting period. For performance-based awards, the compensation cost is adjusted based on whether the performance conditions are achieved or probable of being achieved. Because our equity-based awards are subject to vesting over a number of years, compensation cost for equity-based awards includes costs related to awards granted previously by us and Nextel prior to the Sprint-Nextel merger, as well as awards granted in 2008, 2007 and 2006. See the Grants of Plan-Based Awards table on page |
(4) | For 2008, represents amounts paid under our 2008 STIC plan during 2008 and 2009 for service performed in 2008. Each named executive officer received a 2008 STIC payout of 106% to 138% of their targeted opportunity based on actual performance in 2008 compared to quarterly financial and operating objectives under our 2008 plan. Under their employment agreements, for post-termination days, Messrs. Saleh and Kennedy earned the higher of target or actual performance, Mr. Arendt earned actual performance and Mr. Angelino earned the lower of target or actual performance. The portion of the 2008 STIC payout for post-termination periods is included in “All Other Compensation” (Severance Benefits). For more information regarding our 2008 STIC plan, see “—Compensation Discussion and Analysis—Elements of Compensation—Short-Term Incentive Compensation Plans.” |
For 2007, represents amounts paid under our 2007 STIC plan during 2008 for service performed in 2007. Each named executive officer received a 2007 STIC payout for company-wide objectives of 42.5% of their targeted opportunity and 17.0% to 22.1% of their targeted opportunity for their functional objectives, based on our actual performance in 2007 compared to the financial and operating objectives under the plan. |
For 2006, represents amounts paid under our 2006 STIC plan during 2007 for service performed in 2006. Each named executive officer |
(5) |
Consists of: (a) amounts contributed by us under our 401(k) and deferred compensation plans, (b) amounts paid in reimbursement of relocation expenses and relocation-related allowances, (c) severance benefits in connection with the termination of the employment, |
Year | Company Contributions to 401(k) and Deferred Compensation Plans | Relocation- Related Expenses | Severance Benefits(a) | Perquisites and Other Personal Benefits(b) | Tax Gross-Up Payments | |||||||
Mr. Hesse | 2007 | — | — | — | — | — | ||||||
Mr. Saleh | 2007 | 35,394 | — | — | — | — | ||||||
2006 | 66,635 | — | — | 21,602 | — | |||||||
Mr. West | 2007 | 9,000 | 4,209 | — | — | — | ||||||
2006 | 1,635 | 27,356 | — | — | — | |||||||
Mr. Kelly | 2007 | 33,451 | — | — | — | 119 | ||||||
2006 | 33,146 | — | — | — | 4,971 | |||||||
Ms. Walker | 2007 | 11,250 | — | — | — | 72 | ||||||
Mr. Forsee | 2007 | 11,250 | — | 8,190,478 | 94,912 | 466 | ||||||
2006 | 11,000 | — | — | 241,694 | 2,216 |
Year | Company Contributions to 401(k) and Deferred Compensation Plans($) | Relocation- Related Expenses($) | Severance Benefits(a)($) | Perquisites and Other Personal Benefits(b)($) | Tax Gross-Up Payments($) | |||||||
Mr. Hesse | 2008 | 173,801 | — | — | 113,427 | — | ||||||
2007 | — | — | — | — | — | |||||||
Mr. Brust | 2008 | 8,192 | — | — | 601,338 | — | ||||||
Mr. Cowan | 2008 | — | 59,976 | — | — | 35,081 | ||||||
Mr. Elfman | 2008 | 8,125 | 43,582 | — | 148,965 | 14,132 | ||||||
Mr. Johnson | 2008 | 11,500 | — | — | — | 910 | ||||||
Former Executive Officers: | ||||||||||||
Mr. Saleh | 2008 | — | — | 4,137,848 | — | — | ||||||
2007 | 35,394 | — | — | — | — | |||||||
2006 | 66,635 | — | — | 21,602 | — | |||||||
Mr. Arendt | 2008 | 11,500 | — | 1,368,584 | — | — | ||||||
Mr. Kennedy | 2008 | 11,500 | — | 1,984,922 | — | — | ||||||
Mr. Angelino | 2008 | 5,183 | — | 2,184,253 | — | — |
(a) | Represents severance benefits that we accrued in |
(b) |
The perquisites and other personal benefits received by Mr. |
The perquisites and other personal benefits received by Mr. Brust in 2008 consisted of non-business use of our corporate jet and use of chartered jets, which had an incremental cost to us of $601,338, and personal IT and tech support. In 2008, family members of Mr. Brust occasionally accompanied him on our corporate aircraft, at no orde minimus incremental cost to us. |
The perquisites and other personal benefits received by Mr. |
The perquisites and other personal benefits received by Mr. Saleh in 2006 consist of non-business use of our corporate aircraft by Mr. Saleh and his family members, communications equipment installed in his residence and other miscellaneous gifts. |
Supplement to the Summary Compensation Table
The following supplemental table demonstrates how our Compensation Committee views the value of equity awards granted to our named executive officers. The table provides the value of stock and option awards granted to our named executive officers in 2008 based on fair value as of the grant date and the intrinsic value on December 31, 2008, as well as the total compensation that would have been reported in the Summary Compensation Table had grant date fair value or intrinsic value been used to value equity awards in the Summary Compensation Table. The table illustrates the degree to which equity-based compensation and the overall compensation opportunity provided to our named executive officers are sensitive to changes in the value of our common stock.
Grant Date Fair Value($) | Intrinsic Market Value(1)($) | |||||||||||||
Name and Principal Position | 2008 Stock Awards(2) | 2008 Option Grants | Total Compensation(3) | 2008 Stock Awards(2) | 2008 Option Grants(4) | Total Compensation(3) | ||||||||
Daniel R. Hesse | 9,006,226 | 2,315,195 | 15,460,037 | 3,284,457 | — | 7,423,073 | ||||||||
Robert H. Brust | 3,765,262 | 3,549,960 | 10,638,993 | 859,156 | — | 4,182,927 | ||||||||
Keith O. Cowan | 4,503,112 | 1,157,600 | 8,158,623 | 1,642,227 | — | 4,140,138 | ||||||||
Steven L. Elfman | 3,852,509 | 2,877,491 | 8,044,502 | 1,221,465 | — | 2,535,967 | ||||||||
Robert L. Johnson | 1,384,898 | 296,343 | 2,866,513 | 468,566 | — | 1,653,838 | ||||||||
Former Executive Officers: | ||||||||||||||
Paul N. Saleh | — | — | 4,379,951 | — | — | 4,379,951 | ||||||||
William G. Arendt | 770,229 | 162,062 | 3,179,103 | 238,390 | — | 2,485,202 | ||||||||
Leonard J. Kennedy | 1,675,338 | 370,433 | 5,175,088 | 562,200 | — | 3,691,517 | ||||||||
Mark E. Angelino | — | — | 2,296,725 | — | — | 2,296,725 |
(1) | Intrinsic value determined using the closing price of our common stock on December 31, 2008, which was $1.83. |
(2) | Amount includes the fair value for restricted stock awards granted in 2008 and restricted stock awards granted in February 2009 as a result of our fourth quarter 2008 ENTI award. |
(3) | The Total Compensation amount in the table above includes the stock awards and options awards in the table, as well as the non-equity compensation components listed in the Summary Compensation Table. |
(4) | All options granted in 2008 have an exercise price greater than the closing price of our common stock on December 31, 2008. |
The table below summarizes awards under our short- and long-term incentive plans, and other stock and option awards, to our named executive officers in 2007.2008. These awards consisted of the following:
Awards made pursuant tounder our 20072008 STIC plan, our annual cash incentive compensation plan;
Stock option and performance-based RSU awards granted pursuant tounder our 20072008 LTIC plan, our long-term, equity-based incentive plan, including RSU awards granted for the second, third and fourth quarters of 2008 under the ENTI portion of our 2008 LTIC plan;
A sign-on awardSign-on awards granted to Mr. Hesse;Messrs. Brust and Elfman; and
A retentionRetention RSU awardawards granted to Mr. Saleh.Messrs. Arendt, Johnson and Kennedy.
Mr. Forsee’sAngelino’s employment with us was terminated on January 1,25, 2008. HeMr. Angelino’s outstanding options awarded under legacy Nextel Communications plans cancelled 30 days after his date of termination. Mr. Angelino will continue to vest in outstanding options and RSUs awarded under legacy Sprint plans through December 31, 2009,January 25, 2010, at which point all unvested options and RSUs will be cancelled. Except forMr. Angelino’s vested options granted in 2003 in connection with Mr. Forsee’s employment agreement thatwill remain exercisable for 90 days from December 31, 2009,January 25, 2010.
Mr. Arendt’s employment with us was terminated on November 14, 2008. Pursuant to the terms of Mr. Arendt’s employment agreement, all of his outstanding options and RSUs vested at December 31, 2009 willupon his termination, although RSUs granted under our 2007 LTIC plan remain subject to a performance adjustment. Mr. Arendt’s vested options remain exercisable for 12 months.
Mr. Kennedy’s employment with us was terminated on December 19, 2008. Pursuant to the earlierterms of 60 months or the natural grant expiration date.Mr. Kennedy’s employment agreement, all of his outstanding options and RSUs vested upon his termination, although RSUs granted under our 2007 LTIC plan remain subject to a performance adjustment. Mr. Kennedy’s vested options remain exercisable for 12 months.
Mr. Saleh’s employment with us was terminated on January 25, 2008. Pursuant to the terms of Mr. Saleh’s employment agreement, all of his outstanding options and RSUs vested upon his termination, although RSUs granted pursuant tounder our 2007 LTIC plan remain subject to a performance adjustment. All of Mr. Saleh’s vested options remain exercisable for 12 months.
Mr. Kelly’s employment with us was terminatedexpired on January 25, 2008. He will continue to vest in outstanding options and RSUs through August 2009, at which point all unvested options and RSUs will be cancelled. Mr. Kelly’s vested options will remain exercisable for various lengths of time based on the terms of our equity incentive plans.2009.
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | ||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||
Daniel R. Hesse | 12/17/2007 | 718,907 | (1) | 1,000,000 | (2) | 13.91 | (2) | 15,559,996 | |||||||||||||||||||||||
12/17/2007 | 1,000,000 | (2) | 16.69 | (2) | 4,780,000 | ||||||||||||||||||||||||||
12/17/2007 | 1,275,000 | (2) | 19.47 | (2) | 5,265,750 | ||||||||||||||||||||||||||
Paul N. Saleh | 02/27/2007 | 48,750 | (3) | 975,000 | (3) | 2,340,000 | (3) | 0 | (4) | 191,110 | (4) | 382,220 | (4) | 403,226 | (5) | 18.78 | (5) | 6,121,305 | |||||||||||||
06/25/2007 | 159,163 | (6) | 3,499,994 | ||||||||||||||||||||||||||||
Barry J. West | 02/27/2007 | 23,468 | (3) | 469,356 | (3) | 1,126,454 | (3) | ||||||||||||||||||||||||
Timothy E. Kelly | 02/27/2007 | 30,030 | (3) | 600,601 | (3) | 1,441,442 | (3) | 0 | (4) | 115,622 | (4) | 231,244 | (4) | 243,952 | (5) | 18.78 | (5) | 3,703,400 | |||||||||||||
Kathryn A. Walker | 02/27/2007 | 26,000 | (3) | 520,000 | (3) | 1,248,000 | (3) | 0 | (4) | 76,444 | (4) | 152,888 | (4) | 161,290 | (5) | 18.78 | (5) | 2,448,519 | |||||||||||||
Gary D. Forsee | 02/27/2007 | 127,500 | (3) | 2,550,000 | (3) | 5,100,000 | (3) | 0 | (4) | 283,126 | (4) | 566,252 | (4) | 806,452 | (5) | 18.78 | (5) | 10,381,625 |
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards($) | ||||||||||||||||||||||
Threshold(1) ($) | Target(1) ($) | Maximum(1) ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||
Daniel R. Hesse | 03/26/2008 | 1,020 | 510,000 | 1,020,000 | 322,581 | (2) | 513,347 | (3) | 6.52 | (3) | 4,418,423 | ||||||||||||||||||
08/04/2008 | 25,500 | 510,000 | 1,275,000 | 10,250 | (4)(5) | 205,002 | (4)(5) | 512,505 | (4)(5) | 3,483,331 | |||||||||||||||||||
11/05/2008 | 25,500 | 510,000 | 1,275,000 | 22,462 | (4)(6) | 449,236 | (4)(6) | 1,123,090 | (4)(6) | 2,193,000 | |||||||||||||||||||
02/18/2009 | 25,500 | 510,000 | 1,275,000 | 30,750 | (4)(7) | 615,006 | (4)(7) | 1,537,515 | (4)(7) | 1,226,667 | |||||||||||||||||||
Robert H. Brust | 05/01/2008 | 469,484 | (8) | 677,201 | (8) | 8.02 | (8) | 7,315,222 | |||||||||||||||||||||
10,888 | 217,750 | 544,375 | |||||||||||||||||||||||||||
16,250 | 325,000 | 812,500 | |||||||||||||||||||||||||||
16,250 | 325,000 | 812,500 | |||||||||||||||||||||||||||
Keith O. Cowan | 03/26/2008 | 453 | 226,563 | 453,126 | 161,290 | (2) | 256,674 | (3) | 6.52 | (3) | 2,209,211 | ||||||||||||||||||
08/04/2008 | 11,328 | 226,563 | 566,408 | 5,125 | (4)(9) | 102,501 | (4)(9) | 256,253 | (4)(9) | 1,741,666 | |||||||||||||||||||
11/05/2008 | 11,328 | 226,563 | 566,408 | 11,231 | (4)(10) | 224,618 | (4)(10) | 561,545 | (4)(10) | 1,096,502 | |||||||||||||||||||
02/18/2009 | 11,328 | 226,563 | 566,408 | 15,375 | (4)(11) | 307,503 | (4)(11) | 768,758 | (4)(11) | 613,333 | |||||||||||||||||||
Steven L. Elfman | 05/04/2008 | 96,774 | (2) | 154,004 | (3) | 7.89 | (3) | 1,546,579 | |||||||||||||||||||||
05/04/2008 | 129,032 | (12) | 435,730 | (12) | 9.47 | (12) | 3,112,521 | ||||||||||||||||||||||
08/04/2008 | 6,470 | 129,391 | 323,478 | 3,075 | (4)(13) | 61,501 | (4)(13) | 153,753 | (4)(13) | 1,044,998 | |||||||||||||||||||
11/05/2008 | 10,156 | 203,125 | 507,813 | 6,739 | (4)(14) | 134,771 | (4)(14) | 336,928 | (4)(14) | 657,902 | |||||||||||||||||||
02/18/2009 | 10,156 | 203,125 | 507,813 | 9,225 | (4)(15) | 184,502 | (4)(15) | 461,255 | (4)(15) | 368,000 | |||||||||||||||||||
Robert L. Johnson | 03/26/2008 | 230 | 115,000 | 230,000 | 41,290 | (2) | 65,708 | (3) | 6.52 | (3) | 565,554 | ||||||||||||||||||
06/09/2008 | 26,316 | (16) | 232,107 | ||||||||||||||||||||||||||
08/04/2008 | 5,750 | 115,000 | 287,500 | 1,312 | (4)(17) | 26,240 | (4)(17) | 65,600 | (4)(17) | 445,865 | |||||||||||||||||||
11/05/2008 | 5,750 | 115,000 | 287,500 | 2,875 | (4)(18) | 57,502 | (4)(18) | 143,755 | (4)(18) | 280,702 | |||||||||||||||||||
02/18/2009 | 5,750 | 115,000 | 287,500 | 3,936 | (4)(19) | 78,721 | (4)(19) | 196,803 | (4)(19) | 157,013 | |||||||||||||||||||
Former Executive Officers: | |||||||||||||||||||||||||||||
Paul N. Saleh | 488 | 243,750 | 487,500 | ||||||||||||||||||||||||||
William G. Arendt | 03/26/2008 | 146 | 72,800 | 145,600 | 22,581 | (20) | 35,934 | (21) | 6.52 | (21) | 309,290 | ||||||||||||||||||
06/09/2008 | 20,824 | (22) | 183,668 | ||||||||||||||||||||||||||
08/04/2008 | 3,640 | 72,800 | 182,000 | 718 | (4)(23) | 14,350 | (4)(23) | 35,875 | (4)(23) | 243,835 | |||||||||||||||||||
11/05/2008 | 3,640 | 72,800 | 182,000 | 1,572 | (4)(24) | 31,447 | (4)(24) | 78,618 | (4)(24) | 153,509 | |||||||||||||||||||
02/18/2009 | 3,640 | 72,800 | 182,000 | 2,153 | (4)(25) | 43,051 | (4)(25) | 107,628 | (4)(25) | 41,989 | (25) | ||||||||||||||||||
Leonard J. Kennedy | 03/26/2008 | 219 | 109,438 | 218,876 | 51,613 | (26) | 82,136 | (27) | 6.52 | (27) | 706,950 | ||||||||||||||||||
06/09/2008 | 29,462 | (28) | 259,855 | ||||||||||||||||||||||||||
08/04/2008 | 5,472 | 109,438 | 273,595 | 1,640 | (4)(29) | 32,800 | (4)(29) | 82,000 | (4)(29) | 557,336 | |||||||||||||||||||
11/05/2008 | 5,472 | 109,438 | 273,595 | 3,594 | (4)(30) | 71,878 | (4)(30) | 179,695 | (4)(30) | 350,881 | |||||||||||||||||||
02/18/2009 | 5,472 | 109,438 | 273,595 | 4,920 | (4)(31) | 98,401 | (4)(31) | 246,003 | (4)(31) | 170,752 | (31) | ||||||||||||||||||
Mark E. Angelino | 272 | 135,844 | 271,688 |
Represents the threshold, target and maximum estimated possible payouts under our |
plan had a threshold achievement level, below which there would be no payout, a target achievement level, at which the target opportunity would be paid, and a maximum achievement level, at which 200% of the target would be paid |
|
Represents the payout of time-based RSU awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurs 100% on February 11, 2011. |
3. | Represents the payout of option awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurs in equal installments on each of February 11, 2009, February 11, 2010 and February 11, 2011. |
4. | Represents the threshold, target and maximum estimated possible payouts of |
Actual payout for the second quarter ENTI was 428,454 RSUs that vested on December 31, 2008. |
6. | Actual payout for the third quarter ENTI was 591,105 RSUs that vest on March 31, 2009. |
7. | Actual payout for the fourth quarter ENTI was 452,645 RSUs that vest on June 30, 2009. |
8. | Represents |
Actual payout for the second quarter ENTI was 214,227 RSUs that vested on December 31, 2008. |
10. | Actual payout for the third quarter ENTI was 295,553 RSUs that vest on March 31, 2009. |
11. | Actual payout for the fourth quarter ENTI was 226,322 RSUs that vest on June 30, 2009. |
12. | Represents an option and RSU award that was granted at the time of Mr. Elfman’s employment and will vest in full on May 4, 2010. Pursuant to Mr. Elfman’s employment agreement, the options granted to him have an exercise price equal to 120% of the market value per share on the date of grant. |
13. | Actual payout for the second quarter ENTI was 128,536 RSUs that vested on December 31, 2008. |
14. | Actual payout for the third quarter ENTI was 177,332 RSUs that vest on March 31, 2009. |
15. | Actual payout for the fourth quarter ENTI was 135,793 RSUs that vest on June 30, 2009. |
16. | Represents an RSU award that was granted for retention purposes and |
17. | Actual payout for the second quarter ENTI was 54,842 RSUs that vested on December 31, 2008. |
18. | Actual payout for the third quarter ENTI was 75,661 RSUs that vest on March 31, 2009. |
19. | Actual payout for the fourth quarter ENTI was 57,938 RSUs that vest on June 30, 2009. |
20. | Represents the payout of time-based RSU awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurred 100% on November 24, 2008. |
21. | Represents the payout of option awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurred 100% on November 24, 2008. |
22. | Represents an RSU award that was granted for retention purposes and vested in full on November 24, 2008. |
23. | Actual payout for the second quarter ENTI was 29,992 RSUs that vested on November 24, 2008. |
24. | Actual payout for the third quarter ENTI was 41,377 RSUs that vested on November 24, 2008. |
25. | Actual payout for fourth quarter ENTI was 15,494 RSUs. Because Mr. Arendt was no longer employed with us on the date of grant, the cash equivalent of $41,989 was provided to him. |
26. | Represents the payout of time-based RSU awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurred 100% on January 14, 2009. |
27. | Represents the payout of option awards granted under our 2008 LTIC plan that are not subject to adjustment. Vesting occurred 100% on December 19, 2008. |
28. | Represents an RSU award that was granted for retention purposes and vested in full on January 14, 2009. |
29. | Actual payout for the second quarter ENTI was 68,553 RSUs that vested on December 31, 2008. |
30. | Actual payout for the third quarter ENTI was 94,577 RSUs that vested on January 14, 2009. |
31. | Actual payout for fourth quarter ENTI was 63,008 RSUs. Because Mr. Kennedy was no longer employed with us on the date of grant, the cash equivalent of $170,752 was provided to him. |
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes option and stock awards outstanding as of December 31, 20072008 held by each of our named executive officers. The table reflects the following actions taken in connection with the May 17, 2006 spin-off of Embarq:
Each outstanding stock option held by a named executive officer wasofficers, adjusted by multiplying the number of shares subject to the option by 1.0955 and dividing the exercise price by the same number.
Each named executive officer who held an RSU award entitled to receive dividend equivalent payments, which includes substantially allinclude RSU awards earned under our 2008 fourth quarter ENTI that were outstanding at the time of the spin-off, received one Embarq RSU award for every 20 Sprint Nextel RSU awards held. The vesting schedule for each Embarq RSU award is identical to the vesting schedule of the related Sprint Nextel RSU award.
TheThis table does not reflect accelerated vesting orMr. Angelino’s unvested option and RSU awards that will be cancelled due to the termination of Mr. Forsee on January 1, 2008 and Messrs. Saleh and Kelly on January 25, 2008.2010 due to his involuntary termination without cause. For more information on the effects of Messrs. Forsee’s, Saleh’s and Kelly’s terminationsMr. Angelino’s termination on theirhis outstanding option and RSU awards, see the introduction to the Grants of Plan-Based Awards table on page 43.table.
Option Awards | Sprint Nextel Stock Awards | Embarq Stock Awards | |||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | ||||||||||||||||
Daniel R. Hesse | 1,000,000 | (3) | 13.91 | 12/17/2017 | 718,907 | (4) | 9,439,249 | ||||||||||||||||||||
1,000,000 | (3) | 16.69 | 12/17/2017 | ||||||||||||||||||||||||
1,275,000 | (3) | 19.47 | 12/17/2017 | ||||||||||||||||||||||||
Paul N. Saleh | 403,226 | (5) | 18.78 | 02/27/2017 | 178,653 | (6) | 2,345,714 | 191,110 | (7) | 2,509,274 | |||||||||||||||||
116,445 | (8) | 232,890 | (8) | 20.72 | 02/07/2016 | ||||||||||||||||||||||
100,877 | (9) | 41,540 | (9) | 20.65 | 02/24/2015 | ||||||||||||||||||||||
16,466 | (10) | 4,896 | (10) | 19.99 | 12/01/2014 | ||||||||||||||||||||||
17,801 | (11) | 3,561 | (11) | 16.29 | 08/31/2014 | ||||||||||||||||||||||
19,136 | (12) | 2,226 | (12) | 16.24 | 05/28/2014 | ||||||||||||||||||||||
238,840 | (13) | 10,389 | (13) | 19.20 | 02/11/2014 | ||||||||||||||||||||||
21,362 | 17.79 | 11/28/2013 | |||||||||||||||||||||||||
21,362 | 13.58 | 08/29/2013 | |||||||||||||||||||||||||
21,362 | 10.53 | 05/30/2013 | |||||||||||||||||||||||||
85,450 | 8.65 | 02/13/2013 | |||||||||||||||||||||||||
356,042 | 3.77 | 04/23/2012 | |||||||||||||||||||||||||
142,417 | 3.53 | 02/13/2012 | |||||||||||||||||||||||||
21,362 | 7.53 | 11/30/2011 | |||||||||||||||||||||||||
712,085 | 7.15 | 09/05/2011 | |||||||||||||||||||||||||
Barry J. West | 111,787 | 20.72 | 02/07/2016 | ||||||||||||||||||||||||
113,933 | 20.65 | 02/24/2015 | |||||||||||||||||||||||||
21,362 | 19.99 | 12/01/2014 | |||||||||||||||||||||||||
21,362 | 16.29 | 08/31/2014 | |||||||||||||||||||||||||
21,362 | 16.24 | 05/28/2014 | |||||||||||||||||||||||||
135,296 | 19.20 | 02/11/2014 | |||||||||||||||||||||||||
21,362 | 17.79 | 11/28/2013 | |||||||||||||||||||||||||
298 | 6.08 | 09/28/2011 | |||||||||||||||||||||||||
121,054 | 15.67 | 02/20/2011 | |||||||||||||||||||||||||
1,703 | 16.24 | 01/02/2011 | |||||||||||||||||||||||||
1,954 | 42.97 | 06/30/2010 | |||||||||||||||||||||||||
199,383 | 43.49 | 02/17/2010 | |||||||||||||||||||||||||
Timothy E. Kelly | 243,952 | (5) | 18.78 | 02/27/2017 | 249,366 | (14) | 3,274,176 | 115,622 | (7) | 1,518,117 | 5,157 | (15) | 255,426 | ||||||||||||||
71,860 | (8) | 139,488 | (8) | 20.72 | 02/07/2016 | ||||||||||||||||||||||
85,123 | (16) | 85,117 | (16) | 24.42 | 02/08/2015 | ||||||||||||||||||||||
39,768 | (17) | 13,254 | (17) | 16.38 | 02/10/2014 | ||||||||||||||||||||||
�� | 19,884 | (17) | 6,627 | (17) | 16.64 | 02/10/2014 | |||||||||||||||||||||
24,100 | 7.90 | 03/27/2013 | |||||||||||||||||||||||||
96,405 | 10.76 | 03/27/2013 | |||||||||||||||||||||||||
71,407 | 11.84 | 02/19/2012 | |||||||||||||||||||||||||
35,704 | 16.25 | 02/19/2012 | |||||||||||||||||||||||||
21,171 | 13.18 | 02/11/2012 | |||||||||||||||||||||||||
8,110 | 22.64 | 02/11/2012 | |||||||||||||||||||||||||
25,611 | 20.02 | 05/11/2011 | |||||||||||||||||||||||||
8,537 | 44.89 | 05/11/2011 | |||||||||||||||||||||||||
57,514 | 24.22 | 01/10/2011 | |||||||||||||||||||||||||
16,980 | 48.73 | 01/10/2011 |
Option Awards | Sprint Nextel Stock Awards | |||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested(1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout\ Value of Unearned Shares, Units or Other Rights That Have Not Vested(1)($) | ||||||||||||
Daniel R. Hesse | 513,347 | (2) | 6.52 | 03/26/2018 | 1,845,603 | (4) | 3,377,453 | |||||||||||||
333,333 | (3) | 666,667 | (3) | 13.91 | 12/17/2017 | |||||||||||||||
333,333 | (3) | 666,667 | (3) | 16.69 | 12/17/2017 | |||||||||||||||
425,000 | (3) | 850,000 | (3) | 19.47 | 12/17/2017 | |||||||||||||||
Robert H. Brust | 677,201 | (5) | 8.02 | 05/01/2018 | 469,484 | (6) | 859,156 | |||||||||||||
Keith O. Cowan | 256,674 | (2) | 6.52 | 03/26/2018 | 853,697 | (8) | 1,562,266 | |||||||||||||
105,219 | (7) | 210,438 | (7) | 21.48 | 07/09/2017 | |||||||||||||||
52,609 | (7) | 105,219 | (7) | 21.48 | 07/09/2017 | |||||||||||||||
Steven L. Elfman | 435,730 | (9) | 9.47 | 05/04/2018 | 538,931 | (10) | 986,244 | |||||||||||||
154,004 | (2) | 7.89 | 05/04/2018 | |||||||||||||||||
Robert L. Johnson | 65,708 | (2) | 6.52 | 03/26/2018 | 204,859 | (14) | 374,892 | 35,833 | (15) | 65,574 | ||||||||||
25,201 | (11) | 50,404 | (11) | 18.78 | 02/27/2017 | |||||||||||||||
43,666 | (12) | 21,834 | (12) | 20.72 | 02/07/2016 | |||||||||||||||
95,535 | (13) | 4,156 | (13) | 20.65 | 02/24/2015 | |||||||||||||||
5,341 | 19.99 | 12/01/2014 | ||||||||||||||||||
4,451 | 16.29 | 08/31/2014 | ||||||||||||||||||
3,561 | 16.24 | 05/28/2014 | ||||||||||||||||||
18,694 | 19.20 | 02/11/2014 | ||||||||||||||||||
1,781 | 17.79 | 11/28/2013 | ||||||||||||||||||
891 | 13.58 | 08/29/2013 | ||||||||||||||||||
14,241 | 25.15 | 11/16/2010 | ||||||||||||||||||
28,483 | 25.81 | 11/01/2010 | ||||||||||||||||||
105,388 | 43.49 | 02/17/2010 |
Name Kathryn A. Walker Gary D. Forsee Name Former Executive Officers: Paul N. Saleh William G. Arendt Leonard J. Kennedy Mark E. Angelino Option Awards Sprint Nextel Stock Awards Embarq Stock Awards Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) Option
Exercise
Price
($) Option
Expiration
Date Number of
Shares or
Units
of Stock
That Have
Not Vested
(#) Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(1) Equity
Incentive
Plan
Awards:
Number
of Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#) Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(1) Number of
Shares
or Units
of Stock
That Have
Not Vested
(#) Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2) 161,290 (5) 18.78 02/27/2017 246,065 (18) 3,230,833 76,444 (7) 1,003,710 3,271 (15) 162,013 52,261 (8) 101,446 (8) 20.72 02/07/2016 54,002 (16) 53,996 (16) 24.42 02/08/2015 56,940 (17) 18,979 (17) 16.38 02/10/2014 28,471 (17) 9,488 (17) 16.64 02/10/2014 21,909 7.90 03/27/2013 43,821 10.76 03/27/2013 10,337 16.27 02/19/2012 22,120 16.25 02/19/2012 16,523 11.84 02/19/2012 3,202 12.81 02/19/2012 14,025 13.18 02/11/2012 5,372 22.64 02/11/2012 39,718 20.02 05/11/2011 13,604 44.89 05/11/2011 9,640 20.02 08/07/2010 2,026 44.89 08/07/2010 3,696 20.02 02/08/2010 705 44.89 02/08/2010 8,764 20.02 01/24/2010 3,286 44.89 01/24/2010 17,528 20.02 01/03/2010 4,382 44.89 01/03/2010 2,765 28.47 02/08/2009 33,524 35.59 02/08/2009 885 92.03 02/08/2009 8,220 24.13 02/09/2008 5,472 61.25 02/09/2008 806,452 (5) 18.78 02/27/2017 623,531 (19) 8,186,962 283,126 (7) 3,717,444 29,227 (20) 1,447,613 237,548 (8) 461,122 (8) 20.72 02/07/2016 90,380 (21) 90,380 (21) 23.25 03/15/2015 394,388 (16) 394,383 (16) 24.42 02/08/2015 426,923 (17) 142,307 (17) 16.38 02/10/2014 213,462 (17) 71,153 (17) 16.64 02/10/2014 441,464 7.74 03/19/2013 986,649 10.84 03/19/2013 157,767 23.55 03/19/2013 Option Awards Sprint Nextel Stock Awards Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Option
Exercise
Price
($) Option
Expiration
Date Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(1)($) Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) Equity
Incentive
Plan
Awards:
Market or
Payout\
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(1)($) 403,226 18.78 01/25/2009 349,335 20.72 01/25/2009 142,417 20.65 01/25/2009 21,362 19.99 01/25/2009 21,362 16.29 01/25/2009 21,362 16.24 01/25/2009 249,229 19.20 01/25/2009 21,362 17.79 01/25/2009 21,362 13.58 01/25/2009 21,362 10.53 01/25/2009 35,934 6.52 11/14/2009 56,452 18.78 11/14/2009 48,907 20.72 11/14/2009 28,483 20.65 11/14/2009 14,241 19.99 11/14/2009 10,446 16.29 11/14/2009 8,011 16.24 11/14/2009 32,427 19.20 11/14/2009 8,545 17.79 11/14/2009 3,206 13.58 11/14/2009 2,671 10.53 11/14/2009 6,231 8.65 11/14/2009 2,078 3.77 11/14/2009 42,725 43.49 11/14/2009 82,136 6.52 12/19/2009 129,032 18.78 12/19/2009 104,800 20.72 12/19/2009 99,691 20.65 12/19/2009 14,241 19.99 12/19/2009 14,241 16.29 12/19/2009 14,241 16.24 12/19/2009 99,691 19.20 12/19/2009 14,241 17.79 12/19/2009 14,241 13.58 12/19/2009 12,050 10.53 12/19/2009 21,472 8.65 12/19/2009 66,532 (16) 66,532 (16) 18.78 04/25/2010 9,647 (17) 17,654 115,280 (12) 57,640 (12) 20.72 04/25/2010
Market value is based on the closing price of a share of our common stock of |
| Stock options vest 33 1/3% on each of February 11, 2009, February 11, 2010 and February 11, 2011. |
3. | Stock options vest/vested 33 1/3% on each of December 17, 2008, December 17, 2009 and December 17, 2010. |
4. | RSU awards vest as follows: |
591,105 on March 31, 2009,
452,645 on June 30, 2009,
239,636 on December 17, 2009,
239,636 on December 17, 2010, and
322,581 on February 11, 2011.
5. | Stock options vest 50% on each of May 1, 2010 and May 1, 2011. |
6. | RSU award vests 50% on each of May 1, 2010 and May 1, 2011. |
|
|
8. | RSU awards vest as follows: |
295,553 on March 31, 2009,
226,322 on June 30, 2009,
170,532 on July 9, 2010, and
161,290 on February 11, 2011.
9. | Stock options vest 100% on May 4, 2010. |
10. | RSU awards vest as follows: |
177,332 on March 31, 2009,
135,793 on June 30, 2009,
129,032 on May 4, 2010, and
96,774 on February 11, 2011.
| Stock options vest/vested 33 1/3% on each of February 27, 2008, February 27, 2009 and February 27, 2010. |
12. | Stock options vest/vested 33 1/3% on each of February 7, 2007, February 7, 2008 and February 7, 2009. |
13. | Stock options vest/vested over four years on a monthly basis from the date of grant with the first installment vesting on March 24, 2005. |
14. | RSU awards vest as follows: |
19,4903,654 on February 7, 2009,
75,661 on March 31, 2009,
26,316 on June 9, 2009,
57,938 on June 30, 2009, and
159,16341,290 on June 25, 2010.February 11, 2011.
RSU award vests on February 27, 2010 and is subject to adjustment and forfeiture. Under the terms of our 2007 LTIC plan, RSU awards initially granted under the plan are subject to adjustment based on our actual performance compared to established performance objectives. |
| Stock options |
RSU |
103,166 on February 8, 2008,
11,791award vests 100% on February 7, 2009, and
134,409 on December 11, 2009.
65,447 on February 8, 2008,
8,575 on February 7, 2009, and
172,043 on December 11, 2009.
475,389 on February 8, 2008,
109,163 on March 15, 2008, and
38,979 on February 7, 2009.
23,769 on February 8, 2008, and
5,458 on March 15, 2008.
Option Exercises and Stock Vested
The table below summarizes option awards that were exercised and stock awards that vested in 20072008 with respect to each of our named executive officers. The table below reflects the following actions taken in connection with the May 17, 2006 spin-off of Embarq:
Each outstanding stock option held by a named executive officer was adjusted by multiplying the number of shares subject to the option by 1.0955 and dividing the exercise price by the same number.
Each named executive officer who held an RSU award entitled to receive dividend equivalent payments, which includes substantially all RSU awards that were outstanding at the time of the spin-off, received one Embarq RSU award for every 20 Sprint Nextel RSU awards held. The vesting schedule for each Embarq RSU award is identical to the vesting schedule of the related Sprint Nextel RSU award.
Each outstanding deferred share award granted under the Nextel Incentive Equity Plan was adjusted by multiplying the number of deferred shares by 1.0955, and cash was paid to the named executive officer in lieu of any fractional share.
Option Awards | Sprint Nextel Stock Awards | Embarq Stock Awards | ||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||
Daniel R. Hesse | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||
Paul N. Saleh | 0 | 0 | 106,812 | (3) | 2,070,017 | 0 | 0 | |||||||
Barry J. West | 411,132 | 4,703,567 | 41,841 | (4) | 810,879 | 0 | 0 | |||||||
Timothy E. Kelly | 0 | 0 | 51,843 | (5) | 930,063 | 2,592 | (6) | 143,623 | ||||||
Kathryn A. Walker | 0 | 0 | 39,600 | (7) | 710,424 | 1,980 | (8) | 109,712 | ||||||
Gary D. Forsee | 0 | 0 | 1,171,127 | (9) | 17,125,671 | 60,589 | (10) | 3,091,671 |
Option Awards | Sprint Nextel Stock Awards | ||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1)($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (2)($) | |||||
Daniel R. Hesse | 0 | 0 | 668,089 | (3) | 1,255,135 | ||||
Robert H. Brust | 0 | 0 | 0 | 0 | |||||
Keith O. Cowan | 0 | 0 | 214,227 | (4) | 396,320 | ||||
Steven L. Elfman | 0 | 0 | 128,536 | (5) | 237,792 | ||||
Robert L. Johnson | 0 | 0 | 101,074 | (6) | 487,264 | ||||
Former Executive Officers: | |||||||||
Paul N. Saleh | 1,317,356 | 4,090,696 | 369,763 | (7) | 3,320,490 | ||||
William G. Arendt | 0 | 0 | 144,258 | (8) | 297,590 | ||||
Leonard J. Kennedy | 0 | 0 | 311,597 | (9) | 569,163 | ||||
Mark E. Angelino | 9,497 | 18,619 | 134,409 | (10) | 1,168,014 |
(1) | Amounts reflect the difference between the exercise price of the option and the market price of the underlying common stock at the time of exercise multiplied by the number of shares acquired on exercise. |
(2) | Amounts reflect the market price of the underlying common stock on the day the RSU award vested multiplied by the number of shares that vested. |
(3) | Pursuant to his employment agreement, 239,635 of these RSUs vested but the shares of common stock will not be delivered to Mr. |
(4) | Mr. |
(5) | Mr. |
(6) | Mr. Johnson surrendered 41,013 shares of common stock receivable upon the vesting of these RSU awards to satisfy tax withholding obligations, resulting in Mr. |
(9) | Under our 2007 LTIC plan, 61,155 of these RSUs vested but the shares of common stock will not be delivered until a potential performance adjustment is made in the first quarter of 2010. |
(10) | Mr. |
The table below summarizes, asNone of December 31, 2007, pension benefits to which our named executive officers are entitled which include:
Sprint Retirement Pension Plan, or the Qualified Plan, designed to provide funded, tax-qualified defined benefits up to the limits on compensation and benefits under the IRC;
Sprint Supplemental Executive Retirement Plan, or SERP, which provides unfunded, non-qualified benefits in excess of the limits applicable to the Qualified Plan; and
Additional unfunded, non-qualified benefits to which Mr. Forsee is entitled under his employment agreement.
Name | Plan Name (1) | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||
Daniel R. Hesse | — | — | — | — | ||||
Paul N. Saleh | — | — | — | — | ||||
Barry J. West | — | — | — | — | ||||
Timothy E. Kelly | Sprint Retirement Pension Plan | 12.1667 | 104,533 | — | ||||
Sprint Supplemental Executive Retirement Plan | 12.1667 | 130,706 | — | |||||
Kathryn A. Walker | Sprint Retirement Pension Plan | 22.2500 | 161,517 | — | ||||
Sprint Supplemental Executive Retirement Plan | 22.2500 | 122,383 | — | |||||
Gary Forsee | Sprint Retirement Pension Plan | 14.3333 | 240,154 | — | ||||
Sprint Supplemental Executive Retirement Plan | 14.3333 | 1,105,835 | — | |||||
Additional Retirement Benefits(3) | 5.0000 | 12,271,561 | — |
A discount rate of 6.4%;
Mortality rates based on standard actuarial tables;
No retirements prior to normal retirement age or withdrawals for disability or otherwise prior to retirement; and
A normal retirement age of 65 for all benefits, except with respect to Mr. Forsee’s additional retirement benefits, for which a January 1, 2008 retirement date is assumed.
Sprint Retirement Pension Plan
The Qualified Plan is a tax-qualified defined benefit pension plan. Only individuals who were employed with us prior to August 12, 2005, the date of the Sprint-Nextel merger, are eligible to participate in the Qualified Plan. Ms. Walker and Messrs. Forsee and Kelly are the only named executive officers eligible to participate in the Qualified Plan.
Benefits under the Qualified Plan are based on each participant’s number of years of credited service and his or her eligible compensation. Benefit accruals under the plan were frozen on December 31, 2005 for all plan participants. Eligible compensation under the Qualified Plan is equal to the sum of base salary, certain annual short term incentive compensation, sales commissions and sales bonus compensation, including any amounts deferred under applicable deferred compensation plans, subject to annual compensation limits under the IRC.
The benefit amount, expressed as a single life annuity beginning at age 65, is equal to:
the product of 1.5% and the average annual compensation for the 60 months ending on December 31, 1993, multiplied by the number of years of credited service through December 31, 1993, plus
the product of 1.5% and eligible compensation earned from January 1, 1994 through December 31, 2005.
Benefits are limited by the IRC. The limit for 2007 is $180,000, expressed as a single life annuity beginning at normal retirement age. Benefits under the Qualified Plan are payable in the form of an annuity with monthly benefit payments. No lump sums are available for the named executive officers. Benefits under this plan are funded by an irrevocable tax-exempt trust.
Participants who are at least age 55 and have at least ten years of service are eligible to elect a reduced early retirement benefit. The benefit is reduced by 5% for each year the benefit commences before age 65. Mr. Forsee is the only named executive officer who is eligible for early retirement benefits under the Qualified Plan as of December 31, 2007.
Sprint Supplemental Executive Retirement Plan
The SERP is an unfunded, non-qualified defined benefit pension plan designed to restore a participant’s overall retirement benefit to the level that would have been payable under the Qualified Plan absent certain IRC limitations. Ms. Walker and Messrs. Forsee and Kelly are the only named executive officers eligible to participate in the SERP.
Benefits under the SERP are based on each participant’s number of years of credited service and the participant’s eligible compensation. Benefit accruals under the plan were frozen on December 31, 2005 for all plan participants. The years of credited service for eligible named executive officers are based only on their service while eligible for participation in the Qualified Plan.
Eligible compensation under the SERP is equal to the sum of base salary, certain annual short term incentive compensation, sales commissions, and sales bonus compensation, inclusive of any amounts deferred under applicable deferred compensation plans. The amount of such compensation is not limited by the IRC annual compensation limits.
The benefit amount, expressed as a single life annuity beginning at age 65, is equal to:
the product of 1.5% and the average annual compensation for the 60 months ending on December 31, 1993, multiplied by the number of years of credited service through December 31, 1993, plus
the product of 1.5% and eligible compensation earned from January 1, 1994 through December 31, 2005.
This benefit amount is reduced by the benefit amount provided by the Qualified Plan.
Benefits under the SERP are payable in the form of an annuity with monthly benefit payments. No lump sums are available for the named executive officers. The SERP is unfunded; thus, participants are general creditors of ours with respect to their SERP benefit payments.
Participants who are at least age 55 and have at least ten years of service are eligible to elect a reduced early retirement benefit. The benefit is reduced by 5% for each year the benefit commences before age 65. Mr. Forsee is the only named executive officer who is eligible for early retirement benefits under the SERP as of December 31, 2007.
Additional Retirement Benefits
Under the terms of Mr. Forsee’s employment agreement, he is eligible to receive an annual retirement benefit equal to five percent of his covered compensation (generally, annual base salary plus actual annual incentive pay earned) for each calendar year of service beginning with 2003, up to a maximum of 65% of his covered compensation. This benefit will be offset by pension benefits payable to him by any former employer and by us under the Qualified Plan and the SERP. Any retirement benefits earned pursuant to Mr. Forsee’s employment agreement will be payable, without reduction, on January 1, 2008.from us.
Nonqualified Deferred Compensation
The table below summarizes the information with respect to our nonqualified deferred compensation plans, and the activity and balances with respect to the account of each named executive officer who participates in one of our deferred compensation plans.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(3) | |||||
Daniel R. Hesse | — | — | — | — | — | |||||
Paul N. Saleh | 35,394 | 35,394 | 6,513 | — | 216,209 | |||||
Barry J. West | — | — | — | — | — | |||||
Timothy E. Kelly | 22,201 | 22,201 | 4,076 | — | 94,018 | |||||
Kathryn A. Walker | — | — | — | — | — | |||||
Gary D. Forsee | 70,246 | — | 223,550 | — | 2,978,827 |
Name | Executive Contributions in Last FY (1)($) | Registrant Contributions in Last FY (2)($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE (3)($) | |||||
Daniel R. Hesse | 162,301 | 162,301 | -8,357 | — | 316,245 | |||||
Robert H. Brust | — | — | — | — | — | |||||
Keith O. Cowan | — | — | — | — | — | |||||
Steven L. Elfman | — | — | — | — | — | |||||
Robert L. Johnson | — | — | — | — | — | |||||
Former Executive Officers: | ||||||||||
Paul N. Saleh | 31,444 | — | -25,921 | 221,732 | — | |||||
William G. Arendt | — | — | — | — | — | |||||
Leonard J. Kennedy | — | — | -274,328 | 490,247 | — | |||||
Mark E. Angelino | — | — | — | — | — |
(1) | Represents contributions by the named executive officers, the amounts of which are included in the Summary Compensation Table in the |
(2) | Represents contributions by us, the amounts of which are included in the Summary Compensation Table in the |
(3) | Represents the aggregate balance as of December 31, |
Each named executive officer is entitled to participate in the Sprint Nextel Deferred Compensation Plan, a nonqualified and unfunded plan under which they may defer to future years the receipt of certain compensation that would otherwise be paid to themcompensation. Messrs. Hesse and Saleh participated in the year in which it was earned. Participants maythis plan during 2008. For 2008, participants could defer up to 75% of base salary and 100% of STIC payments. Under the 2008 plan, for each of our named executive officers who participate in the plan, other than Mr. Forsee, we matchmatched contributions made by participants in an amount up to 5% of eligible earnings above the applicable annual limit, which for 20072008 was $225,000,$230,000, to compensate highly-compensated employees for limitations placed on our 401(k) plan by federal tax law. Mr. Forsee isSaleh’s sole deferral in 2008 occurred after his termination and was not eligible to participate in thereceive a matching feature of this plan due to the retirement benefits to which he is eligible under his employment agreement. contribution.
Compensation deferred by participants and any matching contributions made by us are credited to a bookkeeping account that represents our unsecured obligation to repay the participant in the future. Participants elect to allocate deferred and matching contributions among one or more hypothetical investment options, which include one option that tracks our common stock and other options that track broad bond and equity indices. Participants may change hypothetical investment elections only four times a year and at least three months must elapse between each change. Under the plan, the amount of our unfunded obligation is determined by tracking the value in the bookkeeping account according to the performance of the hypothetical investments. Messrs. Saleh, Kelly and Forsee, participated in this plan during 2007.
Prior to the Sprint-Nextel merger, Mr. Forsee participated in our Executive Deferred Compensation Plan, or EDCP. The EDCP provides for two hypothetical investment options—one that is interest bearing and one that tracks the performance of our stock—to which deferred contributions credited to bookkeeping accounts may be allocated. The interest bearing account accrues interest at a per annum rate equal to the greater of Citibank’s prime rate in effect at the beginning of each month or 6%.
Potential Payments Upon Termination of Employment or Change of Control
The amounts shown in the tables and discussed in the narratives below do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees upon termination of employment, including accrued salary and vacation pay, distribution of balances under our 401(k) and deferred compensation plans and accrued pension benefits available for eligible employees. For more information on the pension and deferred compensation benefits available to our named executive officers, see the Pension Benefits table and related narrative disclosure on page 49 and the Nonqualified Deferred Compensation table and related narrative disclosure beginning on page 51 of this proxy statement.
Definitions
For purposes of the discussion below regarding potential payments upon termination of employment or change of control, the following are the definitions for “change of control,” “cause,” “constructive discharge”“cause” and “good reason.” These definitions are summaries and each applicable employment agreement between us and a named executive officer, and each applicable plan document, sets forth the relevant definition in full.
“Change of control” generally means (i)(1) the acquisition by a person or group of 30% or more of Sprint Nextel’s voting stock; (ii)(2) a change in the composition of a majority of our directors; (iii)(3) the consummation of a merger, reorganization, business combination or similar transaction after which Sprint Nextel’s shareholders do not hold more than 50% of the combined entity; the members of Sprint Nextel’s board of directors do not constitute a majority of the directors of the combined entity; or a person or group holds 30% or more of the voting securities of the combined entity; or (iv)(4) the liquidation or dissolution of Sprint Nextel.
We generally have “cause” to terminate the employment of a named executive officer involuntarily where that officer materially breaches his or her employment agreement, fails to perform his or her duties, intentionally acts in a manner that is injurious to us or violates our code of conduct.
“Constructive discharge” generally means that without the executive’s prior consent he or she is removed from his or her position, certain reductions are made to his or her base salary or basic bonus amount other than by an across-the-board reduction or he or she is required to relocate, subject to limited exceptions.
“Good reason” generally means, without the named executive officer’s consent, the occurrence of any of the following: (i)(1) a material breach of his or her employment agreement by Sprint Nextel; (ii)(2) the reduction of an executive’s duties or responsibilities, organizational status, or title; (iii)(3) a reduction in salary, except for across-the-board salary reductions; (iv)(4) our failure to pay any current compensation due, except pursuant to across-the-board compensation deferral; (v)(5) certain relocations; (vi)(6) our failure to continue any compensation plan (or, in some cases, the participation level) that is material to an executive’s total compensation; or (vii)(7) our failure to obtain an agreement from a successor to perform the employment agreement.
Mr. Hesse
The following table and narrative describe the potential payments upon termination of employment for Daniel R. Hesse, our President and CEO, assuming the date of termination of employment was December 31, 2007.2008.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Change of Control: Termination Without Cause or for Good Reason | Disability | Death | Termination Without Cause or for Good Reason | Change of Control: Termination Without Cause or for Good Reason | Disability | Death | ||||||||||||||||
Compensation: | ||||||||||||||||||||||||
Base Salary | $ | 2,400,000 | $ | 2,400,000 | $ | 1,200,000 | $ | 0 | $ | 2,400,000 | $ | 2,400,000 | $ | 1,200,000 | $ | 0 | ||||||||
Short-Term Incentive—2007 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Short-Term Incentive—4th Quarter 2008 | $ | 375,360 | $ | 375,360 | $ | 375,360 | $ | 375,360 | ||||||||||||||||
Short-Term Incentive Plan—Target | $ | 4,080,000 | $ | 4,080,000 | $ | 0 | $ | 0 | $ | 4,080,000 | $ | 4,080,000 | $ | 0 | $ | 0 | ||||||||
Long-Term Incentive—Accelerated Vesting(1) | $ | 9,439,249 | $ | 9,439,249 | $ | 9,439,249 | $ | 9,439,249 | ||||||||||||||||
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 1,226,667 | $ | 1,226,667 | $ | 1,226,667 | $ | 1,226,667 | ||||||||||||||||
Long-Term Incentive—Accelerated/Continued Vesting(1) | $ | 1,958,790 | $ | 2,549,113 | $ | 2,549,113 | $ | 2,549,113 | ||||||||||||||||
Benefits: | ||||||||||||||||||||||||
Health and Welfare Benefits | $ | 20,748 | $ | 20,748 | $ | 10,374 | $ | 0 | $ | 20,409 | $ | 20,409 | $ | 10,205 | $ | 0 | ||||||||
Outplacement Services | $ | 35,000 | $ | 35,000 | $ | 0 | $ | 0 | $ | 35,000 | $ | 35,000 | $ | 0 | $ | 0 | ||||||||
TOTAL | $ | 15,974,997 | $ | 15,974,997 | $ | 10,649,623 | $ | 9,439,249 | $ | 10,096,226 | $ | 10,686,549 | $ | 5,361,345 | $ | 4,151,140 |
(1) | The value of |
Termination Without Cause or Resignation for Good Reason
Had Mr. Hesse’s employment been terminated on December 31, 2007,2008, either by us without cause or by Mr. Hesse for good reason (as defined in Mr. Hesse’s employment agreement), other than in connection with a change of control (as defined in Mr. Hesse’s employment agreement), he would have been entitled to receive the following severance benefits:
compensation through the second anniversary of the termination of his employment, paid in monthly installments, at an annual rate equal to his base salary at the time of termination;
payment of the short-term incentive award for (i)(1) the year of his termination and (ii)(2) the two fiscal years following his termination, in each case at the lesser of the target amount or actual performance, with each annual payment being made after the HC&CCCompensation Committee has determined whether targets have been achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
continued participation in our medical and welfare plans for a period of two years;
acceleratedcontinued vesting of options granted and RSUs awarded to Mr. Hesse pursuant tothrough the severance period and receipt of the Sign-On RSU Award (as defined in his employment agreement;agreement) on the first business day of the seventh month following his termination; and
outplacement services for two years in an amount not to exceed $35,000.
Termination Without Cause or For Good Reason Due to a Change of Control
Had Mr. Hesse’s employment been terminated on December 31, 2007,2008, either by us without cause or by Mr. Hesse for good reason, and the termination date was within an 18-month period following a change of control, Mr. Hesse would have been entitled to receive, as soon as practicable:
an amount equal to two times the sum of: (i)(1) his then current base salary and (ii)(2) his short-term incentive target opportunity;
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
outplacement services in an amount not to exceed $35,000;
continued participation in our medical and welfare plans for a period of two years; and
immediate vesting of all options granted and RSUs awarded to Mr. Hesse pursuant toand receipt of the Sign-On RSU Award (as defined in his employment agreement.agreement) on the first business day of the seventh month following his termination.
Normal (Age 65) Retirement
At Mr. Hesse’s normal (age 65) retirement, he will be entitled to a pro-rata portion of his annual short-term incentive payment, based on our actual performance for the year, with payment being made after the HC&CCCompensation Committee has determined whether targets have been achieved.
Voluntary Termination of Employment or Termination for Cause
Had Mr. Hesse voluntarily terminated his employment with us without good reason (as defined in Mr. Hesse’s employment agreement) or been terminated by us for cause (as defined in Mr. Hesse’s employment agreement) on December 31, 2007,2008, he would not have been entitled to any benefits other than those available to our employees generally.
Termination as a Result of Disability
Had Mr. Hesse’s employment been terminated by reason of disability on December 31, 2007,2008, he would have been entitled to receive:
an amount equal to his then-current salary for 12 months, through periodic payments with the same frequency as our payroll schedule;
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
continued participation in the medical and welfare plans that Mr. Hesse was participating in on his termination date for a period of one year; and
acceleration of options granted and RSUs awarded to Mr. Hesse pursuant toand receipt of the Sign-On RSU Award (as defined in his employment agreement.agreement) on the first business day of the seventh month following his termination.
Termination as a Result of Death
Had Mr. Hesse’s employment been terminated by reason of death on December 31, 2007,2008, his estate would have been entitled to receive the fourth quarter 2008 short-term incentive award, the fourth quarter 2008 Enhanced Near-Term Incentive Compensation and acceleration of options granted and RSUs awarded to Mr. Hesse pursuant to his employment agreement.Hesse.
Conditions Applicable to the Receipt of Severance Payments and Benefits
As a condition to Mr. Hesse’s entitlement to receive the amounts referenced in the above table, Mr. Hesse will:
be required to execute a release in favor of us;
be subject to confidentiality and non-disparagement provisions on a permanent basis following the termination of his employment;
for the 24-month period following the termination of his employment, be prohibited from:
engaging in certain employment activities with a competitor of ours;
soliciting our employees and certain other parties doing business with us to terminate their relationships with us; and
soliciting or assisting any party to undertake any action that would be reasonably likely to, or is intended to, result in a change of control or seek to control our board of directors.
If Mr. Hesse breaches any of these obligations, he will have no rights in, and we will have no obligation to provide, any severance benefits yet to be paid or provided under his employment agreement; and any outstanding equity-based award granted under his employment agreement will terminate immediately.
Mr. SalehBrust
The following table and narrative describe the potential payments upon termination of employment for Paul N. Saleh,Robert H. Brust, our Chief Financial Officer,CFO, assuming the date of termination of employment was December 31, 2007. Mr. Saleh’s employment was terminated by us without cause on January 25, 2008.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason Due to Change In Control | Termination Without Cause or for Good Reason | Termination for Good Reason Due to Relocation | Disability | Death | Termination Without Cause or for Good Reason | Termination Without Cause or for Good Reason Due to Change In Control | Voluntary Termination or Termination for Cause | Disability | Death | ||||||||||||||||||||
Compensation: | ||||||||||||||||||||||||||||||
Base Salary | $ | 1,560,000 | $ | 1,560,000 | $ | 780,000 | $ | 780,000 | $ | 780,000 | $ | 1,333,333 | $ | 1,333,333 | $ | 0 | $ | 1,000,000 | $ | 0 | ||||||||||
Short-Term Incentive—2007 | $ | 975,000 | $ | 975,000 | $ | 975,000 | $ | 628,875 | $ | 628,875 | ||||||||||||||||||||
Sign-On Bonus Award | $ | 700,000 | $ | 700,000 | $ | -250,000 | $ | 700,000 | $ | 700,000 | ||||||||||||||||||||
Short-Term Incentive—4th Quarter 2008 | $ | 239,200 | $ | 239,200 | $ | 239,200 | $ | 239,200 | $ | 239,200 | ||||||||||||||||||||
Short-Term Incentive Plan—Target | $ | 1,950,000 | $ | 1,950,000 | $ | 975,000 | $ | 0 | $ | 0 | $ | 1,733,333 | $ | 1,733,333 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Long-Term Incentive—Accelerated Vesting(1) | $ | 4,854,988 | $ | 4,854,988 | $ | 4,854,988 | $ | 4,854,988 | $ | 4,854,988 | ||||||||||||||||||||
Long-Term Incentive—Accelerated/Continued Vesting(1) | $ | 429,578 | $ | 859,156 | $ | 0 | $ | 859,156 | $ | 859,156 | ||||||||||||||||||||
Benefits: | ||||||||||||||||||||||||||||||
Health and Welfare Benefits | $ | 31,574 | $ | 31,574 | $ | 15,787 | $ | 15,787 | $ | 0 | $ | 3,184 | $ | 3,184 | $ | 0 | $ | 2,388 | $ | 0 | ||||||||||
Outplacement Services | $ | 50,000 | $ | 50,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
TOTAL | $ | 9,421,562 | $ | 9,421,562 | $ | 7,210,075 | $ | 6,279,650 | $ | 6,263,863 | $ | 4,438,628 | $ | 4,868,206 | $ | -10,800 | $ | 2,800,744 | $ | 1,798,356 |
(1) | The value of |
Termination Without Cause or Resignation for Good Reason
Had Mr. Brust’s employment been terminated on December 31, 2008, either by us without cause (as defined in Mr. Brust’s employment agreement), or by Mr. Brust for good reason (as defined in Mr. Brust’s employment agreement), other than in connection with a change in control of Sprint Nextel, he would have been entitled to receive the following severance benefits:
his base salary for the remainder of his employment term, through periodic payments with the same frequency as our payroll schedule;
his Sign-On Bonus Award of $700,000;
his fourth quarter 2008 short-term incentive award and a pro rata payment under the then-applicable short-term incentive plan with respect to the remainder of his employment term equal to the lesser of his targeted opportunity as of the date of his termination of his employment and the payout determined by the Compensation Committee based on actual performance of Sprint Nextel compared to the targeted objectives under the plan;
continued participation in certain benefit plans for the remainder of his employment term; and
immediate vesting of the unvested portions of the Sign-On Option Award and Sign-On RSU Award scheduled to vest on the second anniversary of the date of grant and forfeiture of the remaining unvested portion scheduled to vest on the third anniversary of the date of grant.
Termination Without Cause or For Good Reason Due to a Change inof Control
Had Mr. Saleh’sBrust’s employment been terminated on December 31, 2007, in connection with a change in control,2008, either by us without cause or by Mr. SalehBrust for good reason, and the termination date was within an 18-month period following a change of control, Mr. SalehBrust would have been entitled to receive, as soon as practicable:
his base salary for the remainder of his employment term, through periodic payments with the same frequency as our payroll schedule;
his Sign-On Bonus Award of $700,000;
his fourth quarter 2008 short-term incentive award and a pro rata payment under the then-applicable short-term incentive plan with respect to the remainder of his employment term equal to the lesser of his targeted opportunity as of the date of his termination of his employment and the payout determined by the Compensation Committee based on actual performance of Sprint Nextel compared to the targeted objectives under the plan;
continued participation in our medical and welfare plans for a period of two years; and
immediate vesting of all options granted and RSUs awarded to Mr. Brust.
Voluntary Termination of Employment or Termination for Cause
Had Mr. Brust voluntarily terminated his employment on December 31, 2008, he would have been entitled to receive his short-term incentive award for the fourth quarter of 2008, but he would have had to repay us the $250,000 Sign-On Bonus Award he received under the terms of his employment agreement.
Termination as a Result of Disability
Had Mr. Brust’s employment been terminated by reason of disability on December 31, 2008, he would have been entitled to receive:
an amount equal to his then-current salary for 12 months, through periodic payments with the same frequency as our payroll schedule (reduced by any amounts paid under our long-term disability plan);
his Sign-On Bonus Award of $700,000;
his fourth quarter 2008 short-term incentive award;
continued participation in the medical and welfare plans that Mr. Brust was participating in on his termination date for a period of one year; and
acceleration of options granted and RSUs awarded to Mr. Brust.
Termination as a Result of Death
Had Mr. Brust’s employment been terminated by reason of death on December 31, 2008, his estate would have been entitled to receive the Sign-On Bonus Award of $700,000, the fourth quarter 2008 short-term incentive award and acceleration of options granted and RSUs awarded to Mr. Brust.
Conditions Applicable to the Receipt of Severance Payments and Benefits
For 36 months following the end of his employment term, Mr. Brust may not to compete with Sprint Nextel or solicit employees or customers of Sprint Nextel. If Mr. Brust breaches any of these obligations, he would forfeit his right to any severance payments and benefits to which he otherwise would be entitled.
Mr. Cowan
The following table and narrative describe the potential payments upon termination of employment for Keith O. Cowan, our President, Strategic Planning and Corporate Initiatives and Acting President, CDMA, assuming the date of termination of employment was December 31, 2008.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Change of Control: Termination Without Cause or for Good Reason | Disability | Death | ||||||||
Compensation: | ||||||||||||
Base Salary | $ | 1,450,00 | $ | 1,450,000 | $ | 725,000 | $ | 0 | ||||
Short-Term Incentive—4th Quarter 2008 | $ | 166,750 | $ | 166,750 | $ | 166,750 | $ | 166,750 | ||||
Short-Term Incentive Plan—Target | $ | 1,812,500 | $ | 1,812,500 | $ | 0 | $ | 0 | ||||
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 613,333 | $ | 613,333 | $ | 613,333 | $ | 613,333 | ||||
Long-Term Incentive—Accelerated/Continued Vesting(1) | $ | 852,936 | $ | 1,148,096 | $ | 1,148,096 | $ | 1,148,096 | ||||
Benefits: | ||||||||||||
Health and Welfare Benefits | $ | 19,151 | $ | 19,151 | $ | 9,575 | $ | 0 | ||||
Outplacement Services | $ | 35,000 | $ | 35,000 | $ | 0 | $ | 0 | ||||
TOTAL | $ | 4,949,669 | $ | 5,244,830 | $ | 2,662,755 | $ | 1,928,179 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on December 31, 2008, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on December 31, 2008, multiplied by the number of RSUs. |
Termination Without Cause or Resignation for Good Reason
Had Mr. Cowan’s employment been terminated on December 31, 2008, either by us without cause or by Mr. Cowan for good reason (as defined in Mr. Cowan’s employment agreement), other than in connection with a change of control (as defined in Mr. Cowan’s employment agreement), he would have been entitled to receive the following severance benefits:
an amount equal to his then-current base salary for a two-year period, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (1) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of his termination and (2) the two fiscal years following his termination at the lesser of the target amount or actual performance, with each annual payment being made after the Compensation Committee has determined whether targets have been achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
continued participation in our medical and welfare plans for a period of two years;
continued vesting of options granted and RSUs awarded to Mr. Cowan through his severance period; and
outplacement services in an amount not to exceed $35,000.
Termination Without Cause or For Good Reason Due to a Change of Control
Had Mr. Cowan’s employment been terminated on December 31, 2008, either by us without cause or by Mr. Cowan for good reason, and the termination date was within an 18-month period following a change of control, Mr. Cowan would have been entitled to receive, as soon as practicable:
an amount equal to two times the sum of: (1) his then-currentthen current base salary for a two-year period, payable in a lump sum;and (2) his short-term incentive target opportunity;
payment of the fourth quarter 2008: (1) short-term incentive award for (i) the year of his termination and (ii) the next two fiscal years, in each case at the greater of the target amount or actual performance, with each annual payment being made after the HC&CC has determined whether targets have been achieved;(2) Enhanced Near-Term Incentive Compensation;
acceleratedoutplacement services in an amount not to exceed $35,000;
continued participation in our medical and welfare plans for a period of two years; and
immediate vesting of all options granted and RSUs andawarded to Mr. Cowan.
Voluntary Termination of Employment or Termination for Cause
Had Mr. Cowan voluntarily terminated his employment with us without good reason (as defined in Mr. Cowan’s employment agreement) or been terminated by us for cause (as defined in Mr. Cowan’s employment agreement) on December 31, 2008, he would not have been entitled to any vested stock options will remain outstanding and exercisablebenefits other than those available to our employees generally.
Termination as a Result of Disability
Had Mr. Cowan’s employment been terminated by reason of disability on December 31, 2008, he would have been entitled to receive:
an amount equal to his then-current salary for 12 months;months, through periodic payments with the same frequency as our payroll schedule;
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
continued participation in the medical and welfare plans that Mr. SalehCowan was participating in on his termination date for a period of two years;one year; and
outplacement servicesacceleration of options granted and RSUs awarded to Mr. Cowan.
Termination as a Result of Death
Had Mr. Cowan’s employment been terminated by reason of death on December 31, 2008, his estate would have been entitled to receive the fourth quarter 2008 short-term incentive award, the fourth quarter 2008 Enhanced Near-Term Incentive Compensation and acceleration of options granted and RSUs awarded to Mr. Cowan.
Conditions Applicable to the Receipt of Severance Payments and Benefits
The continued payment of the above amounts, except for benefits provided at normal retirement or death, is based on Mr. Cowan’s compliance with a confidentiality provision on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
If Mr. Cowan breaches any of these obligations, he will have no rights in, an amount notand we will have no obligation to exceed $50,000.
Mr. Elfman
The following table and narrative describe the potential payments upon termination of employment for Steven L. Elfman, our President, Network Operations and Wholesale, assuming the date of termination of employment was December 31, 2008.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Change of Control: Termination Without Cause or for Good Reason | Disability | Death | ||||||||
Compensation: | ||||||||||||
Base Salary | $ | 1,300,000 | $ | 1,300,000 | $ | 650,000 | $ | 0 | ||||
Short-Term Incentive—4th Quarter 2008 | $ | 149,500 | $ | 149,500 | $ | 149,500 | $ | 149,500 | ||||
Short-Term Incentive Plan—Target | $ | 1,625,000 | $ | 1,625,000 | $ | 0 | $ | 0 | ||||
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 368,000 | $ | 368,000 | $ | 368,000 | $ | 368,000 | ||||
Long-Term Incentive—Accelerated/Continued Vesting(1) | $ | 560,646 | $ | 737,743 | $ | 737,743 | $ | 737,743 | ||||
Benefits: | ||||||||||||
Health and Welfare Benefits | $ | 14,552 | $ | 14,552 | $ | 7,276 | $ | 0 | ||||
Outplacement Services | $ | 35,000 | $ | 35,000 | $ | 0 | $ | 0 | ||||
TOTAL | $ | 4,052,698 | $ | 4,229,795 | $ | 1,912,519 | $ | 1,255,243 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on December 31, 2008, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on December 31, 2008, multiplied by the number of RSUs. |
Termination Without Cause or ForResignation for Good Reason (Other than Relocation)
Had Mr. Saleh’sElfman’s employment been terminated on December 31, 2007,2008, either by us without cause (as defined in Mr. Elfman’s employment agreement), or by Mr. SalehElfman for good reason other than for relocation (as these terms are defined in Mr. Saleh’sElfman’s employment agreement), Mr. Salehother than in connection with a change in control of Sprint Nextel, he would have been entitled to receive:receive the following severance benefits:
an amount equal to his then-current base salary and benefits for a two-year period, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (i)(1) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of his termination and (ii)(2) the next two fiscal years in each casefollowing his termination at the greaterlesser of the target amount or actual performance, with each annual payment being made after the HC&CCCompensation Committee has determined whether targets have been achieved;
acceleratedpayment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
continued participation in our medical and welfare plans for a period of two years;
continued vesting of options granted and RSUs awarded to Mr. Elfman through the severance period; and
outplacement services in an amount not to exceed $35,000.
Termination Without Cause or For Good Reason Due to a Change of Control
Had Mr. Elfman’s employment been terminated on December 31, 2008, either by us without cause or by Mr. Elfman for good reason, and the termination date was within an 18-month period following a change of control, Mr. Elfman would have been entitled to receive, as soon as practicable:
an amount equal to two times the sum of: (1) his then current base salary and (2) his short-term incentive target opportunity;
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
outplacement services in an amount not to exceed $35,000;
continued participation in our medical and welfare plans for a period of two years; and
immediate vesting of all options granted and RSUs awarded to Mr. Elfman.
Voluntary Termination of Employment or Termination for Cause
Had Mr. Elfman voluntarily terminated his employment with us without good reason (as defined in Mr. Elfman’s employment agreement) or been terminated by us for cause (as defined in Mr. Elfman’s employment agreement) on December 31, 2008, he would not have been entitled to any vested stock options will remain outstanding and exercisablebenefits other than those available to our employees generally.
Termination as a Result of Disability
Had Mr. Elfman’s employment been terminated by reason of disability on December 31, 2008, he would have been entitled to receive:
an amount equal to his then-current salary for 12 months;months, through periodic payments with the same frequency as our payroll schedule (reduced by any amounts paid under our long-term disability plan);
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
continued participation in the medical and welfare plans that Mr. SalehElfman was participating in on his termination date for a period of one year; and
acceleration of options granted and RSUs awarded to Mr. Elfman.
Termination as a Result of Death
Had Mr. Elfman’s employment been terminated by reason of death on December 31, 2008, his estate would have been entitled to receive the fourth quarter 2008 short-term incentive award, the fourth quarter 2008 Enhanced Near-Term Incentive Compensation and acceleration of options granted and RSUs awarded to Mr. Elfman.
Conditions Applicable to the Receipt of Severance Payments and Benefits
The continued payment of the above amounts, except for benefits provided at normal retirement or death, is based on Mr. Elfman’s compliance with a confidentiality provision on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
If Mr. Elfman breaches any of these obligations, he will have no rights in, and we will have no obligation to provide, any severance benefits yet to be paid or provided under his employment agreement; and pursuant to his employment agreement, any outstanding equity-based award will terminate immediately.
Mr. Johnson
The following table and narrative describe the potential payments upon termination of employment for Robert L. Johnson, our Chief Service Officer, assuming the date of termination of employment was December 31, 2008.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Termination Without Cause or for Good Reason Due to Change In Control | Termination for Good Reason Due to Relocation | Disability | Death | ||||||||||
Compensation: | |||||||||||||||
Base Salary | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 460,000 | $ | 460,000 | |||||
Short-Term Incentive—4th Quarter 2008 | $ | 84,640 | $ | 84,640 | $ | 84,640 | $ | 84,640 | $ | 84,640 | |||||
Short-Term Incentive Plan—Target | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 0 | $ | 0 | |||||
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 157,013 | $ | 157,013 | $ | 157,013 | $ | 157,013 | $ | 157,013 | |||||
Long-Term Incentive—Accelerated Vesting(1) | $ | 334,440 | $ | 334,440 | $ | 334,440 | $ | 334,440 | $ | 334,440 | |||||
Benefits: | |||||||||||||||
Health and Welfare Benefits | $ | 20,140 | $ | 20,140 | $ | 10,070 | $ | 10,070 | $ | 0 | |||||
Outplacement Services | $ | 46,000 | $ | 46,000 | $ | 0 | $ | 0 | $ | 0 | |||||
TOTAL | $ | 2,482,223 | $ | 2,482,233 | $ | 1,506,163 | $ | 1,046,163 | $ | 1,036,093 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on December 31, 2008, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on December 31, 2008, multiplied by the number of RSUs. |
Termination Without Cause or Resignation for Good Reason
Had Mr. Johnson’s employment been terminated on December 31, 2008, either by us without cause (as defined in Mr. Johnson’s employment agreement), or by Mr. Johnson for good reason (as defined in Mr. Johnson’s employment agreement), other than in connection with a change in control of Sprint Nextel, he would have been entitled to receive the following severance benefits:
his base salary for a two-year period, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (1) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of his termination, (2) the next two fiscal years at the greater of the target amount or actual performance, with payment for the post-termination amounts being made after the Compensation Committee determined whether targets were achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
continued participation in our medical and welfare plans for a period of two years;
accelerated vesting of options granted and RSUs awarded to Mr. Johnson; and
outplacement services in an amount not to exceed $50,000.10% of base salary, or $46,000.
Termination Without Cause or For Good Reason Due to a Change of Control
Had Mr. Johnson’s employment been terminated on December 31, 2008, either by us without cause or by Mr. Johnson for good reason, and the termination date was within an 18-month period following a change of control, Mr. Johnson would have been entitled to receive, as soon as practicable:
an amount equal to two times the sum of: (1) his then current base salary and (2) his short-term incentive target opportunity;
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
outplacement services in an amount not to exceed 10% of his base salary, or $46,000;
continued participation in our medical and welfare plans for a period of two years; and
immediate vesting of all options granted and RSUs awarded to Mr. Johnson.
Termination for Good Reason Due to Relocation
Had Mr. SalehJohnson terminated his employment with us on December 31, 20072008 for good reason based on the relocation of his principal place of work more than 30 miles without his consent, he would have been entitled to receive:
an amount equal to his existing annual base salary and benefits for a one-year period, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (i)(1) the fiscal year of his termination and (ii)(2) the next fiscal year, in each case at the greater of the target amount or actual performance, with each annual payment being made after the HC&CCCompensation Committee determined whether targets have been achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months; and
continued participation in the medical and welfare plans that Mr. SalehJohnson was participating in on his termination date for one year.
Benefits UponVoluntary Termination of Employment or Termination for Cause
Had Mr. Johnson voluntarily terminated his employment with us without good reason (as defined in Mr. Johnson’s employment agreement) or been terminated by us for cause (as defined in Mr. Johnson’s employment agreement) on December 31, 2008, he would not have been entitled to any benefits other than those available to our employees generally.
Termination as a Result of Disability
Had Mr. Saleh’sJohnson’s employment been terminated by reason of disability on December 31, 2007,2008, he would have been entitled to receive:
an amount equal to his existing annualthen-current salary for 12 months, through periodic payments with the same frequency as our payroll schedule (reduced by any amounts paid under our long-term disability plan);
payment of the fourth quarter 2008: (1) short-term incentive award and (2) Enhanced Near-Term Incentive Compensation;
continued participation in the medical and welfare plans that Mr. Johnson was participating in on his termination date for a period of one year; and
acceleration of options granted and RSUs awarded to Mr. Johnson.
Termination as a Result of Death
Had Mr. Johnson’s employment been terminated by reason of death on December 31, 2008, his estate would have been entitled to receive an amount equal to his then-current base salary for 12 months, the fourth quarter 2008 short-term incentive award, the fourth quarter 2008 Enhanced Near-Term Incentive Compensation and acceleration of options granted and RSUs awarded to Mr. Johnson.
Conditions Applicable to the Receipt of Severance Payments and Benefits
The continued payment of the above amounts, except for benefits provided at normal retirement or death, is based on Mr. Johnson’s compliance with a one-yearconfidentiality provision on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
If Mr. Johnson breaches any of these obligations, he will have no rights in, and we will have no obligation to provide, any severance benefits yet to be paid or provided under his employment agreement; and pursuant to his employment agreement, any outstanding equity-based award will terminate immediately.
Mr. Saleh
On January 25, 2008, we terminated Paul N. Saleh’s, our former Chief Financial Officer, employment without cause. The following table and narrative describe the payments Mr. Saleh is entitled to receive due to his termination.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | ||
Compensation: | |||
Base Salary | $ | 1,560,000 | |
Short-Term Incentive Plan—January 26 – December 31, 2008 | $ | 1,196,356 | |
Short-Term Incentive Plan—January 1, 2009 – January 26, 2010—Target | $ | 1,056,250 | |
Long-Term Incentive—Accelerated Vesting(1) | $ | 3,468,377 | |
Interim CEO/Severance Release Payment | $ | 250,000 | |
Benefits: | |||
Health and Welfare Benefits | $ | 25,242 | |
Outplacement Services | $ | 50,000 | |
TOTAL | $ | 7,606,225 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on January 25, 2008, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on January 25, 2008, multiplied by the number of RSUs. |
On March 15, 2008, Mr. Saleh entered into an amendment to his employment agreement to provide him a one-time payment of $250,000 conditioned upon execution of a release in recognition of his service as interim Chief Executive Officer.
Pursuant to his employment agreement and our benefit and compensation plans and programs, Mr. Saleh is entitled to receive the following severance benefits:
an amount equal to his then-current base salary and benefits for a two-year period, through periodic payments with the same frequency as our payroll schedule;
a pro-ratapayment of the short-term incentive payment basedaward for (1) the year of his termination and (2) the next fiscal year and (3) a portion of the short-term incentive award for the second fiscal year following his termination (based on ourthe length of time served in the year that his employment was terminated), in each of (2) and (3) at the greater of the target amount or actual performance, for the year, with each annual payment being made after the HC&CCCompensation Committee has determined whether targets werehave been achieved;
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months; and
continued participation in the medical and welfare plans that Mr. Saleh was participating in on his termination date for one year.
If Mr. Saleh becomes entitled to receive benefits under a long-term disability plan paid for by us, then his benefits will be reduced by the amountperiod of the benefits paid under the disability plan.
Benefits Upon Death
Had Mr. Saleh’s employment been terminated by reason of death on December 31, 2007, his estate would have been entitled to receive:
an amount equal to his existing annual salary, payable in a lump sum;
a pro-rata short-term incentive payment based on our actual performance for the year, with payment as soon as practicable;two years; and
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months.
Voluntary Termination of Employment or Termination for Cause
Had Mr. Saleh voluntarily terminated his employment with us without good reason (as definedoutplacement services in Mr. Saleh’s employment agreement) or been terminated by us for cause (as defined in Mr. Saleh’s employment agreement) on December 31, 2007, he would have been entitledan amount not to the actual short-term incentive award for the fiscal year of $628,875.
Normal (Age 65) Retirement
At Mr. Saleh’s normal (age 65) retirement, he would have been entitled to:
a pro-rata portion of his annual short-term incentive payment, based on our actual performance for the year, with payment being made after the HC&CC has determined whether targets have been achieved; and
acceleration of options granted and RSUs awarded to Mr. Saleh that have been outstanding for at least one year as of the date of retirement, pursuant to our 1997 Long-Term Stock Incentive Program.exceed $50,000.
Conditions Applicable to the Receipt of Severance Payments and Benefits
As a condition to Mr. Saleh’s entitlement to receive the benefits discussed above, except for benefits provided at normal retirement or death, he will be required to executehas executed a release in favor of us. In addition, the continued payment of the above amounts except for benefits provided at normal retirement, is based on Mr. Saleh’s compliance with confidentiality and non-disparagement provisions on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
Mr. WestArendt
On November 14, 2008, we terminated William G. Arendt’s, our former Acting Chief Financial Officer, employment without cause. The following table and narrative describe the potential payments upon termination of employment for Barry West, our Chief Technology Officer and President, 4G Mobile Broadband, assuming the date of termination of employment was December 31, 2007.Mr. Arendt is entitled to receive due to his termination.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Termination for Good Reason Due to Relocation | Disability | Death | Termination Without Cause or for Good Reason | ||||||||||
Compensation: | |||||||||||||||
Base-Salary | $ | 0 | $ | 0 | $ | 469,356 | $ | 469,356 | |||||||
Short-Term Incentive—2007 | $ | 166,340 | $ | 166,340 | $ | 303,016 | $ | 303,016 | |||||||
Short-Term Incentive Plan—Target | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||
Base Salary | $ | 728,000 | |||||||||||||
Short-Term Incentive—November 15 – December 31, 2008 | $ | 27,380 | |||||||||||||
Short-Term Incentive Plan—January 1, 2009 – November 15, 2010—Target | $ | 558,133 | |||||||||||||
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 41,989 | |||||||||||||
Long-Term Incentive—Accelerated Vesting(1) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 331,793 | |||||
Benefits: | |||||||||||||||
Health and Welfare Benefits | $ | 32,658 | $ | 16,329 | $ | 16,329 | $ | 0 | $ | 18,670 | |||||
Outplacement Services | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 36,400 | |||||
TOTAL | $ | 198,998 | $ | 182,669 | $ | 788,701 | $ | 772,372 | $ | 1,742,366 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on November 14, 2008, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on November 14, 2008, multiplied by the number of RSUs. |
Pursuant to his employment agreement and our benefit and compensation plans and programs, Mr. Arendt is entitled to receive the following severance benefits:
an amount equal to his then-current base salary for a two-year period, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (1) the fiscal year in which the termination occurred based on the actual performance level for the period beginning before his termination, and (2) the next fiscal year and (3) a portion of the short-term incentive award for the second fiscal year following his termination (based on the length of time served in the year that his employment was terminated), in each of (2) or (3) at the greater of the target amount or actual performance, with each annual payment being made after the Compensation Committee has determined whether targets have been achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months;
continued participation in the medical and welfare plans that Mr. Arendt was participating in on his termination date for a period of two years; and
outplacement services in an amount not to exceed 10% of his base salary, or $36,400.
Conditions Applicable to the Receipt of Severance Payments and Benefits
As a condition to Mr. Arendt’s entitlement to receive the benefits discussed above, he has executed a release in favor of us. In addition, the continued payment of the above amounts is based on Mr. Arendt’s compliance with confidentiality and non-disparagement provisions on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
Mr. Kennedy
On December 19, 2008, we terminated Leonard J. Kennedy’s, our former General Counsel and Corporate Secretary, employment without cause. The following table and narrative describe the payments Mr. Kennedy is entitled to receive due to his termination.
Executive Benefits and Payments Upon Termination | Termination Without Cause | ||
Compensation: | |||
Base Salary | $ | 1,030,000 | |
Short-Term Incentive—December 20 – December 31, 2008 | $ | 10,471 | |
Short-Term Incentive Plan—January 1, 2009 – December 20, 2010—Target | $ | 875,500 | |
4th Quarter 2008 Enhanced Near-Term Incentive Compensation | $ | 170,752 | |
Long-Term Incentive—Accelerated Vesting(1) | $ | 471,505 | |
Benefits: | |||
Health and Welfare Benefits | $ | 18,950 | |
Outplacement Services | $ | 50,000 | |
TOTAL | $ | 2,627,179 |
(1) | The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our common stock on December |
Amendments to Employment Agreement
On December 31, 2007, Mr. West entered into a third amendment
Pursuant to his employment agreement providing for:
a base salary for fiscal year 2008 of $469,356, subject to merit increase in the manner consistent with the company’s general policies regardingand our benefit and compensation of senior executive employees;
ifplans and programs, Mr. West resigns during 2008, a pro-rata payment of his short-term incentive award at the greater of target or actual, with payment being made after the HC&CC has determined whether targets have been achieved;
a lump sum payment of $250,000 on June 30, 2008 if Mr. WestKennedy is employed through that date, or a pro-rata payment of $250,000 based on the number of days employed up until June 30, 2008 if Mr. West resigns or is involuntarily terminated without cause prior to June 30, 2008, payable as soon as practicable after his termination;
a lump sum payment of $250,000 on December 31, 2008 if Mr. West is employed through that date, or a pro-rata payment of $250,000 based on the number of days employed after June 30, 2008 if Mr. West resigns or is involuntarily terminated without cause prior to December 31, 2008, payable as soon as practicable after his termination date; and
waiver by Mr. West of participation in our 2008 long-term incentive compensation programs.
Termination Without Cause or For Good Reason (Other than Relocation)
Had Mr. West’s employment been terminated on December 31, 2007, whether or not in connection with a change in control, either by us without cause or by Mr. West for good reason, other than for relocation (as these terms are defined in Mr. West’s employment agreement), Mr. West would have been entitled to receive:
continued participation inreceive the medical and welfare plans that Mr. West was participating in on his termination date for a period of two years; and
Termination For Good Reason Due to Relocation
Had Mr. West terminated his employment with us on December 31, 2007 for good reason based on the relocation of his principal place of work more than 30 miles without his consent, Mr. West would have been entitled to receive:
continued participation in the medical and welfare plans that Mr. West was participating in on his termination date for one year.
Benefits Upon Disability
Had Mr. West’s employment been terminated by reason of disability on December 31, 2007, he would have been entitled to receive:following severance benefits:
an amount equal to his existing annualthen-current base salary for a one-yeartwo-year period, through periodic payments with the same frequency as our payroll schedule;
apayment of the short-term incentive payment basedaward for (1) the year of his termination, (2) the next fiscal year and (3) a portion of the short-term incentive award for the second fiscal year following his termination (based on ourthe length of time served in the year that his employment was terminated), in each of (2) and (3) at the actual performance, with payment for the year, with paymentpost-termination amounts being made after the HC&CCCompensation Committee determined whether targets were achieved;
payment of the fourth quarter 2008 Enhanced Near-Term Incentive Compensation;
continued participation in our medical and welfare plans for a period of two years;
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months; and
continued participationoutplacement services in the medical and welfare plans that Mr. West was participating in on his termination date for one year.
If Mr. West becomes entitled to receive benefits under a long-term disability plan paid for by us, then his benefits will be reduced by the amount of the benefits paid under the disability plan.
Benefits Upon Death
Had Mr. West’s employment been terminated by reason of death on December 31, 2007, his estate would have been entitled to receive:
an amount equalnot to his existing annual salary, payable in a lump sum;exceed $50,000.
a short-term incentive payment based on our actual performance for the year, with payment as soon as practicable; and
accelerated vesting of options and RSUs, and any vested stock options will remain outstanding and exercisable for 12 months.
Voluntary Termination of Employment or Termination for Cause
Had Mr. West voluntarily terminated his employment with us without good reason (as defined in Mr. West’s employment agreement) or been terminated by us for cause (as defined in Mr. West’s employment agreement) on December 31, 2007, he would have been entitled to the actual short-term incentive award for the fiscal year of $303,016.
Conditions Applicable to the Receipt of Severance Payments and Benefits
As a condition to Mr. West’sKennedy’s entitlement to receive the benefits discussed above, except for benefits provided at normal retirement or death, he will be required to executehas executed a release in favor of us. In addition, the continued payment of the above amounts except for benefits provided at normal retirement, is based on Mr. West’sKennedy’s compliance with a confidentiality and non-disparagement provisionsprovision on a permanent basis following the termination of his employment and, for the 24-month period following the termination of his employment, with anon-competition and non-solicitation provision.provisions.
Mr. KellyAngelino
On January 25, 2008, we terminated TimothyMark E. Kelly’s,Angelino’s, our former Chief Marketing Officer,President, Sales and Distribution, employment without cause. The following table and narrative describe the payments Mr. KellyAngelino is entitled to receive due to his termination.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Constructive Discharge | Termination Without Cause | ||||
Compensation: | ||||||
Base Salary | $ | 858,002 | $ | 1,035,000 | ||
Short-Term Incentive— 2007 | $ | 375,976 | ||||
Short-Term Incentive Plan—Target | $ | 900,902 | ||||
Long-Term Incentive—Continued Vesting(1) | $ | 1,764,812 | ||||
Short-Term Incentive Plan—January 26 – December 31, 2008 | $ | 506,018 | ||||
Short-Term Incentive Plan—January 1, 2009 – January 26, 2010—Target | $ | 588,656 | ||||
Long-Term Incentive—Accelerated/Continued Vesting(1) | $ | 1,351,245 | ||||
Benefits: | ||||||
Health and Welfare Benefits | $ | 19,949 | $ | 19,578 | ||
Outplacement Services | $ | 22,500 | $ | 35,000 | ||
TOTAL | $ | 3,942,141 | $ | 3,535,498 |
(1) | The value of |
Pursuant to his employment agreement and our benefit and compensation plans and programs, Mr. KellyAngelino is entitled to receive the following severance benefits:
compensation at the same rate asan amount equal to his then-current base salary for a two-year period, of 18 months, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (i)(1) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of his termination, and (ii) the next 18 months based on the lesser of the actual performance levels during this period or 100% of targeted performance during this period, with payment for the post-termination amounts being made after the HC&CC determined whether targets were achieved;
continued vesting of options and RSUs during the 18-month severance period;
continued participation in all group health plans that Mr. Kelly was participating in on his termination date for a period of 18 months, unless Mr. Kelly becomes employed full-time during this period;
continued participation in all group life insurance and other retirement plans that Mr. Kelly was participating in on his termination date for a period of 18 months; and
outplacement services until Mr. Kelly becomes employed, assumed one year for purposes of table above.
Conditions Applicable to the Receipt of Severance Payments and Benefits
The continued payment of the above amounts, except for accrued pension benefits and benefits provided at normal retirement or death, is based on Mr. Kelly’s compliance with a confidentiality provision on a permanent basis following the termination of his employment and, for the 18-month period following the termination of his employment, with non-competition and non-solicitation provisions.
Ms. Walker
The following table and narrative describe the potential payments upon termination of employment for Kathryn A. Walker, our Chief Network Officer, assuming the date of termination of employment was December 31, 2007.
Executive Benefits and Payments Upon Termination | Termination Without Cause or for Good Reason | Termination Without Cause or for Good Reason Due to Change in Control | ||||
Compensation: | ||||||
Base Salary | $ | 780,000 | $ | 1,040,000 | ||
Short-Term Incentive—2007 | $ | 330,356 | $ | 330,356 | ||
Short-Term Incentive Plan—Target | $ | 780,000 | $ | 1,040,000 | ||
Long-Term Incentive—Accelerated Vesting/Continued Vesting(1) | $ | 1,133,921 | $ | 3,392,846 | ||
Benefits: | ||||||
Health and Welfare Benefits | $ | 14,811 | $ | 19,748 | ||
Outplacement Services | $ | 33,750 | $ | 45,000 | ||
TOTAL | $ | 3,072,838 | $ | 5,867,950 |
Termination Without Cause or For Good Reason
Had Ms. Walker’s employment been terminated on December 31, 2007 either by us for any reason other than for cause or by Ms. Walker for good reason (as these terms are defined in Ms. Walker’s employment agreement), other than in connection with a change in control, Ms. Walker would have been entitled to receive:
compensation at the same rate as her then-current base salary for a period of 18 months, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (i) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of her termination, (ii)(2) the next fiscal year and (iii)(3) a portion of the short-term incentive award for the second fiscal year following herhis termination (based on the length of time served in the year that herhis employment was terminated), in each of (ii) and (iii)case at the lesser of the target amount or actual performance, with payment for the post-termination amounts being made after the HC&CCCompensation Committee determined whether targets were achieved;
continued participation in all group health plans, all group life insurance plans and retirement plans that Ms. Walker was participating in on her termination date for a period of 18 months, unless Ms. Walker becomes employed full-time during this period;
continued vesting of options and RSUs during the 18-month severance period; and
outplacement services until the earlier of (i) 18 months or (ii) Ms. Walker becoming re-employed.
Termination Without Cause or For Good Reason Following a Change in Control
Had Ms. Walker’s employment been terminated on December 31, 2007, either by us without cause or by Ms. Walker for good reason, and the termination date was within a 24-month period following a change of control, Ms. Walker would have been entitled to receive pursuant to her employment agreement, as soon as practicable:
an amount equal to her then-current base salary for a period of 24-months, through periodic payments with the same frequency as our payroll schedule;
payment of the short-term incentive award for (i) the fiscal year in which the termination occurred based on the actual performance level for the period before the beginning of her termination, (ii) the next fiscal year and (iii) the fiscal year following her termination, in each of (ii) and (iii) at the target amount, with payment for the post-termination amounts being made at the time the payouts are made for the relevant performance period;
continued participation in all group health plans, all group life insurance plans and retirement plans that Ms. Walker was participating in on her termination date for a period of 24 months, unless Ms. Walker becomes employed full-time during this period;
continued vesting of options and RSUs during the 24 month severance period; and
outplacement services until the earlier of (i) 24 months or (ii) Ms. Walker becoming re-employed.
In addition, Ms. Walker is eligible to participate in our Change in Control Severance Plan under which she would receive similar benefits in a lump sum payment but only for defined terminations occurring within 18-months of a change in control.
Voluntary Termination of Employment or Termination for Cause
Had Ms. Walker voluntarily terminated her employment with us or been terminated by us for cause on December 31, 2007, she would have been entitled to a $330,356 short-term incentive award for fiscal year 2007.
Benefits Upon Normal (Age 65) Retirement
At Ms. Walker’s normal (age 65) retirement, she will be entitled to:
a pro-rata portion of her annual short-term incentive payment based on our actual performance for the year, with payment being made after the HC&CC has determined whether targets have been achieved; and
acceleration of options granted and RSUs awarded to Ms. Walker that have been outstanding at least one year as of the date of retirement, pursuant to our 1997 Long-Term Stock Incentive Program.
Termination as a Result of Death or Disability
Had Ms. Walker’s employment been terminated by reason of death or disability on December 31, 2007, she or her estate, as applicable, would have been entitled to:
a short-term incentive award of $330,356 based on our actual performance for the year, with payment being made after the HC&CC determined whether targets were achieved; and
acceleration of $4,396,556 of options granted and RSUs awarded and outstanding as of the date of death or disability, pursuant to our 1997 Long-Term Stock Incentive Program, with the value of accelerated options based on the intrinsic value of the options, and the value of accelerated RSUs based on the market value of our stock, on December 31, 2007.
Conditions Applicable to the Receipt of Severance Payments and Benefits
The continued payment of the above amounts, except for accrued pension benefits and benefits provided at normal retirement or death, is based on Ms. Walker’s compliance with a confidentiality provision on a permanent basis following the termination of her employment and, for the 18-month period following the termination of her employment, with non-competition and non-solicitation provisions.
Mr. Forsee
On January 1, 2008, we terminated Gary D. Forsee’s, our former Chairman, President and CEO, employment without cause.
The following table describes the payments Mr. Forsee is entitled to receive due to his termination.
Termination Without Cause | |||
Compensation | |||
Base Salary | $ | 3,000,000 | |
Short-Term Incentive—2007 | $ | 1,516,740 | |
Short-Term Incentive Plan—Target | $ | 5,100,000 | |
Benefits | |||
Present Value of Additional Retirement Benefit | $ | 3,853,377 | |
Health and Welfare Benefits | $ | 34,205 | |
Outplacement Services | $ | 45,000 | |
Security Equipment and Services and Communication Services | $ | 11,273 | |
TOTAL | $ | 13,560,595 |
Pursuant to his employment agreement and our benefit and compensation plans and programs, Mr. Forsee is entitled to receive the following severance benefits:
compensation through the second anniversary of the termination of his employment, paid in monthly installments, at an annual rate equal to his base salary at the time of termination and his target short-term incentive opportunity for the year in which his employment was terminated;
his annual short-term incentive payment for the year of termination, based on our actual performance for the year, with payment being made after the HC&CC determined whether targets were achieved;
two years of outplacement services;
continued participation in our medical and welfare plans for a period of two years;
continued receipt for two yearsvesting of perquisites that he was receiving, or entitledoptions granted and RSUs awarded to receive, atMr. Angelino through his severance period, with the timeexception of his 2007 RSU retention award which accelerated upon his termination per the terms of his employment was terminated (other than the use of company aircraft), which perquisites currently include security equipment and services and communications services;agreement; and
a 10% increaseoutplacement services in his additional retirement benefit.an amount not to exceed $35,000.
Conditions Applicable to the Receipt of Severance Payments and Benefits
As a condition to Mr. Forsee’sAngelino’s entitlement to receive the amounts referenced in thebenefits discussed above, table, he has executed a release in favor of us. In addition, the continued payment of the above amounts is based on Mr. Forsee’sAngelino’s compliance with a confidentiality and non-disparagement provisionsprovision on a permanent basis following the termination of his employment and, for the two-year24-month period following the termination of his employment, with non-competition and non-solicitation provisions.
Certain Relationships and Related Transactions
In connection with Embarq’s agreement to release any claims that it may have against us or Mr. Hesse with respect to Mr. Hesse’s covenant not to compete with Embarq, we and Embarq have agreed to resolve an arbitration proceeding related to the spin-off of Embarq, extend by three years the period of time that Embarq has limited rights with respect to certain of our patents, extend for one year certain pricing terms for voice wireless services provided by us for resale by Embarq, negotiate and execute a lease for office space located in Overland Park to Embarq, and refrain from soliciting or hiring for employment certain employees of Embarq, none of which will have a material impact on our financial position or results of operations.
In 2007, our board of directors adopted a written policy regarding the review and approval or ratification of transactions involving our company and our directors, nominees for directors, executive officers, immediate family members of these individuals, and shareholders owning five percent or more of our outstanding voting stock, each of whom is referred to as a related party. Our policy covers any related party transaction, arrangement or relationship where a related party has a direct or indirect material interest and the amount involved exceeds $120,000, except for approved compensation-related arrangements. Our corporate governance and legal staff are primarily responsible for the development and implementation of processes and procedures to obtain information from our directors and executive officers with respect to related party transactions.
We have a related party transaction committee comprised of members of management that reviews related party transactions to determine, based on the facts and circumstances, the potential amount involved and whether a related party has a direct or indirect material interest in the transaction. The related party transaction committee then makes a recommendation to the Audit Committee of our board of directors regarding the appropriateness of the related party transaction. The Audit Committee approves or ratifies the related party transaction only if it determines the transaction is in the best interests of our company and our shareholders. No related party transactions were brought before the Audit Committee in 2008.
Proposal 2. Ratification of Independent Registered Public Accounting Firm
(Item 2 on Proxy Card)
Our Audit Committee has voted to appoint KPMG LLP as our independent registered public accounting firm to audit the consolidated financial statements and the effectiveness of internal control over financial reporting for our company and our subsidiaries for the year ending December 31, 2008.2009. Our shareholders are asked to ratify that appointment at the annual meeting. In keeping with good corporate governance, the Audit
Committee will periodically assess the suitability of our incumbent independent registered public accounting firm taking into account all relevant facts and circumstances, including the possible consideration of the qualifications of other accounting firms.
Representatives of KPMG will be present at the annual meeting and will have the opportunity to make a statement and to respond to appropriate questions. If the appointment of KPMG is not ratified at the meeting, the Audit Committee will consider the selection of another accounting firm.
The following paragraphs describe the fees billed for professional services rendered by our independent registered public accounting firm for the fiscal years ended December 31, 20062008 and 2007.
Audit Fees
For professional services rendered for the audit of our 2008 consolidated financial statements, the report on the effectiveness of internal control over financial reporting as required by the Sarbanes-Oxley Act, the review of the consolidated financial statements included in our 2008 Form 10-Qs and the statutory audits of our international subsidiaries, KPMG billed us a total of $15.4 million.
For professional services rendered for the audit of our 2007 consolidated financial statements, the report on the effectiveness of internal control over financial reporting as required by the Sarbanes-Oxley Act, the review of the consolidated financial statements included in our 2007 Form 10-Qs and the statutory audits of our international subsidiaries, KPMG billed us a total of $14.4 million.
For professional services rendered for the audit of our 2006 consolidated financial statements, the report on management’s assessment regarding the effectiveness of our internal control over financial reporting and the effectiveness of internal control over financial reporting as required by the Sarbanes-Oxley Act, the review of the consolidated financial statements included in our 2006 Form 10-Qs and the statutory audits of our international subsidiaries, KPMG billed us a total of $15.1 million.
These amounts also include reviews of documents filed with the SEC, accounting consultations related to the annual audit and preparation of letters for underwriters and other requesting parties.
Audit-Related Fees
For professional audit-related services rendered to us, KPMG billed us a total of $1.3 million in 2008. Audit-related services in 2008 generally included the audits of our employee benefit plans, internal control reviews and other attestation services.
For professional audit-related services rendered to us, KPMG billed us a total of $1.4 million in 2007. Audit-related services in 2007 generally included the audits of our employee benefit plans, internal control reviews and other attestation services.
Tax Fees
For professional audit-relatedtax services rendered to us, KPMG billed us a total of $2.0$0.1 million in 2006. Audit-related2008. Tax services in 2006 generally2008 primarily included support related to the spin-off of our local communications business, the acquisition of former affiliates, the audits of our employee benefit plans and other attestation services.
Tax Feestax consultation matters.
For professional tax services rendered to us, KPMG billed us a total of $0.1 million in 2007. Tax services in 2007 primarily included tax consultation matters.
For professional tax services rendered to us, KPMG billed us a total of $1.3 million in 2006. Tax services in 2006 primarily included tax consultation related to the spin-off of our local communications business, the acquisition of former affiliates and domestic corporate tax compliance and advice.
All Other Fees
In 20072008 and 2006,2007, KPMG did not bill any fees in addition to the fees described above.
The Audit Committee determined that the non-audit services rendered by KPMG in 20072008 and 20062007 were compatible with maintaining its independence as auditors of our consolidated financial statements.
The Audit Committee has adopted policies and procedures concerning our independent registered public accounting firm, including the pre-approval of services to be provided. Our Audit Committee pre-approved all of the services described above. The Audit Committee is responsible for the pre-approval of all audit, audit-related, tax and non-audit services; however, pre-approval authority may be delegated to one or more members of the Audit Committee. The details of any services approved under this delegation must be reported to the full Audit Committee at its next regular meeting. Our independent registered public accounting firm is generally prohibited from providing certain non-audit services under our policy, which is more restrictive than the SEC rules. Any permissible non-audit service engagement must be specifically approved in advance by the Audit Committee. We provide quarterly reporting to the Audit Committee regarding all audit, audit-related, tax and non-audit services provided by our independent registered public accounting firm.
Our boardBoard of directorsDirectors recommends that you votefor “FOR” the ratification of the appointment of KPMG in this Proposal 2.
Proposal 3. Approval of the Amendment to the 1988 Employees Stock Purchase Plan.
(Item 3 on Proxy Card)
The following is a discussion of the Sprint Nextel Employees Stock Purchase Plan and the amendment of the plan to be submitted for shareholder approval at the annual meeting. You are urged to read carefully the Sprint Nextel Employees Stock Purchase Plan, as restated to incorporate the amendment, a copy of which is attached to this proxy statement as Annex A.
The Sprint Employees Stock Purchase Plan (or the ESPP) was established in 1988. Over time, the pool of shares reserved and authorized by shareholders for issuance under the ESPP becomes depleted. Accordingly, we have periodically asked shareholders to consider approving an increase in the number of shares of the applicable stock reserved and authorized for issuance under the ESPP in order to ensure that a sufficient number of shares are available to continue offerings under the ESPP. Our shareholders previously approved such increases in 1994, 1998, 2000, 2001 and 2003.
At its meeting on February 26, 2009, the Sprint Nextel board of directors approved an amendment, subject to the approval of our shareholders, increasing the number of shares of Sprint Nextel Series 1 Common Stock reserved and authorized for issuance under the ESPP by 80 million. The board simultaneously recommended that the ESPP, as so amended, be submitted to our shareholders at the next Sprint Nextel annual meeting of shareholders for their approval. If approved by our shareholders, the amended ESPP will be effective immediately upon approval.
Summary of Plan Provisions
Under the terms of the ESPP, eligible employees of Sprint Nextel and those subsidiaries designated by the Board of Directors can elect on a quarterly basis to receive an option to purchase shares of Sprint Nextel Series 1 Common Stock at a discounted exercise price. Each electing employee allocates a percentage of the employee’s compensation during the applicable calendar quarter to be used for the exercise of the option to purchase shares of Sprint Nextel Series 1 Common Stock on the last business day of that quarter, subject to restrictions described in the next paragraph. The price of shares purchased upon the exercise of the option is currently 95% of the average of the high and low prices of the Sprint Nextel Series 1 Common Stock for composite transactions for the last business day of the applicable calendar quarter.
The option grant date is the first business day of each calendar quarter. A participating employee may not purchase more than 9,000 shares in any offering, and the grant date value of shares purchased in any calendar
year may not exceed $25,000 in total. If the number of shares available under the ESPP as of any particular purchase date is insufficient to meet the purchase requirements based on participants’ contributions for the quarter, the available shares will be allocated pro rata among participants based on their contributions.
If the amendment to the ESPP is approved, approximately 88 million shares will be available after the purchase of shares in the first quarter 2009 offering for purchases in the second quarter and subsequent offerings under the ESPP. It is anticipated that this number of shares will be sufficient through 2013.
Awards Under the ESPP
Participation in the ESPP is voluntary and is dependent on each eligible employee’s election to participate and his or her determination as to the level of payroll deductions. Accordingly, future purchases under the ESPP are not determinable. Non-employee directors are not eligible to participate in the ESPP. As of the date of this proxy statement, no purchases have been made under the amended and restated ESPP since its adoption by the board in February 2009. For illustrative purposes, however, during the fiscal year ended December 31, 2008, the following persons or groups purchased shares of Sprint Nextel Series 1 Common Stock under the ESPP as follows, at a weighted average price of $4.16 per share.
Name and Position | Dollar Value ($) | Number of Shares (#) | ||
Daniel R. Hesse | 0 | 0 | ||
Robert H. Brust | 0 | 0 | ||
Keith O. Cowan | 0 | 0 | ||
Steven L. Elfman | 0 | 0 | ||
Robert L. Johnson | 0 | 0 | ||
Former Executive Officers: | ||||
Paul N. Saleh | 0 | 0 | ||
William G. Arendt | 0 | 0 | ||
Leonard J. Kennedy | 0 | 0 | ||
Mark E. Angelino | 0 | 0 | ||
All executive officers as a group (8 persons) | 15,943 | 2,672 | ||
All current non-employee directors as a group | 0 | 0 | ||
All employees, excluding all executive officers | 36,109,316 | 8,676,427 |
Tax Aspects of the ESPP
The ESPP is an “employee stock purchase plan” under section 423 of the Internal Revenue Code. Options issued under the ESPP qualify for special tax treatment such that no income is recognized by the employee at the time the option is granted or exercised and the recognition of gain is deferred until the disposition of the stock purchased.
If stock purchased is sold after being held for one year from the date of purchase and two years from the date of the grant of the option, the employee will recognize ordinary income to the extent of the lesser of (1) 5% (10% for shares purchased prior to April 1, 2009 and 15% for shares purchased prior to July 1, 2005) of the fair market value of the stock on the date of the option grant and (2) the excess, if any, of the fair market value of the stock on the date of disposition over the purchase price. Any further gain is capital gain. Any loss is treated as capital loss. There will be no tax effect on Sprint Nextel under these circumstances.
If the stock is sold before the holding period described above expires, the employee must recognize additional ordinary income. This ordinary income is reported as wages on the employee’s Form W-2. The amount to be treated as ordinary income is the difference between the fair market value of the stock on the date
of exercise of the option and the purchase price. Any further gain is capital gain. If the selling price is less than the value of the stock at the time of exercise, the ordinary income amount remains the same and a capital loss is recognized. The early disposition of the stock entitles Sprint Nextel to a deduction to the extent that the employee recognizes ordinary income.
Our Board of Directors recommends a vote “FOR” the approval of the amendment to the ESPP in this Proposal 3.
Proposal 4. Shareholder Proposal Concerning Special Shareholder Meetings
(Item 34 on Proxy Card)
Mr. Kenneth Steiner of 14 Stoner Avenue, 2M, Great Neck, NY 11021, owner of 900 shares of our series 1 common stock, has given notice of his designation of John Chevedden as his proxy to introduce the following resolution at the Annual Meeting. The shareholder proposal and supporting statement appear as received by us. Following the shareholder proposal is our response.4—Special Shareowner Meetings
RESOLVED, Special Shareholder Meetings, ShareholdersShareowners ask our board to take the steps necessary to amend our bylaws and any othereach appropriate governing documents in order that there is no restriction ondocument to give holders of 10% of our outstanding common stock (or the shareholder rightlowest percentage allowed by law above 10%) the power to call a special meeting, comparedshareowner meetings. This includes that such bylaw and/or charter text will not have any exception or exclusion conditions (to the fullest extent permitted by state law) that apply only to shareowners but not to management and/or the standard allowed by applicable law on calling a special meeting.
Statement of William Steiner
Special meetings allow investorsshareowners to vote on important matters, such as a takeover offer,electing new directors, that can arise between annual meetings. If shareholdersshareowners cannot call special meetings, management may become insulated and investor returns may suffer.
Shareholders Shareowners should have the ability to call a special meeting when they think a matter is sufficiently important to merit expeditiousprompt consideration. Shareholder control over timing is especially important regarding a major acquisition or restructuring, when events unfold quickly
This proposal topic won impressive support at the following companies based on 2008 yes and issues may become moot by the next annual meeting.no votes:
Fidelity and Vanguard support a shareholder right to call a special meeting. The proxy voting guidelines of many public employee pension funds, including the New York City Employees Retirement System, also favor this right.
Eighteen (18) proposals on this topic averaged 56%-support in 2007—including 74%-support at Honeywell (HON) according to RiskMetrics (formerly Institutional Shareholder Services).
Occidental Petroleum (OXY) | 66 | % | Emil Rossi (Sponsor) | ||
FirstEnergy (FE) | 67 | % | Chris Rossi | ||
Marathon Oil (MRO) | 69 | % | Nick Rossi |
The merits of this Special Shareowner Meetings proposal should also be considered in the context of the need for further improvements in our company’s overall corporate governance structure and in individual director performance. For instance in 2007In 2008 the following structuregovernance and performance issues were identified:
• | The Corporate Library (TCL)www.thecorporatelibrary.com, an independent investment research firm, rated our company: |
“D” overall.
“High Governance Risk Assessment.”
“Very High Concern” in Executive Pay – $40 million for Gary Forsee.
Our directors served on boards rated “D” by The Corporate Library:
Irvine Hockaday | Ford (F) | |
Irvine Hockaday | Estee Lauder (EL) | |
Irvine Hockaday | Crown Media (CRWN) | |
Rodney O’Neal | Goodyear (GT) | |
Rodney O’Neal | Delphi (DPHIQ.PK) | |
Gordon Bethune | Honeywell (HON) | |
Ralph Whitworth | Sovereign Bancorp (SOV) | |
Janet Hill | Wendy’s/Arby’s (WEN) | |
Robert Bennett | Liberty Media (LCAPA) | |
Larry Glasscock | WellPoint (WLP) |
Irvine Hockaday (Sprint Nomination Committee Chairman) was designated a “Problem Director” by The Corporate Library due to his involvement with the proposed Sprint merger with WorldCom that led to the acceleration of $1.7 billion in stock options even though the merger ultimately failed.
Irvine Hockaday and Janet Hill were designated “Accelerated Vesting” directors by TCL due to their accelerating stock option vesting to avoid recognizing the related cost.
We had no shareholder right to:
1) Cumulative voting.
2) Act by written consent.
3) Call a special meeting.
Poison Pill: Our directors can adopt a poison pill and prevent us from ever votingVote on it.executive pay.
Three directors were designated “Accelerated Vesting” directors by The Corporate Library- dueOur management should have the leadership initiative to a director’s involvement with a board that sped up stock option vestingadopt the above Board accountability items instead of leaving it to avoid recognizingshareholders to take the corresponding cost:initiative in proposing such improvements.
Mr. Drendel
Ms. Hill
Mr. Hockaday
Additionally:
|
Seven of our directors also served on boards rated D by the Corporate Library:
Mr. Swanson also had the highest withheld votes at our 2007 annual meeting.
The above concerns shows there is roomneed for improvement and reinforces the reason to take one step forward now andimprovement. Please encourage our board to respond positively to this proposal:
Special ShareholderShareowner Meetings—
Yes on Proposal 34
Notes:
William Steiner, 112 Abbottsford Gate, Piermont, NY 10968 sponsored this proposal.
Our Response to the Shareholder Proposal
Our board believes this proposal is not in the best interest ofUnder our company and recommends that shareholders vote “against” this proposal. The proposal, as submitted, allows any shareholder the right to callbylaws, a special meeting regardless of hisshareholders may be called at any time by the board, the chairman of the board, the chief executive officer or her ownership percentage of our common stock. Allowingthe president. For a company with as many shareholders with potentially conflicting interests to call meetings at will on different matters could create major confusion for our other shareholders and disruption to our business.
The proponent states that shareholders should have the ability to callas us, a special meeting when they thinkof shareholders is a matter is sufficiently importantvery expensive and time-consuming affair because of the legal costs in preparing required disclosure documents, printing and mailing costs, and the time commitment required of the board and members of senior management to merit expeditious consideration.prepare for and conduct the meeting. Calling special meetings of shareholders is not a matter to be taken lightly and should be extraordinary events that only be relied uponoccur when our company’seither fiduciary obligations or strategic concerns require that the matters to be addressed in a timely manner. In the extraordinary circumstance where a matter cannot wait until the next annual meeting,meeting.
Allowing a minority group of shareholders to call special meetings could impose substantial administrative and financial burdens on us, and significantly disrupt the conduct of our business. The current bylaws permitprovision is an appropriate corporate governance provision for a public company of our size because it allows the directors and our chief executive officer and president, according to their fiduciary obligations, to exercise their business judgment to determine when it is in the best interests of shareholders to convene a special meeting.
In addition, our executives and Investor Relations department personnel maintain open lines of communications with large and small shareholders, financial analysts, and shareholder advisory services regarding important issues relating to our business and governance matters.
Under this proposal, holders of ten percent or more of our common stock would have the right to call a special meeting of the shareholdersshareholders. This could provide a forum for parties holding a minority portion of our shares to be called at any time by the Chairmancall meetings that would serve their narrow purposes rather than those of the Board,majority of our shareholders. Controlling the Chief Executive Officer, the Presidenttiming of a regular or the board of directors.
More importantly, our board believes that it is notspecial meeting under such circumstances should be in the best interest of our company and our shareholders to incur the financial and administrative expense and business disruption that would enable any of our shareholders to call shareholder meetings for any reason, at any time, and as frequently as they choose. The expenses would include the legal costs of preparing the necessary disclosure documents and printing and mailing the materials to our large shareholder base, as well as the time commitment requiredhands of our board and memberssenior executives, as it is now, to enable them to discharge their fiduciary duties to all the shareholders of senior management to prepare for and conduct the meeting.company.
This shareholder proposal should also be viewed in the context of the numerous corporate governance initiatives that our board of directors has already implemented for the benefit of our shareholders. Our company’s current corporate governance structure is a sound one that is reviewed annually to consider governance developments and best practices, and that empowers our shareholders to express their concerns on important corporate matters. Our corporate governance structure already provides for the following:
• | Declassified Board—All of our directors serve one-year terms and stand for re-election at each annual meeting. |
• | Director Nomination Process—Our bylaws set forth a process by which a shareholder may nominate directors to our board at an annual meeting. |
• | Majority Voting—Our bylaws provide for a majority vote standard for the election of directors in an uncontested election. |
• | Shareholder Vote Required—Our shareholders have the ability to vote on important matters, such as takeover offers. The rules of the NYSE also require listed companies like us to seek shareholder consent to issue common stock that would amount to 20 percent or more of the outstanding shares of the company, and the Kansas General Corporation Code requires us to seek shareholder approval for certain mergers or the sale of all or substantially all of our assets and our charter documents provide for these matters to be voted on by our shareholders. |
• | Strict Director Independence Standards—Our Corporate Governance Guidelines require that at least two-thirds of our board be independent. |
• | Shareholder Communication Process—Our board has established a process that enables our shareholders to communicate with our directors. The process is described on page |
statement. As enumerated in our Corporate Governance Guidelines, our outside directors may also, from time to time, meet with outside parties on issues of significance to all shareholders. |
Our Board of Directors recommends a vote “AGAINST” this proposal.
Proposal 5. Shareholder Proposal Concerning Political Contributions
Our(Item 5 on Proxy Card)
Resolved,that the shareholders of Sprint Nextel Corporation ( “Company”) hereby request that the Company provide a report, updated semi-annually, disclosing the Company’s:
1. | Policies and procedures for political contributions and expenditures (both direct and indirect) made with corporate funds. |
2. | Monetary and non-monetary political contributions and expenditures not deductible under section 162 (e)(1)(B) of the Internal Revenue Code, including but not limited to contributions to or expenditures on behalf of political candidates, political parties, political committees and other political entities organized and operating under 26 USC Sec. 527 of the Internal Revenue Code and any portion of any dues or similar payments made to any tax exempt organization that is used for an expenditure or contribution if made directly by the corporation would not be deductible under section 162 (e)(1)(B) of the Internal Revenue Code. The report shall include the following: |
a. | An accounting of the Company’s funds that are used for political contributions or expenditures as described above; |
b. | Identification of the person or persons in the Company who participated in making the decisions to make the political contribution or expenditure; and |
The report shall be presented to the board believes that our director nomination process, togetherof directors’ audit committee or other relevant oversight committee and posted on the company’s website to reduce costs to shareholders.
Supporting Statement
As long-term shareholders of Sprint Nextel , we support transparency and accountability in corporate spending on political activities. These activities include direct and indirect political contributions to candidates, political parties or political organizations; independent expenditures; or electioneering communications on behalf of a federal, state or local candidate.
Disclosure is consistent with our majority vote standardpublic policy and in the election of directors, offers substantial opportunities for shareholders to influence the electionbest interest of the directors. According to RiskMetrics’ 2008 U.S. Proxy Voting Guidelines, the abilitycompany and its shareholders. Absent a system of shareholders to nominate directorsaccountability, company assets can be used for policy objectives that may be inimical to the company’s ballotlong-term interests of and may pose risks to the company and its shareholders.
Sprint Nextel contributed at least $1.4 million in corporate funds since the 2002 election cycle. (CQ’s PoliticalMoneyLine:http://moneyline.cq.com/pml/home.do and the adoption of a majority vote standard are deemed to be adequate countervailing measures if a companyNational Institute on Money in State Politics:http://www.followthemoney.org/index.phtml).
However, relying on publicly available data does not provide a complete picture of the Company’s political expenditures. For example, the Company’s payments to trade associations used for cumulative voting. Our annual shareholder meetings also providepolitical activities are undisclosed and unknown. In many cases, even management does not know how trade associations use their company’s money politically. The proposal asks the Company to disclose all of its political contributions, including payments to trade associations and other tax exempt organizations. This would bring our Company in line with a growing number of leading companies, including Pfizer, Aetna, and American Electric Power that support political disclosure and accountability and present this information on their websites.
The Company’s Board and its shareholders with an opportunityneed complete disclosure to submit shareholder proposals, such asbe able to fully evaluate the political use of corporate assets. We urge your support for this one, as a means to communicate with other shareholders and raise appropriate questions and concerns.critical governance reform.
ForOur Response to the reasons described above,Shareholder Proposal
Political contributions, where permitted, are an important part of the regulatory and legislative process. We are in a highly regulated industry and our boardoperations are significantly affected by the actions of elected officials at the local, state and national levels, including rates we can charge customers, our profitability and even how we must provide services to competitors. It is important that we actively participate in the electoral and legislative processes in order to protect your interests as shareholders. We do so by contributing prudently to state and local candidates and by contributing to political organizations and trade associations when such contributions advance our business objectives and the interests of our shareholders. In making such contributions, we are committed to complying with campaign finance and lobbying laws, as well as changes that may be enacted in the future, including the laws requiring public disclosure of political contributions and lobbying expenses. The amount of our expenditures in this area isde minimis as compared to our total expenditures in a year. The adoption of this proposal would add unnecessary costs to our business.
We believe that significant information about our political contributions is already publicly available as required by applicable state and federal law. Moreover, we are continuing to improve the disclosure of our political expenditures so that we are even more transparent than required in this area. We also believe that this is in your best interests.
In addition, no company funds, in accordance with the law, are expended to make federal political contributions. Federal law has long prohibited corporate contributions to federal candidates or their political committees. With the enactment of the Bi-Partisan Campaign Finance Reform Act of 2002 (known as the McCain Feingold Act), corporate contributions to federal political parties and leadership committees are prohibited.
As to state and local contributions, state laws determine when and under what circumstances political contributions are permissible. Moreover, a number of states in which we operate have extensive reporting requirements. These rules, in general, are equally applicable to all participants in the political process. This proposal, on the other hand, would impose a set of rules only on us.
This proposal would impose unwarranted expenditures of funds and administrative burdens on us and would be uniquely applicable only to us and not to our competitors, unions or any other participants in the process. Your directors believe that any reporting requirements that go beyond those required under existing law should be applicable to all participants in the process, not just to us.
Our Board of Directors recommends that youa voteagainst “AGAINST” this Proposal 3.proposal.
Other Matters to Come Before the Meeting
We do not intend to bring any other matters before the meeting, and we do not know of any matters to be brought before the meeting by others. If, however, any other matters properly come before the meeting, the persons named in the proxy will vote the shares represented thereby in accordance with the judgment of management on any such matter.
The deadline for submitting shareholder proposals to be included in the proxy statement for our 20092010 annual meeting of shareholders is November 27, 2008.30, 2009. If you intend to submit a proposal, it must be received by our Corporate Secretary at 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251, no later than that date.
If you intend to submit a matter for consideration at next year’s meeting, other than by submitting a proposal to be included in our proxy statement, you must give timely notice according to our bylaws. Those bylaws provide that, to be timely, your notice must be received by our Corporate Secretary at 6200 Sprint Parkway, Mailstop KSOPHF0302-3B424, Overland Park, Kansas 66251, between December 15, 200813, 2009 and January 13, 2009.12, 2010. For each matter you intend to bring before the meeting, your notice must include a brief description of the business you wish to be considered, the reasons for conducting that business at the meeting, and any material interest you have in that business. The notice must also include your name, address, and the class and number of shares of our stock that you own.
2008EMPLOYEES STOCK PURCHASE PLAN
AMENDED AND RESTATED
EFFECTIVE APRIL 1, 2009
1. | Purpose |
The purpose of this Employees Stock Purchase Plan is to encourage and enable eligible employees of Sprint Nextel and its Subsidiaries to acquire proprietary interests in Sprint Nextel through the ownership of Common Stock in order to establish a closer identification of their interests with those of Sprint Nextel by providing them with another and more direct means of participating in its growth and earnings which, in turn, will provide motivation for participating employees to remain in the employ of and to give greater effort on behalf of Sprint Nextel. It is the intention of Sprint Nextel to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that Section of the Code.
2. | Definitions |
The following words or terms, when used herein, shall have the following respective meanings:
(a) “Account” shall mean the funds accumulated with respect to an individual Employee as a result of deductions from his paycheck for the purpose of purchasing Common Stock under this Plan. The funds allocated to an Employee’s Account shall remain the property of the respective Employee at all times but may be commingled with the general funds of Sprint Nextel.
(b) “Average Market Price” shall mean the average of the high and low prices of the applicable Common Stock for composite transactions for the date in question or, if no trade of such Common Stock shall have been made on that date, the next preceding date on which there was a trade of such Common Stock.
(c) “Board” shall mean the Board of Directors of Sprint Nextel.
(d) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(e) “Committee” shall mean the Compensation Committee of the Board unless the Board designates another committee consisting of three or more members of the Board who are not eligible to participate in this Plan.
(f) “Compensation” shall mean base pay and, if applicable, sales commissions and shall exclude all other forms of compensation.
(g) “Date of Grant” shall mean, with respect to each offering under the Plan, the first day of the calendar quarter during which the offering occurs. A different date may be set by resolution of the Board.
(h) “Date of Exercise” shall mean the date on which Options shall be deemed exercised, which shall be the last day of the Purchase Period. Different dates may be set by resolution of the Board.
(i) “Eligible Employee” or “Employee” shall mean all persons continuously employed by Sprint Nextel or a participating Subsidiary from the 14th day before the end of the month immediately preceding the Purchase Period through the Date of Grant for that offering; provided, however, persons whose customary employment is for less than twenty hours per week shall not be an “Employee” or an “Eligible Employee” as those terms are used herein; and provided further that the Committee may determine, as to any offering under this Plan, that the offer will not be extended to highly compensated employees (within the meaning of Section 414(q) of the Code
or any successor Code section). An individual who is on sick leave or other company approved leave on the Date of Grant and who otherwise is an Eligible Employee may enroll in an offering under the Plan; provided, however, if on the Date of Grant such leave has exceeded a period of 90 days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the individual shall not be permitted to enroll.
(j) “ESPP Broker” shall have the meaning assigned in Section 14(a).
(k) “Option” or “Options” shall mean the right or rights granted to Eligible Employees to purchase Common Stock under an offering made under this Plan.
(l) “Plan” shall mean this Employees Stock Purchase Plan, as amended.
(m) “Plan Administrator” shall mean the individual or individuals appointed under Section 4 to carry out certain administrative duties with respect to the Plan.
(n) “Purchase Period” shall mean, with respect to each offering under the Plan, the period from and including the first business day of each calendar quarter commencing on or after October 1, 2005, through the last business day of each such calendar quarter. A different Purchase Period may be set by resolution of the Board. The Purchase Period relates to the period during which payroll deductions for payment for stock purchased under an offering under this Plan are made.
(o) “Shares,” “Stock” or “Common Stock” shall mean shares of $.01 par value Sprint Nextel Series 1 Common Stock.
(p) “Subscription Period” shall mean, with respect to the offering commencing on October 1, 2005, the period from September 6, 2005 to September 23, 2005. Subscription Period for any subsequent offering shall mean the period from the first day of the calendar quarter preceding such offering to the 14th day before the end of the calendar quarter preceding such offering. A different Subscription Period may be set by resolution of the Board.
(q) “Sprint Nextel” shall mean Sprint Nextel Corporation, a Kansas corporation, or its successor.
(r) “Subsidiary” shall mean a corporation, domestic or foreign, of which not less than 50% of the voting securities are held by Sprint Nextel or by Sprint Nextel together with one or more of its Subsidiaries whether or not such corporation now exists or is hereafter organized or acquired by Sprint Nextel or a Subsidiary.
3. | Number of Shares Under the Plan |
A total of 170 million shares of Stock may be sold to Eligible Employees under this Plan less shares of Stock previously sold under the Plan, as adjusted to reflect the effects of prior mergers, recapitalizations and stock splits. The Shares used under the Plan may be newly issued Shares or may be Shares purchased for the Plan on the open market or from private sources, at the option of Sprint Nextel. The number of shares of Stock that may be sold pursuant to each Subscription Period under the Plan is limited to 16 million shares of Stock, which number shall be appropriately adjusted by the Board for a Purchase Period on other than a quarterly basis. With respect to each offering, the Board of Directors will specify the Subsidiaries participating in the offering and such other terms and conditions not inconsistent with this Plan as may be necessary or appropriate.
In the event of reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, offerings of rights, or any other change in the structure of Common Stock, the Board may make such adjustment, if any, as it may deem appropriate in the number, kind, and the Option price of Shares available for purchase under the Plan, and in the number of Shares which an Employee is entitled to purchase.
4. | Administration of the Plan |
This Plan shall be administered by the Committee. The Committee is vested with full authority to make, administer and interpret such equitable rules and regulations regarding this Plan as it may deem advisable. Its determinations as to the interpretation and operation of this Plan shall be final and conclusive.
To aid in administering the Plan, the Board or the Committee shall appoint a Plan Administrator and the Committee shall allocate to the Plan Administrator certain limited responsibilities to carry out the directives of the Committee in all phases of the administration of the Plan.
Sprint Nextel will pay all expenses incident to establishing and administering the Plan and purchasing or issuing Shares except as otherwise provided in the Plan.
5. | Participation; Payroll Deductions |
(a) An Eligible Employee may become a participant by enrolling during the Subscription Period in the manner prescribed by the Plan Administrator.
(b) Payroll deductions for a participant shall commence with the first payday in the Purchase Period for an offering and shall end with the last payday during the Purchase Period for such offering or until the Employee terminates employment or terminates his participation in the offering as provided in Section 9.
(c) As part of his enrollment, the participant shall elect to have deductions made from his pay on each payday during the time he is a participant in an offering at a percentage (in whole numbers) of his Compensation, up to a maximum of 20% of Compensation. Payroll withholding in excess of the percentage designated by a participant is permitted in order to adjust for delays or mistakes in the processing of enrollments. If a participant’s pay on any payday is insufficient, after all other payroll deductions, to withhold the percentage of Compensation elected by such participant, the deduction for this Plan shall be the amount remaining after such other payroll deductions are taken.
(d) All payroll deductions made for a participant shall be credited to his Account under the Plan. A participant may not make any separate cash payment into such Account nor may payment for Shares be made other than by payroll deduction.
(e) A participant may discontinue his participation in an offering as provided in Section 9, but may not otherwise alter the rate of his payroll deductions for that offering.
6. | Granting of Option |
On the Date of Grant for an offering, this Plan shall be deemed to have granted to each participating Employee an Option for as many full Shares as he will be able to purchase with the payroll deductions credited to his Account during the Purchase Period for that offering, subject to the provisions in the next two paragraphs. Notwithstanding the foregoing, no Employee may purchase more than 9,000 shares of Stock during any single offering; provided, further, that no Employee shall be granted an Option to purchase Shares under this Plan if such Employee, immediately after such Option is granted, owns stock (applying the rules of Section 424(d) of the Code) or holds Options to purchase stock possessing five percent or more of the total combined voting power or value of all classes of stock of Sprint Nextel or of any of its Subsidiaries; provided, further, that no Employee may be granted an Option to purchase Shares which permits his rights to purchase shares of stock under all employee stock purchase plans of Sprint Nextel and its Subsidiaries to accrue at a rate which exceeds in any one calendar year $25,000 of the fair market value of the stock determined as of the date the Option to purchase is granted.
If the total number of Shares for which Options are to be exercised on any Date of Exercise exceeds the number of Shares then available under the Plan for that offering, Sprint Nextel shall make a pro rata allocation of the available Shares based on the amount in each participant’s Account at the end of the Purchase Period.
All Shares of Common Stock included in any offering under this Plan in excess of the total number of Shares purchased in such offering shall be available for inclusion in any subsequent offering under this Plan.
7. | Purchase Price |
The Option price per Share of Common Stock shall be 95% of the Average Market Price for a Share of Stock on the Date of Exercise.
8. | Exercise of Option |
Subject to the availability of Shares as set forth in Section 6, each Employee who has sufficient funds in his Account on a Date of Exercise to purchase at least one full share of Common Stock shall be deemed to have exercised his Option on such date and shall be deemed to have purchased from Sprint Nextel such number of full shares of Stock reserved for the purpose of the Plan as the balance in his Account on the Date of Exercise will pay for at the Option price for that Stock.
The balance in an Employee’s Account not used to purchase Common Stock shall be paid to the Employee as soon as practicable after the Date of Exercise.
9. | Termination of Participation |
An Employee may terminate participation in an offering, in whole but not in part, at any time before the end of the Purchase Period for such offering. To terminate participation, an Employee must deliver a notice to the Plan Administrator in the manner prescribed by the Plan Administrator. As soon as practicable after receipt of such notice, the Plan Administrator shall stop the Employee’s payroll deductions provided for in Section 5.
If an Employee’s participation is terminated as a provided above during the Purchase Period of an offering, the funds remaining in the Employee’s Account will be refunded to the Employee as soon as practicable after such termination.
If an Employee takes a 401(k) hardship withdrawal from the Sprint Nextel 401(k) Plan, his or her participation in the then Plan offering is automatically terminated as required under Federal tax laws. Also, the Employee will not be permitted to enroll in a quarterly offering if he or she has taken a 401(k) hardship withdrawal within the 6-month period before the Grant Date.
10. | Termination of Employment |
If an Employee terminates employment for any reason or ceases to be an Eligible Employee during the Purchase Period of an offering, the funds remaining in the Employee’s Account will be refunded to the Employee as soon as practicable after termination.
11. | Automatic Re-enrollment |
Eligible Employees must enroll in order to participate in the offering commencing on October 1, 2005. There will be no automatic reenrollment in such offering from any previous offering. For each offering subsequent to the offering commencing on October 1, 2005, each participant in an offering who is still an Eligible Employee shall automatically be re-enrolled in the next offering at the same percentage of Compensation in effect at the last day of the Purchase Period immediately preceding such next offering (if such
an offering is authorized by the Board). If the Employee wants to change his payroll deductions in the new offering, he must re-enroll in the new offering during the Subscription Period for the new offering. If an Employee enrolled in a prior offering does not want to participate in the new offering, he must affirmatively elect not to participate in the new offering during the Subscription Period for the new offering.
The balances in the Employee’s Account at the end of an offering not used to purchase Common Stock shall be refunded to him. Upon termination of the Plan, the balances in each Employee’s Account not used to purchase Common Stock shall be refunded to him.
12. | Interest |
No interest will be paid or allowed on any money in the Accounts of participating Employees.
13. | Rights to Purchase Shares Not Transferable |
No Employee shall be permitted to sell, assign, transfer, pledge, or otherwise dispose of or encumber either the payroll deductions credited to his Account or any rights with regard to the exercise of an Option or to receive Shares under the Plan other than by will or the laws of descent and distribution, and such right and interest shall not be liable for, or subject to, the debts, contracts, or liabilities of the Employee. Any such action taken by the Employee shall be null and void.
14. | Rights as Stockholder and Evidence of Stock Ownership |
(a) An Employee will not become a stockholder, and will have no rights as a stockholder, with respect to Shares being purchased under this Plan until after his Option is exercised and the Shares have been issued by Sprint Nextel. Promptly following each Date of Exercise, the number of shares of Common Stock purchased by each participant shall be deposited into an account established in the participant’s name at a stock brokerage or other financial services firm designated by Sprint Nextel (the “ESPP Broker”).
(b) A participant shall be free to undertake a disposition (as that term is defined in Section 424 of the Code) of the Shares in his ESPP Broker account at any time, whether by sale, exchange, gift, or other transfer of legal title, but in the absence of such a disposition of the Shares, the Shares must remain in the participant’s account at the ESPP Broker until the holding period set forth in Section 423(a) of the Code has been satisfied. With respect to Shares for which the Section 423(a) holding period has been satisfied, the participant may move those Shares to another brokerage account of participant’s choosing or request that a stock certificate be issued and delivered to him.
(c) A participant who is not subject to payment of U.S. income taxes may move his Shares to another brokerage account of his choosing or request that a stock certificate be issued and delivered to him at any time, without regard to the satisfaction of the Section 423(a) holding period.
(d) Participants shall be responsible for transaction fees charged by the ESPP Broker for transactions in their account.
15. | Application of Funds |
All funds received by Sprint Nextel in payment for Shares purchased under this Plan may be used for any valid corporate purpose.
16. | Commencement of Plan |
This Plan commenced on the first day of June, 1988. This Plan as amended and restated is effective for the offering commencing April 1, 2009 and subsequent offerings.
17. | Governmental Approvals or Consents; Amendments or Termination |
This Plan and any offering and sales to Employees under it are subject to any governmental approvals or consents that may be or become applicable in connection therewith.
The Plan shall terminate on the effective date of a merger or consolidation in which Sprint Nextel is not the surviving corporation, if such merger or consolidation is not between or among corporations related to Sprint Nextel. If such event occurs during a Purchase Period for an offering, the Date of Exercise shall be the date determined by the Board. Any payroll deductions placed in an Employee’s Account after such Date of Exercise will be refunded to the Employee.
The Board may terminate the Plan or make such changes in the Plan and include such terms in any offering under this Plan as may be necessary or desirable, in the opinion of Counsel for Sprint Nextel, to comply with the rules or regulations of any governmental authority, or to be eligible for tax benefits under the Code or the laws of any state; or for any other reason provided that no termination or amendment may adversely affect the rights of any participant in any offering already commenced, nor may any amendment require the sale of more Shares than are authorized without prior approval of Sprint Nextel’s stockholders.
18. | Notices |
All notices or other communications by a participant to Sprint Nextel under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by Sprint Nextel at the location, or by the person, designated for the receipt thereof.
2009 Sprint Nextel Annual Meeting
SPRINT NEXTEL CORPORATION 6200 SPRINT PARKWAY OVERLAND PARK, KANSAS 66251 | VOTE BY INTERNET-www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern time on May 11, 2009 (May 6, 2009 for shares held through our 401(k) plan). Have the control number in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the environmental impact and the costs incurred by Sprint Nextel in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern time on May 11, 2009 (May 6, 2009 for shares held through our 401(k) plan). Have the control number in hand when you call and then follow the simple instructions the Vote Voice provides you. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Sprint Nextel Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | SPLJR1 KEEP THIS PORTION FOR YOUR RECORDS |
DETACH AND RETURN THIS PORTION ONLY
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SPRINT NEXTEL CORPORATION | ||||||||||||||||||||||||
Vote on Items | ||||||||||||||||||||||||
1. | Election of Ten Directors | |||||||||||||||||||||||
The Board of Directors recommends a vote FOR Item 1. | For | Against | Abstain | |||||||||||||||||||||
1a) | Robert R. Bennett | ¨ | ¨ | ¨ | ||||||||||||||||||||
1b) | Gordon M. Bethune | ¨ | ¨ | ¨ | For | Against | Abstain | |||||||||||||||||
1c) | Larry C. Glasscock | ¨ | ¨ | ¨ | 2. | To ratify the appointment of KPMG LLP as the independent registered public accounting firm of Sprint Nextel for 2009. The Board of Directors recommends a vote FOR Item 2. | ¨ | ¨ | ¨ | |||||||||||||||
1d) | James H. Hance, Jr. | ¨ | ¨ | ¨ | ||||||||||||||||||||
1e) | Daniel R. Hesse | ¨ | ¨ | ¨ | 3. | To approve amendments to the 1988 Employees Stock Purchase Plan. The Board of Directors recommends a vote FOR Item 3. | ¨ | ¨ | ¨ | |||||||||||||||
1f) | V. Janet Hill | ¨ | ¨ | ¨ | ||||||||||||||||||||
1g) | Frank Ianna | ¨ | ¨ | ¨ | 4. | To vote on a shareholder proposal concerning special shareholder meetings. The Board of Directors recommends a vote AGAINST Item 4. | ¨ | ¨ | ¨ | |||||||||||||||
1h) | Sven-Christer Nilsson | ¨ | ¨ | ¨ | ||||||||||||||||||||
1i) | William R. Nuti | ¨ | ¨ | ¨ | 5. | To vote on a shareholder proposal concerning political contributions. The Board of Directors recommends a vote AGAINST Item 5. | ¨ | ¨ | ¨ | |||||||||||||||
1j) | Rodney O’Neal | ¨ | ¨ | ¨ | ||||||||||||||||||||
Please sign exactly as your name(s) appear(s) above. If shares are held jointly, any one of the joint owners may sign. Attorneys-in-fact, executors, administrators, trustees, guardians or corporate officers should indicate the capacity in which they are signing. PLEASE VOTE THIS PROXY PROMPTLY whether or not you expect to attend the meeting. | *NOTE* SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
ADMISSION TICKET 2009 ANNUAL MEETING OF SHAREHOLDERS Tuesday, May 12, 2009 10:00 a.m. Central time The Overland Park Convention Center 6000 College Boulevard Overland Park, Kansas 66211 THIS ADMISSION TICKET ADMITS ONLY THE NAMED SHAREHOLDER AND A GUEST, OR PERSONS HOLDING PROXIES FROM SHAREHOLDERS. |
Sprint Important Notice Regarding Internetthe Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. SPRINT NEXTEL CORPORATION 6200 SPRINT PARKWAY OVERLAND PARK, KANSAS 66251 This Proxy is solicited on behalf of the Board of Directors for the Annual Meeting on May 13, 2008. The undersigned hereby appoints Leonard J. Kennedy and Christie A. Hill, and each of them, with full power of substitution, as proxies, to vote all the shares of common and preferred stock of Sprint Nextel Corporation (“Sprint Nextel”) that the undersigned is entitled to vote at the 2008 Annual Meeting of Shareholders to be held May 13, 2008, and any adjournment thereof, upon the matters set forth, and in their discretion upon such other matters as may properly come before the meeting. This Proxy, if signed and returned, will be voted as indicated. If this card is signed and returned without indication as to how to vote, the shares will be voted FOR items 1 and 2 and AGAINST item 3. Any one of said proxies, or any substitutes, who shall be present and act at the meeting shall have all the powers of said proxies hereunder. ADMISSION TICKET 2008 ANNUAL MEETING OF SHAREHOLDERS Tuesday, May 13, 2008 10:00 a.m. Eastern time The Hyatt Regency Reston 1800 Presidents Street Reston, Virginia 20190 THIS ADMISSION TICKET ADMITS ONLY THE NAMED SHAREHOLDER AND A GUEST, OR PERSONS HOLDING PROXIES FROM SHAREHOLDERS.
SPRINT NEXTEL CORPORATION 6200 SPRINT PARKWAY OVERLAND PARK, KANSAS 66251 This Proxy is solicited on behalf of the Board of Directors for the Annual Meeting on May 12, 2009. The undersigned hereby appoints Charles R. Wunsch and Timothy P. O’Grady, and each of them, with full power of substitution, as proxies, to vote all the shares of common and preferred stock of Sprint Nextel Corporation (“Sprint Nextel”) that the undersigned is entitled to vote at the 2009 Annual Meeting of Shareholders to be held May 12, 2009, and any adjournment thereof, upon the matters set forth,and in their discretion upon such other matters as may properly come before the meeting. This Proxy, if signed and returned, will be voted as indicated. If this card is signed and returned without indication as to how to vote, the shares will be voted FOR items 1, 2 and 3 and AGAINST items 4 and 5.Any one of said proxies, or any substitutes, who shall be present and act at the meeting shall have all the powers of said proxies hereunder. |