Exhibit 10(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 19, 2003
(the "Effective Date"), by and among SPRINT CORPORATION, a Kansas corporation
("SPRINT"), SPRINT/UNITED MANAGEMENT COMPANY, a Kansas corporation and
subsidiary of SPRINT ("SUMC") (SPRINT, SUMC and their subsidiaries are
collectively referred to herein as the "Company"), and Xxxx X. Xxxxxx
("Executive") (certain capitalized terms used herein being defined in Article
7).
WHEREAS, the Board desires to employ Executive in the position and on the
terms and conditions set forth below, and Executive desires to accept such
employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
embodying the terms of such employment;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1
Position; Term Of Agreement
Section 1.01. Position. On the Effective Date, Executive shall commence
service as the Chief Executive Officer of Sprint. Sprint shall use its best
efforts to cause Executive to be appointed a member of the Board at the first
meeting thereof after the Effective Date. The Company's headquarters at Overland
Park, Kansas shall be Executive's principal job location.
(a) Upon the current Chairman of the Board's ceasing to act as such, SPRINT
shall recommend that Executive be elected as the Chairman of the Board.
(b) As Chief Executive Officer, Executive shall have such duties and
authority, consistent with such position, as shall be determined from time to
time by the Board; provided, that he shall be the highest ranking Senior Officer
of the Company and shall report only to the Board.
(c) Starting on the Effective Date, during the Employment Term Executive
will devote substantially all of his business time to the performance of his
duties hereunder and will not engage in any other business, profession or
occupation for compensation or otherwise without the prior written consent of
the Board; provided that nothing herein shall be deemed to preclude Executive,
subject to the prior written consent of the Board, from serving on any business,
civic or charitable board, as long as such activities do not materially
interfere with the performance of Executive's duties hereunder. The Board shall
be deemed to have consented to Executive's continuing to serve on the business,
civic and charitable boards set forth on Exhibit A hereto.
Section 1.02. Term. Executive shall be employed by the Company for a
period commencing on the Effective Date and, subject to earlier termination or
extension as provided herein, ending on December 31, 2007 (the "Employment
Term"). On December 31, 2007 and each December 31 thereafter, the Employment
Term shall automatically be extended for one additional year unless not later
than 180 days prior to such date the Company or Executive shall have given
written notice of its or his intention not so to extend the Employment Term.
Other than in the case of such a notice of non- renewal under this Section 1.02,
each party hereto shall give to the other party 30 days prior written notice of
such party's intent to terminate Executive's employment with the Company;
provided, however, that no prior notice is required for a termination for Cause.
ARTICLE 2
Compensation And Benefits
Subject to Section 6.14(c),
Section 2.01. Base Salary. Starting on the Effective Date, the Company
shall pay Executive an annual base salary (the "Base Salary") at the initial
annual rate of $1,100,000, payable in equal monthly installments or otherwise in
accordance with the payroll and personnel practices of the Company from time to
time. Base Salary shall be reviewed annually by the Board or a committee thereof
to which the Board may from time to time have delegated such authority (the
"Committee") for possible increase (but not decrease) in the sole discretion of
the Board or the Committee, as the case may be.
Section 2.02. Bonus. Subject in each case to Executive's continued
employment as contemplated hereby:
(a) (i) With respect to each fiscal year in the Employment Term, Executive
shall be eligible to participate in the Company's Short-Term Incentive Plan,
with a target bonus opportunity of 150% of Base Salary (the "Basic Bonus
Amount") and a maximum bonus opportunity of 300% of Base Salary. Except as
provided in Section 2.02(a)(ii) or as may be payable pursuant to Article 3,
Executive is not guaranteed the payment of any annual bonus.
(ii) Notwithstanding the foregoing, Executive shall be entitled to a
minimum annual bonus for 2003 of $1,650,000, subject to Executive being employed
by the Company on the day annual bonuses are paid to other Senior Officers of
the Company.
Section 2.03. Initial Option And Restricted Stock Unit Grants. (a) As of
the Effective Date, the Company shall cause the grant to Executive of
non-qualified stock options (the "Initial PCS Options") under the Company's 1990
Stock Option Plan (the "1990 Plan") to purchase 835,000 shares of PCS Common
Stock, having a per share strike price equal to the Fair Market Value of a share
of PCS Common Stock on the Effective Date. In addition, as of the Effective
Date, Company shall cause the initial grant to Executive of non-qualified stock
options (the "Initial FON Options" and, together with the Initial PCS Options,
the "Initial Options") under the 1990 Plan to purchase 835,000 shares of FON
Common Stock, at a strike price equal to the Fair Market Value of a share of FON
Common Stock on the Effective Date. Subject to the Executive's continued
employment with the Company, the Initial Options shall become exercisable as to
25% of the shares subject thereto on each of the first four anniversaries of the
Effective Date. The Initial Options shall otherwise have the standard terms set
forth in the 1990 Plan and shall be subject to the 1990 Plan except that, for
purposes of the Initial Options, (x) the Initial Options shall not automatically
become fully exercisable upon a Change in Control as provided in Section 7.01(j)
of the Plan, which Section shall be deemed fully superseded and replaced for
purposes of the Initial Options by Section 3.02(a) hereof, and (y) the
definition of Cause in the 1990 Plan shall be superseded and replaced by the
definition of Cause herein.
(b) As of the Effective Date, the Company shall cause the grant to
Executive under the Company's 1997 Long- Term Stock Incentive Program (the "1997
Plan") of 130,500 restricted stock units relating to and payable on a
one-for-one basis in PCS Common Stock (the "Initial PCS RSUs") and 130,500
restricted stock units relating to and payable on a one-for-one basis in FON
Common Stock (the "Initial FON RSUs" and, together with the Initial PCS RSUs,
the "Initial RSUs"). The Initial RSUs shall vest in full, subject to Executive's
continued employment with the Company, on the third anniversary of the Effective
Date; provided, however, that the Initial RSUs shall be fully vested on
Executive's death or Disability. Such grants of RSUs shall include associated
Dividend Equivalents payable to Executive at the same time and in the same form
as dividends are paid to shareholders. Unless Executive elects in the time and
manner specified by the Company to defer the payment of all or a portion of the
vested Initial RSUs, upon vesting such vested Initial RSUs shall be converted
into shares of the respective Common Stock to which they relate, which shares
shall be promptly distributed to Executive. Except as otherwise set forth in
this Agreement, the Initial RSUs shall have the standard terms set forth in, and
shall be subject to, the 1997 Plan.
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Section 2.04. Sign-on and Make Whole Awards. (a) As of the Effective Date,
in order to incentivize Executive the Company shall cause the grant to Executive
under the 1997 Plan of a sign-on award consisting of 474,400 restricted stock
units relating to and payable on a one-for-one basis in PCS Common Stock (the
"Sign-On PCS RSUs") and 474,400 restricted stock units relating to and payable
on a one-for-one basis in FON Common Stock (the "Sign-On FON RSUs" and, together
with the Sign-On PCS RSUs, the "Sign-On RSUs"). Sign-On RSUs shall vest in full,
subject to Executive's continued employment with the Company, on December 31,
2007; provided, however, that the Sign-On RSUs shall be fully vested on
Executive's death or Disability. Such grants of RSUs shall include associated
Dividend Equivalents, which prior to vesting will accrue for Executive's account
on the date dividends were otherwise payable to shareholders and upon such
accrual shall be converted into additional restricted stock units related to the
shares on which such dividends were paid. After the Sign-On RSUs are vested,
unless Executive elects in the time and manner specified by the Company to defer
the payment of all or a portion of such accrued dividends, such accrued
dividends shall be paid to Executive in the form of the respective shares to
which such units relate and, thereafter, unless Executive elects to defer
payment thereof as noted above, Dividend Equivalents shall be payable to
Executive at the same time and in the same form as dividends are paid to
shareholders. Unless further deferred pursuant to a timely election in the
manner specified by the Company, all Sign-On RSUs as are vested on the date
Executive's employment with the Company terminates shall be converted into
shares of the respective Common Stock to which they relate, which shares shall
be promptly distributed to Executive. Except as otherwise set forth in this
Agreement, the Sign-On RSUs shall have the standard terms set forth in, and
shall be subject to, the 1997 Plan.
(b) In order both to incentivize Executive and to recognize that Executive
is forfeiting certain stock options and performance shares granted to him by his
Former Employer, as of the Effective Date the Company shall cause the grant to
Executive of non-qualified stock options (the "Make Whole PCS Options") under
the 1990 Stock Plan to purchase 597,200 shares of PCS Common Stock, having a
strike price equal to the Fair Market Value of a share of PCS Common Stock on
the Effective Date. In addition, as of the Effective Date, Company shall cause
the grant to Executive of non- qualified stock options (the "Make Whole FON
Options" and, together with the Make Whole PCS Options, the "Make Whole
Options") under the 1990 Plan to purchase 597,200 shares of FON Common Stock, at
a strike price equal to the Fair Market Value of a share of FON Common Stock on
the Effective Date. Subject to the Executive's continued employment with the
Company, the Make Whole Options shall become exercisable in full on December 31,
2007; provided, however, the Make Whole Options shall become exercisable in full
under Section 7.01(i)(l) of the 1990 Plan upon the Executive's death or
Disability. The Make Whole Options shall
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otherwise have the standard terms set forth in the 1990 Plan and shall be
subject to the 1990 Plan, except that for purposes of the Make Whole Options,
(x) the Make Whole Options shall not automatically become fully exercisable upon
a Change in Control as provided in Section 7.01(j) of the Plan, which Section
shall be deemed fully superseded and replaced for purposes of the Make Whole
Options by Section 3.02(a) hereof, and (y) the definition of Cause in the 1990
Plan shall be superseded and replaced by the definition of Cause herein.
(c) In order both to incentivize Executive and to recognize that Executive
is forfeiting certain benefits and opportunities with his previous employer, as
of the Effective Date Company shall cause the grant to Executive under the 1997
Plan of a make whole award consisting of 194,400 restricted stock units relating
to and payable on a one-for-one basis in PCS Common Stock ("Make Whole PCS
RSUs") and 194,400 restricted stock units relating to and payable on a
one-for-one basis in FON Common Stock (the "Make Whole FON RSUs" and, together
with the Make Whole PCS RSUs, the "Make Whole RSUs"). Make Whole RSUs shall
vest, subject to Executive's continued employment with the Company, as to 20% of
such Units on each of the first four anniversaries of the Effective Date and on
December 31, 2007; provided, however, that the Make Whole RSUs shall be fully
vested on Executive's death or Disability. Such grant shall include associated
Dividend Equivalents that, unless Executive elects in the time and manner
specified by the Company to defer payment of all or a portion thereof, will be
payable to Executive at the same time and in the same form as dividends are
payable to shareholders. Unless Executive elects to defer payment thereof as
noted above, all vested Make Whole RSUs shall be converted into shares of the
respective Common Stock to which they relate, which shares shall be promptly
distributed to Executive. Except as otherwise set forth in this Agreement, the
Make Whole RSUs shall have the standard terms set forth in, and shall be subject
to, the 1997 Plan.
Section 2.05. Employee Benefits. (a) During the Employment Term (i)
Executive shall be eligible for employee benefits (including fringe benefits,
perquisites, financial counseling, club memberships, vacation, pension and
profit sharing plan participation and life, health, accident and disability
insurance) no less favorable than those benefits made available generally to the
Senior Officers of the Company.
(ii) After March 31, 2003, the Company shall maintain for the benefit of
Executive, or reimburse Executive for the cost of maintaining, an excess
"umbrella" liability insurance policy providing $5,000,000 of coverage.
(b) Upon termination of employment other than for Cause and subject to
Section 6.16(b)(ii), after December 31, 2007 Executive shall be eligible for the
Company's retiree medical care benefits under the Company's Medical Plans on
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terms and conditions no less favorable than those applicable generally to Senior
Officers of the Company.
(c) Subject to Section 6.16(b)(ii),
(i) Executive shall be eligible to earn a supplemental retirement
benefit under the Retirement Plan. The accrued benefit will be equal to a
Percentage of the Executive's "Covered Compensation", offset by benefits
otherwise payable to Executive under (x) his Former Employer's qualified
and non-qualified defined benefit plans, and (y) the Company's qualified
and non- qualified defined benefit plans in respect of his service with the
Company after the Effective Date (such benefit, the "Pension Benefit").
(ii) Subject to Executive's employment with the Company on December
31, 2003, the "Percentage" will equal 5% on such date. On the last day of
each calendar month beginning on and after January 1, 2004 that Executive
is employed by the Company the Percentage will increase by five-twelfths of
one percent (5/12%); provided, however, that in no event shall the
Percentage exceed 65%.
(iii) For these purposes, "Covered Compensation" means the
Compensation of Executive averaged over the five consecutive calendar years
of his employment by the Company which produce the highest average. For
purposes of determining Covered Compensation, (i) 2003 will be considered a
complete calendar year of earnings, without annualization other than for
Base Salary, and (ii) the year of termination will be considered a complete
calendar year of earnings, without annualization other than for Base
Salary. If Executive's termination occurs prior to December 31, 2007,
Covered Compensation will be based on Compensation averaged over his total
period of service (counted in completed months, and for purposes of this
calculation, counting Compensation in 2003 as earned over 12 months).
"Compensation" for a calendar year is equal to (x) the Base Salary payable
to Executive with respect to such calendar year plus (y) the annual bonus
earned by Executive with respect to such calendar year, notwithstanding any
forfeiture thereof as a result of a voluntary termination of employment
after such bonus has been determined and prior to the payment date of such
bonus.
(iv) The benefit offset will be based on the normalized benefits
determined under the offset plans described in (i) above. To normalize
means to convert the benefits in the offset plans to an actuarially
equivalent single life annuity commencing when Executive's Pension Benefit
will commence. The normal retirement benefit under the offset
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plans will first be converted to an equivalent single life annuity
commencing at normal retirement age under the plans, and then will be
converted to commence at the time Executive's Pension Benefit will
commence. The actuarial assumptions used in normalizing the benefit offset
are described in subparagraph (viii).
(v) Subject to Section 6.16(b)(ii), benefits accrued on account of the
Pension Benefit will be 100% vested at all times.
(vi) Payment of Executive's Pension Benefit will commence at the later
of (i) January 1, 2008, or (ii) the first day of the month coincident with
or following the Termination Date. The normal form of payment of the
accrued benefit is a single life annuity at the benefit commencement date,
payable without reduction.
(vii) Executive may elect to receive the Pension Benefit in any one of
the annuity forms of benefit available under the Company's tax-qualified
defined benefit plan, as elected by Executive pursuant to procedures
established by the Company.
(viii) The determination of the Pension Benefit, including the offset
calculations, shall be performed by the Company's pension actuaries at the
time of such calculation, and such calculation shall be binding on the
parties hereto. For purposes of converting annuity payments from one form
to another actuarially equivalent form, actuarial equivalence will be
determined using the actuarial assumptions contained in the Company's
tax-qualified defined benefit pension plan for such purpose. For purposes
of converting the offset to a payment date other than normal retirement age
under the offset plans, actuarial equivalence will be determined based on
the mortality table as described in Code Section 417(e)(3)(A)(ii)(I) and
the annual rate of interest as described in Code Section
417(e)(3)(A)(ii)(II) for the second month preceding the calendar year in
which termination occurs.
(d) (i) If in connection with the termination of Executive's employment
with his Former Employer he is required to repay such Former Employer any
dividends previously paid to Executive in respect of certain restricted shares
of such Former Employer and he does repay such dividends directly or by his
Former Employer's withholding compensation previously vested and deferred but
not paid to Executive ("Repaid Amounts") or if, without duplication of any
Repaid Amount, the Former Employer withholds any other compensation previously
earned but not paid to Executive ("Withheld Amounts"), the Company shall pay to
Executive promptly following Executive's providing the Company with satisfactory
documentation thereof, an amount in cash equal to the sum of any such Repaid
Amounts and Withheld Amounts.
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(ii) In connection with the Repaid Amounts the Company shall also reimburse
Executive, on an after-tax basis, for applicable state, local or federal income
taxes previously paid by Executive in respect of such Repaid Amounts, if any,
net of any tax savings or refunds for which Executive is eligible by reason of
such repayments. The determination of such reimbursement amount shall be made by
Deloitte & Touche LLP and shall be binding on the parties hereto.
Section 2.06. Business Expenses And Relocation. (a) Reasonable travel,
entertainment and other business expenses incurred by Executive in the
performance of his duties hereunder shall be reimbursed by the Company in
accordance with Company policies as in effect from time to time. During the
Employment term Executive shall have access to Company-provided ground and air
transportation, subject to such policies as the Board may establish therefor.
Any tax liability associated with any permitted nonbusiness-related personal use
of such transportation shall be Executive's sole responsibility.
(b) Executive shall be required to relocate to the greater Kansas City
metropolitan area promptly after the Effective Date. After March 31, 2003 and
subject to such relocation, the Company agrees to purchase from Executive his
residence at 0000 Xxxxxxx Xxxxx, Xxxxxxx, XX 00000 at a price equal to the
appraised fair market value of such property as may be agreed by two or more
independent appraisers retained by the Company who are approved by Executive,
which approval shall not be unreasonably withheld. The Company shall be
responsible for the fees thereof and to reimburse Executive for customary
relocation expenses reasonably incurred in such relocation.
ARTICLE 3
Certain Benefits
Section 3.01. Certain Events.
(a) A "Qualifying Event" means the involuntary termination of Executive's
employment by the Company other than (x) for Cause, or (y) by reason of
Executive's death or Disability.
(b) A "Severance Event" means any of the following events: (i) Executive's
voluntary termination of employment for Good Reason, provided the events
constituting Good Reason occur during the Employment Term and within the 24
month period following a Change in Control; or (ii) a Qualifying Event occurring
during such 24-month period.
(c) A "Separation Event" means any of the following events: (i) Executive's
voluntary termination of employment for Constructive Discharge; provided (x) the
event or events constituting a Constructive Discharge occur
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during the Employment Term and other than during the 24-month period beginning
on the date of a Change in Control and (y) such termination occurs within 90
days after the occurrence of an event constituting a Constructive Discharge; or
(ii) a Qualifying Event occurring other than during such 24-month period.
(d) In the event of any termination of employment during the Employment
Term, Executive shall be entitled to receive from the Company, subject to
Section 6.14(c) and to Executive's execution of a release in form and substance
reasonably acceptable to Executive and Company, either the Severance Benefits to
the extent and as described in Section 3.03, the relevant Separation Benefits to
the extent and as described in Section 3.04, or the benefits to the extent and
as described in Section 3.05, as the case may be.
Section 3.02. Treatment of Equity-Based Awards. (a) Notwithstanding the
provisions of the Plans, in the event that a Severance Event occurs during the
Employment Term, the Initial Options, Initial RSUs, Sign-On RSUs, Make Whole
Options and Make Whole RSUs (collectively, "Awards") shall become immediately
vested and nonforfeitable (and to the extent such Awards are options,
exercisable) as of the date of the Severance Event. Subject to Section
6.16(b)(ii), such options shall remain exercisable as provided in connection
with a termination of employment under Section 7.01(h)(iii) of the 1990 Plan
(the "Option Termination Date"). All other equity-based awards made to Executive
during the Employment Term shall be governed by their terms upon such a
termination.
(b) In the event that a Separation Event occurs during the Employment Term,
unvested Awards held by Executive shall become vested and nonforfeitable (and,
to the extent such Awards are options, exercisable) as of the date of such
Event, to the extent determined by multiplying the aggregate number of options
or units, as the case may be, originally covered by such Award by a fraction,
not to exceed 1.0, the numerator of which is the number of whole months during
the period beginning on the Effective Date and ending on the Termination Date
and the denominator of which is the number of months in the vesting period with
respect to such Award and subtracting from such results the number of already
vested options or units, as the case may be, in such Award. To the extent Awards
becoming so vested are options, they shall remain exercisable until the Option
Termination Date. All other equity-based awards made to Executive during the
Employment Term shall be governed by their terms upon such a termination.
Section 3.03. Other Severance Benefits. Except to the extent provided in
Section 6.07 and Section 6.08, Executive shall be entitled to the following
benefits (the "Severance Benefits") upon a Severance Event:
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(a) (i) The Company shall pay Executive as soon as practicable a lump sum,
in cash, equal to Executive's earned but unpaid Base Salary and any other vested
but unpaid cash entitlements for the period through and including the date of
termination of Executive's employment, including unused earned vacation pay and
unreimbursed documented business expenses (collectively, "Accrued
Compensation").
(ii) The Company shall pay to Executive as soon as practicable an
amount in cash equal to the product of (x) the greater of Executive's
target bonus opportunity for the year in which the Change in Control
occurred and the year in which the Severance Event occurs (such greater
amount, the ("CIC Bonus Amount")) times (y) a fraction, the numerator of
which is the number of days in the year of termination through the
Termination Date and the denominator of which is 365.
(iii) In addition, Executive shall be entitled to any other vested
benefits earned by Executive for the period through and including the date
of termination of Executive's employment under any other employee benefit
plans, policies, practices, programs and arrangements maintained by the
Company, in accordance with their terms, except as modified herein
(collectively, "Accrued Benefits").
(b) The Company shall pay Executive as soon as practicable a lump sum
amount in cash equal to three times the sum of the amounts set forth in Clauses
(i) and (ii) below:
(i) Executive's Base Salary at its highest annual rate in effect
during the period beginning immediately prior to the date of the Change in
Control to which such Severance Event relates and ending on the date of
such Severance Event; and
(ii) the CIC Bonus Amount.
(c) For purposes of calculating Executive's Pension Benefit under Section
2.05(c), the Percentage shall be increased by 15%, but in no event to more than
65%. Executive shall also be entitled to continued participation in the
Company's Medical Plans and other welfare benefits plans under the terms thereof
and hereof through and in respect of the period ending on the third anniversary
of the Severance Event (the "Continuation Period").
(d) Except as otherwise provided herein, during the Continuation Period the
Company will provide Executive with all applicable executive perquisites that
Executive was receiving or was entitled to receive on the Termination Date
(including automobile allowance and communications services) other than
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country club membership dues, accrual of vacation and use of Company aircraft
(the "Additional Benefits").
Section 3.04. Other Separation Benefits. (a) Except to the extent provided
in Section 6.07 and Section 6.08, upon a Separation Event Executive shall be
entitled to the benefits set forth below (the "Separation Benefits"):
(i) The Accrued Compensation;
(ii) The Accrued Benefits;
(iii) An amount in cash equal to the product of (x); Executive's
actual annual bonus under the Short-Term Incentive Plan for the year in
which Executive's employment terminates based on the actual performance for
such year, times (y) a fraction, the numerator of which is the number of
days in such year through the Termination Date and the denominator of which
is 365 (the "Pro-Rata Bonus Amount"). The Pro-Rata Bonus Amount shall be
paid to Executive at the time benefits under the Short-Term Incentive Plan
for such year are paid to other participants therein;
(iv) Compensation through the second anniversary of such Separation
Event (the "Payment Period") at an annual rate equal to the sum of (i) the
Base Salary as in effect at the time of such termination and (ii)
Executive's target bonus opportunity under the Short-Term Incentive Plan
for the year in which the Separation Event occurs, payable in equal monthly
installments during the Payment Period in accordance with the applicable
Company payroll system; and
(v) In addition, for purposes of calculating Executive's Pension
Benefit under Section 2.05(c), the Percentage shall be increased by 10%,
but in no event to more than 65%. Executive shall also be entitled to
continued participation in the Company's Medical Plans and other welfare
benefit plans under the terms thereof and hereof in respect of the Payment
Period.
(b) During the Payment Period, except as otherwise provided herein the
Company will provide Executive with the Additional Benefits.
Section 3.05. Other Terminations. Upon termination of Executive's
employment by reason of death or Disability or upon termination of Executive's
employment for Cause, Executive shall be entitled to:
(i) The Accrued Compensation;
(ii) The Accrued Benefits.
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ARTICLE 4
Certain Tax Reimbursement Payments
Section 4.01. Initial Determinations By Accounting Firm. In the event that
a Change in Control or Severance Event occurs such that Executive is entitled to
any payments or benefits related thereto, the Company shall retain a national
accounting firm selected by the Company and reasonably acceptable to Executive
(the "Accounting Firm") to perform the calculations contemplated by this Article
4. The Accounting Firm shall have discretion to retain an independent appraiser
with adequate expertise (the "Appraiser") to provide any valuations necessary
for the Accounting Firm's calculations hereunder. The Company shall pay all the
fees and costs associated with the work performed by the Accounting Firm and any
Appraiser retained by the Accounting Firm. If the Accounting Firm has performed
services for any person, entity or group in connection with the related Change
in Control, Executive may select an alternative national accounting firm to be
the Accounting Firm. If the Appraiser otherwise performs work for any of the
entities involved in the Change in Control or their affiliates (or has performed
work for any such entity within the three years preceding the calculations
hereunder), then Executive may select an alternative appraiser of national
stature with adequate expertise to be the Appraiser. The Accounting Firm shall
provide promptly to both the Company and Executive a written report setting
forth the calculations required under this Agreement, together with a detail of
all relevant supportive data, valuations and calculations. All determinations of
the Accounting Firm shall be binding on Executive and the Company. When making
the calculations required hereunder, Executive shall be deemed to pay: (x)
Federal income taxes at the highest applicable marginal rate of Federal income
taxation for the taxable year for which any such calculation is made; and (y)
any applicable state and local income taxes at the highest applicable marginal
rate of taxation for the taxable year for which any such calculation is made,
net of the maximum reduction in Federal income taxes which could be obtained
from deduction of such state and local taxes.
The Accounting Firm shall determine (the "Initial Determination") the
aggregate amount of all payments, benefits and distributions provided to
Executive or for Executive's benefit, whether paid or payable or distributed or
distributable pursuant to the terms of the Agreement or any other agreement,
plan or arrangement of the Company or otherwise (other than any payment pursuant
to this Article 4) which are in the nature of compensation and contingent upon
such Change in Control (valued pursuant to Section 280G of the Code)
(collectively the "Payments").
Section 4.02. Initial Treatment Of Payments. Executive shall be entitled
to receive the full amount of the Payments and, if the amount of the Payments
exceeds the maximum amount of the Payments Executive would be entitled to
receive without being subject to the excise tax imposed by Section 4999 of the
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Code (such excise tax, together with any interest or penalties with respect to
such excise tax, are hereinafter collectively referred to as the "Excise Tax"),
then the Company shall pay to Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Executive of all taxes
(including any interest and penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. All determinations required to be made as to whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment shall be made by the
Accounting Firm.
Section 4.03. Redeterminations Based On IRS Or Court Ruling. If after the
date of the Initial Determination (A) Executive becomes entitled to receive
additional Payments (including, without limitation, severance) contingent upon
the same Change in Control or (B) Executive becomes subject to the terms of any
final binding agreement between Executive and the Internal Revenue Service or
any decision of a court of competent jurisdiction which is not appealable or for
which the time to appeal has lapsed (a "Final Determination") and which is
contrary to the Initial Determination, then based upon such additional Payments
or such Final Determination (as the case may be), the Accounting Firm shall
recalculate: (i) the aggregate Payments (such recalculated amount, the
"Redetermined Payments"); and (ii) the related excise tax, if any, imposed by
Section 4999 of the Code (such excise tax, together with any interest or
penalties with respect to such excise tax, are hereinafter referred to as the
"Redetermined Excise Tax").
Section 4.04. Reconciliations Based On Redeterminations.
If the aggregate value of the Redetermined Excise Tax exceeds the Excise
Tax, then the Company shall pay to Executive an additional payment (a
"Supplemental Gross-Up Payment") in an amount such that after payment by
Executive of all taxes (including any interest and penalties imposed with
respect to such taxes), including any Redetermined Excise Tax, imposed on the
Supplemental Gross-Up Payment Executive retains an amount of the Supplemental
Gross-Up Payment equal to the Redetermined Excise Tax; provided that if
Executive has previously received a Gross-Up Payment, the amount of the
Supplemental Gross-Up Payment shall be reduced by the amount of the Gross-Up
Payment Executive previously received, so that Executive will be fully
reimbursed, but will not receive duplicative reimbursements. If, however, the
Excise Tax exceeds the Redetermined Excise Tax, the excess Gross-Up Payment that
has been paid to Executive shall be repaid by Executive to the Company.
Notwithstanding the foregoing, in the event any portion of the Gross-Up Payment
to be refunded to the Company has been paid to any Federal, state or local tax
authority, repayment thereof shall not be required until actual refund or credit
of such portion has been made to Executive, and interest payable to the Company
13
shall not exceed interest received or credited to Executive by such tax
authority for the period it held such portion. Executive and the Company shall
mutually agree upon the course of action to be pursued (and the method of
allocating the expenses thereof) if Executive's good faith claim for refund or
credit is denied.
Section 4.05. Procedures With Respect To IRS Claims.
(a) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service relating to any unpaid excise tax applicable to the
Payments. Such notification shall be given as soon as practicable but no later
than twenty business days after Executive knows of such claim and shall apprise
the Company of the nature of such claim, any assessment under such claim and the
date on which such assessment is requested to be paid. Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
(b) If the Company notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax, Redetermined Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing, the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or contest the claim in
any
14
permissible manner, and Executive agree to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall provide the amount of such payment
to Executive and shall indemnify and hold Executive harmless, on an after-tax
basis, from any Excise Tax, Redetermined Excise Tax or income tax, including
interest and penalties with respect thereto, imposed with respect to such
payment or with respect to any imputed income with respect to such payment; and
further provided that any extension of the statue of limitations relating to
payment of taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(c) If after the receipt by Executive of an amount from the Company
pursuant to the foregoing, Executive becomes entitled to receive any refund with
respect to such claim, Executive shall (subject to the Company's complying with
the requirements of above with respect to any contest of an excise tax claim)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon by the taxing authority after deducting any
taxes applicable thereto). If, after the receipt by Executive of an amount from
the Company hereunder, a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to contest such denial of refund prior
to the expiration of thirty days after such determination, then Executive shall
have no obligation to repay such amount and the amount of such payment shall
offset, to the extent thereof, the amount of the Supplemental Gross-Up Payment
required to be paid hereunder and shall be considered part of the Supplemental
Gross-Up Payment and subject to gross-up for any taxes (including interest or
penalties) associated therewith.
ARTICLE 5
Successors And Assignments
Section 5.01. Successors. The Company will require any successor (whether
by reason of a Change in Control, direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform the obligations
under this Agreement in the same manner and to the same extent that
15
the Company would be required to perform it if no such succession had taken
place.
Section 5.02. Assignment By Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If Executive should die or become disabled while any amount is owed
but unpaid to Executive hereunder, all such amounts, unless otherwise provided
herein, shall be paid to Executive's legal guardian or to his devisee, legatee
or other designee, as the case may be, or if there is no such designee, to
Executive's estate. Executive's rights hereunder shall not otherwise be
assignable.
ARTICLE 6
Miscellaneous
Section 6.01. Notices. Any notice required to be delivered hereunder shall
be in writing and shall be addressed
if to the Company, to:
0000 Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx, XX 00000
Fax:
Attn: General Counsel
Copies to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxx
if to Executive, to Executive's last known address as reflected on the
books and records of the Company
Copies to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxx
16
or such other address as such party may hereafter specify for the purpose by
written notice to the other party hereto. Any such notice shall be deemed
received on the date of receipt by the recipient thereof if received prior to
5:00 p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
Section 6.02. Legal Fees And Expenses. The Company shall reimburse
Executive for all reasonable legal and financial counseling fees and expenses
incurred by him in connection with the negotiation and execution of this
Agreement.
Section 6.03. Arbitration. Section 6.12 notwithstanding, all disputes,
claims, or controversies arising under or in connection with this Agreement,
other than those contemplated by Section 6.16, shall be settled exclusively by
binding arbitration pursuant to the Federal Arbitration Act administered by
JAMS/Endispute in the greater Kansas City area in accordance with the then
existing JAMS/Endispute Arbitration Rules and Procedures for Employment
Disputes, except that the parties agree that the arbitrator is not authorized or
empowered to impose punitive damages on either of the parties. If it is
determined that any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced, the arbitrator shall have the authority
to modify the provision or term to the minimum extent required to permit
enforcement. In the event of such an arbitration proceeding, the Administrator
of JAMS/Endispute will appoint the arbitrator.
Section 6.04. Unfunded Agreement. The obligations of the Company under
this Agreement represent an unsecured, unfunded promise to pay benefits to
Executive and/or Executive's beneficiaries, and shall not entitle Executive or
such beneficiaries to a preferential claim to any asset of the Company.
Section 6.05. Non-exclusivity Of Benefits. Unless specifically provided
herein, neither the provisions of this Agreement nor the benefits provided
hereunder shall reduce any amounts otherwise payable, or in any way diminish
Executive's rights as an employee of the Company, whether existing now or
hereafter, under any compensation and/or benefit plans (qualified or
nonqualified), programs, policies, or practices provided by the Company, for
which Executive may qualify; provided, however, that the Separation Benefits and
the Severance Benefits shall be in lieu of any severance benefits under any such
plans, programs, policies or practices.
Section 6.06. Employment Status. Nothing herein contained shall interfere
with the Company's right to terminate Executive's employment with the Company at
any time, with or without Cause, subject to the Company's obligation, if any, to
provide Severance Benefits or Separation Benefits.
17
Executive shall also have the right to terminate his employment with the Company
at any time without liability, subject only to his obligations hereunder.
Section 6.07. Mitigation. (a) In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement nor,
except as provided below, shall the amount of any payment or benefit hereunder
be reduced by any compensation earned by Executive as a result of employment by
another employer.
(b) In the event that, during a Continuation Period or Payment Period, as
the case may be, Executive becomes eligible for health or other welfare benefits
from a new employer which are comparable to and of substantially equivalent
value to Executive's benefits under the Company's Medical Plans or other welfare
plans, Executive's benefits hereunder shall be appropriately reduced or
terminated, in the Company's sole discretion, to the extent of such comparable
benefits available to Executive.
Section 6.08. Entire Agreement. This Agreement represents the entire
agreement between Executive and the Company and its affiliates with respect to
Executive's employment and/or severance rights, and supersedes all prior
discussions, negotiations, and agreements concerning such rights; provided,
however, that any amounts payable to Executive hereunder shall be reduced by any
amounts paid to Executive as required by any applicable local law in connection
with any termination of Executive's employment.
Section 6.09. Tax Withholding. Notwithstanding anything in this Agreement
to the contrary, the Company shall withhold from any amounts payable in
connection with Executive's employment hereunder all federal, state, city, or
other taxes as are legally required to be withheld.
Section 6.10. Waiver Of Rights. The waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed as a
continuing waiver or as a consent to or waiver of any subsequent breach hereof.
Section 6.11. Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Agreement, and the Agreement shall
be construed and enforced as if the illegal or invalid provision had not been
included.
Section 6.12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Kansas without reference
to principles of conflict of laws.
18
Section 6.13. Counterparts. This Agreement may be signed in several
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were on the same instrument.
Section 6.14. General And Special Indemnification, Special Payment. (a) The
Company shall indemnify Executive (and Executive's successors) to the fullest
extent permitted by the Certificate of Incorporation and By-Laws of the Company,
as in effect at the relevant time, and Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain generally
for the benefit of its directors and officers (and to the extent the Company
maintains such an insurance policy or policies, Executive shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any Company officer or director), against
all costs, charges and expenses whatsoever incurred or sustained by Executive in
connection with any action, suit or proceeding to which Executive (or
Executive's successors) may be made a party by reason of Executive's being or
having been a director, officer or employee of the Company, or any Subsidiary or
Executive's serving or having served any other enterprise as a director,
officer, employee or fiduciary at the request of the Company.
(b) The Company shall indemnify Executive (and Executive's successors)
against all costs, charges and expenses whatsoever incurred or sustained by
Executive in connection with any action, suit or proceeding commenced against
Executive by the Former Employer, any Affiliate of the Former Employer or any
Affiliate of any such Affiliate by reason of Executive's entering into this
Agreement or agreeing to become an employee of the Company.
(c) In the event that as of March 31, 2003 Executive's employment hereunder
is terminated or has not taken effect, in either case as a result of any
Restrictions, and Executive is not employed by the Former Employer on March 31,
2003, the Company agrees to pay to Executive a special termination payment of
$2,500,000, subject to the execution of mutual releases, reasonably acceptable
in form and substance to Executive and the Company. Articles 2 and 3 of this
Agreement notwithstanding, in such event the Company shall have no obligation or
liability to Executive under this Agreement or otherwise except as provided in
Sections 2.01 (but only in respect of Executive's actual period of employment
hereunder), 2.05(d)(ii), 6.02, 6.14(b), and this 6.14(c).
Section 6.15. Executive Covenants.
(a) Principles of Business Conduct.
Executive shall adhere in all respects to the Company's Principles of
Business Conduct (or any successor code of conduct) as in effect on the
Effective Date and as they may from time to time be established, amended, or
terminated.
19
(b) Proprietary Information.
Executive acknowledges that during the course of his employment he will
learn or develop Proprietary Information. Executive further acknowledges that
unauthorized disclosure or use of such Proprietary Information, other than in
discharge of Executive's duties, will cause the Company irreparable harm. Except
in the course of his employment with for the Company under this Agreement, in
the pursuit of the business of the Company, or as otherwise required in
employment with the Company, Executive shall not, during the course of his
employment or at any time following termination of his employment, directly or
indirectly, disclose, publish, communicate, or use on his behalf or another's
behalf, any Proprietary Information. If during or after his employment Executive
has any questions about whether particular information is Proprietary
Information he shall consult with the Company's General Counsel.
Executive also agrees to disclose promptly to the Company any information,
ideas, or inventions made or conceived by him that result from or are suggested
by services performed by him for the Company under this Agreement, and to assign
to the Company all rights pertaining to such information, ideas, or inventions.
Knowledge or information of any kind disclosed by Executive to the Company shall
be deemed to have been disclosed without obligation on the part of the Company
to hold the same in confidence, and the Company shall have the full right to use
and disclose such knowledge and information without compensation to Executive
beyond that specifically provided in this Agreement; provided, however, that
this Agreement shall not apply to an invention for which no equipment, supplies,
facility or trade secret information of the Company was used and which was
developed entirely on Executive's own time, unless: (i) the invention relates
directly to the business of the Company or to the Company's actual or
demonstrably anticipated research or development; or (ii) the invention results
from any work performed by Executive for the Company.
(c) Non-Competition.
During Executive's employment with the Company and during the Non-Compete
Period, Executive shall not engage in Competitive Employment, whether paid or
unpaid and whether as a consultant, employee, or otherwise. If Executive ceases
to be employed by the Company as a result of a Severance or Separation Event or
because of the sale, spin-off, divestiture, or other disposition by the Company
of a subsidiary, division, or other divested unit employing Executive, this
provision shall continue to apply during the Non-Compete Period, except that
Executive's continued employment by the subsidiary, division, or other divested
unit disposed of by the Company shall not be deemed a violation of this
provision. Executive agrees that because of the worldwide nature of the
Company's business, breach of this Agreement by accepting Competitive Employment
would irreparably injure the Company and that, therefore, a limited
20
geographic restriction is neither feasible nor appropriate to protect the
Company's interests.
(d) Inducement of Employees, Customers and Others.
During Executive's employment with the Company and during the Non-Compete
Period, Executive may not directly or indirectly solicit, induce, or encourage
any employee, consultant, agent, customer, vendor, or other parties doing
business with the Company to terminate their employment, agency, or other
relationship with the Company or to render services for or transfer business to
any Competitor, and Executive shall not initiate discussion with any such person
for any such purpose or authorize or knowingly cooperate with the taking of any
such actions by any other individual or entity on behalf of the Competitor.
(e) No Adverse Actions.
During the Non-Compete Period, Executive shall not, without the prior
written consent of the Company, in any manner, solicit, request, advise, or
assist any other person or entity to (a) undertake any action that would be
reasonably likely to, or is intended to, result in a Change in Control or (b)
seek to control in any material manner the Board.
(f) Return of Property.
Executive shall, upon his Termination Date, return to the Company all
property of the Company in his possession, including all notes, reports,
sketches, plans, published memoranda or other documents, whether in hard copy or
in electronic form, created, developed, generated, received, or held by
Executive during his employment, concerning or related to the Company's
business, whether containing or relating to Proprietary Information or not.
Executive shall not remove, by e- mail, by removal of computer discs or hard
drives, or by other means, any of the above property containing Proprietary
Information, or reproductions or copies thereof, or any apparatus from the
Company's premises without the Company's written consent.
(g) Mutual Nondisparagement.
Executive agrees to refrain from making any statements about the Company or
its officers or directors that would disparage, or reflect unfavorably upon the
image or reputation of the Company or any such officer or director. The Company
agrees to refrain from making any statements about Executive that would
disparage, or reflect unfavorably upon the image or reputation of Executive.
(h) Assistance with Claims.
21
Executive agrees that, consistent with Executive's business and personal
affairs, during and after his employment by the Company, he will assist the
Company in the defense of any claims or potential claims that may be made or
threatened to be made against it in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (a "Proceeding") and will
assist the Company in the prosecution of any claims that may be made by the
Company in any Proceeding, to the extent that such claims may relate to
Executive's services provided under this Agreement. Executive agrees, unless
precluded by law, to promptly inform the Company if Executive is asked to
participate (or otherwise become involved) in any Proceeding involving such
claims or potential claims. Executive also agrees, unless precluded by law,
promptly to inform the Company if Executive is asked to assist in any
investigation (whether governmental or private) of the Company (or its actions),
regardless of whether a lawsuit has then been filed against the Company with
respect to such investigation. The Company agrees to reimburse Executive for all
of Executive's reasonable out-of-pocket expenses associated with such
assistance, including travel expenses and any attorneys' fees.
Section 6.16. Material Inducement; Specific Performance; Forfeiture.
(a) If any provision of Section 6.15 is determined by a court of competent
jurisdiction not to be enforceable in the manner set forth in this Agreement,
the Company and Executive agree that it is the intention of the parties that
such provision should be enforceable to the maximum extent possible under
applicable law and that such court shall reform such provision to make it
enforceable in accordance with the intent of the parties.
(b) (i) Executive acknowledges that a material part of the inducement for
the Company to provide the salary and benefits evidenced hereby is Executive's
covenants set forth in Section 6.15 and that the covenants and obligations of
Executive with respect to nondisclosure and nonsolicitation relate to special,
unique and extraordinary matters and that a violation of any of the terms of
such covenants and obligations will cause the Company irreparable injury for
which adequate remedies are not available at law. Therefore, Executive agrees
that, if Executive shall materially breach any of those covenants following
termination of employment, the Company shall be entitled to an injunction,
restraining order or such other equitable relief (without the requirement to
post a bond) restraining Executive from committing any violation of the
covenants and obligations contained in Section 6.15 and the Company shall have
no further obligation to pay Executive any benefits otherwise payable hereunder.
The remedies in the preceding sentence are cumulative and are in addition to any
other rights and remedies the Company may have at law or in equity as an
arbitrator (or court) shall reasonably determine.
22
(ii) In the event of Executive's breach of any provision of Section 6.15:
(x) Executive shall have no rights in and the Company shall be under no
obligation to provide the Pension Benefit to Executive; (y) Executive shall have
no right to any Severance or Separation Benefits yet to be paid or provided
hereunder; and (z) all then outstanding Awards shall immediately terminate and
be of no force or effect.
ARTICLE 7
Definitions
For purposes of this Agreement, the following terms shall have the meanings
set forth below.
"Accounting Firm" has the meaning accorded such term in Section 4.01.
"Accrued Benefits" has the meaning accorded such term in Section 3.03.
"Accrued Compensation" has the meaning accorded such term in Section 3.03.
"Additional Benefits" has the meaning accorded such term in Section 3.03.
"Affiliate" and "Associate" have the respective meanings accorded to such
terms in Rule 12b-2 under the Exchange Act as in effect on the Effective Date.
"Agreement" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"Appraiser" has the meaning accorded such term in Section 4.01.
"Awards" has the meaning accorded such term in Section 3.02.
"Base Salary" has the meaning accorded such term in Section 2.01.
"Basic Bonus Amount" has the meaning accorded such term in Section 2.02.
"Beneficial Ownership" A Person shall be deemed the "Beneficial Owner" of,
and shall be deemed to "beneficially own," securities pursuant to Rule 13d-3
under the Exchange Act as in effect on the Effective Date.
"Board" means the Board of Directors of SPRINT.
"Cause" means termination upon (A) the willful and continued failure by
Executive to substantially perform his duties with the Company (other than any
23
such failure resulting from Executive's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
Executive by the Board, which demand specifically identifies the manner in which
the Board believes that Executive has not substantially performed his duties, or
(B) the willful engaging by Executive in conduct that is a serious violation of
the Company's Principles of Business Conduct, or (C) the willful engaging by
Executive in conduct that is demonstrably and materially injurious to the
Company. For purposes of this definition, no act, or failure to act, on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company. Failure to meet
performance expectations, unless willful, continuing, and substantial shall not
be considered "Cause."
"Change in Control" means the occurrence of any of the following events:
(i) the acquisition, directly or indirectly, by any "person" or "group" (as
those terms are used in Sections 13(d), and 14(d) of the Exchange Act including,
without limitation, Rule 13d-5(b)) of "beneficial ownership" (as determined
pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote
generally in the election of directors ("voting securities") of SPRINT that
represent 30% or more of the combined voting power of SPRINT's then outstanding
voting securities, other than
(A) an acquisition by a trustee or other fiduciary holding securities
under any employee benefit plan (or related trust) sponsored or maintained
by SPRINT or any person controlled by SPRINT or by any employee benefit
plan (or related trust) sponsored or maintained by SPRINT or any person
controlled by SPRINT, or
(B) an acquisition of voting securities by SPRINT or a Person owned,
directly or indirectly, by the holders of at least 50% of the voting power
of SPRINT's then outstanding securities in substantially the same
proportions as their ownership of the stock of SPRINT, or
(C) an acquisition of voting securities pursuant to a transaction
described in clause (iii) below that would not be a Change in Control under
clause (iii);
(ii) a change in the composition of the Board that causes less than a
majority of the directors of SPRINT to be directors that meet one or more of the
following descriptions:
(A) a director who has been a director of SPRINT for a continuous
period of at least 24 months, or
24
(B) a director whose election or nomination as director was approved
by a vote of at least two-thirds of the then directors described in clauses
(ii)(A), (B), or (C) by prior nomination or election, but excluding, for
the purpose of this subclause (B), any director whose initial assumption of
office occurred as a result of an actual or threatened (y) election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
or group other than the Board or (z) tender offer, merger, sale of
substantially all of SPRINT's assets, consolidation, reorganization, or
business combination that would be a Change in Control under clause (iii)
on consummation thereof, or
(C) who were serving on the Board as a result of the consummation of a
transaction described in clause (iii) that would not be a Change in Control
under clause (iii);
(iii) the consummation by SPRINT (whether directly involving SPRINT or
indirectly involving SPRINT through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or other
disposition of all or substantially all of SPRINT's assets or (z) the
acquisition of assets or stock of another entity, in each case, other than in a
transaction
(A) that results in SPRINT's voting securities outstanding immediately
before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of SPRINT or the
person that, as a result of the transaction, controls, directly or
indirectly, SPRINT or owns, directly or indirectly, all or substantially
all of SPRINT's assets or otherwise succeeds to the business of SPRINT
(SPRINT or such person, the "Successor Entity")) directly or indirectly, at
least 50% of the combined voting power of the Successor Entity's
outstanding voting securities immediately after the transaction or
(B) after which more than 50% of the members of the board of directors
of the Successor Entity were members of the Board at the time of the
Board's approval of the agreement providing for the transaction or other
action of the Board approving the transaction (or whose election or
nomination was approved by a vote of at least two- thirds of the members
who were members of the Board at that time), and
(C) after which no person or group beneficially owns voting securities
representing 30% or more of the combined voting power of the Successor
Entity; provided, however, no person or group shall be treated for purposes
of this clause (C) as beneficially owning 30% or more of combined voting
power of the Successor Entity solely as a result of the
25
voting power held in SPRINT prior to the consummation of the transaction;
or
(iv) a liquidation or dissolution of SPRINT other than in connection with a
transaction described in (iii) above that would not be a Change in Control
thereunder.
For purposes of clarification, (x) a change in the voting power of SPRINT
voting securities based on the relative trading values of SPRINT's then
outstanding securities as determined pursuant to SPRINT's Articles of
Incorporation or (y) an acquisition of SPRINT securities by SPRINT that, in
either case, by itself (or in combination only with the other event listed in
this sentence) causes the SPRINT voting securities beneficially owned by a
person or group to represent 30% or more of the combined voting power of SPRINT
then outstanding voting securities is not to be treated as an "acquisition" by
any person or group for purposes of clause (i) above. For purposes of clause (i)
above, SPRINT makes the calculation of voting power as if the date of any
relevant acquisition were a record date for a vote of SPRINT's shareholders, and
for purposes of clause (iii) above, SPRINT makes the calculation of voting power
as if the date of the consummation of the transaction were a record date for a
vote of SPRINT's shareholders.
"CIC Bonus Amount" has the meaning accorded such term in Section 3.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Committee" has the meaning accorded such term in Section 2.01.
"Company" has the meaning accorded such term in the introductory paragraph
of this Agreement.
"Compensation" has the meaning accorded such term in Section 2.05.
"Competitive Employment" means the performance of duties or
responsibilities, or the supervision of individuals performing such duties or
responsibilities, for a Competitor (i) that are of a similar nature or employ
similar professional or technical skills (for example, executive, managerial,
marketing, engineering, legal, etc.) to those employed by Executive in his
performance of services for the Company at any time during the two years before
the Termination Date, (ii) that relate to products or services that are
competitive with the Company's products or services with respect to which
Executive performed services for the Company at any time during the two years
before the Termination Date, or (iii) in the performance of which Proprietary
Information to which Executive had access at any time during the two-year period
before Termination
26
Date could be of substantial economic value to the Competitor. Further,
Competitive Employment shall include the ownership of any interest in, the
provision of any financing, management or advisory services to, any connection
with or being a principal, partner or agent of any Competitor; provided that
Executive may passively own less than 1% of the outstanding shares of any
Competitor whose shares are traded in the public market.
Because of the highly competitive, evolving nature of the Company's
industry, the identities of companies in competition with the Company are likely
to change over time. The following tests, while not exclusive indications of
what employment may be competitive, are designed to assist the parties and any
court in evaluating whether particular employment is prohibited under this
Agreement.
"Competitor" means any one or more of the following (i) any Person doing
business in the United States or any of its Divisions employing the Executive if
the Person or its Division receives at least 15% of its gross operating revenues
from providing communications services of any type (for example, voice, data,
including Internet, and video), employing any transmission medium (for example,
wireline, wireless, or any other technology), over any distance (for example,
local, long distance, and distance insensitive services), using any protocol
(for example, circuit switched, or packet-based, such as Internet Protocol), or
services or capabilities ancillary to such communications services (for example,
web hosting and network security services); (ii) any Person doing business in
the United States or its Division employing the Executive if the Person or its
Division receives at least 15% of its gross operating revenue from a line of
business in which the Company receives at least 3% of its operating revenues;
(iii) any Person doing business in the United States, or its Division employing
the Executive, operating for less than 5 years a line of business from which the
Company derives at least 3% of gross operating revenues, notwithstanding such
Person's or Division's lack of substantial revenues in such line of business;
and (iv) any Person doing business in the United States, or its Division
employing Executive, if the Person or its Division receives at least 15% of its
gross operating revenue from a line of business in which the Company has
operated for less than 5 years, notwithstanding the Company's lack of
substantial revenues in such line of business.
For purposes of the foregoing, gross operating revenues of the Company and
such other Person shall be those of the Company or such Person, together with
their Consolidated Affiliates, but those of any Division employing or proposing
to employ Executive shall be on a stand-alone basis, all measured by the most
recent available financial information of both the Company and such other Person
or Division at the time Executive accepts, or proposes to accept, employment
with or to otherwise perform services for such Person. If financial information
is not publicly available or is inadequate for purposes of applying this
27
definition, the burden shall be on Executive to demonstrate that such Person is
not a Competitor.
"Constructive Discharge" means the occurrence of any of the following
circumstances without Executive's prior written consent unless the circumstances
are fully corrected before the Termination Date specified in the notice of
termination given in respect thereof: (i) the removal of Executive from his
position with the Company or Board other than as a result of Executive's being
offered a position of equal or superior scope and responsibility; (ii) a
reduction within any 24-month period (other than an across-the-board reduction
similarly affecting all Senior Officers) of the sum of Executive's Base Salary
and Basic Bonus Amount to an amount that is less than 90% of such sum during the
24- month period; (iii) the Company's requiring that Executive be based anywhere
other than the Kansas City metropolitan area (or any other location to which the
Executive has consented to be relocated), except for required travel on
business; or (iv) Executive's failure to become Chairman of the Board upon the
current Chairman's ceasing to act as Chairman.
"Continuation Period" has the meaning accorded such term in Section 3.03.
"Covered Compensation" has the meaning accorded such term in Section 2.05.
"Disability" means termination of employment under circumstances that would
make an employee eligible to receive benefits under the Company long-term
disability plan.
"Dividend Equivalents" has the meaning accorded such term in the 1997 Plan.
"Division" means any distinct group or unit organized as a segment or
portion of a Person that is devoted to the production, provision, or management
of a common product or service or group of related products or services,
regardless of whether the group is organized as a legally distinct entity.
"Effective Date" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"Employment Term" has the meaning accorded such term in Section 1.02.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Excise Tax" has the meaning accorded such term in Section 4.01.
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"Executive" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"Fair Market Value" has the meaning accorded such term in the 1990 Plan.
"Final Determination" has the meaning accorded such term in Section 4.03.
"FON Common Stock" means the Company's FON Common Stock, Series 1, $2.00
par value per share.
"Former Employer" means BellSouth Corporation.
"Good Reason" means, without the Executive's express written consent, the
occurrence of any of the following circumstances unless such circumstances are
fully corrected prior to the Termination Date specified in the notice of
termination given in respect thereof;
(i) the assignment to Executive of any duties inconsistent with
Executive's status as Chief Executive Officer or Chairman of the Board
of SPRINT or a substantial adverse alteration in the nature or status
of Executive's responsibilities or organizational reporting
relationships from those in effect immediately before the Change in
Control or any downgrading of Executive's title or position from that
in effect immediately before the Change in Control;
(ii) a reduction by the Company in Executive's Base Salary as in effect on
the Effective Date or as the same may be increased from time to time,
except for across-the-board salary reductions similarly affecting all
officers of the Company and all officers of any business entity or
entities in control of the Company;
(iii)the failure by the Company, without Executive's consent, to pay to
Executive any portion of Executive's current compensation within 7
days of the date it is due, except pursuant to an across-the-board
compensation deferral similarly affecting all officers of the Company
and all officers of any business entity or entities in control of the
Company;
(iv) (A) the relocation of the Company's principal executive offices
without Executive's consent to a location outside the metropolitan
area in which such offices are located immediately before the Change
in Control; or (B) the Company's requiring Executive to
29
be based anywhere other than the Company's principal executive offices
except for required travel on the Company's business.
(v) a substantial and involuntary adverse alteration in the physical
conditions under or in which Executive is expected to perform
Executive's duties, other than an alteration similarly affecting all
officers of the Company and all officers of any person in control of
the Company;
(vi) the Company's failure to continue in effect any compensation plan in
which Executive participated immediately before the Change in Control
and that is material to Executive's total compensation, including but
not limited to the Incentive Plans or any substitute plans adopted
before the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made
with respect to the plan, or the Company's failure to continue
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of Executive's
participation relative to other Senior Officers, as existed at the
time of the Change in Control;
(vii)the Company's failure to continue to provide Executive with benefits
substantially similar in the aggregate to those he enjoyed under any
of the Company's employee benefit plans in which Executive was
participating at the time of the Change in Control; the taking of any
action by the Company that would directly or indirectly materially
reduce any of such benefits or deprive Executive of any material
fringe benefit enjoyed by Executive at the time of the Change in
Control; or the failure by the Company to provide Executive with the
number of paid vacation days to which Executive is entitled on the
basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change
in Control; unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
benefits;
(viii) the Company's failure to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in Section 5.01 hereof; or
(ix) the Company's attempt to terminate Executive's employment without
complying with the procedures set forth in Section 1.02; any such
attempt shall not be effective.
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"Gross-Up Payment" has the meaning accorded such term in Section 4.02.
"Initial Determination" has the meaning accorded such term in Section 4.01.
"Initial FON RSUs" has the meaning accorded such term in Section 2.03.
"Initial PCS RSUs" has the meaning accorded such term in Section 2.03.
"Initial RSUs" has the meaning accorded such term in Section 2.03.
"Make Whole FON Options" has the meaning accorded such term in Section
2.04.
"Make Whole FON RSUs" has the meaning accorded such term in Section 2.04.
"Make Whole Options" has the meaning accorded such term in Section 2.04.
"Make Whole PCS Options" has the meaning accorded such term in Section
2.04.
"Make Whole PCS RSUs" has the meaning accorded such term in Section 2.04.
"Make Whole RSUs" has the meaning accorded such term in Section 2.04.
"Medical Plans" means the medical care plans (or any successor medical
plans adopted by the Company) in which Executive participates, as in effect
immediately prior to the relevant event (subject to changes in coverage levels
applicable to all employees generally covered by such Plans).
"1990 Plan" has the meaning accorded such term in Section 2.03.
"1997 Plan" has the meaning accorded such term in Section 2.03.
"Non-Compete Period" means the 24-month period beginning on the Termination
Date. If the Executive breaches or violates any of the covenants or provisions
of this Agreement, the running of the Non-Compete Period shall be tolled during
the period the breach or violation continues.
"Option Termination Date" has the meaning accorded such term in Section
3.02.
"Payment Period" has the meaning accorded such term in Section 3.04.
31
"Payments" has the meaning accorded such term in Section 4.01.
"PCS Common Stock" means the Company's PCS Common Stock, Series 1, $1.00
par value per share.
"Pension Benefit" has the meaning accorded such term in Section 2.05.
"Percentage" has the meaning accorded such term in Section 2.05.
"Person" means an individual, corporation, partnership, association, trust
or any other entity or organization.
"Plans" means the 1990 Plan and the 1997 Plan.
"Proceeding" has the meaning accorded such term in Section 6.15.
"Proprietary Information" means trade secrets (such as customer
information, technical and non- technical data, a formula, pattern, compilation,
program, device, method, technique, drawing, process) and other confidential and
proprietary information concerning the products, processes, or services of the
Company or the Company's affiliates, including but not limited to: computer
programs, unpatented or unpatentable inventions, discoveries or improvements;
marketing, manufacturing, or organizational research and development results and
plans; business and strategic plans; sales forecasts and plans; personnel
information, including the identity of other employees of the Company, their
responsibilities, competence, abilities, and compensation; pricing and financial
information; current and prospective customer lists and information on customers
or their employees; information concerning purchases of major equipment or
property; and information about potential mergers or acquisitions which
information: (i) has not been made known generally to the public (other than as
a result of Executive's breach of this Agreement); and (ii) is useful or of
value to the current or anticipated business, or research or development
activities of the Company or of any customer or supplier of the Company, or
(iii) has been identified to Executive as confidential by the Company, either
orally or in writing.
"Pro-Rata Bonus Amount" has the meaning accorded such term in Section 3.03.
"Qualifying Event" has the meaning accorded such term in Section 3.01.
"Redetermined Excise Tax" has the meaning accorded such term in Section
4.03.
"Redetermined Payments" has the meaning accorded such term in Section 4.03.
32
"Repaid Amounts" has the meaning accorded such term in Section 2.05.
"Restrictions" means any contractual or other restriction which in the sole
discretion of the Company precludes Executive from commencing or, prior to March
31, 2003, continuing employment hereunder.
"Retirement Plan" means the SPRINT Supplemental Executive Retirement Plan
and any successor plans as may be approved for this purpose by the Board or the
Committee, as the case may be.
"Senior Officer" means any person who is an officer of SPRINT within the
meaning of Section 16 of the Exchange Act (or any successor statute or statutes
thereto), and the rules and regulations promulgated thereunder.
"Separation Benefits" has the meaning accorded such term in Section 3.04.
"Separation Event" has the meaning accorded such term in Section 3.01.
"Severance Event" has the meaning accorded such term in Section 3.01.
"Severance Benefits" has the meaning accorded such term in Section 3.03.
"Sign-On FON RSUs" has the meaning accorded such term in Section 2.04.
"Sign-On PCS RSUs" has the meaning accorded such term in Section 2.04.
"Sign-On RSUs" has the meaning accorded such term in Section 2.04.
"Short-Term Incentive Plan" means the Company's Management Incentive Plan
and any other successor plans specifically approved for this purpose by the
Board or the Committee, as the case may be.
"SPRINT" has the meaning accorded such term in the introductory paragraph
of this Agreement.
"Subsidiary" of any Person means any other Person of which securities or
other ownership interests having voting power to elect a majority of the board
of directors or other Persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Successor Entity" has the meaning accorded such term in the definition of
Change in Control.
33
"SUMC" has the meaning accorded such term in the introductory paragraph of
this Agreement.
"Supplemental Gross-up Payment" has the meaning accorded such term in
Section 4.04.
"Termination Date" means (i) in the case of a termination of the
Executive's employment by reason of the Executive's death, the Executive's date
of death, (ii) in the case of a termination of the Executive's employment by
reason of a Constructive Discharge or Good Reason, the date which is thirty (30)
days after the notice of termination is given, (iii) in the case of either
party's delivery of a notice of non-renewal under Section 1.02, the last day of
the Employment Term, and (iv) in all other cases including, without limitation,
Disability, the date of any notice of termination or the date, if any, on which
the notice declares itself to be effective (but in no event later than the 60th
day after the date on which such notice is given).
"voting securities" has the meaning accorded such term in the definition of
Change in Control.
"Withheld Amounts" has the meaning accorded such term in Section 2.05.
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IN WITNESS WHEREOF, the Company and Executive have executed this Agreement,
to be effective as set forth in Section 1.01.
SPRINT CORPORATION
/s/ Xxxx X. Xxxxxx By: /s/ J. Xxxxxxx Xxxxxx
Xxxx X. Xxxxxx Name: J. Xxxxxxx Xxxxxx
3/19/03 Title: EVP-General Counsel & External Affairs
SPRINT/UNITED MANAGEMENT
COMPANY
By: /s/ J. Xxxxxxx Xxxxxx
Name: J. Xxxxxxx Xxxxxx
Title: EVP-General Counsel & External Affairs
35
EXHIBIT A
Board Member - GoodYear Tire & Rubber Co.
Chair-National Board of Trustee - March of Dimes
University of Missouri - Rolla Engineering School Advisory Council
36