-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S0I8RBBe4i1d7x4O4/EN2Jq96iBBvdIqCcMvOA6I4HTOIo5f5BdbmRDuTBnIJqLC MwOdls0OXPZ72guv2QQ99w== 0000101830-03-000015.txt : 20030514 0000101830-03-000015.hdr.sgml : 20030514 20030514113833 ACCESSION NUMBER: 0000101830-03-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRINT CORP CENTRAL INDEX KEY: 0000101830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 480457967 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04721 FILM NUMBER: 03697476 BUSINESS ADDRESS: STREET 1: PO BOX 11315 CITY: KANSAS CITY STATE: MO ZIP: 64112 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: PO BOX 11315 CITY: KANSAS CITY STATE: MO ZIP: 64112 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TELECOMMUNICATIONS INC DATE OF NAME CHANGE: 19920316 FORMER COMPANY: FORMER CONFORMED NAME: UNITED UTILITIES INC DATE OF NAME CHANGE: 19731011 10-Q 1 spr10q_1q03.txt SPRINT CORPORATION 1Q03 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 ---------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ----------------------- Commission file number 1-04721 -------------------------------------------------------- SPRINT CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) KANSAS 48-0457967 - ---------------------------------------- --------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) P.O. Box 11315, Kansas City, Missouri 64112 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (913) 624-3000 ------------------------------ - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file these reports), and (2) has been subject to these filing requirements for the past 90 days. Yes X No ---------- --------- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No ---------- --------- COMMON SHARES OUTSTANDING AT APRIL 30, 2003: FON COMMON STOCK 899,064,109 PCS COMMON STOCK: Series 1 769,628,142 Series 2 253,787,745 CLASS A COMMON STOCK 43,118,018
TABLE OF CONTENTS Page Reference Part I - Financial Information Item 1. Financial Statements Consolidated Financial Statements (including Consolidating Information) Consolidated Statements of Operations 1 Consolidated Statements of Comprehensive Income (Loss) 3 Consolidated Balance Sheets 5 Consolidated Statements of Cash Flows 9 Consolidated Statement of Shareholders' Equity 11 Condensed Notes to Consolidated Financial Statements 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 3. Quantitative and Qualitative Disclosures about Market Risk 44 Item 4. Controls and Procedures 45 Part II - Other Information Item 1. Legal Proceedings 46 Item 2. Changes in Securities 46 Item 3. Defaults Upon Senior Securities 47 Item 4. Submission of Matters to a Vote of Security Holders 47 Item 5. Other Information 47 Item 6. Exhibits and Reports on Form 8-K 48 Signature 51 Certifications 52
Part I. Item 1. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Sprint Corporation ------------------------------- (millions, except per share data) Consolidated - --------------------------------------------- --- ------------- -- -------------- -- ------------------------------- Quarters Ended March 31, 2003 2002 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net Operating Revenues $ 6,339 $ 6,637 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Operating Expenses Costs of services and products 2,839 3,170 Selling, general and administrative 1,650 1,755 Depreciation 1,236 1,170 Amortization - 1 Restructuring and asset impairments 10 23 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Total operating expenses 5,735 6,119 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Operating Income 604 518 Interest expense (366) (313) Intergroup interest charge - - Premium on early retirement of debt (19) - Other income (expense), net (61) (31) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Income (loss) from continuing operations before income taxes 158 174 Income tax (expense) benefit (61) (74) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Income (Loss) from Continuing Operations 97 100 Discontinued operation, net 1,313 40 Cumulative effect of change in accounting principle, net 258 - - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net Income (Loss) 1,668 140 Preferred stock dividends (paid) received (2) (2) - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Earnings (Loss) Applicable to Common Stock $ 1,666 $ 138 -- ------------- --- ------------- Diluted Earnings (Loss) per Common Share Continuing operations Discontinued operation Cumulative effect of change in accounting principle, net - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total Diluted weighted average common shares Basic Earnings (Loss) per Common Share Continuing operations Discontinued operation Cumulative effect of change in accounting principle, net - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total Basic weighted average common shares DIVIDENDS PER COMMON SHARE See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). Eliminations/Reclassifications Sprint FON Group Sprint PCS Group - ------------------------------------- ---------------------------------- ---------------------------------- 2003 2002 2003 2002 2003 2002 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ (189) $ (115) $ 3,581 $ 3,904 $ 2,947 $ 2,848 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- (189) (115) 1,580 1,882 1,448 1,403 (10) (8) 919 981 741 782 - - 628 644 608 526 - - - - - 1 - - - - 10 23 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- (199) (123) 3,127 3,507 2,807 2,735 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- 10 8 454 397 140 113 - - (65) (79) (301) (234) - - 82 81 (82) (81) - - (19) - - - (10) (8) (4) 2 (47) (25) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 448 401 (290) (227) - - (169) (155) 108 81 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 279 246 (182) (146) - - 1,313 40 - - - - 258 - - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 1,850 286 (182) (146) - - 2 2 (4) (4) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ - $ - $ 1,852 $ 288 $ (186) $ (150) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ 0.31 $ 0.27 $ (0.18) $ (0.15) 1.46 0.05 - - 0.29 - - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ 2.06 $ 0.32 $ (0.18) $ (0.15) --- ------------- -- ------------- -- ------------- --- ------------- 899.5 891.5 1,022.1 1,009.9 --- ------------- -- ------------- -- ------------- --- ------------- $ 0.31 $ 0.27 $ (0.18) $ (0.15) 1.47 0.05 - - 0.29 - - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ 2.07 $ 0.32 $ (0.18) $ (0.15) --- ------------- -- ------------- -- ------------- --- ------------- 896.6 889.6 1,022.1 1,009.9 --- ------------- -- ------------- -- ------------- --- ------------- $ 0.125 $ 0.125 $ - $ - --- ------------- -- ------------- -- ------------- --- -------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Sprint Corporation ------------------------------- (millions) Consolidated - --------------------------------------------- ----------------- ----------------- -- ------------- --- ------------- Quarters Ended March 31 2003 2002 - --------------------------------------------- ----------------- ----------------- -- ------------- --- ------------- Net Income (Loss) $ 1,668 $ 140 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Other Comprehensive Income (Loss) Unrealized holding losses on securities (1) (6) Income tax benefit - 5 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Net unrealized holding losses on securities during the period (1) (1) Reclassification adjustment for gains on securities included in net income (loss) (1) - Income tax expense 1 - - ------------------------------------------------- ------------- -- -------------- -- ------------- --- ------------- Net reclassification adjustment for gains included in net income - - Foreign currency translation adjustments 2 (3) Unrealized gains (losses) on qualifying cash flow hedges (2) 8 Income tax benefit 1 2 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Net unrealized holding gains (losses) on qualifying cash flow hedges during the period (1) 10 - --------------------------------------------------------------- -- -------------- -- ------------- --- ------------- Total other comprehensive income (loss) - 6 - --------------------------------------------- --- ------------- -- -------------- -- ------------- --- ------------- Comprehensive Income (Loss) $ 1,668 $ 146 -- ------------- --- ------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). Eliminations/Reclassifications Sprint FON Group Sprint PCS Group - ------------------------------------- ------------------------------- -- ---------------------------------- 2003 2002 2003 2002 2002 2001 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ - $ - $ 1,850 $ 286 $ (182) $ (146) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (1) (6) - - - - - 5 - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (1) (1) - - - - (1) - - - - - 1 - - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - - - - - - - 2 (2) - (1) - - (2) 8 - - - - 1 2 - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (1) 10 - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - - 7 - (1) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ - $ - $ 1,850 $ 293 $ (182) $ (147) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- -------------
CONSOLIDATED BALANCE SHEETS Sprint Corporation ----------------------------------- (millions) Consolidated - ------------------------------------------------------------------------------------------------------------------------- March 31, December 31, 2003 2002 - ------------------------------------------------------------------------------------------------------------------------- (Unaudited) Assets Current assets Cash and equivalents $ 2,095 $ 1,035 Accounts receivable, net of consolidated allowance for doubtful accounts of $331 and $414 2,813 2,951 Inventories 750 682 Deferred tax asset - 806 Current tax benefit receivable from the FON Group - - Prepaid expenses 411 360 Intergroup receivable - - Intergroup debt receivable - - Other 236 244 - ------------------------------------------------------------------------------------------------------------------------- Total current assets 6,305 6,078 Assets of discontinued operation - 391 Property, plant and equipment FON Group 35,293 35,055 PCS Group 17,152 16,978 - ------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment 52,445 52,033 Accumulated depreciation (23,992) (23,288) - ------------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 28,453 28,745 Investments in and advances to affiliates 55 73 Intangibles Goodwill 4,401 4,401 Spectrum licenses 4,617 4,620 Other intangibles 28 26 - ------------------------------------------------------------------------------------------------------------------------- Total intangibles 9,046 9,047 Accumulated amortization (3) (2) - ------------------------------------------------------------------------------------------------------------------------- Net intangibles 9,043 9,045 Intergroup debt receivable - - Other assets 909 961 - ------------------------------------------------------------------------------------------------------------------------- Total $ 44,765 $ 45,293 ----------------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). Eliminations/Reclassifications Sprint FON Group Sprint PCS Group - ------------------------------------- ----------------------------------- ----------------------------------- March 31, December 31, March 31, December 31, March 31, December 31, 2003 2002 2003 2002 2003 2002 - ------------------------------------- ----------------------------------- ----------------------------------- (Unaudited) (Unaudited) (Unaudited) $ - $ - $ 1,638 $ 641 $ 457 $ 394 - - 1,614 1,650 1,199 1,301 - - 214 219 536 463 - - - 42 - 764 (760) - - - 760 - - - 220 215 191 145 (592) (536) 592 536 - - (36) - 36 - - - - - 123 114 113 130 - ---------------------------------------- ------------------------------- ----------------------------------- (1,388) (536) 4,437 3,417 3,256 3,197 - - - 391 - - - - 35,293 35,055 - - - - - - 17,152 16,978 - ------------------------------------- ----------------------------------- ----------------------------------- - - 35,293 35,055 17,152 16,978 (46) (46) (18,265) (18,161) (5,681) (5,081) - ------------------------------------- ----------------------------------- ----------------------------------- (46) (46) 17,028 16,894 11,471 11,897 (279) (280) 252 252 82 101 - - 27 27 4,374 4,374 - - 1,520 1,520 3,097 3,100 - - 25 24 3 2 - ------------------------------------- ----------------------------------- ----------------------------------- - - 1,572 1,571 7,474 7,476 - - (3) (2) - - - ------------------------------------- ----------------------------------- ----------------------------------- - - 1,569 1,569 7,474 7,476 (1,041) (406) 1,041 406 - - - - 566 610 343 351 - ------------------------------------- ----------------------------------- ----------------------------------- $ (2,754) $ (1,268) $ 24,893 $ 23,539 $ 22,626 $ 23,022 - ------------------------------------- ----------------------------------- -----------------------------------
CONSOLIDATED BALANCE SHEETS (continued) Sprint Corporation ----------------------------------- (millions, except per share data) Consolidated - ------------------------------------------------------------------------------------------------------------------------- March 31, December 31, 2003 2002 - ------------------------------------------------------------------------------------------------------------------------- (Unaudited) Liabilities and Shareholders' Equity Current liabilities Short-term borrowings and current maturities of long-term debt $ 987 $ 1,887 Current maturities of intergroup debt - - Accounts payable 1,917 2,151 Accrued interconnection costs 628 626 Accrued taxes 258 358 Advance billings 525 510 Accrued restructuring costs 216 277 Payroll and employee benefits 451 579 Accrued interest 361 416 Intergroup payable - - Other 1,068 1,004 - ------------------------------------------------------------------------------------------------------------------------- Total current liabilities 6,411 7,808 Liabilities of discontinued operation Current tax benefit payable to the PCS Group - - Other - 299 Noncurrent liabilities Long-term debt and capital lease obligations 17,753 18,405 Intergroup debt - - Equity unit notes 1,725 1,725 Deferred income taxes 2,117 2,025 Postretirement and other benefit obligations 1,750 1,712 Other 874 769 - ------------------------------------------------------------------------------------------------------------------------- Total noncurrent liabilities 24,219 24,636 Redeemable preferred stock 247 256 Shareholders' equity Common stock Class A FT, par value $0.00 per share and $0.50 per share, 100.0 shares authorized, 43.1 shares issued and outstanding - 22 FON, par value $2.00 per share, 4,200.0 shares authorized, 897.9 and 895.1 shares issued and outstanding 1,796 1,790 PCS, par value $1.00 per share, 4,600.0 shares authorized, 1,022.9 and 999.8 shares issued and outstanding 1,023 1,000 Capital in excess of par or stated value 9,961 9,931 Retained earnings 1,809 252 Accumulated other comprehensive loss (701) (701) Combined attributed net assets - - - ------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 13,888 12,294 - ------------------------------------------------------------------------------------------------------------------------- Total $ 44,765 $ 45,293 ----------------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). Eliminations/Reclassifications Sprint FON Group Sprint PCS Group - ------------------------------------ ----------------------------------- ----------------------------------- March 31, December 31, March 31, December 31, March 31, December 31, 2003 2002 2003 2002 2003 2002 - ------------------------------------ ----------------------------------- ----------------------------------- (Unaudited) (Unaudited) (Unaudited) $ - $ - $ 371 $ 1,234 $ 616 $ 653 (36) - - - 36 - - - 675 808 1,242 1,343 - - 618 614 10 12 (60) - 208 122 110 236 - - 230 232 295 278 - - 209 251 7 26 - - 373 488 78 91 - - 100 116 261 300 (592) (536) - - 592 536 (46) (46) 586 545 528 505 - ------------------------------------ ----------------------------------- ----------------------------------- (734) (582) 3,370 4,410 3,775 3,980 (700) - 700 - - - - - - 299 - - - - 3,144 3,142 14,609 15,263 (1,041) (406) - - 1,041 406 - - - - 1,725 1,725 - - 2,026 1,825 91 200 - - 1,715 1,677 35 35 - - 351 362 523 407 - ------------------------------------ ----------------------------------- ----------------------------------- (1,041) (406) 7,236 7,006 18,024 18,036 (279) (280) - 10 526 526 - 22 - - - - 1,796 1,790 - - - - 1,023 1,000 - - - - 9,961 9,931 - - - - 1,809 252 - - - - (701) (701) - - - - (13,888) (12,294) 13,587 11,814 301 480 - ------------------------------------ ----------------------------------- ----------------------------------- - - - - - - - ------------------------------------ ----------------------------------- ----------------------------------- $ (2,754) $ (1,268) $ 24,893 $ 23,539 $ 22,626 $ 23,022 - ------------------------------------ ----------------------------------- -----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (millions) Sprint Corporation ---------------------------------- Consolidated - ------------------------------------------------------------------ ----------------- ----------------- ---------------- Quarters Ended March 31, 2003 2002 - ------------------------------------------------------------------ ----------------- ----------------- ---------------- Operating Activities Net income (loss) $ 1,668 $ 140 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Discontinued operation, net (1,313) (40) Cumulative effect of change in accounting principle, net (258) - Equity in net losses of affiliates 18 20 Depreciation and amortization 1,236 1,171 Deferred income taxes 736 498 Net losses on write-down of assets 10 11 Changes in assets and liabilities: Accounts receivable, net 138 66 Inventories and other current assets (107) (474) Accounts payable and other current liabilities (1,315) (776) Affiliate receivables and payables, net - - Noncurrent assets and liabilities, net 200 (47) Other, net 45 6 - ------------------------------------------------------------------------------------ --- ------------- -- ------------- Net cash provided by operating activities of continuing operations 1,058 575 - ------------------------------------------------------------------------------------ --- ------------- -- ------------- Investing Activities Capital expenditures (547) (1,146) Investments in and loans to other affiliates, net (12) (8) Net proceeds from sales of assets 3 3 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Net cash used by investing activities of continuing operations (556) (1,151) - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Financing Activities Proceeds from debt - 5,704 Payments on debt (1,555) (3,219) Proceeds from common stock issued 2 1 Dividends paid (114) (114) Other, net 10 (3) - ------------------------------------------------------------------------------------ --- ------------- -- ------------- Net cash provided (used) by financing activities of continuing operations (1,657) 2,369 - ------------------------------------------------------------------------------------ --- ------------- -- ------------- - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Cash from discontinued operations 2,215 60 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Increase in Cash and Equivalents 1,060 1,853 Cash and Equivalents at Beginning of Period 1,035 313 - ------------------------------------------------------------------ --- ------------- --- ------------- -- ------------- Cash and Equivalents at End of Period $ 2,095 $ 2,166 --- ------------- -- ------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). Eliminations/Reclassifications Sprint FON Group Sprint PCS Group - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- 2003 2002 2003 2002 2003 2002 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ - $ - $ 1,850 $ 286 $ (182) $ (146) - - (1,313) (40) - - - - (258) - - - - - (1) (1) 19 21 - - 628 644 608 527 - - 81 131 655 367 - - - 10 10 1 - - 36 72 102 (6) 760 447 (5) (409) (862) (512) (760) (447) (308) (341) (247) 12 - - (43) 121 43 (121) - - 83 (62) 117 15 - - 22 - 23 6 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 772 411 286 164 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (360) (543) (187) (603) - - - (8) (12) - - - 3 3 - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (357) (548) (199) (603) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - - 968 - 4,736 - - (1,534) (483) (21) (2,736) - - 2 - - 1 - - (110) (110) (4) (4) - - 9 2 1 (5) - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - (1,633) 377 (24) 1,992 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 2,215 60 - - - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- - - 997 300 63 1,553 - - 641 134 394 179 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- ------------- $ - $ - $ 1,638 $ 434 $ 457 $ 1,732 - ----- ------------- --- ------------- --- ------------- -- ------------- -- ------------- --- -------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) Sprint Corporation (millions) Quarter Ended March 31, 2003 - ---------------------------------------------------------------------------------------------------------------- Capital in FON PCS Excess of Class A FT Common Common Par or Stated Common Stock Stock Stock Value - ---------------------------------------------------------------------------------------------------------------- Beginning 2003 balance $ 22 $ 1,790 $ 1,000 $ 9,931 Net income (loss) - - - - FON common stock dividends - - - - PCS preferred stock dividends - - - (2) Conversion of PCS common stock underlying Class A common stock (22) - 22 - FON Series 1 common stock issued - 6 - 27 PCS Series 1 common stock issued - - 1 5 Other, net - - - - - ---------------------------------------------------------------------------------------------------------------- March 2003 balance $ - $ 1,796 $ 1,023 $ 9,961 ------------------------------------------------------------------ Shares Outstanding - ------------------------------------------------------------------------------------------------ Beginning 2003 balance 43.1 895.1 999.8 FON Series 1 common stock issued - 2.8 - PCS Series 1 common stock issued - - 1.5 Conversion of Class A FT - - 21.6 - ------------------------------------------------------------------------------------------------ March 2003 balance 43.1 897.9 1,022.9 -------------------------------------------------- See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited). - ------------------------------------------------------------------------------------ Accumulated Other Retained Comprehensive Consolidated Combined Attributed Net Assets Earnings Loss Total Sprint FON Group Sprint PCS Group - ------------------------------------------------------------------------------------ $ 252 $ (701) $ 12,294 $ 11,814 $ 480 1,668 - 1,668 1,850 (182) (112) - (112) (112) - - - (2) 2 (4) - - - - - - - 33 33 - - - 6 - 6 1 - 1 - 1 - ------------------------------------------------------------------------------------ $ 1,809 $ (701) $ 13,888 $ 13,587 $ 301 - ------------------------------------------------------------------------------------
PART I. Item 1. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Sprint Corporation - -------------------------------------------------------------------------------- The information in this Form 10-Q has been prepared according to Securities and Exchange Commission (SEC) rules and regulations. In our opinion, the consolidated interim financial statements reflect all adjustments, consisting only of normal recurring accruals, needed to fairly present Sprint Corporation's consolidated financial position, results of operations, cash flows and comprehensive income (loss). Certain information and footnote disclosures normally included in consolidated financial statements prepared according to accounting principles generally accepted in the United States have been condensed or omitted. As a result, you should read these financial statements along with Sprint Corporation's 2002 Form 10-K. Operating results for the 2003 year-to-date period do not necessarily represent the results that may be expected for the year ending December 31, 2003. - -------------------------------------------------------------------------------- 1. Basis of Consolidation and Presentation - -------------------------------------------------------------------------------- Tracking Stock FON common stock and PCS common stock are intended to reflect the financial results and economic value of the FON and PCS Groups. However, they are classes of common stock of Sprint, not of the group they are intended to track. Accordingly, FON and PCS shareholders are subject to the risks related to an equity investment in Sprint and all of Sprint's businesses, assets and liabilities. Shares of FON common stock and PCS common stock do not represent a direct legal interest in the assets and liabilities allocated to either group, but rather represent a direct equity interest in our assets and liabilities as a whole. Board Discretion Regarding Tracking Stocks Sprint's Board has the discretion to, among other things, make operating and financial decisions that could favor one group over the other and, subject to the restrictions in Sprint's articles of incorporation, to change the allocation of the assets and liabilities that comprise each of the FON Group and the PCS Group without shareholder approval. Under the applicable corporate law, Sprint's Board owes its fiduciary duties to all of Sprint's shareholders and there is no Board of Directors that owes separate duties to the holders of either the FON common stock or the PCS common stock. The Tracking Stock Policies provide that the Board, in resolving material matters in which the holders of FON common stock and PCS common stock have potentially divergent interests, will act in the best interests of Sprint and all of its common shareholders after giving fair consideration to the potentially divergent interests of the holders of the separate classes of Sprint common stock. These policies may be changed by the Board without shareholder approval. Given the Board's discretion in these matters, it may be difficult to assess the future prospects of each group based on past performance. Consolidation and Comparative Presentation The consolidated financial statements include the accounts of Sprint, its wholly owned subsidiaries and subsidiaries it controls. Investments in entities in which Sprint exercises significant influence, but does not control, are accounted for using the equity method (see Note 2). The consolidated financial statements are prepared using accounting principles generally accepted in the United States. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no effect on the results of operations or shareholders' equity as previously reported. Intergroup Transactions The PCS Group uses the long distance operation of the FON Group as its interexchange carrier and purchases wholesale long distance for resale to its customers. Additionally, the FON Group provides the PCS Group with Caller ID services and various other goods and services. Also included in these amounts are goods capitalized by the PCS Group. Charges to the PCS Group for these items totaled $187 million and $148 million in the 2003 and 2002 first quarters, respectively. The intercompany profit on capitalized charges totaled $1 million in the 2003 first quarter and $3 million in the same period last year. The service charges less capitalized charges are included in the FON Group's net operating revenues and in the PCS Group's costs of services and products. The PCS Group provides the FON Group with access to its network and telemarketing and various other services. Charges to the FON Group for these items totaled $3 million in the 2003 first quarter. In the 2002 first quarter, the PCS Group credited the FON Group for $30 million. This credit was primarily related to proceedings initiated by the Federal Communications Commission (FCC) in 2001 to consider a number of issues regarding compensation arrangements between carriers that exchange local and long distance traffic, including the issue of whether wireless carriers should be allowed to charge long distance carriers for terminating long distance calls to their wireless customers. The FON Group charges the PCS Group a return on investment or capital carrying charge for the use of corporate owned capital assets. Charges to the PCS Group for this item totaled $10 million and $8 million in the 2003 and 2002 first quarters, respectively. These amounts are included in the FON Group's other income and the PCS Group's operating expenses. Allocation of Shared Services Sprint directly assigns, where possible, certain general and administrative costs to the FON Group and the PCS Group based on their actual use of those services. Where direct assignment of costs is not possible, or practical, Sprint uses other indirect methods, including time studies, to estimate the allocation of costs to each group. Cost allocation methods other than time studies include factors (general, marketing or headcount) derived from the operating unit's relative share of the predefined category referenced (e.g. headcount). Sprint believes that the costs allocated are comparable to the costs that would be incurred if the groups had been operating on a stand-alone basis. The FON Group provides facilities, information services and certain other services to the PCS Group. Charges to the PCS Group for these services totaled $111 million and $56 million in the 2003 and 2002 first quarters, respectively. This increase primarily reflects the transition of the PCS Group to shared facilities managed by the FON Group. Previously the PCS Group had separate facilities, and thus a direct cost. Also included in these amounts are charges that were capitalized by the PCS Group. These capitalized charges totaled $5 million and $2 million in the 2003 and 2002 first quarters, respectively. The service charges less capitalized charges are included in the PCS Group's operating expenses. Costs for shared services totaled approximately $121 million and $123 million in the 2003 and 2002 first quarters, respectively. The percentage of these costs allocated to the PCS Group were approximately 30% and 27% in the 2003 and 2002 first quarters, respectively, with the balance remaining in the FON Group. The allocation of shared services may change at the discretion of Sprint's Board and does not require shareholder approval. Allocation of Group Financing Financing activities for the groups are managed by Sprint on a centralized basis. Debt incurred by Sprint on behalf of the groups is specifically allocated to and reflected in the financial statements of the applicable group. If the group to which the debt has been allocated does not provide the funds when Sprint subsequently repays all or a part of the debt, the allocated debt is reported as intergroup debt. With certain external borrowings in 1998, the FON Group extended the PCS Group longer repayment terms than the external borrowings. Interest expense is allocated to the PCS Group based on an interest rate that is substantially equal to the rate it would be able to obtain from third parties as a wholly owned Sprint subsidiary, but without the benefit of any guarantee by Sprint or any member of the FON Group. That interest rate is higher than the rate Sprint obtains on borrowings. The difference between Sprint's actual interest rate and the rate charged to the PCS Group is reflected as a reduction in the FON Group's interest expense and totaled $82 million and $81 million in the 2003 and 2002 first quarters, respectively. These amounts are reflected in the "Intergroup interest charge" on the Consolidated Statements of Operations. Under Sprint's centralized cash management program, one group may advance funds to the other group. These advances are accounted for as short-term borrowings between the groups and bear interest at a market rate that is substantially equal to the rate that group would be able to obtain from third parties on a short-term basis. The allocation of group financing activities may change at the discretion of Sprint's Board and does not require shareholder approval. Allocation of Federal and State Income Taxes Sprint files a consolidated federal income tax return and certain state income tax returns which include FON Group and PCS Group results. Sprint adopted a tax sharing agreement which provides for the allocation of income taxes between the two groups. The FON Group's income taxes are calculated as if it files returns which exclude the PCS Group. The PCS Group's income taxes reflect the PCS Group's incremental cumulative impact on Sprint's consolidated income taxes. Intergroup tax payments are satisfied on the date Sprint's related tax payment is due to or the refund is received from the applicable tax authority. - -------------------------------------------------------------------------------- 2. Investments - -------------------------------------------------------------------------------- Investments in Securities The cost of investments in marketable securities, which is included in "Other assets" on the balance sheets, was $95 million at the end of March 2003 and at December 31, 2002. Accumulated unrealized holding losses were $4 million, gross and $3 million, net of income taxes, and accumulated unrealized holding gains were $4 million, gross and $2 million, net of income taxes, at the end of March 2003. Comparatively, as of December 31, 2002, the accumulated unrealized holding losses were $20 million, gross and $12 million, net of income taxes, and accumulated unrealized holding gains were $10 million, gross and $6 million, net of income taxes, at year-end 2002. Both gains and losses are included in "Accumulated other comprehensive loss" in the Sprint Consolidated Balance Sheets. Sprint's cost method investment in EarthLink preferred shares, which is also included in "Other assets" on the Consolidated Balance Sheet, was $116 million at the end of March 2003 and December 2002. Investments in and Advances to Affiliates At the end of March 2003, investments accounted for using the equity method consisted primarily of the PCS Group's investment in Virgin Mobile, U.S.A. At the end of March 2002, investments accounted for using the equity method consisted primarily of the PCS Group's investment in Pegaso Telecomunicaciones, S.A. de C.V. (Pegaso), SVC BidCo L.P., and Virgin Mobile, USA. During 2002, the PCS Group's investment in BidCo was dissolved. In the third quarter of 2002, the PCS Group sold its investment in Pegaso to Telefonica Moviles. Combined, unaudited, summarized financial information (100% basis) of entities accounted for using the equity method was as follows:
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) Results of operations Net operating revenues $ 231 $ 267 ---------------------------------- Operating loss $ (14) $ (30) ---------------------------------- Net loss $ (31) $ (167) ---------------------------------- Equity in net losses of affiliates $ (18) $ (20) ----------------------------------
- -------------------------------------------------------------------------------- 3. Asset Retirement Obligations - -------------------------------------------------------------------------------- Sprint adopted Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations, on January 1, 2003. This standard provides accounting guidance for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction or development and (or) normal operation of that asset. According to the standard, the fair value of an asset retirement obligation (ARO liability) should be recognized in the period in which (1) a legal obligation to retire a long-lived asset exists and (2) the fair value of the obligation based on retirement cost and settlement date is reasonably estimable. Upon initial recognition of the ARO liability, the related asset retirement cost should be capitalized by increasing the carrying amount of the related long-lived asset. Sprint's network is primarily located on leased property. In the FON Group, a majority of the leased property has no requirement for remediation at retirement. The remainder of the FON Group's leased property and predominately all of the PCS Group's leased property do have remediation requirements. However, these leases do not have termination date certainty, and Sprint expects to maintain the property as a necessary component of infrastructure required to maintain FCC licensing. For that reason, Sprint is unable to estimate the remediation liability. Therefore, Sprint's obligations do not meet the ARO liability recognition criteria established in the standard at this time. While adoption of SFAS No. 143 did not result in the recognition of asset retirement obligations, adoption of this standard did affect cost of removal historically recorded by the FON Group's local division. Consistent with regulatory requirements and industry practice, the local division historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an ARO liability. Upon adoption of SFAS No. 143, the FON Group recorded a reduction in its historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the Consolidated Statements of Operations of $258 million. The annual impact of this accounting change on income from continuing operations is an expected decrease to the FON Group's 2003 depreciation expense of approximately $40 million and an increase to 2003 expenses incurred for removal costs of approximately $20 million recognized ratably over the year.
Sprint FON Group Quarters Ended March 31, -- ----------- -- ------------ 2003 2002 ---------------------------------------------------------------------- -- ----------- -- ------------ (millions) Net income, as reported $ 1,850 $ 286 Deduct: Cumulative effect of change in accounting principle, net of related tax effects (258) - Add: Historically accrued cost of removal included in depreciation reserves, less cash removal expenses, net of related tax effects - 3 ---------------------------------------------------------------------- -- ----------- -- ------------ Pro forma net income $ 1,592 $ 289 -- ----------- -- ------------
- -------------------------------------------------------------------------------- 4. Income Taxes - -------------------------------------------------------------------------------- The differences that caused Sprint's effective income tax rates to vary from the 35% federal statutory rate for income taxes related to continuing operations were as follows:
Sprint Sprint Sprint Corporation FON PCS Quarter Ended March 31, 2003 Consolidated Group Group - ------------------------------------------------------------- --- ------------- --- -------------- -- -------------- (millions) Income tax expense (benefit) at the federal statutory rate $ 55 $ 157 $ (102) Effect of: State income taxes, net of federal income tax effect 8 14 (6) Equity in losses of foreign joint ventures 1 1 - Other, net (3) (3) - - ------------------------------------------------------------- --- ------------- --- -------------- -- -------------- Income tax expense (benefit) $ 61 $ 169 $ (108) --- ------------- --- -------------- -- -------------- Effective income tax rate 38.6% 37.7% 37.2% --- ------------- --- -------------- -- -------------- Sprint Sprint Sprint Corporation FON PCS Quarter Ended March 31, 2002 Consolidated Group Group - ------------------------------------------------------------- --- ------------- --- -------------- -- -------------- (millions) Income tax expense (benefit) at the federal statutory rate $ 61 $ 140 $ (79) Effect of: State income taxes, net of federal income tax effect 4 12 (8) Equity in losses of foreign joint ventures 8 - 8 Other, net 1 3 (2) - ------------------------------------------------------------- --- ------------- --- -------------- -- -------------- Income tax expense (benefit) $ 74 $ 155 $ (81) --- ------------- --- -------------- -- -------------- Effective income tax rate 42.5% 38.7% 35.7% --- ------------- --- -------------- -- --------------
- -------------------------------------------------------------------------------- 5. Accounting for Derivative Instruments - -------------------------------------------------------------------------------- Risk Management Policies Sprint's derivative instruments include interest rate swaps, stock warrants, net purchased equity options embedded in forward sale contracts, credit forward contracts, and foreign currency forward contracts. Sprint's derivative transactions are used principally for hedging purposes and comply with Board-approved policies. Senior finance management receives frequent status updates of all outstanding derivative positions. Sprint selectively enters into interest rate swap and cap agreements to manage its exposure to interest rate changes on its debt. Sprint enters into interest rate swap agreements to minimize exposure to interest rate movements and achieve an optimal mixture of floating and fixed-rate debt while minimizing liquidity risk. The interest rate swap agreements designated as fair value hedges effectively convert Sprint's fixed-rate debt to a floating rate through the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the agreement without an exchange of the underlying principal amount. Sprint enters into interest rate swap agreements designated as cash flow hedges to reduce the impact of interest rate movements on future interest expense by effectively converting a portion of its floating-rate debt to a fixed rate. In certain business transactions, Sprint is granted warrants to purchase the securities of other companies at fixed rates. These warrants are supplemental to the terms of the business transactions and are not designated as hedging instruments. Sprint enters into forward sale contracts which reduce the variability in expected cash flows related to a forecasted sale of the underlying equity securities held as available for sale. Sprint holds fair value hedges through credit forward contracts which hedge changes in fair value of certain debt issues. Sprint's foreign exchange risk management program focuses on reducing transaction exposure to optimize consolidated cash flow. Sprint enters into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint's primary transaction exposure results from net payments made to overseas telecommunications companies for completing international calls made by Sprint's domestic customers. Forward contracts, which function as natural hedges, are used to offset the impact of foreign currency fluctuations in these payments. Interest Rate Swaps The interest rate swaps met all the required criteria under derivative accounting rules for the assumption of perfect effectiveness resulting in no recognition of changes in their fair value in earnings during the life of the swap. During the period ending March 31, 2003, Sprint held no interest rate swaps. Sprint held both cash flow hedges and fair value hedges in interest rate swaps in the 2002 first quarter. Sprint recorded a $6 million pre-tax increase to other comprehensive income in the 2002 first quarter resulting from gains on cash flow hedges. The change in other comprehensive income is included in "Unrealized gains (losses) on qualifying cash flow hedges" on the Consolidated Statements of Comprehensive Income (Loss). Stock Warrants The stock warrants are not designated as hedging instruments and changes in the fair value of these derivative instruments are recognized in earnings during the period of change. Sprint's net derivative losses on stock warrants were immaterial in the 2003 first quarter. Sprint recorded net derivative losses in earnings of $2 million after tax for the 2002 first quarter due to changes in the fair value of stock warrants. Net Purchased Equity Options The net purchased equity options embedded in forward sale contracts are designated as cash flow hedges. Sprint recorded a $1 million after-tax decrease to other comprehensive income in the 2003 first quarter resulting from losses on these cash flow hedges. Sprint recorded a $1 million after-tax increase to other comprehensive income in the 2002 first quarter. The changes in other comprehensive income are included in "Net unrealized gains (losses) on qualifying cash flow hedges" on the Consolidated Statements of Comprehensive Income (Loss). Credit Forward Contracts As there is high correlation between the credit forward contracts and the debt issues being hedged, fluctuations in the value of the credit forward contracts are generally offset by changes in the fair value of the debt issues. A nominal amount was recorded in the 2003 first quarter on this investment in Sprint's Consolidated Statements of Operations. Foreign Currency Forward Contracts Foreign currency forward contracts held during the period were not designated as hedges and changes in the fair value of these derivative instruments are recognized in earnings during the period of change. The activity associated with these contracts was immaterial in all periods presented. - -------------------------------------------------------------------------------- 6. Restructuring and Asset Impairment - -------------------------------------------------------------------------------- Restructuring Activity In the 2002 fourth quarter, Sprint announced a consolidation in its Network, Information Technology, and Billing and Accounts Receivable organizations, as well as in other areas of the Company, in the on going effort to streamline operations and maintain a competitive cost structure (One Sprint Consolidation). These decisions resulted in a $146 million pre-tax charge consisting of severance costs associated with work force reductions totaling $58 million, and the remaining $88 million accrued for other exit costs primarily associated with the termination of real estate leases. The severance charge is associated with the involuntary employee separation of approximately 2,100 employees. As of March 31, 2003, approximately 1,200 of the employee separations had been completed. Sprint expects to pay the majority of severance and other exit costs by March 31, 2004. In the 2002 fourth quarter, the PCS group announced it would reduce operating expenses through a work force reduction (PCS Consolidation). This action is expected to create a more competitive cost structure for the business. This decision resulted in a $43 million pre-tax charge consisting primarily of severance costs associated with work force reductions. The charge for severance costs totaled $25 million, and the remaining $18 million was accrued for other exit costs primarily associated with the termination of real estate leases. The severance charge was associated with the involuntary employee separation of approximately 1,600 employees. As of December 31, 2002, substantially all of the employee separations had been completed. Sprint expects to pay the majority of the remaining severance and other exit costs by March 31, 2004. In the 2002 third quarter, Sprint announced a restructuring integrating its E|Solutions' web hosting sales, mobile computing consulting, marketing, and product sales support capabilities into Sprint Business while integrating its customer service operations into Network Services. Additionally, Sprint announced that its global markets division would discontinue offering and internally supporting facilities-based Digital Subscriber Line (DSL) services to customers (collectively, the Global Markets Division Consolidation). These decisions resulted in a $202 million pre-tax charge consisting of asset write-offs, severance costs associated with work force reductions, and termination of real estate leases and other contractual obligations. The charge for asset impairments was $142 million, severance costs totaled $22 million, and the remaining $38 million was accrued for other exit costs associated with the restructuring. The severance charge was associated with the involuntary employee separation of approximately 1,100 employees. As of September 30, 2002, substantially all of the employee separations had been completed. Sprint expects to pay the majority of severance and other exit costs by the third quarter of 2003. In the 2002 first quarter, the PCS Group announced plans to close five PCS customer solution centers, as well as additional steps to reduce operating costs in its network, sales and distribution, and customer solutions business units (PCS Customer Service Center Closures). These decisions resulted in a $23 million pre-tax restructuring charge consisting of severance costs associated with work force reductions and other exit costs, primarily for the termination of real estate leases. The charge for severance costs was $13 million with the remaining $10 million being for other exit costs. The severance charge was associated with the involuntary employee separation of approximately 2,600 employees. As of September 30, 2002, substantially all of the employee separations had been completed. In the 2002 third quarter, Sprint performed an analysis to finalize the restructuring estimates recorded in the 2002 first quarter. This analysis resulted in a reserve reduction of $6 million primarily associated with real estate lease terminations. In the 2001 fourth quarter, Sprint terminated its efforts to provide its Sprint ION consumer and business offerings and announced plans to reduce operating costs in the business units that comprise its FON Group. These efforts included consolidation and streamlining of marketing and network operations, as well as streamlining corporate support functions (Sprint ION Termination). These decisions resulted in a $1,813 million pre-tax charge consisting of asset write-offs, severance costs associated with work force reductions, and termination of supplier agreements, real estate leases, and other contractual obligations. The charge for asset impairments was $1,327 million, severance costs totaled $231 million, and the remaining $256 million was accrued for other exit costs associated with the restructuring. The severance charge was associated with the involuntary employee separation of approximately 6,000 employees. As of September 30, 2002, substantially all of the employee separations had been completed. In the 2002 third quarter, Sprint performed an analysis to finalize the restructuring estimates recorded in the 2001 fourth quarter. This analysis resulted in a reserve reduction in the third quarter of 2002 of $42 million primarily associated with exit costs and a $34 million reduction associated with the asset impairment charge. Sprint expects to pay the majority of the remaining severance costs by December 31, 2003. In several of these restructuring events, the remaining other exit costs are primarily lease commitments which will be paid according to their terms. This activity is summarized as follows:
- --------------------------------------------------------------------------------------------------------------------- 2003 Activity -------------------------------- December 31, 2002 Cash Non-cash/ March 31, Liability Balance Payments Adjustments 2003 Liability Balance - --------------------------------------------------------------------------------------------------------------------- (millions) Restructuring Events - 2002 One Sprint Consolidation Severance $ 58 $ 10 $ - $ 48 Other exit costs 51 1 - 50 PCS Consolidation Severance 22 13 - 9 Other exit costs 16 - (3) 13 Global Markets Division Consolidation Severance 8 2 - 6 Other exit costs 30 6 - 24 PCS Customer Service Center Closures Severance - - - - Other exit costs 2 1 - 1 Restructuring Events - 2001 Sprint ION Termination Severance 43 9 - 34 Other exit costs 47 7 (9) 31 - --------------------------------------------------------------------------------------------------------------------- Total $ 277 $ 49 $ (12) $ 216 ------------------------------------------------------------------------
Other Asset Impairments In the 2003 first quarter, the PCS Group recorded a charge for asset impairment of $10 million. This charge was associated with the termination of a software development project. - -------------------------------------------------------------------------------- 7. Discontinued Operation - -------------------------------------------------------------------------------- In the 2002 third quarter, Sprint reached a definitive agreement to sell its directory publishing business to R.H. Donnelley for $2.23 billion in cash. The sale closed on January 3, 2003. In the 2003 first quarter, Sprint recognized a pretax gain of $2.13 billion, $1.31 billion after-tax. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, Sprint has presented the directory publishing business as a discontinued operation in the consolidated financial statements. Summary financial information is as follows:
----------------- ----------------- March 31, December 31, 2003 2002 --------------------------------------------------- ----------------------------------- (millions) Assets of discontinued operation Accounts receivable, net $ - $ 277 Prepaids - 99 Other assets - 15 --------------------------------------------------- -- -------------- -- -------------- Total assets of discontinued operation $ - $ 391 -- -------------- -- -------------- Liabilities of discontinued operation Advance billings and other $ - $ 299 -- -------------- -- -------------- Quarters Ended March 31, -- -------------- -- -------------- 2003 2002 --------------------------------------------------- -- -------------- -- -------------- (millions) Net operating revenues $ 5 $ 137 -- -------------- -- -------------- Income before income taxes $ 5 $ 63 -- -------------- -- --------------
The FON Group has a current tax payable to the PCS Group related to the gain on the sale of the directory publishing business in the amount of $700 million as of March 31, 2003 because of the tax allocation between the PCS Group and the FON Group under the tax sharing agreement. - -------------------------------------------------------------------------------- 8. Short-term Borrowings and Current Maturities of Long-term Debt - -------------------------------------------------------------------------------- In February 2003, Sprint prepaid the $455 million balance outstanding relating to the global markets division accounts receivable asset securitization facility. As of March 31, 2003, the facility was collateralized by $1.5 billion of gross receivables and no amounts were drawn against the facility. In March 2003, Sprint completed a tender offer to purchase $442 million principal amount of current senior notes before their scheduled maturity. The notes had an interest rate of 5.7% and a maturity date of November 15, 2003. A premium of $6 million was paid as part of the tender offer. The notes were allocated to the PCS Group and reflected as long-term debt. As a result of the FON Group's repayment of the notes, the allocated debt is now reflected as intergroup debt on the PCS Group balance sheet. The PCS Group is scheduled to pay $36 million of the total to the FON Group in the 2003 fourth quarter and the remaining $406 million in the 2004 second quarter. The intergroup debt is eliminated on the consolidated balance sheet. - -------------------------------------------------------------------------------- 9. Long-term Debt and Capital Lease Obligations - -------------------------------------------------------------------------------- In March 2003, Sprint completed a tender offer to purchase $635 million principal amount of its long-term senior notes before their scheduled maturity. The notes had an interest rate of 5.875% and a maturity date of May 1, 2004. A premium of $13 million was paid as part of the tender offer. The notes were allocated to the PCS Group and reflected as long-term debt. As a result of the FON Group's repayment of the notes, the allocated debt is now reflected as intergroup debt on the PCS Group balance sheet. The notes are scheduled to be paid to the FON Group in the 2004 second quarter. The intergroup debt is eliminated on the consolidated balance sheet. - -------------------------------------------------------------------------------- 10. Common Stock Issuances - -------------------------------------------------------------------------------- In March 2003, France Telecom (FT) converted 34.4 million shares of Series 3 PCS common stock into shares of Series 1 PCS common stock. At the same time, FT converted 21.6 million shares of PCS common stock underlying Class A common stock into Series 1 PCS common stock. Upon the issuance of the PCS shares underlying the Class A common stock, there were no more underlying shares of PCS or FON stock. The par value of the Class A common stock was automatically reduced to $0.00 per share from $0.50 per share. While the Class A common stock remains outstanding, it is nonvoting. Sprint's Articles of Incorporation prohibit the issuance of any shares of Series 3 PCS common stock, Series 3 FON common stock, or Class A common stock following the conversion of the shares of Series 3 PCS common stock into shares of Series 1 PCS common stock and the issuance of the Series 1 PCS common stock underlying the Class A common stock. Although 100 million shares of Class A common stock, 1.2 billion shares of Series 3 FON common stock and 600 million shares of Series 3 PCS common stock continue to be authorized, this prohibition effectively limits the authorized common stock reflected on the balance sheet as follows: o Class A FT is limited to the outstanding 43.1 million shares; o FON is limited to 3,000 million shares; o PCS is limited to 4,000 million shares. - -------------------------------------------------------------------------------- 11. Stock-based Compensation - -------------------------------------------------------------------------------- Effective January 1, 2003, Sprint adopted SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, using the prospective method. Upon adoption Sprint began expensing the fair value of stock-based compensation for all grants, modifications or settlements made on or after January 1, 2003. Because grants were made late in March 2003, the impact of adoption was minimal. The following table illustrates the effect on net income and earnings per share of stock-based compensation included in net income and the effect on net income and earnings per share for grants issued on or before December 31, 2002 had the Company applied the fair value recognition provisions of SFAS 123.
Sprint FON Group Quarters Ended March 31, - -------------- - ------------- 2003 2002 ---------------------------------------------------- - -------------- - ------------- (millions, except per share data) Net income, as reported $ 1,850 $ 286 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects - - Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (14) (22) ---------------------------------------------------- - -------------- - ------------- Pro forma net income $ 1,836 $ 264 - -------------- - ------------- Earnings per common share: Basic - as reported $ 2.07 $ 0.32 - -------------- - ------------- Basic - pro forma $ 2.05 $ 0.30 - -------------- - ------------- Diluted - as reported $ 2.06 $ 0.32 - -------------- - ------------- Diluted - pro forma $ 2.04 $ 0.30 - -------------- - -------------
Sprint PCS Group Quarters Ended March 31, - -------------- - ------------- 2003 2002 ---------------------------------------------------- - -------------- - ------------- (millions, except per share data) Net loss, as reported $ (182) $ (146) Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects - - Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (20) (28) ---------------------------------------------------- - -------------- - ------------- Pro forma net loss $ (202) $ (174) - -------------- - ------------- Earnings per common share: Basic - as reported $ (0.18) $ (0.15) - -------------- - ------------- Basic - pro forma $ (0.20) $ (0.18) - -------------- - ------------- Diluted - as reported $ (0.18) $ (0.15) - -------------- - ------------- Diluted - pro forma $ (0.20) $ (0.18) - -------------- - -------------
- -------------------------------------------------------------------------------- 12. Litigation, Claims and Assessments - -------------------------------------------------------------------------------- On March 19, 2003, counsel for plaintiffs and defendants announced a settlement, subject to court approval, of the previously disclosed derivative action filed by The Amalgamated Bank, an institutional stockholder. The settlement does not reflect any admission of liability by the defendants and there has been no finding of any liability by the defendants. The settlement includes the adoption of certain enhancements to Sprint's corporate governance policies and practices; an agreement by Board members and certain former senior executives to certain restrictions on options, or any stock obtained through the exercise of options, accelerated by stockholder approval of the WorldCom merger; and the payment of plaintiff's attorneys' fees in the form of 250,000 FON shares and 500,000 PCS shares. Sprint has reserved $5 million for the payment of these attorney's fees in the 2003 first quarter in other income (expense), net. Also on March 19, 2003, as part of the same negotiations, plaintiffs and defendants announced a settlement, subject to court approval, of the previously disclosed securities class action filed by The New England Health Care Employees Pension Fund, an institutional stockholder, and two other stockholders. The settlement does not reflect any admission of liability by defendants, and there has been no finding of any violation or liability by defendants. The settlement provides for the payment to the plaintiff class of a total of $50 million. Sprint has reserved $45 million for the settlement of the securities class action in the 2003 first quarter in other income (expense), net. This reserve is net of insurance coverage that is undisputed by insurance carriers. Sprint expects further amounts will be reimbursed by insurance carriers and is currently in negotiations about this claim coverage. A number of putative class action cases that allege Sprint failed to obtain easements from property owners during the installation of its fiber optic network are in process. Several of these cases seek certification of nationwide classes, and in one case, a nationwide class has been certified. Settlement negotiations directed to a nationwide, industry-wide settlement of these claims have resulted in an agreement, not yet approved by the Court. Sprint has previously accrued for the estimated settlement costs of these suits. In July 2002, the Federal Communications Commission released a declaratory ruling in a matter referred to it by the federal district court for the Western District of Missouri in Sprint's suit against AT&T Corp for the collection of terminating access charges. The FCC ruled that although nothing prohibited wireless carriers from charging for access to their networks, interexchange carriers were not required to pay such charges absent a contractual obligation to do so. This decision has been appealed to the D.C. Circuit Court of Appeals. Management believes adequate provisions have been recorded in the PCS Group's results of operations. Various other suits, typical for a business enterprise, are pending against Sprint. While it is not possible to determine the ultimate disposition of each of these proceedings, Sprint believes that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on the financial condition or results of operations of Sprint, the FON Group or the PCS Group. - -------------------------------------------------------------------------------- 13. Other Financial Information - -------------------------------------------------------------------------------- Allowance for Doubtful Accounts Sprint's allowance for doubtful accounts was as follows:
----------------- ---------------- March 31, December 31, 2003 2002 --------------------------------------------------- ----------------------------------- (millions) FON Group $ 239 $ 279 PCS Group 92 135 --------------------------------------------------- -- -------------- -- -------------- Consolidated $ 331 $ 414 -- -------------- -- -------------- Supplemental Cash Flows Information Sprint's net cash paid for interest and income taxes was as follows: Quarters Ended March 31, -- ------------- -- ------------- 2003 2002 --------------------------------------------------- -- ------------- -- ------------- (millions) Interest (net of capitalized interest) $ 419 $ 182 -- ------------- -- ------------- Income taxes $ 9 $ 2 -- ------------- -- ------------- In March 2002, Sprint issued $5 billion of debt securities which replaced the commercial paper program and added additional liquidity to the balance sheet. This debt has semiannual interest payments, one of which was paid in March 2003. Sprint's noncash activities included the following: Quarters Ended March 31, -- ------------- -- ------------- 2003 2002 --------------------------------------------------- -- ------------- -- ------------- (millions) Common stock issued under Sprint's employee benefit stock plans $ 37 $ 64 -- ------------- -- ------------- Tax benefit from stock options exercised $ - $ 1 -- ------------- -- -------------
- -------------------------------------------------------------------------------- 14. Segment Information - -------------------------------------------------------------------------------- Sprint is divided into three main lines of business: the global markets division, the local division, and the PCS wireless telephony products and services business, also known as the PCS Group. Other consists primarily of wholesale distribution of telecommunications products. Sprint manages its segments to the operating income (loss) level of reporting. Items below operating income (loss) are held at a corporate level and only attributed to the group level. The reconciliation from operating income to net income is shown on the face of the Consolidated Statements of Operations in the consolidating information. Segment financial information was as follows:
- ---------------------------------------------------------------------------------------------------------------- Global Corporate Quarters Ended Markets Local PCS and March 31, Division Division Other(1) Group Eliminations(2) Consolidated - ---------------------------------------------------------------------------------------------------------------- (millions) 2003 Net operating revenues $ 2,042 $ 1,536 $ 187 $ 2,947 $ (373) $ 6,339 Affiliated revenues 193 52 125 3 (373) - Operating income (loss) 6 460 (10) 140 8 604 2002 Net operating revenues $ 2,342 $ 1,565 $ 193 $ 2,848 $ (311) $ 6,637 Affiliated revenues 147 78 116 (30) (311) - Operating income (loss) (75) 481 (6) 113 5 518 - ---------------------------------------------------------------------------------------------------------------- (1) In the 2003 first quarter, Sprint closed the sale of its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Operations of the directory publishing business are reported as a discontinued operation for all periods presented. See Note 7 for additional information. (2) Revenues eliminated in consolidation consist principally of local access charged to the global markets division by the local division, equipment purchases from the wholesale distribution business, interexchange services provided to the local division, long-distance services provided to the PCS Group for resale to PCS customers and for internal business use, Caller ID services provided by the local division to the PCS Group and handset purchases from the PCS Group.
Net operating revenues by product and services were as follows:
- ---------------------------------------------------------------------------------------------------------------------- Global Quarters Ended Markets Local PCS March 31, Division Division Other(1) Group Eliminations(2)Consolidated - ---------------------------------------------------------------------------------------------------------------------- (millions) 2003 Voice $ 1,292 $ - $ - $ - $ (193) $ 1,099 Data 461 - - - - 461 Internet 243 - - - - 243 Local service - 765 - - (1) 764 Network access - 523 - - (43) 480 Long distance - 144 - - - 144 Wireless services - - - 2,947 (3) 2,944 Other 46 104 187 - (133) 204 ---------------------------------------------------------------------------------- Total net operating revenues $ 2,042 $ 1,536 $ 187 $ 2,947 $ (373) $ 6,339 ---------------------------------------------------------------------------------- 2002 Voice $ 1,536 $ - $ - $ - $ (147) $ 1,389 Data 484 - - - - 484 Internet 245 - - - - 245 Local service - 761 - - - 761 Network access - 518 - - (60) 458 Long distance - 168 - - - 168 Wireless services - - - 2,848 30 2,878 Other 77 118 193 - (134) 254 ---------------------------------------------------------------------------------- Total net operating revenues $ 2,342 $ 1,565 $ 193 $ 2,848 $ (311) $ 6,637 ---------------------------------------------------------------------------------- (1) In the 2003 first quarter, Sprint closed the sale of its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Operations of the directory publishing business are reported as a discontinued operation for all periods presented. See Note 7 for additional information. (2) Revenues eliminated in consolidation consist principally of local access charged to the global markets division by the local division, equipment purchases from the wholesale distribution business, interexchange services provided to the local division, long-distance services provided to the PCS Group for resale to PCS customers and for internal business use, Caller ID services provided by the local division to the PCS Group and handset purchases from the PCS Group.
- -------------------------------------------------------------------------------- 15. Recently Issued Accounting Pronouncements - -------------------------------------------------------------------------------- In November 2002, the Emerging Issues Task Force (EITF) of the FASB reached a consensus on EITF No. 00-21, Accounting for Revenue Arrangements with Multiple Element Deliverables. The issue addresses how to account for arrangements that may involve multiple revenue-generating activities, i.e., the delivery or performance of multiple products, services, and/or rights to use assets. In applying this guidance, separate contracts with the same party, entered into at or near the same time, will be presumed to be a package, and the consideration will be measured and allocated to the separate units based on their relative fair values. This consensus guidance will be applicable to agreements entered into in quarters beginning after June 15, 2003. Sprint will adopt this new accounting effective July 1, 2003. The Company is currently evaluating the impact of this change. - -------------------------------------------------------------------------------- 16. Subsequent Events - -------------------------------------------------------------------------------- Investment Activity In April 2003, Sprint converted 9 million EarthLink preferred shares into common shares and sold the shares to EarthLink, Inc. for $53 million. Sprint recognized a $5 million loss on the sale. Sprint then announced, in May 2003, it may sell up to an additional 4 million shares as part of a prepaid forward contract. Dividend Declaration In May 2003, Sprint's Board of Directors declared a dividend of 12.5 cents per share on the FON common stock. The dividend will be paid June 30, 2003. Separation Arrangements Sprint reached agreement on separation terms with certain senior executives. Charges for associated separation costs will be recorded in the 2003 second quarter. New Director In May 2003, the Sprint Board of Directors elected Michael M. Sears, executive vice president, office of the chairman and chief financial officer of the Boeing Company, as a director of Sprint replacing Ronald T. LeMay, who resigned in April 2003. William T. Esrey resigned as a director of Sprint in May 2003. New Officers At its May 2003 meeting, the Sprint Board of Directors elected the following new executive officers: Gary D. Forsee, Sprint's chief executive officer, was elected as chairman of the Board. Howard E. Janzen, formerly chairman, president and chief executive officer of Williams Communications, was elected president of the global markets division. Bruce N. Hawthorne, formerly a partner at the law firm of King & Spalding, was elected executive vice president and chief staff officer. Michael W. Stout, formerly vice president and chief technology and information officer at GE Capital, was elected executive vice president-chief information officer. William K. White, who has held various positions in Sprint's corporate communications department since 1993, was elected interim senior vice president-communications and brand management. The Board of Directors had elected the following executive officers in April 2003: Thomas A. Gerke, who had held various positions at Sprint, primarily in the legal department, since 1994, was elected as executive vice president-general counsel. James G. Kissinger, who had held various positions in Sprint's human resources department since 1984, was elected senior vice president-human resources. Part I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sprint Corporation - -------------------------------------------------------------------------------- Forward-looking Information - -------------------------------------------------------------------------------- Sprint includes certain estimates, projections and other forward-looking statements in its reports and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forward-looking statements. These statements reflect management's judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer growth, pricing, costs to acquire customers and provide service, the timing of various events and the economic environment. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: o extent and duration of the current economic downturn; o the effects of vigorous competition in the markets in which Sprint operates; o the costs and business risks associated with providing new services and entering new markets necessary to provide nationwide or global services; o adverse change in the ratings afforded our debt securities by ratings agencies; o the ability of the PCS Group to continue to grow a significant market presence; o the ability of the PCS Group to improve its profitability and reduce its cash requirements; o the effects of mergers and consolidations within the telecommunications industry and unexpected announcements or developments from others in the telecommunications industry; o the uncertainties related to the outcome of bankruptcies affecting the telecommunication industry; o the impact to the PCS Group's network coverage due to financial difficulties of third-party affiliates; o the uncertainties related to Sprint's investments; o the impact of any unusual items resulting from ongoing evaluations of Sprint's business strategies; o the impact of new and emerging technologies on Sprint's business; o unexpected results of litigation filed against Sprint; o the possibility of one or more of the markets in which Sprint competes being impacted by changes in political or other factors such as monetary policy, legal and regulatory changes, including the impact of the Telecommunications Act of 1996 (Telecom Act), or other external factors over which Sprint has no control; and o other risks referenced from time to time in Sprint's filings with the Securities and Exchange Commission (SEC). The words "estimate," "project," "intend," "expect," "believe" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout Management's Discussion and Analysis. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Sprint is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this report or unforeseen events. Sprint provides a detailed discussion of risk factors in various SEC filings, including its 2002 Form 10-K, and you are encouraged to review these filings. - -------------------------------------------------------------------------------- Definitions of Financial Measures - -------------------------------------------------------------------------------- Sprint provides readers financial measures generated using generally accepted accounting principles (GAAP). ARPU (Average monthly service revenue per user) is calculated by dividing wireless service revenues by weighted average monthly wireless subscribers. ARPU is used to measure revenue on a per user basis. This is a measure which uses GAAP as the basis for the calculation. CCPU (Cash cost per user) is calculated by dividing the costs of wireless service revenues, service delivery and other general and administrative costs by weighted average monthly wireless subscribers. CCPU is a measure analysts use to evaluate the cash costs to operate the business on a per user basis. This is a measure which uses GAAP as the basis for the calculation. CPGA (Cost per gross addition) is calculated by dividing the costs of acquiring a new wireless subscriber, including equipment subsidies, marketing costs and selling expenses, by gross additional subscribers. Analysts use this measure in conjunction with the other measures to evaluate the profitability of the operation. This is a measure which uses GAAP as the basis for the calculation. - -------------------------------------------------------------------------------- General - -------------------------------------------------------------------------------- Sprint is a global communications company and a leader in integrating long-distance, local service, and wireless communications. Sprint is also one of the largest carriers of Internet traffic using its tier one Internet protocol network, which provides connectivity to any point on the Internet either through its own network or via direct connections with other backbone providers. Sprint is the nation's third-largest provider of long distance services, based on revenues, and operates nationwide, all-digital long distance and tier one Internet protocol networks. In addition, the local division currently serves approximately 8.1 million access lines in 18 states. Sprint also operates a 100% digital PCS wireless network with licenses to provide service to the entire United States population using a single frequency band and a single technology. Sprint operates in industries that have been and continue to be subject to consolidation and dynamic change. Therefore, Sprint routinely reassesses its business strategies. Due to changes in the telecommunications industry, including bankruptcies, over-capacity and the economic downturn, Sprint continues to assess the implications on its operations. Any such assessment may impact the valuation of its long-lived assets. As part of its overall business strategy, Sprint regularly evaluates opportunities to expand and complement its business and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on its business, financial condition, liquidity or results of operations. In the 2003 first quarter, Sprint sold its directory publishing business to R.H. Donnelley for $2.23 billion in cash. Operating Segments Sprint's business is divided into three lines of business: the global markets division, the local division and the PCS wireless telephony products and services business. Board Discretion Regarding Tracking Stocks FON common stock and PCS common stock are intended to reflect the financial results and economic value of the FON and PCS Groups. However, they are classes of common stock of Sprint, not of the group they are intended to track. Accordingly, FON and PCS shareholders are subject to the risks related to an equity investment in Sprint and all of Sprint's businesses, assets and liabilities. Shares of FON common stock and PCS common stock do not represent a direct legal interest in the assets and liabilities allocated to either group, but rather represent a direct equity interest in our assets and liabilities as a whole. Sprint's board of directors has the discretion to, among other things, make operating and financial decisions that could favor one group over the other and, subject to the restrictions in Sprint's articles of incorporation, to change the allocation of the assets and liabilities that comprise each of the FON Group and the PCS Group without shareholder approval. Under the applicable corporate law, Sprint's Board owes its fiduciary duties to all of Sprint's shareholders and there is no board of directors that owes separate duties to the holders of either the FON common stock or the PCS common stock. The Tracking Stock Policies provide that the Board, in resolving material matters in which the holders of FON common stock and PCS common stock have potentially divergent interests, will act in the best interests of Sprint and all of its common shareholders after giving fair consideration to the potentially divergent interests of the holders of the separate classes of Sprint common stock. These policies may be changed by the Board without shareholder approval. Given the Board's discretion in these matters, it may be difficult to assess the future prospects of each group based on past performance. - -------------------------------------------------------------------------------- General Overview of the Sprint FON Group - -------------------------------------------------------------------------------- The FON Group is comprised of the global markets division, the local division and other businesses consisting primarily of wholesale distribution of telecommunications products. The global markets division is the nation's third-largest provider of long distance services based on revenues. The activities of the local division include local exchange communications and consumer long distance services used by customers within Sprint's local franchise territories. The FON Group also includes its investments in EarthLink, Inc., an Internet service provider, and Call-Net, a long distance provider in Canada. Global Markets Division The global markets division provides a broad suite of communications services targeted to domestic business and residential customers, multinational corporations and other communications companies. These services include domestic and international voice; data communications using various protocols such as Internet protocol (IP) and frame relay (a data service that transfers packets of data over Sprint's network) and managed network services. In addition, the global markets division provides web and applications hosting, consulting services, and colocation services and international data communications. The global markets division also includes the operating results of the wireless high speed data and cable TV service operations of the broadband fixed wireless companies. In 2001, Sprint announced it would halt further deployment of Multipoint Multichannel Distribution Services (MMDS) services using current line of sight technology. Sprint is pursuing alternative strategies with respect to the MMDS spectrum leases and licenses. Local Division The local division consists mainly of regulated local phone companies serving approximately 8.1 million access lines in 18 states. The local division provides local voice and data services, including digital subscriber line (DSL), for customers within its franchise territories, access by phone customers and other carriers to the local division's local network, nationwide long distance services to residential customers within its franchise territories, sales of telecommunications equipment, and other services within specified calling areas to residential and business customers. DSL enables high speed transmission of data over existing copper telephone lines. - -------------------------------------------------------------------------------- General Overview of the Sprint PCS Group - -------------------------------------------------------------------------------- The PCS Group includes Sprint's wireless PCS operations. It operates a 100% digital PCS wireless network with licenses to provide service to the entire United States population using a single frequency band and a single technology. At the end of the 2003 first quarter, the PCS Group, together with third party affiliates, operated PCS systems in over 300 metropolitan markets, including the 100 largest U.S. metropolitan areas. The PCS Group's service, including third party affiliates, reaches a quarter billion people. The PCS Group provides nationwide service through a combination of: o operating its own digital network in major U.S. metropolitan areas using code division multiple access (CDMA), which is a digital spread-spectrum wireless technology that allows a large number of users to access a single frequency band by assigning a code to all speech bits, sending a scrambled transmission of the encoded speech over the air and reassembling the speech into its original format, o affiliating with other companies that use CDMA, mainly in and around smaller U.S. metropolitan areas, o roaming on other providers' analog cellular networks using multi-mode and multi-band handsets, and o roaming on other providers' digital networks that use CDMA. Sprint PCS customers can also use their phones in Canada and Mexico through roaming agreements. Sprint launched nationwide third generation (3G) capability in the 2002 third quarter. This capability allows more efficient utilization of the network when voice calls are made using 3G-enabled handsets. It also provides enhanced data services. The service, marketed as "PCS Vision," allows consumer and business customers to use their Vision-enabled PCS devices to exchange personal and corporate e-mail, take and receive pictures, play games with full-color graphics and polyphonic sounds and browse the Internet wirelessly with speeds up to 144 kbps (with average speeds of 50 to 70 kbps). The PCS Group supplements its own network through affiliation arrangements with other companies that use CDMA. Under these arrangements, these companies offer PCS services under the Sprint brand name on CDMA networks built and operated at their own expense. Several of these affiliates are experiencing financial difficulties, are evaluating restructuring activities, and in one case, an affiliate has filed for bankruptcy protection and has made claims against Sprint in the bankruptcy court. Several of the affiliates are also disputing and refusing to pay amounts owed to the PCS Group. The amounts currently in dispute have been fully reserved. The PCS Group also includes its investment in Virgin Mobile, USA (Virgin Mobile), a joint venture to market wireless services. This investment is accounted for using the equity method. The PCS Group also provides PCS services to companies that resell PCS services to their customers on a retail basis under their own brand. These companies bear the costs of acquisition, billing and customer service. The wireless industry, including the PCS Group, typically generates a higher number of subscriber additions and handset sales in the fourth quarter of each year compared to the remaining quarters. This is due to the use of retail distribution, which is dependent on the holiday shopping season; the timing of new products and service introductions; and aggressive marketing and sales promotions. - -------------------------------------------------------------------------------- Results of Operations - -------------------------------------------------------------------------------- Consolidated Total net operating revenues were as follows:
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ 3,581 $ 3,904 PCS Group 2,947 2,848 Intergroup eliminations (189) (115) ------------------------------------------------------------------------ Net operating revenues $ 6,339 $ 6,637 ---------------------------------- Net operating revenues decreased 4% in the 2003 first quarter compared to the same 2002 quarter reflecting declining FON Group long distance voice revenues and product distribution revenues partially offset by growth in the PCS Group revenues. Income (Loss) from continuing operations was as follows: Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ 279 $ 246 PCS Group (182) (146) ------------------------------------------------------------------------ Income from continuing operations $ 97 $ 100 ----------------------------------
In the 2003 first quarter, income from continuing operations includes a $32 million charge to settle derivative action and securities class action litigation, a $12 million charge reflecting the premiums paid on debt tender offers, and a $6 million charge associated with the termination of a software development project. In the 2002 first quarter, income from continuing operations includes a $15 million restructuring charge representing the closing of five PCS customer solution centers, as well as additional steps to reduce operating costs in the PCS business units. This charge was offset by favorable true-ups of unrelated items. In total, the charge and true-ups had no effect on income from continuing operations. - -------------------------------------------------------------------------------- Segmental Results of Operations - -------------------------------------------------------------------------------- Global Markets Division
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ---------------------------------- ------------------------------- 2003 2002 $ % - ---------------------------------------------- ---------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues Voice $ 1,292 $ 1,536 $ (244) (15.9)% Data 461 484 (23) (4.8)% Internet 243 245 (2) (0.8)% Other 46 77 (31) (40.3)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total net operating revenues 2,042 2,342 (300) (12.8)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 1,103 1,421 318 22.4% Selling, general and administrative 573 639 66 10.3% Depreciation and amortization 360 357 (3) (0.8)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total operating expenses 2,036 2,417 381 15.8% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating income (loss) $ 6 $ (75) $ 81 NM -- ------------- -- -------------- -- ------------- Operating margin NM NM -- ------------- -- --------------
NM = Not meaningful Net Operating Revenues Net operating revenues decreased 13% in the 2003 first quarter from the same 2002 period. The overall revenue decrease is in large part due to the decline in voice revenues including the loss of revenues from a major wholesale customer. Voice Revenues Voice revenues decreased 16% in the 2003 first quarter from the same 2002 period due to a decline in consumer voice revenues resulting from wireless and e-mail substitution, aggressive competition from RBOC's for consumer and small business customers and business voice contract renewals occurring at lower prices. Minute volume decreased 7% in the 2003 first quarter compared to the 2002 first quarter. The minute decline was primarily driven by the loss of a major wholesale customer and a large prepaid customer. Data Revenues Data revenues decreased 5% in the 2003 first quarter from the same 2002 period due to declines in private line services and rate reductions in ATM partially offset by an increase in frame relay. Internet Revenues Internet revenues decreased 1% in the 2003 first quarter from the same 2002 period. Increases in dedicated IP and Web hosting services were more than offset by the final, contractually-scheduled repricing of the AOL dial IP agreement, as well as a general decline in dial IP pricing. Other Revenues Other revenues decreased 40% in the 2003 first quarter from the same 2002 period. The decrease was primarily due to the sale of a consulting business in the third quarter of 2002. Costs of Services and Products Costs of services and products include interconnection costs paid to local phone companies, other domestic service providers and foreign phone companies to complete calls made by the division's domestic customers, costs to operate and maintain the long distance network and the IP network, and costs of equipment sales. These costs decreased 22% in the 2003 first quarter from the same 2002 period. The decrease was due to improved access economics, exit from low margin business, restructuring efforts, and volume declines. Costs of services and products for the global markets division were 54.0% of net operating revenues in the 2003 first quarter compared to 60.7% for the same period a year ago. Selling, General and Administrative Expense Selling, general and administrative (SG&A) expenses decreased 10% in the 2003 first quarter from the same 2002 period. The decline was due to reduced bad debt provisions, restructuring efforts, and general cost controls. SG&A expense was 28.1% of net operating revenues in the 2003 first quarter compared to 27.3% for the same period a year ago. SG&A includes charges for estimated bad debt expense. The reserve for bad debts requires management's judgment and is based on customer specific indicators, as well as historical trending, industry norms, regulatory decisions and recognition of current market indicators about general economic conditions. Bad debt expense as a percentage of net revenues was 2.4% in the 2003 first quarter compared to 3.4% in the same 2002 period. This reflects an improvement in collections and aging. Reserve for bad debt as a percent of outstanding accounts receivable was 14.0% at the end of the 2003 first quarter and 14.9% at year-end 2002. Depreciation and Amortization Expense Estimates and assumptions are used both in setting depreciable lives and testing for recoverability. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation and amortization expense increased 1% in the 2003 first quarter from the same period a year ago. Depreciation and amortization expense was 17.6% of net operating revenues in the 2003 first quarter compared to 15.2% for the same 2002 period. Local Division
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ----------------------------------- ------------------------------- ----------------- 2003 2002 $ % - --------------------------------------------- ----------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues Local service $ 765 $ 761 $ 4 0.5% Network access 523 518 5 1.0% Long distance 144 168 (24) (14.3)% Other 104 118 (14) (11.9)% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Total net operating revenues 1,536 1,565 (29) (1.9)% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 490 480 (10) (2.1)% Selling, general and administrative 320 318 (2) (0.6)% Depreciation and amortization 266 286 20 7.0% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Total operating expenses 1,076 1,084 8 0.7% - --------------------------------------------- --- ------------- -- -------------- -- ------------- Operating income $ 460 $ 481 $ (21) (4.4)% --- ------------- -- -------------- -- ------------- Operating margin 29.9% 30.7% --- ------------- -- --------------
Net Operating Revenues Net operating revenues decreased 2% in the 2003 first quarter from the same 2002 period as slight growth in local services and network access was more than offset by declines in long distance services and equipment sales. The local division ended the 2003 first quarter with approximately 8.1 million switched access lines, a 2% decrease during the past 12 months. The reduction in access lines was driven by the continuing economic slowdown, wireless and cable substitution, and losses to competitive local providers. The reduction in access lines is expected to continue as Sprint believes access line losses in 2003 will approximate the 2002 loss. On a voice-grade equivalent basis, which includes both traditional switched services and high capacity lines, voice-grade equivalents grew 7% during the past 12 months. This growth reflects growth in DSL as well as many business customers switching from individual lines to high capacity dedicated circuits. Local Service Revenues Local service revenues, derived from local exchange services, remained flat in the 2003 first quarter from the same 2002 period as an 11% increase in vertical services revenue, driven by the success of bundled offerings, was offset by the decrease in access lines. Network Access Revenues Network access revenues, derived from long distance phone companies using the local network to complete calls, increased 1% in the 2003 first quarter compared to a year ago. Strong growth in special access services in the 2003 first quarter was largely offset by a 4% decline in access minutes of use, as well as by regulator-mandated access rate reductions. Long Distance Revenues Long distance revenues are mainly derived from providing nationwide long distance services to residential customers within Sprint's local franchise territories and other services within specified regional call areas, or LATAs, to residential and business customers. These revenues declined 14% in the 2003 first quarter from the same 2002 period. This was primarily due to a decline in total long distance minutes of use, as customers shifted more of their communications to wireless, e-mail and instant messaging. Other Revenues Other revenues decreased 12% in the 2003 first quarter from the same 2002 period principally due to a decline in equipment sales. The decrease in equipment sales was a result of both a planned shift in focus to selling higher margin products and the economic slowdown causing a reduction in customer demand for equipment. Costs of Services and Products Costs of services and products include costs to operate and maintain the local network and costs of equipment sales. These costs increased 2% in the 2003 first quarter compared to the same 2002 period. This increase was mainly driven by higher pension and retiree costs. Costs of services and products were 31.9% of net operating revenues in the 2003 first quarter compared to 30.7% for the same period a year ago. Selling, General and Administrative Expense SG&A expense increased 1% in the 2003 first quarter compared to the same 2002 period. This increase was primarily due to additional pension and retiree benefit costs somewhat offset by a decline in bad debt expense. SG&A expense was 20.8% of net operating revenues in the 2003 first quarter compared to 20.3% for the same period a year ago. Bad debt expense as a percentage of net revenues was 1.6% in the 2003 first quarter and 2.5% in the same period a year ago. This reflects an improvement in collections and aging. Reserve for bad debt as a percent of outstanding accounts receivable was 10.9% at the end of the 2003 first quarter and 13.9% at year-end 2002. Depreciation and Amortization Expense Estimates and assumptions are used in setting depreciable lives. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation and amortization expense decreased 7% in the 2003 first quarter compared to the same 2002 period. This decline was driven by the implementation of Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, which eliminated the accrual for removal cost from the depreciable rate, as well as declines in circuit switching depreciation rates due to a revised schedule for converting from a digital to a packet network. Depreciation and amortization expense was 17.3% of net operating revenues in the 2003 first quarter compared to 18.3% for the same period a year ago. PCS Group
Selected Operating Results --------------------------------------------------------------------- Quarters Ended March 31, Variance ---------------------------------- ------------------------------- 2003 2002 $ % - ---------------------------------------------- ---------------- ----------------- -- ------------- ----------------- (millions) Net operating revenues $ 2,947 $ 2,848 $ 99 3.5% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating expenses Costs of services and products 1,448 1,403 45 3.2% Selling, general and administrative 741 782 (41) (5.2)% Depreciation 608 526 82 15.6% Amortization - 1 (1) (100)% Restructuring and asset impairment 10 23 (13) (56.5)% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Total operating expenses 2,807 2,735 72 2.6% - ---------------------------------------------- -- ------------- -- -------------- -- ------------- Operating income $ 140 $ 113 $ 27 23.9% -- ------------- -- -------------- -- -------------
The PCS Group markets its products through multiple distribution channels, including its own retail stores as well as other retail outlets. Equipment sales to one retail chain and the service revenues generated by sales to its customers accounted for 23% of net operating revenues in both the 2003 and 2002 first quarters. Net Operating Revenues
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ Customers (millions) 15.0 14.3 ---------------------------------- Average monthly service revenue per user (ARPU) $ 59 $ 60 ---------------------------------- Customer churn rate 3.1% 3.0% ----------------------------------
Net operating revenues include service revenues, sales of handsets and accessory equipment, and other revenues. Service revenues consist of monthly recurring charges, a pro rata portion of activation fees, usage charges and miscellaneous fees such as directory assistance, operator-assisted calling, handset insurance and late payment charges. Service revenues increased 4.9% in the 2003 first quarter from the same 2002 period reflecting an increase in the number of customers, higher monthly recurring charges, and late fees initiated in the third quarter of 2002. The higher monthly recurring charge was partially offset by lower overage charges from usage-based plans driving a slight decline in year-over-year ARPU. Average monthly usage increased by more than two hours when compared to the 2002 first quarter. The PCS Group added 199,000 customers in the 2003 first quarter, ending the period with approximately 15.0 million customers compared to approximately 14.3 million customers at the end of the 2002 first quarter. Resellers added 175,000 customers in the first quarter of 2003, which increased their customer base to 590,000, principally due to Virgin Mobile. The PCS Group third party affiliates added 109,000 customers in the first quarter of 2003, bringing the total number of customers served on the PCS network, including resale customers, at the end of the quarter to more than 18.2 million. The customer churn rate in the 2003 first quarter was 3.1% compared to 3.0% for the same 2002 period. The slight year-over-year increase resulted primarily from an increase in the voluntary churn rate driven by the competitive climate in the wireless industry. The involuntary churn rate was down slightly year-over-year as the PCS Group benefited from credit management policies initiated in the 2002 fourth quarter. Overall churn was down sequentially from the 2002 fourth quarter and we continue to experience improvement. Revenues from sales of handsets and accessories, including new customers and upgrades, were approximately 9.1% of net operating revenues in the 2003 first quarter compared to 10.4% for the same 2002 period. As part of the PCS Group's marketing plans, handsets are normally sold at prices below the PCS Group's cost. Other revenues consist of net fees collected from affiliates for network operation and customer maintenance. It also includes revenues from the wholesale of PCS services to companies that resell to their customers on a retail basis. Other revenues represented 2.5% of net operating revenues in the 2003 first quarter compared to 2.0% for the same 2002 period. Other revenues increased in the 2003 first quarter from the same 2002 period mainly reflecting a net addition of affiliate and wholesale customers. Operating Expenses
Quarters Ended March 31, ---------------------------------- 2003 2002 -------------------------------------------------------------------------- Acquisition costs per gross customer addition (CPGA) $ 365 $ 305 ---------------------------------- Monthly cash costs per user (CCPU) $ 31 $ 31 ----------------------------------
Cost per Gross Customer Addition CPGA, a measure of the costs of acquiring a new subscriber, increased approximately 20% in the 2003 first quarter from the same 2002 period. The CPGA increase was primarily due to certain fixed costs being spread across lower gross customer additions, as well as higher equipment costs and rebates. Cash Cost per User CCPU, a measure of the cash costs to operate the business on a per user basis, was down slightly year-over-year from just over $31 to just under $31. The reduction in CCPU occurred primarily due to lower bad debt expense; however, this savings was mostly offset by upgrade equipment rebate costs incurred to retain existing customers initiated in the fourth quarter of 2002. Costs of Services and Products The PCS Group's costs of services and products mainly include handset and accessory costs, switch and cell site expenses, customer care costs and other network-related costs. These costs increased 3% in the 2003 first quarter from the same 2002 period. The increase was primarily due to network support of a larger customer base, expanded market coverage, and increased unit handset costs. These increases were somewhat offset by scale benefits resulting from the increased customer base and decreases in customer solutions expense. Handset and equipment costs were 40% of total costs of services and products in the 2003 first quarter compared to 39% for the same period a year ago. Costs of services and products were 49.1% of net operating revenues in the 2003 first quarter compared to 49.3% for the same period a year ago. Selling, General and Administrative Expense SG&A expense mainly includes marketing costs to promote products and services as well as related salary and benefit costs. SG&A expense decreased 5% in the 2003 first quarter from the same 2002 period reflecting a decline in bad debt expense due to a better credit class mix, leading to lower write-offs and higher recovery and reduced marketing costs. SG&A expense was 25.1% of net operating revenues in the 2003 first quarter compared to 27.5% for the same period a year ago. Bad debt expense as a percentage of net revenues was 3.0% in the 2003 first quarter compared to 4.6% in the same period a year ago. Reserve for bad debt as a percent of outstanding accounts receivable was 7.1% at the end of the 2003 first quarter and 9.4% at year-end 2002. These improvements were mainly driven by credit management policies initiated in the 2002 fourth quarter resulting in lower involuntary churn and improved receivables aging. Depreciation and Amortization Expense Estimates and assumptions are used both in setting depreciable lives and testing for recoverability. Assumptions are based on internal studies of use, industry data on lives, recognition of technological advancements and understanding of business strategy. Depreciation and amortization expense consists mainly of depreciation of network assets and amortization of definite life intangible assets. The definite life intangible assets include various customer bases, which became fully amortized in August 2002. Depreciation and amortization expense increased 16% in the 2003 first quarter from the same 2002 period due to an increase in the network asset investment during 2002. Depreciation and amortization expense was 20.6% of net operating revenues in the 2003 first quarter compared to 18.5% for the same period a year ago. Restructuring and Asset Impairment In the first quarter of 2003, the PCS Group recorded a charge of $10 million associated with the termination of a software development project. In the first quarter of 2002, the PCS Group announced plans to reduce operating costs through the closing of five PCS customer solution centers, as well as additional steps to reduce operating costs in the PCS business units. These actions were finalized in the third quarter of 2002, and ultimately resulted in PCS incurring an $18 million charge. - -------------------------------------------------------------------------------- Nonoperating Items - -------------------------------------------------------------------------------- Interest Expense Sprint's effective interest rate on long-term debt was 7.0% in the 2003 first quarter compared to 6.7% in the 2002 first quarter. The increase in interest rate is primarily due to additional long-term borrowings with higher interest rates. Interest costs on short-term borrowings, including short-term borrowings classified as long-term debt, and interest costs on deferred compensation plans have been excluded so as not to distort the effective interest rate on long-term debt. See "Liquidity and Capital Resources" for more information on Sprint's financing activities. Premium on Early Retirement of Debt In March 2003, Sprint completed a tender offer to purchase $442 million principal amount of current senior notes before their scheduled maturity. The notes had an interest rate of 5.7% and a maturity date of November 15, 2003. A premium of $6 million was paid as part of the tender offer. Also in March 2003, Sprint completed a tender offer to purchase $635 million principal amount of its long-term senior notes before their scheduled maturity. The notes had an interest rate of 5.875% and a maturity date of May 1, 2004. A premium of $13 million was paid as part of the tender offer. Other Income (Expense), net Other income (expense), net consisted of the following:
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) Dividend and interest income $ 14 $ 8 Equity in net losses of affiliates (18) (20) Net losses from investments - (10) Amortization of debt costs (7) (8) Losses from disposal of PPE (1) (1) Royalties 3 3 Litigation settlement (50) - Other, net (2) (3) ------------------------------------------------------------------------ Total $ (61) $ (31) ----------------------------------
Equity in net losses of affiliates was driven by the PCS Group's investment in Virgin Mobile in the 2003 first quarter and by the PCS Group's investment in Pegaso Telecomunicaciones, S.A. de C.V. (Pegaso) in the 2002 first quarter. Net losses from investments in the 2002 first quarter mainly include the write-down of the investment in Intelig Telecommunicacoes Ltda. (Intelig). In the first quarter of 2003, Sprint recorded a $50 million charge to settle shareholder litigation. See Note 12 for additional information. Beginning in January 2002, Call-Net began making a royalty payment of 2.5% of revenues to Sprint. Currently, this is approximately $3 million per quarter. Income Taxes See Note 4 of Condensed Notes to Consolidated Financial Statements for information about the differences that caused the effective income tax rates to vary from the federal statutory rate for income taxes related to continuing operations. Discontinued Operation, Net In the 2002 third quarter, Sprint reached a definitive agreement to sell its directory publishing business to R.H. Donnelley for $2.23 billion in cash. The sale closed on January 3, 2003. In the 2003 first quarter, Sprint recognized a pretax gain of $2.13 billion, $1.31 billion after-tax. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, Sprint has presented the directory publishing business as a discontinued operation in the consolidated financial statements. Cumulative Effect of Change in Accounting Principle, Net In the 2003 first quarter, Sprint adopted SFAS No. 143, Accounting for Asset Retirement Obligations. Upon adoption of SFAS No. 143, the FON Group recorded a reduction in the local division's depreciation reserves to remove previously accrued costs of removal. Historically, the local division accrued costs of removal in its depreciable rate, a practice consistent with regulatory requirements and others in the industry. These costs of removal do not meet the standard's definition of an asset retirement obligation liability. This one-time benefit of approximately $420 million resulted in a cumulative effect of change in accounting principle credit in the Consolidated Statements of Operations of $258 million. - -------------------------------------------------------------------------------- Financial Condition - -------------------------------------------------------------------------------- Total consolidated assets were as follows:
---------------------------------- March 31, December 31, 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ 24,893 $ 23,539 PCS Group 22,626 23,022 Intergroup eliminations (2,754) (1,268) ------------------------------------------------------------------------ Consolidated assets $ 44,765 $ 45,293 ----------------------------------
Sprint's consolidated assets decreased $528 million in the 2003 first quarter. Cash and equivalents increased $1,060 million due to improved operating cash flows, reduced capital expenditures, and the sale of Sprint's directory publishing business to R.H. Donnelley in the 2003 first quarter. Net property, plant, and equipment decreased $292 million. Capital expenditures were more than offset by depreciation expense and the 2003 first quarter asset impairment. The remaining significant change within consolidated assets includes the $1.1 billion tender offers and prepayment of $455 million related to the global markets division's borrowings, which together reduced external debt by $1.56 billion. - -------------------------------------------------------------------------------- Liquidity and Capital Resources - -------------------------------------------------------------------------------- Sprint's Board of Directors exercises discretion regarding the liquidity and capital resource needs of the FON Group and the PCS Group. This includes the ability to prioritize the use of capital and debt capacity, to determine cash management policies and to make decisions regarding the timing and amount of capital expenditures. The actions of the Board of Directors are subject to its fiduciary duties to all shareholders of Sprint, and not just to the holders of a particular class of common stock. Given the above, it may be difficult for investors to assess each group's liquidity and capital resources and in turn the future prospects of each group based on past performance. Operating Activities
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ 772 $ 411 PCS Group 286 164 ------------------------------------------------------------------------ Cash flows provided by operating activities $ 1,058 $ 575 ----------------------------------
Cash flow from operations increased $483 million in the first quarter of 2003 from the same 2002 period. This increase was driven primarily by the PCS Group's improvement in cash from operations. Additionally, the FON Group had an improvement in its use of working capital related to a receipt in the 2002 second quarter of tax refunds carried as a receivable in the 2002 first quarter. This was partially offset by the PCS Group's increased use of working capital related to a decrease in accounts payable. Investing Activities
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ (357) $ (548) PCS Group (199) (603) ------------------------------------------------------------------------ Cash flows used by investing activities $ (556) $ (1,151) ----------------------------------
The FON Group's capital expenditures totaled $360 million in the 2003 first quarter and $543 million in the same 2002 period. Global markets division capital expenditures were incurred mainly to enhance network reliability and upgrade capabilities for providing new products and services. The local division incurred capital expenditures to accommodate voice grade equivalent growth, expand capabilities for providing enhanced services, convert our network from circuit to packet switching, and continue the build-out of high-speed DSL services. PCS Group capital expenditures were $187 million in the 2003 first quarter and $603 million in the same 2002 period. Capital expenditures in both years were incurred to increase capacity and expand coverage. Lower capital spending in the 2003 first quarter was due to reprioritization efforts initiated late last year to re-focus capital spending on markets with greater impacts. Despite lower capital spending, PCS has experienced strong improvements in network performance since the deployment of 1x technology. The first quarter of 2002 capital expenditures also include the deployment of 3G technology, which was launched nationwide in the 2002 third quarter. Financing Activities
Quarters Ended March 31, ---------------------------------- 2003 2002 ------------------------------------------------------------------------ (millions) FON Group $ (1,633) $ 377 PCS Group (24) 1,992 ------------------------------------------------------------------------ Cash flows provided (used) by financing activities $ (1,657) $ 2,369 ----------------------------------
Financing activities include a debt reduction of $1.6 billion in the 2003 first quarter compared to an increase of $2.5 billion in the same 2002 period. The debt reduction in the 2003 first quarter is mainly due to the March 2003 tender for the 2003 and 2004 senior notes and the prepayment of the global markets division accounts receivable asset securitization facility. Sprint paid cash dividends of $114 million in both the 2003 and 2002 year-to-date periods. Capital Requirements Sprint's 2003 investing activities, mainly consisting of capital expenditures, are expected to total approximately $4.1 billion. FON Group capital expenditures are expected to be approximately $2.0 billion. PCS Group capital expenditures are expected to be approximately $2.1 billion. Sprint continues to review capital expenditures and will adjust capital investment in concert with growth. Dividend payments are expected to approximate $463 million in 2003. Sprint expects these capital requirements and dividend payments to be funded by Sprint's $2.1 billion cash balance at March 31, 2003, existing financing agreements, and expected 2003 cash flow from operations. Liquidity In recent years, Sprint has used the long-term bond market as well as other financial markets to fund its needs. As a result of its improved liquidity position, Sprint currently does not expect to borrow funds through the capital markets in 2003 to fund capital expenditures and operating and working capital requirements. In January 2003, Sprint closed on the $2.23 billion cash sale of its directory publishing business to R.H. Donnelley. Sprint has a revolving credit facility with a syndicate of banks totaling $1.5 billion which expires in August 2003. The $1.5 billion facility is unsecured, with no springing liens, and is structured as a 364-day credit line with a subsequent one-year, $1.0 billion term-out option. Sprint does not intend to draw against this facility. Sprint had standby letters of credit serving as a backup to various obligations of approximately $125 million as of March 31, 2003. Sprint has a PCS Group accounts receivable asset securitization facility that provides Sprint with up to $500 million of additional liquidity. The facility is a three-year program subject to annual renewals and does not include any ratings triggers that would allow the lenders involved to terminate the facility in the event of a credit rating downgrade. The maximum amount of funding available is based on numerous factors and will fluctuate each month. Sprint has not drawn against the facility and more than $210 million was available as of March 31, 2003. Sprint has a global markets division accounts receivable asset securitization facility that provides Sprint with up to $700 million of additional liquidity. The facility is a three-year program subject to annual renewals and does not include any ratings triggers that would allow the lenders involved to terminate the facility in the event of a credit rating downgrade. The maximum amount of funding available is based on numerous factors and will fluctuate each month. In February 2003, Sprint prepaid all outstanding borrowings under this facility. As of March 31, 2003, Sprint had more than $470 million total funding available under the facility, and these funds are available to be redrawn at any time. The undrawn loan facilities described above have interest rates equal to LIBOR or Prime Rate plus a spread that varies depending on our credit ratings. Debt maturities for the remainder of 2003 total approximately $965 million. Sprint's $2.1 billion cash balance at March 31, 2003, existing financing agreements, and expected 2003 cash flow from operations more than fund these requirements. Any borrowings Sprint may incur are ultimately limited by certain debt covenants. Sprint could borrow up to an additional $5.1 billion at March 31, 2003 under the most restrictive of its debt covenants. Sprint is currently in compliance with all debt covenants associated with its borrowings. Sprint completed its tender offers to repurchase senior notes in March 2003 in the amount of $1.1 billion. Sprint continually evaluates various factors and, as a result, may repurchase additional debt in the future. Fitch Ratings (Fitch) currently rates Sprint's long-term senior unsecured debt at BBB with a stable outlook. Standard and Poor's Corporate Ratings (Standard and Poor's) currently rates Sprint's long-term senior unsecured debt at BBB- with a stable outlook. Moody's Investors Service (Moody's) currently rates Sprint's long-term senior unsecured debt at Baa3 with a negative outlook. Sprint's ability to fund its capital needs is ultimately impacted by the overall capacity and terms of the bank, term-debt and equity markets. There is significant volatility in the markets at this time caused by the economic downturn, recent business failures and reduced confidence in the financial accounting process. Sprint continues to monitor the markets closely and to take steps to maintain as much financial flexibility as possible, while maintaining a reasonable capital structure cost. Sprint currently does not intend to access the markets other than extending, replacing or renewing current credit arrangements. Off-Balance Sheet Financing Sprint does not participate in, nor secure, financings for any unconsolidated, special purpose entities. - -------------------------------------------------------------------------------- Financial Strategies - -------------------------------------------------------------------------------- General Risk Management Policies Sprint selectively enters into interest rate swap and cap agreements to manage its exposure to interest rate changes on its debt. Sprint also enters into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint seeks to minimize counterparty credit risk through stringent credit approval and review processes, the selection of only the most creditworthy counterparties, continual review and monitoring of all counterparties, and thorough legal review of contracts. Sprint also controls exposure to market risk by regularly monitoring changes in foreign exchange and interest rate positions under normal and stress conditions to ensure they do not exceed established limits. Sprint's derivative transactions are used principally for hedging purposes and comply with Board-approved policies. Senior management receives frequent status updates of all outstanding derivative positions. Interest Rate Risk Management Fair Value Hedges Sprint enters into interest rate swap agreements to minimize exposure to interest rate movements and achieve an optimal mixture of floating and fixed-rate debt while minimizing liquidity risk. The interest rate swap agreements designated as fair value hedges effectively convert Sprint's fixed-rate debt to a floating rate by receiving fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal amount. As of March 31, 2003, Sprint had no outstanding fair value hedges. Cash Flow Hedges Sprint enters into interest rate swap agreements designated as cash flow hedges to reduce the impact of interest rate movements on future interest expense by effectively converting a portion of its floating-rate debt to a fixed-rate. As of March 31, 2003, Sprint had no outstanding interest rate cash flow hedges. Other Derivatives In certain business transactions, Sprint is granted warrants to purchase the securities of other companies at fixed rates. These warrants are supplemental to the terms of the business transaction and are not designated as hedging instruments. During 2002, Sprint entered into forward sale contracts with net purchased equity option derivatives to monetize equity securities held as available for sale. The derivatives have been designated as cash flow hedges to reduce the variability in expected cash flows related to the forecasted sale of the underlying equity securities. Foreign Exchange Risk Management Sprint's foreign exchange risk management program focuses on reducing transaction exposure to optimize consolidated cash flow. Sprint's primary transaction exposure results from payments made to and received from overseas telecommunications companies for completing international calls made by Sprint's domestic customers. These international operations were not material to the consolidated financial position at March 31, 2003 or results of operations or cash flows for the quarter ended March 31, 2003. Sprint has not entered into any significant foreign currency forward contracts or other derivative instruments to reduce the effects of adverse fluctuations in foreign exchange rates. As a result, Sprint was not subject to material foreign exchange risk. PART I. Item 3 Item 3. Quantitative and Qualitative Disclosures about Market Risk The risk inherent in Sprint's market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. Sprint is susceptible to certain risks related to changes in interest rates and foreign currency exchange rate fluctuations. Sprint does not purchase or hold any derivative financial instruments for trading purposes. Interest Rate Risk The communications industry is a capital intensive, technology driven business. Sprint is subject to interest rate risk primarily associated with its borrowings. Sprint selectively enters into interest rate swap and cap agreements to manage its exposure to interest rate changes on its debt. Approximately 93% of Sprint's debt at March 31, 2003 is fixed-rate debt. While changes in interest rates impact the fair value of this debt, there is no impact to earnings and cash flows because Sprint intends to hold these obligations to maturity unless refinancing conditions are favorable. Sprint performs interest rate sensitivity analyses on its variable-rate debt. These analyses indicate that a one percentage point change in interest rates would have an annual impact of $10 million pre-tax on the statements of operations and cash flows at March 31, 2003. While Sprint's variable-rate debt is subject to earnings and cash flows impacts as interest rates change, it is not subject to changes in fair values. Sprint also performs a sensitivity analysis on the fair market value of its outstanding debt. A 10% decline in market interest rates would cause a $421 million increase in fair market value of its debt to $18.0 billion. This analysis excludes Sprint's equity unit notes. Foreign Currency Risk Sprint also enters into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Sprint uses foreign currency derivatives to hedge its foreign currency exposure related to settlement of international telecommunications access charges. The dollar equivalent of Sprint's net foreign currency payables was $2 million at March 31, 2003. The potential immediate pre-tax loss to Sprint that would result from a hypothetical 10% change in foreign currency exchange rates based on these positions would be less than $1 million. PART I. Item 4 Item 4. Controls and Procedures In response to adoption of the Sarbanes-Oxley Act of 2002, Sprint formalized its disclosure controls and procedures. In connection with the preparation of this Form 10-Q and within 90 days before the filing of the report, Sprint's Chief Executive Officer and Chief Financial Officer directed Sprint's internal auditors to conduct a review of the effectiveness of these disclosure controls and procedures and report their conclusions. The Chief Executive Officer and Chief Financial Officer also met with other members of management, members of the financial accounting and legal departments, and Sprint's independent auditors to discuss and evaluate Sprint's disclosures and the effectiveness of the disclosure controls and procedures. Based on these discussions and the report of the internal auditors, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the disclosure controls and procedures were effective and enabled Sprint to disclose all material financial and non-financial information affecting its businesses. No significant changes were made in Sprint's internal controls or in other factors that could significantly affect those controls after the date of the evaluation. PART II. Other Information PART II. - Other Information Item 1. Legal Proceedings On March 19, 2003, counsel for plaintiffs and defendants announced a settlement, subject to court approval, of the derivative action filed by The Amalgamated Bank, an institutional stockholder, which was reported in Sprint's 2002 Form 10-K. The settlement does not reflect any admission of liability by the defendants and there has been no finding of any liability by the defendants. The settlement includes the adoption of certain enhancements to Sprint's corporate governance policies and practices; an agreement by Board members and certain former senior executives to certain restrictions on options, or any stock obtained through the exercise of options, accelerated by stockholder approval of the WorldCom merger; and the payment of plaintiff's attorneys' fees in the form of 250,000 FON shares and 500,000 PCS shares. Sprint has reserved $5 million for the payment of these attorney's fees in the 2003 first quarter in other income (expense), net. Also on March 19, 2003, as part of the same negotiations, plaintiffs and defendants announced a settlement, subject to court approval, of the securities class action filed by The New England Health Care Employees Pension Fund, an institutional stockholder, and two other stockholders, which was reported in Sprint's 2002 Form 10-K. The settlement does not reflect any admission of liability by defendants, and there has been no finding of any violation or liability by defendants. The settlement provides for the payment to the plaintiff class of a total of $50 million. Sprint has reserved $45 million for the settlement of the securities class action in the 2003 first quarter in other income (expense), net. This reserve is net of insurance coverage that is undisputed by insurance carriers. Sprint expects further amounts will be reimbursed by insurance carriers and is currently in negotiations about this claim coverage. Item 2. Changes in Securities Articles Amendment All of the outstanding shares of Preferred Stock-Fifth Series were repurchased on March 14, 2003. Following the repurchase and retirement of the shares of Preferred Stock-Fifth Series, Sprint filed a Certificate of Retirement with the Kansas Secretary of State on March 25, 2003. This amended Sprint's Articles of Incorporation to eliminate all reference to the Preferred Stock-Fifth Series. The 95 shares were added back to shares of preferred stock authorized and available for issuance. Shareholder Rights Plan Amendment On March 12, 2003, the Sprint Board of Directors approved an amendment to the Amended and Restated Rights Agreement between Sprint and UMB Bank, n.a., as Rights Agent, adding a provision requiring the Nominating and Corporate Governance Committee of the Sprint Board to review the Rights Agreement at least every three years in order to consider whether maintenance of the Rights Agreement continues to be in the best interests of Sprint and its shareholders. Sale of Unregistered Equity Securities In March, 2003, Sprint issued to certain of its executive officers an aggregate of 1,202,750 restricted stock units relating to shares of FON Stock and an aggregate of 1,202,750 restricted stock units relating to shares of PCS Stock. Included in these restricted stock units were 799,300 restricted stock units relating to shares of FON Stock and 799,300 restricted stock units relating to shares of PCS Stock issued to Gary Forsee, Sprint's new Chief Executive Officer, under his employment contract. The other restricted stock units were granted to executive officers as part of their long-term incentive compensation. Each restricted stock unit represents the right to one share of common stock once the unit vests. The restricted stock units also include dividend equivalent rights, which means that, when Sprint pays a dividend on the stock represented by the units, the grantee of the units is entitled to additional shares of the stock when the units vest. The units vest at various times beginning in 2004 and ending in 2008. Neither the units nor the common stock issuable once the units vest were registered under the Securities Act of 1933. The issuance of the restricted stock units was exempt from registration under the Securities Act in reliance on the exemption provided by Section 4(2) of the Securities Act because the restricted stock units were issued in transactions not involving a public offering. Sprint may in the future register the resale of the shares of stock to be received by the executive officers once the units vest. Item 3. Defaults Upon Senior Securities There were no reportable events during the quarter ended March 31, 2003. Item 4. Submission of Matters to a Vote of Security Holders There were no reportable events during the quarter ended March 31, 2003. Item 5. Other Information Ratios of Earnings to Fixed Charges Sprint's ratio of earnings to fixed charges was 1.32 in the 2003 first quarter and 1.36 in the 2002 first quarter. The ratio of earnings to fixed charges was computed by dividing fixed charges into the sum of earnings, after certain adjustments, and fixed charges. Earnings include income or loss from continuing operations before income taxes plus net losses in equity method investees, less capitalized interest. Fixed charges include interest on all debt of continuing operations, including amortization of debt issuance costs, and the interest component of operating rents. New Director In May 2003, the Sprint Board of Directors elected Michael M. Sears, executive vice president, office of the chairman and chief financial officer of the Boeing Company, as a director of Sprint replacing Ronald T. LeMay, who resigned in April 2003. William T. Esrey resigned as a director of Sprint in May 2003. New Officers At its May 2003 meeting, the Sprint Board of Directors elected the following new executive officers: Gary D. Forsee, Sprint's chief executive officer, was elected as chairman of the Board. Howard E. Janzen, formerly chairman, president and chief executive officer of Williams Communications, was elected president of the global markets division. Bruce N. Hawthorne, formerly a partner at the law firm of King & Spalding, was elected executive vice president and chief staff officer. Michael W. Stout, formerly vice president and chief technology and information officer at GE Capital, was elected executive vice president-chief information officer. William K. White, who has held various positions in Sprint's corporate communications department since 1993, was elected interim senior vice president-communications and brand management. The Board of Directors had elected the following executive officers in April 2003: Thomas A. Gerke, who had held various positions at Sprint, primarily in the legal department, since 1994, was elected as executive vice president-general counsel. James G. Kissinger, who had held various positions in Sprint's human resources department since 1984, was elected senior vice president-human resources. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this report: (2) Plan of acquisition, reorganization, arrangement, liquidation or succession: (a) Stock Purchase Agreement, by and between Sprint Corporation, Centel Directories LLC and R.H. Donnelley Corporation, dated as of September 21, 2002 (filed as Exhibit 2 to Sprint Corporation Current Report on Form 8-K dated September 21, 2002 and incorporated herein by reference). (b) Supplemental Agreement to Stock Purchase Agreement, by and between Sprint Corporation, Centel Directories LLC and R.H. Donnelley Corporation, dated as of December 31, 2002 (filed as Exhibit 2(b) to Sprint Corporation Current Report on Form 8-K dated January 3, 2003 and incorporated herein by reference). (3) Articles of Incorporation and Bylaws: (a) Articles of Incorporation, as amended. (b) Bylaws, as amended (filed as Exhibit 3.2 to Amendment No. 4 to Sprint Corporation's Registration Statement on Form 8-A relating to Sprint's Series 1 PCS Common Stock, filed April 17, 2002, and incorporated herein by reference). (4) Instruments defining the Rights of Sprint's Security Holders: (a) The rights of Sprint's equity security holders are defined in the Fifth, Sixth, Seventh and Eighth Articles of Sprint's Articles of Incorporation. See Exhibit 3(a). (b) Provisions regarding Stockholders' Meetings are set forth in Article III of the Bylaws. Provisions regarding the Capital Stock Committee are set forth in Article IV, Section 12 of the Bylaws. See Exhibit 3(b). (c) Amended and Restated Rights Agreement dated as of November 23, 1998, between Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 4.1 to Amendment No. 1 to Sprint Corporation's Registration Statement on Form 8-A relating to Sprint's PCS Group Rights, filed November 25, 1998, and incorporated herein by reference). (d) Amendment dated March 28, 2003, to Amended and Restated Rights Agreement between the Registrant and UMB, n.a., as Rights Agent (filed as Exhibit 4.2 to Amendment No. 3 to Sprint Corporation's Registration Statement on Form 8-A relating to Sprint's PCS Group Rights, filed April 2, 2003 and incorporated herein by reference). (e) Amended and Restated Standstill Agreement dated November 23, 1998, by and among Sprint Corporation, France Telecom and Deutsche Telekom AG (filed as Exhibit 4E to Post-Effective Amendment No. 2 to Sprint Corporation's Registration Statement on Form S-3 (No. 33-58488) and incorporated herein by reference), as amended by the Master Transfer Agreement dated January 21, 2000 between and among France Telecom, Deutsche Telekom AG, NAB Nordamerika Beteiligungs Holding GmbH, Atlas Telecommunications, S.A., Sprint Corporation, Sprint Global Venture, Inc. and the JV Entities set forth in Schedule II thereto (filed as Exhibit 2 to Sprint Corporation's Current Report on Form 8-K dated January 26, 2000 and incorporated herein by reference). (f) Tracking Stock Policies of Sprint Corporation, as amended (filed as Exhibit 4(c) to Sprint Corporation's Annual Report on Form 10-K/A for the year ended December 31, 2001 and incorporated herein by reference). (10) Executive Compensation Plans and Arrangements: (a) 1990 Restricted Stock Plan, as amended (filed as Exhibit (10)(g) to Sprint Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). (b) 1990 Stock Option Plan, as amended (filed as Exhibit (10)(f) to Sprint Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). (c) Employment Agreement dated as of March 19, 2003, by and among Sprint Corporation, Sprint/United Management Company and Gary D. Forsee. (d) Letter Agreement dated April 9, 2003 and Separation Agreement dated as of April 9, 2003 by and among Sprint Corporation, Sprint/United Management Company and Ronald T. LeMay. (e) Form of Indemnification Agreements between Sprint Corporation and its Directors and Officers. (f) Summary of Executive Officer Benefits and Board of Directors Benefits and Fees. (12) Computation of Ratios of Earnings to Fixed Charges (99)(a) Statement of Sprint Corporation's Chief Executive Officer in compliance with 18 U.S.C. ss.1350 as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002. (99)(b) Statement of Sprint Corporation's Chief Financial Officer in compliance with 18 U.S.C. ss.1350 as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002. Sprint will furnish to the Securities and Exchange Commission, upon request, a copy of the instruments defining the rights of holders of long-term debt that does not exceed 10% of the total assets of Sprint. (b) Reports on Form 8-K Sprint filed a Current Report on Form 8-K dated January 3, 2003 in which it reported that it had closed the sale of its directory business. Sprint filed a Current Report on Form 8-K dated February 5, 2003, in which it reported that it had announced fourth quarter 2002 and calendar year 2002 results. The news release regarding fourth quarter 2002 and calendar year 2002 results, which was included as an exhibit to the Current Report, included the following financial information: Sprint Corporation Consolidated Statements of Operations Sprint Corporation Consolidated Balance Sheets Sprint Corporation Condensed Consolidated Cash Flow Information Sprint Corporation Selected Operating Results Sprint Corporation Pro Forma Selected Operating Results Sprint FON Group Summary Financial Information Sprint Corporation Directory Publishing Business Sprint Corporation PCS Group Net Customer Additions Sprint filed a Current Report on Form 8-K dated March 7, 2003, in which it reported that Sprint's Chief Executive Officer and Chief Financial Officer filed with the Securities and Exchange Commission statements in compliance with 18 U.S.C. ss.1350 as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002 with respect to Sprint Corporation's 2002 Form 10-K. Sprint filed a Current Report on Form 8-K dated March 18, 2003 in which it reported that it had announced that Gary D. Forsee, formerly Vice Chairman of BellSouth Corporation, would become Chief Executive Officer of Sprint and a member of its board of directors effective March 19, 2003. Sprint filed a Current Report on Form 8-K dated March 19, 2003 in which it reported that it had announced a settlement, subject to court approval, of the securities class-action and derivative lawsuits related to the failed merger with WorldCom. Sprint filed a Current Report on Form 8-K dated April 21, 2003, in which it reported that it had announced first quarter 2003 results. The news release regarding first quarter 2003 results, which was furnished as an exhibit to the Current Report, included the following financial information: Sprint Corporation Consolidated Statements of Operations Sprint Corporation Consolidated Balance Sheets Sprint Corporation Condensed Consolidated Cash Flow Information Sprint Corporation Reconciliation of Non-GAAP Liquidity Measures Sprint Corporation FON Group - Local Division Selected Information Sprint Corporation PCS Group Net Customer Additions SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPRINT CORPORATION ----------------------------------- (Registrant) By /s/ John P. Meyer ----------------------------------- John P. Meyer Senior Vice President -- Controller Principal Accounting Officer Dated: May 14, 2003 CERTIFICATIONS I, Gary D. Forsee, Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sprint Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Gary D. Forsee ------------------------------------ Gary D. Forsee Chief Executive Officer CERTIFICATIONS I, Robert J. Dellinger, Executive Vice President and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sprint Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Robert J. Dellinger ------------------------------------ Robert J. Dellinger Executive Vice President and Chief Financial Officer EX-3 3 articles32503.txt AMENDED ARTICLES OF INCORPORATION Exhibit 3(a) ARTICLES OF INCORPORATION OF SPRINT CORPORATION (as amended March 25, 2003) First The name of the Corporation is SPRINT CORPORATION. Second This Corporation is organized for profit, and the purpose for which it is formed is to engage in any lawful act or activity for which corporations may be organized under the Kansas General Corporation Code (the "General Corporation Code"). Third The Corporation's registered office is located at 6200 Sprint Parkway, Overland Park, Johnson County, Kansas 66251; Mr. J. Richard Devlin is the registered agent at said address. Fourth The Corporation shall have perpetual existence. Fifth Section 1. Number of Directors. The number of Directors shall not be less than eight nor more than 20 as may be determined from time to time by the affirmative vote of the majority of the Board of Directors. Section 2. Election of Directors. (a) Subject to clause (b) below, the holders of Corporation Common Stock shall have the right to elect that number of Directors equal to the excess of (x) the total number of Directors over (y) the number of Directors, if any, that the holders of Preferred Stock, voting separately by class or series, are entitled to elect in accordance with the provisions of ARTICLE SIXTH of these Articles of Incorporation. (b) So long as Section 310 remains in effect, under no circumstances shall an Alien Director elected by the holders of Corporation Common Stock be qualified to serve as a Director if the number of Aliens who would then be serving as members of the Board of Directors, including such elected Alien, would constitute more than the maximum number of Aliens permitted by Section 310 on the Board of Directors. (c) The Directors (other than any Directors elected by the holders of any one or more classes or series of Preferred Stock having the right, voting separately by class or series, to elect Directors) shall be divided into three classes, designated Class I, Class II and Class III, with the term of office of one class expiring each year. The number of Class I, Class II and Class III Directors shall consist, as nearly as practicable, of one third of the total number of Directors (other than any Directors elected by the holders of any one or more classes or series of Preferred Stock having the right, voting separately by class or series, to elect Directors). At each annual meeting of stockholders of this Corporation, successors to the class of Directors whose term expires at that annual meeting shall be elected for a three-year term. (d) Whenever the holders of any one or more classes or series of Preferred Stock shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these Articles of Incorporation applicable thereto, and such Directors so elected shall not be divided into classes pursuant to this ARTICLE FIFTH unless expressly provided by such terms. Section 3. Change in Number of Directors. If the number of Directors (other than any Directors elected by the holders of any one or more classes or series of Preferred Stock having the right, voting separately by class or series, to elect Directors) is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible. Section 4. Term of Office. (a) Each Director shall be elected for a three-year term. A Director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify to serve, subject to prior death, resignation, retirement, disqualification or removal from office. (b) Any vacancy on the Board of Directors (whether resulting from an increase in the total number of Directors, the departure of one of the Directors or otherwise) may be filled by the affirmative vote of a majority of the Directors elected by the same class or classes of stockholders which would be entitled to elect the Director who would fill such vacancy if the annual meeting of stockholders of this Corporation were held on the date on which such vacancy occurred, provided that at any time when there is only one such Director so elected and then serving, such Director may fill such vacancy and, provided further, that at any time when there are no such Directors then serving, the stockholders of the class or classes entitled to elect the Director who will fill such vacancy shall have the right to fill such vacancy. (c) Any additional Director of any class elected to fill a vacancy resulting from an increase in the number of Directors of such class shall hold office for a term that shall coincide with the remaining term of the Directors of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director. Any Director elected to fill a vacancy not resulting from an increase in the number of Directors shall have the same remaining term as that of his predecessor. Section 5. Rights, Powers, Duties, Rules and Procedures; Amendment of Bylaws. (a) Except to the extent prohibited by law or as set forth in these Articles of Incorporation or the Bylaws, the Board of Directors shall have the right (which, to the extent exercised, shall be exclusive) to establish the rights, powers, duties, rules and procedures that from time to time shall govern the Board of Directors and each of its members, including, without limitation, the vote required for any action by the Board of Directors, and that from time to time shall affect the Directors' power to manage the business and affairs of this Corporation. Except to the extent required by law or as set forth in these Articles of Incorporation or the Bylaws, no Bylaw shall be adopted by stockholders which shall impair or impede the implementation of the foregoing. (b) The Board of Directors is expressly authorized and empowered, in the manner provided in the Bylaws of this Corporation, to adopt, amend and repeal the Bylaws of this Corporation in any respect to the full extent permitted by the General Corporation Code not inconsistent with the laws of the General Corporation Code or with these Articles of Incorporation, provided that prior to November 23, 2002, ARTICLE IV, SECTION 13 of the Bylaws may not be amended, altered, repealed, superseded or made inoperative or ineffective by adoption of other provisions to the Bylaws or these Articles of Incorporation (any such action, a "CP Covered Bylaws Amendment") without the affirmative vote of the holders of record of (i) a majority of the votes represented by the shares of PCS Stock and Class A Common Stock then outstanding, voting together as a single class in accordance with ARTICLE SIXTH, Section 3.2(d), and (ii) a majority of the votes represented by the shares of Corporation Common Stock, voting together as a single class, at any annual or special meeting of stockholders, the notice of which shall have specified or summarized the proposed CP Covered Bylaws Amendment. Section 6. Removal. A Director (other than a Director elected by the holders of any class or series of Preferred Stock having the right, voting separately by class or series, to elect Directors) may be removed only for cause. No Director so removed may be reinstated for so long as the cause for removal continues to exist. Such removal for cause may be effected only by the affirmative vote of the holders of a majority of the votes represented by the shares of the class or classes of stockholders which were entitled to elect such Director. Section 7. Definitions. Certain capitalized terms used in this ARTICLE FIFTH without definition have the meanings set forth in Section 10 of ARTICLE SIXTH. Sixth Section 1.1. Authorized Shares. The total number of shares of capital stock which may be issued by this Corporation is 8,920,000,000, and the designation of each class or series, the number of authorized shares of each class or series and the par value of the shares of each class or series, are as follows: 2
Designation Class Series No. of Shares Par Value The "Series 1 FON Stock" FON Common Stock Series 1 2,500,000,000 $2.00 per share The "Series 2 FON Stock" FON Common Stock Series 2 500,000,000 $2.00 per share The "Series 3 FON Stock" FON Common Stock Series 3 1,200,000,000 $2.00 per share The "Old Class A Common Stock" Class A Common Stock 100,000,000 $2.50 per share(1) The "Series 1 PCS Stock" PCS Common Stock Series 1 3,000,000,000 $1.00 per share The "Series 2 PCS Stock" PCS Common Stock Series 2 1,000,000,000 $1.00 per share The "Series 3 PCS Stock" PCS Common Stock Series 3 600,000,000 $1.00 per share The "Preferred Stock" Preferred Stock See Section 20,000,000 No par value 13 below _________________ (1) Par value at February 13, 2001, before adjustment pursuant to Section 1.2(e) or Section 8.3(a).
Section 1.2. Representation of Equity Value; Exchange of Interests in Class A Common Stock. (a) The aggregate common equity value of the Corporation and each Business Group shall, at any time, be represented as follows: (i) The total common equity value of the Corporation shall be represented by the sum of the outstanding shares of (A) the FON Stock, (B) the PCS Stock and (C) the Class A Common Stock. (ii) The total common equity value of the FON Group shall be represented by the sum of (A) the outstanding shares of the FON Stock and (B) the outstanding shares of Old Class A Common Stock (but only to the extent such stock represents a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group). (iii) The total common equity value of the PCS Group shall be represented by the sum of (A) the outstanding shares of the PCS Stock, (B) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, and (C) the outstanding shares of Old Class A Common Stock (but only to the extent such stock represents a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group). (b) The Old Class A Common Stock shall, at all times, be deemed to represent a number of shares of Series 3 FON Stock and/or Series 3 PCS Stock equal to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group plus the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group. (c) Each holder of a share of Old Class A Common Stock shall have the right, exercisable at any time and from time to time, to cause the Corporation to issue the following: (i) in respect of each share notionally represented in the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group, either a share of Series 3 FON Stock to such holder (or to a Qualified Subsidiary of such holder) or a share of Series 1 FON Stock to a designee of such holder, provided a transfer of such share to such designee is permitted under the Stockholders' Agreement; or (ii) in respect of each share notionally represented in the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, either a share of Series 3 PCS Stock to such holder (or to a Qualified Subsidiary of such holder) or a share of Series 1 PCS Stock to a designee of such holder, provided a transfer of such share to such designee is permitted under the Stockholders' Agreement. A holder of Old Class A Common Stock may exercise its right to cause any such issuance solely with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group, solely with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, or any combination thereof; provided, 3 (x) when the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group is reduced to zero, no further shares of Series 1 FON Stock or Series 3 FON Stock may be issued pursuant to this Section 1.2(c), (y) when the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group is reduced to zero, no further shares of Series 1 PCS Stock or Series 3 PCS Stock may be issued pursuant to this Section 1.2(c), and (z) if at any time the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group are both zero, the Old Class A Common Stock may be redeemed, at the Corporation's option, at a redemption price of $0.001 per share. (d) Deleted. (e) Automatic Reclassification and Adjustment to Par Value Amount. Upon each issuance of any shares of Series 1 FON Stock and/or Series 3 FON Stock, on the one hand, and Series 1 PCS Stock and/or Series 3 PCS Stock, on the other, in accordance with Section 1.2(c) or Section 8.3(a), each share of the Corporation's existing Old Class A Common Stock will be automatically reclassified into a share of Class A Common Stock with a par value amount equal to the Reduced Par Value Amount and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, respectively, will be reduced in accordance with the definitions of such terms set forth in ARTICLE SIXTH, Section 10; provided that after each such reclassification, the sum of (x) the total number of outstanding shares of Series 1 FON Stock and/or Series 3 FON Stock, on the one hand, or Series 1 PCS Stock and/or Series 3 PCS Stock, on the other, so issued in accordance with Section 1.2(c) or Section 8.3(a) times the par value per share of such stock and (y) the total number of outstanding shares of Old Class A Common Stock immediately after such issuance times the Reduced Par Value Amount will always equal (z) the total number of outstanding shares of Old Class A Common Stock immediately prior to such issuance times the par value per share of such shares existing immediately prior to such issuance. (f) Notice Provisions; Issuance of Stock Certificates, etc. (i) A Class A Holder shall exercise its rights under this Section 1.2 by delivering a written notice to the Corporation (an "Issuance Notice") signed by an authorized officer of the Class A Holder specifying (1) the class and series of the Shares to be issued by the Corporation, (2) the number of shares of each to be issued pursuant to such request, and (3) the name of the Person in whose name the shares are to be issued (such a Person, a "Designee"). (ii) As promptly as practical after receipt of an Issuance Notice, and in no event later than 5 Business Days thereafter, the Corporation will deliver or cause to be delivered a certificate or certificates representing the number of duly issued, fully paid and nonassessable shares issued pursuant to the Issuance Notice; provided, however, that the Corporation shall not be obligated to issue such shares if any material defect exists with respect to such Issuance Notice. (iii) Immediately upon the issuance of the shares of Series 1 FON Stock, Series 3 FON Stock, Series 1 PCS Stock and Series 3 PCS Stock pursuant to an Issuance Notice, the Designee shall be treated for all purposes as having become the record holder of the shares of such stock so issued. (iv) This Corporation shall pay all United States federal, state or local documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares in connection with an Issuance Notice pursuant to this Section 1.2, provided that this Corporation shall not be required to pay any tax which may be payable in respect of any registration of Transfer involved in the issue or delivery of such shares in a name other than that of the registered holder of the Class A Common Stock that gave rise to the right to cause the issuance of such Shares, and no such issue or delivery shall be made unless and until the person 4 requesting such issue has paid to this Corporation the amount of any such tax or has established, to the satisfaction of this Corporation, that such tax has been paid. (v) In addition to the obligations of the Corporation contained in these Articles of Incorporation to reserve and keep available Shares, this Corporation shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Series 3 FON Stock, Series 3 PCS Stock, Series 1 PCS Stock and Series 1 FON Stock and its issued Series 1 FON Stock or Series 1 PCS Stock held in its treasury, Shares for the purpose of effecting the issuances of the Series 3 FON Stock, Series 1 FON Stock, Series 3 PCS Stock and Series 1 PCS Stock contemplated hereby. Section 2. General Provisions Relating to All Stock. 2.1. Preemptive Rights; Cumulative Voting. No holder of shares of capital stock of any class or series of this Corporation or holder of any security or obligation convertible into shares of capital stock of any class or series of this Corporation shall have any preemptive right whatsoever to subscribe for, purchase or otherwise acquire shares of capital stock of any class or series of this Corporation, whether now or hereafter authorized; provided that this provision shall not (i) prohibit this Corporation from granting, contractually or otherwise, to any such holder, the right to purchase additional securities of this Corporation or (ii) otherwise limit or otherwise modify any rights of any such holder pursuant to any such contract or other agreement. Stockholders of this Corporation shall not be entitled to cumulative voting of their shares in elections of Directors. 2.2. Redemption of Shares Held by Aliens. Notwithstanding any other provision of these Articles of Incorporation to the contrary, outstanding shares of Non-Class A Common Stock Beneficially Owned by Aliens and Class A Stock Beneficially Owned by Aliens may be redeemed by this Corporation, by action duly taken by the Board of Directors (with the approval of a majority of the Continuing Directors (as defined in ARTICLE SEVENTH) at a meeting at which at least seven Continuing Directors are present, except that no such approval of the Continuing Directors shall be required if: (i) the Fair Price Provisions have been deleted in their entirety, (ii) the Fair Price Provisions have been modified so as explicitly not to apply to any Class A Holder, or they have been modified in a manner reasonably satisfactory to FT and DT so as explicitly not to apply to any transactions with any Class A Holder contemplated under these Articles of Incorporation, (iii) the transaction in question is not a "Business Combination" within the meaning of the Fair Price Provisions, or (iv) the Class A Holder that is a party to the transaction, along with its Affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as in effect on October 1, 1982) and Associates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as in effect on October 1, 1982), is no longer an "Interested Stockholder" or "Affiliate" of an "Interested Stockholder" within the meaning of the Fair Price Provisions), to the extent necessary or advisable, in the judgment of the Board of Directors, for this Corporation or any of its Subsidiaries to comply with the requirements of Section 310 (each of (i) through (iv), a "Fair Price Condition"), provided that (i) for purposes of these Articles of Incorporation, redemption of the Class A Common Stock is deemed to occur upon the reduction, in consideration of payments otherwise made in respect of redemptions under this Section 2.2, of Shares Issuable With Respect To The Class A Equity Interest In The FON Group or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group that are represented by the Class A Common Stock (with any such redemption of shares of Class A Common Stock being referred to in this Section 2.2 as a redemption of Shares Issuable With Respect To The Class A Equity Interest In The FON Group or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group, as applicable) and (ii) Series 3 FON Stock, Series 3 PCS Stock, Shares Issuable With Respect To The Class A Equity Interest In The FON Group and Shares Issuable With Respect To The Class A Equity Interest In The PCS Group may only be redeemed if, and only to the extent that, they represent in the aggregate Votes constituting greater than 20% of the aggregate Voting Power of this Corporation immediately prior to the time of such redemption. 5 The terms and conditions of such redemption shall be as follows, subject in any case to any other rights of a particular Alien or of this Corporation pursuant to any contract or agreement between such Alien and this Corporation: (a) except as provided in Section 2.2(f), the redemption price of the shares to be redeemed pursuant to this Section 2.2 shall be equal to the Market Price of such shares on the third Business Day prior to the date notice of such redemption is given pursuant to Section 2.2(d), provided that, except as provided in Section 2.2(f), such redemption price as to any Alien who purchased such shares of Non-Class A Common Stock after November 21, 1995 and within one year prior to the Redemption Date shall not (unless otherwise determined by the Board of Directors) exceed the purchase price paid by such Alien for such shares; (b) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (c) if less than all of the shares Beneficially Owned by Aliens are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the Board of Directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the Board of Directors to be equitable, provided that this Corporation shall (i) in all cases be entitled to redeem shares of Non- Class A Common Stock Beneficially Owned by Aliens prior to redeeming any shares of Series 3 FON Stock, Series 3 PCS Stock, Shares Issuable With Respect To The Class A Equity Interest In The FON Group or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group Beneficially Owned by Aliens, (ii) redeem Shares Issuable With Respect To The Class A Equity Interest In The FON Group or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group of the holders of Old Class A Common Stock on a pro rata basis, and (iii) redeem shares of Series 3 PCS Stock and Series 3 FON Stock prior to redeeming Shares Issuable With Respect To The Class A Equity Interest In The FON Group and Shares Issuable With Respect To The Class A Equity Interest In The PCS Group; (d) this Corporation shall give notice of the Redemption Date at least 30 days prior to the Redemption Date to the record holders of the shares selected to be redeemed (unless waived in writing by any such holder) by delivering a written notice by first class mail, postage pre-paid, to the holders of record of the shares selected to be redeemed, addressed to such holders at their last address as shown upon the stock transfer books of this Corporation (each such notice of redemption specifying the date fixed for redemption, the redemption price, the place or places of payment and that payment will be made upon presentation and surrender of the certificates representing such shares), provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; (e) on the Redemption Date, unless this Corporation shall have defaulted in paying or setting aside for payment the cash or Redemption Securities payable upon such redemption, any and all rights of Aliens in respect of shares so redeemed (including without limitation any rights to vote or participate in dividends), shall cease and terminate, and from and after such Redemption Date such Aliens shall be entitled only to receive the cash or Redemption Securities payable upon redemption of the shares to be redeemed; and (f) such other terms and conditions as the Board of Directors shall determine to be equitable, provided that, (1) if any Shares Issuable With Respect To The Class A Equity Interest In The FON Group or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group are redeemed pursuant to this Section 2.2, (x) the redemption price, on a per share basis, of Shares Issuable With Respect To The Class A Equity Interest In The FON Group shall be an amount equal to the redemption price of a share of Series 3 FON Stock calculated pursuant to subsection (f)(2) of this Section 2.2, and (y) the redemption price, on a per share basis, of Shares Issuable With Respect To The Class A Equity Interest In The PCS Group shall be an amount equal to the redemption price of shares of Series 3 PCS Stock calculated pursuant to subsection (f)(4) of this Section 2.2; 6 (2) if any shares of Series 3 FON Stock are redeemed pursuant to this Section 2.2, the redemption price thereof shall be the Market Price of a share of Series 1 FON Stock on the Redemption Date; (3) if any shares of Series 2 PCS Stock (or Series 2 FON Stock, if applicable) are redeemed pursuant to this Section 2.2, the redemption price of any such shares redeemed shall be the Market Price of a share of Series 1 PCS Stock (or Series 1 FON Stock, if applicable) on the Redemption Date; and (4) if any shares of Series 3 PCS Stock are redeemed pursuant to this Section 2.2, the redemption price thereof shall be the Market Price of a share of Series 1 PCS Stock on the Redemption Date. The redemption price to be paid to the Class A Holders shall be modified in accordance with Article IX of the Stockholders' Agreement if such redemption is effected within the 120-day period described in the last sentence of Section 2.11 of the Stockholders' Agreement (as such period may be extended pursuant thereto) following an election by this Corporation to redeem shares in accordance with such Section. Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of shares to be redeemed received such notice, provided that all notices to be given to the Class A Holders shall be made and deemed delivered in accordance with Section 11 of ARTICLE SIXTH and failure to give such notice by mail, or any defect in such notice, to holders of shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares. 2.3. Beneficial Ownership Inquiry. (a) This Corporation may by written notice require a Person that is a holder of record of Non-Class A Common Stock or Class A Stock or that this Corporation knows to have, or has reasonable cause to believe has, Beneficial Ownership of Non-Class A Common Stock or Class A Stock, to certify that, to the knowledge of such Person: (i) no Non-Class A Common Stock or Class A Stock as to which such Person has record ownership or Beneficial Ownership is Beneficially Owned by Aliens; or (ii) the number and class or series of shares of Non- Class A Common Stock or Class A Stock owned of record or Beneficially Owned by such Person that are owned of record or Beneficially Owned by Persons that are Aliens are as set forth in such certificate. (b) With respect to any Non-Class A Common Stock or Class A Stock identified by such Person in response to Section 2.3(a)(ii) above, this Corporation may require such Person to provide such further information as this Corporation may reasonably require in order to implement the provisions of Section 2.2 of ARTICLE SIXTH. (c) For purposes of applying Section 2.2 of ARTICLE SIXTH with respect to any Non-Class A Common Stock or Class A Stock, if any Person fails to provide the certificate or other information to which this Corporation is entitled pursuant to this Section 2.3, this Corporation in its sole discretion may presume that the Non- Class A Common Stock or Class A Stock in question is, or is not, Beneficially Owned by Aliens. 2.4. Factual Determinations. The Board of Directors shall have the power and duty to construe and apply the provisions of Sections 2.2 and 2.3 of ARTICLE SIXTH and, with respect to shares of Non-Class A Common Stock, to make all determinations necessary or desirable to implement such provisions, including but not limited to: (a) the number of shares of Non-Class A Common Stock that are Beneficially Owned by any Person; (b) whether a Person is an Alien; (c) the application of any other definition of these Articles of Incorporation to the given facts; and (d) any other matter relating to the applicability or effect of Section 2.2 of ARTICLE SIXTH. 2.5. Loss of Voting Rights. If (a) there is a breach by FT, DT, any Qualified Subsidiary, any Strategic Investor or any Qualified Stock Purchaser of any of the provisions of Sections 3.1(a) or 3.2(b) (as it relates to matters described in Section 3.1(a)) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement, Strategic Investor Standstill Agreement or Qualified Stock Purchaser Standstill Agreement, (b) there is a willful breach in any material respect by FT, DT, any Qualified Subsidiary, any Strategic Investor or any Qualified Stock Purchaser of any provision of Section 3.1 (other than Section 3.1(a)) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement, Strategic Investor Standstill Agreement or 7 Qualified Stock Purchaser Standstill Agreement, or (c) a Government Affiliate or Related Company (each as defined in the Standstill Agreement) takes an action which if taken by FT or DT would violate Sections 3.1 or 3.2(b) (as it relates to matters other than those described in Section 3.1(a)) of the Standstill Agreement, then FT and its Qualified Subsidiaries (except in the case of a breach arising from the action of a Government Affiliate of Germany, a Related Company of DT or a Strategic Investor in a Qualified Subsidiary of DT in which FT is not an investor), DT and its Qualified Subsidiaries (except in the case of a breach arising from the action of a Government Affiliate of France, a Related Company of FT or a Strategic Investor in a Qualified Subsidiary of FT in which DT is not an investor) and each Qualified Stock Purchaser shall not be entitled to vote any of their shares of capital stock of this Corporation with respect to any matter or proposal arising from, relating to or involving, such breach or action, and no such purported vote by such Class A Holders on such matter shall be effective or shall be counted. Section 3. Voting Powers. Section 3.1. General. Except as otherwise provided by law or as expressly set forth in ARTICLE FIFTH or in this ARTICLE SIXTH, each share of Corporation Common Stock shall be entitled to vote, as provided in ARTICLE SIXTH, Section 3.2 and ARTICLE SIXTH, Section 7.5(d) (with respect to Class A Stock only), on all matters in respect of which the holders of Corporation Common Stock are entitled to vote, and, except as otherwise provided by the terms of any outstanding series of Preferred Stock, the holders of Corporation Common Stock shall vote together with the holders of all other classes or series of capital stock which have general voting power on all such matters as a single class; provided, however, that (i) holders of FON Stock and Class A Common Stock, voting together as a single class in accordance with Section 3.2(c), shall be entitled to vote upon a proposed amendment to these Articles of Incorporation if such amendment would (A) increase or decrease the aggregate number of authorized shares of FON Stock, (B) increase or decrease the par value of the shares of FON Stock or (C) alter or change the powers, preferences or special rights of the shares of FON Stock so as to affect them adversely, and (ii) holders of PCS Stock and Class A Common Stock, voting together as a single class in accordance with Section 3.2(d), shall be entitled to vote upon a proposed amendment to these Articles of Incorporation if such amendment would (A) increase or decrease the aggregate number of authorized shares of PCS Stock, (B) increase or decrease the par value of shares of PCS Stock or (C) alter or change the powers, preferences or special rights of the shares of PCS Stock so as to affect them adversely. The Board of Directors is authorized to adopt resolutions requiring the approval of any class or series of capital stock, alone or together with any other class or series of capital stock, as a condition precedent, or condition subsequent, to the approval, adoption, authorization or consummation of any action, transaction or any other matter by or involving the Corporation, and no provision contained in the Amended and Restated Articles of Incorporation shall be interpreted to limit or restrict such authority in any way. Section 3.2. Number of Votes. (a) On each matter to be voted on by the holders of Non-Class A Common Stock and Class A Stock voting together as a single class, (i) each outstanding share of Series 1 FON and Series 3 FON Stock is entitled to one vote (subject, in the case of the Series 3 FON Stock, to any increase in accordance with ARTICLE SIXTH, Section 7.5(d)); (ii) subject to any increase resulting from the provisions of ARTICLE SIXTH, Section 7.5(d), each outstanding share of Old Class A Common Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of a vote) equal to the sum of the Old Class A FON Vote Per Share and the Old Class A PCS Vote Per Share (computed as of the tenth Trading Day preceding the record date for determining the stockholders entitled to vote, expressed as a decimal fraction rounded to the nearest three decimal places); (iii) each outstanding share of Series 1 PCS Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of a vote) (the "PCS Per Share Vote") equal to the number of votes determined by multiplying one by the ratio of the Average Trading Price of one share of Series 1 PCS Stock to the Average Trading Price of one share of Series 1 FON Stock computed 8 as of the tenth Trading Day preceding the record date for determining the stockholders entitled to vote, expressed as a decimal fraction rounded to the nearest three decimal places; (iv) each outstanding share of Series 2 PCS Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of one vote) equal to ten percent of the applicable PCS Per Share Vote as determined in accordance with Section 3.2(a)(iii); (v) each outstanding share of Series 3 PCS Stock is entitled to a number of votes (which, at any time, may be more or less than one whole vote and may include a fraction of one vote) equal to the applicable PCS Per Share Vote as determined in accordance with Section 3.2(a)(iii) (subject to any increase in accordance with ARTICLE SIXTH, Section 7.5(d)); and (vi) each outstanding share of Series 2 FON Stock is entitled to ten percent of one vote. (b) On each matter to be voted on by the holders of Non-Class A Common Stock voting together as a single class, (i) each outstanding share of Series 1 FON Stock is entitled to one vote; (ii) each outstanding share of Series 1 PCS Stock is entitled to the PCS Per Share Vote determined in accordance with Section 3.2(a)(iii); (iii) each outstanding share of Series 2 PCS Stock is entitled to a number of votes determined in accordance with Section 3.2(a)(iv); and (iv) each outstanding share of Series 2 FON Stock is entitled to ten percent of one vote. (c) On each matter to be voted on by the holders of FON Stock and Class A Common Stock, voting together as a single class, each outstanding share of (i) Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock is entitled to one vote and (ii) Old Class A Common Stock is entitled to the Old Class A FON Vote Per Share . (d) On each matter to be voted on by the holders of the PCS Stock and Class A Common Stock voting together as a single class, each outstanding share of (i) Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock is entitled to one vote and (ii) Old Class A Common Stock is entitled to the Old Class A PCS Vote Per Share. (e) On each matter to be voted on by the holders of the Class A Stock voting together as a single class, each outstanding share of (i) Series 3 FON Stock is entitled to one vote, (ii) Series 3 PCS Stock is entitled to the PCS Vote Per Share determined in accordance with Section 3.2(a)(v), and (iii) Old Class A Common Stock is entitled to the per share vote determined in accordance with Section 3.2(a)(ii). (f) In addition to the foregoing provisions of this Section 3, (i) if shares of only one class or series of Corporation Common Stock are outstanding on the record date for determining the holders of Corporation Common Stock entitled to vote on any matter, then each share of that class or series shall be entitled to one vote and (ii) if any class or any series of Corporation Common Stock votes as a single class with respect to any matter, each share of that class or series shall, for purposes of such vote, be entitled to one vote on such matter except with respect to a vote of Old Class A Common Stock voting as a single class, in which case each share of such stock shall be entitled to its per share vote determined in accordance with Section 3.2(a)(ii). Section 4. Liquidation Rights. If any voluntary or involuntary liquidation, dissolution or winding up of this Corporation occurs, then after payment or provision for payment of the debts and other liabilities of this Corporation, including the liquidation preferences of any series of Preferred Stock, the holders of Corporation Common Stock shall be entitled to receive the remaining assets of the Corporation, regardless of the Business Group to which such assets are attributed in accordance with Section 10 of this ARTICLE SIXTH, divided among such holders in accordance with the per share "Liquidation Units" attributable to each such class or series of stock as follows: (i) each share of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock is hereby attributed one "Liquidation Unit," 9 (ii) at the time of the liquidation, dissolution or winding up of this Corporation, each share of Old Class A Common Stock will be attributed a number of "Liquidation Units" (which may be more or less than one whole "Liquidation Unit" and may include a fraction of a "Liquidation Unit") equal to (A) the sum of (I) the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and (II) the product of the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group and the PCS Ratio, divided by (B) the aggregate number of shares of Old Class A Common Stock outstanding; and (iii) each share of PCS Stock is hereby attributed the number of "Liquidation Units" determined by multiplying one by the PCS Ratio. The per share "Liquidation Units" of each such class or series of stock are subject to adjustment as determined by the Board of Directors to be appropriate to reflect equitably (i) any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of such class or series of stock or (ii) any dividend or other distribution of shares of such class or series of stock to holders of shares of such class or series of stock. Neither the merger nor consolidation of this Corporation, nor the Transfer of all or part of its assets, shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of this Corporation within the meaning of this Section 4. Notwithstanding the foregoing, any transaction or series of related transactions which results in the distribution of all or substantially all of the assets of the PCS Group (excluding any portion of such assets retained by the Corporation or distributed to holders of FON Stock in respect of the FON Group Intergroup Interest Fraction) to the holders of the outstanding PCS Stock and Class A Common Stock (to the extent of any Shares Issuable With Respect To The Class A Equity Interest In The PCS Group) by way of the distribution of equity interests in one or more entities that collectively hold, directly or indirectly, all or substantially all of the assets of the PCS Group (including, without limitation, the PCS Group Subsidiary) shall not constitute a voluntary or involuntary liquidation, dissolution or winding up of the Corporation for purposes of this Section 4 but shall be subject to ARTICLE SIXTH, Section 7.2. Section 5. Dividends. Dividends shall be declared and paid only out of net income or surplus of this Corporation and may be declared and paid upon each class and series of Corporation Common Stock, upon the terms with respect to each such class and series, and subject to the limitations provided for in this Section 5 and in Section 13, as the Board of Directors may determine. 5.1. Generally. Dividends on Corporation Common Stock may be declared and paid only out of the funds of the Corporation legally available therefor. 5.1.1. The holders of the Series 1 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share basis to those payable on the Series 2 FON Stock. Dividends on the Series 1 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, respectively. 5.1.2. The holders of the Series 1 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share basis to those payable on the Series 3 FON Stock. Dividends on the Series 1 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 3 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 FON Stock payable in shares of Series 3 FON 10 Stock or Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, respectively. 5.1.3. The holders of shares of Series 2 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per share basis to those payable on the Series 1 FON Stock. Dividends on the Series 2 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, respectively. 5.1.4. The holders of shares of Series 2 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per share basis to those payable on the Series 3 FON Stock. Dividends on the Series 2 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 3 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 FON Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, respectively or equivalent corresponding options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, respectively. 5.1.5. The holders of shares of Series 3 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per share basis to those payable on the Series 1 FON Stock. Dividends on the Series 3 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 FON Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 3 FON Stock payable in shares of Series 3 FON Stock or Series 3 PCS stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.6. The holders of shares of Series 3 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per share basis to those payable on the Series 2 FON Stock. Dividends on the Series 3 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 FON Stock and shall be in an 11 amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 FON Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 3 FON Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.7. In addition to the entitlement with respect to dividends contained in Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock equivalent on a Per Class A FON Share Basis to those payable on a per share basis to the Series 1 FON Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 FON Stock and shall be in an amount, on a Per Class A FON Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 1 FON Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A FON Share Basis on the Class A Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.8. In addition to the entitlement with respect to dividends contained in Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock equivalent on a Per Class A FON Share Basis to those payable on a per share basis to the Series 2 FON Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 FON Stock and shall be in an amount, on a Per Class A FON Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 2 FON Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A FON Share Basis on the Class A Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.9. In addition to the entitlement with respect to dividends contained in Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock, on a Per Class A FON Share Basis, equal to those payable on a per share basis to the Series 3 FON Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 FON Stock and shall be in an amount, on a Per Class A FON Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 3 FON Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 FON Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 FON Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A FON Share Basis on the 12 Class A Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.10. The holders of the Series 1 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share basis to those payable on the Series 2 PCS Stock. Dividends on the Series 1 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 PCS Stock. 5.1.11. The holders of the Series 1 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share basis to those payable on the Series 3 PCS Stock. Dividends on the Series 1 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 3 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 PCS Stock. 5.1.12. The holders of shares of Series 2 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per share basis to those payable on the Series 1 PCS Stock. Dividends on the Series 2 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 PCS Stock. 5.1.13. The holders of shares of Series 2 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per share basis to those payable on the Series 3 PCS Stock. Dividends on the Series 2 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 3 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 PCS Stock. 13 5.1.14. The holders of shares of Series 3 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per share basis to those payable on the Series 1 PCS Stock. Dividends on the Series 3 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 1 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 5.1.15. The holders of shares of Series 3 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per share basis to those payable on the Series 2 PCS Stock. Dividends on the Series 3 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount per share equal to the full per share amount of any cash dividend paid on shares of Series 2 PCS Stock, plus the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend per share on the Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 5.1.16. In addition to the entitlement with respect to dividends contained in Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock equivalent on a Per Class A PCS Share Basis to those payable on a per share basis to the Series 1 PCS Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount, on a Per Class A PCS Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 1 PCS Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or in options, warrants or rights to acquire shares of Series 1 PCS Stock, or in securities convertible into or exchangeable for shares of Series 1 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A PCS Share Basis on the Class A Common Stock payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 5.1.17. In addition to the entitlement with respect to dividends contained in Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock equivalent on a Per Class A PCS Share Basis to those payable on a per share basis to the Series 2 PCS Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount, on a Per Class A PCS Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 2 PCS Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 2 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or in options, warrants or rights to acquire shares of Series 2 PCS Stock, or in securities convertible into or exchangeable for shares of Series 2 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A PCS Share Basis on the Class A Common Stock payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 14 5.1.18. In addition to the entitlement with respect to dividends contained in Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Class A Common Stock equivalent on a Per Class A PCS Share Basis to those payable on a per share basis to the Series 3 PCS Stock. Dividends on the Class A Common Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Series 3 PCS Stock and shall be in an amount, on a Per Class A PCS Share Basis, equal to (i) the full per share amount of any cash dividend paid on shares of Series 3 PCS Stock plus (ii) the full per share amount (payable in kind) of any non-cash dividend paid on shares of Series 3 PCS Stock, provided that if this Corporation shall declare and pay any dividend on shares of Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or in options, warrants or rights to acquire shares of Series 3 PCS Stock, or in securities convertible into or exchangeable for shares of Series 3 PCS Stock, then in each case, this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, an equivalent dividend on a Per Class A PCS Share Basis on the Class A Common Stock payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 5.1.19. Deleted. 5.1.20. Deleted. 5.1.21. The holders of shares of Series 1 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share basis to those payable, on a Per Class A FON Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only). Dividends on the Series 1 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A FON Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only) payable in shares of FON Stock or PCS Stock, or in options, warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities convertible into or exchangeable for shares of FON Stock or PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 1 FON Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A FON Share Basis) payable in shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock, respectively. 5.1.22. The holders of shares of Series 2 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per share basis to those payable, on a Per Class A FON Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only). Dividends on the Series 2 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A FON Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only) payable in shares of FON Stock or PCS Stock, or in options, warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities convertible into or exchangeable for shares of FON Stock or PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 2 FON Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A FON Share Basis) payable in shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 FON Stock or Series 2 PCS Stock, respectively. 15 5.1.23. The holders of shares of Series 3 FON Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per share basis to those payable, on a Per Class A FON Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only). Dividends on the Series 3 FON Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A FON Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group only) payable in shares of FON Stock or PCS Stock, or in options, warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities convertible into or exchangeable for shares of FON Stock or PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 3 FON Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A FON Share Basis) payable in shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 FON Stock or Series 3 PCS Stock, respectively. 5.1.24. The holders of shares of Series 1 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only). Dividends on the Series 1 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A PCS Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only) payable in shares of PCS Stock, or in options, warrants or rights to acquire shares of PCS Stock, or in securities convertible into or exchangeable for shares of PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 1 PCS Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A PCS Share Basis) payable in shares of Series 1 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 1 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 1 PCS Stock. 5.1.25. The holders of shares of Series 2 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only). Dividends on the Series 2 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A PCS Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only) payable in shares of PCS Stock, or in options, warrants or rights to acquire shares of PCS Stock, or in securities convertible into or exchangeable for shares of PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 2 PCS Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A PCS Share Basis) payable in shares of Series 2 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 2 PCS Stock. 5.1.26. The holders of shares of Series 3 PCS Stock shall be entitled to receive, when and if declared by the Board of Directors in accordance with this Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only). Dividends 16 on the Series 3 PCS Stock shall be payable on the same date fixed for the payment of the corresponding dividend on shares of Old Class A Common Stock and shall be in an amount per share equal to the full amount, on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Old Class A Common Stock, plus the full amount, on a Per Class A PCS Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old Class A Common Stock, provided that if this Corporation shall declare and pay any dividend on shares of Old Class A Common Stock (with respect to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group only) payable in shares of PCS Stock, or in options, warrants or rights to acquire shares of PCS Stock, or in securities convertible into or exchangeable for shares of PCS Stock, then in each case this Corporation shall declare and pay, at the same time that it declares and pays any such dividend, a dividend per share on the Series 3 PCS Stock (equivalent to that declared and paid on shares of Old Class A Common Stock on a Per Class A PCS Share Basis) payable in shares of Series 3 PCS Stock, or equivalent corresponding options, warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent corresponding securities convertible into or exchangeable for shares of Series 3 PCS Stock. 5.2. Separate Declaration of Dividends. The Board of Directors, in accordance with the applicable provisions of Section 5.1, may at any time declare and pay dividends (i) exclusively on the FON Stock and the Class A Common Stock (on a Per Class A FON Share Basis), (ii) exclusively on the PCS Stock and the Class A Common Stock (on a Per Class A PCS Share Basis) or (iii) on the FON Stock and the Class A Common Stock (on a Per Class A FON Share Basis), on the one hand, and the PCS Stock and the Class A Common Stock (on a Per Class A PCS Share Basis), on the other, in equal or unequal per share amounts, notwithstanding the amount of dividends previously declared on each class or series of stock, the respective voting or liquidation rights of each class or series of stock or any other factor. 5.3. Share Distributions. Subject to ARTICLE SIXTH, Section 5 and except as permitted by ARTICLE SIXTH, Sections 7.1 and 7.2, the Board of Directors may declare and pay dividends or distributions of shares of Corporation Common Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Corporation Common Stock) on shares of Corporation Common Stock or shares of Preferred Stock only as follows: (A) dividends or distributions of shares of (i) Series 1 FON Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 FON Stock), (ii) Series 2 FON Stock (or Convertible Securities convertible into or exchangeable or exercisable for Shares of Series 2 FON Stock) and (iii) Series 3 FON Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 3 FON Stock) on shares of (i) Series 1 FON Stock, (ii) Series 2 FON Stock and (iii) Series 3 FON Stock and shares of Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity Interest In The FON Group), respectively, as well as on Preferred Stock attributed to the Sprint FON Group exclusively in accordance with ARTICLE SIXTH, Section 13; (B) dividends or distributions of shares of (i) Series 1 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 PCS Stock), (ii) Series 2 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 2 PCS Stock) and (iii) Series 3 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 3 PCS Stock) on shares of (i) Series 1 PCS Stock, (ii) Series 2 PCS Stock and (iii) Series 3 PCS Stock and shares of Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity Interest In The PCS Group), respectively, and Preferred Stock attributed to the PCS Group exclusively in accordance with ARTICLE SIXTH, Section 13; (C) dividends or distributions of shares of (i) Series 1 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 1 PCS Stock), (ii) Series 2 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 2 PCS Stock) and (iii) Series 3 PCS Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Series 3 PCS Stock) on (x) shares of (i) Series 1 FON Stock, (ii) Series 2 FON Stock and (iii) Series 3 FON Stock and shares of Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity Interest In The FON Group), respectively, or (y) shares of FON Preferred Stock, but in any such case only if immediately prior to such dividend or distribution the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than or equal to the sum of (1) the amount of any decrease in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest required by paragraph (B) of the definition of such term in ARTICLE SIXTH, Section 10 as a result of such dividend or distribution, plus (2) the number of shares of PCS Stock issuable upon conversion, exchange or exercise of any Convertible Securities to be so issued or any other outstanding Convertible Securities that have been issued as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity 17 Interest In The FON Group) or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13; and (D) dividends or distributions of shares of PCS Preferred Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Preferred Stock) on shares of FON Stock or Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity Interest In The FON Group) or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13, but in any such case only if immediately prior to such dividend or distribution the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than or equal to the sum of (1) the amount of any decrease in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest required by paragraph (B) of the definition of such term in ARTICLE SIXTH, Section 10 as a result of such dividend or distribution plus (2) the number of shares of PCS Stock issuable upon conversion, exchange or exercise of any Convertible Securities that have been issued as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or Class A Common Stock (but only in respect of the Shares Issuable With Respect To The Class A Equity Interest In The FON Group) or shares of Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13. For purposes of this Section 5.3, any outstanding Convertible Securities that are convertible into or exchangeable or exercisable for any other Convertible Securities which are themselves convertible into or exchangeable or exercisable for FON Stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) or PCS Stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) shall be deemed to have been converted, exchanged or exercised in full for such Convertible Securities. Section 6. No Dilution or Impairment; Certain Tender Offers. (a) No reclassification, subdivision or combination of the outstanding shares of Series 2 FON Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 1 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 FON Stock as were represented by the shares of Series 1 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (b) No reclassification, subdivision or combination of the outstanding shares of Series 3 FON Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 1 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 3 FON Stock as were represented by the shares of Series 1 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 3 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (c) No reclassification, subdivision or combination of the outstanding shares of Series 1 FON Stock shall be effected directly or indirectly (including without limitation any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 2 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 FON Stock as were represented by the shares of Series 2 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. 18 (d) No reclassification, subdivision or combination of the outstanding shares of Series 3 FON Stock shall be effected directly or indirectly (including without limitation any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 2 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 3 FON Stock as were represented by the shares of Series 2 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 3 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (e) No reclassification, subdivision or combination of the outstanding shares of Series 1 FON Stock shall be effected directly or indirectly (including without limitation any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 3 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 3 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 FON Stock as were represented by the shares of Series 3 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 3 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (f) No reclassification, subdivision or combination of the outstanding shares of Series 2 FON Stock shall be effected directly or indirectly (including without limitation any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 3 FON Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 3 FON Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 FON Stock as were represented by the shares of Series 3 FON Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 3 FON Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 FON Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (g) Deleted. (h) Deleted. (i) No reclassification, subdivision or combination of the outstanding shares of Series 2 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 1 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 PCS Stock as were represented by the shares of Series 1 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (j) No reclassification, subdivision or combination of the outstanding shares of Series 3 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 1 PCS Stock is reclassified, subdivided or combined on a equal per share basis so that the holders of the Series 1 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 3 PCS Stock as were represented by the shares of Series 1 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 1 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other 19 distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 3 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (k) No reclassification, subdivision or combination of the outstanding shares of Series 1 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 2 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 PCS Stock as were represented by the shares of Series 2 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (l) No reclassification, subdivision or combination of the outstanding shares of Series 3 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 2 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 2 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 3 PCS Stock as were represented by the shares of Series 2 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 2 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 3 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (m) No reclassification, subdivision or combination of the outstanding shares of Series 1 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 3 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 3 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 1 PCS Stock as were represented by the shares of Series 3 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 3 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 1 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (n) No reclassification, subdivision or combination of the outstanding shares of Series 2 PCS Stock shall be effected directly or indirectly (including, without limitation, any reclassification, subdivision or combination effected pursuant to a consolidation, merger or liquidation) unless at the same time the Series 3 PCS Stock is reclassified, subdivided or combined on an equal per share basis so that the holders of the Series 3 PCS Stock (i) are entitled, in the aggregate, to a number of Votes representing the same percentage of the Voting Power of this Corporation relative to the Series 2 PCS Stock as were represented by the shares of Series 3 PCS Stock outstanding immediately prior to such reclassification, subdivision or combination and (ii) maintain all of the rights associated with the Series 3 PCS Stock set forth in these Articles of Incorporation, including without limitation the right to receive dividends and other distributions (including liquidating and other distributions) that are equivalent to those payable per share in respect of shares of Series 2 PCS Stock, subject to the limitations, restrictions and conditions on such rights contained herein. (o) Without limiting the generality of the foregoing paragraphs (a) through (n), in the case of any consolidation or merger of this Corporation with or into any other entity (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of the Non-Class A Common Stock) or any reclassification of the Non-Class A Common Stock into any other form of capital stock of this Corporation, whether in whole or in part, each Class A Holder shall, after such consolidation, merger or reclassification, have the right (but not the obligation), by notice delivered to this Corporation or any successor thereto within 90 days after the consummation of such consolidation, merger or reclassification, to convert each share of Series 3 FON Stock, Series 3 PCS Stock and Class A Common Stock held by it into the kind and amount of shares of stock and other securities and property which such Class A Holder would have been entitled to receive upon such consolidation, merger, or reclassification if such Class A Holder had (I) converted its shares of Series 3 FON Stock or Series 3 PCS Stock into Series 1 FON Stock or Series 1 20 PCS Stock, respectively, or (II) received shares of Series 3 FON Stock or Series 3 PCS Stock in respect of the Shares Issuable With Respect To The Class A Equity Interest In The FON Group or the Shares Issuable With Respect To The Class A Equity Interest In The PCS Group, respectively, represented by such Class A Common Stock immediately prior to such merger, consolidation or reclassification and converted such shares in accordance with clause (I). This Corporation shall not effect, directly or indirectly, any such reclassification, subdivision or combination of outstanding shares of Non-Class A Common Stock unless it delivers to the Class A Holders written notice of its intent to take such action at least ten Business Days before taking such action. (p) Without limiting the generality of the foregoing, in the case of any consolidation or merger of this Corporation with or into any other entity (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of the Series 1 FON Stock or Series 1 PCS Stock) or any reclassification of the Series 1 FON Stock or Series 1 PCS Stock into any other form of capital stock of this Corporation, whether in whole or in part, each holder of Series 2 FON Stock or Series 2 PCS Stock, as the case may be, shall, after such consolidation, merger or reclassification, have the right (but not the obligation), by notice delivered to this Corporation or any successor thereto within 90 days after the consummation of such consolidation, merger or reclassification, to convert each share of Series 2 FON Stock or Series 2 PCS Stock, as the case may be, held by such holder into the kind and amount of shares of stock and other securities and property which such holder would have been entitled to receive upon such consolidation, merger, or reclassification if such holder had converted its shares of Series 2 FON Stock or Series 2 PCS Stock into Series 1 FON Stock or Series 1 PCS Stock, respectively, immediately prior to such merger, consolidation or reclassification. This Corporation shall not effect, directly or indirectly, any such reclassification, subdivision or combination of outstanding shares of Series 1 FON Stock or Series 1 PCS Stock unless it delivers to the holders of Series 2 FON Stock and Series 2 PCS Stock written notice of its intent to take such action at least ten Business Days before taking such action. (q) Exclusionary Tender Offers. If the Board of Directors shall determine not to oppose a tender offer by a Person other than a Cable Holder for Voting Securities of this Corporation representing not less than 35 percent of the Voting Power of this Corporation, and the terms of such tender offer do not permit the holders of Series 2 PCS Stock to sell an equal or greater percentage of their shares as the holders of Series 1 PCS Stock are permitted to sell taking into account any proration, then each holder of Series 2 PCS Stock shall have the right (but not the obligation) to deliver to this Corporation a written notice requesting conversion of certain shares of Series 2 PCS Stock designated by such holder of Series 2 PCS Stock into Series 1 PCS Stock, upon which delivery each share of Series 2 PCS Stock so designated in such notice shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock, provided that (i) unless the Series 2 PCS Stock shall have otherwise been converted into Series 1 PCS Stock pursuant to ARTICLE SIXTH, Section 7.5 upon or prior to the consummation or abandonment of the transaction contemplated by such tender offer, immediately following the consummation of such transaction or the delivery by this Corporation to each holder of Series 2 PCS Stock of a notice that such transaction has been abandoned, each share of Series 1 PCS Stock held by a holder of Series 2 PCS Stock shall automatically reconvert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 2 PCS Stock, and (ii) only those shares of Series 2 PCS Stock related to shares of Series 1 PCS Stock that were not so reconverted shall be deemed for any purpose under these Articles of Incorporation to have been converted into Series 1 PCS Stock, pursuant to this subparagraph (q) and the Series 2 PCS Stock so reconverted shall be deemed to have been at all times outstanding shares of Series 2 PCS Stock, provided, that if the Series 2 PCS Stock has been converted into or redeemed for Series 2 FON Stock pursuant to ARTICLE SIXTH, Section 7, then the terms "Series 2 FON Stock" and "Series 1 FON Stock" shall be deemed to replace the terms "Series 2 PCS Stock" and "Series 1 PCS Stock," respectively, in this subparagraph (q). (r) Issuer Tender Offers. The Corporation shall not conduct an issuer tender offer (as defined on November 23, 1998 in Rule 13e-4 under the Exchange Act) with respect to the Series 1 PCS Stock or the Series 1 FON Stock unless (i) such tender offer provides for the participation of the holders of Series 2 PCS Stock, Series 3 PCS Stock and Class A Common Stock (with respect to the Shares Issuable With Respect To The Class A Equity Interest In The PCS Group), on the one hand, or Series 2 FON Stock, Series 3 FON Stock and Class A Common Stock (with respect to the Shares Issuable With Respect To The Class A Equity Interest In The FON Group), on the other hand, on an equal basis with the Series 1 PCS Stock or the Series 1 FON Stock, respectively, and (ii) the Corporation accepts for repurchase the number of shares tendered by the holders of Series 1 PCS Stock, Series 2 PCS Stock, Series 3 PCS Stock and Class A Common Stock (with respect to the Shares Issuable With Respect To The Class A Equity Interest In The PCS Group), on the one hand, or Series 1 FON Stock, Series 2 FON Stock, Series 3 FON Stock and Class A Common Stock (with respect to the Shares Issuable With Respect To The Class A Equity Interest In The FON Group), on the other, in 21 proportion to the number of shares of each such class and series tendered; provided that the terms of this subparagraph (r) shall not prevent the Corporation from administering in good faith an "odd-lot" program in connection with such issuer tender offer and shall not apply to customary acquisitions of Corporation Common Stock made by the Corporation on the open market for purposes of maintaining stock option plans of the Corporation. Section 7. Conversion or Redemption of PCS Stock. Except as otherwise provided in Sections 2.2, 6(q) and 8.5, shares of PCS Stock are (i) subject to conversion or redemption, as the case may be, upon the terms provided in this Section 7 with respect to each class and (ii) otherwise not subject to conversion or redemption. 7.1. Conversion or Redemption of PCS Stock. (A) If the Corporation and/or its subsidiaries makes a Disposition, in one transaction or a series of related transactions, of all or substantially all of the properties and assets attributed to the PCS Group to one or more persons or entities (other than (w) the Disposition by the Corporation of all or substantially all of its properties and assets in one transaction or a series of related transactions in connection with the dissolution or the liquidation and winding up of the Corporation and the distribution of assets to stockholders pursuant to Section 4, (x) the redemption of the PCS Stock for the stock of the PCS Group Subsidiary pursuant to Section 7.2, (y) to any person or entity controlled (as determined by the Board of Directors) by the Corporation or (z) pursuant to a Related Business Transaction), then the Corporation shall, on or prior to the 85th Trading Day after the date of consummation of such Disposition (the "PCS Group Disposition Date"), either (I) pay a dividend on the PCS Stock or (II) redeem some or all of the PCS Stock or convert PCS Stock into Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock, as applicable (or another class or series of common stock of the Corporation), in accordance with the following subparagraphs (1) and (2) of this paragraph (A) and, to the extent applicable, in accordance with Section 7.4, as the Board of Directors shall have selected among such alternatives: (1) provided that there are funds of the Corporation legally available therefor: (a) pay to the holders of the shares of PCS Stock a dividend, as the Board of Directors shall have declared in accordance with Section 5.1 of ARTICLE SIXTH, in cash and/or in securities (other than a dividend of Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value as of the PCS Group Disposition Date in the aggregate equal to the product of the Outstanding PCS Fraction as of the record date for determining holders entitled to receive such dividend multiplied by the Fair Value of the Net Proceeds of such Disposition; or (b) (i) subject to the last sentence of this paragraph (A), if such Disposition involves all (not merely substantially all) of the properties and assets attributed to the PCS Group, redeem as of the Redemption Date provided by Section 7.4(C) all outstanding shares of PCS Stock in exchange for cash and/or securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value as of the PCS Group Disposition Date in the aggregate equal to the product of the Outstanding PCS Fraction as of such Redemption Date multiplied by the Fair Value of the Net Proceeds of such Disposition (such aggregate amount to be allocated to shares of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock in the ratio of the number of shares of each such series outstanding to the other series (so that the amount of consideration paid for the redemption of each share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock is the same)); or (ii) subject to the last sentence of this paragraph (A), if such Disposition involves substantially all (but not all) of the properties and assets attributed to the PCS Group, redeem as of the Redemption Date provided by Section 7.4(D) the number of whole shares of PCS Stock (which may be all of such shares outstanding) as have in the aggregate an average Market Value during the period of ten consecutive Trading Days beginning on the sixteenth Trading Day immediately succeeding the PCS Group Disposition Date closest to the product of the Outstanding PCS Fraction as of the date such shares are selected for redemption multiplied by the Fair Value as of the PCS Group Disposition Date of the Net Proceeds of such Disposition, in exchange for cash and/or securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property having a Fair Value in the aggregate equal to such product (such aggregate amount to be allocated to shares of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 22 PCS Stock in the ratio of the number of shares of each such series outstanding to the other series (so that the amount of consideration paid for the redemption of each share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock is the same)); or (2) convert each outstanding share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock as of the Conversion Date provided by Section 7.4(E) into a number of fully paid and nonassessable shares of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of another class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of such conversion required by Section 7.4(E)) equal to 110% of the ratio, expressed as a decimal fraction rounded to the nearest five decimal places, of the average Market Value of one share of Series 1 PCS Stock over the period of ten consecutive Trading Days beginning on the sixteenth Trading Day following the PCS Group Disposition Date to the average Market Value of one share of Series 1 FON Stock (or such other class or series of common stock) over the same ten Trading Day period. Notwithstanding the foregoing provisions of this paragraph (A), the Corporation may redeem PCS Stock as provided by subparagraph (1)(b)(i) or (1)(b)(ii) of this paragraph (A) only if the amount to be paid in redemption of such stock (and the Shares Issuable With Respect To The Class A Equity Interest In The PCS Group in accordance with ARTICLE SIXTH, Section 7.1(B)) is less than or equal to the sum of (i) the amount available for the payment of dividends on such shares to be redeemed in accordance with Section 5 of ARTICLE SIXTH measured as of the Redemption Date and (ii) the amount determined to be capital in respect of the shares to be redeemed in accordance with applicable corporation law as of the Redemption Date. (B) For purposes of this Section 7.1: (1) as of any date, "substantially all of the properties and assets" attributed to the PCS Group means a portion of such properties and assets that represents at least 80% of the Fair Value of the properties and assets attributed to the PCS Group as of such date; (2) in the case of a Disposition of the properties and assets attributed to the PCS Group in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; (3) the Board of Directors may pay any dividend or redemption price referred to in Section 7.1(A) in cash, securities (other than Corporation Common Stock or other common equity securities of the Corporation) or other property, regardless of the form or nature of the proceeds of the Disposition; provided that if such payment is made in Voting Securities (other than Corporation Common Stock or other common equity securities of the Corporation) of the Corporation or another entity, holders of Series 2 PCS Stock shall receive Voting Securities with Voting Power equivalent on a per share basis to such shares received by holders of Series 1 PCS Stock; (4) if the Corporation pays a dividend to the holders of shares of PCS Stock in accordance with Section 7.1(A)(1)(a), then the Corporation will pay a dividend equivalent on a Per Class A PCS Share Basis to the holders of Class A Common Stock; (5) if the Corporation redeems all outstanding shares of PCS Stock in accordance with Section 7.1(A)(1)(b)(i), then the Corporation will pay an aggregate amount to the holders of Old Class A Common Stock equivalent on a Per Class A PCS Share Basis to the per share redemption amount paid in accordance with Section 7.1(A)(1)(b)(i) in respect of the total Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group; (6) if the Corporation redeems shares of PCS Stock in accordance with Section 7.1(A)(1)(b)(ii), then the Corporation will pay to the holders of Old Class A Common Stock an amount in accordance with subparagraph (5) immediately above but only in respect of the same proportion of the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group as the PCS Stock redeemed in accordance with Section 7.1(A)(7)(b)(ii); and 23 (7) if the Corporation converts shares of PCS Stock in accordance with Section 7.1(A)(2), then the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group will convert into a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group, such conversion to be on the same basis as set forth in Section 7.1(A)(2). (C) If the payment of the dividend or the redemption price with respect to the PCS Stock provided for by Section 7.1(A)(1) occurs prior to November 23, 2001, then the Board of Directors may convert each share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock remaining outstanding, but only as of a Conversion Date (determined as provided by Section 7.4(E) hereof) prior to the first anniversary of the payment of such dividend or redemption price, into a number of fully paid and nonassessable shares of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of such conversion required by Section 7.4(E)) equal to 110% of the Optional Conversion Ratio as of the fifth Trading Day prior to the date of the notice of such conversion required by Section 7.4(E); provided, that upon such conversion, the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group will convert, on the same basis, into a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group. (D) At any time following November 23, 2001, the Board of Directors may convert each outstanding share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock, as of the Conversion Date provided by Section 7.4(E), into the number of fully paid and nonassessable shares of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than PCS Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Total Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of conversion required by Section 7.4(E)) equal to, on the Conversion Date, (i) if following November 23, 2001 but prior to November 23, 2002, 110% of the Optional Conversion Ratio as of the fifth Trading Day prior to the date of the notice of such conversion required by Section 7.4(E), or (ii) if on or after November 23, 2002, at such conversion ratio (if any) as the Board of Directors determines to be fair to holders of the PCS Stock, taken as a separate class, and holders of FON Stock, taken as a separate class, provided, that upon such conversion, the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group will convert, on the same basis, into a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group. 7.2. Redemption of PCS Stock for Subsidiary Stock. At any time the Board of Directors may redeem all of the outstanding shares of PCS Stock, on a Redemption Date of which notice is delivered in accordance with Section 7.4(F), in exchange for the number of shares of common stock of one or more wholly-owned subsidiaries of the Corporation (collectively, the "PCS Group Subsidiary") that collectively hold directly or indirectly all of the assets and liabilities attributed to the PCS Group (and no other assets or liabilities of the Corporation or any subsidiary thereof) equal to the product of the Outstanding PCS Fraction and the number of shares of common stock of such PCS Group Subsidiary to be outstanding immediately following such exchange of shares (including any shares of such PCS Group Subsidiary which will be retained by the Corporation in respect of the FON Group Intergroup Interest Fraction), such PCS Group Subsidiary shares to be delivered to the holders of shares of PCS Stock on the Redemption Date and to be divided among the holders of PCS Stock pro rata in accordance with the number of shares of PCS Stock held by each on such Redemption Date, each of which shares of common stock of such PCS Group Subsidiary shall be, upon such delivery, fully paid and nonassessable; provided, however, that (i) no such redemption pursuant to this Section 7.2 may occur prior to November 23, 2000 unless such redemption is approved by the affirmative vote of the holders of a majority of shares of PCS Stock and Class A Common Stock, voting together as a single class in accordance with ARTICLE SIXTH, Section 3.2(d), (ii) holders of shares of Series 2 PCS Stock and Series 3 PCS Stock outstanding immediately prior to the Redemption Date shall receive on a per share basis, pursuant to such redemption, shares of common stock of such PCS Group Subsidiary with Voting Power equivalent on a per share basis to such shares received by holders of Series 1 PCS Stock and 24 (iii) on such Redemption Date, the holders of Old Class A Common Stock will receive the number of shares of the PCS Group Subsidiary equal to the product of (A) the Old Class A PCS Interest Fraction, and (B) the number of shares of common stock of such PCS Group Subsidiary to be outstanding immediately following such issuance of shares; and provided further, that no such redemption pursuant to this Section 7.2 may occur unless (i) the redemption is tax-free to the holders of PCS Stock or (ii) such other arrangement exists for the benefit of the holders of PCS Stock redeemed such that, net of all taxes related to such redemption and to such other arrangement itself which are realized by such stockholders, such stockholders will be in a position that is substantially equivalent economically to the position such stockholders would be in after a tax-free distribution described in the immediately preceding clause (i). 7.3. Treatment of Convertible Securities. After any Conversion Date or Redemption Date on which all outstanding shares of any class or series of PCS Stock are converted or redeemed, any share of such class or series of PCS Stock that is issued on conversion, exchange or exercise of any Convertible Securities shall, immediately upon issuance pursuant to such conversion, exchange or exercise and without any notice from or to, or any other action on the part of, the Corporation or its Board of Directors or the holder of such Convertible Security: (A) if the shares of such class or series of PCS Stock outstanding on such Conversion Date were converted into shares of another class or series of Corporation Common Stock (or another class or series of common stock of the Corporation) pursuant to subparagraph (A)(2) or paragraph (C) or (D) of Section 7.1, be converted into the amount of cash and/or the number of shares of the kind of capital stock and/or other securities or property of the Corporation that the number of shares of such class or series of PCS Stock issued upon such conversion, exchange or exercise would have received had such shares been outstanding on such Conversion Date; or (B) if the shares of such class or series of PCS Stock outstanding on such Redemption Date were redeemed pursuant to Section 7.1(A)(1)(b) or Section 7.2, be redeemed, to the extent of funds of the Corporation legally available therefor, for $.01 per share in cash for each share of such class or series of PCS Stock issued upon such conversion, exchange or exercise. The provisions of this Section 7.3 shall not apply to the extent that other adjustments in respect of such conversion, exchange or redemption of a class or series of PCS Stock are otherwise made pursuant to the provisions of such Convertible Securities. 7.4. Notice and Other Provisions. (A) Not later than the tenth Trading Day following the consummation of a Disposition referred to in Section 7.1(A), the Corporation shall announce publicly by press release (1) the Net Proceeds of such Disposition, (2) the number of shares outstanding of the PCS Stock, (3) the number of shares of PCS Stock into or for which Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (4) the Outstanding PCS Fraction and the Old Class A PCS Interest Fraction on the date of such notice. Not earlier than the 26th Trading Day and not later than the 30th Trading Day following the consummation of such Disposition, the Corporation shall announce publicly by press release which of the actions specified in Section 7.1(A) it has irrevocably determined to take in respect of such Disposition. (B) If the Corporation determines to pay a dividend on shares of PCS Stock pursuant to Section 7.1(A)(1)(a), the Corporation shall, not later than the 30th Trading Day following the consummation of the Disposition referred to in such Section, cause notice to be given to each holder of PCS Stock, Class A Common Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) the record date for determining holders entitled to receive such dividend, which shall be not earlier than the 40th Trading Day and not later than the 50th Trading Day following the consummation of such Disposition, (2) the anticipated payment date of such dividend (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property to be paid as such dividend in respect of the outstanding shares of PCS Stock, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction and the Old Class A PCS Interest Fraction on the date of such notice, (6) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which outstanding 25 Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive such dividend only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (C) If the Corporation determines to redeem PCS Stock pursuant to Section 7.1(A)(1)(b)(i), the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Redemption Date, cause notice to be given to each holder of shares of PCS Stock, Class A Common Stock and to each holder of Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) a statement that all shares of PCS Stock outstanding on the Redemption Date shall be redeemed, (2) the Redemption Date (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property in which the redemption price for the shares to be redeemed is to be paid, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction and the Old Class A PCS Interest Fraction on the date of such notice, (6) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation waives such requirement), are to be surrendered for delivery of cash and/or securities or other property, (7) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which such outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (8) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to participate in such redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date referred to in clause (2) of this sentence and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities and (9) a statement to the effect that, except as otherwise provided by paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Redemption Date. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (D) If the Corporation determines to redeem PCS Stock pursuant to Section 7.1(A)(1)(b)(ii), the Corporation shall, not later than the 30th Trading Day following the consummation of the Disposition referred to in such subparagraph, cause notice to be given to each holder of shares of PCS Stock, Class A Common Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth (1) a date, not earlier than the 40th Trading Day and not later than the 50th Trading Day following the consummation of the Disposition in respect of which such redemption is to be made, on which shares of PCS Stock shall be selected for redemption, (2) the anticipated Redemption Date (which shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the kind of shares of capital stock, cash and/or other securities or property in which the redemption price for the shares to be redeemed is to be paid, (4) the Net Proceeds of such Disposition, (5) the Outstanding PCS Fraction and the Old Class A PCS Interest Fraction on the date of such notice, (6) the number of shares of PCS Stock outstanding and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be eligible to participate in such selection for redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence, and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities and (8) a statement that the Corporation will not be required to register a transfer of any shares of PCS Stock for a period of 15 Trading Days next preceding the date referred to in clause (1) of this sentence. Promptly following the date referred to in clause (1) of the preceding sentence, but not earlier than 40 Trading Days nor later than 50 Trading Days following the consummation of such Disposition, the Corporation shall cause a notice to be given to each holder of record of shares of PCS Stock to be redeemed setting forth (1) the number of shares of PCS Stock held by such holder to be redeemed, (2) a statement that such shares of PCS Stock shall be redeemed, (3) the Redemption Date, (4) the kind and per share amount of cash and/or securities or other property to be received by such holder with respect to each share of PCS Stock to be redeemed, including details as to the calculation thereof, (5) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned 26 for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of such cash and/or securities or other property, (6) if applicable, a statement to the effect that the shares being redeemed may no longer be transferred on the transfer books of the Corporation after the Redemption Date and (7) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of the Redemption Date. Such notices shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (E) If the Corporation determines to convert the PCS Stock pursuant to Section 7.1(A)(2), Section 7.1(C) or Section 7.1(D), as the case may be, the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Conversion Date, cause notice to be given to each holder of shares of PCS Stock, Class A Common Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth (1) a statement that all outstanding shares of PCS Stock shall be converted, (2) the Conversion Date (which, in the case of a conversion after a Disposition, shall not be more than 85 Trading Days following the consummation of such Disposition), (3) the per share number of shares of Series 1 FON Stock (or Series 2 FON Stock or Series 3 FON Stock, if applicable) or another class or series of common stock of the Corporation, as the case may be, to be received with respect to each share of PCS Stock, including details as to the calculation thereof, (4) the place or places where certificates for shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of Series 1 FON Stock (or Series 2 FON Stock or Series 3 FON Stock, if applicable) or another class or series of common stock of the Corporation, as the case may be, (5) the number of outstanding shares of PCS Stock and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof, (6) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Conversion Date and (7) in the case of notice to holders of such Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive shares of common stock upon such conversion only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to such Conversion Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7.4 if such holder thereafter converts, exchanges or exercises such Convertible Securities. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation. (F) If the Corporation determines to redeem shares of PCS Stock pursuant to Section 7.2, the Corporation shall cause notice to be given to each holder of shares of PCS Stock to be redeemed, and to each holder of Class A Common Stock and Convertible Securities that are convertible into or exchangeable or exercisable for shares of such class of PCS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) a statement that all shares of PCS Stock outstanding on the Redemption Date shall be redeemed in exchange for shares of common stock of the PCS Group Subsidiary, (2) the Redemption Date, (3) the Outstanding PCS Fraction and the Old Class A PCS Interest Fraction on the date of such notice, (4) the place or places where certificates for shares of PCS Stock to be redeemed, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of the PCS Group Subsidiaries, (5) a statement to the effect that, subject to paragraph (I) of this Section 7.4, dividends on such shares of PCS Stock shall cease to be paid as of such Redemption Date, (6) the number of shares of PCS Stock outstanding and the number of shares of PCS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (7) in the case of notice to holders of Convertible Securities, a statement to the effect that a holder of Convertible Securities shall be entitled to receive shares of common stock of the PCS Group Subsidiary upon redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 7 if such holder thereafter converts, exchanges or exercises such Convertible Securities. Such notice shall be sent by first-class mail, postage prepaid, not less than 30 Trading Days nor more than 45 Trading Days prior to the Redemption Date to each such holder at such holder's address as the same appears on the transfer books of the Corporation. If any shares of Series 2 PCS Stock or Series 3 PCS Stock are outstanding immediately prior to the Redemption Date, then the notice provided to each holder of Series 2 PCS Stock or Series 3 PCS Stock, as the case may be, pursuant to this Section 7.4(F) will also indicate that such holders of shares of Series 2 PCS Stock and Series 3 PCS Stock outstanding immediately prior to the Redemption Date shall receive on a 27 per share basis, pursuant to such redemption, shares of common stock of such PCS Group Subsidiary with Voting Power equivalent to such shares received by holders of Series 1 PCS Stock. (G) If less than all of the outstanding shares of PCS Stock are to be redeemed pursuant to Section 7.1(A)(1), then the shares to be redeemed by the Corporation shall be selected from among the holders of shares of PCS Stock outstanding at the close of business on the record date for such redemption on a pro rata basis among each class or series of PCS Stock (including pro rata among all holders of Series 2 PCS Stock and Series 3 PCS Stock) or, if Series 2 PCS Stock is no longer outstanding, by lot or such other method as may be determined by the Board of Directors of the Corporation to be equitable. (H) The Corporation shall not be required to issue or deliver fractional shares of any capital stock or of any other securities to any holder of PCS Stock upon any conversion, redemption, dividend or other distribution pursuant to this Section 7. If more than one share of PCS Stock shall be held at the same time by the same holder, the Corporation may aggregate the number of shares of any capital stock that shall be issuable or any other securities or property that shall be distributable to such holder upon any conversion, redemption, dividend or other distribution (including any fractional shares). If there are fractional shares of any capital stock or of any other securities remaining to be issued or distributed to the holders of PCS Stock, the Corporation shall, if such fractional shares are not issued or distributed to the holder, pay cash in respect of such fractional shares in an amount equal to the Fair Value thereof on the fifth Trading Day prior to the date such payment is to be made (without interest). For purposes of the preceding sentence only, "Fair Value" of any fractional share means (A) in the case of any fraction of a share of capital stock of the Corporation, the product of such fraction and the Market Value of one share of such capital stock and (B) in the case of any other fractional security, such value as is determined by the Board of Directors. (I) No adjustments in respect of dividends shall be made upon the conversion or redemption of any shares of PCS Stock; provided, however, that if the Conversion Date or Redemption Date, as the case may be, with respect to any shares of PCS Stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto, the holders of such shares of PCS Stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on or with respect to such shares on the date set for payment of such dividend or other distribution, in each case without interest, notwithstanding the subsequent conversion or redemption of such shares. (J) Before any holder of PCS Stock shall be entitled to receive any cash payment and/or certificates or instruments representing shares of any capital stock and/or other securities or property to be distributed to such holder with respect to such shares of PCS Stock pursuant to this Section 7, such holder shall surrender at such place as the Corporation shall specify certificates for such shares of PCS Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation shall as soon as practicable after receipt of certificates representing such shares of PCS Stock deliver to the person for whose account such shares of PCS Stock were so surrendered, or to such person's nominee or nominees, the cash and/or the certificates or instruments representing the number of whole shares of the kind of capital stock and/or other securities or property to which such person shall be entitled as aforesaid, together with any payment in respect of fractional shares contemplated by Section 7.4(H), in each case without interest. If less than all of the shares of PCS Stock represented by any one certificate are to be redeemed or converted, then the Corporation shall issue and deliver a new certificate for the shares of PCS Stock not redeemed. (K) From and after any applicable Conversion Date or Redemption Date, as the case may be, all rights of a holder of shares of PCS Stock that were converted or redeemed shall cease except for the right, upon surrender of the certificates representing such shares of PCS Stock as required by Section 7.4(J), to receive the cash and/or the certificates or instruments representing shares of the kind of capital stock and/or other securities or property for which such shares were converted or redeemed, together with any payment in respect of fractional shares contemplated by Section 7.4(H) and rights to dividends as provided in Section 7.4(I), in each case without interest. Subject to the next sentence, any holder of a certificate that immediately prior to the applicable Conversion Date or Redemption Date represented shares of PCS Stock shall not be entitled to receive any dividend or other distribution or interest payment with respect to shares of any kind of capital stock or other security or instrument for which PCS Stock was converted or redeemed until the surrender as required by this Section 7 of such certificate in exchange for a certificate or certificates or instrument or instruments representing such capital stock or other security. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable on any class of capital stock of the Corporation as of a record date after the Conversion Date or Redemption Date, but that were not paid by reason of the foregoing, with respect to the number of whole shares of the kind of capital stock 28 represented by the certificate or certificates issued upon such surrender. From and after a Conversion Date or Redemption Date, the Corporation shall, however, be entitled to treat the certificates for PCS Stock that have not yet been surrendered for conversion or redemption as evidencing the ownership of the number of whole shares of the kind or kinds of capital stock of the Corporation for which the shares of PCS Stock represented by such certificates shall have been converted or redeemed, notwithstanding the failure to surrender such certificates. (L) The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of any shares of capital stock and/or other securities upon conversion or redemption of shares of PCS Stock pursuant to this Section 7. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of any shares of capital stock and/or other securities in a name other than that in which the shares of PCS Stock so converted or redeemed were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (M) Neither the failure to mail any notice required by this Section 7.4 to any particular holder of PCS Stock or of Convertible Securities nor any defect therein shall affect the sufficiency of any notice given to any other holder of outstanding shares of PCS Stock or of Convertible Securities or the validity of any such conversion or redemption. (N) The Board of Directors may establish such rules and requirements to facilitate the effectuation of the transactions contemplated by this Section 7 as the Board of Directors shall determine to be appropriate. (O) If notices to Class A Holders are made pursuant to this Section 7, then the Corporation will make such notices in compliance with the provisions of Section 11 of ARTICLE SIXTH as well as with the provisions of this Section 7. 7.5 Automatic Conversion of Series 2 PCS Stock and Series 2 FON Stock. (a) Below One Percent Voting Power. If the total number of Converted Votes represented by the aggregate number of issued and outstanding shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be, is below one percent of the outstanding Voting Power of the Corporation for more than 90 consecutive days, then (i) the Corporation shall notify FT and DT, in accordance with ARTICLE SIXTH, Section 11, of the date on which such conversion will occur as soon as practicable following the date on which such 90-day period ends (the "Conversion Trigger Date") but in no event later than ten Business Days after the Conversion Trigger Date and (ii) each outstanding share of Series 2 PCS Stock or Series 2 FON Stock will automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock or Series 1 FON Stock, respectively, such conversion to take place on the 90th day following the Conversion Trigger Date. (b) Certain Transfers. Upon any Transfer of shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be (other than a Transfer to a Cable Holder) each such share so Transferred shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 PCS Stock or Series 1 FON Stock, respectively, as of the date of such Transfer. (c) Notice of Automatic Conversion; Exchange of Stock Certificates; Effect of Automatic Conversion of All Series 2 PCS Stock, etc. (i) In addition to the notice required in Section 7.5(a), as soon as practicable after a conversion of shares of Series 2 PCS Stock (or, if applicable, Series 2 FON Stock) into shares of Series 1 PCS Stock (or, if applicable, Series 1 FON Stock), pursuant to this Section 7, the Corporation shall notify FT and DT, in accordance with ARTICLE SIXTH, Section 11, of the number of shares so converted and the date on which such conversion occurred. (ii) Immediately upon the conversion of shares of Series 2 PCS Stock (or, if applicable, Series 2 FON Stock) into shares of Series 1 PCS Stock (or, if applicable, Series 1 FON Stock), pursuant to this Section 7 (such shares so converted hereinafter referred to as the "Converted Series Shares"), the rights of the holders of such Converted Series Shares, as such, shall cease and the holders thereof shall be treated for all purposes as having become the record owners of the shares of Series 1 PCS Stock or Series 1 FON Stock, as the case may 29 be, issuable upon such conversion (the "Newly Issued Shares"), provided that such Persons shall be entitled to receive when paid any dividends declared on the Converted Series Shares as of a record date preceding the time the Converted Series Shares were converted (the "Series Conversion Time") and unpaid as of the Series Conversion Time. If the stock transfer books of this Corporation shall be closed at the Series Conversion Time, such Person or Persons shall be deemed to have become such holder or holders of record of the Newly Issued Shares at the opening of business on the next succeeding day on which such stock transfer books are open. (iii) As promptly as practicable after the Series Conversion Time, upon the delivery to this Corporation of the certificates formerly representing Converted Series Shares, this Corporation shall deliver or cause to be delivered, to or upon the written order of the record holder of such certificates, a certificate or certificates representing the number of duly issued, fully paid and nonassessable Newly Issued Shares into which the Converted Series Shares formerly represented by such certificates have been converted in accordance with the provisions of this Section 7.5. (iv) This Corporation shall pay all United States federal, state or local documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Newly Issued Shares upon the conversion of Converted Series Shares pursuant to this Section 7.5, provided that this Corporation shall not be required to pay any tax which may be payable in respect of any registration of Transfer involved in the issue or delivery of Newly Issued Shares in a name other than that of the registered holder of shares converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to this Corporation the amount of any such tax or has established, to the satisfaction of this Corporation, that such tax has been paid. (v) This Corporation shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Series 1 PCS Stock, authorized but unissued Series 1 FON Stock, issued Series 1 PCS Stock held in its treasury and issued Series 1 FON Stock held in its treasury, for the purpose of effecting the conversion of the Series 2 PCS Stock or Series 2 FON Stock, as the case may be, contemplated hereby, the full number of shares of Series 1 PCS Stock and Series 1 FON Stock then deliverable upon the conversion of all outstanding shares of Series 2 PCS Stock or Series 2 FON Stock, as the case may be, and the full number of shares of Series 2 PCS Stock the Cable Holders are permitted to acquire under the Restructuring Agreement and the Cable Holder Standstill Agreements. (d) Temporary Voting Power Adjustment for Class A Holders. If any conversions of shares of Series 2 PCS Stock or Series 2 FON Stock into shares of Series 1 PCS Stock or Series 1 FON Stock, respectively, pursuant to this Section 7.5, or any increases in the per share vote of other Voting Securities of the Corporation upon a Transfer of such Voting Securities, occur on or after the tenth Trading Day preceding a record date for purposes of determining the stockholders entitled to vote or to receive the payment of a dividend, then the per share vote of the Class A Stock determined in accordance with ARTICLE SIXTH, Section 3.2 shall be increased such that the aggregate Percentage Ownership Interest of each Class A Holder, including with respect to Series 3 FON Stock and Series 3 PCS Stock (or stock converting into Series 3 FON Stock and Series 3 PCS Stock pursuant to ARTICLE SIXTH, Section 8.3(c)) acquired prior to such record date, shall not be diluted as a result of such conversions until 12:01 a.m. on the day immediately following the date of such stockholder meeting or the dividend payment date, respectively. Section 8. Provisions Relating to Class A Stock. 8.1. Rights and Privileges. Except as otherwise set forth in these Articles of Incorporation, at all times (i) the holders of Series 3 FON Stock shall be entitled to all of the rights and privileges pertaining to the ownership of Series 1 FON Stock, (ii) the holders of Series 3 PCS Stock shall be entitled to all of the rights and privileges pertaining to the ownership of Series 1 PCS Stock, and (iii) the holders of Class A Common Stock shall be entitled to all of the rights and privileges pertaining to the ownership of Series 1 FON Stock and Series 1 PCS Stock to the extent such Class A Common Stock represents, at such time, Shares Issuable With Respect To The Class A Equity Interest In The FON Group and Shares Issuable With Respect To The Class A Equity Interest In The PCS Group, in all such cases without any limitations, prohibitions, restrictions or qualifications whatsoever, and such holders shall be entitled to such other rights and privileges as are expressly set forth in these Articles of Incorporation; provided that a holder of shares of Class A Common Stock shall not have any rights or privileges under these Articles of Incorporation or the General Corporation Code of Kansas, as amended, or otherwise (whether in connection with the voluntary or involuntary liquidation, dissolution or winding up of this Corporation, in connection with the declaration and/or payment of 30 dividends, with respect to redemptions of such shares or in connection with any other distributions by the Corporation of any character on the Corporation Common Stock or otherwise) in respect of such shares except such rights and privileges that such holder would have had if all Shares Issuable With Respect To The Class A Equity Interest In The FON Group and all Shares Issuable With Respect To The Class A Equity Interest In The PCS Group had been issued and all shares of Class A Common Stock had been redeemed pursuant to ARTICLE SIXTH, Section 1.2(c). 8.2. Certain Agreements. Except as otherwise provided in Section 8.3 of ARTICLE SIXTH, for so long as any shares of Class A Stock are outstanding: (i) if any merger or other business combination involving this Corporation results directly or indirectly in a Change of Control, then unless this Corporation survives as the parent entity, the surviving corporation will expressly assume all of this Corporation's obligations in respect of the Registration Rights Agreement and this Section 8.2; and (ii) if any merger or other business combination involving this Corporation occurs that does not result directly or indirectly in a Change of Control, then unless this Corporation survives as the parent entity, the surviving corporation will expressly assume all of this Corporation's obligations in respect of the rights of the Class A Holders granted pursuant to these Articles of Incorporation, the Stockholders' Agreement, the FT/DT Restructuring Agreement and the Registration Rights Agreement. 8.3. Conversion of Shares. (a) Unauthorized Transfers; Automatic Conversions. Upon any Transfer of shares of Class A Stock (other than a Transfer to a Qualified Subsidiary, to a Qualified Stock Purchaser or to FT or DT, in each case which Transfer is effected in accordance with the provisions of Article II of the Stockholders' Agreement), or upon delivery of a written notice, provided by a Class A Holder with respect to such holder's shares of Class A Stock, to Sprint in accordance with the notice delivery requirements as set forth in ARTICLE SIXTH, Section 11, (A) each share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, so Transferred, or identified in such notice, shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively, and (B) the Old Class A Common Stock, to the extent so Transferred, or identified in such notice, shall be adjusted as provided in, and with the same effect as provided in, ARTICLE SIXTH, Sections 1.2(c) and 1.2(e), except that in such case only Series 1 PCS Stock and Series 1 FON Stock shall be issued; as of the date of such Transfer or delivery of such notice, provided that no conversion of Class A Stock pursuant to this Section 8.3(a) shall be considered to be an acquisition of Series 1 FON Stock or Series 1 PCS Stock for purposes of Section 8.3(c) of ARTICLE SIXTH. (b) Material Breach of Investment Documents. (i) (A) Each outstanding share of Series 3 FON Stock and Series 3 PCS Stock Beneficially Owned by a Breaching Holder shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively, and (B) all outstanding shares of Old Class A Common Stock Beneficially Owned by a Breaching Holder shall automatically convert (without the payment of any consideration) into the number of duly issued, fully paid and nonassessable shares of Series 1 FON Stock and Series 1 PCS Stock equal to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, respectively, represented by such shares of Old Class A Common Stock, if: (v) FT or DT or any Qualified Subsidiary breaches in any material respect its obligations under Section 2.4 of the Stockholders' Agreement; (w) deleted; (x) FT, DT or any Qualified Subsidiary breaches any of the provisions of Article 2 (other than Section 2.1(b)) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement; 31 (y) FT, DT or any Qualified Subsidiary breaches any of the provisions of Sections 3.1 or 3.2 of the Standstill Agreement or any corresponding provisions of any Qualified Subsidiary Standstill Agreement, in each case in a Control Context, or otherwise breaches Sections 3.1(a)(ii), (iii) or (iv) or Section 3.1(g) of the Standstill Agreement or any corresponding provision of any Qualified Subsidiary Standstill Agreement; or (z) FT, DT or any Qualified Subsidiary breaches any of the provisions of Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g)) or 3.2 of the Standstill Agreement or any corresponding provisions of any Qualified Subsidiary Standstill Agreement, in each case other than in a Control Context; provided that, with respect to an alleged breach of the type described in clauses (v), (x), (y) or (z) above, the Class A Holder(s) alleged to have taken the actions causing such breach (the "Breaching Holders") shall deliver a notice (I) except with respect to a breach of the type described in clause (y) above, in accordance with clauses (ii)(x) or (iii)(x) below, in which case no conversion of the Class A Stock shall take place unless such breach fails to be cured within the time provided for cure in such clause (ii) or (iii), as the case may be; (II) in accordance with clauses (ii)(y), (iii)(y) or (iv) below, in which case no conversion of the Class A Stock shall take place until there is issued a final nonappealable decision or order of a court of competent jurisdiction finding that such breach has occurred and, if applicable, was not cured within the time provided for cure in clauses (ii) or (iii) below, as the case may be; or (III) admitting that such a breach has occurred, and (if applicable) cannot be cured within the time periods provided for cure in clauses (ii) or (iii) below, in which case (A) each outstanding share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, Beneficially Owned by a Breaching Holder shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively, and (B) all outstanding shares of Old Class A Common Stock Beneficially Owned by a Breaching Holder shall automatically convert (without the payment of any consideration) into the number of duly issued, fully paid and nonassessable shares of Series 1 FON Stock and Series 1 PCS Stock equal to the number of shares issuable with respect to the Old Class A Equity Interest In The FON Group and the number of shares issuable with respect to the Old Class A Equity Interest in the PCS Group, respectively, represented by such shares of Old Class A Common Stock, upon delivery of such notice; and provided, further, that if the Breaching Holders fail to perform the actions described in clauses (I) or (II) above within the time periods provided for performing such actions in clauses (ii), (iii) or (iv) below, they shall be deemed to have taken the action described in clause (III) above. (ii) For any alleged breach of the type described in clauses (x) or (z) of clause (i) above, the Breaching Holders shall have the right, within five Business Days after the date (for purposes of this clause (ii), the "Breach Notice Date") that notice of such breach is delivered to each Breaching Holder by this Corporation, to deliver to this Corporation a notice either: (x) committing to effect a cure as soon as practical, in which case the Breaching Holders shall effect such cure as soon as practical, but in no event later than the 20th Business Day from the Breach Notice Date (or, with respect to an alleged breach of clause (x), if such cure cannot be effected within such time period due to the anti-fraud rules of the U.S. securities laws, such longer period as is reasonably necessary to cure such breach in a manner consistent with such rules), provided that (I) the Breaching Holders shall have no right to cure unless such breach is susceptible to cure; 32 (II) such cure period shall continue only for so long as each Breaching Holder shall be undertaking to effect such a cure in a diligent manner; (III) with respect to an alleged breach of clause (i)(x) above, this Corporation shall have the right at any time after the end of such 20-day period to purchase such number of shares of Non-Class A Common Stock or Class A Stock, as the case may be, as is necessary to return the Breaching Holder to the ownership level permitted by the Standstill Agreement or a Qualified Subsidiary Standstill Agreement, as the case may be, at a price equal to the lower of (A) the Market Price for such shares at the time of such redemption and (B) the price paid by the Breaching Holders for such shares, provided that this Corporation may only exercise such right if a majority of the Continuing Directors shall have first approved, at a meeting at which at least seven Continuing Directors are present, such a purchase of Shares, unless a Fair Price Condition has been satisfied; and (IV) withdrawal of the action alleged to have caused such breach shall not, in and of itself, give rise to a presumption that such breach has been cured; or (y) disputing that such a breach has occurred, provided that during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred and was not cured within the time provided for cure in clause (x) of this clause (ii), the rights provided to the Class A Holders under this Section 8.3 shall, with respect to the Breaching Holder only, be suspended and may not be exercised by the Breaching Holder. (iii) For any alleged breach of the type described in clause (i)(v) above, the Breaching Holders shall have the right, within five Business Days after the date (for purposes of this clause (iii), the "Breach Notice Date") that notice of such breach is delivered to each Breaching Holder by this Corporation, to deliver to this Corporation a notice either: (x) committing to effect a cure as soon as practical, in which case the Breaching Holders shall effect such cure as soon as practical, but in no event later than the 20th Business Day from the Breach Notice Date (or, if such cure cannot be effected within such time period due to the anti- fraud rules of the U.S. securities laws, such longer period as is reasonably necessary to cure such breach in a manner consistent with such rules), provided that (I) the Breaching Holders shall have no right to cure unless such breach is susceptible to cure; (II) such cure period shall continue only for so long as each Breaching Holder shall be undertaking to effect such a cure in a diligent manner; and (III) withdrawal of the action alleged to have caused such breach shall not, in and of itself, give rise to a presumption that such breach has been cured; or (y) disputing that such a breach has occurred; provided that, in each case, from the Breach Notice Date until the earlier to occur of the cure of such breach and the issuance of a decision or order of a court of competent jurisdiction finding that such breach has not occurred or was cured within the time provided for cure in clause (x) of this clause (iii), the rights provided to the Class A Holders under this Section 8.3 shall, with respect to the Breaching Holder only, be suspended and may not be exercised by the Breaching Holder; and provided, further, that following such decision or order, such rights shall be suspended during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred and was not cured within the time provided for cure in clause (x) of this clause (iii). (iv) For any alleged breach of the type described in clause (i)(y) above, the Breaching Holders shall have the right, within five Business Days after the date (for purposes of this clause (iv), the "Breach Notice Date") that notice of such breach is delivered to each Breaching Holder by this Corporation, to deliver to this Corporation a notice disputing that such a breach has occurred, provided that from the Breach Notice Date until the issuance of a decision or order of a court of competent jurisdiction finding that such breach has not occurred, the rights provided to the Class A 33 Holders under this Section 8.3 shall, with respect to the Breaching Holder only, be suspended and may not be exercised by the Breaching Holder; and provided, further, that following such decision or order, such rights shall be suspended during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred. (v) For purposes of this Section 8.3(b), an alleged breach shall be deemed to have occurred in a "Control Context" if the action or actions alleged to have given rise to such breach were taken in the context of efforts by any Class A Holder or any other Person having the purpose or effect of changing or influencing the control of this Corporation. (vi) No conversion pursuant to this Section 8.3(b) shall be considered an acquisition for purposes of Section 8.3(c) of ARTICLE SIXTH. (c) Conversion into Class A Stock. Until the conversion of all of the shares of Class A Stock pursuant to this Section 8.3, (x) each share of Series 1 FON Stock or Series 2 FON Stock, as the case may be, acquired by a Class A Holder shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 3 FON Stock at the date of such acquisition and (y) each share of Series 1 PCS Stock or Series 2 PCS Stock, as the case may be, acquired by a Class A Holder shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 3 PCS Stock at the date of such acquisition. (d) Notice of Conversion; Exchange of Stock Certificates; Effect of Conversion of all Class A Stock. (i) Immediately upon the conversion of shares of Series 3 FON Stock, Series 3 PCS Stock and Class A Common Stock into shares of Series 1 FON Stock, Series 1 PCS Stock and, as applicable, shares of both Series 1 FON Stock and Series 1 PCS Stock, respectively, or upon the conversion of shares of Series 1 FON Stock and Series 2 FON Stock or Series 2 PCS Stock and Series 1 PCS Stock into shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, and in each case pursuant to this Section 8.3 (the shares of Class A Common Stock, Series 3 FON Stock, Series 3 PCS Stock, Series 1 FON Stock, Series 2 FON Stock, Series 2 PCS Stock or Series 1 PCS Stock so converted hereinafter referred to as the "Converted Shares"), the rights of the holders of such Converted Shares, as such, shall cease and the holders thereof shall be treated for all purposes as having become the record owners of the shares of Series 1 FON Stock, Series 3 FON Stock, Series 1 PCS Stock or Series 3 PCS Stock, as the case may be, issuable upon such conversion (the "New Shares"), provided that such Persons shall be entitled to receive when paid any dividends declared on the Converted Shares as of a record date preceding the time the Converted Shares were converted (the "Conversion Time") and unpaid as of the Conversion Time, if such Persons were the record holders of the Converted Shares on such record date. If the stock transfer books of this Corporation shall be closed at the Conversion Time, such Person or Persons shall be deemed to have become such holder or holders of record of the New Shares at the opening of business on the next succeeding day on which such stock transfer books are open. (ii) As promptly as practicable after the Conversion Time, upon the delivery to this Corporation of the certificates formerly representing Converted Shares, this Corporation shall deliver or cause to be delivered, to or upon the written order of the record holder of such certificates, a certificate or certificates representing the number of duly issued, fully paid and nonassessable New Shares into which the Converted Shares formerly represented by such certificates have been converted in accordance with the provisions of this Section 8.3. (iii) This Corporation shall pay all United States federal, state or local documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of New Shares upon the conversion of Converted Shares pursuant to this Section 8.3, provided that this Corporation shall not be required to pay any tax which may be payable in respect of any registration of Transfer involved in the issue or delivery of New Shares in a name other than that of the registered holder of shares converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to this Corporation the amount of any such tax or has established, to the satisfaction of this Corporation, that such tax has been paid. (iv) This Corporation shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Series 3 FON Stock, Series 3 PCS Stock, Series 1 PCS Stock and Series 1 FON Stock and its issued Series 1 FON Stock or Series 1 PCS Stock held in its treasury, for the purpose of effecting the conversion of the Series 3 FON Stock, Series 1 FON Stock, Series 2 FON Stock, Series 3 PCS Stock, Series 2 PCS Stock, Series 1 PCS Stock and Class 34 A Common Stock contemplated hereby, the full number of shares of Series 1 FON Stock or Series 1 PCS Stock then deliverable upon the conversion of all outstanding shares of Series 3 FON Stock, Series 3 PCS Stock and Class A Common Stock, and the full number of shares of Series 3 FON Stock and Series 3 PCS Stock that would be deliverable upon conversion of all of the shares of Series 1 FON Stock, Series 1 PCS Stock, Series 2 FON Stock and Series 2 PCS Stock the Class A Holders are permitted to acquire hereunder and under the Investment Agreement, the FT/DT Restructuring Agreement, the Stockholders' Agreement and the Standstill Agreement. (v) Following conversion of all outstanding shares of Class A Stock into shares of Series 1 FON Stock or Series 1 PCS Stock, as the case may be, pursuant to this Section 8.3, this Corporation shall not, directly or indirectly, issue, or sell from the treasury, any shares of Class A Stock. (e) Class A Stock Held by Qualified Stock Purchasers. (i) (A) Each outstanding share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, owned by a Qualified Stock Purchaser shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively, if: (v) such Qualified Stock Purchaser breaches in any material respect its obligations under Section 2.4 of the Stockholders' Agreement; (w) Deleted; (x) such Qualified Stock Purchaser breaches any of the provisions of Article 2 of the Qualified Stock Purchaser Standstill Agreement; (y) such Qualified Stock Purchaser breaches any of the provisions of Section 3.1 or 3.2 of the Qualified Stock Purchaser Standstill Agreement in a Control Context, or such Qualified Stock Purchaser otherwise breaches Sections 3.1(a)(ii), (iii) or (iv) or Section 3.1(g) of the Qualified Stock Purchaser Standstill Agreement; or (z) such Qualified Stock Purchaser breaches any of the provisions of Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g)) or 3.2 of the Qualified Stock Purchaser Standstill Agreement, in each case other than in a Control Context; provided, that such Qualified Stock Purchaser shall deliver a notice (I) except with respect to a breach of the type described in clause (y) above, in accordance with clauses (ii)(x) or (iii)(x) below, in which case no conversion of the Class A Stock owned by such Qualified Stock Purchaser shall take place unless such breach fails to be cured within the time provided for cure in such clause (ii) or (iii), as the case may be; (II) in accordance with clauses (ii)(y), (iii)(y) or (iv) below, in which case no conversion of the Class A Stock owned by such Qualified Stock Purchaser shall take place until there is issued a final nonappealable decision or order of a court of competent jurisdiction finding that such breach has occurred and, if applicable, was not cured within the time provided for cure in clauses (ii) or (iii) below, as the case may be; or (III) admitting that such a breach has occurred, and (if applicable) cannot be cured within the time periods provided for cure in clauses (ii) or (iii) below, in which case each outstanding share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, owned by such Qualified Stock Purchaser shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively upon delivery of such notice; and provided, further, that if such Qualified Stock Purchaser fails to perform the actions described in clauses (I) or (II) above within the time periods provided for performing such actions in clauses (ii), (iii) or (iv) below, it shall be deemed to have taken the action described in clause (III) above. 35 (ii) For any alleged breach of the type described in clauses (x) or (z) of clause (i) above, such Qualified Stock Purchaser shall have the right, within five Business Days after the date (for purposes of this clause (iii), the "Breach Notice Date") that notice of such breach is delivered to such Qualified Stock Purchaser by this Corporation, to deliver to this Corporation a notice either: (x) committing to effect a cure as soon as practical, in which case such Qualified Stock Purchaser shall effect such cure as soon as practical, but in no event later than the 20th Business Day from the Breach Notice Date (or, with respect to an alleged breach of clause (x), if such cure cannot be effected within such time period due to the anti-fraud rules of the U.S. securities laws, such longer period as is reasonably necessary to cure such breach in a manner consistent with such rules), provided that (I) such Qualified Stock Purchaser shall have no right to cure unless such breach is susceptible to cure; (II) such cure period shall continue only for so long as such Qualified Stock Purchaser shall be undertaking to effect such a cure in a diligent manner; (III) with respect to an alleged breach of clause (i)(x) above, this Corporation shall have the right at any time after the end of such 20-day period to purchase such number of shares of Class A Stock as is necessary to return such Qualified Stock Purchaser to the ownership level permitted by the Qualified Stock Purchaser Standstill Agreement, at a price equal to the lower of (A) the Market Price for such Shares at the time of such redemption and (B) the price paid by such Qualified Stock Purchaser for such Shares, provided that this Corporation may only exercise such right if a majority of the Continuing Directors shall have first approved, at a meeting at which at least seven Continuing Directors are present, such a purchase of Shares, unless a Fair Price Condition has been satisfied; and (IV) withdrawal of the action alleged to have caused such breach shall not, in and of itself, give rise to a presumption that such breach has been cured; or (y) disputing that such a breach has occurred, provided that during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred and was not cured within the time provided for cure in clause (x) of this clause (ii), the rights provided to such Qualified Stock Purchaser under this Section 8.3 shall be suspended and may not be exercised by such Qualified Stock Purchaser. (iii) For any alleged breach of the type described in clause (i)(v) above, such Qualified Stock Purchaser shall have the right, within five Business Days after the date (for purposes of this clause (iii), the "Breach Notice Date") that notice of such breach is delivered to such Qualified Stock Purchaser by this Corporation, to deliver to this Corporation a notice either: (x) committing to effect a cure as soon as practical, in which case such Qualified Stock Purchaser shall effect such cure as soon as practical, but in no event later than the 20th Business Day from the Breach Notice Date (or, if such cure cannot be effected within such time period due to the anti- fraud rules of the U.S. securities laws, such longer period as is reasonably necessary to cure such breach in a manner consistent with such rules), provided that (I) such Qualified Stock Purchaser shall have no right to cure unless such breach is susceptible to cure; (II) such cure period shall continue only for so long as such Qualified Stock Purchaser shall be undertaking to effect such a cure in a diligent manner; and (III) withdrawal of the action alleged to have caused such breach shall not, in and of itself, give rise to a presumption that such breach has been cured; or (y) disputing that such a breach has occurred; 36 provided that, in each case, from the Breach Notice Date until the earlier to occur of the cure of such breach and the issuance of a decision or order of a court of competent jurisdiction finding that such breach has not occurred or was cured within the time provided for cure in clause (x) of this clause (iii), the rights provided to such Qualified Stock Purchaser under this Section 8.3 shall be suspended and may not be exercised by such Qualified Stock Purchaser; and provided, further, that following such decision or order, such rights shall be suspended during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred and was not cured within the time provided for cure in clause (x) of this clause (iii). (iv) For any alleged breach of the type described in clause (i)(y) above, such Qualified Stock Purchaser shall have the right, within five Business Days after the date (for purposes of this clause (iv), the "Breach Notice Date") that notice of such breach is delivered to such Qualified Stock Purchaser by this Corporation, to deliver to this Corporation a notice disputing that such a breach has occurred, provided that from the Breach Notice Date until the issuance of a decision or order of a court of competent jurisdiction finding that such breach has not occurred, the rights provided to such Qualified Stock Purchaser under this Section 8.3 shall be suspended and may not be exercised by such Qualified Stock Purchaser and provided, further, that following such decision or order, such rights shall be suspended during such time as the most recent decision or order of a court of competent jurisdiction is to the effect that such breach has occurred. (v) For purposes of this Section 8.3(e), an alleged breach shall be deemed to have occurred in a Control Context if the action or actions alleged to have given rise to such breach were taken in the context of efforts by such Qualified Stock Purchaser or any other Person having the purpose or effect of changing or influencing the control of this Corporation. (vi) No conversion pursuant to this Section 8.3(e) shall be considered an acquisition for purposes of Section 8.3(c) of ARTICLE SIXTH. (f) Effect of Conversion. Upon the conversion of all of the shares of Class A Stock pursuant to this Section 8.3, (A) each share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, issued by this Corporation pursuant to the Investment Agreement, the FT/DT Restructuring Agreement, the Stockholders' Agreement or these Articles of Incorporation shall automatically convert (without the payment of any consideration) into one duly issued, fully paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively, and (B) all outstanding shares of Old Class A Common Stock shall automatically convert (without the payment of any consideration) into the number of duly issued, fully paid and nonassessable shares of Series 1 FON Stock and Series 1 PCS Stock equal to the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, respectively, represented by such shares of Old Class A Common Stock; provided that such conversion shall not be considered an acquisition of Series 1 FON Stock or Series 1 PCS Stock, as the case may be, for purposes of Section 8.3(c) of ARTICLE SIXTH. 8.4. Class Voting. Except as otherwise provided by law, the Class A Holders shall not have, nor be entitled to, a class vote with respect to any matter to be voted on by the stockholders of this Corporation. 8.5. Amendment of Class A Provisions; The Master Transfer Agreement. The Class A Provisions may be amended in any manner which would not materially alter or change the powers, preferences or rights of the holders of shares of Non-Class A Common Stock or Preferred Stock so as to affect such powers, preferences or rights adversely, by the Board of Directors of this Corporation with the affirmative vote of only the holders of at least two-thirds of the votes represented by the outstanding shares of Class A Stock, voting together as a single class, and without the affirmative vote of the holders of shares of the Non-Class A Common Stock or the Preferred Stock. Upon the retirement of shares of Class A Common Stock, (i) such shares shall not resume the status of authorized and unissued shares of that class, (ii) such shares shall not be reissued, and (iii) upon the execution, acknowledgment and filing of a certificate in accordance with Kan. Stat. Ann. ss. 17-6003 and ss. 17-6603 (or any successor provisions) stating that the reissuance of such shares is prohibited, identifying the shares and reciting their retirement, then the filing of such 37 certificate shall have the effect of amending these Articles of Incorporation so as to reduce accordingly the number of authorized shares of Class A Common Stock or if such retired shares constitute all of the authorized shares of such class, then the filing of such certificate shall have the effect of amending these Articles of Incorporation automatically so as to eliminate all references to such class of stock therefrom. Notwithstanding any other provision in these Articles of Incorporation, the transactions contemplated by the Master Transfer Agreement shall not constitute a Corporation Joint Venture Termination or an FT/DT Joint Venture Termination. Section 9. Application of the Provisions of ARTICLE SIXTH. 9.1. Certain Determinations of the Board of Directors. In addition to the determinations regarding Preferred Stock to be made by the Board of Directors as provided by Section 13.6, the Board of Directors shall make such determinations (i) with respect to the assets and liabilities to be attributed to the Business Groups (in accordance with the definitions of "PCS Group" and "Sprint FON Group" set forth in ARTICLE SIXTH, Section 10), (ii) with respect to the application of the provisions of this ARTICLE SIXTH to transactions to be engaged in by the Corporation and (iii) as may be or become necessary or appropriate to the exercise of the powers, preferences and relative, participating, optional and other special rights of the classes or series of Corporation Common Stock, including, without limiting the foregoing, the determinations referred to in the following paragraphs (A), (B), (C) and (D) of this Section 9.1. A record of any such determination shall be filed with the Secretary of the Corporation to be kept with the records of the actions of the Board of Directors. (A) Upon any acquisition by the Corporation or its subsidiaries of any assets or business, or any assumption of liabilities, outside of the ordinary course of business of the Sprint FON Group or the PCS Group, as the case may be, the Board of Directors shall determine whether such assets, business and liabilities (or an interest therein) shall be for the benefit of the Sprint FON Group or the PCS Group or that an interest therein shall be partly for the benefit of the Sprint FON Group and partly for the benefit of the PCS Group and, accordingly, shall be attributed to the Sprint FON Group or the PCS Group, or partly to each, in accordance with the definitions of "PCS Group," "Sprint FON Group," and "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" set forth in Section 10 of ARTICLE SIXTH. (B) Upon any issuance of any shares of PCS Stock at a time when the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is more than zero, the Board of Directors shall determine, based on the use of the proceeds of such issuance and any other relevant factors, whether all or any part of the shares of PCS Stock so issued should reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest and the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest shall be adjusted accordingly. (C) Upon any issuance by the Corporation or any subsidiary thereof of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock, if at the time such Convertible Securities are issued the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater than zero, the Board of Directors shall determine whether, upon conversion, exchange or exercise thereof, the issuance of shares of PCS Stock pursuant thereto shall, in whole or in part, reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, taking into consideration the use of the proceeds of such issuance of Convertible Securities in the business of the Sprint FON Group or the PCS Group and any other relevant factors. (D) Upon any redemption or repurchase by the Corporation or any subsidiary thereof of shares of any Preferred Stock of any class or series or of other securities or debt obligations of the Corporation, if some of such shares, other securities or debt obligations were attributed to the Sprint FON Group and some of such shares, other securities or debt obligations were attributed to the PCS Group, the Board of Directors shall determine which, if any, of such shares, other securities or debt obligations redeemed or repurchased shall be attributed to the Sprint FON Group and which, if any, of such shares, other securities or debt obligations shall be attributed to the PCS Group and, accordingly, how many of the shares of such series of Preferred Stock or of such other securities, or how much of such debt obligations, that remain outstanding, if any, continue to be attributed to the Sprint FON Group or to the PCS Group. 9.2. Sources of Dividends and Distributions; Uses of Proceeds of Share Issuances. Notwithstanding the attribution of properties or assets of the Corporation to the Sprint FON Group or the PCS Group as provided in the 38 definitions of such terms in Section 10 of ARTICLE SIXTH, the Board of Directors (i) may cause dividends or distributions or other payments to the holders of any class of Corporation Common Stock or any class or series of Preferred Stock to be made out of the properties or assets attributed to any Business Group, subject, however, to any contrary term of any series of Preferred Stock fixed in accordance with Section 13 of ARTICLE SIXTH, and (ii) may cause the proceeds of issuance of any shares of Non-Class A Stock or Class A Stock or any class or series of Preferred Stock, to whichever Business Group attributed in accordance with Section 13 of ARTICLE SIXTH, to be used in the business of, and to be attributed to, either the Sprint FON Group or the PCS Group in accordance with the definitions of "PCS Group," "Sprint FON Group," and "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" in Section 10 of ARTICLE SIXTH. 9.3. Certain Determinations Not Required. Notwithstanding the foregoing provisions of this Section 9, the provisions of Section 10 of ARTICLE SIXTH or any other provision of this ARTICLE SIXTH, at any time when there are not outstanding both (i) one or more shares of FON Stock (or Shares Issuable With Respect To The Class A Equity Interest In The FON Group) or Convertible Securities convertible into or exchangeable or exercisable for FON Stock and (ii) one or more shares of PCS Stock (or Shares Issuable With Respect To The Class A Equity Interest In The PCS Group) or Convertible Securities convertible into or exchangeable or exercisable for PCS Stock, the Board of Directors need not (A) attribute any of the assets or liabilities of the Corporation or any of its subsidiaries to the Sprint FON Group or the PCS Group, (B) make any determination required in connection therewith, or (C) make any of the determinations otherwise required by this ARTICLE SIXTH, and in such circumstances the holders of the shares of FON Stock or PCS Stock outstanding, as the case may be, shall (unless otherwise specifically provided by the Articles of Incorporation of the Corporation) be entitled to all the voting powers, preferences, optional or other special rights of such classes of Corporation Common Stock without differentiation between the FON Stock and the PCS Stock and any provision of this ARTICLE SIXTH to the contrary shall no longer be in effect or operative and the Board of Directors may cause the Articles of Incorporation of the Corporation to be amended as permitted by law to delete such provisions as are no longer operative or of further effect. 9.4. Emergency Use of Business Group Assets. Notwithstanding the foregoing provisions of this Section 9 or any other provision of ARTICLE SIXTH, the Board of Directors may transfer assets or properties from one Business Group to another on such other basis as the Board of Directors shall determine, consistent with its fiduciary duties to the Corporation and the holders of all classes and series of the Corporation's common stock, provided that the Board of Directors determines (i) that such transfer on such basis should be made to prevent or mitigate material adverse consequences that would fundamentally affect the transferee Business Group, (ii) that the benefit of such transfer on such basis to the transferee Business Group is to materially exceed any adverse effect of such transfer to the transferor Business Group, and (iii) that such transfer on such basis is in the best interest of the Corporation as a whole after giving fair consideration to the potentially divergent interests of the holders of the separate classes of Corporation Common Stock. 9.5. Board Determinations Binding. Subject to applicable law, any determinations made in good faith by the Board of Directors of the Corporation under any provision of this Section 9 or otherwise in furtherance of the application of this ARTICLE SIXTH shall be final and binding on all stockholders. Section 10. Definitions. For purposes of ARTICLE FIFTH and ARTICLE SIXTH of these Articles of Incorporation, the following terms have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless the context otherwise requires. As used in this Section 10, a "contribution" or "transfer" of assets or properties from one Business Group to another refers to the reattribution of such assets or properties from the contributing or transferring Business Group to the other Business Group and correlative phrases have correlative meanings. "Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, such Person, provided that (a) no JV Entity shall be deemed an Affiliate of any Class A Holder or this Corporation unless (i) FT, DT and Atlas own a majority of the Voting Power of such JV Entity and this Corporation does not have the Tie-Breaking Vote (as defined in Section 18.1 of the Joint Venture Agreement), or (ii) FT, DT or Atlas has the Tie-Breaking Vote; (b) FT, DT and this Corporation shall not be deemed Affiliates of each other; (c) Atlas shall be deemed an Affiliate of FT and DT; and (d) the term "Affiliate" shall not include any Governmental Authority of France or Germany or any other Person Controlled, directly or indirectly, by any such Governmental Authority except in each case for FT, DT, Atlas and any other Person directly, or indirectly through one or more intermediaries, Controlled by FT, DT or Atlas. 39 "Alien" means "aliens," "their representatives," "a foreign government or representatives thereof" or "any corporation organized under the laws of a foreign country" as such terms are used in Section 310(b)(4) of the Communications Act of 1934, as amended, or as hereafter may be amended, or any successor provision of law. "Applicable Law" has the meaning set forth in the Stockholders' Agreement. "Associate" has the meaning ascribed to such term in Rule 12b- 2 under the Exchange Act, provided that when used to indicate a relationship with FT or DT or their respective Subsidiaries or Affiliates, the term "Associate" means (a) in the case of FT, any Person occupying any of the positions listed on Schedule A to the Stockholders' Agreement and (b) in the case of DT, any Person occupying any of the positions listed on Schedule B to the Stockholders' Agreement, provided, further, that, in each case, no Person occupying any such position described in clause (a) or (b) hereof shall be deemed an "Associate" of FT or DT, as the case may be, unless the Persons occupying all such positions described in clauses (a) and (b) hereof Beneficially Own, in the aggregate, more than 0.2% of the Voting Power of the Corporation. "Atlas" means the company formed as a societe anonyme under the laws of Belgium pursuant to the Joint Venture Agreement, dated as of December 15, 1994, between FT and DT, as amended. "Average Trading Price" of a share of any class or series of capital stock of the Corporation on any day means the average Closing Price of such capital stock determined over the 20 Trading Days immediately preceding the date of such determination; provided that for purposes of this definition only, in determining the "Closing Price" of a share of any class or series of capital stock for such 20 Trading Day period, (i) the "Closing Price" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (ii)(B) of this definition) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend or distribution and (ii) the "Closing Price" of any share of capital stock on any day prior to (A) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class of capital stock occurring during such period or (B) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or series of capital stock, shall be appropriately adjusted, as determined by the Board of Directors, to reflect such subdivision, combination, dividend or distribution. "Beneficial Owner" (including, with its correlative meanings, "Beneficially Own" and "Beneficial Ownership"), with respect to any securities, means any Person which: (a) has, or any of whose Affiliates or Associates has, directly or indirectly, the right to acquire (whether such right is exercisable immediately or only after the passage of time) such securities pursuant to any agreement, arrangement or understanding (whether or not in writing), including, without limitation, pursuant to the FT/DT Restructuring Agreement and the Stockholders' Agreement, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; (b) has, or any of whose Affiliates or Associates has, directly or indirectly, the right to vote or dispose of (whether such right is exercisable immediately or only after the passage of time) or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act but including all such securities which a Person has the right to acquire beneficial ownership of whether or not such right is exercisable within the 60-day period specified therein) such securities, including pursuant to any agreement, arrangement or understanding (whether or not in writing); or (c) has, or any of whose Affiliates or Associates has, any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of any securities which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate thereof), provided that (i) Class A Stock, Non-Class A Common Stock and Preferred Stock held by one of FT or DT or its Affiliates or Associates shall not also be deemed to be Beneficially Owned by the other of FT or DT or its Affiliates or Associates, (ii) FON Stock and PCS Stock shall not be deemed to be Beneficially Owned by FT, DT or their Affiliates 40 or Associates by virtue of the top up rights and standby commitments granted under the Purchase Rights Agreement (as defined in the FT/DT Restructuring Agreement) except to the extent that FT, DT or their Affiliates or Associates have (A) acquired shares of FON Stock or PCS Stock pursuant to the Purchase Rights Agreement, or (B) become irrevocably committed to acquire, and the Cable Holders have become irrevocably committed to sell, shares of FON Stock or PCS Stock pursuant to the Purchase Rights Agreement (with such Beneficial Ownership being determined on a full-voting basis), subject only to customary closing conditions, if any; (iii) FT, DT and their Affiliates and Associates shall not be deemed to Beneficially Own any incremental Voting Power resulting solely from the increase in Voting Power provided for by the application of ARTICLE SIXTH, Section 7.5(d) and (iv) prior to the conversion thereof (other than during the 90-day period following the Conversion Trigger Date set forth in ARTICLE SIXTH, Section 7.5(a)), a holder of Series 2 PCS Stock or Series 2 FON Stock shall not be deemed to beneficially own the shares of Series 1 PCS Stock or Series 1 FON Stock issuable upon conversion thereof. "Board of Directors" means the board of directors of this Corporation. "Business Day" means any day other than a day on which commercial banks in The City of New York, Paris, France, or Frankfurt am Main, Germany, are required or authorized by law to be closed. "Business Group" means, as of any date, the Sprint FON Group or the PCS Group, as the case may be. "Bylaws" means the Bylaws of this Corporation as amended or supplemented from time to time. "Cable Holder" means any of: (i) Tele-Communications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, or Cox Communications, Inc., a Delaware corporation, (ii) any Affiliate of an entity identified in clause (i) of this definition, (iii) any successor (by operation of law or otherwise) of an entity identified in clauses (i) or (ii) of this definition so long as such successor remains an Affiliate of an entity identified in clause (i) or (ii), (iv) any entity controlled by two or more entities identified in clauses (i) through (iii) of this definition or this clause (iv) even if such entity is not considered an Affiliate of any individual entity so identified and (v) for purposes of ARTICLE SIXTH, Section 7.5(b) only, with respect to any Transfer of shares of Series 2 PCS Stock, the transferee of such shares if (A) at the time of such Transfer, the transferor was a Cable Holder under any of the clauses (i) through (iv) of this definition, (B) after giving effect to such Transfer, the transferee was an Associate of the transferor, (C) immediately prior to such Transfer, the transferee was identified in writing by the transferor as a "Cable Holder" under this clause (v), and (D) the transferor and transferee satisfied the conditions set forth in Section 2.4 of the applicable Cable Holder Standstill Agreements. "Cable Holder Standstill Agreements" means the Standstill Agreements, dated as of May 26, 1998, entered into between this Corporation and each of certain Cable Holders, and any Standstill Agreements in the form thereof entered into from time to time between this Corporation and certain transferee Affiliates and Associates of such Cable Holders. "Cellular and Wireless Division" means the former Cellular and Wireless Communications Services Division of this Corporation. "Change of Control" means a: (a) decision by the Board of Directors to sell Control of this Corporation or not to oppose a third party tender offer for Voting Securities of this Corporation representing more than 35% of the Voting Power of this Corporation; or (b) change in the identity of a majority of the Directors due to (i) a proxy contest (or the threat to engage in a proxy contest) or the election of Directors by the holders of Preferred Stock; or (ii) any unsolicited tender, exchange or other purchase offer which has not been approved by a majority of the Independent Directors, 41 provided that a Strategic Merger shall not be deemed to be a Change of Control and provided, further, that any transaction between this Corporation and FT and DT or otherwise involving FT and DT and any of their direct or indirect Subsidiaries which are party to a Contract therefor shall not be deemed to be a Change of Control. "Class A Action" means action by the holders of a majority of the Votes represented by the Class A Stock taken by a vote at either a regular or special meeting of the stockholders of this Corporation or of the holders of the Class A Stock or by written consent delivered to the Secretary of this Corporation. "Class A Common Stock" means the Old Class A Common Stock. "Class A FON Shares" means shares of Series 3 FON Stock and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group. "Class A Holders" means (a) the holders of the Class A Stock, and (b) any Qualified Stock Purchaser who has executed with this Corporation a Qualified Stock Purchaser Assumption Agreement (as such term is defined in the Stockholders' Agreement), for so long as such Person holds Class A Stock. "Class A PCS Shares" means shares of Series 3 PCS Stock and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group. "Class A Provisions" means Section 5 (but only with respect to those provisions addressing the Class A Stock), Section 6 (but only with respect to those provisions addressing the Class A Stock), Section 8, Section 9 (but only with respect to those provisions addressing the Class A Stock), Section 10, Section 11 and Section 12 of ARTICLE SIXTH. "Class A Stock" means the Class A Common Stock, the Series 3 FON Stock and the Series 3 PCS Stock. "Closing Price" means, with respect to a security on any day, the last sale price, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on The New York Stock Exchange, Inc. or, if such security is not listed or admitted to trading on such exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the security is listed or admitted to trading or, if the security is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use, or, if on any such date such security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the security selected in good faith by the Board of Directors. If the security is not publicly held or so listed or publicly traded, "Closing Price" means the Fair Market Value of such security. "Committed Percentage" means, as to any Class A Holder, the percentage obtained by dividing the aggregate number of Votes represented or to be represented by the Voting Securities of this Corporation (a) owned of record by such Class A Holder or by its nominees; and (b) which such Class A Holder has committed to this Corporation to purchase pursuant to Article V of the Stockholders Agreement, by the sum of (i) the Voting Power of this Corporation, and (ii) the Votes to be represented by any Voting Securities of this Corporation such Class A Holder has committed to this Corporation to purchase from this Corporation pursuant to Article V of the Stockholders' Agreement. "Continuing Director" has the meaning set forth in the Fair Price Provisions. "Contract" means any loan or credit agreement, note, bond, indenture, mortgage, deed of trust, lease, franchise, contract, or other agreement, obligation, instrument or binding commitment of any nature. "Control" means, with respect to a Person or Group, any of the following: (a) ownership by such Person or Group of Votes entitling it to exercise in the aggregate more than 35 percent of the Voting Power of the entity in question; or 42 (b) possession by such Person or Group of the power, directly or indirectly, (i) to elect a majority of the board of directors (or equivalent governing body) of the entity in question; or (ii) to direct or cause the direction of the management and policies of or with respect to the entity in question, whether through ownership of securities, by contract or otherwise. "Conversion Date" means the date fixed by the Board of Directors as the effective date for the conversion of shares of PCS Stock into shares of FON Stock (and Shares Issuable With Respect To The Class A Equity Interest In The PCS Group into Shares Issuable With Respect To The Class A Equity Interest In The FON Group) as shall be set forth in the notice to holders of shares of PCS Stock and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock required pursuant to Section 7.4(E). "Conversion Time" has the meaning set forth in Section 8.3(d) of ARTICLE SIXTH. "Converted Series Shares" has the meaning set forth in Section 7.5(c) of ARTICLE SIXTH. "Converted Shares" has the meaning set forth in Section 8.3(d) of ARTICLE SIXTH. "Converted Votes" means, on any particular day, (i) in the case of a share of Series 2 PCS Stock, the applicable PCS Per Share Vote a share of Series 1 PCS Stock would have had if the computation described in Section 3.2(a)(iii) had occurred on such day and (ii) in the case of a share of Series 2 FON Stock, one vote per share. "Convertible Securities" at any time means any securities of the Corporation or of any subsidiary thereof (other than shares of Corporation Common Stock), including warrants and options, outstanding at such time that by their terms are convertible into or exchangeable or exercisable for or evidence the right to acquire any shares of any class or series of Corporation Common Stock, whether convertible, exchangeable or exercisable at such time or a later time or only upon the occurrence of certain events, pursuant to antidilution provisions of such securities or otherwise. "Corporation Common Stock" means the Series 1 FON Stock, the Series 2 FON Stock, the Series 3 FON Stock, the Class A Common Stock, the Series 1 PCS Stock, the Series 2 PCS Stock and the Series 3 PCS Stock. "Corporation Joint Venture Termination" means any of the following: (a) the sale of Venture Interests by a Sprint Party pursuant to Section 20.5(a) of the Joint Venture Agreement; or (b) the receipt by the FT/DT Parties of the Tie-Breaking Vote due to a Funding Default, Material Non-Funding Default or Bankruptcy (as such terms are defined in the Joint Venture Agreement) on the part of any of the Sprint Parties. "Director" means a member of the Board of Directors. "Disposition" means a sale, transfer, assignment or other disposition (whether by merger, consolidation, sale or contribution of assets or stock or otherwise) of properties or assets. "DT" means Deutsche Telekom AG, an Aktiengesellschaft formed under the laws of Germany. "ESMR" means any commercial mobile radio service, and the resale of such service, of the type authorized under the rules for Specialized Mobile Radio Services designated under Subpart S of Part 90 of the FCC's rules or similar Applicable Laws of any other country in effect on the date hereof, including the networking, marketing, distribution, sales, customer interface and operations functions relating thereto. "Europe" means the current geographic area covered by the following countries and territories located on the European continent, plus, in the case of France, its territories and possessions located outside the European continent: Albania, Andorra, Austria, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City. 43 "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the United States Securities and Exchange Commission promulgated thereunder. "Fair Market Value" means, with respect to any asset, shares or other property, the cash price at which a willing seller would sell and a willing buyer would buy such asset, shares or other property in an arm's-length negotiated transaction without undue time restraints, as determined in good faith by a majority of the Independent Directors. "Fair Price Condition" has the meaning set forth in Section 2.2 of ARTICLE SIXTH. "Fair Price Provisions" means ARTICLE SEVENTH of these Articles of Incorporation, and any successor provision thereto. "Fair Value" means, in the case of equity securities or debt securities of a class that has previously been Publicly Traded for a period of at least 15 months, the Market Value thereof (if such value, as so defined, can be determined) or, in the case of an equity security or debt security that has not been Publicly Traded for at least such period, means the fair value per share of stock or per other unit of such other security, on a fully distributed basis, as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors; provided, however, that in the case of property other than securities, the "Fair Value" thereof shall be determined in good faith by the Board of Directors based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine to be appropriate in accordance with good business practice. Any such determination of Fair Value shall be described in a statement filed with the records of the actions of the Board of Directors. "FCC" means the Federal Communications Commission. "FON Group Intergroup Interest Fraction" as of any date means a fraction the numerator of which is the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on such date and the denominator of which is the sum of (A) such Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (B) the aggregate number of shares of PCS Stock outstanding on such date, and (iii) the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group on such date. A statement setting forth the FON Group Intergroup Interest Fraction as of the record date for any dividend or distribution on the PCS Stock, as of the end of each fiscal quarter of the Corporation and as of any date otherwise required under these Articles of Incorporation or by the Board of Directors shall be filed by the Secretary of the Corporation in the records of the Board of Directors of the Corporation not later than fifteen Business Days after such date. "FON Preferred Stock" means Preferred Stock to the extent attributed to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13. "FON Stock" means the Series 1 FON Stock, the Series 2 FON Stock and the Series 3 FON Stock. "France" means the Republic of France, including French Guiana, Guadeloupe, Martinique and Reunion, and its territories and possessions. "FT" means France Telecom SA, a societe anonyme formed under the laws of France. "FT/DT Joint Venture Termination" means any of the following: (a) the sale of Venture Interests by an FT/DT Party pursuant to Section 20.5(b), 20.5(c) or 20.5(d) of the Joint Venture Agreement; or (b) the receipt by the Sprint Parties of the Tie-Breaking Vote due to a Funding Default, Material Non-Funding Default or Bankruptcy (as such terms are defined in the Joint Venture Agreement) on the part of any of the FT/DT Parties. "FT/DT Party" has the meaning set forth in the Joint Venture Agreement. 44 "FT/DT Restructuring Agreement" means the Master Restructuring and Investment Agreement, dated as of May 26, 1998, among FT, DT and this Corporation, as amended or supplemented from time to time. "Germany" means the Federal Republic of Germany. "Governmental Authority" means any federation, nation, state, sovereign, or government, any federal, supranational, regional, state or local political subdivision, any governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission or other similar dispute resolving panel or body, and any other entity exercising executive, legislative, judicial, regulatory or administrative functions of a government, provided that the term "Governmental Authority" shall not include FT, DT, Atlas or any of their respective Subsidiaries. "Group" means any group within the meaning of Section 13(d)(3) of the Exchange Act. "Independent Director" means any member of the Board of Directors who (a) is not an officer or employee of this Corporation, or any Class A Holder, or any of their respective Subsidiaries, (b) is not a former officer of this Corporation, or any Class A Holder, or any of their respective Subsidiaries, (c) does not, in addition to such person's role as a Director, act on a regular basis, either individually or as a member or representative of an organization, serving as a professional adviser, legal counsel or consultant to this Corporation, or any Class A Holder, or their respective Subsidiaries, if, in the opinion of the Nominating Committee of the Board of Directors of this Corporation (the "Nominating Committee") or the Board of Directors if a Nominating Committee is not in existence, such relationship is material to this Corporation, any Class A Holder, or the organization so represented or such person, and (d) does not represent, and is not a member of the immediate family of, a person who would not satisfy the requirements of the preceding clauses (a), (b) and (c) of this sentence. A person who has been or is a partner, officer or director of an organization that has customary commercial, industrial, banking or underwriting relationships with this Corporation, any Class A Holder, or any of their respective Subsidiaries, that are carried on in the ordinary course of business on an arms-length basis and who otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the first sentence of this definition, may qualify as an Independent Director, unless, in the opinion of the Nominating Committee or the Board of Directors if a Nominating Committee is not in existence, such person is not independent of the management of this Corporation, or any Class A Holder, or any of their respective Subsidiaries, or the relationship would interfere with the exercise of independent judgment as a member of the Board of Directors. A person who otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the first sentence of this definition and who, in addition to fulfilling the customary director's role, also provides additional services directly for the Board of Directors and is separately compensated therefor, would nonetheless qualify as an Independent Director. Notwithstanding anything to the contrary contained in this definition, each Director as of the date of the filing of these Articles of Incorporation who is not an executive officer of this Corporation shall be deemed to be an Independent Director hereunder. "Investment Agreement" means the Investment Agreement, dated as of July 31, 1995, among FT, DT and this Corporation (and all exhibits and schedules thereto), as amended or supplemented from time to time. "Investment Documents" means the FT/DT Restructuring Agreement and the Stockholders' Agreement. "Joint Venture" means the joint venture formed by FT, DT, this Corporation and Sprint Sub, as provided in the Joint Venture Agreement. "Joint Venture Agreement" means the Joint Venture Agreement, dated as of June 22, 1995 among FT, DT, Sprint Sub, and this Corporation, as amended or supplemented from time to time. "JV Entity" has the meaning set forth in the Joint Venture Agreement. "Lien" means any mortgage, pledge, security interest, adverse claim, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or similar Applicable Law of any jurisdiction) or any other type of preferential 45 arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation. "Lien Transfer" means the granting of any Lien on any Long Distance Asset, other than: (a) a Lien securing purchase money indebtedness that does not have a term longer than the estimated useful life of such Long Distance Asset; (b) Liens or other comparable arrangements relating to the financing of accounts receivable; and (c) Liens securing any other indebtedness for borrowed money, provided that (i) the amount of such indebtedness, when added to the aggregate amount of purchase money indebtedness referred to in clause (a) above, does not exceed 30% of the total book value of the Long Distance Assets as at the date of the most recently published balance sheet of this Corporation, (ii) the indebtedness secured by such Liens is secured only by Liens on Long Distance Assets, (iii) the face amount of such indebtedness does not exceed the book value of the Long Distance Assets subject to such Liens, and (iv) such indebtedness is for a term no longer than the estimated useful life of the Long Distance Assets subject to such Liens. "Local Exchange Division" means the Local Communications Services Division of this Corporation. "Long Distance Assets" means: (a) the assets reflected in this Corporation's balance sheet for the year ended December 31, 1994 as included in the Long Distance Division; (b) any assets acquired by this Corporation or any of its Subsidiaries following December 31, 1994 that are reflected in this Corporation's balance sheet as included in the Long Distance Division; (c) any assets of this Corporation or any of its Subsidiaries that are not reflected in this Corporation's balance sheet for the year ended December 31, 1994 as included in the Long Distance Division, which after December 31, 1994 are transferred by this Corporation or any of its Subsidiaries to, or reclassified by this Corporation or any of its Subsidiaries as part of, the Long Distance Division; (d) any assets acquired by this Corporation after December 31, 1994 that are used or held for use primarily for the benefit of the Long Distance Business; and (e) any assets referred to in clauses (a) through (c) above that are used or held for use primarily for the benefit of the Long Distance Business which are transferred or reclassified by this Corporation or any of its Subsidiaries outside of the Long Distance Division, but which continue to be owned by this Corporation or any of its Subsidiaries; provided that the term "Long Distance Assets" shall not include (i) any assets that are used or held for use primarily for the benefit of any Non-Long Distance Business, or (ii) any other assets reflected in this Corporation's balance sheet for the year ended December 31, 1994 as included in the Cellular and Wireless Division or the Local Exchange Division (other than as such assets in the Cellular and Wireless Division or the Local Exchange Division may be transferred or reclassified in accordance with paragraph (c) of this definition). "Long Distance Business" means all long distance telecommunications activities and services of this Corporation and its Subsidiaries at the relevant time, including (but not limited to) all long distance transport services, switching and value-added services for voice, data, video and multimedia transmission, migration paths and intelligent overlapping architectures, provided that the term "Long Distance Business" shall not include any activities or services primarily related to any Non-Long Distance Business. "Long Distance Division" means the Long Distance Communications Services Division of this Corporation. "Major Competitor" means (a) with respect to this Corporation, a Person that materially competes with a major portion of the telecommunications services business of this Corporation in North America, or a Person that has taken substantial steps to become such a Major Competitor and which this Corporation has reasonably concluded, in its good 46 faith judgment, will be such a competitor in the near future in the United States of America provided that this Corporation furnish in writing to each Class A Holder reasonable evidence of the occurrence of such steps; and (b) with respect to the Joint Venture, a Person that materially competes with a major portion of the telecommunications services business of the Joint Venture, or a Person that has taken substantial steps to become such a Major Competitor and which FT, DT or this Corporation has reasonably concluded, in its good faith judgment, will be such a competitor in the near future, provided that FT, DT or this Corporation furnish in writing to the other two of them reasonable evidence of the occurrence of such steps. "Major Issuance" means any transaction, including, but not limited to, a merger or business combination, resulting, directly or indirectly, in the issuance (or sale from treasury) in connection with such transaction of Voting Securities of this Corporation with a number of Votes equal to or greater than 30 percent of the Voting Power of this Corporation immediately prior to such issuance. "Market Capitalization" means, with respect to this Corporation at any date, the sum of the average Market Price over the immediately preceding 20 Business Days of each share of outstanding capital stock of this Corporation, securities convertible into such capital stock and options, warrants or other rights to acquire such capital stock. "Market Price" means with respect to a security on any date, the Closing Price of such security on the Trading Day immediately prior to such date. The Market Price shall be deemed to be equal to, (i) in the case of a share of Series 3 FON Stock or Series 2 FON Stock, as the case may be, the Market Price of a share of Series 1 FON Stock and (ii) in the case of a share of Series 3 PCS Stock or Series 2 PCS Stock, as the case may be, the Market Price of a share of Series 1 PCS Stock. The Market Price of (x) any options, warrants, rights or other securities convertible into or exercisable for Series 3 FON Stock or Series 2 FON Stock shall be equal to the Market Price of options, warrants, rights or other securities convertible into or exercisable for Series 1 FON Stock upon the same terms and otherwise containing the same terms as such options, warrants, rights or other securities convertible into or exercisable for Series 3 FON Stock or Series 2 FON Stock, as the case may be, and (y) any options, warrants, rights or other securities convertible into or exercisable for Series 3 PCS Stock or Series 2 PCS Stock, as the case may be, shall be equal to the Market Price of options, warrants, rights or other securities convertible into or exercisable for Series 1 PCS Stock upon the same terms and otherwise containing the same terms as such options, warrants, rights or other securities convertible into or exercisable for Series 3 PCS Stock or Series 2 PCS Stock, as the case may be. "Market Value" of a share of any class or series of capital stock of the Corporation on any day means the average of the high and low reported sales prices regular way of a share of such class or series on such day (if such day is a Trading Day, and if such day is not a Trading Day, on the Trading Day immediately preceding such day) or, in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way of a share of such class or series on such Trading Day, in either case as reported on the New York Stock Exchange Composite Tape or, if the shares of such class or series are not listed or admitted to trading on such Exchange on such Trading Day, on the principal national securities exchange in the United States on which the shares of such class or series are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange on such Trading Day, on the National Market tier of The Nasdaq Stock Market or, if the shares of such class or series are not listed or admitted to trading on any national securities exchange or quoted on such National Market System on such Trading Day, the average of the closing bid and asked prices of a share of such class or series in the over-the-counter market on such Trading Day as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors or, if such closing bid and asked prices are not made available by any such New York Stock Exchange member firm on such Trading Day, the Fair Value of a share of such class or series; provided that, for purposes of determining the Market Value of a share of any class or series of capital stock for any period, (i) the "Market Value" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (ii)(B) of this definition) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend or distribution and (ii) the "Market Value" of any share of capital stock on any day prior to (A) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class of capital stock occurring during such period or (B) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or 47 series of capital stock shall be appropriately adjusted, as determined by the Board of Directors, to reflect such subdivision, combination, dividend or distribution. "Master Transfer Agreement" means the Master Transfer Agreement, dated as of January 21, 2000, between and among the Corporation, FT, DT and the other parties named therein. "Net Proceeds" means, as of any date with respect to any Disposition of any of the properties and assets attributed to the PCS Group, an amount, if any, equal to what remains of the gross proceeds of such Disposition after payment of, or reasonable provision is made as determined by the Board of Directors for, (A) any taxes payable by the Corporation (or which would have been payable but for the utilization of tax benefits attributable to the Sprint FON Group) in respect of such Disposition or in respect of any resulting dividend or redemption pursuant to ARTICLE SIXTH, Section 7.1(A)(1)(a) or (b), (B) any transaction costs, including, without limitation, any legal, investment banking and accounting fees and expenses and (C) any liabilities (contingent or otherwise) of or attributed to the PCS Group, including, without limitation, any liabilities for deferred taxes or any indemnity or guarantee obligations of the Corporation incurred in connection with the Disposition or otherwise, and any liabilities for future purchase price adjustments and any preferential amounts plus any accumulated and unpaid dividends in respect of Preferred Stock attributed to the PCS Group. For purposes of this definition, any properties and assets attributed to the PCS Group remaining after such Disposition shall constitute "reasonable provision" for such amount of taxes, costs and liabilities (contingent or otherwise) as the Board of Directors determines can be expected to be supported by such properties and assets. "Non-Class A Common Stock" means the Series 1 FON Stock, the Series 2 FON Stock, the Series 1 PCS Stock and the Series 2 PCS Stock. "Non-Long Distance Business" means (a) the ownership of any equity or other interests in the Joint Venture or any of the JV Entities; the enforcement or performance of any of the rights or obligations of this Corporation or any Subsidiary of this Corporation pursuant to the Joint Venture Agreement; or any activities or services of the Joint Venture or any of the JV Entities; (b) the interests, assets, properties and businesses attributed to the PCS Group in accordance with this Section 10; (c) any activities or services primarily related to the provision of subscriber connections to a local exchange or switch providing access to the public switched telephone network; (d) any activities or services primarily related to the provision of exchange access services for the purpose of originating or terminating long distance telecommunications services; (e) any activities or services primarily related to the resale by the Local Exchange Division of long distance telecommunications services of this Corporation or other carriers; (f) any activities or services primarily related to the provision of inter-LATA long distance telecommunications services that are incidental to the local exchange services business of the Local Exchange Division; (g) any activities or services primarily related to the provision of intra- LATA long distance telecommunications services; (h) any activities or services (whether local, intra-LATA or inter-LATA) primarily related to the provision of cellular, PCS, ESMR or paging services, mobile telecommunications services or any other voice, data or voice/data wireless services, whether fixed or mobile, or related to telecommunications services provided through communications satellite systems (whether low, medium or high orbit systems); and (i) the use of the "Sprint" brand name or any other brand names, trade names or trademarks owned or licensed by this Corporation or any of its Subsidiaries. "North America" means the current geographic area covered by the following countries: Canada, Mexico and the United States of America. "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest" means, as of November 23, 1998, a number equal to 220,000,000 less the sum of (i) the Number Of Shares Issuable With Respect To The Old Class A Common Equity Interest In The PCS Group, (ii) 21,559,009, (iii) one-half of the number of shares of Common Stock, par value $2.50 per share, outstanding immediately prior to November 23, 1998, and (iv) one-half of the number of shares of Common Stock, par value $2.50 per share, held as treasury shares by the Corporation immediately prior to November 23, 1998; provided, however, that such number shall from time to time thereafter be: (A) adjusted, as determined by the Board of Directors to be appropriate to reflect equitably any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the PCS Stock or any dividend or other distribution of shares of PCS Stock to holders of shares of PCS Stock or any reclassification of PCS Stock; 48 (B) decreased (but to not less than zero), if before such decrease such number is greater than zero, by action of the Board of Directors by (1) the number of shares of PCS Stock issued or sold by the Corporation that, immediately prior to such issuance or sale, were included (as determined by the Board of Directors pursuant to paragraph (C) of this definition) in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (2) the number of shares of PCS Stock issued upon conversion, exchange or exercise of Convertible Securities that, immediately prior to the issuance or sale of such Convertible Securities, were included in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (3) the number of shares of PCS Stock issued by the Corporation as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock and Class A Common Stock (but only with respect to any Shares Issuable With Respect To The Class A Equity Interest In The FON Group) or shares of FON Preferred Stock, as the case may be, (4) the number of shares of PCS Stock issued upon the conversion, exchange or exercise of any Convertible Securities issued by the Corporation as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of FON Stock or Class A Common Stock (but only with respect to any Shares Issuable With Respect To The Class A Equity Interest In The FON Group) or shares of FON Preferred Stock, as the case may be, (5) the quotient of (a) the aggregate Fair Value of any PCS Preferred Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of PCS Preferred Stock) issued by the Corporation as a dividend or other distribution (including in connection with any classification or exchange of shares) to holders of FON Stock, Class A Common Stock (but only with respect to any Shares Issuable With Respect To The Class A Equity Interest In The FON Group), or shares of FON Preferred Stock, as the case may be, divided by (b) the Market Value of one share of PCS Stock as of the date of issuance of such PCS Preferred Stock (or Convertible Securities), or (6) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the aggregate Fair Value as of the date of contribution of properties or assets (including cash) transferred from the PCS Group to the Sprint FON Group in consideration for a reduction in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest divided by (b) the Market Value of one share of PCS Stock as of the date of such transfer; and (C) increased by (1) the number of outstanding shares of PCS Stock repurchased by the Corporation for consideration that had been attributed to the Sprint FON Group, (2) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the Fair Value of properties or assets (including cash) theretofore attributed to the Sprint FON Group that are contributed, by action of the Board of Directors, to the PCS Group in consideration of an increase in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, divided by (b) the Market Value of one share of PCS Stock as of the date of such contribution and (3) the number of shares of PCS Stock into or for which Convertible Securities are deemed converted, exchanged or exercised pursuant to the penultimate sentence of the definition of "Sprint FON Group"; provided, further, that the Board of Directors may make such subsequent changes to the calculations made pursuant to subparagraphs (A), (B) and (C) immediately above as may be required for purposes of accurately determining such number. "Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group" means, as of November 23, 1998, a number equal to the aggregate number of outstanding shares of Old Class A Common Stock as of November 23, 1998; provided, however, that such number shall from time to time thereafter be: (A) adjusted, on an equivalent Per Class A FON Share Basis, to reflect any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the FON Stock or any reclassification of FON Stock; and (B) decreased (but to not less than zero), if before such decrease such number is greater than zero, by the number of Shares of Series 1 FON Stock or Series 3 FON Stock issued in accordance with ARTICLE SIXTH, Section 1.2(c) or ARTICLE SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE SIXTH, Section 1.2(c)) and any reduction required to reflect the redemption of Shares Issuable With Respect To The Class A Equity Interest In The FON Group pursuant to Section 2.2 to the extent allocated to shares of Old Class A Common Stock; and (C) adjusted by the Board of Directors to properly reflect any other necessary changes on an equivalent Per Class A FON Share Basis. "Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group" means, as of November 23, 1998, a number (rounded up to the nearest whole share) equal to one-half of the aggregate number of 49 outstanding shares of Old Class A Common Stock as of November 23, 1998; provided, however, that such number shall from time to time thereafter be: (A) adjusted, on an equivalent Per Class A PCS Share Basis, to reflect any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the PCS Stock or any reclassification of PCS Stock; and (B) decreased (but to not less than zero), if before such decrease such number is greater than zero, by action of the Board of Directors by (1) the amount of any payment made to the holders of Old Class A Common Stock pursuant to Section 7.1(B)(5) or Section 7.1(B)(6) divided by the corresponding redemption price per share of PCS Stock pursuant to Section 7.1(A)(1)(b)(i) or Section 7.1(A)(1)(b)(ii), (2) any reduction required to reflect the redemption of Shares Issuable With Respect To The Class A Equity Interest In The PCS Group pursuant to Section 2.2 to the extent allocated to shares of Old Class A Common Stock, (3) the amount necessary to reflect the conversion of some or all of this number into a Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group in accordance with Sections 7.1(B)(7), 7.1(C) and 7.1(D), and (4) the amount necessary to reflect the redemption thereof in exchange for the issuance of shares of common stock of the PCS Group Subsidiary in accordance with Section 7.2; and (C) decreased (but to not less than zero), if before such decrease such number is greater than zero, by the number of shares of Series 1 PCS Stock or Series 3 PCS Stock issued by the Corporation in accordance with ARTICLE SIXTH, Section 1.2(c) or ARTICLE SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE SIXTH, Section 1.2(c)); and (D) adjusted by the Board of Directors to properly reflect any other necessary changes on an equivalent Per Class A PCS Share Basis. "Old Class A Common Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Old Class A FON Vote Per Share" means, on any date, a number equal to X/Y, where "X" equals the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and "Y" equals the aggregate number of outstanding shares of Old Class A Common Stock. "Old Class A PCS Interest Fraction," as of any date, means the fraction the numerator of which shall be the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group on such date and the denominator of which shall be the sum of (i) the number of shares of PCS Stock outstanding on such date, (ii) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on such date, and (iii) the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group on such date. "Old Class A PCS Vote Per Share" means, on any date, a number equal to (X/Y) x Z, where "X" equals the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, "Y" equals the aggregate number of outstanding shares of Old Class A Common Stock and "Z" equals, in the case of ARTICLE SIXTH, Section 3.2(d), one, and in all other cases, the applicable PCS Per Share Vote on such date. "Optional Conversion Ratio" as of any date means the ratio of the Average Trading Price of a share of Series 1 PCS Stock to the Average Trading Price of a share of Series 1 FON Stock; provided, that such ratio would be determined over a 60-Trading Day period if the 20-Trading Day period normally used to determine the Average Trading Price is less than 90% of such ratio as determined over a 60-Trading Day period. "Outstanding PCS Fraction," as of any date, means the fraction the numerator of which shall be the number of shares of PCS Stock outstanding on such date and the denominator of which shall be the sum of (i) the number of shares of PCS Stock outstanding on such date, (ii) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on such date, and (iii) the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group on such date. A statement setting forth the Outstanding PCS Fraction as of the record date for the payment of any dividend or distribution on PCS Stock and as of the end of each fiscal quarter of the Corporation shall be filed by the Secretary of the Corporation in the records of the actions of the Board of Directors not later than fifteen Business Days after such date. 50 "PCS" means a radio communications system of the type authorized under the rules for broadband personal communications services designated as Subpart E of Part 24 of the FCC's rules or similar Applicable Laws of any other country, including the network, marketing, distribution, sales, customer interface and operations functions relating thereto. "PCS Group" means, as of any date from and after November 23, 1998: (A) the interest on such date of the Corporation and any of its subsidiaries in any of the following Persons or any of their respective subsidiaries (including any successor thereto by merger, consolidation or sale of all or substantially all of its assets, whether or not in connection with a Related Business Transaction) (the "PCS Group Companies") and the corresponding interests in their respective assets and liabilities and the businessesconducted by such entities: SWV Six, Inc.; SWV One, Inc.; SWV Two, Inc.; SWV Three, Inc.; SWV Four, Inc.; SWV Seven, Inc.; SWV Eight, Inc.; SWV One Telephony Partnership; SWV Two Telephony Partnership; SWV Three Telephony Partnership; Sprint Enterprises, L.P.; MinorCo, L.P.; Sprint Spectrum Holding Company, L.P.; American PCS, L.P.; Cox Communications PCS, L.P.; NewTelco, L.P.; Sprint Spectrum L.P.; American Personal Communications Holdings, Inc.; American PCS Communications, LLC; APC PCS, LLC; APC Realty and Equipment Company, LLC; Sprint Spectrum Finance Corporation; Sprint Spectrum Equipment Company, L.P.; Sprint Spectrum Realty Company, L.P.; WirelessCo, L.P.; SWV Five, Inc.; PhillieCo Partners I, L.P.; PhillieCo Partners II, L.P.; PhillieCo Sub, L.P.; PhillieCo., L.P.; PhillieCo Equipment & Realty Company, L.P.; SprintCom, Inc.; SprintCom Equipment Company L.P.; PCS Leasing Co., L.P.; Cox PCS Assets, L.L.C.; and Cox PCS License, L.L.C.; (B) all assets and liabilities of the Corporation and its subsidiaries attributed by the Board of Directors to the PCS Group, whether or not such assets or liabilities are or were also assets or liabilities of any of the PCS Group Companies; (C) all properties and assets transferred to the PCS Group from the Sprint FON Group (other than a transaction pursuant to paragraph (D) of this definition) after November 23, 1998 pursuant to transactions in the ordinary course of business of both the Sprint FON Group and the PCS Group or otherwise as the Board of Directors may have directed as permitted by this ARTICLE SIXTH; (D) all properties and assets transferred to the PCS Group from the Sprint FON Group in connection with an increase in the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest; and (E) the interest of the Corporation or any of its subsidiaries in any business or asset acquired and any liabilities assumed by the Corporation or any of its subsidiaries outside of the ordinary course of business and attributed to the PCS Group, as determined by the Board of Directors as contemplated by Section 9.1(A) of ARTICLE SIXTH; provided that (1) from and after the payment date of any dividend or other distribution with respect to shares of PCS Stock (other than a dividend or other distribution payable in shares of PCS Stock, with respect to which adjustment shall be made as provided in the definition of "Number Of Shares Issuable In Respect Of The FON Group Intergroup Interest," or in securities of the Corporation attributed to the PCS Group, for which provision shall be made as set forth in clause (2) of this proviso), the PCS Group shall no longer include an amount of assets or properties previously attributed to the PCS Group of the same kind as so paid in such dividend or other distribution with respect of shares of PCS Stock as have a Fair Value on the record date for such dividend or distribution equal to the product of (a) the Fair Value on such record date of the aggregate of such dividend or distribution to holders of shares of PCS Stock declared multiplied by (b) a fraction the numerator of which is equal to the FON Group Intergroup Interest Fraction in effect on the record date for such dividend or distribution and the denominator of which is equal to the Outstanding PCS Fraction in effect on the record date for such dividend or distribution (and in such eventuality such assets as are no longer included in the PCS Group shall be attributed to the Sprint FON Group in accordance with the definition of "Sprint FON Group"), and (2) if the Corporation shall pay a dividend or make some other distribution with respect to shares of PCS Stock payable in securities of the Corporation that are attributed to the PCS Group for purposes of this ARTICLE SIXTH (other than PCS Stock), there shall be excluded from the PCS Group an interest in the PCS 51 Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of PCS Stock multiplied by the fraction specified in clause 1(b) of this proviso (determined as of the record date for such distribution) (and such interest in the PCS Group shall be attributed to the Sprint FON Group) and, to the extent interest is or dividends are paid on the securities so distributed, the PCS Group shall no longer include a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of the securities equivalent to such interest in the PCS Group deemed held by the Sprint FON Group if the securities equivalent to such interest were outstanding (and in such eventuality such assets as are no longer included in the PCS Group shall be attributed to the Sprint FON Group in accordance with the definition of "Sprint FON Group"). The Corporation may also, to the extent a dividend or distribution on the PCS Stock has been paid in Convertible Securities that are convertible into or exchangeable or exercisable for PCS Stock, cause such Convertible Securities as are deemed to be held by the Sprint FON Group in accordance with the third-to-last sentence of the definition of "Sprint FON Group" and clause (2) of the proviso to the immediately preceding sentence to be deemed to be converted, exchanged or exercised as provided in the penultimate sentence of the definition of "Sprint FON Group," in which case such Convertible Securities shall no longer be deemed to be held by the Sprint FON Group. "PCS Group Disposition Date" has the meaning set forth in Section 7.1(A) of ARTICLE SIXTH. "PCS Group Subsidiary" has the meaning set forth in Section 7.2 of ARTICLE SIXTH. "PCS Per Share Vote" has the meaning set forth in Section 3.2 of ARTICLE SIXTH. "PCS Preferred Stock" means Preferred Stock to the extent attributed to the PCS Group in accordance with ARTICLE SIXTH, Section 13. "PCS Ratio" means the ratio of the Average Trading Price of one share of Series 1 PCS Stock to the Average Trading Price of one share of Series 1 FON Stock determined, in each such case, as of the 21st Trading Day following the commencement of regular way trading of both the Series 1 PCS Stock and the Series 1 FON Stock. "PCS Stock" means the Series 1 PCS Stock, the Series 2 PCS Stock and the Series 3 PCS Stock. "Per Class A FON Share Basis" means, with respect to Old Class A Common Stock, an amount per share equal to (X/Y) x Z, where "X" equals the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group, "Y"equals the number of shares outstanding of Old Class A Common Stock, and "Z" equals the per share number of votes or dividend amount, redemption amount or other payment paid to the class or series of FON Stock to which the Old Class A Common Stock is being compared. "Per Class A PCS Share Basis" means, with respect to Old Class A Common Stock, an amount per share equal to (X/Y) x Z, where "X" equals the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group, "Y" equals the number of shares outstanding of Old Class A Common Stock, and "Z" equals the per share number of votes or dividend amount, redemption amount or other payment paid to the class or series of PCS Stock to which the Old Class A Common Stock is being compared. "Percentage Ownership Interest" means, with respect to any Person, that percentage of the Voting Power of this Corporation represented by Votes associated with the Voting Securities of this Corporation owned of record by such Person or by its nominees. "Person" means an individual, a partnership, an association, a joint venture, a corporation, a business, a trust, any entity organized or existing under Applicable Law, an unincorporated organization or any Governmental Authority. "Preferred Stock" has the meaning set forth in Section 1 of ARTICLE SIXTH. "Proceeding" means any action, litigation, suit, proceeding or formal investigation or review of any nature, civil, criminal, regulatory or otherwise, before any Governmental Authority. 52 "Publicly Traded" with respect to any security means (i) registered under Section 12 of the Securities Exchange Act of 1934, as amended (or any successor provision of law), and (ii) listed for trading on the New York Stock Exchange or the American Stock Exchange (or any national securities exchange registered under Section 7 of the Securities Exchange Act of 1934, as amended (or any successor provision of law), that is the successor to either such exchange) or quoted in the National Association of Securities Dealers Automation Quotation System (or any successor system). "Qualified Joint Venture" has the meaning set forth in Article I of the Investment Agreement. "Qualified Stock Purchaser" means a Person that (a) FT and DT reasonably believe has the legal and financial ability to purchase shares of Class A Stock from this Corporation in accordance with Article VI of the Stockholders' Agreement and (b) would not be a Major Competitor of this Corporation or of the Joint Venture immediately following such purchase. "Qualified Stock Purchaser Standstill Agreement" has the meaning set forth in the Standstill Agreement. "Qualified Subsidiary" has the meaning set forth in the Investment Agreement. "Qualified Subsidiary Standstill Agreement" has the meaning set forth in the Investment Agreement. "Recapitalization" means the reclassification of, among other things, certain outstanding shares of Sprint capital stock to be effected pursuant to the terms set forth in the Restructuring Agreement and the FT/DT Restructuring Agreement. "Redemption Date" means the date fixed by the Board of Directors for the redemption of (i) any shares of capital stock of this Corporation pursuant to ARTICLE SIXTH, Section 2.2 or (ii) shares of PCS Stock as shall be set forth in the notice to holders of shares of PCS Stock and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of PCS Stock required pursuant to ARTICLE SIXTH, Section 7.4. "Redemption Securities" means any debt or equity securities of this Corporation, any of its Subsidiaries, or any combination thereof having such terms and conditions as shall be approved by the Board of Directors and which, together with any cash to be paid as part of the redemption price pursuant to Section 2.2(b) of ARTICLE SIXTH of these Articles of Incorporation, in the opinion of an investment banking firm of recognized national standing selected by the Board of Directors (which may be a firm which provides other investment banking, brokerage or other services to this Corporation), have a Market Price, at the time notice of redemption is given pursuant to Section 2.2(d) of ARTICLE SIXTH of these Articles of Incorporation, at least equal to the redemption price required to be paid by such Section 2.2(a). "Reduced Par Value Amount" means, at any time and only with respect to the Old Class A Common Stock following an issuance of FON Stock and/or PCS Stock in accordance with ARTICLE SIXTH, Sections 1.2(c) or 8.3(a) the amount resulting from (X-Y)/Z, where "X" equals Z times the par value per share of the Old Class A Common Stock immediately prior to an issuance of shares of FON Stock and/or PCS Stock in accordance with ARTICLE SIXTH, Sections 1.2(c) or 8.3(a), "Y" equals the number of shares of FON Stock and/or PCS Stock issued in accordance with ARTICLE SIXTH, Sections 1.2(c) or 8.3(a) times the par value of such shares so issued, and "Z" equals the aggregate outstanding shares of Old Class A Common Stock. "Registration Rights Agreement" means the Amended and Restated Registration Rights Agreement, dated as of November 23, 1998, among FT, DT and this Corporation, as amended from time to time and any replacement registration rights agreement or agreements entered into pursuant to Section 5.16 of the Master Transfer Agreement. "Related Business Transaction" means any Disposition of all or substantially all the properties and assets attributed to the PCS Group in a transaction or series of related transactions that result in the Corporation receiving in consideration of such properties and assets primarily equity securities (including, without limitation, capital stock, debt 53 securities convertible into or exchangeable for equity securities or interests in a general or limited partnership or limited liability company, without regard to the voting power or other management or governance rights associated therewith) of any entity which (i) acquires such properties or assets or succeeds (by merger, formation of a joint venture or otherwise) to the business conducted with such properties or assets or controls such acquiror or successor and (ii) which the Board of Directors determines is primarily engaged or proposes to engage primarily in one or more businesses similar or complementary to the businesses conducted by such Business Group prior to such Disposition. "Restructuring Agreement" means the Restructuring and Merger Agreement dated as of May 26, 1998, by and among certain Cable Holders, this Corporation and the other parties listed therein, as amended or supplemented from time to time. "Rights Agreement" means the Rights Agreement, dated as of November 23, 1998, between this Corporation and UMB Bank, N.A., as amended or supplemented from time to time. "Section 310" means Section 310 of the Communications Act of 1934, as amended (or any successor provision of law). "Series 1 FON Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 1 PCS Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 2 FON Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 2 PCS Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 3 FON Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Series 3 PCS Stock" has the meaning set forth in the "Designation" column in Section 1 of ARTICLE SIXTH. "Shares" means (a) shares of Class A Stock, Non-Class A Common Stock, Preferred Stock or any other Voting Securities of this Corporation, (b) securities of this Corporation convertible into Voting Securities of this Corporation and (c) options, warrants or other rights to acquire such Voting Securities, but in the case of clause (c) excluding any rights of the Class A Holders or FT and DT to acquire Voting Securities of this Corporation pursuant to the FT/DT Restructuring Agreement, the Purchase Rights Agreement (as defined in the FT/DT Restructuring Agreement) and the Stockholders' Agreement (but not excluding any Voting Securities received upon the exercise of such rights). "Shares Issuable With Respect To The Class A Equity Interest In The FON Group" means, at any time, the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group. "Shares Issuable With Respect To The Class A Equity Interest In The PCS Group" means, at any time, the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group. "Sprint FON Group" means, as of any date from and after November 23, 1998: (A) the interest of the Corporation or any of its subsidiaries on such date in all of the assets, liabilities and businesses of the Corporation or any of its subsidiaries (and any successor companies), other than any assets, liabilities and businesses attributed in accordance with this Section 10 to the PCS Group; (B) a proportionate undivided interest in each and every business, asset and liability attributed to the PCS Group equal to the FON Group Intergroup Interest Fraction as of such date; (C) all properties and assets transferred to the Sprint FON Group from the PCS Group (other than pursuant to paragraph (D) or (F) of this definition) after November 23, 1998 pursuant to transactions in the ordinary course of 54 business of both the Sprint FON Group and the PCS Group or otherwise as the Board of Directors may have directed as permitted by this ARTICLE SIXTH; (D) all properties and assets transferred to the Sprint FON Group from the PCS Group in connection with a reduction of the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest; (E) the interest of the Corporation or any of its subsidiaries in any business or asset acquired and any liabilities assumed by the Corporation or any of its subsidiaries outside the ordinary course of business and attributed to the Sprint FON Group, as determined by the Board of Directors as contemplated by Section 9.1(A) of ARTICLE SIXTH; and (F) from and after the payment date of any dividend or other distribution with respect to shares of PCS Stock (other than a dividend or other distribution payable in shares of PCS Stock, with respect to which adjustment shall be made as provided in the definition of "Number Of Shares Issuable With Respect Of The FON Group Intergroup Interest," or in securities of the Corporation attributed to the PCS Group, for which provision shall be made as set forth in the third to last sentence of this definition), an amount of assets or properties previously attributed to the PCS Group of the same kind as were paid in such dividend or other distribution with respect to shares of PCS Stock and Class A Common Stock (with respect to Shares Issuable With Respect To The Class A Equity Interest In The PCS Group) as have a Fair Value on the record date for such dividend or distribution equal to the product of (1) the Fair Value on such record date of such dividend or distribution to holders of shares of PCS Stock declared on a per share basis multiplied by (2) the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest (determined as of the record date for such dividend or distribution); provided that from and after any transfer of any assets or properties from the Sprint FON Group to the PCS Group, the Sprint FON Group shall no longer include such assets or properties so transferred (other than as reflected in respect of such a transfer by the FON Group Intergroup Interest Fraction, as provided by paragraph (B) of this definition). If the Corporation shall pay a dividend or make some other distribution with respect to shares of PCS Stock payable in securities of the Corporation that are attributed to the PCS Group for purposes of this ARTICLE SIXTH (other than PCS Stock), the Sprint FON Group shall be deemed to hold an interest in the PCS Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of PCS Stock on a per share basis multiplied by the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest (determined as of the record date for such distribution) and, to the extent interest is or dividends are paid on the securities so distributed, the Sprint FON Group shall include, and there shall be transferred thereto out of the PCS Group, a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of such securities so deemed to be held by the Sprint FON Group if such securities were outstanding. The Corporation may also, to the extent the securities so paid as a dividend or other distribution to the holders of PCS Stock are Convertible Securities and at the time are convertible into or exchangeable or exercisable for shares of PCS Stock, treat such Convertible Securities as are so deemed to be held by the Sprint FON Group to be deemed to be converted, exchanged or exercised, and shall do so to the extent such Convertible Securities are mandatorily converted, exchanged or exercised (and to the extent the terms of such Convertible Securities require payment of consideration for such conversion, exchange or exercise, the Sprint FON Group shall then no longer include an amount of the kind of properties or assets required to be paid as such consideration for the amount of Convertible Securities deemed converted, exchanged or exercised (and such properties or assets shall be attributed to the PCS Group)), in which case, from and after such time, the securities into or for which such Convertible Securities so deemed to be held by the Sprint FON Group were so considered converted, exchanged or exercised shall be deemed held by the Sprint FON Group (as provided in clause (3) of paragraph (C) of the definition of "Number Of Shares Issuable With Respect To The FON Group Intergroup Interest") and such Convertible Securities shall no longer be deemed to be held by the Sprint FON Group. A statement setting forth the election to effectuate any such deemed conversion, exchange or exercise of Convertible Securities so deemed to be held by the Sprint FON Group and the properties or assets, if any, to be attributed to the PCS Group in consideration of such conversion, exchange or exercise (if any) shall be filed in the records of the actions of the Board of Directors and, upon such filing, such deemed conversion, exchange or exercise shall be effectuated. "Sprint Party" has the meaning set forth in the Joint Venture Agreement. 55 "Sprint Sub" means Sprint Global Venture, Inc. "Standstill Agreement" means the Amended and Restated Standstill Agreement, dated as of November 23, 1998, among FT, DT and this Corporation, as amended or supplemented from time to time, and any replacement standstill agreement or agreements entered into pursuant to Section 5.17 of the Master Transfer Agreement. "Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement, dated as of November 23, 1998, among FT, DT and this Corporation (and all exhibits thereto), as amended or supplemented from time to time. "Strategic Investor" has the meaning set forth in the Investment Agreement. "Strategic Merger" means a merger or other business combination involving this Corporation (a) in which the Class A Holders are entitled to retain or receive, as the case may be, voting equity securities of the surviving parent entity in exchange for or in respect of (by conversion or otherwise) such Class A Stock, with an aggregate Fair Market Value equal to at least 75% of the sum of (i) the Fair Market Value of all consideration which such Class A Holders have a right to receive with respect to such merger or other business combination, and (ii) if this Corporation is the surviving parent entity, the Fair Market Value of the equity securities of the surviving parent entity which the Class A Holders are entitled to retain, (b) immediately after which the surviving parent entity is an entity whose voting equity securities are registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act or which otherwise has any class or series of its voting equity securities held by at least 500 holders and (c) immediately after which no Person or Group (other than the Class A Holders) owns Voting Securities of such surviving parent entity with Votes equal to more than 35 percent of the Voting Power of such surviving parent entity. "Subsidiary" means, with respect to any Person (the "Parent"), any other Person in which the Parent, one or more direct or indirect Subsidiaries of the Parent, or the Parent and one or more of its direct or indirect Subsidiaries (a) have the ability, through ownership of securities individually or as a group, ordinarily, in the absence of contingencies, to elect a majority of the directors (or individuals performing similar functions) of such other Person, and (b) own more than 50% of the equity interests, provided that Atlas shall be deemed to be a Subsidiary of each of FT and DT. "Tie-Breaking Vote" has the meaning set forth in Section 18.1(a) of the Joint Venture Agreement, and shall include any successor provision thereto. "Total Market Capitalization" of any class or series of common stock on any date means the product of (i) the Market Value of one share of such class or series of common stock on such date and (ii) the number of shares of such class or series of common stock outstanding on such date. "Trading Day" means, with respect to any security, any day on which the principal national securities exchange on which such security is listed or admitted to trading or The Nasdaq Stock Market, if such security is listed or admitted to trading thereon, is open for the transaction of business (unless such trading shall have been suspended for the entire day) or, if such security is not listed or admitted to trading on any national securities exchange or The Nasdaq Stock Market, any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Transfer" means any act pursuant to which, directly or indirectly, the ownership of the assets or securities in question is sold, transferred, conveyed, delivered or otherwise disposed, but shall not include (a) any grant of Liens, (b) any conversion or exchange of any security of this Corporation pursuant to a merger or other business combination involving this Corporation, (c) any transfer of ownership of assets to the surviving entity in a Strategic Merger or pursuant to any other merger or other business combination not prohibited by the Class A Provisions, or (d) any foreclosure or other execution upon any of the assets of this Corporation or any of its Subsidiaries other than foreclosures resulting from Lien Transfers. "Venture Interests" has the meaning set forth in the Joint Venture Agreement. "Vote" means, with respect to any entity, the ability to cast a vote at a stockholders', members' or comparable meeting of such entity with respect to the election of directors, managers or other members of such entity's governing body, or the ability to cast a general partnership or comparable vote, provided that with respect to this Corporation, the 56 term "Vote" means the ability to exercise general voting power (as opposed to the exercise of special voting or disapproval rights such as those set forth in this ARTICLE SIXTH) with respect to matters other than the election of directors at a meeting of the stockholders of this Corporation. "Voting Power" means, with respect to any entity as at any date, the aggregate number of Votes outstanding as at such date in respect of such entity. "Voting Securities" means, with respect to an entity, any capital stock or debt securities of such entity if the holders thereof are ordinarily, in the absence of contingencies, entitled to a Vote, even though the right to such Vote has been suspended by the happening of such a contingency, and in the case of this Corporation, shall include, without limitation, the Non-Class A Common Stock and the Class A Stock, but shall not include any shares issued pursuant to the Rights Agreement to the extent such issuance is caused by action of a Class A Holder. "Weighted Average Price" means the weighted average per unit price paid by the purchasers of any capital stock, debt instrument or security of this Corporation; provided, that (i) the price paid by the purchasers of Series 2 PCS Stock and Series 3 PCS Stock acquired on November 23, 1998 is the Average Trading Price of a share of Series 1 PCS Stock as of the 21st Trading Day following the commencement of regular way trading in connection with the Recapitalization, and (ii) the original purchase price paid by the purchasers of Old Class A Common Stock shall be allocated as of November 23, 1998 among the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group represented by such Old Class A Common Stock in the same proportion per share of Old Class A Common Stock as the per share reclassification and exchange of a share of Common Stock, par value $2.50 per share, outstanding immediately prior to the Recapitalization, into one share of Series 1 FON Stock and one-half of a share of Series 1 PCS Stock . In determining the price of shares of Non-Class A Common Stock or Class A Stock issued upon the conversion or exchange of securities or issued upon the exercise of options, warrants or other rights, the consideration for such shares shall be deemed to include the price paid to purchase the convertible security or the warrant, option or other right, plus any additional consideration paid upon conversion or exercise. If any portion of the price paid is not cash, the Independent Directors (acting by majority vote) shall determine in good faith the Fair Market Value of such non-cash consideration. If any new shares of Non-Class A Common Stock are issued together with other shares or securities or other assets of this Corporation for consideration which covers both the new shares and such other shares, securities or other assets, the portion of such consideration allocable to such new shares shall be determined in good faith by the Independent Directors (acting by majority vote), in each case as certified in a resolution sent to all Class A Holders or holders of Series 2 PCS Stock or Series 2 FON Stock, as the case may be. Section 11. Notices. Notwithstanding the provisions of Section 7.4, all notices to Class A Holders made by this Corporation pursuant to this ARTICLE SIXTH shall be made in writing and any such notice shall be deemed delivered when the same has been delivered in person to, or transmitted by telex or telefacsimile communication to, or seven days after it has been sent by air mail to the addresses of, all of the Class A Holders as indicated on the stock transfer books of this Corporation. Communications by telex or telefacsimile communication also shall be sent concurrently by air mail, but shall in any event be effective as stated above. Section 12. No Other Beneficiaries. The Class A Provisions are intended for the benefit of the Class A Holders only, and nothing in the Class A Provisions is intended or will be construed to confer upon or to give any third party or other stockholder of this Corporation any rights or remedies by virtue hereof. Any term of the Class A Provisions may be waived by the holders of at least two- thirds of the votes represented by the outstanding shares of Class A Stock, voting together as a single class. Section 13. General Provisions Relating to Preferred Stock. 13.1. The Preferred Stock may be issued from time to time in one or more series, each of such series to have such voting powers (full or limited or without voting powers) designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed herein, or in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. 57 13.2. Authority is hereby granted to the Board of Directors, subject to the provisions of this ARTICLE SIXTH, to create one or more series of Preferred Stock and, with respect to each series, to fix or alter as permitted by law, by resolution or resolutions providing for the issue of such series: (a) the number of shares to constitute such series and the distinctive designation thereof; (b) the dividend rate on the shares of such series, the dividend payment dates, the periods in respect of which dividends are payable ("dividend periods") whether such dividends shall be cumulative, and if cumulative, the date or dates from which dividends shall accumulate; (c) whether or not the shares of such series shall be redeemable, and, if redeemable, on what terms, including the redemption prices which the shares of such series shall be entitled to receive upon the redemption thereof; (d) whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (e) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and the conversion price or prices or rate or rates, or the rate or rates at which such exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided in such resolution or resolutions; (f) the voting power, if any, of the shares of such series; and (g) such other terms, conditions, special rights and protective provisions as the Board of Directors may deem advisable. 13.3. No dividend shall be declared and set apart for payment on any series of Preferred Stock in respect of any dividend period unless there shall likewise be or have been paid, or declared and set apart for payment, on all shares of Preferred Stock of each other series entitled to cumulative dividends at the time outstanding which rank equally as to dividends with the series in question, dividends ratably in accordance with the sums which would be payable on the said shares through the end of the last preceding dividend period if all dividends were declared and paid in full. 13.4. If upon any dissolution of the Corporation, the assets of the Corporation distributable among the holders of any one or more series of Preferred Stock which are (i) entitled to a preference over the holders of the Corporation Common Stock upon such dissolution, and (ii) rank equally in connection with any such distribution, shall be insufficient to pay in full the preferential amount to which the holders of such shares shall be entitled, then such assets, or the proceeds thereof, shall be distributed among the holders of each such series of the Preferred Stock ratably in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. 13.5. In the event that the Preferred Stock of any series shall be redeemable, then, at the option of the Board of Directors, the Corporation may at such time or times as may be specified by the Board of Directors as provided in Section 13.2(c) of this ARTICLE SIXTH redeem all, or any number less than all, of the outstanding shares of such series at the redemption price thereof and on the other terms fixed herein or by the Board of Directors as provided in said Section 13.2(c) (the sum so payable upon any redemption of Preferred Stock being herein referred to as the "redemption price"). 13.6. Attribution of Preferred Stock to Groups. As of November 23, 1998, the outstanding shares of Preferred Stock- First Series and Preferred Stock-Second Series shall be attributed entirely to the Sprint FON Group. Upon any issuance of any shares of Preferred Stock of any series after November 23, 1998, the Board of Directors shall attribute for purposes of this ARTICLE SIXTH the shares so issued entirely to the Sprint FON Group or entirely to the PCS Group or partly to the Sprint FON Group and partly to the PCS Group in such proportion as the Board of Directors shall determine and, further, in case of the issuance of shares of Preferred Stock that are exchangeable or exercisable for PCS Stock, if at the time such shares of Preferred Stock are issued the Number Of Shares Issuable With Respect To The 58 FON Group Intergroup Interest shall be greater than zero, then the Board of Directors shall also determine what portion (which may be some, all or none) of such shares of Preferred Stock shall reduce the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, taking into consideration the use of the proceeds of such issuance of shares of Preferred Stock in the business of the Sprint FON Group or the PCS Group and any other relevant factors. Upon any redemption or repurchase of shares of Preferred Stock, the Board of Directors shall determine the proper attribution thereof in accordance with Section 9.1(D) of ARTICLE SIXTH. Notwithstanding any such attribution of shares of Preferred Stock to the Sprint FON Group or the PCS Group, any dividends or distributions or other payments which are made by the Corporation on such shares of Preferred Stock may be made, and as required by the preferences and relative, participating, optional or other special rights thereof shall be made, out of any of the properties or assets of the Corporation, regardless of the Business Group to which such properties or assets are attributed in accordance with the definitions of "Sprint FON Group" and "PCS Group" set forth in Section 10, except as otherwise provided by the resolution of the Board of Directors fixing the preferences and relative, participating, optional or other special rights of a series of Preferred Stock. 13.7. Intentionally Omitted. 13.8. Intentionally Omitted. 13.9. Intentionally Omitted. PREFERRED STOCK - SIXTH SERIES (1) Designation and Amount. The shares of such Series shall be designated as "Preferred Stock-Sixth Series, Junior Participating" (hereafter "Sixth Series") and the number of shares constituting such series shall be one million five hundred thousand (1,500,000). (2) Dividends. (A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ("Preferred Stock"), or any similar stock ranking prior and superior to the shares of the Sixth Series with respect to dividends, the holders of shares of the Sixth Series, in preference to the holders of Common Stock and any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the shares of the Sixth Series (collectively with such Common Stock, "Junior Stock"), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") in an amount (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) the product of the FON Group Multiple (as defined below) times the aggregate per share amount of all cash dividends, plus the product of the FON Group Multiple times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of FON Group Common Stock, or a subdivision of the outstanding shares of FON Group Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the FON Group Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Sixth Series. (B) As used herein, the FON Group Multiple shall initially be 2,000. In the event the Corporation shall (i) declare any dividend on FON Group Common Stock payable in shares of such stock, (ii) subdivide the outstanding FON Group Common Stock, or (iii) combine the outstanding FON Group Common Stock into a smaller number of shares, then in each such case the FON Group Multiple shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of FON Group Common Stock outstanding immediately after such event and the denominator of which is the number of shares of FON Group Common Stock that were outstanding immediately prior to such event. (C) The Corporation shall declare a dividend or distribution on the Sixth Series as provided above in paragraph (A) of this Section (2) immediately after it declares a dividend or distribution on the FON Group 59 Common Stock (other than a dividend payable in shares of FON Group Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the FON Group Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, the minimum quarterly dividend of $100.00 on the Sixth Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Sixth Series from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Sixth Series, unless the date of issue of such shares of Sixth Series is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Sixth Series entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Sixth Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (3) Voting Rights. Except as prescribed by law and in addition to the rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the Corporation, as amended, the holders of the shares of the Sixth Series shall be entitled to vote at any annual or special meeting of the stockholders of the Corporation, for each share of Sixth Series, a number of votes equal to the product of the FON Group Multiple then in effect times the highest number of votes that any share of FON Group Common Stock entitles its holder to vote at such meeting of stockholders of the Corporation. The holders of the shares of the Sixth Series shall be entitled to exercise such voting rights with the holders of Series 1 FON Stock, without distinction as to class, at any annual or special meeting of stockholders for the election of directors and on any other matter submitted to a vote of the stockholders of the Corporation at such meeting. Except as otherwise provided herein, in the Articles of Incorporation of the Corporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or otherwise required by law, the holders of the shares of the Sixth Series and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (4) Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the shares of the Sixth Series as provided in Section (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Sixth Series outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends (except a dividend payable in FON Group Common Stock and/or any other Junior Stock) on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Junior Stock; (ii) declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Sixth Series, except dividends paid ratably on the shares of the Sixth Series and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares ranking on a parity (either as to dividends or upon dissolution, liquidation or winding up) with the shares of the Sixth Series, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of such parity stock in exchange for shares of Junior Stock; or (iv) purchase or otherwise acquire for consideration any shares of the Sixth Series, or any shares of stock ranking on a parity with the shares of the Sixth Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective 60 annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section (4), purchase or otherwise acquire such shares at such time and in such manner. (5) Reacquired Shares. Any shares of the Sixth Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or as otherwise required by law. (6) Liquidation, Dissolution or Winding Up. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of the Sixth Series shall be entitled to receive, in preference to the holders of Junior Stock, the greater of (a) $1,000.00 per share, plus accrued and unpaid dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share equal to the product of the FON Group Multiple then in effect times the aggregate amount to be distributed per share to holders of FON Group Common Stock. (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Sixth Series shall not receive any distributions except for distributions made ratably on the Sixth Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Sixth Series shall at the same time be similarly exchanged or changed in an amount per share equal to the product of the FON Group Multiple then in effect times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of FON Group Common Stock is changed or exchanged. (8) Ranking. The shares of the Sixth Series shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. The shares of the Sixth Series shall rank on a parity with the Corporation's Preferred Stock-Series Eighth, Junior Participating, as to the payment of dividends and the distribution of assets. Nothing herein shall preclude the Board of Directors of the Corporation from creating any additional series of Preferred Stock or any similar stock ranking on a parity with or prior to the shares of the Sixth Series as to the payment of dividends or distribution of assets. (9) Fractional Shares. Shares of the Sixth Series may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of the Sixth Series. (10) Definitions. For purposes of this amended and restated Certificate of Designation, Preferences and Rights of Sixth Series, unless the context otherwise requires: (A) Deleted. (B) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, and/or Series 3 FON Stock, and/or Old Class A Common Stock, and/or Series 1 PCS Stock, and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as the context requires. 61 (C) "FON Group Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, and/or Series 3 FON Stock, in each case as the context requires. (D) "FON Group Multiple" shall have the meaning set forth in Section 2(B). (E) "Initial Charter Amendment" shall have the meaning set forth in the Restructuring and Merger Agreement. (F) "Old Class A Common Stock" shall have the meaning set forth in the Subsequent Charter Amendment. (G) "Recapitalization" shall mean the reclassification of each outstanding share of Sprint Common Stock into one share of Series 1 FON Stock and one-half of a share of Series 1 PCS Stock effected by filing of the Subsequent Charter Amendment. (H) "Restructuring and Merger Agreement" shall mean that certain agreement, dated as of May 26, 1998, by and among the Corporation, TeleCommunications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, Cox Communications, Inc., a Delaware corporation, TCI Spectrum Holdings, Inc., a Colorado corporation, Comcast Telephony Services, a Delaware general partnership, Cox Telephony Partnership, a Delaware general partnership, Sprint Enterprises, L.P., a Delaware limited partnership, TCI Philadelphia Holdings, Inc., a Delaware corporation, Com Telephony Services, Inc., a Delaware corporation, Comcast Telephony Services, Inc., a Delaware corporation, Cox Telephony Partners, Inc., a Delaware corporation, Cox Communications Wireless, Inc., a Delaware corporation, SWV One, Inc., a Delaware corporation, SWV Two, Inc., a Delaware corporation, SWV Three, Inc., a Delaware corporation, SWV Four, Inc., a Delaware corporation, SWV Five, Inc., a Delaware corporation, and SWV Six, Inc., a Colorado corporation. (I) "Series 2 Common Stock" shall mean the Common Stock - Series 2, par value $2.50 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (J) "Series 1 FON Stock" shall mean the FON Common Stock - Series 1, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (K) "Series 2 FON Stock" shall mean the FON Common Stock - Series 2, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (L) "Series 3 FON Stock" shall mean the FON Common Stock - Series 3, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (M) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series 1, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (N) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series 2, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (O) "Series 3 PCS Stock" shall mean the PCS Common Stock - Series 3, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (P) "Sprint Common Stock" shall mean Common Stock, par value $2.50 per share, of the Corporation, as provided for in the Initial Charter Amendment. (Q) "Subsequent Charter Amendment" shall have the meaning set forth in the Restructuring and Merger Agreement. 13.10 Preferred Stock--Seventh Series Convertible. 62 13.10.1 Amount, Rank and Designation. The amount of shares to constitute the Seventh Series of Preferred Stock shall be 300,000 shares. The designation thereof shall be "Preferred Stock--Seventh Series, Convertible" (hereinafter "Seventh Series"). Shares of the Seventh Series shall rank junior as to dividends and upon liquidation to shares of any other Preferred Stock designated as senior to the Seventh Series as to dividends or upon liquidation, dissolution or winding up ("Senior Stock"), and shall have a preference over the shares of the Corporation Common Stock and any other class or series of Junior Stock. 13.10.2. Dividends. Holders of record of shares of the Seventh Series will be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available for the payment of dividends, cumulative cash dividends ("Preferred Dividends") payable at the rate of $6.73 per share quarterly in arrears on each September 30, December 31, March 31 and June 30 (each a "Dividend Payment Date") or, if any such date is not a business day (as defined herein), the Preferred Dividends due on such Dividend Payment Date shall be paid on the next succeeding business day. Preferred Dividends on the Seventh Series shall be cumulative and shall accumulate from the date of original issuance of the Seventh Series. Preferred Dividends shall be payable to holders of record as they appear on the stock register of the Corporation, net of any amounts required to be withheld for or with respect to taxes, on such record dates, not more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Preferred Dividends payable on the Seventh Series for any period less than a full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any period less than one month. Preferred Dividends shall accrue on a daily basis whether or not there are funds of the Corporation legally available for the payment of such dividends and whether or not such Preferred Dividends are declared. Accrued but unpaid Preferred Dividends shall accumulate as of the Dividend Payment Date on which they first become payable, but no interest shall accrue on accumulated but unpaid Preferred Dividends. Before any dividends on the Corporation Common Stock or any other class or series of stock of the Corporation ranking junior to the Seventh Series as to dividends shall be paid or declared and set apart for payment, the holders of shares of the Seventh Series shall be entitled to receive the full accumulated cash dividends for all quarterly dividend periods ending on or before the date on which any dividend on any such class or series of stock ranking junior to the Seventh Series as to dividends is declared or is to be paid. 13.10.3. Conversion. (a) Each holder of shares of Seventh Series may at such holder's option at any time convert any or all of such holder's shares of Seventh Series into (i) if such holder is a Cable Holder, shares of Series 2 PCS Stock, and (ii) if such holder is not a Cable Holder, shares of Series 1 PCS Stock. All references herein to shares of Series 2 PCS Stock issuable upon conversion of shares of Seventh Series shall be deemed to refer to shares of Series 1 PCS Stock if the holder of such Seventh Series is not a Cable Holder. Such shares of Seventh Series shall be convertible into a number of fully paid and nonassessable whole shares of Series 2 PCS Stock as is equal to the aggregate Liquidation Preference of the shares of Seventh Series surrendered for conversion divided by the Initial Conversion Price (as adjusted from time to time, the "Conversion Price"). In case of the redemption of any shares of the Seventh Series, such right of conversion shall cease and terminate as to the shares duly called for redemption at the close of business on the date fixed for redemption, unless the Corporation defaults in the payment of the redemption price plus all accrued and unpaid dividends. If the Corporation defaults with respect to such payment, the right to convert the shares designated for redemption shall terminate at the close of business on the business day next preceding the date that such default is cured. Upon conversion the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on the Seventh Series surrendered for conversion. (b) Holders of shares of Seventh Series at the close of business on a record date for any payment of declared Preferred Dividends shall be entitled to receive the Preferred Dividends payable on those shares of Seventh Series on the corresponding Dividend Payment Date notwithstanding the conversion pursuant to this section of those shares of Seventh Series following such record date and before the close of business on such Dividend Payment Date. Except as provided in the preceding sentence, upon any conversion of shares of Seventh Series, the Corporation shall make no payment of or allowance of unpaid Preferred Dividends, whether or not in arrears, on such shares of Seventh Series, or for previously declared dividends or distributions on the shares of Series 2 PCS Stock issued upon conversion. 63 (c) Conversion of shares of Seventh Series may be effected by delivering certificates evidencing such shares of Seventh Series, together with written notice of conversion stating the number of shares to be converted and a proper assignment of such certificates to the Corporation or in blank, to the office of the transfer agent for the Seventh Series or to any other office or agency maintained by the Corporation for that purpose and otherwise in accordance with conversion procedures established by the Corporation. Each conversion shall be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements shall have been satisfied. The Corporation shall as promptly as practicable after any conversion pursuant to this section issue and deliver to the converting holder a certificate or certificates representing the number of whole shares of Series 2 PCS Stock into which such shares of Seventh Series were converted. Upon conversion of less than the entire number of the shares of Seventh Series represented by any certificate, the Corporation shall issue and deliver to the converting holder a new certificate representing the number of shares of Seventh Series not converted. The Corporation shall effect such conversion as soon as practicable; provided that the Corporation shall not be required to convert shares of Seventh Series, and no surrender of shares of Seventh Series shall be effective for that purpose, while the stock transfer books of the Corporation for the Series 2 PCS Stock are closed for any reason, but the surrender of shares of Seventh Series for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Seventh Series were surrendered, and at the Conversion Price in effect on the date of such surrender. (d) No fraction of a share of Series 2 PCS Stock shall be issued upon any conversion. In lieu of the fraction of a share to which the holder of shares of the Seventh Series surrendered for conversion would otherwise be entitled, such holder shall receive, as soon as practicable after the date of conversion, an amount in cash equal to the same fraction of the market value of a full share of Series 1 PCS Stock. For the purposes of this subparagraph, the market value of a share of Series 1 PCS Stock shall be the Closing Price of such a share on the day immediately preceding the date upon which such shares of Seventh Series are surrendered for conversion. (e) The Conversion Price in effect at any time shall be subject to adjustment as follows: (i) If the Corporation shall at any time after the filing of these Articles of Incorporation: (A) pay a dividend on the PCS Stock in shares of PCS Stock, (B) subdivide the outstanding shares of PCS Stock into a greater number of shares, (C) combine the outstanding shares of PCS Stock into a smaller number of shares, (D) pay a dividend on the PCS Stock in shares of its capital stock (other than PCS Stock), or (E) issue any shares of its capital stock by reclassification of the shares of PCS Stock (other than any reclassification by way of merger or binding share exchange that is subject to Section 13.10.3(e)(viii)), then the Conversion Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that if the holder elects to convert shares of Seventh Series after such time, the holder thereof shall be entitled to receive the aggregate number of shares of PCS Stock which, if such conversion had occurred immediately prior to such time, he would have owned upon such conversion and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. Subject to Section 13.10.3(e)(vi) for a dividend or distribution, the adjustment shall become effective immediately after the record date for the dividend or distribution, and for a subdivision, combination or reclassification, the adjustment shall become effective immediately after the effective date of the subdivision, combination or reclassification. (ii) If the Corporation shall issue rights or warrants to the holders of the PCS Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of PCS Stock (or Convertible Securities) at a price per share (or having a conversion price per share, after adding thereto an allocable portion of the Conversion Price 64 of the right or warrant to purchase such Convertible Securities, computed on the basis of the maximum number of shares of PCS Stock issuable upon conversion of such Convertible Securities) less than the Current Market Price per share on the Determination Date, the Conversion Price shall be adjusted by multiplying the conversion price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of PCS Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of PCS Stock so offered (or the aggregate initial conversion price of the Convertible Securities so offered, after adding thereto the aggregate conversion price of the rights or warrants to purchase such Convertible Securities) to holders of PCS Stock (and to holders of Convertible Securities referred to in the following paragraph if the distribution to which this paragraph (ii) applies is also being made to such holders) would purchase at such Current Market Price, and of which the denominator shall be the number of shares of PCS Stock outstanding on such record date plus the number of additional shares of PCS Stock so offered for subscription or purchase (or into which the Convertible Securities so offered are initially convertible). The adjustment contemplated by this paragraph (ii) shall be made successively whenever any such rights or warrants are issued and shall become effective immediately after the close of business on such record date; however, to the extent that shares of PCS Stock (or Convertible Securities) have not been issued when such rights or warrants expire (or, in the case of rights or warrants to purchase Convertible Securities which have been exercised, if all of the shares of PCS Stock issuable upon conversion of such Convertible Securities have not been issued prior to the expiration of the conversion right thereof), the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares (or Convertible Securities) actually issued upon the exercise of such rights or warrants (or the conversion of such Convertible Securities). For purposes of this paragraph (ii) the number of shares of PCS Stock outstanding on any record date shall be deemed to include the maximum number of shares of PCS Stock the issuance of which would be necessary to effect the full exercise, exchange or conversion of all Convertible Securities outstanding on such record date which are then exercisable, exchangeable or convertible at a price (before giving effect to any adjustment to such price for the distribution to which this paragraph (ii) is being applied) equal to or less than the Current Market Price per share of PCS Stock on the applicable Determination Date, if all of such Convertible Securities were deemed to have been exercised, exchanged or converted immediately prior to the opening of business on such record date. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined by the Board of Directors of the Corporation. (iii) If the Corporation shall distribute to the holders of PCS Stock evidences of its indebtedness or assets or subscription rights or warrants (excluding (x) dividends or distributions referred to in Section 13.10.3(e)(i) and distributions of rights or warrants referred to in Section 13.10.3(e)(ii) and (y) cash dividends or other cash distributions, unless such cash dividends or cash distributions are Extraordinary Cash Dividends), the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, of which the numerator shall be the number of shares of PCS Stock outstanding on such record date multiplied by the Current Market Price on the Determination Date, less the fair market value (as determined by the Board of Directors of the Corporation) on such record date of the evidences of indebtedness, assets (including Extraordinary Cash Dividends), subscription rights or warrants to be distributed to the holders of PCS Stock (and to the holders of Convertible Securities referred to below if the distribution to which this paragraph (iii) applies is also being made to such holders), and of which the denominator shall be the number of shares of PCS Stock outstanding on such record date multiplied by such Current Market Price. For purposes of this paragraph (iii), the number of shares of PCS Stock outstanding on any record date shall be deemed to include the maximum number of 65 shares of PCS Stock the issuance of which would be necessary to effect the full exercise, exchange or conversion of all Convertible Securities outstanding on such record date which are then exercisable, exchangeable or convertible at a price (before giving effect to any adjustment to such price for the distribution to which this paragraph (iii) is being applied) equal to or less than the Current Market Price per share of PCS Stock on the applicable Determination Date, if all of such Convertible Securities were deemed to have been exercised, exchanged or converted immediately prior to the opening of business on such record date. For purposes of this paragraph (iii), the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the PCS Stock the amount of which, together with the aggregate amount of cash dividends on the PCS Stock to be aggregated with such cash dividend in accordance with the following provisions of this paragraph, equals or exceeds the threshold percentage set forth below in the following sentence. If, upon the date prior to the Ex-Dividend Date with respect to a cash dividend on the PCS Stock, the aggregate of the amount of such cash dividend together with the amounts of all cash dividends on the PCS Stock with Ex-Dividend Dates occurring in the 365 consecutive day period ending on the date prior to the Ex- Dividend Date with respect to the cash dividend to which this provision is being applied (other than any such other cash dividends with Ex-Dividend Dates occurring in such period for which a prior adjustment to the Conversion Price was previously made under this paragraph (iii)) equals or exceeds on a per share basis 5% of the average of the Closing Prices during the period beginning on the date after the first such Ex-Dividend Date in such period and ending on the date prior to the Ex-Dividend Date with respect to the cash dividend to which this provision is being applied (except that if no other cash dividend has had an Ex-Dividend Date occurring in such period, the period for calculating the average of the Closing Prices shall be the period commencing 365 days prior to the date immediately prior to the Ex- Dividend Date with respect to the cash dividend to which this provision is being applied), such cash dividend together with each other cash dividend with an Ex-Dividend Date occurring in such 365-day period that is aggregated with such cash dividend in accordance with this paragraph shall be deemed to be an Extraordinary Cash Dividend. The adjustment pursuant to the foregoing provisions of this paragraph (iii) shall be made successively whenever any distribution to which this paragraph (iii) applies is made, and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. (iv) If this Section 13.10.3(e) requires adjustments to the Conversion Price under more than one of clause (D) of the first sentence of paragraph (i), paragraph (ii) or paragraph (iii), and the record dates for the distribution giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of paragraph (i), second the provisions of paragraph (iii) and, third, the provisions of paragraph (ii). (v) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent thereof; provided, however, that any adjustments which by reason of this paragraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 13.10.3(e) shall be made to the nearest cent or to the nearest one- hundredth of a share, as the case may be. (vi) In any case in which this Section 13.10.3(e) shall require that an adjustment in the Conversion Price be made effective as of the record date for a specified event, the Corporation may elect to defer until the occurrence of such event (x) issuing to the holder of the Seventh Series the Shares, if any, issuable upon such conversion over and above the Shares, if any, issuable upon such conversion on the basis of the Conversion Price in effect prior to such adjustment, if the Seventh Series is converted after such record date, and (y) paying to the holder cash or its check in lieu of any fractional interest to which the holder 66 would be entitled pursuant to Section 13.10.3(d); provided, however, that the Corporation shall deliver to the holder a due bill or other appropriate instrument evidencing the holder's right to receive such additional Shares and such cash upon the occurrence of the event requiring such adjustment. (vii) If the Corporation consolidates with or merges into, or transfers (other than by mortgage or pledge) its properties and assets substantially as an entirety to, another Person or the Corporation is a party to a merger or binding share exchange which reclassifies or changes its outstanding PCS Stock, or the PCS Stock is converted into another class or series of capital stock of the Corporation, the Corporation (or its successor in such transaction) or the transferee of such properties and assets shall make appropriate provision so that the holder's certificate representing shares of Seventh Series shall thereafter be convertible, upon the terms and conditions specified in the certificates, for the kind and amount of securities, cash or other assets receivable upon such transaction by a holder of the number of shares of PCS Stock purchasable upon conversion of the holder's Seventh Series immediately before the effective date of such transaction (assuming, to the extent applicable, that such holder of PCS Stock failed to exercise any rights of election with respect thereto, and received per Share the kind and amount of securities, cash or other assets received per share of PCS Stock by a plurality of the nonelecting shares of PCS Stock); and in any such case, if necessary, the provisions set forth in this Section 13.10.3(e) with respect to the rights and interests thereafter of the holder of the Seventh Series shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any such other securities or assets thereafter deliverable on the conversion of the holder's Seventh Series. The subdivision or combination of the PCS Stock at any time outstanding into a greater or lesser number of shares of PCS Stock shall not be deemed to be a reclassification of the PCS Stock for the purposes of this subsection. The Corporation shall not effect any such consolidation, merger, transfer or binding share exchange unless prior to or simultaneously with the consummation thereof the successor (if other than the Corporation) resulting from such consolidation or merger or the Person purchasing such assets or other appropriate Person shall assume, by written instrument, the obligation to deliver to the holders of the Seventh Series such securities, cash or other assets as, in accordance with the foregoing provisions, the holder may be entitled to purchase and the other obligations in this Section 13.10. The Corporation may make such reductions in the Conversion Price, in addition to those required by paragraphs (i), (ii) and (iii) of this Section 13.10.3(e), as it shall in its sole discretion determine to be advisable. (viii) Subject to Section 13.10.3(e)(v) and to the remaining provisions of this Section 13.10.3(e)(viii), in the event that a holder of Seventh Series would be entitled to receive upon conversion thereof pursuant to this Section 13.10.3(e) any Redeemable Capital Stock and the Corporation redeems, exchanges or otherwise acquires all of the outstanding shares or other units of such Redeemable Capital Stock (such event being a "Redemption Event"), then, from and after the effective date of such Redemption Event, the holders of shares of Seventh Series then outstanding shall be entitled to receive upon conversion of such shares, in lieu of shares or units of such Redeemable Capital Stock, the kind and amount of shares of stock and other securities and property receivable upon the Redemption Event by a holder of the number of shares or units of such Redeemable Capital Stock into which such shares of Seventh Series could have been converted immediately prior to the effective date of such Redemption Event (assuming, to the extent applicable, that such holder failed to exercise any rights of election with respect thereto and received per share or unit of such Redeemable Capital Stock the kind and amount of stock and other securities and property received per share or unit by a plurality of the non-electing shares or units of such Redeemable Capital Stock), and (from and after the effective date of such Redemption Event) the holders of the Seventh Series shall have no other conversion rights under these provisions with respect to such Redeemable Capital Stock. 67 Notwithstanding the foregoing, if the redemption price for the shares of such Redeemable Capital Stock is paid in whole or in part in Redemption Securities, and the Mirror Preferred Stock Condition is met, the Seventh Series shall not be convertible into such Redemption Securities and, from and after the applicable redemption date, the holders of any shares of Seventh Series that have not been exchanged for Mirror Preferred Stock and Exchange Preferred Stock shall have no conversion rights under these provisions except for any conversion right that may have existed immediately prior to the effective date of the Redemption Event with respect to any shares of stock (including the PCS Stock) or other securities or property other than the Redeemable Capital Stock so redeemed. The Corporation shall use all commercially reasonable efforts to ensure that the Mirror Preferred Stock Condition is satisfied. The "Mirror Preferred Stock Condition" will be satisfied in connection with a redemption of any Redeemable Capital Stock into which the Seventh Series is then convertible if appropriate provision is made so that the holders of the Seventh Series have the right to exchange their shares of Seventh Series on the effective date of the Redemption Event for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock of the issuer of the Redemption Securities. The sum of the initial liquidation preferences of the shares of Exchange Preferred and Mirror Preferred Stock delivered in exchange for a share of Seventh Series will equal the Liquidation Preference of a share of Seventh Series on the effective date of the Redemption Event. The Mirror Preferred Stock will have an aggregate initial liquidation preference equal to the product of the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the quotient of (x) the product of the amount of shares of the Redeemable Capital Stock for which each share of Seventh Series is then convertible to be redeemed (determined immediately prior to the effective date of the Redemption Event) and the average of the daily Closing Prices of the Redeemable Capital Stock for the period of ten consecutive trading days ending on the third trading day prior to the effective date of the Redemption Event, divided by (y) the sum of the amount determined pursuant to clause (x), plus the fair value of the shares of stock or other securities or property (other than the Redeemable Capital Stock being redeemed) that would have been receivable by a holder of Seventh Series upon conversion thereof immediately prior to the effective date of the Redemption Event (such fair value to be determined in the case of stock or other securities with a Closing Price in the same manner as provided in clause (x) and otherwise by the Board of Directors in the exercise of its judgment). The shares of Exchange Preferred Stock will have an aggregate initial liquidation preference equal to the difference between the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the aggregate initial liquidation preference of the Mirror Preferred Stock. No shares of Exchange Preferred Stock will be issued in exchange for the Seventh Series if the shares of Exchange Preferred Stock would have no Liquidation Preference as a result of the above formula. (ix) If the Corporation effects a Spin Off, the Corporation shall make appropriate provision so that the holders of the Seventh Series have the right to exchange their shares of Seventh Series on the effective date of the Spin Off for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock of the issuer of the Spin Off Securities. The sum of the initial liquidation preference of the shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in exchange for a share of Seventh Series will equal the Liquidation Preference of a share of Seventh Series on the effective date of the Spin Off. The Mirror Preferred Stock will have an aggregate liquidation preference equal to the product of the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the quotient of (x) the product of the number (or fraction) of Spin Off Securities that would have been receivable upon such Spin Off by a holder of the number of shares of PCS Stock issuable upon conversion of a share of Seventh Series immediately prior to the effective date of the Spin Off and the average of the daily Closing Prices of the Spin Off Securities for the period of ten consecutive trading days commencing on the tenth trading day following the effective date of the Spin Off, divided by (y) the sum of the amount determined pursuant to clause (x), plus the fair value of the shares of PCS Stock and other securities or property (other than Spin Off Securities) that would have been receivable by a holder of a share of Seventh Series in the Spin Off following conversion thereof immediately prior to the 68 effective date of the Spin Off (such fair value to be determined in the case of PCS Stock or other securities with a Closing Price in the same manner as provided in clause (x) and otherwise by the Board of Directors in the exercise of its judgment). The shares of Exchange Preferred Stock will have an aggregate initial liquidation preference equal to the difference between the aggregate Liquidation Preference of the shares of Seventh Series exchanged therefor and the aggregate initial liquidation preference of the Mirror Preferred Stock. No shares of Exchange Preferred Stock will be issued in exchange for the Seventh Series if the shares of Exchange Preferred Stock would have no Liquidation Preference as a result of the above formula. From and after the effective date of such Spin Off, the holders of any shares of Seventh Series that have not been exchanged for Mirror Preferred Stock and Exchange Preferred Stock as provided above shall have no conversion rights under these provisions with respect to such Spin Off Securities. (f) The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of PCS Stock on the conversion of Seventh Series; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any registration of transfer involved in the issue or delivery of shares of PCS Stock in a name other than that of the registered holder of Seventh Series converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. 13.10.4. Liquidation Rights. Subject to prior payment of preferred amounts to which any Senior Stock is entitled, in the event of any liquidation, dissolution or winding up of the Corporation the holders of the Seventh Series will be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any distribution of the assets shall be made to the holders of the Corporation Common Stock or any other class or series of stock ranking junior to the Seventh Series upon liquidation, the sum of U.S. $1,000 per share (the "Liquidation Preference"), plus in each case any accumulated unpaid dividends (whether or not declared), to the date of final distribution. If upon any liquidation, dissolution or winding up of the Corporation the amounts payable with respect to the Seventh Series and any other Parity Stock are not paid in full, the holders of the Seventh Series and such Parity Stock will share ratably in any distribution of assets in proportion to the full preferential amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of Seventh Series shall not be entitled to any further participation in any distribution of assets by the Corporation. A consolidation or merger of the Corporation with or into one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger), or a sale, lease or exchange of all or substantially all of the assets of the Corporation shall not be deemed to be a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation. Notice of a liquidation, dissolution or winding up of the Corporation shall be filed at each office or agency maintained for the purpose of conversion of the Seventh Series, and shall be mailed to the holders of Seventh Series at their last addresses as they shall appear on the stock register of the Corporation, at least 20 business days before any such action, stating the date on which any such action is expected to become effective. The failure to give or receive the notice required by this Section or any defect therein shall not affect the legality or validity of any such action. 13.10.5. Redemption. (a) General. Except as provided below and in Section 13.10.5(h), the Seventh Series shall not be redeemed by the Corporation prior to November 23, 2001. The Corporation may at its option redeem the Seventh Series in whole or in part after November 23, 2001, at any time or from time to time, upon at least thirty days' prior notice, at a redemption price equal to the Liquidation Preference per share of Seventh Series, plus any accumulated unpaid dividends (whether or not declared) up to but excluding such redemption date. In connection with a Spin Off or a Redemption Event, the Corporation may, at its option, redeem the Seventh Series in whole after November 23, 2000, and before November 23, 2001, upon at least thirty days prior notice, at a redemption price equal to the Premium Price per share of Seventh Series, plus any accumulated unpaid dividends (whether or not declared) up to but excluding such redemption date, which redemption shall be deemed effective immediately prior to the consummation of the Spin Off or the Redemption Event. If less than all the outstanding Seventh Series is to be redeemed, the shares to be redeemed shall be selected pro rata as 69 nearly as practicable or by lot, or by such other method as may be determined by the Board of Directors to be equitable, without regard to whether the shares to be redeemed are convertible into Series 1 PCS Stock or Series 2 PCS Stock. Shares so redeemed shall be cancelled and upon such cancellation shall be deemed to be authorized and unissued shares of Preferred Stock, without par value, of the Corporation but shall not be reissued as shares of the same series. (b) Mandatory Redemption. To the extent permitted by law, the Corporation shall redeem, on November 23, 2008 (or, if such day is not a business day, on the first business day thereafter) (subject to extension as provided in the last sentence of this Section 13.10.5(b), the "Mandatory Redemption Date"), all remaining shares of Seventh Series then outstanding, at the redemption price of $1,000 for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the Mandatory Redemption Date. Prior to authorizing or making such redemption with respect to the Seventh Series, the Corporation, by resolution of the Board of Directors shall, to the extent of funds legally available therefor, declare a dividend on the Seventh Series payable on the Mandatory Redemption Date in an amount equal to any accrued and unpaid dividends on the Seventh Series as of such date and, if the Corporation does not have sufficient legally available funds to declare and pay all dividends accrued at the time of such redemption, any remaining accrued and unpaid dividends shall be added to the redemption price. After paying any accrued and unpaid dividends pursuant to the foregoing sentence, if the funds of the Corporation legally available for redemption of shares of the Seventh Series then required to be redeemed are insufficient to redeem the total number of such shares then outstanding, those funds which are legally available shall be used to redeem the maximum possible number of shares of the Seventh Series. At any time and from time to time thereafter, when additional funds of the Corporation are legally available to discharge its obligation to redeem all of the outstanding shares of Seventh Series required to be redeemed pursuant to this section (the "Mandatory Redemption Obligation"), such funds shall be immediately used to discharge such Mandatory Redemption Obligation until the balance of such shares have been redeemed. If and so long as the Mandatory Redemption Obligation shall not be fully discharged, (x) dividends on any remaining outstanding shares of Seventh Series shall continue to accrue and be added to the dividend payable pursuant to the second preceding sentence and (y) the Corporation shall not declare or pay any dividend or make any distribution on any Parity Stock or Junior Stock. With respect to any Exchange Preferred Stock or Mirror Preferred Stock, the Mandatory Redemption Date shall be the later to occur of (i) November 23, 2008, and (ii) the fifth anniversary of the date of issuance of such Exchange Preferred Stock or Mirror Preferred Stock. (c) Notice. The Corporation will provide notice of any redemption of shares of Seventh Series to holders of record of the Seventh Series to be redeemed not less than 30 nor more than 60 days prior to the date fixed for such redemption. Such notice shall be provided by first-class mail postage prepaid, to each holder of record of the Seventh Series to be redeemed, at such holder's address as it appears on the stock transfer books of the Corporation. Each such mailed notice shall state, as appropriate, the following: (i) the redemption date; (ii) the number of shares of Seventh Series to be redeemed and, if fewer than all the shares held by any holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the Redemption Price; (iv) the place or places where certificates for such shares are to be surrendered for redemption; (v) the amount of full cumulative dividends per share of Seventh Series to be redeemed accrued and unpaid up to but excluding such redemption date, and that dividends on shares of Seventh Series to be redeemed will cease to accrue on such redemption date unless the Corporation shall default in payment of the Redemption Price plus such full cumulative dividends accrued and unpaid thereon; (vi) the name and location of any bank or trust company with which the Corporation will deposit redemption funds pursuant to subsection (e) below; 70 (vii) the then effective Conversion Price (as determined under Section 13.10.3); and (viii) that the right of holders to convert shares of Seventh Series to be redeemed will terminate at the close of business on the business day next preceding the date fixed for redemption (unless the Corporation shall default in the payment of the Redemption Price and such full cumulative dividends accrued and unpaid thereon). Any notice that is mailed as set forth above shall be conclusively presumed to have been duly given, whether or not the holder of shares of Seventh Series receives such notice, and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Seventh Series. (d) Mechanics of Redemption. Upon surrender in accordance with the aforesaid notice of the certificate for any shares so redeemed (duly endorsed or accompanied by appropriate instruments of transfer if so required by the Corporation), the holders of record of such shares shall be entitled to receive the redemption price, without interest, plus full cumulative dividends thereon accrued and unpaid up to but excluding such redemption date out of funds legally available therefor. If fewer than all the shares represented by any such certificate are redeemed, a new certificate representing the unredeemed shares shall be issued without cost to the holder thereof. (e) Redemption Funds. On the date of any redemption being made pursuant to this Section, the Corporation shall, and at any time after notice of such redemption shall have been mailed and before the date of redemption the Corporation may, deposit for the benefit of the holders of shares of Seventh Series to be redeemed the funds necessary for such redemption with a bank or trust company in the City of New York having a capital and surplus of at least $1 billion, with instructions to such bank or trust company to pay the full redemption amounts as provided herein to the holders of shares of Seventh Series upon surrender of certificates for such shares; provided, however, that the making of such deposit shall not release the Corporation from any of its obligations hereunder. Any moneys so deposited by the Corporation and unclaimed at the end of two years from the date designated for such redemption shall revert to the general funds of the Corporation and, upon demand, such bank or trust company shall pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of Seventh Series so redeemed shall look only to the Corporation for the payment of the full redemption amounts, as provided herein. (f) Rights After Redemption. Notice of redemption having been given as aforesaid, upon the deposit pursuant to subsection (e) of the full redemption amounts as provided herein in respect of all shares of Seventh Series then to be redeemed, notwithstanding that any certificates for such shares shall not have been surrendered in accordance with subsection (d), from and after the date of redemption designated in the notice of redemption: (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of such shares of Seventh Series shall cease and terminate, excepting only the right to receive the full redemption amounts as provided herein without interest thereon. If the funds deposited are not sufficient for redemption of the shares of the Seventh Series that were to be redeemed, then no certificates evidencing such shares shall be deemed surrendered and such shares shall remain outstanding and the rights of holders of shares of Seventh Series shall continue to be those of holders of shares of the Seventh Series. (g) Restrictions on Redemption and Purchase. Any provision of this Section to the contrary notwithstanding, in the event that any quarterly dividend payable on the Seventh Series shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Parity Stock or Junior Stock unless all outstanding shares of Seventh Series are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Seventh Series or any Parity Stock or Junior Stock except (i) by conversion into or exchange for stock ranking junior as to dividends or (ii) in accordance with a purchase or exchange offer made by the Corporation to all holders of record of Seventh Series and such Parity Stock upon the same terms as to holders of any series and, in the case of offers relating to more than one series, upon such terms as between such series as the Board of Directors or, to the extent permitted by applicable law, any authorized committee thereof, after consideration of the respective 71 annual dividend rates and other relative rights and preferences of the respective series of stock, will result in fair and equitable treatment as between such series, which determination shall be conclusive. (h) The Corporation shall redeem the Seventh Series in whole or in part in accordance with and to the extent required by Section 6.6 of the Restructuring Agreement. With respect to any such redemption, (i) the provisions of Section 13.10.5(c) and Section 13.10.5(e) shall not apply and (ii) the restriction on rights in Section 13.10.5(f) shall apply from the time of the closing of the IPO or other primary offering contemplated by Section 6.6 of the Restructuring Agreement. 13.10.6. Advance Notice of Certain Transactions. If the Corporation: (i) takes any action which would require any adjustment to the Conversion Price or the number of shares issuable upon a Conversion; (ii) is a party to a consolidation, merger or binding share exchange, or transfers all or substantially all of its assets to another person or entity, and any stockholders of the Corporation must approve the transaction; or (iii) voluntarily or involuntarily dissolves, liquidates or winds up, then, in any such event, the Corporation shall give to the holders of the Seventh Series, at least 10 days prior to any record date or other date set for definitive action if there shall be no record date, a notice stating the record date for, the anticipated effective date of such action or event and, if applicable, whether the Corporation will adjust the Conversion Price or the number of shares issuable upon a Conversion. Notwithstanding the foregoing, notice shall be given no later than the time any required notice of such action or event is given to the holders of PCS Stock. 13.10.7. Reservation of Shares. The Corporation shall at all times keep available and reserved for the purpose of issuance upon conversion of shares of Seventh Series the number of shares of its Series 1 PCS Stock and the number of shares of its Series 2 PCS Stock required for conversion of the outstanding and any reserved shares of the Seventh Series. The Corporation shall take all corporate and other actions necessary to ensure that all shares of PCS Stock issuable on conversion of Seventh Series will upon issuance be duly and validly authorized and issued, fully paid and nonassessable. 13.10.8. Certain Protective Provisions. If at any time the full cumulative dividends on shares of the Seventh Series have not been paid or declared and set aside for payment for the current and all past quarterly dividend periods, the Corporation (a) will not declare, or pay, or set apart for payment any dividends or make any distribution, on any class or series of Parity Stock or Junior Stock; (b) will not redeem, purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise acquire, any shares of any class or series of Parity Stock or Junior Stock; provided that notwithstanding the foregoing, the Corporation may at any time redeem, purchase or otherwise acquire shares of Junior Stock in exchange for, or out of the net cash proceeds from the substantially simultaneous sale of, other shares of Junior Stock; and (c) will not redeem pursuant to redemption rights in the terms of such stock any Parity Stock unless at the same time it redeems all the shares of the Seventh Series. 13.10.9. Voting Rights. Except as otherwise required by law, each outstanding share of the Seventh Series shall be entitled to vote on all matters in respect of which the holders of the common stock of the Corporation are entitled to vote, and the holders of the Seventh Series shall vote together with the holders of all other classes or series of capital stock that have general voting power on all such matters as a single class; provided, however, that the affirmative vote or consent of two-thirds of the votes to which the holders of the outstanding shares of the Seventh Series are entitled shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any or the provisions of the Articles of Incorporation or of any amendment thereto (including any certificate of designation or any similar document relating to any series of preferred stock) of the Corporation, which would materially and adversely affect the voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh Series; provided, however, that neither (i) the creation, issuance, or increase in the amount of authorized shares of, any series of preferred stock nor (ii) the consummation of any transaction described in Section 13.10.3 in which the voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh Series are addressed as contemplated by such Section will (in either such case) be deemed to materially and adversely affect such voting powers, preferences, rights, powers or privileges, qualifications, limitations and restrictions of the Seventh Series. On each matter to be voted on by the holders of the Seventh Series, each outstanding share of the Seventh Series is entitled to a number of votes equal to the number of votes that could be cast with respect to such matter by the holder of that number of the series of PCS Stock into which such share of Seventh Series could be converted if the requirements 72 for conversion under Section 13.10.3(c) had been satisfied by such voting party on the record date for determining the shareholders of the Corporation who are entitled to vote with respect to such matter. 13.10.10. Definitions. As used in this Section 13.10 only: (a) the term "Affiliate" has the meaning given to such term in the Restructuring Agreement; (b) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; (c) the term "Cable Holder" means any of (i) TeleCommunications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, or Cox Communications, Inc., a Delaware corporation, (ii) any Affiliate of an entity identified in clause (i) of this definition, (iii) any successor by operation of law of an entity identified in clauses (i) or (ii) of this definition, or (iv) any entity controlled by two or more entities identified in clauses (i) through (iii) of this definition or this clause (iv) even if such entity is not considered an Affiliate of any individual entity so identified; (d) the term "close of business" means 5:00 p.m. local New York City time on a business day; (e) the term "Closing Price" for a security, on any day, means the last sale price, regular way, per share of such security as reported on the New York Stock Exchange on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, of such security on the New York Stock Exchange, in either case as reported on the New York Stock Exchange Composite Transactions Tape, or if such security is not then listed or admitted to trading on such exchange, on the principal national securities exchange on which such security is then listed or admitted to trading, or if such security is not then listed or admitted to trading on any national securities exchange, as quoted through the National Market tier of The Nasdaq Stock Market; (f) "Convertible Securities" means any or all options, warrants, securities and rights which are convertible into or exercisable or exchangeable for PCS Stock at the option of the holder thereof, or which otherwise entitle the holder thereof to subscribe for, purchase or otherwise acquire PCS Stock. (g) "Current Market Price", on the Determination Date for any issuance of rights or warrants or any distribution in respect of which the Current Market Price is being calculated, means the average of the daily Closing Prices of the Series 1 PCS Group Common Stock for the shortest of: (i) the period of 30 consecutive Trading Days commencing 45 Trading Days before such Determination Date; (ii) the period commencing on the date next succeeding the first public announcement of the issuance of rights or warrants or the distribution in respect of which the Current Market price is being calculated and ending on the last full Trading Day before such Determination Date; and (iii) the period, if any, commencing on the date next succeeding the Ex-Dividend Date with respect to the next preceding issuance of rights or warrants or distribution for which an adjustment is required by the provisions of clause (D) of the first sentence of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii), and ending on the last full Trading Day before such Determination Date. If the record date for an issuance of rights or warrants or a distribution for which an adjustment is required by the provisions of clause (D) of the first sentence of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii) (the "preceding adjustment event") precedes the record date for the issuance or distribution in respect of which the Current Market Price is being calculated and the Ex- Dividend Date for such preceding adjustment event is on or after the Determination Date for the issuance or distribution in respect of which the Current Market Price is being calculated, then the Current Market Price shall be adjusted by deducting therefrom the fair market value (on the record date for the issuance or distribution in respect of which the Current Market Price is being calculated), as determined in good faith by the Board of Directors, of 73 the capital stock, rights, warrants, assets or evidences of indebtedness issued or distributed in respect of each share of Series 1 PCS Group Common Stock in such preceding adjustment event. Further, in the event that the Ex-Dividend Date (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which clauses (A), (B), (C) or (D) of the first sentence of Section 13.10.3(e)(i) applies occurs during the period applicable for calculating the Current Market Price, then the Current Market Price shall be calculated for such period in a manner determined in good faith by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Closing Prices of the Series 1 PCS Group Common Stock during such period. For purposes of this Section 13.10, the Current Market Price of a share of Series 2 PCS Group Common Stock as of any Determination Date shall be the Current Market Price of a share of Series 1 PCS Group Common Stock as of such Determination Date; (h) "Determination Date" for any issuance of rights or warrants or any distribution to which Section 13.10.3(e)(i) or 13.10.3(e)(ii) applies means the earlier of (i) the record date for the determination of stockholders entitled to receive the rights or warrants or the distribution to which such Section applies and (ii) the Ex-Dividend Date for such right, warrants or distribution; (i) "Exchange Preferred Stock" means a series of convertible preferred stock of the Corporation having terms, conditions, designations, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof that are identical, or as nearly so as is practicable in the judgment of the Board of Directors, to those of the Seventh Series for which such Exchange Preferred Stock is exchanged, except that (i) the liquidation preference will be determined as provided in Section 13.10.3(e)(vii) or Section 13.10.3(e)(viii), as applicable, (ii) the running of any time periods pursuant to the terms of the Seventh Series shall be tacked to the corresponding time periods in the Exchange Preferred Stock and (iii) the Exchange Preferred Stock will not be convertible into, and the holders will have no conversion rights thereunder with respect to, (x) in the case of a redemption of Redeemable Capital Stock, the Redeemable Capital Stock redeemed, or the Redemption Securities issued, in the Redemption Event, and (y) in the case of a Spin Off, the Spin Off Securities; (j) "Ex-Dividend Date" shall mean the date on which "ex- dividend" trading commences for a dividend, an issuance of rights or warrants or a distribution to which any of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section 13.10.3(e)(iii) applies in the over-the-counter market or on the principal exchange on which the Series 1 PCS Stock is then quoted or listed; (k) the term "Initial Conversion Price" shall be an amount equal to $15.3733. (l) "IPO" has the meaning given to such term in the Restructuring Agreement; (m) the term "IPO Price" means the price per share of Series 1 PCS Stock in the IPO; (n) the term "Junior Stock" means any stock ranking junior as to dividends or upon liquidation, dissolution or winding up to the Seventh Series; (o) the term "Lien" means any mortgage, pledge, security interest, adverse claim, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or similar applicable law of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation; (p) the term "Mirror Preferred Stock" means convertible preferred stock issued by (i) in the case of a redemption of Redeemable Capital Stock, the issuer of the applicable Redemption Securities, and (b) in the case of a Spin Off, the issuer of the applicable Spin Off Securities and having terms, designations, conditions, dividend rights, voting powers, rights on liquidation and other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof that are identical, or as nearly so as 74 is practicable in the judgment of the Board of Directors, to those of the Seventh Series for which such Mirror Preferred Stock is exchanged, except that (i) the liquidation preference will be determined as provided in Section 13.10.3(e)(vii) or Section 13.10.3(e)(viii), as applicable, (ii) the running of any time periods pursuant to the terms of the Seventh Series shall be tacked to the corresponding time periods in the Mirror Preferred Stock and (iii) the Mirror Preferred Stock shall be convertible into the kind and amount of Redemption Securities or Spin Off Securities, as applicable, and other securities and property that the holder of a share of Seventh Series in respect of which such Mirror Preferred Stock is issued pursuant to the terms hereof would have received (x) in the case of the redemption of Redeemable Capital Stock, upon such redemption had such share of Seventh Series been converted immediately prior to the effective date of the Redemption Event and (y) in the case of a Spin Off, in such Spin Off had such share of Seventh Series been converted immediately prior to the record date for such Spin Off; (q) the term "Parity Stock" means any stock ranking on a parity as to dividends or upon liquidation, dissolution or winding up with the Seventh Series; (r) the term "PCS Stock" means the Series 1 PCS Stock, the Series 2 PCS Stock and the Series 3 PCS Stock; (s) the term "Premium Price," which shall be measured as of the effective date of the redemption referred to in Section 13.10.5(a), means the greater of (i) 110% of the Liquidation Preference and (ii) 110% of the product of (A) the number of shares of PCS Stock (or other securities) into which a share of Seventh Series is convertible as of such redemption date multiplied by (B) the average of the Closing Prices for the Series 1 PCS Stock (or, if the Seventh Series is then convertible into a different publicly traded security of the Corporation, then the average of the Closing Prices of such publicly traded security) for the 30 consecutive Trading Days ending on the 5th Trading Day prior to such redemption date. (t) the term "record date" means such date as from time to time fixed by the Board of Directors with respect to the receipt of dividends, the receipt of a redemption price upon redemption or the taking of any action or exercise of any voting rights; (u) the term "Redeemable Capital Stock" means a class or series of capital stock of the Corporation that provides by its terms a right in favor of the Corporation to call, redeem, exchange or otherwise acquire all of the outstanding shares or units of such class or series; (v) the term "Redemption Securities" means, with respect to the redemption of any Redeemable Capital Stock, stock of a Subsidiary of the Corporation that is distributed by the Corporation in payment, in whole or in part, of the redemption price of such Redeemable Capital Stock; (w) the term "Restructuring Agreement" means that Restructuring and Merger Agreement, dated as of May 26, 1998, among the Corporation, Tele-Communications, Inc., Comcast Corporation, Cox Communications, Inc. and certain of their respective Affiliates; (x) the term "Series 1 PCS Stock" means the PCS Common Stock--Series 1, par value $1.00 per share, of the Corporation; (y) the term "Series 2 PCS Stock" means the PCS Common Stock--Series 2, par value $1.00 per share, of the Corporation; (z) the term "Series 3 PCS Stock" means the PCS Common Stock--Series 3, par value $1.00 per share, of the Corporation; (aa) the term "Spin Off" means the distribution of stock of a Subsidiary of the Corporation as a dividend to all holders of PCS Stock. (bb) the term "Spin Off Securities" means stock of a Subsidiary of the Corporation that is distributed to holders of PCS Stock in a Spin Off. 75 (cc) the term "Subsidiary" means, with respect to any person, any corporation, limited liability company, partnership or other legal entity more than 50% of whose outstanding voting securities or membership, partnership or other ownership interests, as the case may be, are directly or indirectly owned by such person. (dd) the term "Trading Day" means a day on which the principal national securities exchange on which the Series 1 PCS Stock is listed or admitted to trading, or The Nasdaq Stock Market, as applicable, if the Series 1 PCS Stock is not listed or admitted to trading on any national securities exchange, is open for the transaction of business (unless such trading shall have been suspended for the entire day) or, if the Series 1 PCS Stock is not listed or admitted to trading on any national securities exchange or The Nasdaq Stock Market, any Business Day; and (ee) the term "Transfer" means any act pursuant to which, directly or indirectly, the ownership of the assets or securities in question is sold, transferred, conveyed, delivered or otherwise disposed, but shall not include (a) any grant of Liens or (b) any conversion or exchange of any security of this Corporation pursuant to a merger or other business combination involving this Corporation. PREFERRED STOCK-EIGHTH SERIES (1) Designation and Amount. The shares of such Series shall be designated as "Preferred Stock-Eighth Series, Junior Participating" (hereafter "Eighth Series") and the number of shares constituting such series shall be one million two hundred fifty thousand (1,250,000). (2) Dividends. (A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ("Preferred Stock"), or any similar stock ranking prior and superior to the shares of the Eighth Series with respect to dividends, the holders of shares of the Eighth Series, in preference to the holders of Common Stock and any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the shares of the Eighth Series (collectively with such Common Stock, "Junior Stock"), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") in an amount (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) the product of the PCS Group Multiple (as defined below) times the aggregate per share amount of all cash dividends, plus the product of the PCS Group Multiple times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of PCS Group Common Stock, or a subdivision of the outstanding shares of PCS Group Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the PCS Group Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Eighth Series. (B) As used herein, the PCS Group Multiple shall initially be 2,000. In the event the Corporation shall (i) declare any dividend on PCS Group Common Stock payable in shares of PCS Group Common Stock, (ii) subdivide the outstanding PCS Group Common Stock, or (iii) combine the outstanding PCS Group Common Stock into a smaller number of shares, then in each such case the PCS Group Multiple shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of PCS Group Common Stock outstanding immediately after such event and the denominator of which is the number of shares of PCS Group Common Stock that were outstanding immediately prior to such event. (C) The Corporation shall declare a dividend or distribution on the Eighth Series as provided above in paragraph (A) of this Section (2) immediately after it declares a dividend or distribution on the PCS Group Common Stock (other than a dividend payable in shares of PCS Group Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the PCS Group Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend 76 Payment Date, the minimum quarterly dividend of $100.00 on the Eighth Series shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Eighth Series from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Eighth Series, unless the date of issue of such shares of Eighth Series is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Eighth Series entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Eighth Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (3) Voting Rights. Except as prescribed by law and in addition to the rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the Corporation, as amended, the holders of the shares of the Eighth Series shall be entitled to vote at any annual or special meeting of the stockholders of the Corporation, for each share of Eighth Series, a number of votes equal to the product of the PCS Group Multiple then in effect times the highest number of votes that each share of PCS Group Common Stock entitles its holder to vote at such meeting of stockholders of the Corporation. The holders of the shares of the Eighth Series shall be entitled to exercise such voting rights with the holders of Series 1 PCS Stock, without distinction as to class, at any annual or special meeting of stockholders for the election of directors and on any other matter submitted to a vote of the stockholders of the Corporation at such meeting. Except as otherwise provided herein, in the Articles of Incorporation of the Corporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or otherwise required by law, the holders of the shares of the Eighth Series and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (4) Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the shares of the Eighth Series as provided in Section (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Eighth Series outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends (except a dividend payable in PCS Group Common Stock and/or any other Junior Stock) on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of Junior Stock; (ii) declare or pay dividends on or make any other distribution on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Eighth Series, except dividends paid ratably on the shares of the Eighth Series and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the shares of the Eighth Series, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of such parity stock in exchange for shares of Junior Stock; or (iv) purchase or otherwise acquire for consideration any shares of the Eighth Series, or any shares of stock ranking on a parity with the shares of the Eighth Series, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. 77 (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section (4), purchase or otherwise acquire such shares at such time and in such manner. (5) Reacquired Shares. Any shares of the Eighth Series purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation establishing a series of Preferred Stock or any similar stock or as otherwise required by law. (6) Liquidation, Dissolution or Winding Up. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of the Eighth Series shall be entitled to receive, in preference to the holders of Junior Stock, the greater of (a) $1,000.00 per share, plus accrued dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share equal to the product of the PCS Group Multiple then in effect times the aggregate amount to be distributed per share to holders of PCS Group Common Stock. (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Eighth Series shall not receive any distributions except for distributions made ratably on the Eighth Series and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of PCS Group Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Eighth Series shall at the same time be similarly exchanged or changed in an amount per share equal to the product of the PCS Group Multiple then in effect times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of PCS Group Common Stock is changed or exchanged. (8) Ranking. The shares of the Eighth Series shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. The shares of the Eighth Series shall rank on a parity with the Corporation's Preferred Stock-Series Sixth, Junior Participating, as to the payment of dividends and the distribution of assets. Nothing herein shall preclude the Board of Directors of the Corporation from creating any additional series of Preferred Stock or any similar stock ranking on a parity with or prior to the shares of the Eighth Series as to the payment of dividends or distribution of assets. (9) Fractional Shares. Shares of the Eighth Series may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of the Eighth Series. (10) Definitions. For purposes of this Certificate of Designation, Preferences and Rights of Eighth Series, unless the context otherwise requires: (A) Deleted. (B) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2 FON Stock, and/or Series 3 FON Stock, and/or Old Class A Common Stock, and/or Series 1 PCS Stock, and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as the context requires. (C) "Initial Charter Amendment" shall have the meaning set forth in the Restructuring and Merger Agreement. 78 (D) "Old Class A Common Stock" shall have the meaning set forth in the Subsequent Charter Amendment. (E) "PCS Group Common Stock" shall mean Series 1 PCS Stock, and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as the context requires. (F) "PCS Group Multiple" shall have the meaning set forth in Section 2(B). (G) "Recapitalization" shall mean the reclassification of each outstanding share of Sprint Common Stock into one share of Series 1 FON Stock and one-half of a share of Series 1 PCS Stock effected by filing of the Subsequent Charter Amendment. (H) "Restructuring and Merger Agreement" shall mean that certain agreement, dated as of May 26, 1998, by and among the Corporation, TeleCommunications, Inc., a Delaware corporation, Comcast Corporation, a Pennsylvania corporation, Cox Communications, Inc., a Delaware corporation, TCI Spectrum Holdings, Inc., a Colorado corporation, Comcast Telephony Services, a Delaware general partnership, Cox Telephony Partnership, a Delaware general partnership, Sprint Enterprises, L.P., a Delaware limited partnership, TCI Philadelphia Holdings, Inc., a Delaware corporation, Com Telephony Services, Inc., a Delaware corporation, Comcast Telephony Services, Inc., a Delaware corporation, Cox Telephony Partners, Inc., a Delaware corporation, Cox Communications Wireless, Inc., a Delaware corporation, SWV One, Inc., a Delaware corporation, SWV Two, Inc., a Delaware corporation, SWV Three, Inc., a Delaware corporation, SWV Four, Inc., a Delaware corporation, SWV Five, Inc., a Delaware corporation, and SWV Six, Inc., a Colorado corporation. (I) "Series 2 Common Stock" shall mean the Common Stock - Series 2, par value $2.50 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (J) "Series 1 FON Stock" shall mean the FON Common Stock - Series 1, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (K) "Series 2 FON Stock" shall mean the FON Common Stock - Series 2, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (L) "Series 3 FON Stock" shall mean the FON Common Stock - Series 3, par value $2.00 per share, of the Corporation, created by the filing of the Subsequent Charter Amendment. (M) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series 1, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (N) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series 2, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (O) "Series 3 PCS Stock" shall mean the PCS Common Stock - Series 3, par value $1.00 per share, of the Corporation, created by the filing of the Initial Charter Amendment. (P) "Sprint Common Stock" shall mean Common Stock, par value $2.50 per share, of the Corporation, as provided for in the Initial Charter Amendment. (Q) "Subsequent Charter Amendment" shall have the meaning set forth in the Restructuring and Merger Agreement. Seventh 1. In addition to any affirmative vote required by law or these Articles of Incorporation, and except as expressly provided in Section 2 of this ARTICLE SEVENTH, the affirmative vote of the holders of eighty (80) percent 79 of the outstanding shares of the Corporation entitled to vote in an election of Directors shall be required for the approval or authorization of any Business Combination (as hereinafter defined). 2. The provisions of Section 1 of this ARTICLE SEVENTH shall not be applicable if: A. The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined); provided, however, that such approval shall only be effective if obtained at a meeting of Directors at which at least seven Continuing Directors are present; or B. The Business Combination is a merger or consolidation and the cash or Fair Market Value (as hereinafter defined) of the property, securities or other consideration to be received per share by the stockholders of each class of stock of the Corporation in the Business Combination, if applicable, is not less than the highest per share price paid by the Interested Stockholder (as hereinafter defined), with appropriate adjustments for stock splits, stock dividends and like distributions, in the acquisition by the Interested Stockholder of any of its holdings of each class of the Corporation's capital stock. 3. For purposes of this ARTICLE SEVENTH: A. The term "Business Combination" means: (i) any merger or consolidation of the Corporation or any subsidiary of the Corporation with (a) any Interested Stockholder or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as defined on October 1, 1982 in Rule 12b- 2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of an Interested Stockholder; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any subsidiary of the Corporation that have an aggregate Fair Market Value of $1,000,000 or more; (iii) the issuance or transfer by the Corporation or any subsidiary of the Corporation (in one transaction or a series of transactions) of any securities of the Corporation or any subsidiary of the Corporation to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. B. The term "Continuing Director" means any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director if the successor is unaffiliated with the Interested Stockholder and is recommended or elected to succeed a Continuing Director by a majority of Continuing Directors, provided that such recommendation or election shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present. 80 C. The term "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-listed stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of Continuing Directors, provided that such determination shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present; or (ii) in the case of property or securities other than cash or stock, the fair market value of such property or securities on the date in question as determined in good faith by a majority of Continuing Directors, provided that such determination shall only be effective if made at a meeting of Directors at which at least seven Continuing Directors are present. D. The term "Interested Stockholder" means and includes, as of the date of any proposed Business Combination, any individual, corporation, partnership or other person or entity which, together with its "Affiliates" and "Associates" (as defined on October 1, 1982 in Rule 12b-2 under the Exchange Act), "Beneficially Owns" (as defined on October 1, 1982 in Rule 13d- 3 under the Exchange Act) in the aggregate ten percent or more of the outstanding shares of the Corporation entitled to vote in an election of Directors, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity. Eighth 1. Prevention of "Greenmail." Any direct or indirect purchase or other acquisition by this Corporation of any Equity Security (as hereinafter defined) of any class at a price above Market Price (as hereinafter defined) from any Interested Securityholder (as hereinafter defined) who has beneficially owned any Equity Security of the class to be purchased for less than two years prior to the date of such purchase or any agreement in respect thereof shall, except as hereinafter expressly provided, require the affirmative vote of the holders of at least a majority of the voting power of the then outstanding shares of capital stock of this Corporation entitled to vote generally in the election of directors (the "Voting Stock"), excluding Voting Stock beneficially owned by such Interested Securityholder, voting together as a single class (it being understood that for the purposes of this ARTICLE EIGHTH, each share of the Voting Stock shall have the number of votes granted to it pursuant to ARTICLE SIXTH of these Articles of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange, or otherwise, but (i) no such affirmative vote shall be required with respect to any purchase, redemption or other acquisition by this Corporation of capital stock from FT, DT, any Qualified Subsidiary or any Qualified Stock Purchaser pursuant to the provisions of the Investment Documents (as such term is defined in Section 10 of ARTICLE SIXTH of these Articles of Incorporation) or these Articles of Incorporation, (ii) no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of a tender or exchange offer by this Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations), and (iii) no such affirmative vote shall be required with respect to any purchase, redemption, conversion or other acquisition by this Corporation of Series 2 FON Stock or PCS Stock (as defined in ARTICLE SIXTH) from a holder thereof pursuant to the provisions of these Articles of Incorporation. 2. Certain Definitions. For the purposes of this ARTICLE EIGHTH: A. A "person" means any individual, firm, corporation or other entity. B. "Interested Securityholder" means any person (other than the Corporation or any corporation of which a majority of any class of Equity Security is owned, directly or indirectly, by the Corporation) who or which: 81 (i) is the beneficial owner, directly or indirectly, of 5% or more of the class of securities to be acquired; or (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 5% or more of the class of securities to be acquired; or (iii) is an assignee or has otherwise succeeded to any shares of the class of securities to be acquired which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Securityholder, if such assignment or succession shall have occurred in the course of a transaction or transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. C. A person shall be a "beneficial owner" of any security of any class of the Corporation: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) any right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any security of any class of the Corporation. D. For the purposes of determining whether a person is an Interested Securityholder pursuant to paragraph B of this Section 2, the relevant class of securities outstanding shall be deemed to comprise all such securities deemed owned through application of paragraph C of this Section 2, but shall not include other securities of such class which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on October 1, 1982. F. "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on January 1, 1985. G. "Market Price" means the highest closing sale price during the thirty-day period immediately preceding the date in question, of a share of any Equity Security on the Composite Tape for New York Stock Exchange issues or, if such Equity Security is not quoted on the Composite Tape or is not listed on such Exchange, on the principal United States security exchange registered under the Securities Exchange Act of 1934, as amended, on which such Equity Security is listed, or, if such Equity Security is not listed on any such exchange, the highest closing bid quotation with respect to a share of such Equity Security during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such Equity Security. 3. Compliance. The Board of Directors of the Corporation shall have the power to determine the application of, or compliance with, this ARTICLE EIGHTH, including, without limitation: (i) whether a person is an Interested Securityholder; (ii) whether a person is a beneficial owner of any Equity Security; and (iii) the Market Price of any Equity Security. Any decision or action taken by the Board of Directors arising out of or in connection with the 82 construction, interpretation and effect of this ARTICLE EIGHTH shall lie within its absolute discretion and shall be conclusive and binding, except in circumstances involving bad faith. Ninth No Director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty by such Director as a Director; provided, however, that this ARTICLE NINTH shall not eliminate or limit the liability of a Director to the extent provided by applicable law (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 51 of the General Corporation Code of the State of Kansas, or (iv) for any transaction from which the Director derived an improper personal benefit. No amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect on the liability or alleged liability of any Director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal. 83 EX-10 4 forseeagree10c.txt EMPLOYEE AGREEMENT - GARY FORSEE 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 Gary D. Forsee ("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. 3 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 4 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 5 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 6 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. 7 (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 4179 Randall Court, Atlanta, GA 30327 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 8 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: 9 (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 10 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. 11 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 12 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 sue 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 sue 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: 6200 Sprint Parkway Overland Park, KS 66251 Fax: Attn: General Counsel Copies to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Fax: 212-450-4800 Attn: Lewis B. Kaden if to Executive, to Executive's last known address as reflected on the books and records of the Company Copies to: Heller Ehrman White & McAuliffe LLP 333 Bush Street San Francisco, CA 94104 Fax: 415-772-6268 Attn: Victor A. Hebert 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. 28 "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. 30 "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. 34 IN WITNESS WHEREOF, the Company and Executive have executed this Agreement, to be effective as set forth in Section 1.01. SPRINT CORPORATION /s/ Gary D. Forsee By: /s/ J. Richard Devlin Gary D. Forsee Name: J. Richard Devlin 3/19/03 Title: EVP-General Counsel & External Affairs SPRINT/UNITED MANAGEMENT COMPANY By: /s/ J. Richard Devlin Name: J. Richard Devlin 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 EX-10 5 lemayseparagree10d1.txt RON LEMAY SEPARATION AGREEMENT Exhibit 10(d) April 9, 2003 Mr. Ronald T. LeMay 1025 West 54th Street Kansas City, MO 64112 Dear Ron: As we have discussed, I am appreciative of your willingness to provide consulting services to the Company and I look forward to being able to call upon you during the next year. This letter sets forth the terms and conditions on which we have agreed that you will provide such consulting services. Unless otherwise defined herein, capitalized terms will have the meanings accorded such terms in the Separation Agreement dated as of April 9, 2003 among Sprint Corporation, Sprint/United Management Company and you (the "Separation Agreement"). 1. You agree to provide consulting services to the Company as reasonably requested by Sprint's Chief Executive Officer during the 12-month period beginning on the Effective Date (the "Consulting Period"). 2. In consideration of such agreement, during the Consulting Period the Company shall pay to you a monthly consulting fee of $190,400, payable in arrears and shall make available to you Office Support. You will perform such consulting services as an independent contractor and shall be responsible for paying all required withholdings and taxes in respect of such consulting fees. The Company's obligations hereunder shall terminate in the event that during the Consulting Period you breach any of the Restrictive Covenants or engage in any Restricted Activity. 3. You agree to observe the Restrictive Covenants during the Consulting Period and to use reasonable efforts to cause your associates and agents to comply with confidentiality provisions consistent with those contained in Section 4(a) of the Separation Agreement. 4. All disputes, claims or controversies arising under or in connection with this Letter Agreement shall be resolved in the same manner as provided in Section 7 or 11, as the case may be, of the Separation Agreement. Please indicate your acceptance of the foregoing terms and conditions by executing both copies of this Letter Agreement in the space indicated below and return one copy to the undersigned, retaining the other copy for your records. Agreed: /s/ Ronald T. LeMay Ronald T. LeMay Sprint Corporation By: /s/ Gary D. Forsee Name: Gary D. Forsee Title: Chief Executive Officer Sprint/United Management Company By: /s/ Claudia S. Toussaint Name: Claudia S. Toussaint Title: Vice President - Law 2 SEPARATION AGREEMENT THIS SEPARATION AGREEMENT (this "Agreement"), dated as of April 9, 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 the subsidiaries of Sprint are collectively referred to herein as the "Company"), and RONALD T. LeMAY (the "Executive"). Certain capitalized terms used herein are defined in Section 8 of this Agreement. Recitals WHEREAS, the Company and Executive have previously entered into an Employment Agreement dated as of February 26, 2001 (the "Prior Agreement"); WHEREAS, Executive has been serving as the President and Chief Operating Officer of Sprint and a member of its Board of Directors (the "Board"); WHEREAS, the Company and Executive have agreed as hereinafter set forth with respect to Executive's resignation of employment with the Company and from the Board; WHEREAS, in furtherance of the foregoing, the Company and Executive have determined that this Agreement shall supersede and replace the Prior Agreement in all respects; WHEREAS, the Company and Executive have agreed as set forth herein with respect to his compensation in connection with his resignations; WHEREAS, in consideration for the respective benefits to be received by the parties under this Agreement, (i) Executive desires to release the Company from certain current and potential liabilities, and (ii) the Company desires to release Executive from certain current and potential liabilities, all as set forth herein; NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which consideration are mutually acknowledged by the parties, the parties hereby agree as follows: 1. RESIGNATIONS. Executive hereby resigns as an employee and officer of the Company and as a member of the Board, in each case effective as of the Effective Date. Executive further agrees to execute all documents that are reasonably necessary to implement such resignations, provided that all such documents are consistent with the terms and conditions of this Agreement and do not impose any greater duties or obligations on Executive than those contemplated by this Agreement. 2. SEPARATION BENEFITS In consideration of Executive's agreements hereunder, the Company further agrees to make the payments and provide the benefits set forth in this Section 2 (the "Separation Benefits"). Except as expressly provided herein, the Separation Benefits supersede and replace any and all benefits to which Executive might otherwise be or become entitled under the Company's compensation and employee benefit plans (including severance plans and arrangements) and the Prior Agreement, other than benefit plans subject to Section 401(a) of the Code. Executive's rights with respect to any compensation previously deferred by him shall be governed by the terms and conditions of any such deferral and neither Executive's termination of employment nor anything provided in this Agreement shall cause a forfeiture of Executive's rights to such deferred compensation. (a) Accrued Obligations. Within ten business days after the Effective Date, the Company will pay Executive's accrued and unpaid base salary and accrued and unused vacation days, all through the Effective Date (subject to applicable withholdings). In addition, in accordance with the Company's policies and procedures, the Company shall promptly reimburse Executive for eligible business expenses incurred by him on or before the Effective Date. (b) Compensation Continuation; Pro-Rata Bonus. (i) The Company will pay Executive for the eighteen month period commencing on the Effective Date (the "Payment Period") compensation continuation payable in eighteen equal monthly installments of $190,400, commencing on the last day of the month in which the Effective Date occurs in accordance with the normal payroll practices of the Company ("Continuation Benefits"); provided that if the Effective Date is other than the first day of a month, the first installment shall be pro-rated and the Company shall make a 19th pro-rated installment. (ii) Executive shall be entitled to a bonus for 2003 under the Short-Term Incentive Plan of $322,500, payable in a lump sum at the time bonuses for 2003 are otherwise payable under the Short-Term Incentive Plan. (c) Stock Options. The Options granted to Executive pursuant to Section 2(b) of the Prior Agreement shall become immediately exercisable on the Effective Date. All other Options held by Executive on the Effective Date shall continue to vest during the Payment Period. Subject to the provisions of this Section 2(c), all Options shall be governed following the Effective Date pursuant to the terms thereof and the applicable plan pursuant to which such Options were 2 granted. For the avoidance of doubt but subject to Section 2(h)(i), for purposes of computing the post-employment exercise period of the Options the last day of the Payment Period shall be deemed Executive's employment termination date. (d) Retirement Benefits. (i) Executive's benefit under the Retirement Plan shall be calculated deeming the Payment Period to constitute credited service and treating the Continuation Benefits payable under Section 2(b) as "Covered Compensation", for all purposes under the Retirement Plan. (ii) Executive may elect to begin payment of benefits under the Retirement Plan at any time after the Effective Date, giving effect to the deemed credited service and Covered Compensation provisions of Section 2(d)(i) above, without any further actuarial reduction to reflect payments commencing prior to the end of the Payment Period. (iii) In the event that Section 2(h)(i)(y) is triggered by reason of Executive's breaching any Restrictive Covenant, the Retirement Plan benefits then remaining payable to Executive shall be reduced to the extent necessary to effectuate such provision. The determination of such reduction shall be performed by the Company's pension actuaries at the time of such calculation, using the actuarial assumptions contained in the Company's tax-qualified defined benefit pension plan, and shall be binding on the parties hereto. (e) Key Management Benefit Plan. Executive shall be entitled to participate in the KMBP on the terms thereof, deeming the Payment Period to constitute credited service and treating the Continuation Benefits as covered compensation for KMBP purposes. Executive will be eligible for early retirement under the KMBP at the end of the Payment Period. (f) Certain Welfare Benefits. During the Payment Period, the Company shall continue to provide on the same basis the medical, dental and life insurance benefits that Executive was receiving or was entitled to receive as of the Effective Date; provided, however, that if Executive becomes employed on a full-time basis during the Payment Period, Executive's entitlement to benefit continuation under this Section 2(f) shall immediately cease, subject to Executive's rights to COBRA continuation coverage under the Company's welfare benefit plans by paying the applicable premium therefor. (g) Certain Perquisites. (i) During the Payment Period, Executive shall be entitled to receive all perquisites that Executive was entitled to receive on the Effective Date (including automobile allowance, communications services and all miscellaneous services other than country club membership dues and accrual of vacation). 3 (ii) During the Payment Period, the Company will provide out placement counseling by a firm selected by the Company, which payments shall cease upon the earlier of (x) Executive's becoming re-employed and (y) the end of the Payment Period. (iii) The Company shall provide Executive with Office Support for the six-month period beginning on the 365th day following the Effective Date; provided, however, that if Executive becomes employed on a full- time basis during the Payment Period, Executive's right to Office Support shall immediately cease. (h) Benefits to Cease upon Breach of Restrictive Covenants or Engaging in Restricted Activities. In all events, (i) if Executive breaches any of the Restrictive Covenants then, notwithstanding anything herein to the contrary, (x) Executive shall immediately cease to have any rights to: (A) the Continuation Benefits; (B) the Options granted to Executive pursuant to Section 2(b) of the Prior Agreement and all other Options not vested on the Effective Date shall immediately terminate and be cancelled; and (C) the benefits to be provided or paid to Executive, as the case may be, under Sections 2(f) (except with respect to COBRA continuation coverage) and (g) hereof and (y) Executive's benefit under the Retirement Plan will be reduced to recapture the benefit provided to Executive under Section 2(d)(ii) (for the avoidance of doubt, such recaptured benefit means the absence of any further actuarial reduction in connection with the commencement of Pension Plan benefits prior to the end of the Payment Period and does not mean (x) benefits accrued under the Retirement Plan through the Effective Date, (y) Executive's Mid-Career Pension Enhancement and (z) the credits accorded under Section 2(d)(i)); and (ii) Executive's right to receive the Separation Benefits, other than the Separation Benefits set forth in Sections 2(c), (d) and (e) above, shall immediately cease if Executive engages in any Restricted Activity; provided that prior to any such cessation under (i) or (ii) above of any Separation Benefits there shall have been delivered to Executive a written notice from the Board of its intent to cease payment or provision of such Separation Benefits accompanied by a written statement setting forth in reasonable detail the grounds for such cessation, together with an opportunity for Executive, with Executive's counsel, to be heard before the Board in response to such notice and statement. In all cases, the Company's rights under Section 7(a) shall continue. (i) The Company shall reimburse Executive for reasonable legal and other professional fees and expenses incurred by him in connection with the negotiation and execution of this Agreement in an aggregate amount not to exceed $150,000. (j) Other Provisions Regarding Payments and Benefits. (i) Executive shall be under no obligation to seek other employment and, except as expressly provided herein, there shall be no offset against amounts due Executive under this 4 Agreement on account of any remuneration attributable to any subsequent employment that he may obtain. (ii) If, for any period during which Executive is entitled to continued benefits under this Section 2, the Company reasonably determines that Executive cannot participate in any Company sponsored welfare benefit plan because he is not actively performing services for the Company, then, in lieu of providing benefits under such plan the Company shall provide comparable benefits or the cash equivalent of the cost thereof (increased, on a fully tax-adjusted basis, by the amount of all incremental employment and income taxes incurred by Executive and Executive's dependents as the case may be) to Executive and, if applicable, Executive's dependents through other arrangements. 3. RELEASE AND WAIVER OF CLAIMS. (a) In exchange for this Agreement, Executive (on behalf of Executive and anyone claiming through or on behalf of Executive), releases the Company and each of the Company's subsidiaries and other Affiliates (as the term "Affiliates" is defined by Rule 12b-2 under the Exchange Act), its and their successors and assigns, and all of their past and present employees, officers, directors and stockholders (the "Company Group"), and their agents and attorneys from any and all claims and potential claims, whether known or unknown and whether or not matured or contingent, demands and causes of action Executive has or may have had against any of them arising out of, related to or concerning Executive's service or employment with the Company and the termination thereof, including claims not currently known to or contemplated by the parties, to the maximum extent permitted by law. This release includes, but is not limited to, any and all claims, demands and causes of action which are related to or concern: the Prior Agreement; service as a director or officer of the Company; Executive's acquisition or ownership of Company securities or options thereon; Executive's employment and the prospective termination thereof as contemplated hereby; Tax Liabilities; attorneys' fees or costs; discrimination under local, state or federal law; the Missouri Service Letter Statute; the Age Discrimination in Employment Act; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Americans With Disabilities Act; the Employee Retirement Income Security Act; the Family and Medical Leave Act; severance pay; tort claims including invasion of privacy, defamation, fraud and infliction of emotional distress; disputed wage claims; and all other claims, demands, and causes of action, whether they arise in the United States of America or elsewhere, to the maximum extent permitted by law. This release does not apply to (i) any rights or benefits as set forth in this Agreement, (ii) any rights to indemnification to which Executive is 5 entitled under the Company's Certificate of Incorporation, Bylaws, the Indemnification Agreement or any other applicable agreement now in effect relating to directors' and officers' liability or (iii) any claims Executive may have against any parties other than the Company Group related to or arising out of any Tax Liabilities, tax planning, tax preparation or any personal financial advice. (b) In exchange for this Agreement, the Company (on behalf of the Company and the Company's subsidiaries and other Affiliates, their successors and assigns and anyone claiming through or on behalf of the Company or any of the Company's subsidiaries or other Affiliates, their successors and assigns) releases Executive, Executive's heirs, executors, personal representatives, attorneys, agents, successors and assigns, from any and all claims and potential claims, known or unknown and whether or not matured or contingent, demands and causes of action which they have or may have had against Executive or them arising out of, related to or concerning Executive's service or employment with the Company and the termination thereof, including claims, demands and causes of action not currently known or contemplated by the parties, in each case, to the maximum extent permitted by law. This release includes, but is not limited to, any and all claims, demands and causes of action which are related to or concern: Executive's service as a director or officer of the Company; Executive's acquisition or ownership of the Company's securities or options thereon; the Prior Agreement; and Executive's employment and the prospective termination thereof as contemplated hereby, except that this Release does not release Executive from the obligation to comply with Executive's other obligations under this Agreement. This release does not apply to any claim, right or cause of action that is (i) asserted in, relates to or arises from the subject matter at issue in, the derivative action styled Amalgamated Bank v. LeMay, et al., No. 00-CV- 230077 (such subject matter, the "Issues") or (ii) related to any Tax Liabilities, all of which claims, rights or causes of action are expressly preserved. 4. EXECUTIVE COVENANTS (a) Proprietary Information. Executive acknowledges that during the course of his employment he has learned or developed Proprietary Information. Executive further acknowledges that unauthorized disclosure or use of such Proprietary Information will cause the Company irreparable harm. Except as otherwise required by the Company, Executive shall not at any time following the date hereof directly or indirectly, disclose, publish, communicate, or use on his behalf or another's behalf any Proprietary Information. If Executive has any 6 questions about whether particular information is Proprietary Information he shall consult with the Company's General Counsel. (b) Inducement of Employees, Customers and Others. During the Restricted 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. (c) No Adverse Actions. During the Restricted 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 (i) undertake any action that would be reasonably likely to, or is intended to, result in a change in control of the Company or (ii) seek to control in any material manner the Board. (d) Return of Property. Executive shall, within five business days following his Effective 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. (e) Mutual Nondisparagement. Executive agrees to refrain from making at any time after the date hereof 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 at any time after the date hereof any statements about Executive that would disparage, or reflect unfavorably upon the image or reputation of the Executive. Notwithstanding the foregoing, (i) no statement made by either party in the context of any legal proceeding or relating to the Issues shall be deemed to violate the provisions of this Section 4(e) and (ii) subject to (i), all communications relating to the termination of Executive's 7 employment with the Company shall be consistent with the draft statement previously provided to Executive by the Company. (f) Assistance with Claims. Executive agrees that, consistent with Executive's business and personal affairs, he will assist the Company in the defense of any claims or potential claims that are pending or 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, to promptly 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 and shall pay a reasonable per diem fee of $3,980 for Executive's services. (g) Tax Considerations. Executive acknowledges that no representations have been made to him by the Company or its Affiliates or their agents or legal counsel regarding the tax implications of any payments made pursuant to this Agreement. All liability for Executive's share of federal, state, and local taxes (including FICA) remains with Executive, unless otherwise agreed to in writing by the Company, and the Company shall deduct withholdings in the minimum amount required under applicable tax laws, rules or regulations from the consideration payable under this Agreement. (h) Limitation to Restricted Activities and Restricted Covenants. The provisions of this Agreement regarding Restricted Activities and Restrictive Covenants shall supersede and control over all covenants, restrictions and other limitations (and the remedies for a violation thereof), under any plan, program or policy of the Company in which Executive is a participant or any grant, award or agreement between the Company and Executive, on Executive's activity after the Effective Date (including, without limitation, noncompetition covenants and covenants of a nature set forth in Section 4(a) though Section 4(f) hereof). 8 5. NO ADMISSION OF WRONGDOING. This Agreement is not an admission of wrongdoing or liability by Executive, the Company, or any of the individuals or entities referenced in Section 3, above and any and all such wrongdoing or liability is expressly denied. Further, neither the existence of this Agreement nor the terms and conditions hereof should be deemed or construed as a conclusion that Executive has engaged in any wrongdoing. 6. LATE PAYMENTS If the Company fails to pay any amounts due to Executive under this Agreement as they come due, the Company agrees to pay interest on such amounts at the Applicable Federal Rate plus two (2%) percent per annum. 7. ENFORCEMENT AND REMEDIES (a) Equitable Remedies. Executive acknowledges that the Company would be irreparably injured by a violation of any of the covenants contained in Sections 4(a), (b), (c), (e) and (f) (the "Restrictive Covenants") and he agrees that the Company, in addition to any other remedies available to it for any such breach or threatened breach, shall be entitled to a preliminary or permanent injunction, temporary restraining order, or other equivalent relief, restraining Executive from any actual or threatened breach of any of the Restrictive Covenants. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. (b) Resolution of Disputes. Section 11 notwithstanding, all disputes, claims, or controversies arising under or in connection with this Agreement, other than those contemplated by Section 7(a) above, 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. 9 (c) Attorney Fees. If either party seeks to enforce this Agreement and prevails on the merits, the losing party agrees to pay to the prevailing party all reasonable legal fees and expenses incurred by the prevailing party in seeking such enforcement. Such payments shall be made within five days after the prevailing party's request for payment accompanied by such evidence of fees and expenses incurred as the losing party reasonably may require. 8. DEFINITIONS As used in the Agreement, the following terms shall have the meanings set forth below. "Affiliate" has the meaning accorded such term in Section 3. "Agreement" has the meaning accorded such term in the introductory paragraph of this Agreement. "Applicable Federal Rate" means the applicable Federal rate within the meaning of Section 7872 of the Code. "Board" has the meaning accorded such term in the Recitals. "Code" means the Internal Revenue Code of 1986, as amended, and references to sections of the Code include any successor provision. "Company" has the meaning accorded such term in the introductory paragraph of this Agreement. "Company Group" has the meaning accorded such term in Section 3. "Competitor" means each of the entities set forth on Schedule A hereto. "Continuation Benefits" has the meaning accorded such term in Section 2. "Covered Compensation" has the meaning accorded such term in Section 2. "Effective Date" has the meaning accorded such term in the introductory paragraph of this Agreement. "Exchange Act" means the Securities Exchange of 1934, as amended. "Executive" has the meaning accorded such term in the introductory paragraph of this Agreement. 10 "FON Common Stock" means Sprint's FON Common Stock, Series 1, $2.00 par value per share. "Indemnification Agreement" means that certain Indemnification Agreement dated April 14, 1987 between United Telecommunications, Inc., a Kansas corporation and a predecessor of the Company, and Executive. "Issues" has the meaning accorded such term in Section 3. "KMBP" means the Company's Key Management Benefit Plan. "Office Support" means the continued administrative services of Executive's current administrative assistant (or, if such administrative assistant is unavailable, another such individual having comparable skills and experience who is reasonably acceptable to Executive) and a monthly office allowance of $2,500. "Options" means all of the options previously granted to Executive to purchase shares of FON Common Stock and PCS Common Stock under any of Sprint's stock option plans or programs. "Payment Period" has the meaning accorded such term in Section 2. "PCS Common Stock" means the Sprint's PCS Common Stock, Series 1, $1.00 par value per share. "Person" means an individual, corporation, partnership, association, trust or any other entity or organization. "Proceeding" has the meaning accorded such term in Section 4. "Prior Agreement" has the meaning accorded such term in the Recitals. "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 and is useful or 11 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 (ii) has been identified to Executive as confidential by the Company, either orally or in writing. "Restricted Activities" means, during the Restricted Period, Executive's becoming associated with a Competitor, whether paid or unpaid and whether as a consultant, employee, or otherwise. "Restricted Period" means the eighteen month period beginning on the Effective Date. If Executive breaches or violates any of the covenants or provisions of this Agreement, the running of the Restricted Period shall be tolled during the period the breach or violation continues. "Retirement Plan" means the Sprint Supplemental Executive Retirement Plan. "Restrictive Covenants" has the meaning accorded such term in Section 7. "Separation Benefits" has the meaning accorded such term in Section 2. "Short-Term Incentive Plan" means the Company's Management Incentive Plan. "SPRINT" has the meaning accorded such term in the introductory paragraph of this Agreement. "SUMC" has the meaning accorded such term in the introductory paragraph of this Agreement. "Tax Liabilities" means any federal, state or local taxes, including income and withholding taxes and interest and penalties thereon, relating to any compensation paid or deemed paid by the Company or any of its Affiliates to Executive. 9. ASSIGNABILITY, BINDING NATURE This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs (in the case of Executive), and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred to any subsidiary of Sprint or pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, but only if the assignee or transferee becomes the successor to all or substantially all of the 12 assets of the Company and assumes the liabilities, obligations, and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it will take whatever action it legally can in order to cause the assignee or transferee to expressly assume the liabilities, obligations, and duties of the Company hereunder. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only in connection with Executive's estate planning objectives or by will or operation of law. 10. AMENDMENT This Agreement may be amended, modified, or canceled only by mutual agreement of the parties in writing. 11. APPLICABLE LAW The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Kansas, without regard to the conflict of law provisions of any state. 12. SEVERABILITY The various provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations. If any provision of this Agreement is determined to be invalid, illegal, or incapable of being enforced, in whole or in part, it shall not affect or impair the validity of any other provision or part of this Agreement, and the provision or part shall be deemed modified to the minimum extent required to permit enforcement. Upon such a determination that any term or other provision is invalid, illegal, or incapable of being enforced, the court or arbitrator, as applicable, shall have the authority to so modify the provision or term. If such provision or term is not modified by the court or arbitrator, the parties must negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions of this Agreement are preserved to the greatest extent possible. 13. WAIVER OF BREACH No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by the other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent 13 time. The failure of either party to take any action by reason of such breach will not deprive the party of the right to take action at any time while the breach continues. 14. NOTICES Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice): If to the Company: 6200 Sprint Parkway KSOPHF0410-4A203 Overland Park, KS 66251 Fax: 913-794-1436 Attn: General Counsel Copies to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Fax: 212-450-4800 Attn: Lewis B. Kaden If to Executive: 1025 West 54th Street Kansas City, MO 64112 Fax: 816-523-5581 Attn: Ronald T. LeMay Copies to: Vedder, Price, Kaufman & Kammholz 222 North LaSalle Street Chicago, IL 60601 Fax: 312-609-5005 Attn: Robert J. Stucker Each party, by written notice furnished to the other party, may modify the applicable delivery address, but any notice of change of address shall be effective only upon receipt. Such notices, demands, claims and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; or in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail, but in no event will any such communications be deemed to be given later than the date they are actually received. 14 15. ENTIRE AGREEMENT Except as otherwise noted herein, this Agreement constitutes the entire agreement between the parties concerning the subject matter specifically addressed herein and, except for the terms and provisions of any other employee benefit or other compensation plans (or any agreements or awards thereunder) referred to herein or contemplated hereby, this Agreement supersedes all prior and contemporaneous oral agreements, if any, between the parties relating to the subject matter specifically addressed herein including, without limitation, the Prior Agreement among the Company and Executive, but excluding the Retirement Plan except to the extent specifically provided in Sections 2(d) and (h) and the Letter Agreement, dated as of the Effective Date. The Indemnification Agreement shall survive the termination of Executive's employment and the termination of the Prior Agreement hereunder. 16. HEADINGS The headings in this Agreement are for convenience of reference only and will not affect the construction of any of its provisions. 17. COUNTERPARTS This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. [SIGNATURE PAGE FOLLOWS] 15 IN WITNESS WHEREOF, the Company and Executive have executed this Agreement, to be effective as of the date first set forth above. SPRINT CORPORATION /s/ Ronald T. LeMay Ronald T. LeMay By: /s/ Gary D. Forsee Name: Gary D. Forsee Title: Chief Executive Officer SPRINT/UNITED MANAGEMENT COMPANY By: /s/ Claudia S. Toussiant Name: Claudia S. Toussaint Title: Vice President - Law 16 Schedule A Alltel Corporation AOL Time Warner Inc. AT&T Corp. AT&T Wireless Services BellSouth Corporation Broadwing Inc. BT Group plc Cable and Wireless plc CenturyTel, Inc. Cingular Wireless LLC Citizens Communications Comcast Corporation Cox Communications, Inc. Deustche Telekom AG Everest Connections Corporation France Telecom McLeodUSA Incorporated Level 3 Communications, Inc. Nextel Communications, Inc. Qwest Communications Int. Rogers Communications SBC Communications Inc. T-Mobile USA, Inc. U.S. Cellular Verizon Communications Inc. Vodafone Group plc WorldCom Inc. XO Communications, Inc. EX-10 6 indemnagree10e.txt INDEMNIFICATION AGREEMENT Exhibit 10(e) INDEMNIFICATION AGREEMENT THIS AGREEMENT is made this day of _______, 2003, between Sprint Corporation, a Kansas corporation ("Sprint"), and ______________ (the "Indemnitee"). WHEREAS, it is important to Sprint to attract and retain as directors and officers the most capable persons available; and WHEREAS, the Bylaws of Sprint (the "Bylaws") provide for the indemnification of the officers, directors, agents and employees of the corporation as authorized by K.S.A. 17-6305 (the "State Statute"); and WHEREAS, such Bylaws and the State Statute specifically provide that they are not exclusive, and thereby contemplate that contracts may be entered into between Sprint and its directors and officers with respect to indemnification of such directors and officers; and WHEREAS, in accordance with the authorization provided by the State Statute and the Bylaws, Sprint has purchased and presently maintains a policy or policies of Directors and Officers Liability Insurance ("D & O Insurance"), covering certain liabilities which may be incurred by its directors and officers in the performance of their services for Sprint; and WHEREAS, recent developments with respect to the terms and availability of D & O Insurance and with respect to the application, amendment and enforcement of statutory and bylaw indemnification provisions generally have raised questions concerning the adequacy and reliability of the protection afforded to directors and officers thereby; and WHEREAS, in order to resolve such questions and thereby induce the Indemnitee to agree to serve or continue to serve as a director and/or officer of Sprint, Sprint has determined and agreed to enter into this contract with the Indemnitee; NOW, THEREFORE, in consideration of the premises and of Indemnitee's agreeing to serve or continuing to serve as a director and/or officer of Sprint, the parties hereto agree as follows: l. Indemnity. Sprint hereby agrees to hold harmless and indemnify the Indemnitee to the full extent permitted by law: 1 a. Against any and all expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which the Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the Indemnitee is, was or at any time becomes a director, officer, employee, agent or fiduciary of Sprint or by reason of anything done or not done by Indemnitee in any such capacity, whether prior to or subsequent to the date of this Agreement; and b. Against any and all expenses (including attorneys' fees) actually and reasonably incurred by the Indemnitee in serving or preparing to serve as a witness or other participant in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, if Indemnitee is such a witness or participant by reason of the fact that the Indemnitee is, was or at any time becomes a director, officer, employee, agent or fiduciary of Sprint. 2. Specific Limitations on Indemnity. Indemnitee shall not be entitled to indemnification under this Agreement: a. In respect to remuneration paid to or advantage gained by the Indemnitee if it shall be determined by a final judgment or other final adjudication that the Indemnitee was not legally entitled to such remuneration or advantage; b. On account of the Indemnitee's conduct which is finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct; c. Prior to a Change in Control (as defined in Section 4(d)), in respect of any action, suit or proceeding initiated by the Indemnitee against Sprint or any director or officer of Sprint unless Sprint has joined in or consented to the initiation of such action, suit or proceeding, except (i) as set forth in Section 12(b) hereof, (ii) in respect of any counterclaims made against Indemnitee in any such action, suit or proceeding, and (iii) to the extent Indemnitee seeks contribution or apportionment of an award or settlement against Indemnitee and against Sprint and/or any other director or officer of Sprint. 3. Advance of Expenses and Payment of Indemnification. Upon the written request of Indemnitee, expenses that are subject to indemnification under this Agreement shall be advanced by Sprint within five business days of receipt of such request. Subject to Section 4(a), indemnification shall be made under this Agreement no later than sixty (60) days after receipt by Sprint 2 of the written request of Indemnitee, which written request shall identify the expenses, judgments, fines and amounts paid in settlement for which indemnification is requested. Written request shall be deemed received three days after the date postmarked if sent by prepaid mail properly addressed to Sprint at the address set forth in Section 11 hereof. 4. Determination of Indemnification. a. Subject to Section 12, (i) the obligations of Sprint under Section 1 shall be subject to the condition that the Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel makes the determination under this Section 4) that Indemnitee would be permitted to be indemnified under applicable law, and (ii) the obligation of Sprint to make an expense advance pursuant to Section 3 shall be subject to the condition that, if, when and to the extent that it is finally determined that Indemnitee would not be permitted to be indemnified for such expenses under applicable law, Sprint shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse Sprint) for all such amounts theretofore paid. Indemnitee's obligation to reimburse Sprint for expense advances shall be unsecured and no interest shall be charged thereon. b. If there has not been a Change in Control or if there has been a Change in Control which has been approved by a majority of Sprint's Board of Directors who were directors immediately prior to such Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been a Change in Control (other than a Change in Control which has been approved by a majority of Sprint's Board of Directors who were directors immediately prior to such Change in Control) the Reviewing Party shall be the Independent Legal Counsel referred to in Section 4(c). If there has been no determination by the Reviewing Party within the sixty (60) day period referred to in Section 3, the Reviewing Party shall be deemed to have made a determination that it is permissible to indemnify Indemnitee under applicable law. c. Sprint agrees that if there is a Change in Control of Sprint (other than a Change in Control which has been approved by a majority of Sprint's Board of Directors who were directors immediately prior to such Change in Control) then Independent Legal Counsel shall be selected by Indemnitee and approved by Sprint (which approval shall not be unreasonably withheld) and such Independent Legal Counsel shall determine whether the Indemnitee is entitled to indemnification under this Agreement or any other agreement or Articles of Incorporation or Bylaws of Sprint now or hereafter in effect relating to indemnification. If Independent Legal Counsel is making the determination under this Section 4, such Independent Legal Counsel shall render its 3 written opinion to Sprint and Indemnitee as to whether and to what extent the Indemnitee will be permitted to be indemnified. Sprint agrees to pay the reasonable fees of the Independent Legal Counsel and to indemnify fully such Independent Legal Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of Independent Legal Counsel pursuant hereto. d. "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of Sprint or a corporation owned directly or indirectly by the stockholders of Sprint in substantially the same proportions as their ownership of stock of Sprint, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Sprint representing 20% or more of the total voting power represented by Sprint's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Sprint and any new director whose election by the Board of Directors or nomination for election by Sprint's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of Sprint approve a merger or consolidation of Sprint with any other corporation, other than a merger or consolidation which would result in the Voting Securities of Sprint outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of Sprint or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of Sprint approve a plan of complete liquidation of Sprint or an agreement for the sale or disposition by Sprint (in one transaction or a series of transactions) of all or substantially all the assets of Sprint. "Reviewing Party" shall mean any appropriate person or body consisting of a member or members of the Board of Directors of Sprint or any other person or body appointed by the Board who is not a party to the particular action, suit or proceeding for which Indemnitee is seeking indemnification, or Independent Legal Counsel. "Independent Legal Counsel" shall mean an attorney, selected in accordance with the provisions of Section 4, who shall not have otherwise performed services for Sprint or Indemnitee within 4 the last five years (other than in connection with seeking indemnification under this Agreement). Independent Legal Counsel shall not be any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either Sprint or Indemnitee in an action to determine Indemnitee's rights under this Agreement, nor shall Independent Legal Counsel be any person who has been sanctioned or censured for ethical violations of applicable standards of professional conduct. "Voting Securities" shall mean any securities of Sprint which vote generally in the election of directors. 5. Partial Indemnity; Expenses. If the Indemnitee is entitled under any provision of this Agreement to indemnification by Sprint for some or a portion of the expenses, judgments, fines, penalties and amounts paid in settlement incurred by the Indemnitee, but not for the total amount thereof, Sprint shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all actions, suits or proceedings relating in whole or in part to an event subject to indemnification hereunder or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against expenses incurred in connection with such action, suit, proceeding, issue or matter, as the case may be. 6. Non-exclusivity. The rights of the Indemnitee under this Agreement shall be in addition to any other rights Indemnitee may have under the Articles of Incorporation or the Bylaws of Sprint, the Kansas General Corporation Code or otherwise. To the extent that a change in the Kansas General Corporation Code (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Articles of Incorporation and the Bylaws of Sprint and this Agreement, it is the intent of the parties hereto that Indemnitee shall by this Agreement be entitled to the greater benefits so afforded by such change. 7. Liability Insurance. To the extent Sprint maintains D & O Insurance, Sprint shall maintain coverage for Indemnitee under such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage provided under such policy or policies in effect for any other director or officer of Sprint. 8. No Duplication of Payments. Sprint shall not be liable under this Agreement to make any payment in connection with any claim against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable 5 hereunder or to the extent that Indemnitee is entitled to be indemnified directly by any insurance company under the individual directors' and officers' liability provisions of any D & O Insurance maintained by Sprint. 9. No Presumption. For purposes of this Agreement, the termination of any claim, action, suit or proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not of itself create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 10. Continuation of Indemnity. All agreements and obligations of Sprint contained herein shall continue during the period the Indemnitee is a director, officer, employee, agent or fiduciary of Sprint and shall continue thereafter so long as the Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative, by reason of the fact that the Indemnitee was a director or officer of Sprint or serving in any other capacity referred to herein. 11. Notification of Proceedings; Consent to Settlements. Promptly after receipt by the Indemnitee of notice of the commencement of any action, suit or proceeding, the Indemnitee shall, if a claim in respect thereof is to be made against Sprint under this Agreement, notify Sprint of the commencement thereof. Notice shall be in writing and shall be addressed as follows: Sprint Corporation P.O. Box 11315 Kansas City, Missouri 64112 Attention: General Counsel Notice shall be deemed received if sent by prepaid mail properly addressed. Indemnitee and Sprint shall cooperate fully with each other in the defense of any such action, suit or proceeding and each shall provide the other with such information as the other may reasonably require. Sprint shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent (which consent shall not be unreasonably withheld). 12. Enforcement. a. Sprint expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce the Indemnitee to agree to serve 6 or to continue to serve as a director and/or officer of Sprint and acknowledges that the Indemnitee is relying upon this Agreement in agreeing to serve or continuing to serve in such capacity. b. The right to indemnification provided by this Agreement shall be enforceable by Indemnitee in any court in the State of Kansas having subject matter jurisdiction thereof and in which venue is proper. The Indemnitee shall have the right to commence litigation in any such court challenging any determination by the Reviewing Party or any aspect thereof, or the legal or factual bases therefor. Sprint shall reimburse Indemnitee for any and all reasonable expenses (including attorneys' fees) incurred by Indemnitee in connection with any claim asserted or action brought by Indemnitee to enforce rights or to collect moneys due under this Agreement, the Articles of Incorporation or the Bylaws of Sprint or any other agreement with Sprint now or hereafter in effect relating to indemnification, or any D & O Insurance purchased and maintained by Sprint, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance coverage, as the case may be, unless the court determines that the claim or action is frivolous or that assertions made therein were made with no reasonable basis. c. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder the burden of proof shall be on Sprint to establish that Indemnitee is not so entitled. 13. Separability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. The parties agree that the court making such determination that any provision hereof is invalid or unenforceable shall have the power to modify such provision to the minimum extent necessary to avoid a violation of law consistent with the intent of the parties manifested by such provision. If this Agreement or any portion thereof shall be held to be invalid or unenforceable for any reason, Sprint shall nevertheless indemnify Indemnitee to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Governing Law; Binding Effect; Amendment and Termination. a. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Kansas. 7 b. This Agreement shall be binding upon the Indemnitee and upon Sprint, its successors and assigns (including any transferee of all or substantially all of the assets of Sprint and any successor by merger or operation of law), and shall inure to the benefit of the Indemnitee, his or her heirs, personal representatives and assigns and to the benefit of Sprint, its successors and assigns. Sprint shall require and cause any successor to all or substantially all of its assets, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Sprint would be required to perform if no succession had taken place. c. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, and no such waiver shall constitute a continuing waiver. 15. Subrogation. In the event of payment under this Agreement, Sprint shall be subrogated to the extent of such payment to all of the rights of recovery of such Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. SPRINT CORPORATION By _____________________________________ ------------------------------------- 8 EX-10 7 summaryexecben10f.txt EXECUTIVE BENEFIT SUMMARY Exhibit 10(f) SUMMARY OF EXECUTIVE OFFICER BENEFITS AND BOARD OF DIRECTORS BENEFITS AND FEES
Description of Eligible Positions Amount/Schedule Benefit Automobile Chief Executive Officer $1,500/month Allowance Chief Operating Officer $1,300/month Division Presidents and $1,100/month Executive Vice Presidents Senior Vice Presidents $1,000/month _______________________________________________________________________________ Club Membership Chief Executive Officer Approved at discretion of Compensation Committee Chief Operating Officer, Approved at discretion of Division Presidents and direct supervisor Executive Vice Presidents, Senior Vice Presidents _______________________________________________________________________________ Sprint Long- Board of Directors $6,000/year Distance Telephone (continues after Service (1) retirement for up to 120 months) Chief Executive Officer, Actual usage (continues Chief Operating Officer, after retirement) Division Presidents, Executive and Senior Vice Presidents _______________________________________________________________________________ Sprint PCS Board of Directors $2,000/year Service (1) Use of PCS handsets _______________________________________________________________________________ Income tax Chief Executive Officer and Amount incurred compliance for Chief Operating Officer, 2002 tax year Division Presidents, (preparation EVP/Chief Financial Officer of federal and & EVP Legal & External state income Affairs tax filings and related analyses) (1)(2) _______________________________________________________________________________ Miscellaneous Chief Executive Officer and $15,000/year services Chief Operating Officer (investment Division Presidents and $12,000/year counseling, Executive Vice Presidents insurance Senior Vice Presidents $10,000/year counseling, preparation of wills and trusts, tax counseling, income tax preparation, estate planning, and personal financial planning) (1)(3) _______________________________________________________________________________ Description of Eligible Positions Amount/Schedule Benefit Disability Chief Executive Officer, 52 weeks at full base pay Chief Operating Officer, Division Presidents, Executive and Senior Vice Presidents _______________________________________________________________________________ Separation Chief Executive Officer, Less than 5 years Chief Operating service: Officer, Division 17 weeks salary Presidents, Executive and continuation Senior Vice Presidents 5 to 10 years service (unless otherwise 35 weeks salary provided in an individual continuation agreement with an 11 to 18 years service officer) 43 weeks salary continuation More than 19 years service: 1 year salary continuation _______________________________________________________________________________ Fees Board of Directors Annual retainer - $40,000/ year Meeting Fee - $ 1,250/ meeting Committee Meeting Fee - $ 1,000/ Meeting Fee for In-person Meetings of Outside Directors - $ 1,250/ meeting _______________________________________________________________________________ (1) Sprint reimburses for income taxes associated with these benefits. (2) This benefit has been eliminated with respect to tax years after 2002. (3) With respect to tax years after 2002, Sprint's independent auditor may not provide these services.
EX-12 8 exhib12.txt EXHIBIT 12
EXHIBIT (12) COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Sprint Corporation (Unaudited) Quarters Ended, March 31, ------------------------------- 2003 2002 - -------------------------------------------------------------------------------------------------------------------- (millions) Earnings Income from continuing operations before income taxes $ 158 $ 174 Capitalized interest (20) (32) Net losses in equity method investees 18 20 - -------------------------------------------------------------------------------------------------------------------- Subtotal 156 162 - -------------------------------------------------------------------------------------------------------------------- Fixed charges Interest charges 394 352 Interest factor of operating rents 96 99 - -------------------------------------------------------------------------------------------------------------------- Total fixed charges 490 451 - -------------------------------------------------------------------------------------------------------------------- Earnings, as adjusted $ 646 $ 613 ------------------------------- Ratio of earnings to fixed charges 1.32 1.36 ------------------------------- Note: The ratios of earnings to fixed charges were computed by dividing fixed charges into the sum of earnings (after certain adjustments) and fixed charges. Earnings include income from continuing operations before income taxes, plus net losses in equity method investees, less capitalized interest. Fixed charges include interest on all debt of continuing operations, including amortization of debt issuance costs, and the interest component of operating rents.
EX-99 9 exhib99a.txt GARY FORSEE CERTIFICATION EXHIBIT 99(a) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Sprint Corporation (the "Company") on Form 10-Q for the period ending March 31, 2003, as filed with the Securities and Exchange Commission (the "Report"), I, Gary D. Forsee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 12, 2003 /s/ Gary D. Forsee - ------------------------------------------- ------------------------ Date Gary D. Forsee Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Sprint Corporation and will be retained by Sprint Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-99 10 exhib99b.txt ROBERT DELLINGER CERTIFICATION EXHIBIT 99(b) Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of Sprint Corporation (the "Company") on Form 10-Q for the period ending March 31, 2003, as filed with the Securities and Exchange Commission (the "Report"), I, Robert J. Dellinger, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 12, 2003 /s/ Robert J. Dellinger - ------------------------------------------- --------------------------- Date Robert J. Dellinger Executive Vice President and Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Sprint Corporation and will be retained by Sprint Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----