UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material pursuant to § 240.14a-12 | |
T-Mobile US, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Place: Four Seasons Hotel 99 Union Street Seattle, WA 98101
Date: June 13, 2018
Time: 8:00 a.m. PDT |
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∎ Approve an amendment to the Company’s 2013 Omnibus Incentive Plan to increase the number of shares of the Company’s common stock available for awards thereunder by an additional 18,500,000 shares to a total of 81,775,000 shares;
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YOUR VOTE IS VERY IMPORTANT. Please vote | ||||
By Order of the Board of Directors,
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Timotheus Höttges Chairman of the Board of Directors
April
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 2018
The Proxy Statement and Annual Report to Stockholders are available athttps://t-mobile.com/Proxy2018 andhttps://www.proxyvote.com.
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| Corporate Governance at T-Mobile | ||||
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How to Communicate with our Board | 6 | |||
Board Committees and Related Matters | 7 | |||
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| Proposal 1 | 13 | |||
| Executive Officers | ||||
| Proposal 2 | ||||
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Audit | ||||
| Executive Compensation | 24 | |||
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Compensation Committee Report | 32 | |||
Executive Compensation Tables | 33 | |||
Equity Compensation Plan Information | 42 | |||
Proxy Statement Summary
This summary highlights information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.
2018 Annual Meeting Information
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Date and Time: Wednesday, June 13, 2018 at 8:00 a.m. (PDT) |
99 Union Street
| Record Date: April 17, 2018 | Proxy Mail Date: On or about April 26, 2018 |
How to Vote
By Internet: Visit the website listed on your proxy card | By Phone: Call the telephone number on proxy card | By Mail: Sign, date and return your proxy card in the enclosed envelope | In Person: Attend the Annual Meeting in Seattle, Washington |
| Voting: | ||
Admission to ∎ Notice of Internet Availability of Proxy Materials ∎ Admission ticket enclosed with the paper copy of the proxy ∎ Legal proxy, account statement or other documentation confirming your T-Mobile stock holdings from the broker, bank or other institution that holds your | ||
Annual Meeting Agenda and Vote Recommendations:
| Agenda and Voting Recommendations | ||||||||
| Proposal | Description | Board Recommendation | Page | |||||
| 1 | Election of 11 Directors | “FOR” each nominee | 13 | |||||
| 2 | Ratification of Appointment of Independent Registered Public Accounting Firm for 2016 | “FOR” | 21 | |||||
| 3 | Stockholder Proposal for Implementation of Proxy Access | “AGAINST” | 47 | |||||
| 4 | Stockholder Proposal for Limitations on Acceleration of Equity Awards in the Event of a Change of Control | “AGAINST” | 49 | |||||
| 5 | Stockholder Proposal for an Amendment of the Company’s Clawback Policy | “AGAINST” | 51 | |||||
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Proposal1 | Election of Directors |
| FOR | 13 | ||||
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| FOR | 22 | ||||
| Approval of an Amendment to the Company’s 2013 Omnibus Incentive Plan |
| FOR | 43 | ||||
Proposal 4 | Stockholder Proposal for Implementation of Proxy Access |
| AGAINST | 58 | ||||
Proposal5 | Stockholder Proposal for Limitations on Accelerated Vesting of Equity Awards in the |
| AGAINST | 60 | ||||
In this Proxy Statement, “we,” “our,” “us,” “T-Mobile” and the “Company” refer to T-Mobile US, Inc. and the “Annual Meeting” refers to the 20162018 Annual Meeting of Stockholders. We first made this Proxy Statement and form of proxy card available to stockholders on or about April 28, 2016.26, 2018.
2016 PROXY STATEMENT SUMMARY INFORMATION
PROXY SUMMARY STATEMENT
Commitment to Good Corporate Governance Practices
WeGovernance is real at T-Mobile. In connection with the business combination with MetroPCS Communications, Inc. completed in 2013 (the “Business Combination”), T-Mobile became a publicly-traded company with a significant stockholder, Deutsche Telekom AG (“Deutsche Telekom”). Deutsche Telekom has the right to designate a number of our directors, and as a result, we have stockholder representation on our Board. Directors approach each Board decision with a stockholder mindset that is intellectually independent from management. In addition, our Board has structured our corporate governance program to promote the long-term interest of stockholders, strengthen Board of Directorsthe Board’s and managementmanagement’s accountability and help build public trust in the Company. Highlights include:
 | Unclassified Board and Annual Election of Directors | | Annual Board and Committee Self-Evaluations | |||
| 12 Director Nominees | | No poison pill | |||
| Separation of Chairman and Chief Executive Officer Roles | | Stockholder Right to Call Special Meeting and Act by Written Consent | |||
| Lead Independent Director | | Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies | |||
| Independent Chairs of the Audit, Compensation and Nominating and Corporate Governance Committees | | Executive Compensation Driven by Pay for Performance | |||
| Regular Executive Sessions of Independent Directors | | Stock Ownership Guidelines for Executive Officers and Directors | |||
| Comprehensive Risk Oversight by the Board and its Committees | | Clawback Policy to Recapture Incentive Payments | |||
UnclassifiedT-Mobile Had Record Financial Results Across the Board with all directors elected annually
Separationin 2017 and proved that taking care of Chairman and Chief Executive Officer roles
Appointment of a lead independent director
Independent directors serve as chairs of our Audit, Nominating and Corporate Governance and Compensation Committees
Regular executive sessions of independent directors
Regular Board and committee self-evaluations
Stock ownership guidelinescustomers is also good for directors and executives
Clawback Policy to recapture incentive payments
Customer Momentum Continued at T-Mobile for the Second Straight Year, Resulting in Strong Financial Performance That Balanced Growth With Profitabilitystockholders
T-Mobile had another record yearfinancial results in 2015, delivering industry leading customer,2017, including service revenue andrevenues, total revenues, net income, Adjusted EBITDA, growth.net cash from operating activities and free cash flow. We ended the year with more than 63 million total customers and became the third largest wireless carrier in the United States. T-Mobile added 8.35.7 million total net customers in 20152017 and captured allthe majority of the industry’s postpaid phone growth which made T-Mobile America’s fastest growing wireless company once again. In addition to strong net customer additions, we kept customers longer, with branded postpaid phone churn of 1.39% for the fullfourth consecutive year. We ended the year of 2015.with 72.6 million total customers.
Our customer growth translated into strong financial results.industry-leading revenue and cash flow growth. Service revenue of $24.8$30.2 billion for 20152017 grew at an industry-leading 10.9%8.3% year over year. Similarly,Net income of $4.5 billion for 2017 grew 211% year over year, net income of $2.3 billion (excluding impact from the Tax Cuts and Jobs Act (the “Tax Act”) of $2.2 billion) for 2017 grew 62% year over year and Adjusted EBITDA of $7.4$11.2 billion for 2015 grew 31.2%5.4% year over year, significantly outpacing the industry.year.
As of December 31, 2017, T-Mobile also delivered on several major network milestones in 2015. The Company more than doubled its geographic covered 322 million people with 4G LTE footprint during the year, expanding its reach to 305 million Americans, and exceeding its stated year-end 2015 goalLTE. Our stock price increased by 284% from May 1, 2013 (the first day of 300 million. Sincetrading after the Business Combination,Combination) through December 29, 2017 and 10.4% during 2017 alone. Looking back three years, our stock price has increased by 137% from May133% (January 1, 201312015 through December 31, 2015.29, 2017).
Adjusted EBITDA is a non-GAAP financial measure. This non-GAAP financial measure should be considered in addition to, but not as a substitute for, the information provided in accordance with U.S. generally accepted accounting principles (“GAAP”). A reconciliation to the most directly comparable GAAP financial measure is provided in Appendix A to this proxy statement.
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Our executive compensation program emphasizes pay for performance. As a result, our 2015 Named Executive Officer compensation reflects T-Mobile’s strong 2015 operational and financial performance.
| 2 | T-Mobile 2018 Proxy Statement |
2016 PROXY STATEMENT SUMMARY INFORMATION
Executive Compensation Highlights – Paying for Performance
Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent, reward short-term and long-term business results and exceptional individual performance, and most importantly, maximize stockholder value. Our executive compensation program is competitive in the marketplace and highly incentive-based, with Company performance determining a significant portion of total compensation.
| Key Features of Our Executive Compensation Program |
| What We Do | |||||
| Emphasis on pay for performance | |||||
| Independent compensation consultant | |||||
| Executive and director stock ownership guidelines | |||||
| Clawback policy to recapture incentive payments | |||||
| Use multiple performance measures and caps on potential incentive payments | |||||
| Substantial majority of target total compensation is variable | |||||
| Use of executive compensation statements (“tally sheets”) | |||||
| Annual risk assessment of compensation programs | |||||
| What We Don’t Do | ||||||||
 | No short-selling, hedging or pledging of Company’s securities | |||||||
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| No excise tax | |||||
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| No special executive retirement program | |||||
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| No acceleration of compensation upon retirement | |||||
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| No single-trigger vesting of equity awards upon a change in control | |||||
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What We Pay and Why: Goals and Elements of Compensation
2016 PROXY STATEMENT SUMMARY INFORMATION
To promote a performance-based culture that further aligns the interests of management and stockholders, in 2015 the executive compensation program focused extensively on variable, performance-based compensation. As illustrated in the charts below, the substantial majority of the Named Executive Officers’ total compensation as reported in the 2015 Summary Compensation Table was in the form of variable compensation (short-term and long-term).
| T-Mobile 2018 Proxy Statement | 3 |
Corporate Governance at T-Mobile
The Company’sT-Mobile is committed to good corporate governance
Our corporate governance practices and policies promote the long-term interests of our stockholders, strengthen the accountability of theour Board of Directors and management and help build public trust.
Our Board has established a boardroom dynamic that encourages meaningful and robust discussions based on each director’s unique and
diverse background, resulting in informed decision-making that seeks to maximize stockholder value and
promotes stockholder interests. Directors exercise thorough oversight of decisions regarding the Company’s strategy and outlook. The Board regularly reviews developments in corporate governance and updates its practices and governance materials as it deems necessary and appropriate. The dashboard below highlights key aspects of the Company’s corporate governance program.
Governance Dashboard
Key Governance Materials
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| Unclassified Board and Annual Election of Directors | | Annual Board and Committee Self-Evaluations | |||
| 12 Director Nominees | | No poison pill | |||
| Separation of Chairman and Chief Executive Officer Roles | | Stockholder Right to Call Special Meeting and Act by Written Consent | |||
| Lead Independent Director | | Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies | |||
| Independent Chairs of the Audit, Compensation and Nominating and Corporate Governance Committees | | Executive Compensation Driven by Pay for Performance | |||
| Regular Executive Sessions of Independent Directors | | Stock Ownership Guidelines for Executive Officers and Directors | |||
| Comprehensive Risk Oversight by the Board and its Committees | | Clawback Policy to Recapture Incentive Payments | |||
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| Certificate of Incorporation | | Charter for Each Board Committee |
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| Bylaws | | Code of Business Conduct | |||
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| Corporate Governance Guidelines | | Code of Ethics for Senior Financial Officers | |||
| Stockholder’s Agreement | | Whistleblower Protection Policy | |||
You can access the Company’s current corporate governance guidelines, committee charters, Code of Business Conduct and Code of Ethics for Senior Financial OfficersThese documents are available on the Investor Relations section of our website athttp://investor.t-mobile.com by selecting “Governance Documents” under the “Corporate Governance” tab. The certificate of incorporation, bylaws and Stockholder’s Agreement or are listed as exhibits to the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and are available on the SEC’s web site at www.sec.gov. Instructions on how to obtain copies of the Company’s corporate governance materials can also be found on page 56.
Governance Highlights.
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CORPORATE GOVERNANCE AT T-MOBILE |
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ABOUT THE BOARD OF DIRECTORS |
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Corporate Governance GuidelinesFramework and Code of Business Conduct
Our Board of Directors established our corporate governance guidelines,has adopted Corporate Governance Guidelines, which, together with our certificate of incorporation, our bylaws and the Stockholder’s Agreement with Deutsche Telekom, which beneficially ownsprovide a majority of our outstanding shares of common stock (approximately 65% as of March 31, 2016), set forthframework for the framework within which the Board and its committees direct the affairseffective governance of the Company. See “Transactions With Related Persons and Approval — Transactions With Deutsche Telekom — Stockholder’s Agreement” for more information regarding the
Stockholder’s Agreement. The Board also adopted our Code of Business Conduct, which establishes the standards of ethical conduct applicable to all of our directors, officers and employees. In addition, we have a Code of Ethics for Senior Financial Officers. In the event of a waiver by the Board of Directors of any Code of Business Conduct or Code of Ethics for Senior Financial Officers provisions applicable to directors or executive officers, we will promptly disclose the Board’s actions on our website.
CORPORATE GOVERNANCE
Our Board Compositionand Director Independence
The sizeOur Board consists of our Board12 directors, two of Directors has been fixed at 11. The size of our Board may be changed pursuant to our bylaws, subject towhom are currently employed by the provisions of our certificate of incorporation and the Stockholder’s Agreement between the Company and Deutsche Telekom.
Company. Pursuant to our certificate of incorporation and the Stockholder’s Agreement, Deutsche Telekom has certain rights to designate
director nominees and to have such designees serve on the committees of the Board. See “Transactions With Related Persons and Approval — Transactions Withwith Deutsche Telekom — Stockholder’s Agreement” for more information.
We Are a Controlled Company with Certain Exemptions
Since Deutsche Telekom beneficially owns a majority of our outstanding stock (approximately 63% as of March 31, 2018), we are deemed a “controlled company” under the NASDAQ Stock Market LLC (“NASDAQ”) rules. These rules exempt “controlled companies,” like us, from certain corporate governance requirements, including: (a) that a majority of our Board be independent, (b) that our Nominating and Corporate Governance Committee be composed entirely of independent directors and (c) that our Compensation Committee be composed entirely of independent directors. In addition, we rely on the exemption for controlled companies from NASDAQ rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) that relate to compensation committee member independence and compensation committee consultants.
Director Independence
TheOn an annual basis, our Board of Directors evaluates the independence of each director, including nominees for election to the Board, in accordance with applicable laws and regulations, the NASDAQ Stock Market LLC (“NASDAQ”) rules and our corporate governance guidelines. As a “controlled company” under NASDAQ rules, we are exempt from the requirement to have a majority of independent directors on our Board. However, pursuant to our certificate of incorporation, the Stockholder’s Agreement and our corporate governance guidelines, the Board is required to have at least three directors, including all the members of the Audit Committee, who meet the director independence standards under NASDAQ rules. We have five directors who our Board has determined are independent. The Board considers all relevant facts and circumstances in determining independence, including, among other things, making an affirmative
determination that the director has no material relationship with the Company directly or as an officer, stockholder, or partner of an organization that has a material relationship with the Company.Corporate Governance Guidelines. For certain types of relationships, NASDAQ rules require us to consider a director’s relationship with the Company, and also with any parent or subsidiary in a consolidated group with the Company, which includes Deutsche Telekom and its affiliates.
The Board Each of Directors has determined that Messrs. Barnes, Datar, Guffey and Westbrook and Ms. Taylor are independentthe following directors or director nominees is an “independent director” under NASDAQ rules and our corporate governance guidelines. In addition, the Board has determined that each member of the Audit Committee meets the heightened independence criteria applicable to audit committee members under NASDAQ and SEC rules.Corporate Governance Guidelines:
∎ W. Michael Barnes* | ∎ Olaf Swantee | |
∎ Srikant M. Datar* | ∎ Kelvin R. Westbrook* | |
∎ Lawrence H. Guffey | ∎ Teresa A. Taylor |
| * | The Board has determined that each member of the Audit Committee meets the heightened independence criteria applicable to audit committee members under NASDAQ and SEC rules. |
SeparateBoard Leadership
Our Chairman and Our Chief Executive Officer Roles Are Separated
Our Board of Directors has chosen to separate the roles of Chairman of the Board and Chief Executive Officer, and it has appointed Timotheus Höttges, Deutsche Telekom’s Chief Executive Officer, as the Chairman of the Board.
We believe that separating the roles of Chief Executive Officer and Chairman of the Board is appropriate for the Company and in the best interests of the Company and its stockholders at this time. Our Chairman manages the overall Board function, and his current responsibilities include chairing all regular sessions of the Board; establishing the agenda for each Board meeting in consultation with the lead independent director, ourTimotheus Höttges, Deutsche Telekom’s Chief Executive Officer, and other
senior management as appropriate; and helping to establish, coordinate and reviewis the criteria and methods for evaluating, at least annually, the effectivenessChairman of the Board and its committees. Board. Key responsibilities of our Chairman include:
| ∎ | Managing the overall Board function |
| ∎ | Chairing all regular sessions of the Board |
| ∎ | Establishing the agenda for each Board meeting in consultation with the lead independent director, our Chief Executive Officer and other senior management as appropriate |
| ∎ | Assisting in establishing, coordinating and reviewing the criteria and methods for evaluating, at least annually, the effectiveness of the Board and its committees |
The separation of the offices allows Mr. Höttges to focus on management of Board matters and allows our Chief Executive Officer to focus on managing our business. Additionally, we believe the separation of the roles ensures the objectivity of the Board in its management oversight role, specifically with respect to reviewing and assessing our Chief Executive Officer’s performance. The Board believes that its role in risk oversight did not impact the leadership structure chosen by the Board.
We Have a Lead Independent Director
In addition to separating the Chairman of theOur Board and Chief Executive Officer roles, our Board of Directors has also chosen to also appoint a lead independent director. TheTeresa A. Taylor is our current lead independent director. Key responsibilities of our lead independent director a position currently held by Teresa A. Taylor, coordinates the activities of our independent directors, calls and presides over the executiveinclude:
sessions of the independent directors and functions as a liaison between such independent directors and the Chairman of the Board and/or the Chief Executive Officer. The lead independent director provides input on the flow of information to the Board, including the Board’s agenda and schedule.
We qualify as a “controlled company” under the NASDAQ rules because Deutsche Telekom beneficially owns a majority of our outstanding shares of common stock (approximately 65% as of March 31, 2016). As a controlled company, we are eligible for exemptions from certain corporate governance requirements under the NASDAQ rules. Specifically, we rely on controlled company exemptions from the NASDAQ rules that require:
a majority of the board of directors to be independent;
independent directors or a nominating committee composed entirely of independent directors to select (or recommend for selection by the full board) director nominees; and
a compensation committee composed entirely of independent directors to determine (or recommend for determination by the full board) the compensation of executive officers, including the chief executive officer.
In addition, we rely on the exemption for controlled companies from NASDAQ rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) that relate to compensation committee member independence and compensation committee consultants.
| Coordinating the activities of our independent directors |
CORPORATE GOVERNANCE
| ∎ | Calling and presiding over the executive sessions of the independent directors |
| ∎ | Functioning as a liaison between the independent directors and the Chairman of the Board and/or the Chief Executive Officer |
| ∎ | Providing input on the flow of information to the Board, including the Board’s agenda and schedule |
Board Meetings and Director Attendance
Our Board meets regularly throughout the year. Committees typically meet the day prior to the Board meeting and depending on the schedule of the Board meeting, the Audit Committee holds additional meetings in connection with quarterly earnings. Directors are expected to attend all meetings of the Board of Directors and each committee on which they serve, as well as the Annual Meeting of Stockholders. TheAt each regularly-scheduled Board met seven times during 2015. Each director attended at least 75% of the total number of meetings of the Board and Board committees on which he or she served. Eight of our directors attended our 2015 Annual Meeting of Stockholders.
Executivemeeting (or more frequently if necessary), time is set aside for executive sessions or meetings ofwhere outside (non-management) directors meet without management present, are held at each regularly scheduled Board meeting or more frequently if necessary. The Chairman of the Board or the lead independent director presides
over these executive sessions. The executive sessions provide an opportunity for outside directors to review any matters of interest raised by the Chairman of the Board, the lead independent director or the other non-management members of the Board, including strategic, operational, or financial issues and management performance and succession.
present. In addition, our corporate governance guidelinesCorporate Governance Guidelines require the independent directors to meet at least twice each year in executive session, with the lead independent director presiding at such executive session.
| ∎ | Our Board met 16 times during 2017 |
| ∎ | Each director attended at least 75% of the total number of meetings of the Board and Board committees on which he or she served |
| ∎ | All directors who then served on the Board, other than one, attended our 2017 Annual Meeting of Stockholders |
| T-Mobile 2018 Proxy Statement | 5 |
CORPORATE GOVERNANCE AT T-MOBILE
Communications with DirectorsANNUAL BOARD AND COMMITTEE EVALUATIONS
The Nominating and Corporate Governance Committee oversees the annual Board and committee self-evaluation process. In 2017, the Committee engaged an outside consultant to coordinate and provide insight on the annual self-evaluation process.
 | The Board is committed to a comprehensive self-evaluation process to review the Board and each committee’s overall effectiveness. |
Noted below are the high-level steps of the Board and Committee self-evaluation process.
Board Evaluation Process
Interested personsHOW TO COMMUNICATE WITH OUR BOARD
You may contact the Chairman of the Board, the Board as a whole, the lead independent director, or any individual director as follows:
T-Mobile US, Inc.
The Board of Directors
c/o Corporate Secretary
12920 SE 38th Street
Bellevue, Washington 98006
| T-Mobile US, Inc. The Board of Directors c/o Corporate Secretary 12920 SE 38th Street Bellevue, Washington 98006 |
After receipt, communications will generally be forwarded to the Chairman of the Board, the whole Board, the lead independent director or specific directors as the Corporate Secretary deems appropriate based on the content of, and the matters raised in, the communication. Communications that are unrelated to the duties and responsibilities of the Board or are unduly hostile, threatening, potentially illegal or similarly unsuitable will not be forwarded. Responses to letters and any communications that are excluded are maintained by the Company and are available to any director upon request.
Board Committees and Related Matters
| 6 | T-Mobile 2018 Proxy Statement |
CORPORATE GOVERNANCE AT T-MOBILE
TheBOARD COMMITTEES AND RELATED MATTERS
Our Board of Directors has four standing committees: Audit, Compensation, Executive, and Nominating and Corporate Governance. The Board makes committee and committee chair assignments annually at its meeting immediately following the Annual Meeting of Stockholders, although further changes may be made from time to time as deemed appropriate by the Board.
Each committee has a Board-approved charter, which is reviewed annually by the respective committee. Recommended changes, if
any, are submitted to the Board for approval. Each committee may retain and compensate consultants or other advisors as necessary for it to carry out its duties, without consulting with or obtaining the approval of the Board or the Company. A copy of the charter for each standing committee can be found on the Investor Relations section of our website athttp://investor.t-mobile.com by selecting “Governance Documents” under the “Corporate Governance” tab.
CORPORATE GOVERNANCE
Audit Committee
Chair: Srikant M. Datar | ||||
Additional W. Michael Barnes Kelvin R. Westbrook Meetings Held in 2017: 15 | ||||
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∎ Assist the Board in oversight of the integrity of the Company’s financial statements and the financial reporting process, disclosure controls and procedures and internal audit functions ∎ Directly appoint, compensate and retain our independent auditor, including the evaluation of the independent auditor’s qualifications, performance and independence ∎ Pre-approve the retention of the independent auditor for all audit and such non-audit services as the independent auditor is ∎ Discuss the Company’s risk assessment and risk management policies, as well as annually review the implementation and effectiveness of our compliance and ethics programs ∎ Develop and oversee compliance with the Code of Ethics for Senior Financial Officers and the Code of Business Conduct for all employees, officers and directors ∎ Establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters ∎ Review and approve all related person transactions pursuant to the Company’s Related Person Transaction Policy
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The Audit Committee represents and assists the Board of Directors in its oversight responsibility relating to the integrity of the Company’s financial statements and the financial reporting process, disclosure controls and procedures and internal audit functions. The Audit Committee also oversees the appointment, compensation and retention of our independent registered public accounting firm, including the performance by the independent registered public accounting firm of permissible audit, audit-related, and non-audit services, and the associated fees. The Audit Committee periodically reviews the Company’s risk assessment and risk management
policies, as well as our compliance and ethics programs. The Audit Committee develops and oversees compliance with the Code of Ethics for Senior Financial Officers and the Code of Business Conduct for all employees, officers and directors. The Audit Committee is also responsible for establishing procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. In addition, the Audit Committee reviews and approves all related person transactions pursuant to the Company’s Related Person Transaction Policy.
| T-Mobile 2018 Proxy Statement |
CORPORATE GOVERNANCE AT T-MOBILE
Compensation Committee
Chair: Teresa Taylor Additional Members W. Michael Barnes Thomas Dannenfeldt Lawrence H. Guffey Raphael Kübler Meetings Held in 2017: 5 Section 16 Subcommittee: Teresa A. Taylor Lawrence H. Guffey | As more fully described in its charter, the primary responsibilities of the Compensation Committee are to: ∎ Review and approve the Company’s executive compensation philosophy and its programs, policies and practices ∎ Review and approve corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluate the CEO’s performance in light of those goals and objectives and determine and approve the CEO’s compensation ∎ Review and approve compensation for the Company’s Executive Officers ∎ Oversee the development of succession plans for the Chief Executive Officer and senior management ∎ Assist the Board in reviewing the results of any shareholder advisory votes, or responding to other shareholder communications, that relate to Executive Officer compensation, and consider whether to make or recommend adjustments to the Company’s policies and practices as a result of such votes or communications ∎ Review a report from management regarding potential material risks, if any, created by the Company’s compensation policies and practices ∎ The Section 16 Subcommittee has sole authority to approve all awards granted to the Company’s officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Section 16 officers”) that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) | |||
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The Compensation Committee has overall responsibility for evaluating and approving compensation plans, policies and programs applicable primarily to the Company’s executive officers, including executive compensation philosophy and Chief Executive Officer compensation. TheHas Engaged an Independent Compensation Committee is also responsible for certain compensation programs affecting the Company’s employees generally, such as equity compensation plans, and reviews annually with management the risks arising from such programs. In addition, the Compensation Committee reviews and oversees the independent director compensation policies. A significant focus area of the Compensation Committee is succession plan development for the Chief Executive Officer and senior management.Consultant
The Compensation Committee has established the Section 16 Subcommittee, which has sole authority to approve all awards granted to the Company’s officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Section 16 officers”) that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and unless otherwise determined by the Compensation Committee, authority to approve all equity or equity-based awards to the Company’s Section 16 officers. The Compensation Committee has delegated authority to the Company’s Executive Vice President, Human Resources, to make awards to employees who are not Section 16 officers. The Compensation Committee charter authorizes the Compensation Committee to form and delegate its authority to other subcommittees and to one or more members of the Board of Directors.
Compensation Consultant.The Compensation Committee has retained Mercer (a wholly ownedwholly-owned subsidiary of Marsh & McLennan Companies, Inc.), a well-recognized employee benefits and compensation consulting firm, as its independent compensation consultant to adviseconsultant. Mercer assists the Compensation Committee in its evaluation of the compensation and benefits provided to the Chief Executive Officer and the other executive officers. At the request of the Compensation Committee, a consultant from Mercer generally attends the Committee meetings at which executive officer compensation is discussed and provides information, research and analysis pertaining to executive compensation as requested by the Compensation Committee. Mercer also updates the Compensation Committee on market trends.
In connection with its engagement of Mercer, the Compensation Committee considered various factors bearing upon Mercer’s independence including, but not limited to, the amount of fees received by Mercer from the Company, Mercer’s policies and procedures designed to prevent conflicts of interest, and the existence of any business or personal relationship that could impact Mercer’s independence. After reviewing these and other factors, the Compensation Committee determined that Mercer was independent and that its engagement did not present any conflicts of interest. Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Compensation Committee.
| ∎ | The Compensation Committee determined that Mercer is (and was, during 2017) independent and that its engagement does not (and did not, during 2017) present any conflicts of interest. |
| ∎ | Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Compensation Committee. |
During 2015,2017, Mercer provided executive compensation services to the Company. The aggregate fees for such services were approximately $179,000.$215,000. In addition, Mercer provided services to the Company for investment and benefits consulting and retirement plan consulting. The aggregate fees for such services were approximately $110,000.$140,000.
Compensation Committee Interlocks and Insider Participation
During 2017, Ms. Taylor and Messrs. Barnes, Dannenfeldt, Guffey and Kübler served as members of our Compensation Committee. No member of the Compensation Committee who served during 2017 was an officer or employee of the Company or any of its subsidiaries during the year, was formerly a Company officer or had any relationship otherwise requiring disclosure as a compensation committee interlock.
| 8 | T-Mobile 2018 Proxy Statement |
CORPORATE GOVERNANCE
AT T-MOBILE
The Compensation Committee sets compensation based on the skills, experience and achievements of each executive officer, taking into account market analysis and input provided by its compensation consultant and the compensation recommendations of our Chief Executive Officer, except with respect to his own position. The
Compensation Committee believes that input from both its consultant and our Chief Executive Officer provides useful information and points of view to assist the Compensation Committee in determining the appropriate compensation.
Executive Committee
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Additional Thomas Dannenfeldt Lawrence H. Guffey Bruno Jacobfeuerborn Raphael Kübler Thorsten Langheim John J. Legere | ||||
Meetings Held in *Per the Executive Committee’s charter, the Committee meets as often as it determines necessary | As more fully described in its charter, the primary responsibilities of the Executive Committee are to: ∎ Monitor the Company’s operating performance relative to its operating objectives, strategy, plans and actions ∎ Provide management with feedback regarding the Company’s operating objectives, strategy, plans, and actions, as well as the Company’s operating performance ∎ Consider strategic operating goals, opportunities and risks ∎ Recommend changes to the Company’s operating objectives, strategy, plans, and actions for consideration by the Board, as appropriate | |||
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The Executive Committee has been established by our Board of Directors to review and provide guidance to our senior management regarding our strategy, operating plans and operating performance.
Nominating and Corporate Governance Committee
Chair: Kelvin R. Westbrook Additional Members Lawrence H. Guffey Thorsten Langheim Meetings Held in 2017: 6 | As more fully described in its charter, the primary responsibilities of the Nominating and Corporate Governance Committee are to: ∎ Subject to the terms of the Company’s certificate of incorporation and the Stockholder’s Agreement, review, approve and recommend for Board consideration director candidates based on the director selection guidelines then in effect, and advise the Board with regard to the nomination or appointment of such director candidates ∎ Periodically review and make recommendations to the Board regarding the appropriate size, role and function of the Board ∎ Develop and oversee a process for an annual evaluation of the Board and its committees ∎ Monitor the process for preparing agendas for, organizing and running Board meetings (including the occurrence of regular executive sessions) in coordination with the Chairman of the Board and Chief Executive Officer ∎ Recommend to the Board, as appropriate, the number, type, functions, and structure of committees of the Board, and the chairperson of each such committee ∎ Periodically review the Company’s director orientation program and recommend changes, as appropriate ∎ Monitor, plan and support continuing education activities of the directors ∎ Develop, update as necessary and recommend to the Board corporate governance principles and policies | |||
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The Nominating and Corporate Governance Committee assists the Board of Directors with the process of identifying, recruiting, evaluating, and nominating candidates for membership to our Board and overseeing corporate governance principles and policies
applicable to the Company. In addition, the Nominating and Corporate Governance Committee oversees the functions and needs of the Board and its committees, including leading the annual Board and committee performance review.
| T-Mobile | 9 |
CORPORATE GOVERNANCE
AT T-MOBILE
Board of Directors’ Role in Risk ManagementBOARD RISK OVERSIGHT
Management of the Company, including the Chief Executive Officer and other executive officers, is primarily responsible for managing the risks associated with the business, operations, and financial and disclosure controls. Financial,Management conducts a quarterly enterprise-wide risk assessment and considers financial, strategic, IT, technology, operational, compliance, legal/regulatory, and reputational risks to the CompanyCompany. The results of these assessments are considered by management when it conducts its quarterly enterprise-wide risk assessment and are reviewed and updated regularly in connection with the operational, financial, and business activities of the Company.
As part of the risk management process, management of the Company has establishedManagement Has Established an Enterprise Risk and Compliance Committee to help overseeand an Information Security and Privacy Council
The Enterprise Risk and Compliance Committee oversees activities in the areas of risk management and compliance as a means of bringing risk issues to the attention of senior management. Responsibilities for risk management and compliance are distributed throughout various functional areas of the business, and the Enterprise Risk and Compliance Committee regularly reviews the Company’s activities in these areas. In addition, the Company has established an
The Information Security and Privacy Council, with support from the Senior Vice President, Enterprise InformationDigital Security, who serves as the Chief Information Security Officer, and the Vice President, Chief Privacy Officer, to overseeoversees the strategic governance and prioritization of the Company’s information security and privacy initiatives.
OurSelective Delegation of Risk Oversight to Committees
While the full Board of Directors assesses Company risks and strategieshas overall responsibility for risk mitigation, and it manages itsoversight, the Board has delegated risk oversight function primarily, but not exclusively, through the Audit Committeeresponsibility for certain risks to committees of the Board. As such,On a regular basis, reports of all committee meetings are presented to the Board and the Board periodically conducts deep dives on key enterprise risks.
Audit Committee
The Audit Committee has primary responsibility for overseeing the Company’s various risk assessment and risk management policies. In performing this function, theThe Audit Committee considers and discusses policies with respect to risk assessment and risk management, including the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
To assist the Audit Committee with its risk assessment function, the Senior Vice President, Internal Audit & Risk Management, who serves as the Chief Audit Executive, and the Vice President, Chief Compliance Officer have direct reporting channels to the Audit Committee, and have regular meetings with the Audit Committee and/or its members. They provide a quarterly enterprise-wide risk assessment and annual fraud and compliance risk assessments to the Audit Committee and update the Audit Committee on significant issues raised by the Enterprise Risk and Compliance Committee.
The Audit Committee reviews all risk assessments, provides feedback to executive management and may shareshares the risk assessments with the Board. The Audit Committee also has other oversight responsibilities with respect to the
Company’s internal audit and SOX Compliance program, as well as other compliance and ethics programs, as more fully set out in its charter.
Compensation Committee
The Compensation Committee has certain oversight responsibilities with respect to the assessment of risk in
connection with our compensation programs. The Executive Committee of the Board, charged with reviewing and providing guidance to senior management of the Company regarding the Company’s strategy, operating plans and operating performance, also plays a key role in helping the Board perform its risk oversight function by considering strategic operating goals, opportunities and risks. In addition, the Nominating and Corporate Governance Committee oversees Board process and corporate governance-related risks. Finally, reports of all committee meetings are presented to the Board on a regular basis.
Risk Assessment of Compensation Programs. The Company designs the compensation programs to encourage appropriate risk taking while discouraging behavior that may result in unnecessary or excessive risk. In this regard, the following elements have been incorporated in our compensation programs for executive officers:
Use of multiple metrics in annual incentive plan and use of two long-term incentive vehicles for executive officers
Each annual incentive award metric capped at 200%
Performance-based share awards capped at 200%
Emphasis on long-term and performance-based compensation
Compensation Committee has discretion to reduce incentive awards, as appropriate
Long-term incentive awards vest ratably over three years or performance vest at end of performance period
Formal clawback policy applicable to both cash and equity compensation
Alignment of interests of our executive officers with the long-term interests of our stockholders through stock ownership guidelines that call for significant share ownership
Generally no supplemental benefits or perquisites for executive officers
The Compensation Committee periodically reviews with management an assessment of whether risks arising from the Company’s compensation policies and practices for all employees are reasonably likely to have a material adverse effect on the Company, as well as the means by which any potential risks may be mitigated, such as through governance and oversight policies. Based on an assessment conducted by management consultant Towers Watson, which was presentedThe Company designs the compensation programs to and discussed withencourage appropriate risk taking while discouraging behavior that may result in unnecessary or excessive risk. In this regard, the Compensation Committee, management concluded thatfollowing elements have been incorporated in our compensation programs for executive officers:
| ∎ | Use of multiple metrics in the annual incentive plan and use of two long-term incentive vehicles (time-based and performance-based) for executive officers |
| ∎ | Annual incentive award payouts capped at 200% of target |
| ∎ | Performance-based long-term incentive awards capped at 200% of target |
| ∎ | Emphasis on long-term and performance-based compensation |
| ∎ | Compensation Committee has discretion to reduce incentive awards, as appropriate |
| ∎ | Alignment of interests of our executive officers with the long-term interests of our stockholders through stock ownership guidelines that call for significant share ownership by our executive officers |
| ∎ | Formal clawback policy applicable to both cash and equity compensation |
| ∎ | Generally, long-term incentive awards vest ratably over three years or at the end of a three-year performance period |
| ∎ | No excessive perquisites for executive officers |
| ∎ | Based on an assessment conducted by management consultant Willis Towers Watson, which was presented to and discussed with the Compensation Committee, management concluded that our compensation policies and practices for all employees do not create risks that are reasonably likely to have a material adverse effect on the Company. |
Executive Committee
The Executive Committee reviews and provides guidance to senior management regarding the Company’s strategy, operating plans and operating performance. The Executive Committee also plays a key role in helping the Board perform its risk oversight function by considering strategic operating goals, opportunities and risks.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee oversees Board process and corporate governance-related risks.
| 10 | T-Mobile 2018 Proxy Statement |
CORPORATE GOVERNANCE
AT T-MOBILE
Director CompensationDIRECTOR COMPENSATION
Non-Employee Director Compensation Program
Each directorOur “non-employee directors”—directors who isare not an employeeemployees of the Company or an officerofficers or employeeemployees of Deutsche Telekom (a “non-employee director”) isTelekom—are eligible to participate in the Company’s non-employee director compensation program. The main features of this program, outlined in more detail below, are:
A larger allocation to equity-based compensation than cash
All equity-based compensation is subject to a vesting period
Substantial stock ownership guidelines of five times his or her annual cash retainer
described below. The Compensation Committee periodically reviews the compensation of our non-employee directors. As part of the review, the Compensation Committee engages Mercer to assess our non-employee director compensation program in comparison to our peer group as discussed in(see “—Executive Compensation — Compensation—Factors Considered in Determining Executive Compensation — Compensation—Executive Compensation Peer Group.”Group” for more information on our peer group). Based on such assessment, the non-employeenon-
employee director compensation program is adjusted as appropriate to ensure alignment with market practices.
Key Features of Our Non-Employee Director Compensation Program
| ∎ | A larger allocation of total director compensation to equity-based compensation rather than cash compensation |
| ∎ | All equity-based compensation is subject to a vesting period |
| ∎ | Substantial stock ownership guidelines of five times the non-employee director’s annual cash retainer |
Annual cash retainers are subject to proration for any person who becomes a non-employee director and/or committee chair at any time of the year other than the date of the Company’s Annual Meeting of Stockholders. Directors also receive reimbursement of expenses incurred in connection with their Board service.
Elements of Non-Employee Director Compensation | Amount ($) | |||
Annual cash retainer | 120,000 | |||
Additional annual cash retainer for: | ||||
Lead Independent Director | 35,000 | |||
Audit Committee Chair | 50,000 | |||
Compensation Committee Chair | 25,000 | |||
Chair of Independent Director Committee | 25,000 | |||
Nominating and Corporate Governance Committee Chair | 15,000 | |||
Additional Retainer for Audit Committee Members | 15,000 | |||
Independent Committee Member Annual Retainer | 50,000 | |||
Annual award of Restricted Stock Units | 195,000 | |||
Additional cash amounts for each Board and committee meeting in excess of ten meetings per year: | ||||
In person | 2,000 | |||
By telephone | 1,000 | |||
Under our current non-employee director compensation program, immediately after each Annual Meeting of Stockholders, each non-employee director receives an
The annual award of restricted stock units (“RSUs”) with a value of $160,000 (rounded up to the nearest share number), with pro rata awards for non-employee directors joining the Board at any time other than the date of theis made immediately after each Annual Meeting of Stockholders. The RSUs vest on the one-year anniversary of the grant date or, for directors not standing for re-election, on the date of the next Annual Meeting of Stockholders, for directors not standing for re-election.subject to continued service as a non-employee director through the vesting date. In the event of a director’s termination of service prior to vesting, all RSUs are automatically forfeited. The RSUs immediately vest on the date of a change in control of the Company.
Annual cash retainers and the annual RSU award are prorated for any person who becomes a non-employee director and/or committee chair, or who otherwise becomes entitled to an additional annual cash retainer as described above, at any time of the year other than the date of the Company’s Annual Meeting of Stockholders. Non-employee directors also receive reimbursement of expenses incurred in connection with their Board service and are eligible to receive up to two handsets per year and up to ten lines of U.S. service pursuant to the Board of Directors Phone Perquisite Program.
Our Directors Are Required to Acquire and Maintain Ownership of Shares of T-Mobile
Under our stock ownership guidelines, each non-employee director is expected to acquire and maintain ownership of shares of common stock equal in value to five times his or her annual cash retainer for Board service measured as of the later of (i) the date we adopted the policy (May 1, 2013) and (ii) the date on which he or she becomes a non-employee director. Each non-employee director is expected to meet the ownership guidelines within the later of (a) five years from the date we adopted the policy and (b) the date on which he or she became a non-employee director, and is expected to retain at least 50% of the net shares of common stock acquired through equity awards until the ownership threshold is met.
| ∎ | As of December 31, 2017, all non-employee directors were in compliance with our stock ownership guidelines |
The following table summarizes the compensation payable to the Company’s non-employee directors:
| T-Mobile 2018 Proxy Statement | |||||
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CORPORATE GOVERNANCE AT T-MOBILE
20152017 Non-Employee Director Compensation Table
During fiscal year 2015,2017, the Company’s non-employee directors received the following compensation for their services:
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | Fees Earned or Paid in Cash(1) ($) | Stock Awards (2) ($) | All Other Compensation (3) ($) | Total ($) | ||||||||||||||||||||||||
| W. Michael Barnes | 109,753 | 160,008 | 3,107 | 272,868 | 241,598 | 195,038 | 35,332 | 471,969 | ||||||||||||||||||||||||
| Srikant M. Datar | 155,753 | 160,008 | 2,537 | 318,298 | 272,000 | 195,038 | 4,533 | 471,571 | ||||||||||||||||||||||||
| Lawrence H. Guffey | 112,753 | 160,008 | 4,028 | 276,789 | 212,000 | 195,038 | 2,355 | 409,393 | ||||||||||||||||||||||||
| Teresa A. Taylor | 155,753 | 160,008 | — | 315,761 | 287,371 | 195,038 | 18,057 | 500,467 | ||||||||||||||||||||||||
| Kelvin R. Westbrook | 126,658 | 160,008 | 3,823 | 290,489 | 260,129 | 195,038 | 24,413 | 479,580 | ||||||||||||||||||||||||
| (1) | Includes fees earned as an Independent Committee member as described above under “Elements of Non-Employee Director Compensation”. |
| (2) | The value of stock awards is determined using the aggregate grant date fair value computed in accordance with FASB Accounting Standards Codification Topic 718, “Compensation–Stock Compensation,” or ASC 718, excluding the effect of any estimated forfeitures. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be realized by the directors. See Note |
Includes (i) phone perquisites under the Board of Directors Phone Perquisite Program, (ii) personal and spousal travel expenses in connection with a Board meeting |
CORPORATE GOVERNANCE
Non-Employee Director Stock Ownership GuidelinesDIRECTOR NOMINATION, SELECTION AND QUALIFICATIONS
Under our stock ownership guidelines, each non-employee director is expected to acquire and maintain ownership of shares of common stock equal in value to five times his or her annual retainer measured as of May 1, 2013, for non-employee directors serving on that date or as of the date Board service commences for any non-employee director joining the Board after May 1, 2013. Each non-employee
director is expected to meet the ownership guidelines within five years from the applicable measurement date, and is expected to retain at least 50% of the net shares of common stock acquired through the Company’s equity compensation plans until the ownership threshold is met.
Director Nomination, Selection and Qualifications
Qualifications and Diversity
Subject to Deutsche Telekom’s board designation rights, the Nominating and Corporate Governance Committee is responsible for identifying and evaluating director nominees and recommending to the Board of Directors a slate of nominees for election at each Annual Meeting of Stockholders. The Board has adopted director selection guidelines, which the Nominating and Corporate Governance Committee considers in evaluating each director candidate.
The Nominating and Corporate Governance Committee considers, among others, the following factors:
Professional experience, industry knowledge, skills and expertise;
Leadership qualities, public company board and committee experience and non-business-related activities and experience;
High standard of personal and professional ethics, integrity and values;
Training, experience and ability at making and overseeing policy in business, government and/or education sectors;
Willingness and ability to keep an open mind when considering matters affecting interests of the Company and its constituents;
Willingness and ability to devote the required time and effort to effectively fulfill the duties and responsibilities related to Board and committee membership;
Willingness and ability to serve on the Board for multiple terms, if nominated and elected, to enable development of a deeper understanding of the Company’s business affairs;
Willingness not to engage in activities or interests that may create a conflict of interest with a director’s responsibilities and duties to the Company and its constituents; and
Willingness to act in the best interests of the Company and its constituents and to objectively assess Board, committee and management performances.
| ∎ | Professional experience, industry knowledge, skills and expertise |
| ∎ | Leadership qualities, public company board and committee experience and non-business-related activities and experience |
| ∎ | High standard of personal and professional ethics, integrity and values |
| ∎ | Training, experience and ability at making and overseeing policy in business, government and/or education sectors |
| ∎ | Willingness and ability to: |
| ∎ | keep an open mind when considering matters affecting interests of the Company and its constituents |
| ∎ | devote the required time and effort to effectively fulfill the duties and responsibilities related to Board and committee membership |
| ∎ | serve on the Board for multiple terms, if nominated and elected, to enable development of a deeper understanding of the Company’s business affairs |
| ∎ | Willingness not to engage in activities or interests that may create a conflict of interest with a director’s responsibilities and duties to the Company and its constituents |
| ∎ | Willingness to act in the best interests of the Company and its constituents and to objectively assess Board, committee and management performances |
Diversity is one of many factors under our director selection guidelines that the Nominating and Corporate Governance Committee considers when
evaluating potential director candidates. However, we do not have a formal policy with respect to diversity on the Board. Our director selection guidelines define diversity broadly to include not just factors such as gender and race, but also factors such as age, ethnic, geographic, cultural and professional diversity.
In connection with its general responsibility to monitor and advise the Board on the size, role, function and composition of the Board, the Nominating and Corporate Governance Committee will periodically consider whether the Board represents the overall mix of skills and characteristics described in the director selection guidelines, including diversity and the other factors described above. Subject to Deutsche Telekom’s board designation rights, the selection process for director candidates is intended to be flexible, and the Nominating and Corporate Governance Committee, in the exercise of its discretion, may deviate from the selection process when particular circumstances warrant a different approach.
Nomination Process
In addition to candidates designated by Deutsche Telekom, the Nominating and Corporate Governance Committee may consider possible director candidates from a number of sources, including those recommended by stockholders, directors, or officers. In addition, the Nominating and Corporate Governance Committee may engage the services of outside consultants and search firms to identify potential director candidates.
A stockholder who wishes to suggest a director candidate for consideration by the Nominating and Corporate Governance
Committee should submit the suggestion to the Chair of the Nominating and Corporate Governance Committee, care of our Corporate Secretary, at 12920 SE 38th Street Bellevue, Washington 98006, and include the candidate’s name, biographical data, relationship to the stockholder and other relevant information. The Nominating and Corporate Governance Committee may request additional information about the suggested candidate and the proposing stockholder. Subject to Deutsche Telekom’s board designation rights, the full Board of Directors will approve all final nominations after considering the recommendations of the Nominating and Corporate Governance Committee.
| 12 | T-Mobile 2018 Proxy Statement |
Proposal 1 - Election of Directors
2018 Director Nominees
The following persons, eachBoard has nominated 12 directors for election at the Annual Meeting to serve as directors for terms that would end at the 2019 Annual Meeting of whom is currentlyStockholders. W. Michael Barnes has not been nominated for re-election and his Board service will end on the date of the Annual Meeting. The Board would like to recognize Mr. Barnes for his service and his immense contributions as a member of the Board over the last 14 years, and to wish him well in his retirement. The Board has nominated as a new director for election, Olaf Swantee. If elected, Mr. Swantee’s term will begin on June 13, 2018. Other than Messrs. Sievert and Swantee, all nominees were elected at the 2017 Annual Meeting of T-Mobile, have beenStockholders.
Each nominee was nominated by the Board of Directors on the recommendation of the Nominating and Corporate Governance Committee for election at the Annual Meeting to serve as a director for a term that would end at the 2017 Annual Meeting of Stockholders.Committee. The Board has found each nominee to be qualified based on his or her qualifications, experience, attributes, skills and overall service during the director’s term, including the number of meetings attended, his or her level of participation, the quality of his or her performance and whether he or she meets the applicable independence standards. Each of the nominees has consented to stand for election and we do not anticipate any candidate will be unavailable to serve. In the event that any of the nominees should be unavailable for election as a result of an unexpected occurrence, shares may be voted for the election of such substitute nominee as
the Board of Directors may nominate. In the alternative, if a vacancy remains, the Board may fill such vacancy at a later date or reduce the size of the Board, subject to certain requirements in our certificate of incorporation. The Board knows of no reason why any of the nominees would be unavailable or unable to serve.
Messrs. Dannenfeldt, Höttges, Jacobfeuerborn, Kübler, Langheim, Swantee and Westbrook and Ms. Taylor were designated for nomination by Deutsche Telekom pursuant to its rights under our certificate of incorporation and the Stockholder’s Agreement.
Required Vote
Under our bylaws, directors are elected by a plurality of the votes cast by stockholders entitled to vote on the election of directors at the Annual Meeting. Shares represented by executed proxies received by the Company will be voted, unless otherwise marked withheld, “FOR” the election of each of the nominees.
Nominees
| Our Board of Directors recommends a voteFOR the election to the Board of each of the nominees listed below |
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Board ∎ Compensation
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Thomas Dannenfeldt
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PROPOSAL 1 – ELECTION OF DIRECTORS
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| Mr. Dannenfeldt has served as the Chief Financial Officer of Deutsche Telekom, our majority stockholder and a leading integrated telecommunications company, since January 2014. He was Finance Director of Telekom Deutschland from April 2010 to December 2013. From July 2009 to April 2010, he was the CFO of T-Mobile Deutschland. From January 2010 to April 2010, he was also responsible for the fixed line part of Deutsche Telekom as a member of the T-Home Board of Management. Mr. Dannenfeldt started his career at Deutsche Telekom in 1992 and has gained more than 20 years of experience in various leadership roles in sales, marketing and finance in the national and international mobile and fixed line telecommunications business. He also served on the Board of Directors of Virgin Mobile in the UK in 2003 and 2004, as well as the Chairman of the Board of Directors of EE Limited in 2014 and 2015. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Expertise in strategy, business and finance ∎ Experience in accounting and internal controls | ||||||
| T-Mobile 2018 Proxy Statement | 13 |
PROPOSAL 1 - ELECTION OF DIRECTORS
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Company Boards: ∎ Novartis AG ∎ ICF International Inc. ∎ Syryker Corporation ∎ HCL Technologies
Board ∎ Audit (Chair)
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Srikant M Datar Arthur Lowes Dickinson Professor at the Graduate School of Business Administration at Harvard University
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| Mr. Datar is the Arthur Lowes Dickinson Professor at the Graduate School of Business Administration at Harvard University. Mr. Datar is a Chartered Accountant and planner in industry, and has been a professor of accounting and business administration at Harvard since July 1996; he previously served as a professor at Stanford University and Carnegie Mellon University. Mr. Datar received gold medals upon his graduation from the Indian Institute of Management, Ahmedabad, and the Institute of Cost and Works Accountants of India. Mr. Datar received a Master’s degree in Statistics and Economics and a Ph.D. in Business from Stanford University. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in accounting, governance and risk management ∎ Public company director and committee experience ∎ Academic and commercial perspective on complex issues | ||||||
PROPOSAL 1 – ELECTION OF DIRECTORS
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Board ∎ Compensation ∎ Executive ∎ Nominating and Corporate Governance |
Lawrence H. Guffey Chief Executive Officer of LG Capital Investors LLC
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| Mr. Guffey is Chief Executive Officer of LG Capital Investors LLC, a single-family investment office formed in 2014. From 1991 to He holds a Bachelor of Arts magna cum laude degree from Rice University, where he was elected to Phi Beta Kappa. Qualifications and Skills Supporting Election to the Board: ∎ Core financial and business skills ∎ Experience overseeing investments in media and communications industries ∎ Public company director and committee experience | ||||||
| T-Mobile 2018 Proxy Statement |
PROPOSAL 1 - ELECTION OF DIRECTORS
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Other Company Boards:
∎ BT plc
Board Committees:
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Timotheus Höttges Chief Executive Officer of Deutsche Telekom
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| Since January 2014, Mr. Höttges has served as Chief Executive Officer of Deutsche Telekom, our majority stockholder and a leading integrated telecommunications company. From March 2009 to December 2013, he served as Deutsche Telekom’s Chief Financial Officer Mr. Höttges studied Business Administration at the University of Cologne. | ||||
Qualifications and Skills Supporting Election to the Board:
∎ Core finance, business and |
PROPOSAL 1 – ELECTION OF DIRECTORS
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Board ∎ Executive |
Bruno Jacobfeuerborn Chief Executive Officer of DFMG Deutsche Funkturm GmbH and
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| Mr. Jacobfeuerborn has been Chief Executive Officer of DFMG Deutsche Funkturm GmbH since January 2017 and Chief Executive Officer of Comfortcharge GmbH since January 2018. Previously, he served as Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Wireless network and technology expertise ∎ Core finance, business and leadership skills | ||||||
| T-Mobile 2018 Proxy Statement | 15 |
PROPOSAL 1 - ELECTION OF DIRECTORS
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Company Boards: ∎ Hellenic Telecommunications Organization
Board ∎ Compensation
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Raphael Kübler Senior Vice President of the Corporate Operating Office of Deutsche Telekom
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| In January 2014, Mr. Kübler assumed the position of Senior Vice President of the Corporate Operating Office of Deutsche Telekom, our majority stockholder and a leading integrated telecommunications company, and reports directly to the Chief Executive Officer of Deutsche Telekom. From July 2009 to December 2013, Mr. Kübler served as Mr. Kübler studied Business Administration at H.E.C. in Paris and the Universities of Bonn and Cologne. He holds a doctoral degree from the University of Cologne. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Core business, management and leadership skills ∎ Complex financial management experience | ||||||
PROPOSAL 1 – ELECTION OF DIRECTORS
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Board ∎ Executive ∎ Nominating and Corporate Governance |
Thorsten Langheim Executive Vice President, Group Corporate Development of Deutsche Telekom
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| Mr. Langheim Mr. Langheim holds a Master of Science degree in International Securities, Investment and Banking from the ISMA Centre for Education and Research at the University of Reading. Mr. Langheim holds a Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Experience overseeing telecommunications and technology investments ∎ Corporate strategy and M&A experience | ||||||
| T-Mobile 2018 Proxy Statement |
PROPOSAL 1 - ELECTION OF DIRECTORS
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Board ∎ Executive
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John J. Legere President and
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Mr. Legere joined T-Mobile USA in September 2012 as President and Chief Executive Officer and became our President and Chief Executive Officer on April 30, 2013 upon the consummation of the Business Combination. Mr. Legere has over Mr. Legere received a | ||||
Qualifications and Skills Supporting Election to the Board:
∎ Expertise in telecommunications and |
PROPOSAL 1 – ELECTION OF DIRECTORS
2018 Age: 48 Other Public Company Boards: ∎ Shaw Communications | G. Michael (Mike) Sievert Chief Operating Officer of T-Mobile US, Inc. Biography: Mr. Sievert serves as our Chief Operating Officer. Mr. Sievert is responsible for guiding all customer-facing operations across the business, including marketing, product development, retail management, sales and customer care for all of our direct and indirect channels and each of our brands. Mr. Sievert served as our Executive Vice President and Chief Marketing Officer from April 2013 to February 2015 and from November 2012 to April 2013, Mr. Sievert was Executive Vice President and Chief Marketing Officer of T-Mobile USA. Prior to joining T-Mobile USA, Mr. Sievert was an entrepreneur and investor involved with several Seattle-area start-up companies. From April 2009 to June 2011, he was Chief Commercial Officer at Clearwire Corporation, a broadband communications provider, responsible for all customer-facing operations. From February 2008 to January 2009, Mr. Sievert was co-founder and Chief Executive Officer of Switchbox Labs, Inc., a consumer technologies developer, leading up to its sale to Lenovo. He also served from January 2005 to February 2008 as Corporate Vice President of the worldwide Windows group at Microsoft Corporation, responsible for global product management and P&L performance for that unit. Prior to Microsoft, he served as Executive Vice President and Chief Marketing Officer at AT&T Wireless for three years. He also served as Chief Sales and Marketing Officer at E*TRADE Financial and began his career with management positions at Procter & Gamble and IBM. He has served on the boards of Rogers Wireless Communications in Canada, Switch & Data Corporation, and a number of technology start-ups. Mr. Sievert received a bachelor’s degree in Economics from the Wharton School at the University of Pennsylvania. Qualifications and Skills Supporting Election to the Board: ∎ Chief Operating Officer of T-Mobile ∎ Expertise in telecommunications and technology industries | |||
| T-Mobile 2018 Proxy Statement | 17 |
PROPOSAL 1 - ELECTION OF DIRECTORS
Other Company Boards:
Telia Company AB
| Olaf Swantee Chief Executive Officer of Sunrise Communications Group AG Biography: Since May 2016, Mr. Swantee has served as Chief Executive Officer of Sunrise Communications Group AG, a private Swiss telecommunications provider. From 2011 to May 2016, he served as Chief Executive Officer of EE Limited, a British mobile network and telecommunications provider. From 2007 to 2011, Mr. Swantee held executive positions at Orange-France Telecom, first as Executive Vice President Europe and Mobile WW and then as Executive Vice President Europe and Purchasing WW, while also serving as a member of the global management committee. He held various senior positions from 2002 to 2007 at Hewlett-Packard (Switzerland) LLC. Mr. Swantee received a Master of Business Administration degree from the European School of Management in Paris, France. Qualifications and
∎ Chief executive officer of major global communication companies
|
Director Since: 2013 Age: 54 Lead Independent Director Other Public Company Boards: ∎ First Interstate BancSystem, Inc. ∎ Black Hills Corporation Board Committees: ∎ Compensation (Chair) | Teresa A. Taylor Chief Executive Officer of Blue Valley Advisors, LLC Biography: Since April 2011, Ms. Taylor has served as Chief Executive Officer of Blue Valley Advisors, LLC, an advisory firm. Ms. Taylor served as Chief Operating Officer of Qwest Communications, Inc., a telecommunications carrier, from August 2009 to April 2011. She served as Qwest’s Executive Vice President, Business Markets Group, from January 2008 to April 2009 and served as its Executive Vice President and Chief Administrative Officer from December 2005 to January 2008. Ms. Taylor served in various positions with Qwest and the former US West beginning in 1987. During her 24-year tenure with Qwest and US West, she held various leadership positions and was responsible for strategic planning and execution, sales, marketing, product, network, information technology, human resources and corporate communications. Ms. Taylor received a Bachelor of Science degree from the University of Wisconsin-LaCrosse. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in technology, media and telecommunications industries ∎ Expertise in strategic planning and execution, technology development, human resources, labor relations and corporate communications ∎ Public company director and committee experience | |||
| T-Mobile 2018 Proxy Statement |
PROPOSAL 1 - ELECTION OF DIRECTORS
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62
Company Boards: ∎ Archer Daniels Midland Company ∎ Stifel Financial Corp. (not standing for re-election at its 2018 annual meeting of stockholders) ∎ Camden Property Trust ∎ The Mosaic Company
Board ∎ Audit ∎ Nominating and Corporate Governance Committee (Chair)
|
Kelvin R. Westbrook President and
| ||||
| Mr. Westbrook is President and Chief Executive Officer of KRW Advisors, LLC, a consulting and advisory firm, a position he has held since October 2007. Mr. Westbrook also served as Chairman and Chief Strategic Officer of Millennium Digital Media Systems, L.L.C. (“MDM”), a broadband services company that later changed its name to Broadstripe LLC, from September 2006 until October 2007. Mr. Westbrook was also President and Chief Executive Officer of MDM from May 1997 until October 2006. Broadstripe LLC (formerly MDM) and certain of its affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 2009, approximately Mr. Westbrook received an undergraduate degree in Business Administration from the University of Washington and a Juris Doctor degree from Harvard Law School. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in the telecommunications industry ∎ Core legal, media, marketing and risk analysis skills ∎ Public company director and committee experience | ||||||
The Board of Directors recommends that you vote
“FOR”
the election of each of the above-named nominees.
| T-Mobile 2018 Proxy Statement | 19 |
Executive Officers
The following sets forth information regarding the executive officers of the Company. Biographical information pertaining to Mr.Messrs. Legere and Sievert, who isare both an executive officerofficers and a directordirectors of the Company, can be found in the Section entitled “Proposal 1—Election of Directors.”
Name | Age | Position | |||||||
John J. Legere | 59 | President and Chief Executive Officer | |||||||
G. Michael Sievert | 48 | Chief Operating Officer | |||||||
David R. Carey | 64 | Executive Vice President, Corporate Services | |||||||
J. Braxton Carter | 59 | Executive Vice President and Chief Financial Officer | |||||||
Peter A. Ewens | 55 | Executive Vice President, Corporate Strategy | |||||||
Thomas C. Keys | 59 | President, | |||||||
David A. Miller | 57 | Executive Vice President, General Counsel and Secretary | |||||||
| 55 | ||||||||
| Executive Vice President and Chief Technology Officer | |||||||||
| 55 | ||||||||
David R. Carey
Mr. Carey serves as our Executive Vice President, Corporate Services and is responsible for leading the Enterprise Program Office, Corporate Communications, Corporate Real Estate, Corporate Responsibility, Corporate Security and a broad range of responsibilities in leading the Chief Executive Officer Staff.Office of the CEO. Mr. Carey has also served in the same role withT-Mobile USA, Inc., the wholly-owned subsidiary of the Company(“T-Mobile USA”), since MarchFebruary 2013. Mr. Carey’s career spans 43 years in the telecom and energy services industry. Before joining T-Mobile USA, from October 2011 to MarchFebruary 2013, Mr. Carey served as the Chief Executive Officer and Founder of TeleScopeTelescope Advisors, LLC, an advisory firm specializing in telecommunications. From September 1999 to October 2011, Mr. Carey served asin various executive positions, including Executive Vice President, Chief Marketing Officer, Head of Global Sales, Strategy and Corporate Development and Chief Ethics Officer at Global Crossing Limited, a telecommunications company, from September 1999company. In addition to October 2011. Mr. Carey’s career spans 35 years in the telecom and energy services industries. HisGlobal Crossing, his experience in telecom includes executive leadership positions at AT&T, LG&E Energy and Frontier Communications and Global Crossing. He currently serves on the Board of Directors of Wind Mobile, Canada and on the telecommunications and media advisory board of Hewlett-Packard Corporation.Communications. Mr. Carey holds a Master of Science in Management Science from the Massachusetts Institute of Technology, where he was appointed to a Sloan Fellowship, and received his Bachelor of Science degree at Clarkson University. He has also attended executive programs at the Harvard Business School and the Wharton School at the University of Pennsylvania.
J. Braxton Carter
Mr. Carter serves as our Executive Vice President and Chief Financial Officer, and is responsible for leading the financial functions of the Company. Mr. Carter served as MetroPCS’sMetroPCS Communications, Inc.’s Chief Financial Officer from March 2005 until the consummation of the Business Combination. Mr. Carter also served as MetroPCS’sMetroPCS Communications Inc.’s Vice Chairman from May 2011 until the consummation of the Business Combination. From February 2001 to March 2005 he was Vice President, Corporate Operations of MetroPCS.MetroPCS Communications, Inc. Mr. Carter also has extensive senior management experience in the wireless and retail industry and spent ten years in public accounting. Mr. CarterHe is a certified public accountant. Mr. Carter presently serves on the Board of Alumni for the Leeds School of Business of the University of Colorado. Mr. Carter received a Bachelor of Science degree from the University of Colorado with a major in accounting.
Peter A. Ewens
Mr. Ewens serves as our Executive Vice President, Corporate Strategy. He leads the Company’s corporate strategy, business development and M&A activities, which include spectrum strategy and acquisitions and co-brand partnerships. Mr. Ewens has also served as Executive Vice President and Chief Strategy Officer of T-Mobile USA since July 2010. From April 2008 until July 2010, Mr. Ewens was Senior Vice President, Corporate Strategy at T-Mobile USA. Before joining T-Mobile USA, Mr. Ewens was Vice President of OEM Business at Sun Microsystems, a computer software and information technology services company, from June 2006 through March 2008. Before that, Mr. Ewens was a partner at McKinsey & Company, a global management consulting firm. Mr. Ewens received a Master of Science in Management from the Sloan School at Massachusetts Institute of Technology, and Master’s and Bachelor’sbachelor’s degrees in Electrical Engineering from the University of Toronto.
Thomas C. Keys
Mr. Keys serves as our President, T-Mobile Indirect Channels,MetroPCS, and is responsible for leading our partner relationships, including dealers, for the T-Mobile and MetroPCS brands.business. Previously, Mr. Keys served as our Executive Vice President and Chief Operating Officer, MetroPCS Business, from April 2013 to February 2015. Mr. Keys served as MetroPCS’sMetroPCS Communications Inc.’s President from May 2011 until the consummation of the Business Combination, and as Chief Operating Officer since June 2007. Mr. Keys also served as MetroPCS’sMetroPCS Communications Inc.’s President from June 2007 to December 2007, Senior Vice President, Market Operations, West, from January 2007 until June 2007, and as Vice President and General Manager, Dallas, from April 2005 until January 2007. Mr. Keys received a Bachelor of Arts degree from the State University of New York at Oswego, and a Master of Arts from Syracuse University.
David A. Miller
Mr. Miller serves as our Executive Vice President, General Counsel and Secretary. Mr. Miller oversees all legal affairs and government affairs functions of the Company. Mr. Miller has also served as T-Mobile USA’s Chief Legal Officer, Executive Vice President, General Counsel and Secretary. Mr. Miller was appointed Senior Vice President and General
| 20 | T-Mobile 2018 Proxy Statement |
EXECUTIVE OFFICERS
Counsel of T-Mobile USA in April 2002 and Executive Vice President in January 2011. Previously, Mr. Miller served as Director of Legal Affairs for Western Wireless (a predecessor to T-Mobile USA) from March 1995 to May 1999, and he became Vice President of Legal Affairs of VoiceStream in May 1999 following its spin-off from Western Wireless. VoiceStream was acquired by Deutsche Telekom in May 2001, when it became T-Mobile USA. Prior to joining Western Wireless, Mr. Miller was an attorney with the law firm of Lane Powell and began his law career as an attorney with the firm McCutchen, Doyle, Brown and Enersen. Mr. Miller serves on the Board of Directors of the Competitive Carriers Association and is a member of its Executive Committee. Mr. Miller received a Bachelor’sbachelor’s degree in Economics from the University of Washington and a Juris Doctor from Harvard Law School.
Larry L. Myers serves as our Executive Vice President, Human Resources. Mr. Myers is responsible for leading the human resources function that supports our employees across the country. Mr. Myers has also served as Executive Vice President of Human Resources and Chief People
EXECUTIVE OFFICERS
Officer of T-Mobile USA since June 2008. From January 2001 to May 2008, Mr. Myers served as Senior Vice President of human resources for Washington Group International, a corporation that provided integrated engineering, construction, and management services to businesses and governments around the world. Mr. Myers has more than 36 years of experience in human resources management. Mr. Myers received Bachelor degrees in sociology and business administration from Idaho State University.
Neville R. Ray
Mr. Ray serves as our Executive Vice President and Chief Technology Officer. Mr. Ray joined T-Mobile USA then VoiceStream,(then VoiceStream) in April 2000 and since December 2010 has served as its Chief Technology Officer, responsible for the national management and development of the T-Mobile USA wireless network and the Company’s ITcompany’s information technology services and operations. Prior to joining T-Mobile USA, from September 1996 to September 1999, Mr. Ray served as Network Vice President for Pacific Bell Mobile Services. He currently serves on the Board of Directors of Next Generation Mobile Networks Alliance, a mobile telecommunications association of mobile operators, vendors, manufacturers and research institutes, and as the Chairperson of 4Gthe Board of Governors of 5G Americas, which promotesa mobile telecommunications
association of mobile operators, vendors, and facilitatesmanufacturers. Both associations have a focus on the seamless deployment throughout the Americasadvancement and development of the 3GPP family of5G technologies including HSPA, HSPA+, and LTE.services. He has alsopreviously served as a member of the National Telecommunications and Information Administration’s Commerce Spectrum Management Advisory Committee and the Federal Communications Commission’s Communications Security, Reliability and Interoperability Council. Mr. Ray is an honors graduate of The City, University of London and a member of the Institution of Electrical and Electronic Engineers and the Institution of Civil Engineers.
Elizabeth A. McAuliffe
G. Michael (Mike) SievertMs. McAuliffe serves as our Chief Operating Officer. Mr. Sievert is responsible for guiding all customer-facing operations across the business, including marketing, product development, retail management, sales and customer care for all of our direct and indirect channels and each of our brands. Mr. Sievert served as our Executive Vice President, and Chief Marketing Officer from April 2013 to February 2015 and from November 2012 to April 2013, Mr. Sievert was Executive Vice President and Chief Marketing Officer of T-Mobile USA. Prior to joining T-Mobile USA, Mr. Sievert was an entrepreneur and investor involved with several Seattle-area start-up companies.Human Resources. Ms. McAuliffe is responsible for leading the human resources function that supports our employees across the country. From April 2009January 2014 to June 2011, he was Chief Commercial Officer at Clearwire Corporation, a broadband communications provider, responsible for all customer-facing operations. From February 2008 to January 2009, Mr. Sievert was co-founder and Chief Executive Officer of Switchbox Labs, Inc., a consumer technologies developer, leading up to its sale to Lenovo. He also2016 she served from January 2005 to February 2008 as CorporateSenior Vice President of the worldwide Windows groupTotal Rewards and Operations, encompassing leadership of all compensation, Rewards & Recognition, benefits, payroll, human resources systems and human resources operations. From June 2013 to January 2014, she served as Vice President, CHRO Regions, at Microsoft Corporation, responsible for global product management and P&L performance for that unit.Providence Health & Services, a nonprofit health system. From January 2011 to June 2013 she served as Senior Vice President, Human Resources at T-Mobile. Prior to Microsoft, he served as Executive Vice President and Chief Marketing Officer at AT&T Wireless for three years. He also served as Chief Sales and Marketing Officer at E*TRADE Financial and began his career with managementjoiningT-Mobile, Ms. McAuliffe held various positions at ProcterStarbucks Coffee Company, a coffee retailer, in both the Law & GambleCorporate Affairs department and IBM. He has served on the boards of Rogers Wireless in Canada, Switch & Data Corporation, and a number of technology start-ups. Mr. SievertHuman Resources department. Ms. McAuliffe received a Bachelor’sbachelor’s degree in Economics from the Wharton School at the University of Pennsylvania.Massachusetts, Amherst and a Juris Doctor from Northeastern University School of Law.
| T-Mobile 2018 Proxy Statement | 21 |
Proposal 2 - Ratification of the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal Year 2018
The Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2018. Although ratification of the appointment of PricewaterhouseCoopers LLP by our stockholders is not required, the Board of Directors is submitting the selection of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate governance. If the selection is not ratified,
the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm.
We expect representatives of PricewaterhouseCoopers LLP to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions by stockholders.
| Our Board of Directors recommends a voteFOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2018 |
ApprovalThe affirmative vote of the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2016 requires that the number of votes cast “FOR” the proposal represents a majority of the total
votes cast on theis required to approve this proposal. If the stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee will reconsider the appointment but is under no obligation to appoint a different independent registered public accounting firm.
Audit Committee Pre-Approval PolicyProcess
The Audit Committee is responsible for reviewing and, if appropriate, pre-approving all audit, audit-related and non-audit services to be performed by our independent registered public accounting firm. The Audit Committee charter authorizes the Audit Committee to establish a policy and related procedures regarding the pre-approval of audit, audit-related and non-audit services to be performed by our independent registered public accounting firm.
The Audit Committee has delegated its pre-approval authority to the Chair of the Audit Committee, who is authorized to pre-approve services to be
performed by our independent registered public accounting firm and the compensation to be paid for such services if it is impracticable to delay the review and approval of such services and compensation until the next regularly scheduledregularly-scheduled meeting of the Audit Committee, provided that in such case the Chair shall provide a report to the Audit Committee at its next regularly scheduledregularly-scheduled meeting of any services and compensation approved by the Chair pursuant to the delegated authority.
Audit and All Other Fees Paid to PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP was paid the following fees for services rendered during fiscal years 20152017 and 2014,2016, all of which were approved in conformity with the Audit Committee’s pre-approval process, as described above under “Audit Committee Pre-Approval Policy”“Pre-Approval Process”:
2015 ($) | 2014 ($) | 2017 ($) | 2016 ($) | |||||||||||||
| Audit Fees(1) | 7,822,000 | 6,993,000 | 9,330,000 | 8,398,000 | ||||||||||||
| Audit-Related Fees(2) | 562,000 | 47,000 | 748,000 | 414,000 | ||||||||||||
| Tax Fees(3) | 568,000 | 361,000 | 163,000 | 738,000 | ||||||||||||
| All Other Fees(4) | 58,000 | 355,000 | 79,000 | 61,000 | ||||||||||||
| Total Fees | 9,010,000 | 7,756,000 | 10,320,000 | 9,611,000 | ||||||||||||
| (1) | Audit Fees relate to professional services rendered in connection with the audit of the Company’s annual financial statements and internal control over financial reporting, quarterly review of financial statements included in the Company’s Quarterly Reports on Form 10-Q and audit services provided in connection with other statutory and regulatory filings. |
| (2) | Audit-Related Fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under Audit Fees. This category includes fees related to audit and attest services not required by statute or regulations, and consultations concerning financial accounting and reporting standards. |
| (3) | Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance. |
| (4) | All Other Fees consist of fees for permitted services other than those that meet the criteria above and include fees to assess mobile advertising for a joint venture and research subscriptions. |
PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2016
In the performance of its oversight responsibilities, the Audit Committee (1) reviewed and discussed with management and the independent registered public accounting firm the Company’s audited financial statements for the fiscal year ended December 31, 2015;2017; (2) discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”(the “PCAOB”) Auditing Standard No. 16,1301,Communications with Audit Committees;Committees; (3) received the written disclosures and the letter from the Company’s independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee regarding independence; and (4) discussed with the Company’s independent registered public accounting firm any relationships that may impact theirits objectivity and independence and satisfied itself as to the firm’s independence.
| 22 | T-Mobile 2018 Proxy Statement |
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2018
Company management is responsible for the assessment and determination of risks associated with the Company’s business, financials,financial reporting, operations and contractual obligations. The Audit Committee, together with the Board of Directors, is responsible for oversight of the Company’s management of risks. As part of its responsibilities for oversight of the Company’s management of risk,risks, the Audit Committee has reviewed and discussed the Company’s enterprise-wide risk assessment, and the Company’s policies with respect to risk assessment and risk management, including discussions of individual risk areas as well as an annual summary of the overall process.
The Audit Committee has discussed with the Company’s Internal Audit Department and its independent registered public accounting firm the overall scope of and plans for their respective audits. The Committee regularly meets with the head of the Company’s Internal Audit Department and representatives of the independent registered public accounting firm, in regular and executive sessions, to discuss the results of their examinations, thetheir evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.
Management is responsible for the Company’s financial reporting process, including establishing and maintaining adequate internal control over financial controlsreporting and the preparation of the Company’s financial statements. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of the Company’s audited financial statements with U.S. generally accepted accounting principles. The Company’s independent
registered public accounting firm also is responsible for performing an independent audit of the effectiveness of the Company’s internal controlscontrol over financial reporting and issuing a report thereon. We rely, without independent verification, on the information provided to us and on the representations made by management and the Company’s independent registered public accounting firm. Based on the review and discussion and the representations made by management and the Company’s independent registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the fiscal year ended December 31, 20152017 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.2017.
The Audit Committee:
Srikant M. Datar, Ph.D,Ph.D., Chairman
W. Michael Barnes, Ph.D.
Kelvin R. Westbrook
The material contained in this Audit Committee Report does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing, except to the extent that the Company specifically incorporates the Audit Committee Report by reference therein.
The Board of Directors recommends that you vote
“FOR”
the ratification of the appointment of PricewaterhouseCoopers LLP
as the Company’s independent registered public accounting firm for fiscal year 2016.
| T-Mobile 2018 Proxy Statement | 23 |
Executive Compensation
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program for the following executive officers (collectively, the “Named Executive Officers”):
| This Compensation Discussion and Analysis (“CD&A”) describes our 2017 executive compensation program for the following executive officers (collectively, the “Named Executive Officers”): | ||||||||
∎JohnJ.Legere | ||||||||
∎J.BraxtonCarter | ||||||||
∎G.MichaelSievert | ||||||||
∎NevilleR.Ray | ∎ThomasC.Keys | |||||||
President and Chief Executive Officer | ||||||||
| Executive Vice President Financial Officer | Chief Operating Officer | Executive Vice President and Chief Technology Officer | President, MetroPCS | ||||
Customer Momentum Continued at T-Mobile Had Record Financial Results Across the Board in 2017 and Proved that Taking Care of Customers is Also Good for the Second Straight Year, Resulting in Strong Financial Performance That Balanced Growth With ProfitabilityStockholders
T-Mobile had another record yearfinancial results in 2015, delivering industry leading customer,2017, including service revenue andrevenues, total revenues, net income, Adjusted EBITDA, growth.net cash from operating activities and free cash flow. We ended the year with more than 63 million total customers and became the third largest wireless carrier in the United States. T-Mobile added 8.35.7 million total net customers in 20152017 and captured allthe majority of the industry’s postpaid phone growth which made T-Mobile America’s fastest growing wireless company once again. In addition to strong net customer additions, we kept customers longer with branded postpaid phone churn of 1.39% for the fullfourth consecutive year. We ended the year 2015.with 72.6 million total customers.
Our customer growth translated into strong financial results.industry-leading revenue and cash flow growth. Service revenue of $24.8$30.2 billion for 20152017 grew at an industry-leading 10.9%8.3% year over year. Similarly,Net income of $4.5 billion for 2017 grew 211% year over year, net income of $2.3 billion (excluding impact from the Tax Cuts and Jobs Act of $2.2 billion) for 2017 grew 62% year over year and Adjusted EBITDA of $7.4$11.2 billion for 2015 grew 31.2%5.4% year over year, significantly outpacing the industry.year.
As of December 31, 2017, T-Mobile also delivered on several major network milestones in 2015. The Company more than doubled its geographic covered 322 million people with 4G LTE footprint during the year, expanding its reach to 305 million Americans, and exceeding its stated year-end 2015 goalLTE. Our stock price increased by 284% from May 1, 2013 (the first day of 300 million. Sincetrading after the Business Combination,Combination) through December 29, 2017 and 10.4% during 2017 alone. Looking back three years, our stock price has increased by 137% from May133% (January 1, 201312015 through December 31, 2015.29, 2017).
Adjusted EBITDA is a non-GAAP financial measure. This non-GAAP financial measure should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. A reconciliation to the most directly comparable GAAP financial measure is provided in Appendix A to this proxy statement.
|
Our executive compensation program emphasizes pay for performance. As a result, our 20152017 Named Executive Officer compensation reflects T-Mobile’s strong 20152017 operational and financial performance.
EXECUTIVE COMPENSATION
Executive Compensation Program
Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent, reward short-term and long-term business results and exceptional performance, and most importantly, maximize stockholder value. Our executive compensation program is competitive in the marketplace and highly incentive-based, with Company performance determining a significant portion of total compensation.
| Key Features of Our Executive Compensation Program |
| What We Do | |||||
| ||||||
| Emphasis on pay for performance | |||||
| Independent compensation consultant | |||||
| Executive and director stock ownership guidelines | |||||
| Clawback policy to recapture incentive payments | |||||
| Use multiple performance measures and caps on potential incentive payments | |||||
| Substantial majority of target total compensation is variable | |||||
| Use of executive compensation statements (“tally sheets”) | |||||
| Annual risk assessment of compensation programs | |||||
| What We Don’t Do | ||||||||
| No short-selling, hedging or pledging of Company’s securities | |||||||
| |
| No excise tax gross ups | |||||
| |
| No special executive retirement program | |||||
| |
| No acceleration of compensation upon retirement | |||||
| |
| No single-trigger vesting of equity awards upon a change in control | |||||
| No significant perquisites | |||||||
GOALS OF COMPENSATION PROGRAM
WHAT WE PAY AND WHY: GOALS AND ELEMENTS OF COMPENSATION
|
| |||||||||||||||
| ||||||||||||||||
| Attract, retain and motivate talented and experienced executives within the highly competitive and dynamic wireless communications industry | Recognize and reward executives whose skill and performance are critical to our success | Align interests of our executives with our stockholders | Encourage appropriate risk taking | ||||||||||||
What We Pay and Why: Goals and Elements of CompensationELEMENTS OF TOTAL DIRECT COMPENSATION
SUMMARY OF AVERAGE TARGET NAMED EXECUTIVE OFFICER COMPENSATION AS OF DECEMBER 31, 2017
| T-Mobile 2018 Proxy Statement | 25 |
EXECUTIVE COMPENSATION
To promote a performance-based culture that further aligns the interests of management and stockholders, in 20152017 the executive compensation program focused extensively on variable, performance-based compensation. As illustrated in the charts below, the substantial majority of our Chief Executive Officer’s and other Named Executive Officers’ actual total compensation as reported in the 20152017 Summary Compensation Table was in the form of variable compensation (short-term and long-term).
Factors Considered in Determining Executive Compensation
Compensation Consultant and Management
The Compensation Committee sets compensation levels based on the skills, experience and achievements of each executive officer, taking into account market analysis, input by its compensation consultant and the compensation recommendations of our Chief Executive Officer, except with respect to his own position. The Chief Executive Officer provides recommended target annual compensation adjustments for the Named Executive Officers to base salaries, target annual short-term incentive opportunity and target long-term incentive opportunity. The Compensation Committee believes that input from both its independent compensation consultant and our Chief Executive Officer provides useful information and points of view to assist the Compensation Committee in determining appropriate compensation.
Market Analysis
We use comparative executive officer compensation data publicly disclosed by a peer group of public companies in addition to compensation survey data to evaluate the competitiveness of our executive officer compensation and to guide the compensation for newly hired executive officers. We believe a competitive total compensation package is necessary to attract and retain an executive management team with the appropriate abilities and experience required to lead the Company and execute on our strategic business plan. In analyzing this information, we compare theour executive compensation program as a whole to the programs of our peer group companies and compare the pay of our individual executives to that of the
executive officers of our peer group companies if we believe the positions are sufficiently similar to make meaningful comparisons. We do not target a specific percentile in the range of comparative data for each individual or for each component of compensation. In determining the amount of base salary, target incentive award and level of equity compensation for each Named Executive Officer, we review the comparative compensation data and consider each executive’s level of responsibility, prior experience, past job performance, contribution to
the Company’s success and results achieved. The Compensation Committee exercises its business judgment and discretion and does not apply formulas or assign these factors specific mathematical weights.
Executive Compensation Peer Group
We select our peer group based on similarity to us in terms of relative size of revenue and market capitalization, industry and the ability to compete with us for talent at the executive officer level. The Compensation Committee reviews the Company’s peer group on an annual basis. Initially, our 2017 peer group was the same as our 2016 peer group. This peer group, which is described below, was used to set compensation for 2017. In October 2015, as part ofNovember 2017, upon its acquisition by CenturyLink, Level 3 Communications was removed from our peer group. T-Mobile was ranked near the Compensation Committee’s regular reviewmedian of the peer group composition, fivefor 2017 both in terms of the companies that were previously part of our peer group were removed and one company was added.
Four of the removed companies, DIRECTV, Cablevision Systems Corporation, Time Warner Cable Inc. and Windstream Holdings, Inc., were no longer valid due to merger and acquisition activity. United States Cellular Corporation (with 2015 year end revenue of $4.0 billion and market capitalization of $3.4 billion) was removed due to the large difference in revenue and market capitalization relative to T-Mobile and the other peer group companies. Intel Corporation was added as a peer due to its relevant size and industry, as well as its prevalence among existing peer company peer groups. The current peer group is appropriate based on financial scope, with T-Mobile falling near the median for both revenue and market capitalization.
Compensation decisions made prior to October 2015 utilized the prior peer group for relevant peer practice information. Additionally, unvested performance-based RSUs granted prior to October 2015 that utilize relative total shareholder return (“RTSR”) as the performance metric continue to be measured relative to the prior peer group as established at the time of grant.
EXECUTIVE COMPENSATION
The following chart shows the currentT-Mobile’s 2017 peer group of 1514 companies theirand each such company’s revenue as of fiscal year-end and market capitalization as of December 31, 2015.2017 (other than with respect to Level3 Communications, which, as noted, was removed from our peer group in November 2017 due to its acquisition). Our peer group for 2018 has not changed.
| 26 | T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
Analysis of Executive Officer Compensation
The key components of our annual target total compensation package for executive compensationofficers are base salary, an annual cash-based short termshort-term incentive and long-term incentives composed ofincentive awards, including performance-based RSUsrestricted stock units (“PRSUs”) and time-based RSUs.restricted stock units (“RSUs”).
Target Total Direct Compensation
The Compensation Committee reviews the compensation of the Named Executive Officers based on a market analysis prepared by management in partnership with the Compensation Committee’s independent
independent compensation consultant. Based on such analysis, the Compensation Committee increased the target compensation of Messrs. Legere, Carter, Sievert and Ray for 2015. Increases were established based on the Compensation Committee’s assessment of each Named Executive Officer in relation to peer and survey market data as well as the executive officer’s contribution to the Company’s ongoing strategy.strategy, the Compensation Committee increased the total target compensation of each of our Named Executive Officers for 2017, including increases to base salary, annual short-term incentive opportunity and target long-term incentive opportunity. Increases to target compensation supported the continued retention and engagement of our Named Executive Officers.
The following table shows the 20152017 target total direct compensation established for each Named Executive Officer effective as of January 1, 2015. No subsequent changes were made in 2015 impacting target compensation.Officer.
| Officer | Base Salary ($) | Target STIP Percent (1) | Target STIP Value ($) | Total Target Cash ($) | Target LTIP Percent (2) | Target LTIP Value ($) | Total Direct Compensation ($) | Base Salary ($) | Target STIP Percent (1) | Target STIP Value ($) | Total Target Cash ($) | Target LTIP Percent (2) | Target LTIP Value ($) | Target Total Direct Compensation ($) | ||||||||||||||||||||||||||||||||||||||||||
| John J. Legere | 1,500,000 | 200% | 3,000,000 | 4,500,000 | 266.7% | 12,000,000 | 16,500,000 | 1,666,667 | — | 3,333,333 | 5,000,000 | — | 15,000,000 | 20,000,000 | ||||||||||||||||||||||||||||||||||||||||||
| J. Braxton Carter | 700,000 | 100% | 700,000 | 1,400,000 | 250% | 3,500,000 | 4,900,000 | 850,000 | 150 | % | 1,275,000 | 2,125,000 | 250 | % | 5,312,500 | 7,437,500 | ||||||||||||||||||||||||||||||||||||||||
| G. Michael Sievert | 800,000 | 100% | 800,000 | 1,600,000 | 250% | 4,000,000 | 5,600,000 | 950,000 | 200 | % | 1,900,000 | 2,850,000 | 250 | % | 7,125,000 | 9,975,000 | ||||||||||||||||||||||||||||||||||||||||
| Neville R. Ray | 600,000 | 100% | 600,000 | 1,200,000 | 200% | 2,400,000 | 3,600,000 | 800,000 | 150 | % | 1,200,000 | 2,000,000 | 250 | % | 5,000,000 | 7,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Thomas C. Keys | 700,000 | 100% | 700,000 | 1,400,000 | 250% | 3,500,000 | 4,900,000 | 750,000 | 125 | % | 937,500 | 1,687,500 | 250 | % | 4,218,750 | 5,906,250 | ||||||||||||||||||||||||||||||||||||||||
| (1) | Target STIP Percent as a percent of base salary. |
| (2) | Target LTIP Percent as a percent of total target cash. |
| (3) | Target STIP value and LTIP value for Mr. Legere are as specified in his employment agreement. |
| T-Mobile 2018 Proxy Statement | 27 |
EXECUTIVE COMPENSATION
Annual Base Salaries
Base salary is designed to provide a competitive fixed component of income. Base salaries for our Named Executive Officers are set by the Compensation Committee, with assistance from the independent compensation consultant, after consideration of various factors including individual performance, executive experience and skill set and market data. In particular, the Compensation Committee focuses on how base salary levels may impact the market competitiveness of an executive’s total compensation opportunity. See further discussion under “— Factors Considered in Determining Executive Compensation-Market Analysis” above.
Annual Short-Term Incentives
Our executive officers are eligible for annual cash-based short-term incentives under the 2013 Omnibus Incentive Plan. The Compensation Committee sets the valuestarget value of theeach executive’s short-term incentive award opportunitiesopportunity as a percentage of anthe executive’s base salary. TheseThe final award is based on the eligible base earnings for the performance period. Award opportunities for each metric evaluated under the plan are established at threshold, target and maximum levels. The maximum level for each metric is capped at 200% of target. The 20152017 short-term incentive plan (the “2015“2017 STIP”) awards for executive officers, including the Named Executive Officers, were based entirely on Company performance, which was measured by: Total Service Revenue, Branded Net Additions (Total
Branded Customers)Customer Additions), Adjusted EBITDA, and Operating Free Cash Flow. Adjusted EBITDA and Operating Free Cash Flow are non-GAAP measures.measures and Operating Free Cash Flow is not provided in our earnings materials. Please seeAppendix A for more information. information on how these measures are calculated.
These measures were aligned with the operational objectives of the Company’s business. AThe minimum threshold had to be achieved onperformance level for at least one of the performance metrics was required to generate awards.be attained in order for the executives to receive any payment under the 2017 STIP. If none of the minimum performance thresholds had been achieved during 2017, no awards would have been paid. If the minimum threshold for any metric was achieved, then the results were applied to the participants’ target awards.
| Metric | Weight | Minimum (in millions) | Target (in millions) | Maximum (in millions) | Actual (in millions) | Weight | Minimum (in millions) | Target (in millions) | Maximum (in millions) | Actual (in millions) | ||||||||||||||||||||||||||||||
| Total Service Revenue | 30% | $ | 23,465 | $ | 24,700 | $ | 25,317 | $ | 24,821 | 30% | $ | 28,032 | $ | 29,507 | $ | 30,244 | $ | 30,160 | ||||||||||||||||||||||
| Branded Net Additions | 20% | 1.470 | 3.675 | 5.140 | 5.825 | |||||||||||||||||||||||||||||||||||
Branded Net Customer Additions | 20% | 1.470 | 3.674 | 5.139 | 4.475 | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 20% | $ | 6,440 | $ | 7,000 | $ | 7,373 | $ | 7,393 | 20% | $ | 9,470 | $ | 10,294 | $ | 10,843 | $ | 11,213 | ||||||||||||||||||||||
| Operating Free Cash Flow | 30% | $ | 1,931 | $ | 2,549 | $ | 2,796 | $ | 2,923 | 30% | $ | 3,409 | $ | 4,500 | $ | 4,936 | $ | 4,677 | ||||||||||||||||||||||
The Company performed above target inlevels with respect to all four performance metrics in 2015.2017. Overall performance under the 20152017 STIP, determined based on actual performance for each performance metric and the relative weighting of each such metric (as disclosed in the table above), was achieved at 176%170% of target. The following table shows the payouts under the 20152017 STIP offor each Named Executive Officer.Officer based on these performance results.
| Officer | Base Earnings (1) ($) | Target 2015 STIP Percent (as a % of Base Salary) | Target 2015 STIP Value ($) | Company Attainment | Total 2015 STIP Payout Value ($) | Base Earnings (1) ($) | Target 2017 STIP Percent (as a % of Base Earnings) | Target 2017 STIP Value ($) | Company Attainment | Total 2017 STIP Payout Value ($) | ||||||||||||||||||||||||||||||
| John J. Legere | 1,492,358 | 200% | 2,984,716 | 176% | 5,253,101 | 1,618,590 | — | 3,333,333 | 170 | % | 5,666,666 | |||||||||||||||||||||||||||||
| J. Braxton Carter | 698,462 | 100% | 698,462 | 176% | 1,229,292 | 845,192 | 150 | % | 1,267,789 | 170 | % | 2,155,241 | ||||||||||||||||||||||||||||
| G. Michael Sievert | 792,308 | 100% | 792,308 | 176% | 1,394,461 | 944,231 | 200 | % | 1,888,461 | 170 | % | 3,210,384 | ||||||||||||||||||||||||||||
| Neville R. Ray | 598,462 | 100% | 598,462 | 176% | 1,053,293 | 796,154 | 150 | % | 1,194,231 | 170 | % | 2,030,192 | ||||||||||||||||||||||||||||
| Thomas C. Keys | 700,000 | 100% | 700,000 | 176% | 1,232,000 | 749,038 | 125 | % | 936,298 | 170 | % | 1,591,707 | ||||||||||||||||||||||||||||
| (1) | Base earnings |
| (2) | Mr. Legere’s employment agreement targeted his short-term incentive value at not less than $3,333,333. |
Long-Term Incentives
| 28 | T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
Long-Term Incentives
We grant our executive officers long-term incentive compensation in the form of performance-based RSUs and time-based RSUs under the 2013 Omnibus Incentive Plan. Performance-based RSUs are measured based on RTSR, which weour relative total shareholder return (“RTSR”) over a three-year performance period. We believe it is an appropriate performance measure due to the fact thatbecause RTSR inherently contains
reflects relevant financial and operational results as share price is a reflection of our current and expected future performance and directly links a significant portion of executive officer compensation withto shareholder value creation.
Long-Term Incentive Awards Granted in 20152017
On February 25, 2015,2017, we granted long-term incentive awards to the Named Executive Officers long-term incentive awards.Officers. With the exception of Mr. Legere, the Named Executive Officers received half of the aggregate value of their 20152017 long-term incentive awards in the form of performance-based RSUs and half of such value in the form of time-based RSUs. We believe this mix
emphasizes long-term Company performance as well as the retention and engagement of the Named Executive Officers. To further align Mr. Legere’s grantcompensation with stockholder value creation, Mr. Legere’s 2017 long-term incentive award had a greater emphasis on performance-based RSUs, with 2/3approximately 3/4 of his 2015 long-term incentivethe award consisting of performance-based RSUs (including his True-Up PRSUs described below) and
roughly 1/34 consisting of time-based RSUs. In addition to their annual awards, each of Messrs. Legere, Sievert and Carter were granted one-time special long-term incentive awards, as discussed below under “— Special Equity Awards in 2017.” Time-based RSUsRSU awards for 2017 generally vest annually in three equal tranches beginning in February 2016.2018, subject to the Named Executive Officer’s continued service through the applicable vesting date. The performance-based RSUsRSU awards for 2017 generally cliff vest at the conclusion of athe three-year performance period fromending February 25, 2015 through February 25, 2018. Our2020, subject to the Named Executive Officers did not receive any equity grants in 2015 other than those issuedOfficer’s continued service through the vesting date and based on February 25, 2015.the level of RTSR attained during the performance period.
EXECUTIVE COMPENSATION
Performance-based RSU achievement can range from 0% to 200% of target based on relative performance against our peer group, and ispayouts are determined by multiplying the target number of performance-based RSUs by an adjustment percentage based on the total shareholder return (“TSR”)RTSR percentile performance of the Company, relative to our peer group, as follows:
The peer group for the 20152017 performance-based RSU award onawards against which RTSR is measured consistsoriginally consisted of the following 15 companies: AT&T, Cablevision Systems, CenturyLink, Charter Communications, Cisco Systems, Comcast, DIRECTV, Dish Network, Frontier Communications, Intel, Level 3 Communications, Liberty Global, Inc., Microsoft, Motorola Solutions, Qualcomm, Sprint, Time Warner Cable, United States Cellular,and Verizon Communications, and Windstream. IfCommunications. Under the terms of the award, if one or more members of the peer group cease to be a publicly traded entity during the performance period, then that company will be removed from the peer group. NoIn such an event, no additional companies will be added to the peer group for purposes of determining any earned performance-based RSU awards. Level 3
Communications was removed from the award. The award was made priorpeer group upon acquisition by CenturyLink on November 1, 2017, and will not be taken into account in measuring RTSR with respect to the
establishment of the new peer group that was confirmed by the Compensation Committee in October 2015. The new peer group will be used for applicable future 2017 performance-based RSU awards.
The total 2017 target 2015long-term incentive grant value award mix and unitsthe number of performance-based and time-based RSUs awarded are shown below for each Named Executive Officer. The number of unitsRSUs awarded was established as the total grantgrant-date target value multiplied by the award mix and divided by the average closing price of our common stock for the 30 calendar daycalendar-day period ending five business days prior to the grant date.
| Officer | Total 2015 Grant Target Value ($) | Target PRSU / RSU Award | Target Number of Performance- Vested RSUs (#) | Number of Time- Vested RSUs (#) | ||||||||||||
| John J. Legere | 12,000,000 | 2/3 PRSU, 1/3 RSU | 260,163 | 130,082 | ||||||||||||
| J. Braxton Carter | 3,500,000 | 1/2 PRSU, 1/2 RSU | 56,911 | 56,911 | ||||||||||||
| G. Michael Sievert | 4,000,000 | 1/2 PRSU, 1/2 RSU | 65,041 | 65,041 | ||||||||||||
| Neville R. Ray | 2,400,000 | 1/2 PRSU, 1/2 RSU | 39,025 | 39,025 | ||||||||||||
| Thomas C. Keys | 3,500,000 | 1/2 PRSU, 1/2 RSU | 56,911 | 56,911 | ||||||||||||
Performance-Based Long-Term Incentive Awards Vested in 2015
In connection with the Business Combination, the Company granted a one-time “Founders Grant” designed to give executives and employees at all levels an ownership stake in the Company and to align their interests with those of our stockholders. For retention and incentive purposes, the Founders Grant made in June 2013 to the Named Executive Officers had longer vesting periods for time-based
RSUs and a higher target value than were anticipated for future annual equity grants and was in lieu of the 2014 annual grant (other than supplemental equity awards made to retain high-performing leaders, reward exceptional performance or recognize expanded responsibilities).
| T-Mobile 2018 Proxy Statement | 29 |
EXECUTIVE COMPENSATION
Officer | Total 2017 Grant ($) | Target Number of Based RSUs (#) | Number of Time-Based (#) | |||||||||
John J. Legere | 15,000,000 | 178,775 | 65,009 | |||||||||
J. Braxton Carter | 5,312,500 | 43,170 | 43,170 | |||||||||
G. Michael Sievert | 7,125,000 | 57,899 | 57,899 | |||||||||
Neville R. Ray | 5,000,000 | 40,631 | 40,631 | |||||||||
Thomas C. Keys | 4,218,750 | 34,283 | 34,283 | |||||||||
| (1) | Named Executive Officers received half of the aggregate target value of their long-term incentive awards in the form of performance-based RSUs and half of such value in the form of time-based RSUs, except for Mr. Legere who received approximately 3/4 of his target award in the form of performance-based RSUs (including his True-Up PRSUs described below). |
EXECUTIVE COMPENSATIONSpecial Equity Awards in 2017
In April 2017, the Company entered into an amended and restated employment agreement with Mr. Legere, pursuant to which Mr. Legere was granted a one-time award of performance-based RSUs with a target value equal to $3,000,000 (the “True-Up PRSUs”). The award was intended to bring Mr. Legere’s 2017 annual award to $15,000,000 pursuant to his amended and restated employment agreement. The True-Up PRSUs are subject to the same vesting schedule and other terms and conditions applicable to the annual award of performance-based RSUs granted to Mr. Legere on February 25, 2017 (see “— Long-Term Incentive Awards Granted in 2017” above for additional information).
TheIn February 2017, to recognize Mr. Sievert’s role and incentivize continued strong performance, the Company entered into an amended and restated compensation term sheet with Mr. Sievert, pursuant to which he was granted a one-time award of performance-based RSU componentRSUs with a target value equal to $3,562,500 and a one-time award of time-based RSUs with a target value equal to $3,562,500. Subject to Mr. Sievert’s continued employment through such date, the Founders Grant hadperformance-based RSUs cliff vest at the conclusion of a two-year performance period of May 1, 2013 to December 31, 2015. Basedending February 25, 2019 (based on the Company’slevel of RTSR at the end ofattained during the performance period against our peer group) and the time-based RSUs vest in full on February 25, 2019.
In December 2017, to recognize Mr. Carter’s role and incentivize continued strong performance, the Company entered into an adjustment percentageamended and restated employment agreement with Mr. Carter, pursuant to which he was granted a one-time award of 185% was earned for each Named Executive Officer.time-based RSUs with a target value of $2,500,000. Subject to Mr. Carter’s continued employment through such date, the award vests in full on March 1, 2019.
| Officer | Target 2013 PRSUs (#) | RTSR Adjustment Percentage | PRSUs Earned (#) | |||||||||
| John J. Legere | 453,996 | 185% | 839,892 | |||||||||
| J. Braxton Carter | 147,549 | 185% | 272,965 | |||||||||
| G. Michael Sievert | 92,389 | 185% | 170,919 | |||||||||
| Neville R. Ray | 92,389 | 185% | 170,919 | |||||||||
| Thomas C. Keys | 152,089 | 185% | 281,364 | |||||||||
Legacy T-Mobile USA LTIP
The legacy T-Mobile USA Long-Term Incentive Plan (the “legacy T-Mobile USA LTIP”) consisted of cash awards because T-Mobile USA was a wholly-owned subsidiary of Deutsche Telekom at the time the legacy T-Mobile USA LTIP was adopted. Executives received performance awards (with a three-year performance period) based on Company goals. To the extent earned, half of each performance award vested in three equal annual tranches beginning with the end of the first year of the performance period, with the other half of the
award cliff vesting at the end of the three-year performance period. In 2015, one cycle of legacy T-Mobile USA LTIP awards was outstanding. As a result of the Business Combination, outstanding awards continued to vest as scheduled with both tranche and cliff portions paying at the end of the respective performance periods,special time-based and performance-based RSUs granted during 2017 are subject to continued employment,accelerated vesting in certain circumstances as described below under “— Potential Payments upon Termination or in Connection with the amount of payment fixed at 100% of target. The final tranche was earneda Change in 2015 and is disclosed in the 2015 Summary Compensation Table.
Control”.
Perquisites
We generally do not haveprovide perquisites forto any executive officer, including the Named Executive Officers, beyond what all other employees may be eligible for, other than relocation benefits from time to time.receive. In 2015,2017, we provided personal security for Mr. Legere
due to the range of security issues encountered by senior executiveschief executive officers of large public companies, particularly with respect to high profilehigh-profile chief executive officers such as Mr. Legere. For fiscal year 2015,2017, we paid $37,043approximately $48,000 toward Mr. Legere’s personal security. We also
reimbursed Messrs. Legere, Sievert and Carter for legal fees and expenses (capped at $25,000 for each executive) incurred in connection with the negotiation and preparation of each such executive’s amended and restated employment agreement or term sheet, as applicable. In 2017, the Company also permitted the spouses of executive officers, including the Named Executive Officers, to attend one Board meeting and paid for certain incremental costs (excluding travel costs) associated with such attendance.
Comprehensive Benefits Package
We provide a competitive benefits package to all full-time employees, including the Named Executive Officers, that includes health and welfare benefits, such as medical, dental, vision care, disability insurance, life insurance benefits and a 401(k) savings plan.plan (with an employer match up to 4%). We provide a non-qualified deferred compensation plan under which
eligible participants may defer up to 75% of their base salary and 100% of their short-term incentive and long-term cash incentive as well asannual RSUs. We do not provide any employer matching or discretionary allocations under the non-qualified deferred compensation plan.
Severance and Change-in-Control Benefits
We provide severance pay and other termination benefits to eligible executive officers, including the Named Executive Officers, whose employment is terminated, including due to corporate restructuring, and, in some cases, due to involuntary termination by us without cause, due to our non-renewal of the executive’s employment term or due to the voluntary termination by the executive for good reason. These arrangements provide security of transition income and benefit replacement that allow such executives to focus on our prospective business priorities that create value for stockholders. We believe the level of severance and termination benefits provided by these arrangements is consistent with the practices of our peer group and is necessary to
attract and retain key employees. These benefits are provided pursuant to our Severance Guidelines, Executive Continuity Plan, 2013 Omnibus Incentive Plan, long-term incentive award agreements and, for each of Messrs. Legere, Sievert and Sievert,Carter, pursuant to a written agreements.employment agreement or term sheet, as applicable. These arrangements do not include any gross up for excise taxes imposed as a result of severance or other payments that are deemed made in connection with a change in control. The potential payments and benefits available under these arrangements are discussed further under “—“ — Potential Payments Uponupon Termination or in Connection Withwith a Change in Control.”
| 30 | T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
Other Matters
Tax and Accounting Considerations
Tax Considerations
Section 162(m) of the Code. The Internal Revenue Code (the “Code”) Section 162(m) generally disallows an income tax deduction to public companies for annual compensation in excess of $1 million paid to the chief executive officer and other “covered employees.” For taxable years beginning on or before December 31, 2017, this deduction limit included an exception for “qualified performance-based compensation”. The recently-enacted Tax Act amended certain provisions of Code Section 162(m), including eliminating the three other most highly compensated named executive officers (excluding the chief financial officer). Compensationexemption for “qualified performance-based compensation” for tax years beginning after December 31, 2017. The Tax Act includes a grandfather provision, pursuant to which compensation that qualifies as “performance-based”is provided pursuant to a written binding contract in effect on November 2, 2017, and which has not been modified in any material respect on or satisfies another exception is excluded for purposes of calculating the amount of compensationafter that date, will not be subject to the $1 million limit. Althoughamendments made to Code Section 162(m) by the Tax Act. We believe that maintaining the discretion to evaluate the performance of our executive officers through the use of performance-based compensation is an important part of our responsibilities and benefits our stockholders, even if it may be non-deductible under Code Section 162(m). The Compensation Committee considershas historically considered the potential impact of Code Section 162(m) of the Code as well as other tax and accounting
consequences when developing and implementing the Company’s executive compensation programs,programs. However, the Compensation Committee retains the discretion and flexibility to design and administer compensation programs that are in the best interests of the Company and its stockholders. In addition, due to the ambiguitiesstockholders, and, uncertainties as to the application and interpretation of Section 162(m)in light of the repeal of the performance-based compensation exception to Code no assurances can be given that compensation even if intended bySection 162(m), the Compensation Committee may in the future approve compensation that would not have qualified as performance-based compensation under Code Section 162(m) as in effect prior to the Tax Act.
Section 280G of the Code. Code Section 280G disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Code Section 4999 imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Code Section 280G based on the executive’s prior compensation. As discussed above, we do not provide tax gross-ups on income attributable to change in control and other executive arrangements.
Section 409A of the Code. Code Section 409A requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements for deductibility under Section 162(m) of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and directors to accelerated income tax liabilities, substantial additional taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefit plans and arrangements for all of our employees and directors, including our Named Executive Officers, so that they are either exempt from, or satisfy the requirements of, Code would, in fact, do so.Section 409A.
EXECUTIVE COMPENSATIONAccounting for Stock-Based Compensation
. We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of performance-based RSUs, time-based RSUs and other equity-based awards under equity incentive award plans have been and will be accounted for under ASC Topic 718. We expect that we will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives. For further information on our accounting for our stock-based compensation awards, refer to our Annual Report on Form 10-K for the year ended December 31, 2017.
Securities Trading Policy
Our insiderpolicy on securities trading policy prohibits our directors, officers and employees from trading in our securities during certain designated blackout periods and otherwise while they are aware of material non-public information, and from engaging in hedging transactions or short sales
and trading in puts and callsoptions with respect to our securities. The policy also prohibits holding our securities in a margin account or pledging our securities as collateral for a loan.
Clawback Provisions
In 2014, the Compensation Committee adopted a policy of recoupment of compensation in certain circumstances. The policy provides that in the event the Company issues a restatement of its financial statements due to its material noncompliance with financial reporting requirements under U.S. securities laws, the Company will, to the extent permitted by governing law, require reimbursement from current and former executive officers for excess incentive compensation received at any time during the three-year period preceding the date on which the Company is required to prepare the accounting restatement if a lower payment would have occurred based on the restated results, regardless of whether the executive officer engaged in misconduct or otherwise caused or contributed to the requirement for the restatement. The policy is administered by the
Section 16 Subcommittee, which has the sole discretion to seek recovery from an executive officer and may consider whether seeking recovery would be in the best interests of the Company, including the costs and benefits of seeking recovery and whether doing so may prejudice the interests of the Company, including in any related proceeding or investigation. All awards granted under the 2013 Omnibus Incentive Plan are subject to the requirements of Section 954 of the Dodd-Frank Act regarding the recovery of erroneously awarded compensation as well as any implementing rules and regulations under the Dodd-Frank Act, any policies adopted by the Company to implement such requirement, and any other compensation recovery policies that may be adopted from time to time by the Company.
| T-Mobile 2018 Proxy Statement | 31 |
EXECUTIVE COMPENSATION
Stock Ownership Guidelines and Broad-Based Stock Ownership
Under our stock ownership guidelines, forthe Chief Executive Officer and all executive officers each executive officer isreporting to the Chief Executive Officer are expected to acquire and maintain ownership of ourshares of common stock equal in value to a specified multiple of the executive officer’s base salary measured as of May 1, 2013, for executives in office on that date, and asthe later of (i) the date we adopted the stock ownership guidelines (May 1, 2013) and (ii) the date on which he or she became an executive takes office for executives hired after that date. The multiple for our Chief Executive Officer is five times base salary and the multiple for our other executive officers is three times base salary. officer.
Position | Ownership Requirement | |||
Chief Executive Officer | 5x base salary | |||
Executive Officers reporting to the CEO | 3x base salary | |||
Each executive officer is expected to meet the ownership guidelines within the later of (i) five years from the date we adopted the policyguidelines and (ii) the date on which
he or she became an executive officer, and is expected to retain at least 50% of the net shares of common stock acquired through equity awards granted after the Business Combination until the ownership thresholds are met.
| ∎ | As of December 31, 2017, our Chief Executive Officer and each of the executive officers reporting to the Chief Executive Officer were in compliance with our stock ownership guidelines |
We believe that all employees should have a stake in the Company’s performance. Therefore,Accordingly, we implementedutilize a Company-wide annual equity award program. In addition, we implemented an Employee Stock Purchase Plan (“ESPP”) in 2015 to provide employees with a cost-effective vehicle to purchase stock.
Equity Granting Practices
The Compensation Committee has adopted an equity grant policy pursuant to which the Compensation Committee (or a subcommittee) approvesmay approve annual grants to executive officers and other members of the executive leadership team at a specified time.time each year. In addition to the annual grants, equity awards may be granted on a quarterly basis to new hires. We may also grant supplemental equity awards from time to time to retain high-performing leaders, reward
exceptional performance or recognize expanded responsibility. No such grants were made to the Named Executive Officers in 2015. The Compensation Committee has delegated authority to the Company’s Executive Vice President, Human Resources, subject to certain terms and limitations as established by the Compensation Committee, to makegrant awards to employees who are not Section 16 officers.
Results of Stockholder Advisory Approval of Named Executive Officer Compensation
At the 20142017 Annual Meeting of Stockholders, stockholders were asked to approve, on an advisory basis, the Named Executive Officer compensation for 20132016 as reported in the proxy statement. This say-on-pay proposal was approved by over 99% of the shares present and entitled to vote.vote, and the Compensation Committee believes this affirms our stockholders’ strong support of our executive compensation program.
TheAccordingly, while the Compensation Committee considered the results of the 20142017 advisory vote along with stockholder input and other factors discussed in this CD&A, andit concluded that no changes to our compensation policies and practices were warranted in response to the stockholder advisory vote. The Board has previously determined to hold advisory say-on-pay votes every three years. Accordingly, the next advisory say-on-pay proposalstockholder vote will occur in connection with the 20172020 Annual Meeting of Stockholders.
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Company management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement and incorporated by reference into the 20152017 Form 10-K.
The Compensation Committee:
Teresa A. Taylor, Chair
W. Michael Barnes
Thomas Dannenfeldt
Lawrence H. Guffey
Raphael Kübler
| T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Executive Compensation Tables TABLES
20152017 Summary Compensation Table
The following table sets forth certain information with respect to compensation for the years ended December 31, 2015, 20142017, 2016 and 20132015 earned by or paid to our ChiefNamed Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers who were serving as executive officers at the end of 2015.Officers.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) | Stock Awards (1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||
| John J. Legere | 2015 | 1,492,358 | — | 13,675,485 | — | 9,253,101 | 37,043 | (3) | 24,457,987 | 2017 | 1,618,590 | — | 16,278,923 | — | 5,666,666 | 67,027 | 23,631,206 | |||||||||||||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | 2014 | 1,250,000 | — | 10,658,668 | — | 6,658,333 | — | 18,567,001 | 2016 | 1,500,000 | — | 12,898,115 | — | 5,610,000 | 51,800 | 20,059,915 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 1,250,000 | 525,000 | 22,500,050 | — | 4,833,333 | 137,325 | 29,245,708 | 2015 | 1,492,358 | — | 13,675,485 | — | 9,253,101 | 37,043 | 24,457,987 | |||||||||||||||||||||||||||||||||||||||||||||||||
| J. Braxton Carter | 2015 | 698,462 | — | 3,907,509 | — | 2,895,959 | 10,600 | (4) | 7,512,530 | 2017 | 845,192 | — | 8,128,113 | — | 2,155,241 | 28,192 | 11,156,737 | |||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2014 | 650,000 | — | — | — | 1,424,167 | 10,400 | 2,084,567 | 2016 | 724,135 | — | 4,339,167 | — | 1,692,665 | 10,600 | 6,766,567 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 605,426 | — | 9,493,794 | 931,855 | 1,701,747 | 99,997 | 12,832,819 | 2015 | 698,462 | — | 3,907,509 | — | 2,895,959 | 10,600 | 7,512,530 | |||||||||||||||||||||||||||||||||||||||||||||||||
| G. Michael Sievert | 2015 | 792,308 | — | 4,465,715 | — | 2,751,128 | 10,600 | (4) | 8,019,751 | 2017 | 944,231 | — | 14,699,399 | — | 3,210,384 | 36,729 | 18,890,743 | |||||||||||||||||||||||||||||||||||||||||||||||
Chief Operating Officer | 2014 | 550,000 | — | 1,022,919 | — | 1,063,792 | 10,400 | 2,647,111 | 2016 | 800,000 | — | 5,320,028 | — | 2,244,000 | 10,600 | 8,374,628 | ||||||||||||||||||||||||||||||||||||||||||||||||
Chief Operating Officer | 2015 | 792,308 | — | 4,465,715 | — | 2,751,128 | 10,600 | 8,019,751 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 598,462 | — | 2,679,457 | — | 2,409,960 | 10,600 | (4) | 5,698,479 | 2017 | 796,154 | — | 5,222,303 | — | 2,030,192 | 11,468 | 8,060,117 | ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Technology Officer | 2014 | 550,000 | — | — | — | 1,683,583 | 10,400 | 2,243,983 | 2016 | 696,539 | — | 4,189,514 | — | 1,628,159 | 10,600 | 6,524,811 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 550,000 | 600,000 | 5,362,258 | — | 2,612,448 | 10,641 | 9,135,347 | 2015 | 598,462 | — | 2,679,457 | — | 2,409,960 | 10,600 | 5,698,479 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Thomas C. Keys | 2015 | 700,000 | — | 3,907,509 | — | 2,565,333 | 10,600 | (4) | 7,183,442 | 2017 | 749,038 | — | 4,406,394 | — | 1,591,707 | 11,037 | 6,758,176 | |||||||||||||||||||||||||||||||||||||||||||||||
President, T-Mobile Indirect Channel | 2014 | 688,462 | — | — | — | 1,400,449 | 10,400 | 2,099,311 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 647,714 | — | 9,806,246 | 980,900 | 1,761,187 | 5,100 | 13,201,147 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President, MetroPCS | 2016 | 724,136 | — | 3,857,046 | — | 1,354,135 | 10,600 | 5,945,917 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 700,000 | — | 3,907,509 | — | 2,565,333 | 10,600 | 7,183,442 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The value of stock awards (consisting of time-based RSUs and performance-based RSUs at target level) is determined using the aggregate grant date fair value computed in accordance with ASC 718, excluding the effect of any estimated forfeitures. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be realized by the Named Executive Officer. See Note |
| (2) |
|
| Name | T-Mobile 2015 STIP ($) | Legacy T-Mobile USA LTIP ($) | ||||||
John J. Legere | 5,253,101 | 4,000,000 | ||||||
J. Braxton Carter | 1,229,292 | 1,666,667 | ||||||
G. Michael Sievert | 1,394,461 | 1,356,667 | ||||||
Neville R. Ray | 1,053,293 | 1,356,667 | ||||||
Thomas C. Keys | 1,232,000 | 1,333,333 | ||||||
|
|
| (3) | Amounts included in the “All Other Compensation” column are detailed in the table below. |
Officer | 401k Employer Match ($) | Legal Fee Reimbursement ($) | Security Arrangements ($) | Spousal Travel (1) ($) | Other ($) | Total ($) | ||||||||||||||||||
John J. Legere | — | 18,750 | 48,101 | — | 176 | 67,027 | ||||||||||||||||||
J. Braxton Carter | 10,800 | 16,047 | — | 459 | 887 | 28,192 | ||||||||||||||||||
G. Michael Sievert | 10,800 | 25,000 | — | 398 | 531 | 36,729 | ||||||||||||||||||
Neville R. Ray | 10,800 | — | — | — | 668 | 11,468 | ||||||||||||||||||
Thomas C. Keys | 10,800 | — | — | — | 237 | 11,037 | ||||||||||||||||||
| Converted from Euro to US Dollars using the |
| T-Mobile |
EXECUTIVE COMPENSATION
20152017 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 2015,2017, to the Named Executive Officers.
| Name | Type of Award | Grant Date | Approval Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock or Units (#) | Grant Fair Value of Stock | Type of Award | Grant Date | Approval Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other (#) | Grant-Date of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target(1) ($) | Maximum (1) ($) | Threshold (#) | Target (2) (#) | Maximum (2) (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| John J. Legere | STIP | — | 2,984,716 | 5,969,432 | — | — | — | — |
|
— |
| STIP | 166,667 | 3,333,333 | 6,666,666 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 260,163 | 520,326 | — | $ | 9,488,145 | PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 32,505 | 130,018 | 260,036 | — | 8,622,794 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 130,082 | $ | 4,187,340 | RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 65,009 | 4,044,210 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 4/1/2017 | 3/27/2017 | — | — | — | 12,189 | 48,757 | 97,514 | — | 3,611,919 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| J. Braxton Carter | STIP | — | 698,462 | 1,396,924 | — | — | — | — | — | STIP | 63,389 | 1,267,789 | 2,535,577 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 56,911 | 113,822 | — | $ | 2,075,544 | PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 10,793 | 43,170 | 86,340 | — | 2,863,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 56,911 | $ | 1,831,965 | RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 43,170 | 2,685,606 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 12/22/2017 | 12/15/2017 | — | — | — | — | — | — | 40,545 | 2,579,473 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G. Michael Sievert | STIP | — | 792,308 | 1,584,616 | — | — | — | — | — | STIP | 94,423 | 1,888,461 | 3,776,923 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 14,475 | 57,899 | 115,798 | — | 3,839,862 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 57,899 | 3,601,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 65,041 | 130,082 | — | $ | 2,372,045 | PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 14,475 | 57,899 | 115,798 | — | 3,655,743 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 65,041 | $ | 2,093,670 | RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 57,899 | 3,601,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Neville R. Ray | STIP | — | 598,462 | 1,196,924 | — | — | — | — | — | STIP | 59,712 | 1,194,231 | 2,388,462 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 39,025 | 78,050 | — | $ | 1,423,242 | PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 10,158 | 40,631 | 81,262 | — | 2,694,648 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 39,025 | $ | 1,256,215 | RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 40,631 | 2,527,655 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thomas C. Keys | STIP | — | 700,000 | 1,400,000 | — | — | — | — | — | STIP | 46,815 | 936,298 | 1,872,596 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 56,911 | 113,822 | — | $ | 2,075,544 | PRSU | 2/25/2017 | 2/16/2017 | — | — | — | 8,571 | 34,283 | 68,566 | — | 2,273,649 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 56,911 | $ | 1,831,965 | RSU | 2/25/2017 | 2/16/2017 | — | — | — | — | — | — | 34,283 | 2,132,745 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Represents the threshold, target and maximum amounts of annual cash incentive compensation that might have |
| (2) | Represents the threshold, target and maximum number of shares that might be paid pursuant to performance-based RSU |
| (3) | The value of |
Employment Arrangements
Employment Arrangements
2012 Employment Agreement with Mr. Legere. TheAs of January 1, 2017, the Company entered intowas party to an employment agreement with Mr. Legere effective(dated September 22, 2012 (which wasand amended on October 23, 2013 and February 25, 2015) providing for his employment as Chief Executive Officer and his appointment to the Board of Directors. The initial term of the agreement ends on September 22, 2017 and automatically extends for successive one-year terms. Either the Company or Mr. Legere may give notice that the term will not be extended. Pursuant to the amendment entered into on February 25, 2015,employment agreement, Mr. Legere iswas entitled (effective January 1, 2015) to a minimum (i) an annual base salary of $1.5 million$1,500,000, (ii) an annual incentive plan target award of $3 million$3,000,000 (with a maximum award equal to 200% of target), and (iii) annual long-term incentive plan target awardawards of $12 million.$12,000,000.
2017 Employment Agreement with Mr. Legere. Effective April 1, 2017, the Company entered into an amended and restated employment agreement with Mr. Legere, which superseded Mr. Legere’s prior employment agreement in its entirety. The current term of the amended and restated employment agreement extends through April 1, 2019, and automatically extends for successive one-year terms thereafter (unless either party provides notice of non-renewal). Pursuant to the amended and restated employment agreement, Mr. Legere is entitled to (i) an annual base salary of $1,666,667, effective as of April 1, 2017, (ii) commencing with fiscal year 2017, an annual incentive plan target of no less than $3,333,333 (with a maximum award equal to 200% of target), and (iii) employee benefits to the same extent and on the same terms as such benefits are provided generally by the Company to its senior managers.
Following the entrance into the amended and restated employment agreement, Mr. Legere received a one-time grant of True-Up PRSUs under the 2013 Omnibus Incentive Plan, with a target value equal to $3,000,000. See “— Long-Term Incentive Awards Granted in 2017” above for additional information.
Commencing with calendar year 2018, Mr. Legere is entitled to annual long-term incentive awards with a target value equal to $15,000,000, allocated as follows: (i) $3,000,000 of such value will be granted in the form of performance-based RSUs (the “Incremental PRSUs”); and (ii) with respect to the remaining $12,000,000 of such value, (a) one-third of such remaining value (or $4,000,000) will be granted in the form of time-based RSUs and (b) two-thirds of such remaining value (or $8,000,000) will be granted in the form of performance-based RSUs.
In addition, Mr. Legere is entitled upon request to certain Company-paid financial planning advice in connection with potential change in control payments under Code Section 280G.
2017 Term Sheet with Mr. Sievert. Effective January 1, 2017, the Company entered into an amended and restated term sheet with Mr. Sievert. Pursuant to the 2017 term sheet, Mr. Sievert is entitled to (i) an annual base salary of $950,000, (ii) an annual incentive plan target of 200% of his base salary, (iii) an annual long-term incentive plan award with a target value of $7,125,000, and (iv) eligibility to receive any employee benefits provided broadly to executives at his level in the future
| 34 | T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
(except as would result in a duplication of benefits). Following the entrance into the 2017 term sheet, Mr. Sievert received a one-time special equity award comprised of time-based and performance-based RSUs, with an aggregate value equal to $7,125,000. See “— Long-Term Incentive Awards Granted in 2017” above for additional information.
2013 Term Sheets with Messrs. Carter and KeysKeys.. Effective May 1, 2013, Messrs. Carter and Keys entered into term sheets with
the Company, which confirmed their post Businesspost-Business Combination roles and compensation.
Term Sheet2017 Employment Agreement with Mr. Sievert.Carter. Effective January 1, 2015,December 22, 2017, the Company entered into aan amended and restated employment agreement with Mr. Carter which superseded his 2013 term sheet pursuantin its entirety. Pursuant to whichhis amended and restated employment agreement, Mr. Sievert willCarter is entitled to receive (i) an (i) annual base salary of $800,000,$850,000, (ii) an annual incentive plan target of 100%150% of his eligible base salary andearnings, (iii) an annual long-term incentive plan award with a target value of 250% of his total target cash compensation.compensation, (iv) a one-time special cash bonus equal to $2,500,000, payable in a single lump-sum amount on or within 15 days following March 1, 2019 (subject to his continued employment through such date, except as described below), which Mr. Carter received following entrance into the amended and restated employment agreement, and (v) employee benefits to the same extent and on the same terms as such benefits are provided generally by the Company to its similarly-situated executives.
Following entrance into the amended and restated employment agreement, Mr. Carter received a one-time grant of time-based RSUs under the 2013 Omnibus Incentive Plan with a target value equal to $2,500,000. See “— Long-Term Incentive Awards Granted in 2017” above for additional information.
See “— Potential Payments Uponupon Termination or in Connection Withwith a Change in Control” for information regarding payments payable upon termination of employment of the Named Executive Officers.
Cash and Incentive Compensation
Non-Equity Incentive Plan AwardsAwards.. The 20152017 Summary Compensation Table includes payments received under the 20152017 STIP as well as payments underfor the legacy T-Mobile USA LTIP that were paid at target with respect to performance periodsperiod ended in 2013, 2014 and 2015 in connection with the Business Combination. For Messrs. Carter and Keys, the 2015 Summary Compensation Table also includes payments under the legacy MetroPCS short-term incentive plan for 2013.December 31, 2017. The 20152017 Grants of Plan-Based Awards Table includes the range of potential payouts of awards granted under the 20152017 STIP.
Equity Incentive Plan AwardsAwards.. All of the Named Executive Officers received equity awards consisting of both time-based RSUs that vest in three annual installments beginning in February 20162018, subject to continued service through the applicable vesting dates, and performance-based RSUs that vest based on the relative performance of the Company’s TSR compared to that of the peer group over a three-year measurement period ending on February 25, 2018.2020, subject to continued service through the end of the measurement period (in each case, except as described below). See “— Long-Term Incentives” above.above for more information.
| T-Mobile 2018 Proxy Statement | 35 |
EXECUTIVE COMPENSATION
Outstanding Equity Awards at 20152017 Fiscal Year-End Table
The following table sets forth certain information with respect to all outstanding equity awards held by the Named Executive Officers as of December 31, 2015.2017.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | | Type of | |
| Grant Date |
|
|
Number of |
|
|
Number of |
|
| Option Exercise Price ($) |
| | Option Expiration | |
| Value of Unexercised In-the- Money Options/ SARs at Year-End (6) ($) |
|
| Number of Shares or Units or Stock Vested |
|
| Market Value of Shares or Units of Stock That Have Not Vested (7) ($) |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | |
| Equity Incentive Plan Awards: Value of Units or Rights That Not Vested (7) ($) |
| | Type of Award | | Grant Date |
|
|
Number of |
|
|
Number of
|
| | Option Exercise Price ($) |
| | Option Expiration |
| | Value of Unexercised In-the- Money Options/ SARs at Year-End ($) |
| | Number of Shares or Units or Stock Not Vested (#) |
| | Market Value of Shares or Units of Stock That Have Not Vested (7) ($) |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested |
| | Equity Incentive Plan Awards: Value of Units or Rights That Not Vested (7) ($) |
| |||||||||||||||||||||||||||||||
Exercisable | Unexerciseable | Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| John J. Legere | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 260,163 | 10,177,577 | PRSU | 4/1/2017 | (1) | — | — | — | — | — | — | — | 48,757 | 6,193,114 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (2) | — | — | — | — | — | 130,082 | 5,088,808 | — | — | PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 130,018 | 16,514,886 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 12/16/2014 | (3) | — | — | — | — | — | — | — | 282,986 | 11,070,412 | RSU | 2/25/2017 | (3) | — | — | — | — | — | 65,009 | 4,128,722 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 12/16/2014 | (4) | — | — | — | — | — | — | — | 282,986 | 11,070,412 | PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 215,112 | 27,323,526 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/10/2013 | (2) | — | — | — | — | — | 181,599 | 7,104,153 | — | — | RSU | 2/25/2016 | (3) | — | — | — | — | — | 71,704 | 4,553,921 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | (2) | — | — | — | — | — | — | — | 260,163 | 33,045,904 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (3) | — | — | — | — | — | 43,361 | 2,753,857 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| J. Braxton Carter | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 56,911 | 2,226,358 | RSU | 12/22/2017 | (4) | — | — | — | — | — | 40,545 | 2,575,013 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 43,170 | 5,483,453 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2017 | (3) | — | — | — | — | — | 43,170 | 2,741,727 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 54,829 | 6,964,380 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (2) | — | — | — | — | — | 56,911 | 2,226,358 | — | — | RSU | 2/25/2016 | (3) | — | — | — | — | — | 36,553 | 2,321,481 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/10/2013 | (2) | — | — | — | — | — | 98,366 | 3,848,078 | — | — | PRSU | 2/25/2015 | (2) | — | — | — | — | — | — | — | 56,911 | 7,228,835 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option | 4/18/2007 | (5) | 145,500 | — | 37.91 | 4/18/2017 | 176,055 | — | — | — | — | RSU | 2/25/2015 | (3) | — | — | — | — | — | 18,971 | 1,204,848 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G. Michael Sievert | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 65,041 | 2,544,404 | PRSU | 2/25/2017 | (5) | — | — | — | — | — | — | — | 57,899 | 7,354,331 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (2) | — | — | — | — | — | 65,041 | 2,544,404 | — | — | RSU | 2/25/2017 | (6) | — | — | — | — | — | 57,899 | 3,677,165 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/5/2014 | (2) | — | — | — | — | — | 20,363 | 796,601 | — | — | PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 57,899 | 7,354,331 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/10/2013 | (2) | — | — | — | — | — | 61,593 | 2,409,518 | — | — | RSU | 2/25/2017 | (3) | — | — | — | — | — | 57,899 | 3,677,165 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 67,223 | 8,538,665 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2016 | (3) | — | — | — | — | — | 44,816 | 2,846,264 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2015 | (2) | — | — | — | — | — | — | — | 65,041 | 8,261,508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (3) | — | — | — | — | — | 21,681 | 1,376,960 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Neville R. Ray | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 39,025 | 1,526,658 | PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 40,631 | 5,160,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2017 | (3) | — | — | — | — | — | 40,631 | 2,580,475 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 52,938 | 6,724,185 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2016 | (3) | — | — | — | — | — | 35,292 | 2,241,395 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (2) | — | — | — | — | — | 39,025 | 1,526,658 | — | — | PRSU | 2/25/2015 | (2) | — | — | — | — | — | — | — | 39,025 | 4,956,956 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/10/2013 | (2) | — | — | — | — | — | 61,593 | 2,409,518 | — | — | RSU | 2/25/2015 | (3) | — | — | — | — | — | 13,009 | 826,202 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thomas C. Keys | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 56,911 | 2,226,358 | PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 34,283 | 4,354,627 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (2) | — | — | — | — | — | 56,911 | 2,226,358 | — | — | RSU | 2/25/2017 | (3) | — | — | — | — | — | 34,283 | 2,177,313 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 6/10/2013 | (2) | — | — | — | — | — | 101,393 | 3,966,494 | — | — | PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 48,737 | 6,190,574 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option | 8/8/2007 | (5) | 200,000 | — | 55.43 | 8/8/2017 | — | — | — | — | — | RSU | 2/25/2016 | (3) | — | — | — | — | — | 32,492 | 2,063,567 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option | 4/18/2007 | (5) | 88,875 | — | 37.91 | 4/18/2017 | 107,539 | — | — | — | — | PRSU | 2/25/2015 | (2) | — | — | — | — | — | — | — | 56,911 | 7,228,835 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 2/25/2015 | (3) | — | — | — | — | — | 18,971 | 1,204,848 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) |
|
| (2) | PRSUs vest based on the relative performance of the Company’s TSR compared to that of the peer group over a measurement period of three years. |
| (3) | RSUs vest in annual installments with respect to one-third of the shares on February 25 of each of the three calendar years following the calendar year in which the grant occurred. |
RSUs vest in full on March 1, 2019. |
| (5) | PRSUs vest based on the relative performance of the Company’s TSR compared to that of the peer group |
|
|
|
Calculated based on the number of PRSUs that may be earned upon achievement of |
| 36 | T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
Option Exercises and Stock Vested for Fiscal Year 20152017 Table
The following table sets forth certain information with respect to option exercises and restricted stock vesting during the fiscal year ended December 31, 2015,2017, with respect to the Named Executive Officers.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1)($) | ||||||||||||||||||||||||||||
John J. Legere | — | — | 930,691 | 35,779,395 | — | — | 170,013 | 10,576,509 | ||||||||||||||||||||||||||||
J. Braxton Carter | 516,300 | 8,620,434 | 322,148 | 12,261,592 | 500 | 13,515 | 86,429 | 5,376,748 | ||||||||||||||||||||||||||||
G. Michael Sievert | — | — | 211,896 | 8,087,358 | — | — | 85,066 | 5,344,800 | ||||||||||||||||||||||||||||
Neville R. Ray | — | — | 201,715 | 7,677,675 | — | — | 61,451 | 3,822,867 | ||||||||||||||||||||||||||||
Thomas C. Keys | 469,904 | 5,763,492 | 332,060 | 12,638,864 | 200,000 | 1,362,192 | 85,912 | 5,344,586 | ||||||||||||||||||||||||||||
| (1) | ||
EXECUTIVE COMPENSATION
20152017 Non-Qualified Deferred Compensation
The following table shows the contributions, earnings and the aggregate balance of total deferrals as of December 31, 2017.
Name | Executive Contributions in | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End(1)($) | |||||||||
John J. Legere | — | — | — | |||||||||
J. Braxton Carter | — | 251,790 | 2,642,259 | |||||||||
G. Michael Sievert | — | — | — | |||||||||
Neville R. Ray | 194,406 | 850,487 | 6,007,745 | |||||||||
Thomas C. Keys | — | — | — | |||||||||
| (1) | Of the amounts listed in this column, the following aggregate amounts were reported in the Summary Compensation Tables in proxy statements for prior years: Mr. Carter, $1,368,783 and Mr. Ray, $1,332,250. |
All of the Named Executive Officers are eligible to participate in the Company’s non-qualified deferred compensation plan (the “Deferred Compensation Plan”). However, only Messrs. Carter and Ray have elected to do so. Under the terms of the Deferred Compensation Plan, participants are eligible to defer up to 75% of their base salary, 100% of their annual incentive compensation and 100% of annual RSU awards. All amounts attributable to participant deferrals under the Deferred Compensation Plan are fully vested at all times. We did not provide any employer matching or discretionary allocations under the Deferred Compensation Plan for 2015.2017.
Participants choose how their deferrals (and their account balances) will be allocated among the national investment funds available under the Deferred Compensation Plan. For 2015,2017, there were 1618 funds for deferral of base salary and incentive compensation, which did not include a Company stock fund. Any deferred RSUs would be credited to a Company stock fund.
A participant’s account balancesbalance under the Deferred Compensation Plan will be distributed in a lump-sum distribution when the participant terminates employment, unless termination is due to retirement or disability, in which case the participant can elect annual installments over two to fifteen15 years. For this purpose, “retirement” means termination of employment on or after either (i) the date on which the sum of the participant’s age and years of service equals 65 or (ii) the date on which the participant completes ten years of service. Participants may also elect to have amounts attributable to their deferrals for a particular year distributed (or commence to be distributed) as of a specified date in a lump sum or in annual installments over two to five years, even if they are still employed by the Company on that date. Generally, the specified date for base
salary and incentive compensation distribution may not be earlier than the first day of the second year beginning after the year in which such amounts are deferred
and for RSUs may not be earlier than the first day of the fourth year beginning after the year in which such amounts are deferred.
If a participant’s employment with the Company terminates prior to the in-service distribution date specified by the participant or while in-service distribution installment payments are being made, then any portions of the participant’s account balances that are subject to specified distribution date elections will be distributed upon termination of employment, as described above.
If a participant dies before his or her entire interest under the Deferred Compensation Plan has been distributed, his or her remaining interest will be distributed in a lump sum to his or her beneficiary.
If a participant’s employment terminates within 24 months following a change in control (as defined in the Company’s 2013 Omnibus Incentive Plan), then all amounts credited to his accounts under the Deferred Compensation Plan will be paid to the participant in a lump sum within 90 days after such termination. Similarly, if a change in control occurs after a participant retires or becomes disabled, any undistributed amounts remaining in such participant’s accounts under the Deferred Compensation Plan will be distributed in a lump sum within 90 days after the change in control. Notwithstanding the foregoing, if a participant is a “specified employee” for purposes of Code Section 409A of the Code at the time his or her employment with the Company terminates, then distributions on account of termination of employment will not be made (or commence to be made) prior to the earlier of the participant’s death or the six-month anniversary of the participant’s termination of employment. Each of the Named Executive Officers is a specified employee for this purpose. Distributions are made in cash or stock, as applicable.
The following table shows the contributions, earnings and the aggregate balance of total deferrals as of December 31, 2015.
| T-Mobile 2018 Proxy Statement | 37 |
EXECUTIVE COMPENSATION
| Name | Executive Contributions in | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End(1)($) | |||||||||
John J. Legere | — | — | — | |||||||||
J. Braxton Carter | 453,000 | (12,219 | ) | 920,288 | ||||||||
G. Michael Sievert | — | — | — | |||||||||
Neville R. Ray | 698,990 | (110,891 | ) | 3,266,823 | ||||||||
Thomas C. Keys | — | — | — | |||||||||
The Deferred Compensation Plan is an unfunded plan for tax purposes and for purposes of the Employee Retirement Income Security Act of 1974, as amended. We have established a “rabbi trust” to satisfy our obligations under the Deferred Compensation Plan. |
Potential Payments Uponupon Termination or in Connection Withwith a Change in Control
The following describes and quantifies the estimated amount of potential payments and benefits that would be provided to each of our current Named Executive Officers under the Company’s compensation plans and agreements in the event of a termination of employment and/or change in control of the Company. The amounts shown assume that the termination was effective as of December 31, 2015, and that the price of our common stock as of termination was the closing price of $39.12 on December 31, 2015. The actual amounts can be determined only following the officer’s termination and the conclusion of all relevant incentive plan performance periods. If an executive officer voluntarily leaves the Company, the executive officer is not entitled to any severance compensation.
Named Executive Officers are subject to covenants regarding protection of confidential information, a non-compete and certain other restrictive covenants regarding solicitation of employees or customers for a period through one year after termination of employment for Named Executive Officers other thanemployment. For Mr. Legere, and for athis period throughis two years after termination of employment.
Termination Due to Death or Disability
Upon a termination of the applicable executive’s employment due to death or disability, each Named Executive Officer is entitled to receive (i) unpaid annual incentive award from the preceding fiscal year (if any); (ii) target annual incentive award for the current fiscal year; and (iii) for Mr. Legere.Carter, a prorated portion of his special cash bonus (discussed above under “Employment Arrangements — 2017 Employment Agreement with Mr. Carter”). In addition, (a) any unearned time-based long-term incentive awards (“LTI awards”) then-held by the Named Executive Officer will become immediately earned and vested, and (b) any performance-based LTI awards will vest and be paid at target as of the date of the executive’s separation from service.
Termination Without Cause or for Good Reason
(No Change in Control)
Under their respective employment arrangements with the Company, upon a termination of the applicable executive’s employment by us without “cause,” by the executive for “good reason” (or, for Mr. Sievert, due to a “constructive termination”) (each, as defined in the applicable employment arrangement), or, in the case of Mr. Legere, due to the Company’s non-renewal of his then-current employment term, each of Messrs. Legere, Sievert and Carter will (subject to his timely execution and non-revocation of a release of claims in favor of the Company and, for Mr. Legere, his compliance with certain restrictive covenants) be entitled to receive:
| ∎ | a lump-sum cash payment equal to two times the sum of his annual base salary and then-current target annual incentive award; |
| ∎ | for Messrs. Legere and Sievert, his unpaid annual incentive award from the preceding fiscal year (if any); |
| ∎ | a prorated portion of his annual incentive award for the current fiscal year, based on actual performance (except that Mr. Legere’s 2012 employment agreement, which was effective through April 1, 2017, provided for payment of a prorated annual incentive award based on target if his termination occurred within three months prior to a change in control (and prior to payment of annual awards for such year)); |
| ∎ | for Mr. Carter, a prorated portion of his special cash bonus; and |
| ∎ | with respect to their LTI awards: |
| ∎ | Under the 2017 employment arrangements for Messrs. Sievert and Carter and the 2012 employment agreement for Mr. Legere (which was in effect through April 1, 2017), (a) accelerated vesting of the |
next tranche of any time-based LTI awards and (b) pro-rata vesting of any performance-based LTI awards (subject to adjustment based on actual performance during the applicable performance period). |
| ∎ | Under Mr. Legere’s 2017 employment agreement (which became effective on April 1, 2017), (a) full vesting of any then-outstanding time-based LTI awards and (b) with respect to any performance-vesting LTI awards (including any performance-based RSUs), such awards will become vested and earned as of the date of termination based on actual performance through the termination date, except that the accelerated vesting of Mr. Legere’s True-Up PRSUs and Incremental PRSUs, described above, will be subject to Mr. Legere’s satisfactory participation and cooperation in, and assistance with, succession planning (including his satisfactory and orderly transition of duties and responsibilities to his successor) after any notice of qualifying termination or non-renewal is provided until the termination date, with such determination to be made by the Section 16 Subcommittee in its good faith sole discretion. |
Termination in Connection with a Corporate Restructuring, Business Combination or Change in Control
John J. Legere
Under Mr. Legere’s Employment Agreement. Mr. Legere’s2012 employment agreement provides for the following termination benefits.
Uponand LTI award agreements, upon termination by us without “cause” or“cause,” by Mr. Legere for “good reason” notor due to the Company’s non-renewal of the employment agreement, in any case, within three months prior to or two years after a change in control, Mr. Legere would have received (subject to his timely execution and non-revocation of a release of claims in favor of the Company and compliance with certain restrictive covenants) the benefits described above under “— Termination Without Cause or for Good Reason – Employment Arrangements,” except that: (i) he would have been entitled to receive a prorated portion of his annual incentive award for the current fiscal year based on target performance (instead of actual performance) unless such termination occurred within three months before a change in control and after annual incentive awards were paid for such year (in which case such prorated award would have been based on actual performance results); and (ii) if such termination occurred within 12 months after a change in control, Mr. Legere’s time-based LTI awards would have vested in full upon such termination and his performance-based LTI awards would have vested at the greater of target or actual performance through the change in control.
Under Mr. Legere’s 2017 employment agreement, upon termination by us without “cause,” by Mr. Legere for “good reason” or due to the Company’s non-renewal of the employment agreement in connection with a change in control, he would be entitled to receive (subject to his timely execution of a release of claims in favor of the Company and compliance with certain restrictive covenants) the benefits described above under “—Termination Without Cause or for Good Reason,” except that: (a) if such termination occurs on or within 24 months after a change in control, his prorated annual short-term incentive award for the current fiscal year will receive: (i)be paid at target; and (b) if such termination occurs on or within 12 months after a change in control, his performance-vesting LTI awards (including any performance-based RSUs) will vest based on the greater of target or actual performance through the change in control.
| T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
lump-sum cash payment equal to two times the sumNamed Executive Officers (Other Than Mr. Legere)
Each of his annual base salaryMessrs. Sievert, Carter, Ray and then-current target annual incentive award; (ii) his annual incentive award from the preceding fiscal year that remains unpaid; (iii) a prorated portion of his annual performance bonus for the current fiscal year, based on the Company’s actual performance results; (iv) any unpaid, but earned, tranche vesting or cliff vesting legacy T-Mobile USA LTIP awards; (v) the portion of any outstanding legacy T-Mobile USA LTIP awards that vest in annual tranches, at target and prorated over the one-year vesting period; and (vi) the portion of any outstanding legacy T-Mobile USA LTIP awards that cliff vest at the end of the three-year vesting period, at target for the current year and prorated over the three-year vesting period.
Upon termination by the Company without cause or by Mr. Legere for good reason within a period beginning three months prior to the entering into of an agreement that leads to a change in control and ending on the second anniversary of the change in control, Mr. Legere would receive, in addition to the benefits describedKeys participates in the preceding paragraph, the difference between the full amount, at target, of any outstanding legacy T-Mobile USA LTIP awards that he has not yet earned, and the amounts described in subsections (v) and (vi) of the preceding paragraph. See “— 2013 Omnibus Incentive Plan” below for the treatment of Mr. Legere’s RSUs.
“Good reason” is defined as any of the following:
a material diminution in base compensation, annual performance bonus target, or long-term incentive target or in the maximum potential amount payable with respect to any annual bonus or long-term incentive bonus award provided for under his employment agreement;
a material diminution in authority, duties or responsibilities, including, without limitation, any change in title or the appointment of any person as a result of which Mr. Legere ceases to be the Company’s sole Chief Executive Officer, provided that it will not be good reason if, in connection with a change in control, Mr. Legere reports to the Board of Directors rather than the Chairman of the Board;
a material diminution in the authority, duties or responsibilities of the supervisor to whom Mr. Legere is required to report (including a requirement that he report to a corporate officer or employee instead of reporting directly to the Chairman of the Board);
a change of 50 miles or greater in the principal geographic location at which he must perform services; or
any other action or inaction that constitutes a material breach by the Company or the successor company, as applicable, of any agreement under which Mr. Legere provides services to the Company or the successor company, as applicable.
“Cause” has generally the same definition as in the Executive Continuity Plan, discussed below, except that the employment agreement’s definition also includes breach of a nonsolicitation covenant as well as unlawful discrimination, harassment, or retaliation, assault or other violent act toward any employee or third party, or other act or omission that, in each case, in the view of the Board of Directors constitutes a material breach of the Company’s written policies or Code of Business Conduct.
“Change in control” has the same definition as in the 2013 Omnibus Incentive Plan, discussed below.
Mr. Sievert’s Term Sheet. Mr. Sievert’s term sheet provides that he is entitled to two times the sum of his base salary and annual incentive plan target in the event he is terminated without cause or constructively discharged.
“Cause” generally has the same definition as in the Executive Continuity Plan, discussed below.
“Constructive discharge” has generally the same definition as “constructive termination” in the Executive Continuity Plan, discussed below, except that the definition of “constructive discharge” in the term sheet also includes a change in reporting relationship such that Mr. Sievert reports to anyone below the Chief Executive Officer level as an additional condition.
Executive Severance Benefit Guidelines. Under the Company’s Executive Severance Benefit Guidelines (“Severance Guidelines”), if as a result of a corporate restructuring or business combination in which an executive is terminated or resigns after being offered a new position that would:
result in a greater than 5% reduction in total compensation, or
require a move to a work location more than 50 miles from the executive’s current work location,
the executive may be considered for the following benefits: (i) a cash payment of two times total target cash (composed of annual salary and target annual bonus); (ii) a prorated portion of the annual short-term incentive for the current fiscal year, based on the Company’s actual performance results; (iii) COBRA benefit payments for up to 12 months; (iv) 12 months of executive outplacement services valued at $6,500; (v) an amount equal to the tranche of each legacy T-Mobile USA LTIP award that would have vested at the end of the year in which the separation occurs, prorated at target by the ratio of the number of days in the tranche year preceding the date of the separation to the number of days in the tranche year; and (vi) an amount equal to the cliff-vesting portion of each legacy T-Mobile USA LTIP award prorated at target by the ratio of the number of days in the performance period preceding the date of the separation to the total number of days in the entire performance period.
Executive Continuity Plan. The Company’s Executive Continuity Plan, which provides that the Named Executive Officersparticipants who are terminated within the period of 24 months following a change in control byof the Company without cause or by the participant as the result ofdue to a constructive termination or for good reason are entitled to receive (subject to the Named Executive Officer’s timely execution and non-revocation of a release of claims in favor of the Company) two times the sum of (a) the executive’s base salary plus (b) the greater of the executive’s target annual bonus percentageshort-term incentive award (i) at the time of termination, or (ii) immediately prior to the change in control.
“Cause” is definedcontrol, payable in a lump-sum amount within 60 days following termination. Any cash severance paid under the Executive Continuity Plan as any one of the following:
the participant’s gross neglect or willful material breach of participant’s principal employment responsibilities or duties;
a final judicial adjudication that the participant is guilty of any felony (other than a law, rule or regulation relating to a traffic violation or other similar offense that has no material adverse effect on the Company or any of its affiliates);
EXECUTIVE COMPENSATION
the participant’s breach of any non-competition or confidentiality covenant between the participant and the Company or any affiliate of the Company;
fraudulent conduct, as determined by a court of competent jurisdiction, in the course of the participant’s employment with the Company or any of its affiliates; and
the material breach by the participant of any other obligation that continues uncured for a period of 30 days after notice thereof by the Company or any of its affiliates and that is demonstrably injurious to the Company or its affiliates.
For the Named Executive Officers other than Mr. Legere, “constructive termination” or “good reason” means the occurrence, after a change in control, of any of the following conditions:
a material diminution in the participant’s duties, authority or responsibilities;
a material reduction in the participant’s base salary, target short-term incentive opportunity, or target long-term incentive opportunity as in effect immediately prior to the change in control, except for across-the-board salary reductions based on the Company’s and its subsidiaries’ financial performance similarly affecting all or substantially all management employees of the Company and its subsidiaries;
a material reduction in the kind or level of qualified retirement and welfare employee benefits from the like kind benefits to which the participant was entitled immediately prior to a change in control with the result that the participant’s overall benefits package is materially reduced without similar action occurring to other eligible comparably situated employees;
the relocation of the office at which the participant was principally employed immediately prior to a change in control to a location more than 50 miles from the location of such office, or the participant being required to be based anywhere other than such office, except to the extent the participant was not previously assigned to a principal location and except for required travel on business to an extent substantially consistent with the participant’s business travel obligations at the time of the change in control; or
such other event, if any, as is set forth in the participant’s agreement regarding executive continuity benefits.
For Mr. Legere, “good reason” has the same definition as in his employment agreement described above.
“Change in control” in the Executive Continuity Plan has the same definition as in the 2013 Omnibus Incentive Plan.
The cash severance payments pursuant to the above-described severance plans or agreements will be reduced by any cash severance payments otherwise required to be provided to a participantpayable pursuant to any other severance plans or agreements except that any rights or payments(including amounts payable under the employment arrangements for Messrs. Sievert and Carter).
In addition, pursuant to the 2013 Omnibus Incentive Plan or any other long-term incentive plan or bonus plan will not reduce any such cash severance payments.
2013 Omnibus Incentive Plan. Under the terms of the 2013 Omnibus Incentive Plan and the award agreements applicable togoverning the Named Executive Officers, in the event ofLTI awards for Messrs. Sievert, Carter, Ray and Keys, if (i) a change in control in whichoccurs and outstanding awards are assumed, converted or replaced by the resulting entity, all time-based RSUs will become fully vested, and all performance-based RSUs will be deemed to be satisfied and paid at the greater of target or actual performance determined as of the
last trading day prior to the change in control (without proration) if,(ii) on or after the change in control and within one year after the change in control, the participant’sexecutive’s employment or service is terminated by the Company other than for cause or by the participantexecutive for good reason.reason, then: (a) all time-based LTI awards will become fully vested, and (b) all performance-based LTI awards will vest and be paid at the greater of target or actual performance determined as of the last trading day prior to the change in control. In addition, unless more favorable treatment is provided under the Executive Continuity Plan, each such Named Executive Officer’s annual incentive award will vest and be paid at the greater of target or actual performance determined as of the last trading day prior to the change in control.
Executive Severance Benefit Guidelines
Under the Company’s Executive Severance Benefit Guidelines (“Severance Guidelines”), which covers all Named Executive Officers, if, as a result of a corporate restructuring or business combination in which a Named Executive Officer is terminated or resigns after being offered a new position that would: (i) result in a greater than 5% reduction in total cash compensation, (ii) require a move to a work location more than 50 miles from the executive’s current work location, or (iii) significantly reduce their duties and responsibilities (including such a change to their existing position), then, in any such case, we will consider providing the applicable executive with the following benefits: (i) a lump-sum cash payment of two times the executive’s total target cash (composed of annual salary and target annual bonus); (ii) a pro-rated annual short-term incentive for the current fiscal year, based on actual performance; (iii) COBRA benefit payments for up to 12 months following termination; and (iv) 12 months of outplacement services valued at $6,500. Any cash severance paid under the Severance Guidelines will be reduced by any cash severance payments payable pursuant to any other severance plans or agreements (including amounts payable under the applicable executive’s employment arrangement and/or the Executive Continuity Plan (as applicable)).
“Best Pay” Provisions
The employment arrangements for each of Messrs. Legere, Sievert and Carter, as well as our Executive Continuity Plan, include “best pay” provisions under Code Section 280G, pursuant to which any “parachute payments” that become payable to the applicable Named Executive Officer will either be paid in full or reduced so that such payments are not subject
to the excise tax under Code Section 4999, whichever results in the better after-tax treatment to the Named Executive Officer.
Change in Control (No Termination)
Pursuant to our 2013 Omnibus Incentive Plan and award agreements thereunder, in the event of a change in control of the Company in which outstanding awards are not assumed, converted or replaced by the resulting entity, (i) all time-based RSUsLTI awards will become vested, and(ii) all performance-based RSUsLTI awards will be deemed to be satisfied and paid at the greater of target or actual performance as of the last trading day prior to the change in control prorated up to and including the date of the change in control.
The award agreements under the 2013 Omnibus Incentive Plan also provide that, in the case of death or total and permanent disability, any unearned time-based RSUs will become immediately earned and vested and any performance-based RSUs will be paid at target as of the date of the executive’s separation from service.
For the Named Executive Officers, other than Mr. Legere, under the terms of the 2013 Omnibus Incentive Plan and the applicable award agreements, in the event of a termination of employment in connection with a workforce reduction or divestiture, time-based RSUs that are scheduled to vest at the next scheduled vesting date will become earned and vested immediately. For performance-based RSUs, the number of performance-adjusted units would be determined after the end of the performance period and multiplied by the pro rata fraction (as defined below).
“Pro rata fraction” is defined as a fraction, the numerator of which is the number of days from the grant date of the award to the date of separation from service and the denominator of which is the number of days from the grant date through the end of the performance period.
“Divestiture” is defined as a separation from service as the result of a divestiture or sale of a business unit.
“Workforce reduction” is defined as the executive’s separation from service as a result of a reduction in force, realignment or similar measure.
Mr. Legere’s award agreements also provide that if he is terminated by the Company other than for cause, or if he leaves for good reason, he would be entitled to any unearned time-based RSUs scheduled to vest on the next vesting date. The number of performance-based RSUs will be determined following the end of the performance period and multiplied by the pro rata fraction, as defined above.
Mr. Legere’s award agreements provide that, from the period following a change in control but before the first anniversary of the change in control, upon termination other than for cause or for separation for good reason, any unearned time-based RSUs will become immediately earned and vested and any performance-based RSUs will become immediately earned and vested as of the date of such separation from service at the greater of target or actual performance immediately prior to the change in control.
Beginning with the 2015 performance-based RSU awards (and Mr. Legere’s 2014 performance-based RSU award), under the 2013 Omnibus Incentive Plan, the award agreements provide that in the event of a change in control, and continuation of service by an executive, the performance cycles outstanding upon a change in control under performance-based RSUs(iii) all annual incentive awards will be paid at the greater of target or actual performance as of the endlast trading day prior to the change in control prorated up to and including the date of the performance period.change in control.
Potential Payments upon Death or DisabilityDefinitions. Under the terms
For each of the 2015 STIP, inNamed Executive Officers, “cause” generally has the following meaning:
| ∎ | the executive’s gross neglect or willful material breach of the executive’s principal employment responsibilities or duties; |
| ∎ | a final judicial adjudication that the participant is guilty of any felony (other than a law, rule or regulation relating to a traffic violation or other similar offense that has no material adverse effect on the Company or any of its affiliates); |
| ∎ | the executive’s breach of any non-competition or confidentiality covenant between the participant and the Company or any affiliate of the Company; |
| ∎ | fraudulent conduct, as determined by a court of competent jurisdiction, in the course of the executive’s employment with the Company or any of its affiliates; |
| ∎ | the material breach by the executive of any other obligation that continues uncured for a period of 30 days after notice thereof by the Company or any of its affiliates and that is demonstrably injurious to the Company or its affiliates; and |
| ∎ | for Mr. Legere, his breach of his nonsolicitation covenant, or his unlawful discrimination, harassment, or retaliation, assault or other violent act toward any employee or third party, or other act or omission that, in each case, in the view of the Board of Directors, constitutes a material breach of the Company’s written policies or Code of Conduct. |
For Mr. Legere, “good reason” is defined as any of death or disability, a Named Executivethe following:
| ∎ | a material diminution in base compensation, annual performance bonus target, or long-term incentive target or in the maximum potential amount payable with respect to any annual bonus or long-term incentive bonus award provided for under his 2017 employment agreement; |
| ∎ | a material diminution in authority, duties or responsibilities, including, without limitation, any change in title or the appointment of any person as a result of which Mr. Legere ceased to be the Company’s sole Chief Executive Officer, provided that it would not be good reason if, in connection with a change in control, Mr. Legere reported to the Board of Directors rather than the Chairman of the Board; |
| ∎ | a material diminution in the authority, duties or responsibilities of the supervisor to whom Mr. Legere is required to report (including a requirement that he report to a corporate officer or employee instead of reporting directly to the Chairman of the Board); |
| T-Mobile 2018 Proxy Statement |
EXECUTIVE COMPENSATION
| ∎ | a change of 50 miles or greater in the principal geographic location at which he must perform services; or |
| ∎ | any other action or inaction that constitutes a material breach by the Company or the successor company, as applicable, of any agreement under which Mr. Legere provides services to the Company or the successor company, as applicable. |
For Messrs. Sievert and Carter, “good reason” or “constructive discharge” generally has the same definition as in the Executive Continuity Plan, discussed below, except that it includes:
| ∎ | for Mr. Sievert, (a) in the event of a change in control, Mr. Sievert does not become the sole Chief Operating Officer of the principal entity resulting from such change in control, (b) any reduction (rather than a material reduction) in total target direct compensation (which consists of base salary, long term incentive and short-term incentive), (c) a change in reporting relationship such that Mr. Sievert would report to anyone other than Mr. Legere or the Board of Directors and (d) in the event of a change in control, Mr. Sievert does not become Chief Executive Officer of the principal entity resulting from such change in control within six months after the change in control; and |
| ∎ | for Mr. Carter, (a) a reduction by more than five percent (rather than a material reduction) in Mr. Carter’s then-effective total target direct compensation (which consists of his then-effective base salary, short-term incentive award and long-term incentive award) and (b) a change in reporting relationship such that Mr. Carter would report to anyone other than the Chief Executive Officer of the Company or the Board. In addition to the foregoing, neither the appointment or hiring of a new Chief Financial Officer (or the related change in Mr. Carter’s title) nor the requirement that Mr. Carter engage in any transition duties under his employment agreement will constitute good reason. |
For purposes of the Executive Continuity Plan, “constructive termination” or “good reason” means, with respect to our Named Executive Officers (other than Mr. Legere), the occurrence, after a change in control, of any of the following conditions (as modified, for Messrs. Sievert and Carter, by their employment arrangements, as discussed above):
| ∎ | a material diminution in the participant’s duties, authority or responsibilities; |
| ∎ | a material reduction in the participant’s base salary, target short-term incentive opportunity, or target long-term incentive opportunity as in effect immediately prior to the change in control, except for across-the-board salary reductions based on the Company’s and its subsidiaries’ financial performance similarly affecting all or substantially all management employees of the Company and its subsidiaries; |
| ∎ | a material reduction in the kind or level of qualified retirement and welfare employee benefits from the like kind benefits to which the participant was entitled immediately prior to a change in control with the result that the participant’s overall benefits package is materially reduced without similar action occurring to other eligible comparably situated employees; |
| ∎ | the relocation of the office at which the participant was principally employed immediately prior to a change in control to a location more than 50 miles from the location of such office, or the participant being |
required to be based anywhere other than such office, except to the extent the participant was not previously assigned to a principal location and except for required travel on business to an extent substantially consistent with the participant’s business travel obligations at the time of the change in control; or |
| ∎ | such other event, if any, as is set forth in the participant’s agreement regarding executive continuity benefits. |
EXECUTIVE COMPENSATION
Officer (or his/her dependent) would be eligible for an incentive payout for the performance period in which the executive died or was disabled. Any such incentive payout would be prorated at 100% achievement and calculated using the executive’s target incentive payout percentage and annual salary prorated for the numberFor each of weeks employed during the performance period.
Under the legacy T-Mobile USA LTIP, aour Named Executive Officer who dies or becomes disabled is entitled toOfficers, “change in control” generally has the payment for tranche vesting and cliff vesting ofmeaning set forth in the award for the calendar year in which the executive dies or becomes disabled as if the executive were employed through the date of payment.2013 Omnibus Incentive Plan.
Estimated Payments
The following table presents the estimated compensation payable to each of the Company’s Named Executive Officers if a termination of employment and/or change in control (as applicable) had occurred as of December 31, 20152017 under the circumstances described above. The amounts shown with respect to RSUs are based on the closing price of our common stock ($63.51 per share) on December 29, 2017. The estimated compensation is presented in the following benefit categories:
Cash Severance: reflects cash severance (i) in the case of termination in connection with a corporate restructuring or a termination without cause (including, for Mr. Legere, our non-renewal of his then-current employment term) or for good reason before a change in control under the Severance Guidelines, pursuant to |
Carter and (ii) in the case of termination without cause or for good reason in connection with or after a change in control, under the Executive Continuity Plan; |
Time-Based RSUs: market value, as of December |
Performance-Based RSUs: market value, as of December |
|
|
Medical Coverage: estimated value of payment for continued medical coverage under COBRA (i) pursuant to the terms |
Outplacement Services: estimated potential value of this |
The actual amounts that may become payable to our Named Executive Officers can be determined only following the officer’s termination and the conclusion of all relevant incentive plan performance periods. If an executive officer voluntarily leaves the Company, the executive officer is not entitled to any severance compensation.
EXECUTIVE COMPENSATION
| Name | Termination in Connection with Restructuring Before a Change in Control(1) ($) | Termination Without Cause or for Good Reason in Connection with or After a Change in Control ($) | Death or Disability ($) | |||||||||
| John J. Legere | ||||||||||||
| Cash Severance | 9,000,000 | 9,000,000 | — | |||||||||
| Time-Based RSUs | 5,248,300 | 12,192,961 | 12,192,961 | |||||||||
| Performance-Based RSUs | 19,474,171 | 32,318,401 | 32,318,401 | |||||||||
| 2015 STIP | 5,253,101 | 5,253,101 | 5,253,101 | |||||||||
| Legacy T-Mobile USA LTIP | 6,000,000 | 6,000,000 | 6,000,000 | |||||||||
| Medical Coverage | 6,075 | 6,075 | — | |||||||||
| Outplacement Services | 6,500 | 6,500 | — | |||||||||
| Total Estimated Value | 44,988,147 | 64,777,038 | 55,764,463 | |||||||||
| J. Braxton Carter | ||||||||||||
| Cash Severance | 2,800,000 | 2,800,000 | — | |||||||||
| Time-Based RSUs | 2,666,145 | 6,074,436 | 6,074,436 | |||||||||
| Performance-Based RSUs | 629,167 | 2,226,358 | 2,226,358 | |||||||||
| 2015 STIP | 1,229,292 | 1,229,292 | 1,229,292 | |||||||||
| Legacy T-Mobile USA LTIP | 1,666,667 | 1,666,667 | 1,666,667 | |||||||||
| Medical Coverage | 6,213 | 6,213 | — | |||||||||
| Outplacement Services | 6,500 | 6,500 | — | |||||||||
| Total Estimated Value | 9,003,984 | 14,009,466 | 11,196,753 | |||||||||
| G. Michael Sievert | ||||||||||||
| Cash Severance | 3,200,000 | 3,200,000 | — | |||||||||
| Time-Based RSUs | 2,451,142 | 5,750,523 | 5,750,523 | |||||||||
| Performance-Based RSUs | 719,026 | 2,544,404 | 2,544,404 | |||||||||
| 2015 STIP | 1,394,461 | 1,394,461 | 1,394,461 | |||||||||
| Legacy T-Mobile USA LTIP | 1,356,667 | 1,356,667 | 1,356,667 | |||||||||
| Medical Coverage | 20,196 | 20,196 | — | |||||||||
| Outplacement Services | 6,500 | 6,500 | — | |||||||||
| Total Estimated Value | 9,147,992 | 14,272,751 | 11,046,055 | |||||||||
| Neville R. Ray | ||||||||||||
| Cash Severance | 2,400,000 | 2,400,000 | — | |||||||||
| Time-Based RSUs | 1,713,612 | 3,936,176 | 3,936,176 | |||||||||
| Performance-Based RSUs | 431,454 | 1,526,658 | 1,526,658 | |||||||||
| 2015 STIP | 1,053,293 | 1,053,293 | 1,053,293 | |||||||||
| Legacy T-Mobile USA LTIP | 1,356,667 | 1,356,667 | 1,356,667 | |||||||||
| Medical Coverage | 20,073 | 20,073 | — | |||||||||
| Outplacement Services | 6,500 | 6,500 | — | |||||||||
| Total Estimated Value | 6,981,599 | 10,299,367 | 7,872,794 | |||||||||
| Thomas C. Keys | ||||||||||||
| Cash Severance | 2,800,000 | 2,800,000 | — | |||||||||
| Time-Based RSUs | 2,725,334 | 6,192,852 | 6,192,852 | |||||||||
| Performance-Based RSUs | 629,167 | 2,226,358 | 2,226,358 | |||||||||
| 2015 STIP | 1,232,000 | 1,232,000 | 1,232,000 | |||||||||
| Legacy T-Mobile USA LTIP | 1,333,333 | 1,333,333 | 1,333,333 | |||||||||
| Medical Coverage | 18,058 | 18,058 | — | |||||||||
| Outplacement Services | 6,500 | 6,500 | — | |||||||||
| Total Estimated Value | 8,744,392 | 13,809,101 | 10,984,543 | |||||||||
|
Name | Termination in Connection with Restructuring Before a Change in Control ($) | Termination Without Cause or for Good Reason in Connection with or After a Change in Control ($) | Death or Disability ($) | |||||||||
John J. Legere | ||||||||||||
Cash Severance | 10,000,000 | 10,000,000 | — | |||||||||
Time-Based RSUs | 11,436,500 | 11,436,500 | 11,436,500 | |||||||||
Performance-Based RSUs | 41,538,716 | 41,538,716 | 41,538,716 | |||||||||
2017 STIP | 5,666,666 | 5,666,666 | 5,666,666 | |||||||||
Medical Coverage | 6,516 | 6,516 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 68,654,897 | 68,654,897 | 58,641,881 | |||||||||
J. Braxton Carter | ||||||||||||
Cash Severance | 4,250,000 | 4,250,000 | — | |||||||||
Time-Based RSUs | 5,854,415 | 8,843,069 | 8,843,069 | |||||||||
Performance-Based RSUs | 6,351,318 | 9,838,334 | 9,838,334 | |||||||||
2017 STIP | 2,155,241 | 2,155,241 | 2,155,241 | |||||||||
Bonus | 63,073 | 63,073 | 63,073 | |||||||||
Medical Coverage | 13,912 | 13,912 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 18,694,459 | 25,170,129 | 20,899,717 | |||||||||
G. Michael Sievert | ||||||||||||
Cash Severance | 5,700,000 | 5,700,000 | — | |||||||||
Time-Based RSUs | 7,702,810 | 11,577,555 | 11,577,555 | |||||||||
Performance-Based RSUs | 9,150,330 | 15,754,418 | 15,754,418 | |||||||||
2017 STIP | 3,210,384 | 3,210,384 | 3,210,384 | |||||||||
Medical Coverage | 19,316 | 19,316 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 25,789,341 | 36,268,173 | 30,542,358 | |||||||||
Neville R. Ray | ||||||||||||
Cash Severance | 4,000,000 | 4,000,000 | — | |||||||||
Time-Based RSUs | 2,806,951 | 5,648,071 | 5,648,071 | |||||||||
Performance-Based RSUs | 5,153,709 | 8,421,045 | 8,421,045 | |||||||||
2017 STIP | 2,030,192 | 2,030,192 | 2,030,192 | |||||||||
Medical Coverage | 20,975 | 20,975 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 14,018,329 | 20,126,784 | 16,099,309 | |||||||||
Thomas C. Keys | ||||||||||||
Cash Severance | 3,375,000 | 3,375,000 | — | |||||||||
Time-Based RSUs | 2,962,233 | 5,445,728 | 5,445,728 | |||||||||
Performance-Based RSUs | 5,953,237 | 8,887,018 | 8,887,018 | |||||||||
2017 STIP | 1,591,707 | 1,591,707 | 1,591,707 | |||||||||
Medical Coverage | 19,395 | 19,395 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 13,908,072 | 19,325,348 | 15,924,453 | |||||||||
In addition to the items described above, the Named Executive Officers are entitled to receive amounts earned during the term of employment.employment through the date of termination. These amounts, which are not included in the table, include earned base salary, vested awards under our long-term
incentive awards, any vested entitlements under our applicable
employee benefit plans, including vested 401(k) plan balances, and rights to continuation of coverage under our group medical plans. In addition, Mr. Legere is entitled upon request to certain financial planning advice in connection with potential change in control excise taxes.plans at the Named Executive Officer’s expense.
| T-Mobile 2018 Proxy Statement | 41 |
EXECUTIVE COMPENSATION
Pay Ratio
As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Legere, our Chief Executive Officer. We have calculated the median of our employees’ 2017 total annual compensation (excluding our Chief Executive Officer) to be $55,739. Our Chief Executive Officer’s 2017 total annual compensation, as set forth in the 2017 Summary Compensation Table above (adjusted to include his employer-paid health benefits with respect to 2017), was $23,636,334. As a result, the estimated ratio of the total compensation of Mr. Legere to the median of the annual total compensation of our employees (other than the Chief Executive Officer) was 424 to 1. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with applicable rules of the Securities and Exchange Commission. This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.
We identified the median employee by preparing a listing of all 51,300 individuals (excluding our Chief Executive Officer) who were employed by us on December 31, 2017, the last day of the calendar year, and examining the 2017 total compensation paid to each such individual as reflected in our payroll records as reported to the Internal Revenue Services on Form W-2 for 2017. We included all employees (other than
the Chief Executive Officer), whether employed on a full-time, part-time, or seasonal basis who received a paycheck in the final pay period of the year. We did not make any assumptions, adjustments, or estimates with respect to total compensation paid, and we did not annualize the compensation for any full-time employees that were not employed by us for all of 2017. We believe the use of total compensation paid for all employees as reflected in our payroll records is a consistently applied compensation measure due to our large part-time, retail and customer service employee population and practice of granting annual equity awards across our broad employee base. The gross pay used for purposes of calculating the total annual compensation of our employees reflects the value of long-term equity incentive compensation granted to our employees, in addition to the hours worked by such employees and the cash compensation paid to such employees with respect to 2017.
Using the method described above, we identified a small sample of 16 employees, consisting of the median employee and 15 other employees whose gross pay was very close to the median employee’s gross pay (“median group”). We then calculated annual total compensation for such employees using the same methodology we use for our Named Executive Officers as set forth in the 2017 Summary Compensation Table in this proxy statement, taking into account employer-paid costs for 2017 health benefits, and selected the median employee from this median group. We believe that our median employee’s compensation reasonably reflects the actual annual compensation of our employees generally in terms of realized pay and benefits.
Equity Compensation Plan InformationEQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2015,2017, with respect to outstanding equity awards and shares available for future issuance under our equity compensation plans.
| Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, (a) | Weighted Average Warrants and (b) | Number of Securities Under Equity Compensation Plans (c) | Number of Securities to (a) | Weighted Average (b) | Number of Securities (c) | ||||||||||||||||||
| Equity Compensation Plans Approved by Stockholders: | ||||||||||||||||||||||||
Equity Compensation Plans Approved by Stockholders | 20,689,169 | (5) | ||||||||||||||||||||||
| Stock Options | 1,824,354 | (1) | $ | 30.50 | — | 373,158 | (1) | $ | 16.36 | — | ||||||||||||||
| RSUs | 16,334,271 | (2)(3) | — | (4) | — | 13,695,543 | (2)(3) | — | (4) | — | ||||||||||||||
| Equity Compensation Plans Not Approved by Stockholders | — | — | — | — | — | — | ||||||||||||||||||
| Total | 18,158,625 | $ | 30.50 | (4) | 37,838,752 (5) | 14,068,701 | $ | 16.36 | (4) | 20,689,169 | (5) | |||||||||||||
| (1) | Granted under |
| (2) | Granted under the 2013 Omnibus Incentive Plan. |
| (3) | Includes performance-based |
| (4) | RSUs do not have an exercise price and are not included in the weighted average exercise price. The weighted average exercise price is also determined without considering outstanding rights under the Company’s ESPP. |
| (5) |
|
| 42 | T-Mobile 2018 Proxy Statement |
Proposal 3 - Approval of an Amendment to the Company’s 2013 Omnibus Incentive Plan
We are asking our stockholders to approve the Amendment (the “Amendment”) to the Company’s 2013 Omnibus Incentive Plan (as amended from time to time, the “2013 Omnibus Incentive Plan”), which amends the 2013 Omnibus Incentive Plan to increase the number of shares available for issuance thereunder by 18,500,000 shares to a total of 81,775,000 shares. As of February 28, 2018, 7,768,482 shares remained available for future grants under the 2013 Omnibus Incentive Plan. Our Compensation Committee and our Board believes that this share increase is necessary to ensure that the Company has a sufficient reserve of shares available to attract and retain the services of key individuals essential to the Company’s long-term growth and success. No other changes to the 2013 Omnibus Incentive Plan are proposed. A copy of the Amendment is attached to this Proxy Statement asAnnex A, and the discussion in this proposal is qualified in its entirety by the full text of the Amendment.
The Amendment was adopted by the Board on February 14, 2018, subject to stockholder approval. Currently, the 2013 Omnibus Incentive Plan provides that the maximum number of shares available for issuance pursuant to awards issued thereunder is 63,275,000 shares of our common stock. If the stockholders do not approve the Amendment, the Amendment will not become effective, the 2013 Omnibus Incentive Plan will continue in effect (without giving effect to the Amendment), and we will be subject to the current share limit set forth in the 2013 Omnibus Incentive Plan. Because certain of our directors and executive officers may be eligible to receive awards under the 2013 Omnibus Incentive Plan, such directors and executive officers may be considered to have an interest in this proposal.
| Our Board of Directors recommends a voteFOR the approval of the Amendment to the T-Mobile US, Inc. 2013 Omnibus Incentive Plan |
Required Vote
The affirmative vote of a majority of the shares is required to approve this proposal.
Rationale for the Amendment
During the beginning of 2018, in its determination to recommend that the Board adopt the Amendment, the Compensation Committee considered advice and input presented by management with the assistance of Willis Towers Watson and reviewed by the Compensation Committee’s independent compensation consultant. As of February 28, 2018, a total of 7,768,482 shares remained available for issuance under the 2013 Omnibus Incentive Plan, which is our only incentive award plan with shares available for issuance. Outstanding awards under all plans (consisting of
our 2013 Omnibus Incentive Plan, Layer3 TV, Inc. 2013 Stock Plan and MetroPCS 2004 and 2010 stock plans) included 435,670 stock options with a weighted average exercise price of $15.54 and weighted average term of 4.46 years as well as an aggregate of 17,253,455 full value awards. The Compensation Committee also considered several factors including the following:
| ∎ | the number of |
| ∎ | the Company’s desire to have what it expects to be sufficient capacity under the 2013 Omnibus Incentive Plan to grant equity awards for the next three years (noting that future circumstances, grant practices and other conditions, which we cannot predict at this time, may result in a different outcome); and |
| ∎ | the Company’s burn rate, overhang and dilution data (described below). |
Burn Rate
The following table sets forth the Company’s three-year average burn rate:
Year | Number of Shares Subject to Awards (1) | Burn Rate (%) | ||||||
2015 | 10,369,763 | 1.25 | % | |||||
2016 | 8,316,018 | 1.01 | % | |||||
2017 | 6,580,084 | 0.81 | % | |||||
Average Three-Year Burn Rate |
| 1.02 | % | |||||
| (1) | Shares subject to awards include options and RSUs granted, and performance-based awards earned, in the given year. |
Dilution and Overhang
As noted above, as of February 28, 2018, approximately 7,768,482 shares remained available for issuance under the 2013 Omnibus Incentive Plan, which is our only incentive award plan with shares available for issuance. Additionally, an aggregate of 17,689,125 shares were outstanding under all equity plans (including our 2013 Omnibus Incentive Plan, Layer3 TV, Inc. 2013 Stock Plan and MetroPCS 2004 and 2010 stock plans) and 5,501,338 shares remained available for issuance under our Employee Stock Purchase Plan. This represented approximately 3.48% of our fully diluted common shares outstanding (our “overhang percentage”). If our stockholders approve the Amendment, the 18,500,000 additional shares proposed to be reserved for issuance under the 2013 Omnibus Incentive Plan would increase our overhang percentage to approximately 5.76%.
| T-Mobile 2018 Proxy Statement | 43 |
PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2013 OMNIBUS INCENTIVE PLAN
The following table provides details on shares available and outstanding under all equity plans and our Employee Stock Purchase Plan:
| Potential Dilution as of February 28, 2018 | Potential Dilution After Giving Effect to the Amendment | |||||||
Available for Issuance (all under 2013 Omnibus Incentive Plan) | 7,768,482 | 7,768,482 | ||||||
Unvested RSUs | 14,668,551 | 14,668,551 | ||||||
Unvested Performance RSUs | 2,230,194 | 2,230,194 | ||||||
Unvested RSAs | 354,459 | 354,459 | ||||||
Options Outstanding | 435,670 | 435,670 | ||||||
Restricted Stock Awards | 251 | 251 | ||||||
Employee Stock Purchase Plan | 5,501,338 | 5,501,338 | ||||||
Additional Shares Requested | 18,500,000 | |||||||
Total | 30,958,945 | 49,458,945 | ||||||
Based on its review of the considerations noted above, including the fact that the Company’s three-year average burn rate was lower when compared to the Institutional Shareholder Services benchmark of 7.10% for the telecommunications services industry group (GICS 5010 & Russell 3000), the Compensation Committee determined that the proposed share increase to the 2013 Omnibus Incentive Plan is in line with our peers as well as necessary to retain equity compensation as an important recruiting and retention tool. The Compensation Committee determined in light of these factors, among others, that it was appropriate to recommend that the Board adopt the Amendment.
Stockholder Approval
The 2013 Omnibus Incentive Plan initially received stockholder approval on June 4, 2013. The 2013 Omnibus Incentive Plan provides a means to attract and retain highly-qualified persons to serve as officers, non-employee directors, key employees and consultants and advisors of the Company and to promote greater ownership in the Company by such individuals in order to align their interests more closely with the interests of the Company’s stockholders.
Stockholder approval of the Amendment is necessary in order for us to meet the stockholder approval requirements of the NASDAQ Global Select Market, to enable the Company to grant awards under the 2013 Omnibus Incentive Plan that are designed to qualify for special tax treatment under Code Section 422, and to enable the Company to receive a federal income tax deduction for certain compensation paid under the 2013 Omnibus Incentive Plan under Code Section 162(m).
If our stockholders approve the Amendment, we intend to register the additional shares issuable pursuant to the 2013 Omnibus Incentive Plan, as amended by the Amendment, under the Securities Act of 1933, as amended, as soon as practicable following such approval.
Material Features of the 2013 Omnibus Incentive Plan, as Amended by the Amendment
Following is a summary of the material terms of the 2013 Omnibus Incentive Plan, as amended by the Amendment. This summary is qualified in its entirety by reference to the full text of the Amendment, which is attached to this Proxy Statement asAnnex A, and the full text of the 2013 Omnibus Incentive Plan, which is incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 10-Q filed on August 8, 2013.
Effectiveness
As noted above, the Amendment will become effective upon approval thereof by the stockholders. If the stockholders do not approve the Amendment, the 2013 Omnibus Incentive Plan will continue in effect without giving effect to the Amendment.
Eligibility
Awards may be granted under the 2013 Omnibus Incentive Plan to officers, employees, consultants and advisors of the Company and its affiliates and to non-employee directors of the Company. Incentive stock options may be granted only to employees of the Company or its subsidiaries. As of February 28, 2018, approximately 51,500 employees (including nine executive officers) and five non-employee directors were eligible to receive grants under the 2013 Omnibus Incentive Plan.
Administration
The Board of Directors has the authority to administer the 2013 Omnibus Incentive Plan and to delegate its authority to administer the 2013 Omnibus Incentive Plan to a committee or subcommittee appointed by the Board, subject to the satisfaction of any applicable stock exchange requirements (each referred to as the “Committee”). The Committee has
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PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2013 OMNIBUS INCENTIVE PLAN
the authority to select individuals to whom awards may be granted, the type of awards granted and the terms of any such awards (subject to the following limitations). The Board of Directors has delegated its authority to the Compensation Committee to administer the 2013 Omnibus Incentive Plan. The Compensation Committee has established the Section 16 Subcommittee, unless otherwise determined by the Compensation Committee, has the sole authority to approve all equity or equity-based awards to the Company’s Section 16 officers. The Compensation Committee has also delegated authority to the Company’s Executive Vice President, Human Resources, to grant awards to employees who are not Section 16 officers.
Number of Authorized Shares
The number of shares originally authorized for issuance under the 2013 Omnibus Incentive Plan was equal to (i) 63,275,000 shares of our common stock plus (ii) any shares that, as of June 4, 2013, were subject to outstanding awards under the MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan or the MetroPCS Communications, Inc. 2010 Equity Incentive Compensation Plan (together, the “Predecessor Plans”) that, following June 4, 2013, are (or were, as applicable) canceled, terminated, expired or lapse for any reason without the issuance of shares (the “Predecessor Plan Shares”). If the stockholders approve the Amendment, the number of shares authorized for issuance under the 2013 Omnibus Incentive Plan, as amended by the Amendment, will be increased by 18,500,000 shares to a total of 81,775,000 shares of our common stock (plus any Predecessor Plan Shares). As of February 28, 2018, 316,951 shares of common stock remained subject to outstanding awards under the Predecessor Plans. A total of approximately 17,253,204 shares of the common stock were outstanding under the 2013 Omnibus Incentive Plan as of February 28, 2018. The shares of common stock issuable under the 2013 Omnibus Incentive Plan, as amended by the Amendment, may consist of authorized and unissued shares, shares purchased on the open market or shares now held or subsequently acquired by the Company as treasury shares. As of March 29, 2018, the closing price of our common stock was $61.04 per share.
If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of shares the shares subject to such awards will not count against the aggregate number of shares of common stock available for grant under the 2013 Omnibus Incentive Plan. In addition, the following items will not count against the aggregate number of shares of common stock available for grant under the 2013 Omnibus Incentive Plan: (a) the payment in cash of dividends or dividend equivalents under any outstanding award, (b) any award that is settled in cash rather than by issuance of shares of common stock, or (c) awards granted in assumption of or in substitution for awards previously granted by an acquired company. Shares tendered or withheld to pay the exercise price of any option or to satisfy tax withholding requirements with respect to any award will continue to count against the aggregate number of shares of common stock available for grant under the 2013 Omnibus Incentive Plan.
Limits on Awards
The 2013 Omnibus Incentive Plan originally provided that 63,275,000 shares of common stock may be issued under incentive stock options. If the stockholders approve the Amendment, a total of 81,775,000 shares may be issued under incentive stock options.
No more than $400,000 may be granted in equity-based awards during any one year to a non-employee member of the Board, based on the grant date fair value for accounting purposes in the case of stock options or
stock appreciation rights and based on the fair market value of the common stock underlying the award on the grant date for other equity-based awards.
Adjustments
If certain changes in the common stock occur by reason of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in stock, or other increase or decrease in the common stock without receipt of consideration by the Company, or if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kind of securities for which stock options and other stock-based awards may be made under the 2013 Omnibus Incentive Plan, including any applicable individual award limits, shall be equitably adjusted by the Company. In addition, if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kind of securities subject to any outstanding awards and the exercise price of any outstanding stock options or SARs shall be equitably adjusted by the Company.
Types of Awards
The 2013 Omnibus Incentive Plan permits the granting of any or all of the following types of awards:
Stock Options. Stock options entitle the holder to purchase a specified number of shares of common stock at a specified price (the exercise price), subject to the terms and conditions of the stock option grant. The Committee may grant either incentive stock options, which must comply with Code Section 422, or nonqualified stock options. The Committee sets exercise prices and terms, except that stock options must be granted with an exercise price not less than 100% (or, with respect to incentive stock options granted to individuals who hold more than 10% of our stock, 110%) of the fair market value of the common stock on the date of grant (excluding stock options granted in connection with assuming or substituting stock options in acquisition transactions). Unless the Committee determines otherwise, fair market value means, as of a given date, the closing price of the common stock. At the time of grant, the Committee determines the terms and conditions of stock options, including the quantity, exercise price, vesting periods, term (which cannot exceed ten years or, with respect to incentive stock options granted to individuals who hold more than 10% of our stock, five years) and restrictions on exercise.
Stock Appreciation Rights. The Committee may grant SARs, either in tandem with the number of shares underlying stock options or other awards granted under the 2013 Omnibus Incentive Plan or as a freestanding award. Upon exercise, SARs entitle the holder to receive payment per share in stock or cash, or in a combination of stock and cash, equal to the excess of the fair market value of a share on the date of exercise over the exercise price of the SAR. The exercise price of a tandem SAR must equal the exercise price of the related stock option and the grant price for a freestanding SAR is determined by the Committee (but generally may be no less than the fair market value of a share on the date of grant). The term of a SAR is determined by the Committee but cannot exceed ten years.
Restricted Stock, Restricted Stock Units. The Committee may grant awards of restricted stock, which are shares of common stock subject to specified restrictions, and restricted stock units, which represent the right to receive shares of the common stock in the future. These awards may be made subject to repurchase, forfeiture or vesting restrictions at the
| T-Mobile 2018 Proxy Statement |
Committee’s discretion. The restrictions may be based on continuous service with the Company and/or the attainment of specified performance goals, as determined by the Committee. Unless otherwise determined by the Committee, holders of restricted stock will have rights as stockholders of the Company, including voting and dividend rights. Holders of restricted stock units will not have any rights as stockholders unless and until the shares underlying such restricted stock units are paid to the holder (unless otherwise determined by the Committee). Restricted stock units may be paid in stock or cash or a combination of stock and cash, as determined by the Committee.
Other Stock-Based Awards. The Committee may also grant other stock-based awards, which are awards valued in whole or in part by reference to, or otherwise based on, our common stock, subject to the terms of the 2013 Omnibus Incentive Plan and any other terms and conditions determined by the Committee. Other stock-based awards may be granted in lieu of cash or other compensation.
Performance Awards. The Committee may grant performance awards, which entitle participants to receive a payment from the Company, the amount of which is based on the attainment of performance goals established by the Committee over a specified performance period of not less than one year. Performance awards may be denominated in shares of common stock or in cash, and may be paid in stock or cash or a combination of stock and cash, as determined by the Committee. Performance awards include annual incentive awards, which are cash-based awards with a performance period equal to the Company’s fiscal year (or another 12-month period approved by the Committee).
No Repricing
Without prior stockholder approval, the Committee may not (a) lower the exercise or grant price of a stock option or SAR after it is granted, except in connection with certain adjustments to our corporate or capital structure permitted by the 2013 Omnibus Incentive Plan, such as stock splits, (b) take any other action that is treated as a “repricing” under generally accepted accounting principles, or (c) cancel a stock option or SAR at a time when its exercise price exceeds the fair market value of the underlying stock, in exchange for cash, another stock option or SAR, restricted stock, restricted stock units or other equity award, unless the cancellation and exchange occur in connection with a change in capitalization or other similar change permitted by the 2013 Omnibus Incentive Plan.
Clawback
All cash and equity awards granted under the 2013 Omnibus Incentive Plan will be subject to the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding the recovery of erroneously awarded compensation, any implementing rules and regulations under such act, any policies adopted by the Company to implement such requirements, and any other compensation recovery policies as may be adopted from time to time by the Company.
Performance-Based Compensation under Code Section 162(m)
Performance Goals and Criteria. Under Code Section 162(m), we generally are prohibited from deducting compensation paid to our principal executive officer and other “covered employees” in excess of $1 million per person in any year. For taxable years beginning on or before December 31, 2017, this deduction limit included an exception for “qualified performance-
based compensation”. As discussed in “Executive Compensation—Other Matters—Tax and Accounting Considerations”, the recently-enacted Tax Act eliminated the exemption for “qualified performance-based compensation” for tax years beginning after December 31, 2017. The Tax Act includes a grandfather provision, pursuant to which compensation that is provided pursuant to a written binding contract in effect on November 2, 2017, and which has not been modified in any material respect on or after that date, will not be subject to the amendments made to Code Section 162(m) by the Tax Act.
If the Committee intended an award previously granted under the 2013 Omnibus Incentive Plan to qualify as “performance-based” compensation under Code Section 162(m), the performance goals selected by the Committee were based on the attainment of specified levels of one, or any combination, of the following performance criteria for the Company on a consolidated basis, and/or specified subsidiaries, divisions business segments or business units (except with respect to the total stockholder return and earnings per share criteria): (a) cash flow; (b) earnings per share, as adjusted for any stock split, stock dividend or other recapitalization; (c) earnings measures; (d) return on equity; (e) total shareholder return; (f) share price performance, as adjusted for any stock split, stock dividend or other recapitalization; (g) return on capital; (h) revenue; (i) income; (j) profit margin; (k) return on operating revenue; (l) brand recognition/acceptance; (m) customer satisfaction; (n) productivity; (o) expense targets; (p) market share; (q) cost control measures; (r) balance sheet metrics; (s) strategic initiatives; (t) implementation, completion or attainment of measurable objectives with respect to recruitment or retention of personnel or employee satisfaction; or (u) any other business criteria established by the Committee, except that such business criteria shall include any derivations of business criteria listed above (e.g., income shall include pre-tax income, net income, operating income, etc.). Performance goals could be absolute or relative to the performance of one or more comparable companies or indices, and could, in the Committee’s discretion, exclude the impact of charges for restructuring, discontinued operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings).
Limitations
Subject to certain adjustments for changes in our corporate or capital structure described above, participants who were previously granted awards intended to qualify as “performance-based” compensation under Code Section 162(m) could not be granted stock options or stock appreciation rights covering more than 5,000,000 shares in any calendar year or more than 2,000,000 shares for all share-based performance awards in any calendar year. The maximum dollar value of cash-based performance awards granted under the 2013 Omnibus Incentive Plan in any calendar year to any employee that were intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) could not exceed $10 million for any annual incentive award and $10 million for all other cash-based performance awards.
Transferability
Awards granted under the 2013 Omnibus Incentive Plan generally are not transferable other than by will or the laws of descent and distribution, except that in certain instances transfers may be made to or for the benefit of designated family members of the participant for no value.
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PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2013 OMNIBUS INCENTIVE PLAN
Transactions; Change in Control
Effect of Transactions. Subject to the change in control provisions below, in the event of a liquidation or dissolution of the Company or a reorganization, merger, exchange or consolidation of the Company or involving our common stock, each outstanding award will be treated as provided in the applicable definitive transaction agreement, or, if not so provided in such agreement, the holders of outstanding awards will be entitled to receive the transaction consideration with respect to the shares of common stock underlying their awards (subject to the satisfaction of any vesting or other restrictions as determined by the Committee).
Effect of Change in Control. Under the 2013 Omnibus Incentive Plan, in the event of a change in control of the Company (as defined in the 2013 Omnibus Incentive Plan) in which outstanding awards are not assumed, converted or replaced by the resulting entity, then upon the change in control all outstanding awards other than performance awards will become fully exercisable, all restrictions will lapse, and such awards will become vested and nonforfeitable, and all performance awards will be deemed to be satisfied and paid at the greater of (a) target or (b) the actual level of performance determined as if the applicable performance period had ended as of (i) the last trading day immediately preceding the change in control or (ii) if determined by the Compensation Committee to be necessary or appropriate based on the applicable performance goal, as of another specified date preceding the change in control (e.g., the Company’s preceding fiscal quarter end), prorated up to and including the date of the change in control.
In the event of a change in control in which outstanding awards are assumed, converted or replaced by the resulting entity, all outstanding awards other than performance awards will become fully exercisable, all restrictions will lapse, and such awards will become vested and nonforfeitable, and all performance awards will be deemed to be satisfied and paid at the greater of (a) target or (b) the actual level of performance determined as if the applicable performance period had ended as of (i) the last trading day immediately preceding the change in control or (ii) if determined by the Compensation Committee to be necessary or appropriate based on the applicable performance goal, as of another specified date preceding the change in control (e.g., the Company’s preceding fiscal quarter end) (without proration) if, within one year after the change in control the participant’s employment or service is terminated by the Company other than for cause or by the participant for good reason.
Notwithstanding the foregoing, in the event of a change in control, all outstanding awards held by non-employee directors will become fully exercisable, all restrictions will lapse, and such awards will become vested and nonforfeitable, and any specified performance goals will be deemed to be satisfied at the greater of (a) target or (b) the actual level of performance determined as if the applicable performance period had ended as of (i) the last trading day immediately preceding the change in control or (ii) if determined by the Compensation Committee to be necessary or appropriate based on the applicable performance goal, as of another specified date preceding the change in control (e.g., the Company’s preceding fiscal quarter end).
Term; Termination and Amendment of the 2013 Omnibus Incentive Plan
Unless earlier terminated by the Board, the 2013 Omnibus Incentive Plan will terminate on, and no further awards may be granted after, June 4,
2023, which is ten years after the date on which the 2013 Omnibus Incentive Plan was originally approved by stockholders. The Board may amend, suspend or terminate the 2013 Omnibus Incentive Plan at any time, except that, if required by applicable law, regulation or stock exchange rule, stockholder approval will be required for any amendment. The amendment, suspension or termination of the 2013 Omnibus Incentive Plan or the amendment of an outstanding award generally may not, without a participant’s consent, materially impair the participant’s rights under an outstanding award.
Federal Income Tax Information
The following is a brief summary of the U.S. federal income tax consequences of the 2013 Omnibus Incentive Plan generally applicable to the Company and to participants in the 2013 Omnibus Incentive Plan who are subject to U.S. federal taxes. The summary is based on the Code, applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this Proxy Statement, and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Nonqualified Stock Options. A participant generally will not recognize taxable income upon the grant or vesting of a nonqualified stock option. Upon the exercise of a nonqualified stock option, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the stock option on the date of exercise and the exercise price of the stock option. The basis that participants have in shares of common stock, for purposes of determining their gain or loss on subsequent disposition of such shares of common stock, generally will be the fair market value of the shares of common stock on the date the participants exercise their options. Any subsequent gain or loss will be generally taxable as capital gains or losses.
Incentive Stock Options. A participant generally will not recognize taxable income upon the grant or exercise of an incentive stock option. However, the amount by which the fair market value of the shares of common stock at the time of exercise exceeds the option exercise price will be an “item of adjustment” for purposes of the alternative minimum tax. If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the stock option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the exercise price of the stock option. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the participant generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the exercise price of the stock option (or, if less, the excess of the amount realized on the disposition of the shares over the exercise price of the stock option). The balance of the participant’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.
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PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2013 OMNIBUS INCENTIVE PLAN
Incentive stock options exercised more than three months after a participant terminates employment, other than by reason of death or disability, will be taxed as a non-qualified stock option, and the participant will have been deemed to have received income on the exercise taxable at ordinary income rates.
Stock Appreciation Rights. A participant generally will not recognize taxable income upon the grant or vesting of an SAR. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income (and we will be entitled to a deduction) in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the exercise price of the SAR.
Restricted Stock Units. A participant generally will not have taxable income upon the grant of restricted stock units. Instead, the participant will recognize ordinary income at the time of vesting or payout equal to the fair market value (on the vesting or payout date) of the shares or cash received.
Other Awards. The current federal income tax consequences of other awards authorized under the 2013 Omnibus Incentive Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); stock-based performance awards and other types of awards are generally subject to income tax at the time of payment, vesting or settlement based on the fair market value of the award on that date. Compensation otherwise effectively deferred will generally be subject to income taxation when paid. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income.
Tax Consequences to the Company. In the foregoing cases, we generally will be entitled to a deduction at the same time, and in the same amount, as a participant recognizes ordinary income, subject to certain limitations imposed under the Code.
Code Section 409A. We intend that awards granted under the 2013 Omnibus Incentive Plan comply with, or be exempt from, Code Section 409A, but make no representation or warranty to that effect. To the extent determined necessary or appropriate by the Board or Committee, the 2013 Omnibus Incentive Plan and applicable award agreements may be amended to further comply with Code Section 409A or to exempt the applicable awards from Code Section 409A.
Code Section 162(m)
Code Section 162(m) denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1,000,000. However, for taxable years beginning on or before December 31, 2017, this deduction limit included an exception for “qualified performance-based compensation”. As discussed in “Executive
Compensation—Other Matters—Tax and Accounting Considerations”, the recently-enacted Tax Act eliminated the exemption for “qualified performance-based compensation” for tax years beginning after December 31, 2017.
In order to qualify for the “qualified performance-based compensation” exemption, Code Section 162(m) (as in effect prior to the Tax Act) generally requires that (1) the award is granted by a compensation committee composed solely of two or more “outside directors,” (2) the plan contains a per-employee limitation on the number of awards which may be granted during a specified period, (3) the material terms of the plan are disclosed to and approved by the stockholders, (4) for stock options and SARs, the amount of compensation an employee could receive is based solely on an increase in the value of the stock after the date of the grant (which requires that the exercise price of the option is not less than the fair market value of the stock on the date of grant), and for awards other than options and SARs, established performance criteria that must be met before the award actually will vest or be paid, and (5) in the case of awards other than stock options and stock appreciation rights, the compensation committee has certified that the performance goals have been met prior to payment.
The 2013 Omnibus Incentive Plan was designed to permit the Committee to grant awards intended to qualify as “performance-based compensation” under Code Section 162(m); and the Committee has historically considered the potential impact of Code Section 162(m) when granting performance awards under the 2013 Omnibus Incentive Plan. In light of the repeal of the performance-based compensation exception to Code Section 162(m), the Committee may in the future approve compensation that would not have qualified as performance-based compensation under Code Section 162(m) as in effect prior to the Tax Act.
Tax Withholding. We are authorized to deduct or withhold from any award granted or payment due under the 2013 Omnibus Incentive Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of common stock or otherwise settle an award under the 2013 Omnibus Incentive Plan until all tax withholding obligations are satisfied.
Plan Benefits
Certain tables in this Proxy Statement under the heading “Compensation Discussion and Analysis,” including the Summary Compensation Table for 2017, Grants of Plan-Based Awards for 2017 table and Outstanding Equity Awards at Fiscal Year-End for 2017 table set forth information with respect to prior awards granted to our individual named executive officers under the 2013 Omnibus Incentive Plan. The grant of any award is within the discretion of the Committee. Therefore, it is not possible to determine the benefits that will be received in the future by participants under the 2013 Omnibus Incentive Plan, as amended by the Amendment.
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PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2013 OMNIBUS INCENTIVE PLAN
Awards Granted
The following table provides information with respect to awards granted under the 2013 Omnibus Incentive Plan to our named executive officers, directors and employees since its inception through March 31, 2018. As stated above, it is not possible to determine the amounts of awards that will be granted in the future to participants under the 2013 Omnibus Incentive Plan, as amended by the Amendment.
Name and Position | Shares Underlying Restricted Stock Units Grants | Restricted Stock Granted | ||||||
John J. Legere, President & CEO | 3,359,768 | — | ||||||
J. Braxton Carter, EVP & Chief Financial Officer | 904,450 | — | ||||||
G. Michael Sievert, Chief Operating Officer | 953,600 | — | ||||||
Neville R. Ray, EVP & Chief Technology Officer | 690,272 | — | ||||||
Thomas C. Keys, President, MetroPCS | 874,207 | — | ||||||
All current executive officers as a group | 8,417,637 | — | ||||||
Thomas Dannenfeldt, Director | — | — | ||||||
Srikant M. Datar, Director | 20,782 | — | ||||||
Lawrence H. Guffey, Director | 20,782 | — | ||||||
Timotheus Höttges, Director | — | — | ||||||
Bruno Jacobfeuerborn, Director | — | — | ||||||
Raphael Kübler, Director | — | — | ||||||
Thorsten Langheim, Director | — | — | ||||||
Teresa A. Taylor, Director | 20,782 | — | ||||||
Kelvin R. Westbrook, Director | 20,782 | — | ||||||
Olaf Swantee, Nominee for election as a Director | — | — | ||||||
All current non-executive directors as a group | 99,106 | — | ||||||
All non-executive officer employees as a group | 53,828,516 | 354,459 | ||||||
*The closing price of the Company’s common stock as of March 29, 2018 was $61.04 per share.
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Security Ownership of Principal Stockholders and Management
The following table sets forth information as of March 31, 20162018 regarding the beneficial ownership of T-Mobile US, Inc.our common stock by:
each of our directors;
each of the Named Executive Officers;
all of our directors and executive officers as a group; and
each person known by us to beneficially own more than 5% of the outstanding shares of our common stock.
| ∎ | each of our directors; |
| ∎ | each of the Named Executive Officers; |
| ∎ | all of our directors and executive officers as a group; and |
| ∎ | each person known by us to beneficially own more than 5% of the outstanding shares of our common stock. |
The beneficial ownership information has been presented in accordance with SEC rules and is not necessarily indicative of
beneficial ownership for
any other purpose. Unless otherwise indicated below and except to the extent authority is shared by spouses under applicable law, to our knowledge, each of the persons set forth below has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by him or her. The number of shares of common stock used to calculate each listed person’s percentage ownership of each such class includes the shares of common stock underlying options or other convertible securities held by such person that are exercisable or vest within 60 days after March 31, 2016. None of our directors or executive officers owns any of our outstanding shares of 5.50% Mandatory Convertible Preferred Stock, Series A, as of March 31, 2016.2018.
| Common Stock Beneficially Owned | Common Stock Beneficially Owned | |||||||||||||||
| Number | Percentage | Number | Percentage | |||||||||||||
| Directors, Nominees and Named Executive Officers (1) | ||||||||||||||||
| W. Michael Barnes(2) | 201,356 | * | 141,167 | * | ||||||||||||
| J. Braxton Carter | 372,068 | * | 175,222 | * | ||||||||||||
| Thomas Dannenfeldt | — | * | — | * | ||||||||||||
| Srikant M. Datar | 21,424 | * | 25,735 | * | ||||||||||||
| Lawrence H. Guffey | 13,424 | * | 17,735 | * | ||||||||||||
| Timotheus Höttges | — | * | — | * | ||||||||||||
| Bruno Jacobfeuerborn | — | * | — | * | ||||||||||||
| Thomas C. Keys | 522,076 | * | 333,444 | * | ||||||||||||
| Raphael Kübler | — | * | — | * | ||||||||||||
| Thorsten Langheim | — | * | — | * | ||||||||||||
| John J. Legere | 825,910 | * | 1,473,051 | * | ||||||||||||
| Neville R. Ray | 75,337 | * | 204,369 | * | ||||||||||||
| G. Michael Sievert | 89,097 | * | 294,753 | * | ||||||||||||
| Teresa A. Taylor | 13,424 | * | 17,735 | * | ||||||||||||
| Kelvin R. Westbrook | 13,424 | * | 17,735 | * | ||||||||||||
Olaf Swantee | — | * | ||||||||||||||
| All directors and executive officers as a group (19 persons) | 2,449,556 | * | 3,151,143 | * | ||||||||||||
| Beneficial Owners of More Than 5%: | ||||||||||||||||
Deutsche Telekom AG(7) Friedrich-Ebert-Alle 140 53113 Bonn, Germany | 535,286,077 | 65.11 | % | |||||||||||||
T. Rowe Price Associates, Inc.(8) 100 E. Pratt Street Baltimore, Maryland 21202 | 43,917,985 | 5.34 | % | |||||||||||||
Deutsche Telekom AG(5) Friedrich-Ebert-Alle 140 53113 Bonn, Germany | 538,590,941 | 63.14 | % | |||||||||||||
| * | Represents less than 1% |
| (1) | Unless otherwise indicated, the address of each person is c/o T-Mobile US, Inc., 12920 SE 38th Street, Bellevue, Washington 98006. |
| (2) | Includes |
| (3) |
|
Includes 8,000 shares of common stock held by Datar Investment LLC and 13,424 shares held by Safari LLC. Mr. Datar is a co-manager of Datar Investment LLC and Safari LLC and has shared voting and investment power over the securities held by these entities. |
Includes |
|
According to the Schedule 13D/A filed by Deutsche Telekom on |
|
| T-Mobile 2018 Proxy Statement |
Transactions with Related Persons and Approval
Related Person TransactionsRELATED PERSON TRANSACTIONS
Since the Business Combination, we have not been a participant in any related person transactions (as defined in the Related Person Transaction Policy described below) other than as described below in “Transactions with Deutsche Telekom” and “Indemnification.”. We are party to a number of related person transactions with our majority stockholder, Deutsche Telekom and its affiliates. These transactions include important financing arrangements and commercial arrangements pursuant to which we obtain or provide various services and/or license intellectual property or technology. Each of the related person transactions with Deutsche Telekom or its affiliates
described below that were entered into from and after the consummation of the Business Combination werewas reviewed and approved in accordance with our current Related Person Transaction Policy (the “Related Person Transaction Policy”), which includes consideration of whether the terms are comparable to those generally available in arms’-lengtharm’s-length transactions with unaffiliated third parties and whether the related person transaction is consistent with the best interests of the Company. All factors that are considered by the Audit committee are described below.
Related Person Transaction PolicyRELATED PERSON TRANSACTION POLICY
Under the Company’s written Related Person Transaction Policy, any proposed or existing transaction, arrangement or relationship involving a director, director nominee, executive officer, or a member of the immediate family of any of the foregoing, or a greater than 5% owner of our stock (a “related person”) must be reviewed by our General Counsel to determine whether such transaction is a related person transaction. A “related person transaction” is any transaction, arrangement or relationship or any series of transactions, arrangements or relationships in which:
the Company, or any of its subsidiaries, is, was or will be a participant;
the aggregate amount involved exceeds, or may be expected to exceed, $120,000; and
any related person has, had or will have a direct or indirect material interest.
| ∎ | the Company, or any of its subsidiaries, is, was or will be a participant; |
| ∎ | the aggregate amount involved exceeds, or may be expected to exceed, $120,000; and |
| ∎ | any related person has, had or will have a direct or indirect material interest. |
A transaction, arrangement or relationship that is determined to be a related person transaction must be submitted to our Audit Committee for review, approval or ratification based on certain factors, including the following:
the nature and terms of the related person transaction and the terms of the related person transaction;
| ∎ | the nature of the related person transaction and the terms of the related person transaction; |
the extent of the related person’s interest in the transaction;
the business reasons for the Company to enter into the related person transaction;
whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties;
whether the terms are comparable to those generally available in arms’-length transactions with unaffiliated third parties;
whether the related person transaction is consistent with the best interests of the Company; and
in the case of any related person transaction involving an outside director of the Company, the potential impact of such related person transaction on such outside director’s independence and the Company’s continued compliance with the requirements under the Exchange Act, the NASDAQ rules or any other exchange on which the Company’s securities are traded, or other applicable laws and regulations.
| ∎ | the extent of the related person’s interest in the transaction; |
| ∎ | the business reasons for the Company to enter into the related person transaction; |
| ∎ | whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties; |
| ∎ | whether the terms are comparable to those generally available in arm’s-length transactions with unaffiliated third parties; |
| ∎ | whether the related person transaction is consistent with the best interests of the Company; and |
| ∎ | in the case of any related person transaction involving an outside director of the Company, the potential impact of such related person transaction on such outside director’s independence and the Company’s continued compliance with the requirements under the Exchange Act, the NASDAQ rules, or other applicable rules, laws and regulations. |
If the proposed related person transaction is with Deutsche Telekom or any of its affiliates while the Stockholder’s Agreement is in effect, the Audit Committee must unanimously approve such transaction or must submit such transaction to the full Board of Directors for approval.
Transactions With Deutsche TelekomTRANSACTIONS WITH DEUTSCHE TELEKOM
Certain of the related person transactions with Deutsche Telekom or its affiliates described below were not required to be approved in accordance with our current Related Person Transaction Policy because they were entered into prior to or in connection with the
consummation of the Business Combination, at which time Deutsche Telekom became a “related person” and our current Related Person Transaction Policy became effective.
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Stockholder’s Agreement
Pursuant to the Stockholder’s Agreement we entered into with Deutsche Telekom on April 30, 2013 in connection with the Business Combination, we granted certain governance and other rights to Deutsche Telekom and Deutsche Telekom agreed to certain restrictions, as outlined below:
| ∎ | So long as Deutsche Telekom’s stock ownership percentage is at least 10%, Deutsche Telekom has the right to designate as nominees for |
|
| ∎ | Each committee of the Board shall include in its membership a number of Deutsche Telekom designees in proportion to its stock ownership percentage, rounded to the nearest whole number, except to the extent such membership would violate applicable securities laws or stock exchange rules. No committee of the Board may consist solely of directors who are also officers, employees, directors or affiliates of Deutsche Telekom. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause at least three members of our Board to be considered “independent” under SEC and NASDAQ rules, including for purposes of Rule 10A-3 promulgated under the Exchange Act. |
| ∎ | So long as Deutsche Telekom beneficially owns 30% or more of the outstanding shares of our common stock, without Deutsche Telekom’s |
Each committee of the Board of Directors shall include in its membership a number of Deutsche Telekom designees in proportion to its stock ownership percentage, rounded to the nearest whole number, except to the extent such membership would violate applicable securities laws or stock exchange rules. No committee of the Board may consist solely of directors who are also officers, employees, directors or affiliates of Deutsche Telekom. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause at least three members of our Board to be considered “independent” under SEC and NASDAQ rules, including for purposes of Rule 10A-3 promulgated under the Exchange Act.
So long as Deutsche Telekom beneficially owns 30% or more of the outstanding shares of our common stock, without Deutsche Telekom’s consent we are not permitted to take certain actions, including the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow for the most recently ended four full fiscal quarters for which financial statements are available would exceed 5.25 to 1.0 on a pro forma basis, the acquisition of any business, debt or equity interests, operations or assets of any person for consideration in excess of $1 billion, the sale of any of the Company’s or its subsidiaries’ divisions, businesses, operations or equity interests for consideration in excess of $1 billion, any change in the size of our Board of Directors, the issuances of equity securities in excess of 10% of our outstanding shares or to repurchase debt held by Deutsche Telekom, the repurchase or redemption of equity securities or the declaration of extraordinary or in-kind dividends or distributions other than on a pro rata basis, or the termination or hiring of our Chief Executive Officer.
We must notify Deutsche Telekom any time it is reasonably likely that we will default on any indebtedness with a principal amount greater than $75 million and Deutsche Telekom will have the right, but not the obligation, to provide us new debt financing up to the amount of the indebtedness that is the subject of the potential default plus any applicable prepayment or other penalties, on the same terms and conditions as such indebtedness (together with any waiver of the potential default).
As long as Deutsche Telekom beneficially owns 10% or more of the outstanding shares of our common stock, we must provide Deutsche Telekom with certain information and consultation rights, subject to certain confidentiality restrictions.
During the term of the Stockholder’s Agreement, Deutsche Telekom is not permitted to, and is required to cause the Deutsche Telekom designees then serving as directors on our Board of Directors not to, support, enter into or vote in favor of any controlling stockholder transaction, unless such transaction is approved by a majority of the directors on our Board, which majority includes a majority of the directors on our Board that are not affiliates of Deutsche Telekom. In August 2013, the Company (upon the approval of a majority of the directors on our Board, which included a majority of directors not affiliated with Deutsche Telekom) and Deutsche Telekom agreed to waive the approval requirement described above with respect to (i) any controlling stockholder transaction in which the amount involved does not exceed, or is not expected to exceed, $120,000; or (ii) any controlling stockholder transaction in which the amount involved exceeds, or is expected to exceed, $120,000 that has been unanimously approved by the Audit Committee.
Deutsche Telekom and its affiliates are generally prohibited from acquiring more than 80.1% of the outstanding shares of our common stock unless it makes an offer to acquire all of the then remaining outstanding shares of our common stock at the same price and on the same terms and conditions as the proposed acquisition from all other stockholders of the Company, which is either (i) accepted or approved by the majority of the directors, which majority includes a majority of the directors that are not affiliates of Deutsche Telekom, or (ii) accepted or approved by holders of a majority of our common stock held by stockholders other than Deutsche Telekom or its affiliates.
Deutsche Telekom is prohibited from transferring any shares of the Company’s common stock in any transaction that would result in the transferee owning more than 30% of the outstanding shares of the Company’s common stock unless such transferee offers to acquire all of the then outstanding shares of the Company’s common stock at the same price and on the same terms and conditions as the proposed transfer.
We have granted Deutsche Telekom certain demand and piggyback registration rights for shares of our common stock and debt securities of the Company and its subsidiaries beneficially owned by Deutsche Telekom and acquired in connection with the Business Combination or in the future.
Deutsche Telekom’s ability to compete with the Company in the United States, Puerto Rico and the territories and protectorates of the United States is subject to certain restrictions during the period beginning on the date of the closing of the Business Combination and ending on the date that is two years after the date on which Deutsche Telekom beneficially owns less than 10% of the outstanding shares of the Company’s common stock. In addition, for the period that commenced at the closing of the Business Combination and expires on the first anniversary of the termination of the trademark license in accordance with its terms, Deutsche Telekom may not manufacture, market or distribute any products or services under, or use in any way, the trademarkT-Mobile in connection with certain specified activities, other than by the Company and its affiliates in accordance with the terms of the trademark license. The trademark license is more fully described below.
| T-Mobile 2018 Proxy Statement | 51 |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
| consent we are not permitted to take certain actions, including the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow for the most recently ended four full fiscal quarters for which financial statements are available would exceed 5.25 to 1.0 on a pro forma basis, the acquisition of any business, debt or equity interests, operations or assets of any person for consideration in excess of $1 billion, the sale of any of the Company’s or its subsidiaries’ divisions, businesses, operations or equity interests for consideration in excess of $1 billion, any change in the size of our Board, the issuances of equity securities in excess of 10% of our outstanding shares or for the purpose of redeeming or purchasing debt held by Deutsche Telekom, the repurchase or redemption of equity securities or the declaration of extraordinary or in-kind dividends or distributions other than on a pro rata basis, or the termination or hiring of our Chief Executive Officer. |
| ∎ | We must notify Deutsche Telekom any time it is reasonably likely that we will default on any indebtedness with a principal amount greater than $75 million and Deutsche Telekom will have the right, but not the obligation, to provide us new debt financing up to the amount of the indebtedness that is the subject of the potential default plus any applicable prepayment or other penalties, on the same terms and conditions as such indebtedness (together with any waiver of the potential default). |
| ∎ | As long as Deutsche Telekom beneficially owns 10% or more of the outstanding shares of our common stock, we must provide Deutsche Telekom with certain information and consultation rights, subject to certain confidentiality restrictions. |
| ∎ | During the term of the Stockholder’s Agreement, Deutsche Telekom is not permitted to, and is required to cause the Deutsche Telekom designees then serving as directors on our Board not to, support, enter into or vote in favor of any controlling stockholder transaction, unless such transaction is approved by a majority of the directors on our Board, which majority includes a majority of the directors on our Board that are not affiliates of Deutsche Telekom. In August 2013, the Company (upon the approval of a majority of the directors on our Board, which included a majority of directors not affiliated with Deutsche Telekom) and Deutsche Telekom agreed to waive the approval requirement described above with respect to (i) any controlling stockholder transaction in which the amount involved does not exceed, or is not expected to exceed, $120,000; or (ii) any controlling stockholder transaction in which the amount involved exceeds, or is expected to exceed, $120,000 that has been unanimously approved by the Audit Committee. |
| ∎ | Deutsche Telekom and its affiliates are generally prohibited from acquiring more than 80.1% of the outstanding shares of our common stock unless they make an offer to acquire all of the then-remaining outstanding shares of our common stock at the same price and on the same terms and conditions as the proposed acquisition from all other stockholders of the Company, which is either (i) accepted or approved by the majority of the directors, which majority includes a majority of the directors that are not affiliates of Deutsche Telekom, or (ii) accepted or approved by holders of a majority of our common stock held by stockholders other than Deutsche Telekom or its affiliates. |
| ∎ | Deutsche Telekom is prohibited from transferring any shares of the Company’s common stock in any transaction that would result in the transferee owning more than 30% of the outstanding shares of the Company’s common stock unless such transferee offers to acquire all of the then-outstanding shares of the Company’s common stock at the same price and on the same terms and conditions as the proposed transfer. |
| ∎ | We have granted Deutsche Telekom certain demand and piggyback registration rights for shares of our common stock and debt securities of the Company and its subsidiaries beneficially owned by Deutsche Telekom and acquired in connection with the Business Combination or in the future. |
| ∎ | Deutsche Telekom’s ability to compete with the Company in the United States, Puerto Rico and the territories and protectorates of the United States is subject to certain restrictions during the period beginning on the date of the closing of the Business Combination and ending on the date that is two years after the date on which Deutsche Telekom beneficially owns less than 10% of the outstanding shares of the Company’s common stock. In addition, for the period that commenced at the closing of the Business Combination and expires on the first anniversary of the termination of the trademark license in accordance with its terms, Deutsche Telekom may not manufacture, market or distribute any products or services under, or use in any way, the trademark T-Mobile in connection with certain specified activities, other than by the Company and its affiliates in accordance with the terms of the trademark license. The trademark license is more fully described below. |
Trademark License
In connection with the Business Combination, we and Deutsche Telekom entered into a trademark license, pursuant to which we received (a) a limited, exclusive, non-revocable and royalty-bearing license to certain T-Mobile trademarks (including Internetinternet domains) for use in connection with telecommunications and broadband products and services in the United States, Puerto Rico and the territories and protectorates of the United States, (b) a limited, non-exclusive, non-revocable and royalty-bearing license to use certain other trademarks for use in connection with telecommunications and broadband products and services in the United States, Puerto Rico and the territories and protectorates of the United States, and (c) free of charge, the right to use the trademark “T-Mobile” as a name for the Company.
The initial term of the trademark license ends on December 31, 2018, subject to automatic renewal for successive five-year terms unless we provide notice of our intent not to renew the trademark license prior to the expiration of the then-current term. Thereafter, the trademark license automatically renews for subsequent five-year periods unless we provide 12 months’ notice prior to the expiration of the then-current term. We may terminate the trademark license at any time upon one year’s12-months’ prior notice, and Deutsche Telekom can terminate the trademark license if we abandon the trademarks licensed thereunder or if we commit a material breach.
We and Deutsche Telekom are obligated to negotiate a new trademark license when (a) Deutsche Telekom has 50% or less of the voting power of the outstanding shares of capital stock of the Company or (b) any third-party owns or controls, directly or indirectly, 50% or more of the voting power of the outstanding shares of capital stock of the Company, or otherwise has the power to direct or cause the direction of the management and policies of the Company. If we and Deutsche Telekom fail to agree on a new trademark license, either we or Deutsche Telekom may terminate the trademark license and such termination shall be effective, in the case of clause (a) above, on the third anniversary after notice of termination and, in the
case of clause (b) above, on the second anniversary after notice of termination. We have the right to continue to sell products under the licensed trademarks for a period of one year12 months after termination or expiration of the trademark license. Additionally, we have the right to continue to use advertising materials bearing the licensed
| 52 | T-Mobile 2018 Proxy Statement |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
trademarks for a period of up to six months after termination or expiration of the trademark license.
We are obligated to pay Deutsche Telekom a royalty in an amount equal to 0.25%, which we refer to as the royalty rate, (the “royalty rate”) of the net revenue (as defined in the trademark license) generated by products and services sold by the Company under the licensed trademarks. In 2015,2017, we paid Deutsche Telekom royalties totaling approximately $64.9$78.9 million under the terms of the trademark license. On the fifth anniversary of the trademark license, the Company and Deutsche Telekom have agreed to adjust the royalty rate to the royalty rate found under similar licenses for trademarks in the field of wireless telecommunication, broadband and information products and services in the territory through a binding benchmarking process.
The trademark license contains certain quality control requirements, branding guidelines and approval processes that the Company is obligated to maintain.
Deutsche Telekom is obligated to indemnify us against trademark infringement claims with respect to certain licensed T-Mobile marks and has the right (but not the obligation) to indemnify us against trademark infringement claims with respect to certain other licensed trademarks. If Deutsche Telekom chooses not to defend us against trademark infringement claims with respect to certain other licensed trademarks, we have the right to defend ourselfourselves against such claim. We are obligated to indemnify Deutsche Telekom against third-party claims due to the Company’s advertising or anti-competitive use by the Company of the licensed trademarks. Except for indemnification obligations and intentional misconduct, the liability of the Company and Deutsche Telekom is limited to€1 million per calendar year.
Financing Arrangements
Senior Unsecured Notes
Senior Reset Notes
In connection with the Business Combination, on April 28, 2013,T-Mobile USA issued senior unsecured notes in an aggregate principal amount of $11.2 billion to Deutsche Telekom pursuant to an indenture between T-Mobile USA, the guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee.trustee (the “April 2013 Indenture”). These notes were issued as part of a recapitalization of T-Mobile USA pursuant to which, among other things, certain previously outstanding notes payable to Deutsche Telekom were retired. The new notes are guaranteed by the Company and by all of T-Mobile USA’s wholly ownedwholly-owned domestic restricted subsidiaries (other than certain designated special purpose entities, a certain reinsurance subsidiary and immaterial subsidiaries), all of T-Mobile USA’s restricted subsidiaries that guarantee certain of T-Mobile USA’s indebtedness, and any future subsidiary of the Company that directly or indirectly owns any of T-Mobile USA’s equity interests.interests (collectively, the “Guarantors”).
The notes originally issued to Deutsche Telekom were comprised of five series of senior unsecured notes with interest rates that remain constant through maturity (the “non-reset notes”) and five series of
senior unsecured notes with interest rates that reset at various intervals (the “reset notes”), having tenors ranging from six to ten years. In October 2013, Deutsche Telekom sold the non-reset notes to third parties in a secondary public offering. In April 2017, $2.5 billion in outstanding aggregate principal amount of reset notes were redeemed in exchange for the issuance to Deutsche Telekom of additional senior unsecured notes, as described below. The Company paid Deutsche Telekom approximately $79.1 million in early redemption fees for the notes redeemed.
The no-call period with respect to each series of reset notes ranges from four to six years after the issuance thereof, which is two or three years after the applicable interest reset date of such series. Each series of the reset notes has an initial aggregate principal amount of $1.25 billion, except that the series of reset notes with a tenor of ten years has an initial aggregate principal amount of $600 million.
The interest rates applicable to the reset notes were determined at the closing of the Business Combination. The interest rates applicable to the reset notes were reset at the applicable times, according to a formula specified in the indenture governing the reset notes.
The indenture governing the reset notes contains customary events of default, covenants and other terms, including, among other things,
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
covenants that restrict the ability of the issuer and its subsidiaries to, among other things, pay dividends and make certain other restricted payments, incur indebtedness and issue preferred stock, create liens on assets, sell or otherwise dispose of assets, enter into transactions with affiliates and enter new lines of business. These covenants include certain customary baskets, exceptions and incurrence-based ratio tests. The indenture does not contain any financial maintenance covenants.
Pursuant to a Noteholder Agreement entered into by T-Mobile USA and Deutsche Telekom upon the closing of the Business Combination, Deutsche Telekom has certain special rights, and is subject to certain special restrictions, that do not apply to other persons who may become holders of the reset notes, including
among other things (i) a more broadly defined change in control put right, (ii) restrictions on its ability to tender the notes into a change-in-control offer following a change in control resulting from a transfer of common stock of the Company by Deutsche Telekom unless all holders of common stock are required or entitled to participate on the same terms, (iii) a right to consent to equity issuances the proceeds of which would be used to redeem reset notes held by Deutsche Telekom, and (iv) a right to consent to any redemption of the reset notes held by Deutsche Telekom with the proceeds of any equity issuance by T-Mobile USA or the Company.
During 2015, we2017, the Company paid Deutsche Telekom approximately $330$338.7 million in interest on the reset notes.
April and September 2017 Issuances
On April 27, 2017 and on April 28, 2017, pursuant to the terms of a purchase agreement, dated as of March 13, 2017, among T-Mobile USA, the guarantors party thereto (including the Company), and Deutsche Telekom (the “March Purchase Agreement”), T-Mobile USA issued to Deutsche Telekom (i) $500.0 million in aggregate principal amount of its 4.000% Senior Notes due 2022-1 (the “Initial 2022 Notes”), (ii) an additional $500.0 million in aggregate principal amount of its 4.000% Senior Notes due 2022-1 (the “Additional 2022 Notes” and, together with the Initial 2022 Notes, the “2022 Notes”), (iii) $1.25 billion in aggregate principal amount of its 5.125% Senior Notes due 2025-1 (the “2025 Notes”) and (iv) $750.0 million in aggregate principal amount of its 5.375% Senior Notes due 2027-1 (the “Initial 2027 Notes” and, together with the 2022 Notes and the 2025 Notes, the “April Notes”).
Concurrently with the issuance, T-Mobile USA redeemed through net settlement $2.5 billion in outstanding aggregate principal amount of reset notes (the “DT Exchange Notes”). T-Mobile USA paid Deutsche Telekom $158 million in early redemption fees and accrued interest due on the DT Exchange Notes.
Working Capital Facility
| T-Mobile 2018 Proxy Statement | 53 |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Upon the closing of the Business Combination, T-Mobile USA andIn addition, in September 2017, we issued to Deutsche Telekom entered into a credit agreement pursuant to which Deutsche Telekom made available to T-Mobile USA a revolving credit facility with a maximum$500 million in aggregate principal amount of $500 million,5.375% Senior Notes due 2027 (the “Additional 2027 Notes”, together with the Initial 2027 Notes, the “2027 Notes” and together with the April Notes, the “March Purchase Agreement Notes”), which is the final tranche of the notes to be used for working capital and other general corporate purposes (the “working capital facility”).
T-Mobile USA’s obligations underissued pursuant to the credit agreement are unsecured but are guaranteed by the Company and each ofT-Mobile USA’s wholly owned domestic restricted subsidiaries (other than certain designated special purpose entities, a certain reinsurance subsidiary and immaterial subsidiaries). The term of the working capital facility is five years after the closing date of the Business Combination.March Purchase Agreement.
T-Mobile USA may borrow from timewas not required to time underpay any upfront fees, underwriting fees, new issuance concession or other consideration to Deutsche Telekom in connection the working capital facility duringissuance and sale of the term. Outstanding borrowings underMarch Purchase Agreement Notes.
The March Purchase Agreement Notes were issued pursuant to the facilityApril 2013 Indenture, as amended and supplemented on or prior to the date of such issuance. The 2022 Notes bear interest at a variable rate basedof 4.000% per year and mature on the primeApril 15, 2022. The 2025 Notes bear interest at a rate or Eurodollarof 5.125% per year and mature on April 15, 2025. The 2027 Notes bear interest at a rate plus a margin ranging from 2.5% to 3.0% (for Eurodollar rate loans) or 1.5% to 2.0% (for base rate loans) (dependingof 5.375% per year and mature on April 15, 2027. T-Mobile USA’s debt-to-cash flow ratio). At the endUSA pays interest on each series of the five-year term, all amounts outstanding under the working capital facility will be dueMarch Purchase Agreement Notes semiannually in arrears on each April 15 and payable. Loans under the working capital facility may be prepaid without penalty or premium (other than customary Eurodollar breakage costs) at any time.
The working capital facility requires the payment of additional commitment fees ranging from 0.25% to 0.50% (depending onT-Mobile USA’s debt-to-cash flow ratio) of the amount of the undrawn commitment, payable quarterly in arrears. In 2015, we paid Deutsche Telekom commitment fees of approximately $2.5 million.October 15.
The credit agreement governingMarch Purchase Agreement Notes are guaranteed on a senior unsecured basis by the working capital facilityGuarantors.
The April 2013 Indenture contains covenants that, among other things, restrict the ability of T-Mobile USA and its restricted subsidiaries to incur more debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into agreements that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. The April 2013 Indenture also contains customary events of default. These covenants, events of default covenants and other terms, including, among other things, restrictions on paymentlimitations are subject to a number of dividendsimportant qualifications and the making of certain other restricted payments, incurrence of indebtedness and issuance of preferred stock, creation of liens on assets, salesexceptions.
In addition, if at any time T-Mobile USA exercises any rights with respect to its March 16, 2017 publicly issued 4.000% Senior Notes due 2022, 5.125% Senior Notes due 2025 or other dispositions of assets, entry into transactions with affiliates and entry into new lines of business. If loans are outstanding under the working capital facility, then5.375% Senior Notes due 2027, T-Mobile USA is required to maintain a debt-to-cash flow ratio, tested quarterly, as set forthexercise the same rights under the corresponding series of the March Purchase Agreement Notes.
During 2017, the Company paid Deutsche Telekom approximately $69.0 million in interest on the credit agreement.March Purchase Agreement Notes.
May 2017 Issuances
On November 2, 2015, T-Mobile and T-Mobile USA entered into Amendment No. 3May 9, 2017, pursuant to the credit agreement with Deutsche Telekom and JP Morgan Chase Bank, N.A. (the “Amendment”). The Amendment sets the maximum debt-to-cash flow ratio at 5.00 to 1.00 for fiscal periods ending on or prior to June 30, 2016, 4.75 to 1.00 for fiscal periods ending after June 30, 2016 and on or prior to June 30, 2017 and 4.25 to 1.00 for fiscal periods ending after June 30, 2017. We had no borrowings under the working capital facility in 2015.
Commitment to Purchase Senior Unsecured Notes
Onterms of several purchase agreements dated March 6, 2016, the Company,April 25, 2016 and April 29, 2016, respectively, in each case among T-Mobile USA, the guarantors party thereto (including the Company), and certain of its wholly-owned domestic restricted subsidiaries entered into a purchase agreement with Deutsche Telekom pursuant to which(the “2016 Purchase Agreements”), T-Mobile USA has agreed to issue and sellissued to Deutsche Telekom (i) $2.0 billion in aggregate principal amount of T-Mobile USA’s 5.300% Senior Notes due 2021 (the “2021 DT Notes”) for an aggregatea purchase price of $2.0 billion. Subject to certain limited$2.000 billion, (ii) $1.350 billion in aggregate principal amount of T-Mobile USA’s 6.000% Senior Notes due 2024 (the “$1.350B 2024 Notes”) for a purchase price of approximately $1.390 billion and customary closing conditions (which closing conditions do not include(iii) $650 million in aggregate principal amount of T-Mobile USA’s 6.000% Senior Notes due 2024 (the “$650M 2024 Notes”, together with the absence of a material adverse change),$1.350B 2024 Notes, the closing of the issuance“2024 Notes” and sale oftogether with the 2021 DT Notes, is scheduled to occur onthe “May Notes”) for a date determined by purchase price of approximately $674 million.
T-Mobile USA that may not be later than December 7, 2016.
Pursuant to the purchase agreement, T-Mobile USA is required to useused the proceeds from the saleissuance of the 2021 DTMay Notes (i) for acquisitionsto fund a portion of low-bandthe purchase price of spectrum (ii) iflicenses won in the proceeds are not needed for acquisitions of low-bandFCC 600 MHz spectrum for refinancing of debt (other than certain auction due to the FCC.
T-Mobile USA debt held by Deutsche Telekom) and (iii) if the proceeds arewas not needed for acquisitions of low-band spectrum or refinancing of debt, for general corporate purposes.
Norequired to pay any commitment fees, underwriting fees, new issuance concession or other compensation are payable to Deutsche Telekom in connection with the commitment under the purchase agreement or the issuance and sale of the 2021 DT Notes.May Notes, but was required to reimburse Deutsche Telekom for its hedging costs related to its commitments under the 2016 Purchase Agreements.
T-Mobile USA may elect not to issue theThe 2021 DT Notes and can terminate the commitment under2024 Notes were issued pursuant to the purchase agreement at any timeApril 2013 Indenture, as amended and supplemented on or prior to November 30, 2016 subject to T-Mobile USA reimbursing Deutsche Telekom for the costdate of its hedging arrangements (if any) related to the transaction.
such issuance. The 2021 DT Notes if issued, will bear interest at a fixed rate of 5.300% per year which is payable on a semiannual basis, and will mature on March 15, 2021. T-Mobile USA pays interest on the 2021 Notes semiannually in arrears on each March 15 and September 15. The notes will be redeemable2024 Notes bear interest at a rate of 6.000% per year and mature on April 15, 2024. T-Mobile USA pays interest on each series of 2024 Notes semiannually in arrears on each April 15 and October 15.
The May Notes are guaranteed on a senior unsecured basis by the optionGuarantors.
The April 2013 Indenture contains covenants that, among other things, restrict the ability of T-Mobile USA atand its restricted subsidiaries to incur more debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into agreements that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. The April 2013 Indenture also contains customary events of default. These covenants, events of default and other limitations are subject to a number of important qualifications and exceptions.
During 2017, the redemption prices set forthCompany paid Deutsche Telekom approximately $89.1 million in interest on the May Notes and approximately $11.8 million in hedge expenses.
Working Capital Facility
On December 29, 2016, T-Mobile USA entered into a new three-year $2.5 billion revolving credit facility (the “working capital facility”) with Deutsche Telekom. The working capital facility is comprised of (i) a three-year $1.0 billion senior unsecured revolving credit agreement (the “unsecured working capital facility”) and (ii) a three-year $1.5 billion senior secured revolving credit agreement (the “secured working capital facility”).
T-Mobile USA was not required to pay any upfront fees or other consideration to Deutsche Telekom in connection with the closing of the working capital facility. Interest on outstanding borrowings, and commitment fees, under the working capital facility is based on the Company’s leverage profile, which is determined on a quarterly basis in accordance with a debt to cash flow ratio similar to the leverage test included in its Existing Secured Term Loan Facility (as defined below).
The interest rate on borrowings under the unsecured working capital facility is the eurodollar rate plus an applicable margin. The applicable margin for the unsecured working capital facility ranges from 2.00% to 3.25% per annum for eurodollar rate loans. The commitment fee for the unsecured working capital facility ranges from 0.25% to 0.625% per annum.
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The interest rate on borrowings under the secured working capital facility is the eurodollar rate plus an applicable margin. The applicable margin for the secured working capital facility ranges from 1.00% to 1.75% per annum for eurodollar rate loans. The commitment fee for the secured working capital facility is 0.25% per annum.
The working capital facility does not contain financial maintenance covenants and only contains certain limited covenants on the Company’s and T-Mobile USA’s (and certain of their subsidiaries’) ability to incur liens, sell assets and extend loans and/or guaranties. The working capital facility also contains customary events of default.
If Deutsche Telekom ceases to own and control more than 50% of the voting stock of the Company, T-Mobile USA may draw any remaining capacity under the working capital facility and (i) in the indenture, which redemption price would includecase of the secured working capital facility, at T-Mobile’s option, convert the outstanding loans to secured term debt and/or issue senior unsecured high-yield notes to Deutsche Telekom in satisfaction of outstanding loans under the secured working capital facility, in either case, with a make-whole payment for redemptions priortenor equal to March 15, 2018. the remaining tenor under the secured working capital facility, in an aggregate amount not to exceed the loans then outstanding under the secured working capital facility and (ii) in the case of the unsecured working capital facility, issue senior unsecured high-yield notes to Deutsche Telekom in satisfaction of the outstanding loans under the unsecured working capital facility, with a tenor equal to the remaining tenor under the unsecured working capital facility in an aggregate amount not to exceed the loans then outstanding under the unsecured working capital facility.
The 2021 DT Notes, if issued, will haveworking capital facility has the benefit of guarantees from the same entities that are guarantors under the Existing Secured Term Loan Facility. The obligations of T-Mobile USA and the guarantors under the secured working capital facility are secured by a first priority lien on substantially all of T-Mobile USA’s and such guarantors’ assets, subject to certain exceptions. In addition, T-Mobile USA’s obligations under the secured working capital facility are subject to a first priority pledge of the equity interests held by T-Mobile USA and substantially all of its direct and indirect subsidiaries, subject to certain exceptions. The obligations of T-Mobile USA, and the guarantees under the unsecured working capital facility are effectively subordinated to all of T-Mobile USA’s and the Guarantors’ existing seniorand future secured indebtedness to the extent of the assets securing such indebtedness, and are structurally subordinated to all of the liabilities and preferred stock of any of T-Mobile USA’s subsidiaries that do not guarantee the notes.
In 2017, we paid to Deutsche Telekom commitment fees of approximately $6.2 million and approximately $8.4 million in interest on borrowings under the working capital facility in 2017.
On March 29, 2018, T-Mobile USA amended the terms of (a) its secured working capital facility and (b) its unsecured notesworking capital facility. Following these amendments, (i) the range of applicable margin payable under the secured working capital facility is 1.05% to 1.80%, (ii) the range of the applicable margin payable under the unsecured working capital facility is 2.05% to 3.05%, (iii) the undrawn commitment fee applicable to the secured working capital facility is 0.25% to 0.45%, (iv) the range of the undrawn commitment fee applicable to the unsecured working capital facility is 0.20% to 0.575% and (v) the maturity date of the working capital facility is December 29, 2020. The amendments also modify the facility to update certain covenants and other thanprovisions to make them substantially
consistent, subject to certain additional carveouts, with T-Mobile USA’s most recently publicly issued bonds.
As of March 31, 2018, $455.0 million under the working capital facility was outstanding.
Secured Term Loan
On January 25, 2017, T-Mobile USA entered into a Second Incremental Facility Amendment among T-Mobile USA, as borrower, Deutsche Bank AG New York Branch (“DB”), as administrative agent, the guarantors party thereto and Deutsche Telekom, as the initial incremental term loan lender, which amended its existing Term Loan Credit Agreement, dated November 9, 2015, as amended by that certain First Incremental Facility Amendment dated as of December 29, 2016 (the “Existing Secured Term Loan Facility”), among the Company, T-Mobile USA, DB and the lenders party thereto pursuant to which Deutsche Telekom agreed to (1) increase its incremental term loan commitment provided to T-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016 from $660 million to $2 billion and (2) provide to T-Mobile USA an additional $2 billion incremental term loan commitment (collectively, the “Incremental Secured Term Loan Facility”).
T-Mobile USA was not required to pay any upfront fees, underwriting fees, original issue discount or other consideration to Deutsche Telekom in connection with the Incremental Secured Term Loan Facility. The loans under the Incremental Secured Term Loan Facility were drawn in two tranches on January 31, 2017 (i) $2 billion of which bear interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.00% and mature on November 9, 2022 and (ii) $2 billion of which bear interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.25% and mature on January 31, 2024. In July 2017, we repriced the $2.0 billion Incremental Secured Term Loan Facility maturing on January 31, 2024, by reducing the interest rate maturityto a per annum rate of LIBOR plus a margin of 2.00%. There is a 0% LIBOR floor under each tranche of the Incremental Secured Term Loan Facility.
The loans under the Incremental Secured Term Loan Facility may be prepaid and terminated by T-Mobile USA at any time on any interest payment date without penalty or premium; provided that T-Mobile USA would have to pay a 1% premium in connection with certain refinancings of the Incremental Secured Term Loan Facility with third parties resulting in a lower pricing level.
In 2017, we paid to Deutsche Telekom approximately $113.3 million in interest under the Incremental Secured Term Loan Facility.
On March 29, 2018, T-Mobile USA amended the terms of the Incremental Secured Term Loan Facility. Following this amendment, the applicable margin payable on LIBOR indexed loans is 1.50% under the $2.0 billion the Incremental Secured Term Loan Facility maturing on November 9, 2022 and optional redemption pricing, will have1.75% under the $2.0 billion the Incremental Secured Term Loan Facility maturing on January 31, 2024. The amendments also modify the Incremental Secured Term Loan Facility to (a) include a soft-call prepayment premium of 1.00% of the outstanding principal amount of the loans under the Incremental Secured Term Loan Facility payable to DT upon certain refinancings of such loans by T-Mobile USA with lower priced debt prior to a date that is six months after March 29, 2018 and (b) update certain covenants and other provisions to make them substantially the same terms asconsistent, subject to certain additional carveouts, with T-Mobile USA’s existing senior unsecured notes.most recently publicly issued bonds.
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TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Commitment to Purchase Senior Unsecured Notes
New DT Notes
On January 22, 2018, T-Mobile USA, the Company, and the guarantors party thereto (including the Company) entered into a purchase agreement (the “2018 Purchase Agreement”) with Deutsche Telekom, pursuant to which T-Mobile USA has agreed to issue and sell to Deutsche Telekom, and Deutsche Telekom has agreed to purchase, $1.0 billion in aggregate principal amount of 4.500% senior notes due 2026 and $1.5 billion in aggregate principal amount of 4.750% senior notes due 2028 (collectively, the “New DT Notes”) directly from T-Mobile USA. T-Mobile USA is not required to pay any upfront fees, underwriting fees, new issuance concession or other consideration to Deutsche Telekom in connection with the issuance and sale of the New DT Notes. The New DT Notes will have substantially the same terms and conditions as each of T-Mobile USA’s 4.500% senior notes due 2026 and T-Mobile USA’s 4.750% senior notes due 2028 issued pursuant to a public offering on January 25, 2018 (collectively, the “2018 Public Notes”), as applicable, other than issue date, registration rights and CUSIP. In addition, the New DT Notes will be issued under separate supplemental indentures and will each constitute a separate series from the 2018 Public Notes for all purposes, including voting; provided that if T-Mobile USA exercises its rights in respect of a series of 2018 Public Notes, T-Mobile USA will exercise the same rights in respect of the New DT Notes of the corresponding series on an equal and ratable basis.
T-Mobile USA expects to use the issuance and sale of the New DT Notes to refinance existing indebtedness by exchanging the New DT Notes for $2.5 billion of reset notes. In connection with the exchange, T-Mobile USA will pay DT in cash the premium portion of the redemption price set forth in the indenture governing the reset notes, plus accrued but unpaid interest on such reset notes to, but not including, the exchange date. The closing of the issuance and sale of the New DT Notes is expected to occur on or about April 30, 2018.
Other Agreements
The related person transactions described below consist of ongoing arrangements under which the execution of transactions or the provision of services, and the payments related thereto, may vary
from period to period or may only occur from time to time, depending on the circumstances of the parties involved and the terms of the applicable arrangements.
Management Agreement, Between Deutsche TelekomT-Systems andT-Mobile USA
The Management Agreement covers certain international multinational corporation (“MNC”) services that T-Systems International GmbH (“T-Systems”), a wholly-owned subsidiary of Deutsche Telekom, provides to T-Mobile USA in the MNC segment. These services include sales, business development and account management services, marketing and bid management services, business strategy and ITinformation technology services, and business solicitation services aimed toward multinational enterprises. In March 2015, the partiesThe Management Agreement was initially entered into an
amendment tobetween the Company and Deutsche Telekom. In July 2016, Deutsche Telekom transferred its rights and obligations under the Management Agreement, which updated the commissions payableas amended to Deutsche Telekom.T-Systems. The Management Agreement may be terminated by either party on 12 months’ notice. During 2015,2017, T-Mobile USA incurred approximately $0.5 million$9,000 in expenses for Deutsche Telekom’sT-Systems’ services under the Management Agreement.
Discount Agreements on Inter-Operator Tariffs
T-Mobile USA has entered into Discount Agreements on Inter-Operator Tariffs with certain Deutsche Telekom affiliates. The Discount Agreements establish a reciprocal discount scheme for roaming charges based on inter-operator tariffs to be paid by the Home Public Mobile Network operator to the Visited Public Mobile
Network operator according to their respective international roaming agreements. The Discount Agreements expirehad an initial term ending on December 31, 2016 with yearly renewal terms thereafter. During 2015,2017, T-Mobile USA received approximately $1.8 million in net revenue and incurred approximately $3.6$4.6 million in net expenses for Deutsche Telekom’s and its affiliates’ services under these agreements.
Agreement on Commercial Roaming Broker Services Between Deutsche Telekom and T-Mobile USA
Under this agreement, Deutsche Telekom negotiates, for the benefit of certain of its wireless affiliates, including T-Mobile USA referred to as “NatCos,”(“NatCos”), the terms of group roaming discount agreements with third-party network/service operators, or roaming partners. This agreement has an indefinite term, but by September 30 of each year, T-Mobile USA has the right to elect to participate or decline to participate under the broker arrangement for the following calendar year, and the parties negotiate the scope of roaming partners with which Deutsche Telekom is entitled to negotiate for T-Mobile USA’s benefit. If T-Mobile USA agrees to be a participating NatCo in a given calendar year, T-Mobile USA will receive and/or provide roaming services according to the terms of the group roaming discount agreements during such calendar year, and at the end of a specified settlement period, Deutsche Telekom will receive from, or make payments to, the roaming partners for T-Mobile USA and the other participating NatCos, pursuant to the payment terms of the roaming
agreements. Intercompany payments are made between Deutsche Telekom and T-Mobile USA to settle any amounts due to, or owed by, T-Mobile for roaming services under the roaming agreements.
Deutsche Telekom may realize volume discounts for roaming services based on the NatCos’ participation in the group roaming discount agreements. Deutsche Telekom also allocates its commercial roaming costs, which consist of certain strategic and financial planning costs associated with roaming transactions, to the NatCos, including T-Mobile USA. During 2015,2017, T-Mobile USA experienced an approximately $6.0$0.2 million reductionincrease in roaming revenues (primarily as a result of minimum revenue commitment payments to T-Mobile USA from certain partners) and received approximately $20.8$0.1 million of expense discounts for roaming usage provided to, or delivered by, third-party operators under this agreement. In September 2015,2017, T-Mobile USA elected to participate in the roaming broker arrangement for calendar year 2016.
2018.
Frame Agreement for the Provision and Marketing of “Mobile Device Management” Between Deutsche Telekom and T-Mobile USA
Pursuant to the Frame Agreement for the Provision and Marketing of “Mobile Device Management,” Deutsche Telekom granted to T-Mobile USA the right to market, resell, and license certain mobile device management services and agreed to provide support related
to these services. The agreement expired on January 7, 2015. During 2015, T-Mobile USA did not incur any expenses for Deutsche Telekom’s services under this agreement.
Framework Agreement for the Provision and Marketing of “Global Corporate Access” between Deutsche Telekom and T-Mobile USA
Pursuant to the Framework Agreement for the Provision and Marketing of “Global Corporate Access,” Deutsche Telekom provides a specific global corporate access service, based on products offered by iPass Inc., and WiFi network access services to T-Mobile USA for the purpose of resale toT-Mobile USA’s business
customers in the United States. The agreement was terminated effective February 2016. During 2015, T-Mobile USA incurred approximately $130,800 in expenses for Deutsche Telekom’s services under the Framework Agreement.
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Telecom Master Services Agreement Between Deutsche Telekom North America, Inc. andT-Mobile USA
Pursuant to the Master Services Agreement, Deutsche Telekom North America, a wholly ownedwholly-owned subsidiary of Deutsche Telekom, provides international long-distance and IP transit (internet connectivity) services to T-Mobile USA. The Master Services Agreement will remain in effect for so long as there remain statements of work pending. In December 2017 and February 2018, the Company entered into amendments to the Master Services Agreement to enable new services over other carrier networks. During 2015,2017, T-Mobile USA incurred approximately $55.0 million in
$1.2 million in
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TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
expenses for Deutsche Telekom North America’s services under the Master Services Agreement. In February 2016, the Company entered into a new statement of work under the Master Services Agreement and expects an increase in the total spend in 2016.
Services Agreement, Between T-Systems andT-Mobile USA
T-Mobile USA and T-Systems North America, Inc., a wholly-owned subsidiary of Deutsche Telekom (“T-Systems North America”), entered into a Services Agreement on January 4, 2008, which governs the terms of certain IT support services provided by T-Systems North America to T-Mobile USA. The agreement will terminateexpired on January 31, 2017 unless extended by mutual written agreement byand the parties. In general, specificparties entered into a Statement of Work, pursuant to which T-Systems North America would provide termination assistance to transition IT support services to be provided under the Services Agreement are governed by statements of work entered into by the parties from time to time. The Services Agreement
will remain in effect for so long as there remain statements of work pending. The statements of work currently pending under the Services Agreement have varying expiration terms, but they may generally be terminated upon 30 days’ notice, except for certain scopes of work in which the parties agree to limit that right.a new vendor. During 2015,2017, T-Mobile USA incurred approximately $22.1$12.3 million in aggregate expenses for T-Systems North America’s services under the agreement.
Insurance Brokerage Services Provided by DeTeAssekuranz-Deutsche Telekom Assekuranz-Vermittlungsgesellschaft mbH (DeTeAssekuranz)
DeTeAssekuranz, a wholly ownedwholly-owned subsidiary of Deutsche Telekom, provides certain insurance brokerage services for T-Mobile USA.
During 2015,2017, T-Mobile USA incurred approximately $0.8$2.8 million in expenses for DeTeAssekuranz’s services under this arrangement.
SOX Tool Provided by Deutsche Telekom
In November 2013, the Company entered into an arrangement with Deutsche Telekom whereby Deutsche Telekom modified its ICCSInternal Control Compliance System tool to enable the Company to use it for its Sarbanes-OxleySarbanes- Oxley Act
compliance. This arrangement was terminated in August 2017. During 2015,2017, the Company incurred approximately $49,000$34,000 in expenses for Deutsche Telekom’s services under the arrangement.
Data Reseller Agreement Between Deutsche Telekom and T-Mobile USA
In April 2014, T-Mobile USA and Deutsche Telekom entered into a Data Reseller Agreement, pursuant to which Deutsche Telekom may purchase data services from T-Mobile USA for resale to its enterprise customers in the United States. The Data Reseller Agreement
terminates in April 2019 and automatically renews on monthly terms unless terminated upon 60 days’ prior written notice by either party. T-Mobile USA did not receive any revenue in 20152017 under the Data Reseller Agreement.
Services Agreement Between Deutsche Telekom and T-Mobile
In February 2015, T-Mobile entered into a Services Agreement effective as of January 1, 2014 with Deutsche Telekom pertaining to the provision by T-Mobile of certain financial, tax and accounting-related services to Deutsche Telekom and the payment by Deutsche Telekom for such services. The services relate to certain operating
and financial data and other information that Deutsche Telekom may request from T-Mobile. In December 2016, the parties entered into an Amendment updating the fees and services schedule. Pursuant to the Services Agreement, as amended, T-Mobile has billed Deutsche Telekom $1.2$10.0 million for such services in 2015.2017.
Connected Car Agreement Between Mojioand T-Mobile
In November 2016, T-Mobile entered into a Connected Car Agreement effective as of November 18, 2016 with Mojio, Inc. (“Mojio”), a company in which an affiliate of Deutsche Telekom at the time owned an approximately 14% equity interest. The agreement enables Mojio to provide cloud platform and software support to the Company for the connected car devices purchased by the Company. In addition, the agreement provides for the possibility of monetization of data collected by the connected car devices. During 2017, the Company incurred approximately $2.7 million in expenses under the arrangement.
Equipment Supply Amendment Between ZTEand T-Mobile
In February 2016, T-Mobile entered into an Equipment Addendum to the ZTE Handset and Accessory Supply Agreement with ZTE USA, Inc. (“ZTE”), as amended in March 2017 by the Amendment (the “Equipment Supply Amendment”) to OBD II Connected Car Equipment Addendum, pursuant to which ZTE provides connected car devices to T-Mobile. Pursuant to the Equipment Supply Amendment, with respect to a limited number of units of the connected car device purchased by T-Mobile, ZTE is required to remit a portion of the purchase price for the device to Mojio, a company in which an affiliate of Deutsche Telekom at the time owned an approximately 14% equity interest, for Mojio’s provision of client applications and cloud services associated with T-Mobile’s connected car offering. The Company branded connected car equipment includes ZTE firmware and Mojio software that allows such devices to connect over the Company’s network to a cloud service and related client applications provided by Mojio or a successor provider. During 2017, the Company incurred approximately $12.4 million in expenses under the arrangement, of which approximately $1.8 million was remitted by ZTE to Mojio.
Purchase Order Between Deutsche Telekomand T-Mobile
In February 2017, T-Mobile entered into a purchaser order with Deutsche Telekom, pursuant to which Deutsche Telekom will sell to the Company 1,000 smartphone devices in a one-time transaction for an aggregate purchase price of approximately $635,070, plus tariffs and shipping.
We indemnify our directors and our officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. This is required under our certificate of incorporation, and we have also entered into agreements with our directors and executive officers that require us to indemnify and advance expenses to such directors and executive officers to the fullest extent permitted by applicable law if the person is or is threatened to be made a party to any threatened, pending or completed action, suit, hearing, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether formal or informal, governmental or non-governmental, or civil, criminal, administrative or investigative, provided such director or executive officer acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company or in a manner otherwise expressly permitted under our certificate of incorporation, bylaws or the Stockholder’s Agreement.
| T-Mobile 2018 Proxy Statement | 57 |
Ms. Eileen Dunbar, on behalfProposal 4 - Stockholder Proposal for Implementation of Proxy Access
The Marco Consulting Group Trust I, 550 W. Washington Blvd., Suite 900, Chicago, Illinois 60661, a beneficial owner of 1,632933 shares of the Company’s common stock, has
advised us that sheit intends to submit the following proposal at the Annual Meeting.
| Our Board of Directors recommends a voteAGAINST the proposal for Implementation of Proxy Access |
Required Vote
Approval of the stockholder proposal for implementation of proxy access requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
Proposal
RESOLVED: Shareholders of T-Mobile US, Inc. (the “Company”) ask the board of directors (the “Board”) to adopt, and present for shareholder approval, a “proxy access” bylaw. Such bylaw shall require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy card.
The number of shareholder-nominated candidates appearing in proxy materials shall not exceed one quarter of the directors then serving. This bylaw, which shall supplement existing rights under Company bylaws, should provide that a Nominator must:
| a) | have beneficially owned 3% or more of the Company’s outstanding common stock continuously for at least three years before submitting the nomination; |
| b) | given the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and |
| c) | certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator’s communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials; and (c) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at the Company. |
The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority to be given to multiple nominations exceeding the one-quarter limit.
Supporting Statement
We believe proxy access is a fundamental shareholder right that will makemakes directors more accountable and contributecontributes to increased shareholder value. The CFA Institute’s 2014 assessment of pertinent academic studies and the use of proxy access in other markets concluded that proxy access:
Would “benefit both the markets and corporate boardrooms, with little cost of disruption.”
Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide. (http://www.cfapubs.org/dio/pdf/10.2469/ccb.v2014.n9.1) [sic]
| ∎ | Would “benefit both the markets and corporate boardrooms, with little cost of disruption.” |
| ∎ | Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide. (http://www.cfapubs.org/dio/pdf/10.2469/ccb.v2014.n9.1) [sic] |
Shareholders would benefit from this reform, which would provide holders of some $10 billion of equityoutside shareholders with a meaningful voice given Deutsche Telekom’s controlling shareholder status. It is also the default policy in Germany where Deutsche Telekom is based, and has already been adopted by U.S. companies of various sizes across industries.
PROPOSAL 3 — STOCKHOLDER PROPOSAL FOR IMPLEMENTATION OF PROXY ACCESS
Board of Directors’The Board’s Response to Proposal 34
TheThis marks the fourth time the proponent has submitted this or a similar proxy access proposal. Having again carefully considered the matter, for similar reasons as with prior proposals, the Board recommends a vote “AGAINST” Proposal 3.
We are aware of and understand the ongoing developments regarding the issue of proxy access. However, after careful considerationbelieves that adoption of this proposal the Board and Nominating and Corporate Governance Committee have concluded that adoption of proxy access is not appropriate or beneficial at this time in lightthe best interests of our controlled company status.the Company and its stockholders.
Although this proposal recommends that the Company adopt what is becoming a common form of proxy access stockholder proposal,for typical public companies, we believe that it raises unique policy and practical considerations forthat are unique to our companyCompany and that are neither acknowledged nor addressed in the proposal. As disclosed elsewhere in this Proxy Statement, and as we have previously communicated with the proponent, T-Mobile is a controlled company.
Our controlling stockholder, Deutsche Telekom, currently owns approximately 65%63% of our outstanding shares of common stock and is entitled to certain governance rights pursuant to our certificate of incorporation and the publicly filed Stockholder’s Agreement described elsewhere in this Proxy Statement. Among these rights, Deutsche Telekom may designate a number of nominees for election to our Board in proportion to its share ownership percentage, which currently corresponds to designation rights for seveneight of the eleven12 seats on the T-Mobile Board. Thus, the proponent’s proxy access proposal raises unique considerations for a controlled company like T-Mobile, such as how such proxy access would interact with Deutsche Telekom’s existing director designation rights, how
Deutsche Telekom’s status as a greater than 3% stockholder would be addressed or managed under a proxy access bylaw, and whether it is appropriate for the board of a controlled company to further reduce its oversight of the director nomination process by adopting proxy access when there is already significant stockholder influence in place pursuant to the Stockholder’s Agreement. In this respect, we believe it is instructive
Also, contrary to the proponent’s assertion that proxy access would benefit minority holders, proxy access may in fact be detrimental to our knowledge, no other controlled company has adoptedthe Company’s minority holders. If the Company were to adopt proxy access, Deutsche Telekom could potentially use proxy access to date.designate additional Board members beyond its current rights under the Stockholder’s Agreement.
| 58 | T-Mobile 2018 Proxy Statement |
PROPOSAL 4 - STOCKHOLDER PROPOSAL FOR IMPLEMENTATION OF PROXY ACCESS
Given these considerations, the proponent has not meaningfully addressed how or why it believes our stockholders would benefit from proxy access, since we believe that the interests of Deutsche Telekom are properly aligned with those of other long-term stockholders. Importantly, since the Business Combination, the directors designated by Deutsche Telekom (which will include twothree independent directors) and our other directors have successfully guided the Company to enhance value for all stockholders. Since the Business Combination (May 1, 2013) through December 29, 2017, our stock price has increased 284%.
Furthermore, the Company has a number of existing governance practices that are designed to ensure effective oversight of management and to
support the accountability of our Board of Directors to our stockholders, includingstockholders. Such practices include the annual election of all directors, an audit committee consisting solely of independent directors, independent committee chairpersons of our three core Board committees and a lead independent director.
We believe that proxy access is neither necessary nor appropriate for us at this time due to the circumstances set forth above that are unique to our controlled company status. Therefore, the Board recommends a vote against this proposal.
| Therefore, the Board recommends a voteAGAINST this proposal. |
| T-Mobile 2018 Proxy Statement | 59 |
Proposal 5 - Stockholder Proposal for Limitations on Accelerated Vesting of Equity Awards in the Event of a Change of Control
AmalgaTrust, a division of Amalgamated Bank of Chicago, on behalf of the AFL-CIO Reserve Fund, 815 Sixteenth St. N.W., Washington, D.C. 20006, a beneficial owner of 200 shares of the Company’s common stock, has advised us that it intends to submit the following proposal at the Annual Meeting.
| Our Board of Directors recommends a voteAGAINST the proposal for Limitations on Accelerated Vesting of Equity Awards in the Event of a Change of Control |
Required Vote
Approval of the stockholder proposal for implementationlimitations on accelerated vesting of proxy accessequity awards in the event of a change of control requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for implementation of proxy access.
Ms. Heather Slavkin, on behalf of the AFL-CIO Reserve Fund, 815 Sixteenth St. N.W., Washington, D.C. 20006, a beneficial owner of
200 shares of the Company’s common stock, has advised us that she intends to submit the following proposal at the Annual Meeting.
Proposal
RESOLVED: The shareholdersShareholders urge the Board of Directors ofT-Mobile US Inc. (the “Company”) to adopt a policy that in the event of a change in control of the Company, as defined under any applicable employment agreement, equity incentive plan or other plan, there shall be no acceleration of vesting of any equity award granted to any senior executive. However, under this policy the Compensation Committee may provide in an applicable grant or
purchase agreement that any unvested award will vest on a partial,pro ratabasis up to the time of the senior executive’s termination, with such qualifications for an award as the Compensation Committee may determine. ThisThe policy shallshould be implemented so as not affect [sic]to violate any contractual rightsobligations in existence on the date adopted.
Supporting Statement
The Company allows senior executives to receive accelerated equity awards under certain conditions after a change in control of the Company. These accelerated equity awards can significantly increase the total value of senior executives’ “golden parachutes” after a change in control. We do not question that a reasonable amount of severance payments may be appropriate for senior executives and other employees.
We are concerned, however, that current practices at our Company may permit windfall awards to senior executives. As of December 31, 2014,2016, our Company’s Chief Executive OfficerCEO John Legere had $31$43.7 million in unvested time-based and performance-based restricted stock units subject to acceleration following a change in control. This amount of accelerated equity is in addition to a lump sum of $5.5$9 million in cash severance $2.3and $5.6 million in short term cash incentives and $11.2 million in long-term cash incentives that Leger [sic]Legere would have been entitled to receive if his employment was terminated after a change inon control.
We note that many companies use a “double trigger” system to determine eligibility for accelerated vesting of equity wards-thereawards – there must be a change in control, and the executive must be involuntarily terminated. While we support the use of double triggers, we are not convinced that executives deserve to receive all unvested awards after a termination event. We do believe, however, that an affected executive should be eligible to receive vesting of equity awards on apro rata basis as of his or her termination date, with the details of anypro rata award to be determined by the Compensation Committee.
Other leading companies, including Apple Inc., Chevron Corporation, Exxon Mobil Corporation, International Business Machines Corporation, Intel Corporation, Microsoft Corporation and Occidental Petroleum Corporation impose limitations on accelerated vesting of equity, such as providingpro rataawards or simply forfeiting unearned awards.
We urge you to vote FOR this proposal.
PROPOSAL 4 — STOCKHOLDER PROPOSAL FOR LIMITATIONS ON ACCELERATED VESTING OF EQUITY AWARDS IN THE EVENT OF A CHANGE OF CONTROL
Board of Directors’The Board’s Response to Proposal 45
The Board recommendsThis marks the third time the proponent has submitted this or a vote “AGAINST” Proposal 4.
Thesimilar proposal. Having again carefully considered the matter, for similar reasons as with prior proposals, the Board believes that adoption of this proposal is not in the best interests of the Company and its stockholders.
None of the Company’s outstanding equity awards granted as part of our annual compensation program provides for automatic accelerated vesting of awards in connection with a change in control unless an acquirer or successor does not assume or replace such awards in connection with the change in control. Instead, equity awards granted to our executives are subject to “double-trigger” vesting, meaning that equity awards vest only upon a change in control, which effectively aligns the interests of our executive officers with those of our stockholders by requiring the occurrence of aqualifying termination of employment, either for good reason (such as material diminution of duties, material reduction of compensation or other specified adverse events) or without cause, for awardsin connection with a change in control, which effectively aligns the interests of our executive officers with those of our stockholders by encouraging our executive officers to be accelerated. In addition,continue in employment with the Company through the consummation of a change in control.
Notwithstanding the assertions in the proposal, eliminating the executives’ “double-trigger” arrangements upon adoption of the proposal would place the Company outside the practice of its peers and lead to a competitive disadvantage when competing for executive talent. Thus, weWe also do not believe that adoption of this proposal is appropriate given our existing compensation practices and programs, which have received strong support from stockholders as demonstrated by the fact that our most recent say-on-pay proposal was approved by 99%99.5% of the votes cast on the proposal.
We provide our executives with benefits, including severance and change in control benefits, that the Compensation Committee believes are competitively necessary, customary and in the best
interests of the Company and its stockholders. ProvidingAs noted above, providing for “double-trigger” accelerated vesting of equity awards upon a qualifying termination of employment in connection with a change in control commonly referred to as “double-trigger,” further aligns the interests of the Company’s executives with those of its stockholders.stockholders by encouraging continued stability of our executive team through a change in control. No windfall is created because an executive will not receive accelerated vesting based solely on a change in control, nor solely if he or she is terminated with cause or leaves voluntarily (other thanwould an executive be entitled to receive accelerated vesting upon a termination of employment
| 60 | T-Mobile 2018 Proxy Statement |
PROPOSAL 5 - STOCKHOLDER PROPOSAL FOR LIMITATIONS ON ACCELERATED VESTING OF EQUITY AWARDS IN THE EVENT OF A CHANGE OF CONTROL
unless the executive terminates for good reason as defined in relevant employment agreements or plans). the Company terminates the executive without cause.
Allowing for double-trigger accelerated vesting ensures that executives are not penalized with a loss of then-unvested equity compensation awards that would occur fromdue to an involuntary termination of employment in connection with the consummation of a transaction that, while outside the control of the executives,any individual executive, is in the best interests of stockholders. Therefore, weWe believe that accelerated vesting in appropriate circumstances permits
management to remain objective and focused on protecting stockholder rights and maximizing stockholder value during a potential change in control event. In addition, the double-trigger provision in our equity awards ensures that executives are not distracted by a potential loss of employment and remain with the Company through the transaction, thereby reducing deal uncertainty.
For the reasons above, the Board recommends a vote against this proposal.
| For the reasons above, the Board recommends a voteAGAINST this proposal. |
Required Vote
Approval of the stockholder proposal for limitations on accelerated vesting of equity awards in the event of a change of control requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for limitations on accelerated vesting of equity awards in the event of a change of control.
Mr. Cornish F. Hitchcock, on behalf of the Amalgamated Bank’s LongView Broad Market 3000 Index Fund, 5614 Connecticut Avenue, N.W. No. 304, Washington, D.C. 20015, a beneficial owner
of 2,768 shares of the Company’s common stock, has advised us that he intends to submit the following proposal at the Annual Meeting.
Proposal
RESOLVED: The shareholders of T-Mobile US. Inc. (the “Company”) urge the Compensation Committee of the Board of Directors (the “Committee”) to amend the Company’s compensation clawback policy, as applied to senior executives, to provide that the Committee will review and determine whether to seek recoupment of incentive compensation paid, granted or awarded to a senior executive if, in the Committee’s judgment, there has been conduct resulting in a violation of law or T-Mobile policy that causes significant financial or reputational harm to T-Mobile, and a senior executive either engaged
in the conduct or failed in his or her responsibility to manage or monitor conduct or risks, with the Company to disclose to shareholders the circumstances of any recoupment and of any decision not to pursue recoupment in the situations described above.
“Recoupment” includes both recovery of compensation already paid and forfeiture, recapture, reduction or cancellation of amounts awarded or granted over which T-Mobile retains control. These amendments should operate prospectively and be implemented so as not to violate any contract, compensation plan, law or regulation.
Supporting Statement
As long-term shareholders, we believe that compensation policies should promote sustainable value creation. We agree with former GE general counsel Ben Heineman Jr. that recoupment policies are “a powerful mechanism for holding senior leadership accountable to the fundamental mission of the corporation: proper risk taking balanced with proper risk management and the robust fusion of high performance with high integrity.” (http//:blogs.law.harvard.edu/corpgov/2010/08/13/making-sense-out-of-clawbacks/)
T-Mobile has adopted a policy allowing recoupment of certain incentive pay from a corporate officer as a result of a restatement of financial results, taking into account, among other things, whether the incentive award would have been lower based on the restated results. In our view, providing for recoupment only for accounting and financial reporting noncompliance is too narrow. We believe that recoupment is an important remedy for other kinds of conduct that may not cause a restatement, but may harm T-Mobile’s reputation and prospects.
Our proposal retains the Board’s discretion to decide whether a recoupment is appropriate in particular circumstances. Moreover, the current policy allows for too much discretion by limiting clawbacks to incidents having a “material” effect on the company without providing a definition of materiality. Thus the policy may not cover conduct that causes reputational damage to T-Mobile and harms shareholders.
Recent legal settlements underscore the need for a stronger policy in this area, notably T-Mobile’s agreement to pay $112.5 million in 2014 to settle an FTC lawsuit alleging that T-Mobile placed unauthorized third-party charges on its customers’ mobile phone bills. Did the board scrutinize the actions of executives responsible for any control failures to see if any incentive compensation should be recouped?
We urge you to vote FOR this proposal.
| T-Mobile |
PROPOSAL 5 — STOCKHOLDER PROPOSAL FOR AN AMENDMENT OF THE COMPANY’S CLAWBACK POLICY
Board of Directors’ Response to Proposal 5
Questions and Answers About the Annual Meeting and Voting
The Board recommends a vote “AGAINST” Proposal 5.
The Board believes that this proposal is unnecessary because the Company has already adopted a customary and robust executive compensation clawback policy. In contrast to the Company’s existing clawback policy, the proposal’s vague and imprecise standards could be problematic when put into practice, injecting unnecessary subjectivity into our compensation programs and impacting our ability to attract and retain executive talent. In addition, the proposal’s disclosure obligations could prevent the Board from acting in the Company’s best interests.
The Company adopted its clawback policy in October 2014 after undertaking a review of market practice and the SEC’s proposed clawback policy rules. As a result, the Company adopted a clawback policy that is based on measureable impacts to the Company and is in line with the triggers under the SEC’s proposed clawback policy rules, which are expected to be adopted later this year. Our current clawback policy allows the Compensation Committee to recoup cash and equity incentive compensation from current and former executive officers due to an accounting restatement. The policy provides the Compensation Committee with discretion to ensure that recoupment would be in the best interests of the Company, but avoids the vague and subjective standards advocated by this proposal. The Board believes the Company’s current compensation structure and recoupment tools strike the right balance to motivate executives to deliver long-term results, while at the same time discouraging inappropriate behavior.
In contrast, the proponent’s amendment would introduce vague and imprecise standards into the recoupment process by requiring recoupment if there has been conduct resulting in a “violation of law or T-Mobile policy that causes significant financial or reputational harm to T-Mobile.” There is no definition or measurable standard for what qualifies as financial or reputational harm or for calculating the recoupment amount resulting from such harm. In addition, the proposal’s lack of clarity is further exacerbated by the fact that the proposed amendment would subject an executive to recoupment if he or she “failed in his or her responsibility to manage or monitor conduct or risks.” The Board believes the proposed amendment would undermine the effectiveness of our performance-based compensation by introducing the type of discretionary, subjective evaluations that we have sought to avoid under our performance-based programs.
Finally, the Board believes that requiring public disclosure of all recoupment action could be harmful to the Company, its employees and stockholders. SEC rules already require disclosure of recoupment action taken against our CEO, CFO and other Named Executive Officers. The Board believes that disclosure of recoupment action impacting other executive officers should be at the Board’s discretion, subject to its fiduciary duties and business judgment, in order to balance investors’ interest in receiving the information with applicable legal, commercial and privacy concerns.
Due to the foregoing reasons, the Board believes adopting the proposal’s amendments are not in the best interests of the Company and its stockholders.
Required Vote
Approval of the stockholder proposal for an amendment of the Company’s clawback policy requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for an amendment of the Company’s clawback policy.
Why did I receive these materials?
As a holder of common stock of T-Mobile US, Inc. at the close of business on April 19, 2016,17, 2018, the record date, you are entitled to vote at the Annual Meeting. We are providing you with these proxy materials in connection with the solicitation of proxies by our Board of Directors to be used at the Annual Meeting. These proxy materials
were first made available to our stockholders on or about April 28, 2016.26, 2018. This Proxy Statement describes the proposals to be voted on at the Annual Meeting by the holders of record of our common stock on the record date and includes information required to be disclosed to our stockholders.
Who may vote at the Annual Meeting?
If you are a holder of record of our common stock as of the record date (April 19, 2016)17, 2018), you may vote your shares on the matters to be voted on at the Annual Meeting. You will receive only one proxy card for all the shares of common stock you hold in certificate and book-entry form.
If, as of the record date, you hold shares of our common stock in “street name” – that is, through an account with a bank, broker or other institution – you may direct the registered holder how to vote your shares at the Annual Meeting by following the instructions that you will receive from the registered holder.
How do proxies work?
You may vote by authorizing the persons selected by us as your proxy to vote your shares at the Annual Meeting according to your instructions on the matters discussed in this Proxy Statement, and according to their discretion on any other business that may properly
come before the Annual Meeting. We have designated two of our executive officers as proxies for the Annual Meeting: John J. Legere, our President and Chief Executive Officer, and J. Braxton Carter, our Executive Vice President and Chief Financial Officer.
How do I vote?
By InternetInternet.. Go towww.proxyvote.com, available 24 hours a day, seven days a week, and follow the on-screen instructions to submit your proxy. You will need to have your proxy card available and use the Company number and account number shown on your proxy card to cast your vote. This method of voting will be available until 11:59 p.m. Eastern Daylight Time, or EDT, on June 15, 2016,12, 2018, or the date immediately before any date to which the Annual Meeting may be continued, adjourned or postponed.
By Mail. You may submit your proxy by mail by returning your executed proxy card. You should sign your proxy card using exactly the same name
as appears on the card, date your proxy card and indicate your voting preference on each proposal. You should mail your proxy card in plenty of time to allow delivery prior to the Annual Meeting. Proxy cards received after 9:308:00 a.m. Pacific Daylight Time
on June 16, 201613, 2018 may not be considered unless the Annual Meeting is continued, adjourned or postponed and then only if such proxy cards are received before the date and time the continued, adjourned or postponed Annual Meeting is held.
By Phone. You also may submit your proxy by phone from the United States and Canada, using the toll-free number on the proxy card and the procedures and instructions described on the proxy card. Telephone voting will be considered at the Annual Meeting if completed prior to 11:59 p.m. EDT on June 15, 2016,12, 2018, or the date immediately before any date to which the Annual Meeting may be continued, adjourned or postponed.
In Person. You also may vote in person at the Annual Meeting. See “What do I need in order to attend the Annual Meeting?” below.
How are the votes recorded? What is the effect if I do not vote?
If you are a registered holder and we receive a valid proxy card from you by mail or receive your vote by phone or Internet, your shares will be voted by the named proxy holders as indicated in your voting preference selection.
| ∎ | If you are a registered holder and we receive a valid proxy card from you by mail or receive your vote by phone or internet, your shares will be voted by the named proxy holders as indicated in your voting preference selection. |
| ∎ | If you return your signed and dated proxy card without indicating your voting preference on one or more of the proposals to be considered at the
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Can I change my vote or revoke my proxy? Yes. If you are a holder of record of our common stock, you may revoke your proxy at any time prior to the voting deadlines referred to in “How do I vote?” above by:
Attendance at the Annual Meeting will not, by itself, revoke a proxy. If your shares are held in street name, you must contact your broker or other registered holder in order to revoke your previously submitted voting instructions. Such revocation should be made sufficiently in advance of the Annual Meeting to ensure that the revocation of the proxy card submitted by your registered holder is received by our Corporate Secretary prior to the date and time of the Annual Meeting. What is required for a quorum at the Annual Meeting? To transact business at the Annual Meeting, a majority of the shares of our common stock outstanding on the record date and entitled to vote at the Annual Meeting must be present, in person or by proxy, at the Annual Meeting. If a quorum is not present at the Annual Meeting, no business can be transacted at that time, and the meeting will be continued, adjourned or postponed to a later date. On the record date there were A stockholder’s instruction to “withhold authority,” abstentions, and broker non-votes will be counted as present and entitled to vote at the Annual Meeting for purposes of determining a quorum. What do I need in order to attend the Annual Meeting? If you are a record holder of shares of our common stock, you must bring the Notice of Internet Availability of Proxy Materials or the admission ticket enclosed with the paper copy of the proxy materials. However, if you hold your shares of common stock in street name, you must ask the broker, bank or other institution (registered holder) that holds your shares to provide you with a legal proxy, a copy of your account statement, or a letter from the registered holder confirming that you beneficially own or hold shares of our common stock as of the close of business on April Every attendee of the Annual Meeting will be required to show a valid, government-issued picture identification that matches his or her Notice of Internet Availability of Proxy Materials, admission ticket, legal proxy and/or confirming documentation to gain admission to the Annual Meeting. Seating is limited and will be available on a first-come, first-served basis. For safety and security purposes, we do not permit any stockholder to bring cameras, video or audio recording equipment, large bags, briefcases or packages into the meeting room or to otherwise record or photograph the Annual Meeting. We also ask that all stockholders attending the Annual Meeting turn off all cell phones and other electronic devices during the Annual Meeting. We reserve the right to inspect any bags, purses or briefcases brought into the Annual Meeting.
Who will tabulate and count the votes? Representatives of Broadridge Financial Solutions will tabulate the votes and act as the Company’s Inspector of Elections. Where can I find the voting results for each proposal? We will file a Current Report on Form 8-K within four business days after the Annual Meeting to announce the preliminary results of voting. Who bears the cost of the proxy solicitation? We will bear all of the costs of soliciting proxies, including the preparation, assembly, printing and distribution of all proxy materials. We also reimburse brokers, banks, fiduciaries, custodians and other institutions for their costs in forwarding the proxy materials to the beneficial owners or holders of our common stock. Our directors, officers and employees also may solicit proxies by mail, personally, by telephone, by email or by other appropriate means. No additional compensation will be paid to directors, officers or other employees for such services.
Other Information and Business
Our website contains the Company’s current copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
We have adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, we If you received only one copy of this Proxy Statement and the Proxy Materials and wish to receive a separate copy for each stockholder at your household, or if you wish to participate in householding, please contact Broadridge Financial Solutions, Inc. by calling toll free at (866) 540-7095 or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York, NY 11717. We will promptly deliver, upon written or oral request to the address or telephone number above by stockholders at a shared address to which a single copy of the documents was delivered, a separate copy of the Proxy Statement and the 2017 Annual Report to Stockholders. A number of brokerage firms have instituted householding. If you hold your shares in street name, please contact your bank, broker or other holder of record to request information on householding.
Proposals Pursuant to Rule 14a-8. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in our Proxy Statement and for consideration at our Business Proposals and Nominations Pursuant to Our Bylaws. Under our bylaws, in order to nominate a director or bring any other business before the stockholders at the procedures and timing specifically described in our bylaws. In addition, assuming the date of the A copy of our bylaws setting forth the requirements for the nomination of director candidates by stockholders and the requirements for proposals by stockholders may be obtained free of charge from our Corporate Secretary at 12920 SE 38th Street, Bellevue, Washington 98006. A nomination or proposal that does not comply with the above procedures will be disregarded. Compliance with the above procedures does not require the Company to include the proposed nominee or proposal in the Company’s proxy solicitation material.
OTHER INFORMATION AND BUSINESS
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and holders of 10% or more of our outstanding common stock to file reports concerning their ownership (Form 3) and changes in ownership (Form 4 and Form 5) of Company equity securities with the SEC. Based solely upon our review of such reports, the Company believes that all persons filed on a timely basis all reports required by Section 16(a).
Management does not know of any other items or business, other than those in the accompanying Notice of Annual Meeting of Stockholders that may properly come before the Annual Meeting or other matters incident to the conduct of the Annual Meeting. As to any other item or proposal that may properly come before the Annual Meeting, including voting on a proposal omitted from this Proxy Statement pursuant to the rules of the SEC, it is intended that proxies will be voted in accordance with the discretion of the proxy holders.
By Order of the Board of Directors,
David A. Miller Executive Vice President, General Counsel and Secretary
APPENDIX A Reconciliation of Non-GAAP Financial Measures Certain of the financial metrics applicable to the “Adjusted EBITDA”: Earnings before interest expense, Adjusted EBITDA is reconciled to net income
Adjusted EBITDA is a non-GAAP financial measure utilized by T-Mobile’s management to monitor the financial performance of our operations. T-Mobile uses Adjusted EBITDA internally as a metric to evaluate and compensate its personnel and management for their performance, and as a benchmark to evaluate T-Mobile’s operating performance in comparison to its competitors. Management believes analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate overall operating performance and facilitate comparisons with other wireless communications companies because it is indicative of T-Mobile’s ongoing operating performance and trends by excluding the impact of interest expense from financing, non-cash depreciation and amortization from capital investments, non-cash stock-based compensation, network decommissioning costs as they are not indicative of T-Mobile’s ongoing operating performance and certain other nonrecurring income and expenses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for income from operations, net income or any other measure of financial performance reported in accordance with U.S. generally accepted accounting principles (“GAAP”). In Q1 2017, we made an accounting change to include imputed interest associated with EIP receivables in Other revenues which are included in Adjusted EBITDA. “Operating Free Cash Flow”: Operating free cash flow is a non-GAAP financial measure as defined and used under the
ANNEX A Amendment to T-Mobile US, Inc. 2013 Omnibus Incentive Plan THIS AMENDMENT (this “Amendment”) to the T-Mobile US, Inc. 2013 Omnibus Incentive Plan, is made and adopted by the Board of Directors (the “Board”) of T-Mobile US, Inc., a Delaware corporation (the “Company”), effective as of the Effective Date (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Plan (as defined below). RECITALS WHEREAS, the Company has previously adopted, and the Company’s stockholders have previously approved, the T-Mobile US, Inc. 2013 Omnibus Incentive Plan (as amended from time to time, the “Plan”); WHEREAS, pursuant to Section 5.2 of the Plan, the Board has the authority to amend the Plan to increase the maximum aggregate number of shares of Common Stock available for issuance pursuant to Awards thereunder (the “Share Limit”), subject to approval of the Company’s stockholders; WHEREAS, the Board believes it is in the best interests of the Company and its stockholders to amend the Plan to increase the Share Limit under the Plan as set forth herein; and WHEREAS, this Amendment shall become effective upon the approval of this Amendment by the Company’s stockholders (the date of such approval, the “Effective Date”). NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as follows, effective as of the Effective Date: AMENDMENT
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ANNUAL MEETING OF STOCKHOLDERS OF T-MOBILE US, INC.
Four Seasons Hotel
At the Annual Meeting, stockholders will vote upon the proposals outlined in the Notice of Upon arrival please present this Admission Ticket, together with a valid government-issued picture identification to enter the Annual Meeting. This Admission Ticket only admits the stockholder identified on the reverse side and is non-transferable. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — E45164-P08446
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