UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 8, 2005
SPRINT CORPORATION
(Exact name of Registrant as specified in its charter)
Kansas 1-04721 48-0457967
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
6200 Sprint Parkway, Overland Park, Kansas 66251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
(Former name or former address, if changed since last report)
P. O. Box 7997, Shawnee Mission, Kansas 66207-0997
(Mailing address of principal executive offices)
Check the appropriate box below if the Form 8-K is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Directors' Deferred Fee Plan
On February 8, 2005, the Board of Directors of Sprint Corporation ("Sprint")
adopted an amendment to the Directors' Deferred Fee Plan (the "Plan") to be in
line with competitive practices. The Plan allows outside directors of Sprint to
defer a portion of their annual retainer, meeting fees and committee meeting
fees. The Plan also provides that new members of the Board of Directors receive
a one time grant of share units, an award having a value based on the market
value of a share of Sprint common stock. The purpose of the award is to assist
in the attraction and retention of qualified board members. The award is
currently valued at approximately three times the $50,000 annual board member
retainer. Before the amendment, the Plan provided that 50% of these share units
vest on the fifth anniversary of the director's election to the Board of
Directors and 10% on each of the sixth through tenth anniversaries.
The Plan was amended to provide that 100% of the share units vest on the third
anniversary of the director's election to the Board of Directors, except in the
following situations:
1. If the director leaves the Board of Directors at his or her convenience,
the share units would vest on a pro-rata basis in a proportional amount
equivalent to the number of full years of service completed by the director
after the grant date of the share units.
2. If a director leaves the Board of Directors because of a change of
control of Sprint, as defined in the 1997 Long-Term Stock Incentive Program, a
change in Board policy or otherwise at the convenience of the Board of
Directors, the share units would vest upon the director's departure from the
Board.
On February 8, 2005, the Compensation Committee of the Board of Directors
approved the award of share units, with a grant date of February 18, 2005, to
the new director elected to the Board of Directors. See item 5.02 for
information regarding the new director.
Management Incentive Plan
On February 8, 2005, the Compensation Committee of the Board of Directors
approved incentive payments to executive officers of Sprint and other eligible
employees under the Management Incentive Plan based on 2004 results. It also
established the 2005 performance objectives, allocations and targets on which
incentive payments will be based in 2006. The Management Incentive Plan provides
for the payment to executive officers and other eligible employees of incentive
compensation based on the achievement of near term objectives of Sprint.
1
Payouts based on 2004 results for the five executive officers with the highest
2004 compensation were as follows:
Gary D. Forsee, Chairman and Chief Executive Officer $2,090,991
Len J. Lauer, President and Chief Operating Officer $ 913,758
Robert J. Dellinger, Executive Vice President - Chief
Financial Officer $ 549,376
Michael B. Fuller, President - Local Telecommunications
Division $ 549,376
Howard E. Janzen, President - Sprint Business Solutions $ 549,376
The awards based on 2005 results will be determined using three variables: (1)
the executive officer's annual incentive target, (2) achievement of two
objectives, described below, and (3) weightings for the objectives. The
executive officer's incentive target will be multiplied by the weightings and
the payout results for each objective to calculate the actual incentive amount.
Payouts can range from 0 to 200% of the respective target awards for each
objective. In addition, the incentive payout for those executive officers who
are senior vice presidents will be adjusted based on individual performance
(from 0 to 120%).
The 2005 objectives for executive officers include consolidated EVA (80%) and
enterprise composite customer satisfaction (20%).
If the proposed merger with Nextel Communications, Inc., is completed before
year-end 2005, full year EVA performance will be calculated by dividing actual
year-to-date performance through the most recent full month before the close of
the merger by budgeted year-to-date performance for the same period and
multiplying the quotient by the 2005 full year budget. The most recently
completed quarterly customer satisfaction survey results available before the
close of the merger will be used to proportionately assess cumulative quarterly
performance and payment results.
Executive Officer Compensation
On February 8, 2005, the Compensation Committee also approved 2005 base salaries
for executive officers. Because of additional duties and responsibilities that
now include the Information Technology Services and Network Services
organizations, Len J. Lauer, the President and Chief Operating Officer, was
promoted to a grade level in which his 2005 base salary is $933,000 and his 2005
incentive target is $1,120,000. His title remains the same.
Equity Awards
On February 8, 2005, the Compensation Committee of the Board of Directors also
granted new equity awards under the shareholder approved 1997 Long-Term Stock
Incentive Program (the "1997 Program"). Restricted stock units were granted to
outside directors of Sprint. These restricted stock units vest February 8, 2008.
The Compensation Committee also approved an award of restricted stock units to
the new director with a grant date of February 18, 2005. The
2
terms of the restricted stock units are governed by the 1997 Program and the
form of the award agreement attached as Exhibit 10.2, which is incorporated
herein by reference.
A combination of restricted stock units and stock options were granted to
officers, including executive officers. The exercise price for stock options
granted to executive officers and certain other officers was equal to 110% of
the market value on the grant date (the average of the high and low sales
prices). The grant of options with an exercise price above market value ensures
that stockholders benefit from stock appreciation before senior management of
Sprint. The options vest 25% per year on each of the first through fourth
anniversaries of the grant date; however, if the executive officer is a
participant in the Retention Program adopted in connection with the proposed
merger with Nextel, the vesting accelerates in the same situations as equity
based awards covered by the Retention Program accelerate, if the executive
officer is involuntarily terminated not for cause before the one-year
anniversary of the proposed merger or, in the case of one executive officer,
before the one-year anniversary of the contemplated spin-off of the local
division operations. The terms of the stock options are governed by the 1997
Program and the form of award agreements attached as Exhibits 10.3, 10.4 and
10.5, which are incorporated herein by reference.
The number of restricted stock units subject to the awards granted to executive
officers are performance based and, subject to the discretion of the
Compensation Committee, will be adjusted by multiplying the number of restricted
stock units subject to the awards by a payout percentage (from 0 to 200%) based
on actual achievement of 2005 EVA performance measures. The restricted stock
units vest three years from the grant date, and have the same acceleration terms
that options granted to executive officers have as described above. The terms of
the restricted stock units are also governed by the 1997 Program and the forms
of award agreement attached as Exhibits 10.3, 10.4 and 10.5.
Corporate Aircraft Usage
On February 8, 2005, amendments to Sprint's aircraft usage policy were made,
with guidance and oversight by the Compensation Committee. The amendments
provide for limited use by certain executive officers (those who hold the
position of executive vice president or above) of corporate aircraft for
personal reasons subject to pre-approval by the Chairman and Chief Executive
Officer. The limited use of the aircraft cannot exceed $75,000 in value each
year for any of these executive officers, with a cap of $150,000 for all of
these executive officers. The Chairman and Chief Executive Officer is required
by the company security policy to use company aircraft in lieu of commercial
aircraft for all travel, including personal travel.
Item 5.02 Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers
On February 8, 2005, the Board of Directors of Sprint elected a new independent
director, James H. Hance, Jr. Mr. Hance recently retired as vice chairman of
Bank of America Corporation, a
3
global financial service provider. The Sprint Board has not yet appointed Mr.
Hance to serve on any Board committee. A copy of Sprint's press release
announcing Mr. Hance's election to the Board of Directors as an independent
director is attached as Exhibit 99 to this report and incorporated herein by
reference.
4
Item 9.01 Financial Statements and Exhibits
Exhibits
10.1 Directors' Deferred Fee Plan, as amended.
10.2 Form of 2004 Award Agreement (awarding restricted stock units) with
Directors
10.3 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with Messrs. Forsee and Lauer
10.4 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with Mr. Fuller
10.5 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with other executive officers
10.6 Summary of Executive Officer Benefits and Board of Directors Benefits and
Fees
99 Press Release announcing election of James H. Hance, Jr. as an independent
director of Sprint Corporation.
5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SPRINT CORPORATION
Date: February 14, 2005 By: /s/ Michael T. Hyde
Michael T. Hyde, Assistant Secretary
6
EXHIBIT INDEX
Exhibit
Number Description Page
10.1 Directors' Deferred Fee Plan, as amended.
10.2 Form of 2004 Award Agreement (awarding restricted stock units) with
Directors
10.3 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with Messrs. Forsee and Lauer
10.4 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with Mr. Fuller
10.5 Form of 2005 Award Agreement (awarding stock options and restricted stock
units) with other executive officers
10.6 Summary of Executive Officer Benefits and Board of Directors Benefits and
Fees
99 Press Release announcing election of James H. Hance, Jr. as an independent
director of Sprint Corporation.