
Note 13.	Compensation Plans

As of December 31, 2011, Sprint sponsored four incentive plans: the 2007 Omnibus Incentive Plan (2007 Plan); the 1997 Long-Term Incentive Program (1997 Program); the Nextel Incentive Equity Plan (Nextel Plan) and the Management Incentive Stock Option Plan (MISOP) (together, "Compensation Plans"). Sprint also sponsors an Employee Stock Purchase Plan (ESPP). Under the 2007 Plan, we may grant share and non-share based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other equity-based and cash awards to employees, outside directors and other eligible individuals as defined by the plan. Options, other than those issued through the offer to exchange ("Exchange Offer") described below, are generally granted with an exercise price equal to the market value of the underlying shares on the grant date, generally vest on an annual basis over three or four years, and generally have a contractual term of ten years. Restricted stock units generally have performance and service requirements or service requirements only with vesting periods ranging from one to three years. Performance-based restricted stock units awarded in 2011 and 2010 have three distinct one-year performance periods and are granted in each period once the performance objectives are established, usually during the first quarter of each calendar year. Employees and directors who are granted restricted stock units are not required to pay for the shares but generally must remain employed with us, or continue to serve as a member of our board of directors, until the restrictions lapse, which is typically three years for employees and one year for directors. The Compensation Committee of our board of directors, or one or more executive officers should the Compensation Committee so authorize, as provided in the 2007 Plan, will determine the terms of each share and non-share based award. No new grants can be made under the 1997 Program, the Nextel Plan or the MISOP.

During 2011, the number of shares available and reserved for future grants under the 2007 Plan totaled approximately 165 million common shares. The number of shares available under the 2007 Plan includes any shares originally granted under the 1997 Program, the Nextel Plan or the MISOP that are forfeited, expired, or otherwise terminated, which totaled approximately 10 million shares in 2011. As of December 31, 2011, restricted stock units and options to acquire about 56 million shares were outstanding under the 2007 Plan, restricted stock units and options to acquire about 9 million shares were outstanding under the 1997 Program, options to acquire about 3 million shares were outstanding under the Nextel Plan and options to acquire about 5 million common shares were outstanding under the MISOP.

Under our ESPP, eligible employees may subscribe quarterly to purchase shares of our Series 1 common stock through payroll deductions of up to 20% of eligible compensation. Effective April 1, 2009 the purchase price is equal to 95% of the market value on the last trading day of each quarterly offering period, modified from 90% of the market value in previous periods. The aggregate number of shares purchased by an employee may not exceed 9,000 shares or $25,000 of fair market value in any calendar year, subject to limitations imposed by the Internal Revenue Code. As of December 31, 2011, the ESPP has approximately 77 million common shares authorized and reserved for future purchases, which is net of elections made by employees participating in the fourth quarter 2011 offering period under the ESPP to purchase about 1.5 million of our common shares, which were issued in the first quarter 2012. Employees purchased these shares for $2.21 per share.

Currently, we use new shares to satisfy share-based awards or treasury shares, if available.

Compensation Costs

The cost of employee services received in exchange for share-based awards classified as equity is measured using the estimated fair value of the award on the date of the grant, and that cost is recognized over the period that the award recipient is required to provide service in exchange for the award. Awards of instruments classified as liabilities are measured at the estimated fair value at each reporting date through settlement. Share-based compensation cost related to awards with graded vesting is recognized using the straight-line method.

Pre-tax share and non-share based compensation charges from our incentive plans included in net loss were $73 million for 2011, $70 million for 2010, and $81 million for 2009. The net income tax benefit (expense) recognized in the consolidated financial statements for share-based compensation awards was $13 million for 2011, $(18) million for 2010, and $(3) million for 2009.

As of December 31, 2011, there was $42 million of total unrecognized compensation cost related to non-vested incentive awards that are expected to be recognized over a weighted average period of 1.60 years. Cash received from exercise under all share-based payment arrangements, net of shares surrendered for employee tax obligations, was $9 million for 2011, $7 million for 2010, and insignificant for 2009.

Options

The fair value of each option award is estimated on the grant date using the Black-Scholes option valuation model, based on several assumptions including the risk-free interest rate, volatility, expected dividend yield and expected term. Options outstanding as of December 31, 2011 include options granted under the 2007 Plan, the 1997 Program, the Nextel Plan, and the MISOP, as discussed above. The risk-free interest rate used is based on the zero-coupon U.S. Treasury bond, with a term equal to the expected term of the options. The volatility used is the implied volatility from traded options on our common shares. The expected dividend yield used is estimated based on our historical dividend yield and other factors. The expected term of options granted is estimated using the simplified method, defined as the average of the vesting term and the contractual term as our historical data is not expected to represent the future expected term of equity awards due to our severance activities over the last several years.

The following table provides the estimated fair value and assumptions used in determining the fair value of option awards granted during 2011, 2010 and 2009:



	2011				2010			2009
Weighted average grant date fair value	$1.89				$1.97			$3.07
Risk free interest rate	2.34	-	2.55	%	2.71	-	2.74%	2.05	-	2.86%
Volatility	41.8	-	42.9	%	58.5%			72.0	-	126.2%
Weighted average expected volatility	42.9%				58.5%			113.6%
Expected dividend yield	—%				—%			—%
Weighted average expected dividend yield	—%				—%			—%
Expected term (years)	6.0				6.0	-	6.25	6.25	-	6.5
Options granted (millions)	8				8			28

A summary of the status of the options under our option plans as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:



	Shares Under Option		Weighted Average per Share Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in millions)				(in years)	(in millions)
Outstanding at January 1, 2011	72		$	10.79
Granted	8		$	4.22
Exercised	(2	)	$	3.60
Forfeited/expired	(13	)	$	22.37
Outstanding at December 31, 2011	65		$	8.16	6.19	$	—
Vested or expected to vest at December 31, 2011	63		$	8.31	6.11	$	—
Exercisable at December 31, 2011	39		$	11.14	4.89	$	—

Restricted Stock Units

The fair value of each restricted stock unit award is calculated using the share price at the date of grant. Restricted stock units outstanding consist of those units granted under the 2007 Plan and the 1997 Program, as discussed above. A summary of the status of the restricted stock units as of December 31, 2011 and changes during the year ended December 31, 2011 is presented below:



	Restricted Stock Units			Weighted Average Grant Date Fair Value of Restricted Stock Units
	Future Performance and Service Required	Future Service Required		Future Performance and Service Required		Future Service Required
	(in millions)
Outstanding at January 1, 2011	2	5		$	3.45	$	7.03
Granted	4	—		$	4.21	$	—
Vested	—	(3	)	$	—	$	6.10
Forfeited	—	—		$	—	$	—
Outstanding at December 31, 2011	6	2		$	3.95	$	8.52

The total fair value of restricted stock units vested during the years ended December 31, 2011, 2010 and 2009 was $15 million, $40 million, and $53 million, respectively. The weighted-average grant date fair value of restricted stock units granted during 2011 was $4.25 per unit, compared with $3.48 per unit for 2010 and $2.96 per unit for 2009.

Certain restricted stock units outstanding as of December 31, 2011 are entitled to dividend equivalents paid in cash, if dividends are declared and paid on common shares, but performance-based restricted stock units are not entitled to dividend equivalent payments until the applicable performance and service criteria have been met.