SPRINT DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH UNAUDITED PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).
Interests of Certain Executive Officers and Directors of T-Mobile in the Merger Transactions
Certain of T-Mobile’s executive officers and members of the T-Mobile board of directors have interests in the merger transactions that may be different from, or in addition to, the interests of T-Mobile’s stockholders generally. The members of the T-Mobile board of directors and the T-Mobile independent committee were aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the merger transactions.
The merger transactions contemplated by the business combination agreement will not constitute a “change in control” for purposes of the T-Mobile executive compensation and benefit plans described below.
Leadership Following the Merger Transactions
Certain members of the T-Mobile board of directors and certain executive officers of T-Mobile, including John J. Legere and G. Michael Sievert, will serve as members of the combined company board of directors or executive officers of the combined company following the effective time. See “—Board of Directors and Management of the Combined Company.”
T-Mobile Executive Officer Arrangements
T-Mobile Executive Severance Letters
In connection with the execution of the business combination agreement, T-Mobile entered into severance letter agreements with David R. Carey, J. Braxton Carter, Peter A. Ewens, Thomas C. Keys, David A. Miller, Neville R. Ray and Elizabeth A. McAuliffe (which we refer to as the “severance letter agreements”). The severance letter agreements provide that, upon an executive officer’s termination of employment without cause or for good reason, within 12 months following the earlier of the effective time or T-Mobile’s public announcement that the merger transactions will not close, such executive officer would be entitled to the following: (1) a cash payment equal to the executive officer’s annual incentive for the calendar year in which the termination occurs based on actual performance, prorated for the portion of the year elapsed as of the termination date, which payment is payable in a lump sum; (2) a cash severance payment equal to the product of (a) two, multiplied by (b) the sum of the executive officer’s annual base salary plus target annual incentive award, which severance payment is payable in a lump sum; (3) the executive officer’s earned, unpaid annual incentive for the calendar year preceding the year in which the termination occurs (if any), payable in a lump sum; (4) full vesting of the executive’s time-based long-term incentive awards and vesting of the executive’s performance-based long-term incentive awards based on actual performance determined as if the performance period in effect as of the termination date had ended as of the last trading day immediately preceding the termination date; (5) continued medical and dental coverage for the executive and the executive’s eligible dependents for up to 18 months following the termination date; and (6) outplacement services for 12 months following termination. As a condition of receiving the severance benefits under the severance letter agreements, the applicable executive officer must execute a release of claims in favor of T-Mobile and continue to comply with certain non-competition and non-solicitation restrictions for 18 months following termination (or 12 months if such termination occurs within 12 months following the date on which T-Mobile publicly announces the merger transactions will not close).
The Legere Amendment
In connection with the execution of the business combination agreement, T-Mobile adopted an amendment to Mr. Legere’s employment agreement (which we refer to as the “Legere amendment”), which extends the term of Mr. Legere’s employment agreement through April 30, 2020 (with Mr. Legere’s employment terminating on such date, unless terminated earlier) and increases Mr. Legere’s annual base salary to $2 million, target annual incentive award to $4 million and target grant-date value of his long-term incentive awards to $17.25 million. Pursuant to the Legere amendment, Mr. Legere was granted a one-time award of performance-based restricted stock units on April 29, 2018, with an approximate aggregate grant-date value of $37 million, 50% of which would vest on the earlier of the effective time or the date on which Mr. Legere’s employment term expires, and the remaining 50% of which would vest on the date on which Mr. Legere’s employment term expires, subject to Mr. Legere’s continued employment through the applicable vesting date (except as otherwise provided in his employment agreement, as amended, or the applicable award agreement) and based on T-Mobile’s total shareholder return during the applicable performance period. Under Mr. Legere’s employment agreement (as amended by the Legere amendment), if Mr. Legere’s employment is terminated by T-Mobile without cause (including due to the expiration of Mr. Legere’s employment agreement) or by Mr. Legere for good reason, subject to the execution and non-revocation of a release of claims in favor of T-Mobile and continued compliance with certain non-competition and non-solicitation restrictions for 24 months following termination, Mr. Legere would be entitled to the following severance benefits: (1) a lump-sum cash payment equal to two multiplied by the sum of his base salary and target annual incentive award; (2) a lump-sum payment equal to his prorated annual incentive award for the calendar year in which his termination occurs based on actual performance; (3) a lump-sum payment equal to his earned, unpaid annual incentive for the calendar year preceding the year in which the termination occurs (if any); (4) full vesting of his time-based long-term incentive awards; (5) vesting of his performance-based long-term incentive awards based on actual performance through the termination date (subject to Mr. Legere’s cooperation with succession planning with respect to certain performance-based awards); (6) medical and dental coverage for Mr. Legere and his eligible dependents for up to 18 months following termination; and (7) payment or reimbursement for an exclusive office and exclusive executive assistant for 18 months following termination (capped at $25,000 per month). Mr. Legere is also eligible for outplacement services for 12 months following termination under T-Mobile’s Executive Severance Benefit Guidelines.
The Sievert Amendment
In connection with the execution of the business combination agreement, T-Mobile adopted an amendment to Mr. Sievert’s compensation term sheet (which we refer to as the “Sievert amendment”), which increases Mr. Sievert’s annual base salary to $1.2 million, target grant-date value of his annual incentive award to $2.4 million and target long-term incentive awards to $10.35 million. Pursuant to the Sievert amendment, Mr. Sievert was granted a one-time award of performance-based restricted stock units on April 29, 2018, with an approximate aggregate grant-date value of $20 million, 50% of which is scheduled to vest on the earlier of the effective time or the third anniversary of the grant date, and the remaining 50% of which is scheduled to vest on the third anniversary of the grant date, subject to Mr. Sievert’s continued employment through the applicable vesting date (except as otherwise provided in his compensation term sheet, as amended, or the applicable award agreement) and based on T-Mobile’s total shareholder return during the applicable performance period. Under Mr. Sievert’s compensation term sheet (as amended by the Sievert amendment), if Mr. Sievert’s employment is terminated by T-Mobile without cause or by Mr. Sievert for good reason, subject to the execution and non-revocation of a release of claims in favor of T-Mobile, Mr. Sievert would be entitled to the following severance benefits: (1) a lump-sum cash payment equal to his annual incentive for the calendar year in which the termination occurs based on actual performance, prorated for the portion of the year elapsed as of the termination date; (2) a lump-sum cash severance payment equal to the product of (a) two, multiplied by (b) the sum of his annual base salary and target annual incentive award; (3) a lump-sum payment equal to his earned, unpaid annual incentive for the calendar year preceding the year in which the termination occurs (if any); (4) full vesting of his time-based long-term incentive awards; (5) vesting of his performance-based long-term incentive awards based
on (a) actual performance during the portion of the performance period prior to and through Mr. Sievert’s termination date and (b) target performance during the remaining portion of the performance period following Mr. Sievert’s termination; (6) continued medical and dental coverage for Mr. Sievert and his eligible dependents for up to 18 months following the termination date; and (7) outplacement services for 12 months following termination.
The Carter Amendment
In connection with the execution of the business combination agreement, T-Mobile adopted an amendment to Mr. Carter’s employment agreement (which we refer to as the “Carter amendment”), which provides that Mr. Carter’s employment will continue until the first to occur of the following dates: (1) if the merger transactions close, the 20th day following T-Mobile’s first quarterly or annual financial filing following the effective time; or (2) if the merger transactions are terminated and (a) public announcement thereof is made prior to March 1, 2019, (x) the 20th day following T-Mobile’s next quarterly or annual financial filing after such public announcement if the deadline for such financial filing is after March 1, 2019, or (y) March 1, 2019 if the deadline for T-Mobile’s next quarterly or annual financial filing after such public announcement is before March 1, 2019, and (b) public announcement thereof is made following March 1, 2019, the 20th day following the first quarterly or annual financial filing made by T-Mobile after such public announcement. Mr. Carter’s employment will automatically terminate upon the expiration of his employment term (unless earlier terminated), at which time Mr. Carter will be eligible for severance benefits as if he experienced a termination without cause, subject to the execution and non-revocation of a release of claims in favor of T-Mobile.
Carey Term Sheet
In connection with the execution of the business combination agreement, T-Mobile adopted a compensation term sheet for Mr. Carey (which we refer to as the “Carey term sheet”), which has a two-year term continuing until April 29, 2020 and increases Mr. Carey’s annual base salary to $775,000, target annual incentive award to 125% of his base compensation and target grant-date value of long-term incentive awards to approximately $4.36 million. Pursuant to the Carey term sheet, Mr. Carey was granted a one-time award of performance-based restricted stock units on April 29, 2018, with an aggregate grant date value of approximately $5.72 million, 50% of which will vest on the earlier of the effective time or the date on which the Carey term sheet expires, and the remaining 50% of which will vest on the date on which the Carey term sheet expires, subject to Mr. Carey’s continued employment through the applicable vesting date (except as otherwise set forth in the Carey term sheet and the applicable award agreement) and based on T-Mobile’s total shareholder return during the applicable performance period.
Ray Performance-Based Restricted Stock Unit Award
In connection with the execution of the business combination agreement, Mr. Ray was granted a one-time award of performance-based restricted stock units on April 29, 2018, with an approximate aggregate value of $12.19 million, 50% of which vests on the earlier of the effective time or the third anniversary of the grant date, and the remaining 50% of which vests on the third anniversary of the grant date, subject to Mr. Ray’s continued employment through the applicable vesting date (except as otherwise set forth in the applicable award agreement) and based on T-Mobile’s total shareholder return during the applicable performance period.
For an estimate of the amounts that would become payable to each of T-Mobile’s named executive officers if a severance-qualifying termination of employment were to occur immediately following the completion of the merger, see “—Quantification of Potential Payments and Benefits to T-Mobile’s Named Executive Officers in Connection with the Merger Transactions.” T-Mobile estimates that the aggregate value of the severance payments and benefits that would become payable to T-Mobile’s other executive officers under their applicable agreements if the effective time were June 30, 2018, and each incurred a severance-qualifying termination of employment on that date, to be $213,457,466.
Quantification of Potential Payments and Benefits to T-Mobile’s Named Executive Officers in Connection with the Merger Transactions
The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosures of information about certain compensation for each of T-Mobile’s named executive officers that is based on or otherwise relates to the merger transactions and assumes, among other things, that the T-Mobile named executive officers will incur a severance-qualifying termination immediately following the effective time. For additional details regarding the terms of the payments described below, see the discussion under the caption “—Interests of Certain Executive Officers and Directors of T-Mobile in the Merger Transaction” above.
The amounts indicated below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below, and do not reflect certain compensation actions that may occur before the completion of the merger transactions and, as a result, the actual amounts, if any, to be received by an executive officer may differ in material respects from the amounts set forth below. For purposes of calculating such amounts, we have assumed:
| • | the effective time of the combination is June 30, 2018, which is the assumed date of the closing solely for the purposes of this merger transactions-related compensation disclosure (which we refer to as the “assumed closing date”); |
| • | each named executive officer incurs a qualifying termination immediately following the effective time; |
| • | performance goals applicable to the cash annual incentive awards and performance-based RSUs are achieved at the target level; and |
| • | the value of a share of T-Mobile common stock immediately following the effective time is $58.02, which is equal to the five-day average closing price of a share of T-Mobile common stock following the announcement of the merger transactions (including the April 30, 2018 announcement date). |
| Name |
Cash ($)(1) |
Equity ($)(2) |
Perquisites/ Benefits ($)(3) |
Total ($) |
||||||||||||
| Named Executive Officers |
||||||||||||||||
| John J. Legere |
13,768,036 | 75,855,522 | 463,016 | 90,086,574 | ||||||||||||
| J. Braxton Carter |
5,224,038 | 15,909,838 | 20,412 | 21,154,289 | ||||||||||||
| G. Michael Sievert |
8,309,615 | 42,785,631 | 25,816 | 51,121,062 | ||||||||||||
| Neville R. Ray |
6,171,274 | 27,051,013 | 27,475 | 33,249,762 | ||||||||||||
| Thomas C. Keys |
4,007,933 | 13,811,951 | 25,895 | 17,845,779 | ||||||||||||
| (1) | The cash amounts payable to the named executive officers include the following components: |
| a. | A cash payment equal to the named executive officer’s annual incentive for the year of termination based on actual performance, prorated for the portion of the year elapsed as of the termination date, which payment is payable in a lump sum; and |
| b. | A cash severance payment equal to the product of (i) two multiplied by (ii) the sum of the executive officer’s annual base salary plus target annual incentive award, which severance payment is payable in a lump sum. |
In addition to the amounts described above, each named executive officer would become entitled to a cash amount equal to any earned, unpaid prior year bonus; however, annual bonuses for 2017 have already been paid to the named executive officer and, accordingly, have not been included here. All components of such cash amount are “double-trigger” (i.e., they are contingent upon a qualifying termination of employment). As a condition of receiving the prorated annual incentive and severance payment, the named executive officers must execute and not revoke a release of claims and comply with certain restrictive covenant obligations. The estimated amount of each component of the cash payment is set forth in the table below.
| Name |
Prorated Annual Short-Term Incentive ($) |
T-Mobile Severance Payment ($) |
||||||
| Named Executive Officers |
||||||||
| John J. Legere |
1,768,036 | 12,000,000 | ||||||
| J. Braxton Carter |
724,038 | 4,500,000 | ||||||
| G. Michael Sievert |
1,109,615 | 7,200,000 | ||||||
| Neville R. Ray |
771,274 | 5,400,000 | ||||||
| Thomas C. Keys |
520,433 | 3,487,500 | ||||||
The prorated annual short-term incentive payments are prorated based on the assumed closing date of June 30, 2018.
| (2) | As described in more detail above in “—Interests of Certain Executive Officers and Directors of T-Mobile in the Merger Transactions,” each named executive officer would receive, subject to the execution and non-revocation of a release of claims in favor of T-Mobile and, as applicable, continued compliance with certain restrictive covenants, (a) full vesting of the executive’s time-based long-term incentive awards and (b) vesting of the executive’s performance-based long-term incentive awards based on actual performance determined as if the performance period in effect as of the termination date had ended as of the last trading day immediately preceding the termination date (or in the case of Mr. Sievert, vesting (i) based on actual performance during the portion of the performance period prior to and through Mr. Sievert’s termination date and (ii) based on target performance during the remaining portion of the performance period following Mr. Sievert’s termination). Outstanding equity awards are subject to “double-trigger” vesting (i.e., vesting is contingent upon a qualifying termination of employment). The amounts above and in the table below assume a price per share of T-Mobile common stock of $58.02. Set forth below are the values of time-based restricted stock units and performance-based restricted stock units (including any related dividend equivalents) held by the named executive officers that would become vested upon a qualifying termination of employment. |
| Name |
Time-Based RSUs ($) |
Performance-Based RSUs ($) |
||||||
| Named Executive Officers |
||||||||
| John J. Legere |
8,250,676 | 67,604,846 | ||||||
| J. Braxton Carter |
7,653,302 | 8,256,536 | ||||||
| G. Michael Sievert |
10,155,125 | 32,630,506 | ||||||
| Neville R. Ray |
5,023,256 | 22,027,757 | ||||||
| Thomas C. Keys |
4,260,931 | 9,551,020 | ||||||
| (3) | Subject to the execution and non-revocation of a release of claims in favor of T-Mobile and continued compliance with certain restrictive covenants, (a) each named executive officer is entitled to continued medical and dental coverage for the executive and the executive’s eligible dependents for up to 18 months following termination, (b) Mr. Legere is entitled to an exclusive office and exclusive executive assistant for 18 months following termination (capped at $25,000 per month) and (c) each named executive officer is |
