Sprint - Nextel 2010 Annual Report Download - page 85

Note 12. Compensation Plans
As of December 31, 2010, 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 certain other service providers. 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 2010 have three distinct one-year
performance periods and are granted in each period once the performance objectives are established. 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 equity-based award.
No new grants can be made under the 1997 Program, the Nextel Plan or the MISOP.
During 2010, the number of shares available and reserved for future grants under the 2007 Plan increased by about
25 million to approximately 174 million common shares, as the number of shares available under the 2007 Plan is increased by
any shares originally granted under the 1997 Program, the Nextel Plan or the MISOP that are forfeited, expired, or otherwise
terminated, including a portion of the shares surrendered under the Company's Exchange Offer completed during the second
quarter 2010. As of December 31, 2010, restricted stock units and options to acquire about 52 million shares were outstanding
under the 2007 Plan, restricted stock units and options to acquire about 12 million shares were outstanding under the 1997
Program, options to acquire about 4 million shares were outstanding under the Nextel Plan and options to acquire about 11
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, 2010, the ESPP
has approximately 81 million common shares authorized and reserved for future purchases. This includes 80 million shares
authorized in the second quarter 2009 and is net of elections made in 2010 by employees participating in the fourth quarter
2010 offering period under the ESPP to purchase about 1 million of our common shares, which were issued in the first quarter
2011. Employees purchased these shares for $4.00 per share.
Currently, we use treasury shares to satisfy share-based awards or new shares if no treasury shares are 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 compensation charges included in net loss from our Compensation Plans were $70 million for 2010, $81
million for 2009 and $272 million for 2008. The net income tax benefit (expense) recognized in the consolidated financial
statements for share-based compensation awards was $(18) million for 2010, $(3) million for 2009 and $101 million for 2008.
As of December 31, 2010, there was $58 million of total unrecognized compensation cost related to non-vested
share-based awards that are expected to be recognized over a weighted average period of 1.98 years. Cash received from
exercise under all share-based payment arrangements, net of shares surrendered for employee tax obligations, was $7 million
for 2010, insignificant for 2009, and $57 million for 2008.
Under our share-based payment plans, we had options and restricted stock units outstanding as of December 31,
2010. Forfeitures were estimated for share-based awards using a 9.4% weighted average annual rate.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-28