Sprint - Nextel 2006 Annual Report Download - page 101

employees under the 1997 Program. Employees granted restricted shares are not required to pay for the shares;
however, they must remain employed with us until the restrictions on the shares lapse. These shares vest on an
annual basis over three years.
Under the Nextel Incentive Equity Plan, outstanding Nextel deferred shares, or nonvested shares, which
constitute an agreement to deliver shares upon the performance of service over a defined period of time, and
grants of options to purchase Nextel common shares were converted at the time of the Sprint-Nextel merger
into our nonvested shares or options to purchase a number of our common shares. As of December 31, 2006,
this plan authorized equity-based awards for about 113 million common shares, of which about 49 million
common shares remained available. Options were granted prior to the Sprint-Nextel merger with an exercise
price equal to the market value of the underlying shares on the grant date. These options vest on a monthly
basis over periods of up to four years, and have a contractual term of ten years. Employees are not required to
pay for the nonvested shares; however, they must remain employed with us until the restrictions on the shares
lapse. The nonvested shares generally vest over a service period ranging from several months to four years. An
accelerated vesting schedule may be triggered in the event of a change in control. Accelerated vesting was
triggered with respect to certain deferred shares and options granted prior to the Sprint-Nextel merger as a
result of the Sprint-Nextel merger. We do not intend to grant any more awards under this plan.
Under the Management Incentive Stock Option Plan, or MISOP, before 2003 we granted stock options to
employees eligible to receive annual incentive compensation. Eligible employees could elect to receive stock
options in lieu of a portion of their target incentive under our annual incentive compensation plans. The
options generally became exercisable on December 31 of the year granted and have a maximum term of ten
years. Under the MISOP, we also granted stock options to executives in lieu of long-term incentive
compensation, or LTIP-MISOP options. The LTIP-MISOP options generally became exercisable on the third
December 31 following the grant date and have a maximum term of ten years. MISOP options were granted
with exercise prices equal to the market price of the underlying common stock on the grant date. No new
options may be granted under this plan after April 2005. As of December 31, 2006, options to buy about
33 million common shares were outstanding.
In connection with the Sprint-Nextel merger, the vesting of certain equity-based awards issued under the 1997
Program, the MISOP and the Nextel Incentive Equity Plan was accelerated following the termination of
employment of certain award recipients. In January 2005, we adopted a retention program designed to retain
our senior executives and other key personnel through completion of the Sprint-Nextel merger and for the one-
year period following the merger. Under this program, if we terminated the employment of a program
participant other than for cause within one year of the Sprint-Nextel merger, certain unvested equity-based
awards held by that participant vested automatically. Under the Nextel Incentive Equity Plan, if, within one
year of the Sprint-Nextel merger, we terminated other than for cause the employment of a holder of an equity-
based award granted under the plan, or in the case of specified executives, the holder terminated his or her
employment with good reason, as defined in the plan, then that holder’s unvested equity-based awards vested
automatically.
Under our Employees Stock Purchase Plan, or 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. The
purchase price is equal to 90% of the market value on the last trading day of each quarterly offering period.
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 Section 423 of the Internal Revenue
Code. As of December 31, 2006, this plan authorized for purchase about 22 million shares, net of elections
made in 2006 by employees participating in the fourth quarter 2006 offering period under the ESPP to
purchase about 757,000 of our common shares, which were issued in the first quarter 2007. Employees
purchased these shares for $17.14 per share.
Currently, we use treasury shares to satisfy share-based awards or new shares if no treasury shares are
available.
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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)