<PAGE> 1
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-26649
------------------------
NEXTEL INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-167-1412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1191 SECOND AVENUE, SUITE 1600, SEATTLE, WA 98101
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (206) 749-8000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of issuer's classes of
common stock as of the latest practicable date:
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
TITLE OF CLASS ON AUGUST 1, 1998
-------------- -----------------
<S> <C>
Common Stock, no par value 36,500,000
</TABLE>
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<PAGE> 2
NEXTEL INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION.
Item 1. Financial Statements--Unaudited................... 3
Condensed Consolidated Balance Sheets--As of June 30,
1998 and December 31, 1997............................ 3
Condensed Consolidated Statements of Operations--For
the Three Months Ended June 30, 1998 and 1997......... 4
Condensed Consolidated Statements of Operations--For
the Six Months Ended June 30, 1998 and 1997........... 5
Condensed Consolidated Statement of Stockholders'
Equity--For the Six Months Ended June 30, 1998........ 6
Condensed Consolidated Statements of Cash Flows--For
the Six Months Ended June 30, 1998 and 1997........... 7
Notes to Condensed Consolidated Interim Financial
Statements............................................ 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 13
PART II OTHER INFORMATION.
Item 1. Legal Proceedings................................. 22
Item 6. Exhibits and Reports on Form 8-K.................. 22
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS -- UNAUDITED.
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (of which $33,409 is
restricted as of June 30, 1998)....................... $ 333,570 $ 159,790
Marketable securities.................................. 2,638 128,560
Accounts receivable, less allowance for doubtful
accounts of $3,033 and $1,003......................... 7,889 3,838
Subscriber equipment inventory......................... 23,596 1,749
Prepaid and other...................................... 21,692 15,884
---------- ----------
Total current assets.............................. 389,385 309,821
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $6,978 and $1,992......................... 407,022 136,210
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES, at cost less
equity in net losses of $2,195 and $7,526................. 101,777 106,489
INTANGIBLE ASSETS, net of accumulated amortization of
$28,625 and $14,664....................................... 581,296 526,000
INVESTMENTS AND OTHER ASSETS................................ 165,353 44,518
---------- ----------
$1,644,833 $1,123,038
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, accrued expenses and other........... $ 93,758 $ 76,048
Due to parent.......................................... -- 8,254
Notes payable and current portion of long-term debt.... 2,948 2,211
---------- ----------
Total current liabilities......................... 96,706 86,513
LONG-TERM DEBT.............................................. 1,111,167 597,809
DEFERRED INCOME TAXES....................................... 112,140 120,777
---------- ----------
Total liabilities...................................... 1,320,013 805,099
---------- ----------
MINORITY INTEREST........................................... 28,099 21,910
STOCKHOLDERS' EQUITY:
Series A exchangeable redeemable preferred stock (1,250
shares authorized, $10.00 par value, 988.86 shares
issued and outstanding)............................... 98,886 --
Series B redeemable preferred stock (2,500 shares
authorized, $10.00 par value, no shares issued and
outstanding).......................................... -- --
Common stock (73,000,000 shares authorized, no par
value, 36,500,000 shares issued and outstanding)...... 395,428 395,428
Accumulated deficit.................................... (177,068) (102,689)
Unrealized gain (loss) on investments.................. (11,613) 3,290
Cumulative translation adjustment...................... (8,912) --
---------- ----------
Total stockholders' equity........................ 296,721 296,029
---------- ----------
$1,644,833 $1,123,038
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Radio service revenue.................................. $ 7,238 $ 1,973
Equipment sales and maintenance........................ 1,951 531
----------- -----------
9,189 2,504
----------- -----------
OPERATING EXPENSES
Cost of radio service revenue.......................... 2,268 420
Cost of equipment sales and maintenance................ 1,176 300
Selling, general and administrative.................... 24,752 6,245
Depreciation and amortization.......................... 10,723 4,110
----------- -----------
38,919 11,075
----------- -----------
OPERATING LOSS.............................................. (29,730) (8,571)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income........................................ 5,081 6,168
Interest expense....................................... (25,417) (16,762)
Loss from equity method investments.................... (882) (2,015)
Other, net............................................. (3,359) 310
Minority interest...................................... 2,319 910
----------- -----------
(22,258) (11,389)
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT.............................. (51,988) (19,960)
INCOME TAX BENEFIT.......................................... 6,178 1,622
----------- -----------
NET LOSS.................................................... $ (45,810) $ (18,338)
----------- -----------
NET LOSS PER COMMON SHARE, BASIC AND DILUTED................ $ (1.26) $ (0.50)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING........ 36,500,000 36,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Radio service revenue.................................. $ 13,376 $ 3,153
Equipment sales and maintenance........................ 4,371 811
----------- -----------
17,747 3,964
----------- -----------
OPERATING EXPENSES
Cost of radio service revenue.......................... 4,767 1,013
Cost of equipment sales and maintenance................ 2,229 465
Selling, general and administrative.................... 39,979 10,296
Depreciation and amortization.......................... 19,915 6,691
----------- -----------
66,890 18,465
----------- -----------
OPERATING LOSS.............................................. (49,143) (14,501)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income........................................ 9,405 8,966
Interest expense....................................... (44,385) (22,353)
Loss from equity method investments.................... (2,196) (3,882)
Other, net............................................. (2,161) 153
Minority interest...................................... 3,549 1,347
----------- -----------
(35,788) (15,769)
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT.............................. (84,931) (30,270)
INCOME TAX BENEFIT.......................................... 10,552 2,121
----------- -----------
NET LOSS.................................................... $ (74,379) $ (28,149)
----------- -----------
NET LOSS PER COMMON SHARE, BASIC AND DILUTED................ $ (2.04) $ (0.77)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING........ 36,500,000 36,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
----------------- --------------- --------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT
------ -------- ------ ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998...... -- -- -- -- 36,500,000 $395,428 $(102,689)
Issuance of Series A
preferred stock........ 988.86 $98,886 -- -- -- -- --
Unrealized loss on
investments............ -- -- -- -- -- -- --
Cumulative translation
adjustment............. -- -- -- -- -- -- --
Net loss................. -- -- -- -- -- -- (74,379)
------ ------- -- -- ---------- -------- ---------
BALANCE, June 30, 1998........ 988.86 $98,886 36,500,000 $395,428 $(177,068)
====== ======= == == ========== ======== =========
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
----------------------------
UNREALIZED CUMULATIVE
GAIN (LOSS) ON TRANSLATION
INVESTMENTS ADJUSTMENT TOTAL
-------------- ----------- --------
<S> <C> <C> <C>
BALANCE, January 1, 1998...... $ 3,290 -- $296,029
Issuance of Series A
preferred stock........ -- -- 98,886
Unrealized loss on
investments............ (14,903) -- (14,903)
Cumulative translation
adjustment............. -- $(8,912) (8,912)
Net loss................. -- -- (74,379)
-------- ------- --------
BALANCE, June 30, 1998........ $(11,613) $(8,912) $296,721
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (74,379) $(28,149)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization..................... 19,915 6,691
Interest accretion on long-term debt, net of
capitalization.................................. 41,909 21,558
Loss from equity method investments............... 2,196 3,882
Deferred income taxes............................. (12,896) (1,295)
Minority interest................................. (3,549) (1,347)
Change in current assets and liabilities:
Accounts receivable.......................... (2,574) 684
Subscriber equipment inventory............... (18,763) 34
Prepaid and other............................ (4,300) (2,418)
Accounts payable, accrued expenses and
other...................................... 19,215 (2,703)
Prepaid value added taxes and other............... (27,464) 2,205
--------- --------
Net cash used in operating activities.................. (60,690) (858)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (217,759) (15,524)
Purchase of marketable securities...................... (6,812) (69,962)
Proceeds from sale of marketable securities............ 131,222 --
Business acquisitions, net of cash acquired............ (67,251) --
Investments in unconsolidated subsidiaries............. (61,799) (48,990)
Other.................................................. -- (3,806)
--------- --------
Net cash used in investing activities.................. (222,399) (138,282)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to parent, net.............................. (8,254) (23,556)
Capital contributions from parent...................... -- 6,366
Capital contributions from minority stockholders....... 6,164 --
Proceeds from issuance of Series A preferred stock to
parent................................................ 8,254 --
Proceeds from issuance of warrants..................... -- 14,800
Net proceeds from issuance of long-term debt........... 452,045 467,578
Repayment of long-term debt............................ (1,340) --
--------- --------
Net cash provided by financing activities.............. 456,869 465,188
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 173,780 326,048
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 159,790 53,029
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 333,570 $379,077
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of $3,594 capitalized in
1998.................................................. $ -- $ --
========= ========
Cash paid for income taxes............................. $ 1,685 $ --
========= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE> 8
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF PRESENTATION
The condensed consolidated interim financial statements of Nextel
International, Inc. and subsidiaries ("Nextel International" or the "Company"),
an indirect wholly owned subsidiary of Nextel Communications, Inc. ("Nextel
Communications"), included herein have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission") and reflect all adjustments that are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods. All adjustments made were normal recurring accruals.
The interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
Operating results for the interim periods are not necessarily indicative of
results for an entire year.
The accounts of the Company's consolidated foreign subsidiaries and foreign
subsidiaries accounted for under the equity method are presented utilizing
accounts as of a date one month earlier than the accounts of the Company and its
U.S. subsidiaries to ensure timely reporting of consolidated results.
Certain prior period amounts have been reclassified to conform with the
current presentation.
SUPPLEMENTAL CASH FLOW INFORMATION: In March 1998, a wholly owned
subsidiary of Nextel Communications transferred to the Company 6,777,778 Class D
Shares of Clearnet Communications Inc. ("Clearnet") with a fair value of $90.6
million at the date of transfer in exchange for 906.32 shares of the Company's
Series A Exchangeable Redeemable Preferred Stock, $10 par value per share (the
"Series A Preferred Stock"). See Note 3.
RESTRICTED CASH AND CASH EQUIVALENTS: As of June 30, 1998, approximately
$33.4 million of cash and cash equivalents was restricted for use as equity
investments under certain of the Company's financing agreements and as equipment
purchases under certain infrastructure purchase contracts.
COMPREHENSIVE INCOME: Effective January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130") that establishes new rules for the reporting and display
of comprehensive income and its components. Adoption of SFAS 130 requires
unrealized gains or losses on the Company's available-for-sale securities and
foreign currency translation adjustments be included in other comprehensive
income. The components of comprehensive income, net of related tax, are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss.................................... $(45,810) $(18,338) $(74,379) $(28,149)
Other comprehensive income:
Unrealized gain (loss) on investments, net
of tax................................. (21,414) 2,852 (14,903) 1,167
Foreign currency translation loss......... (5,442) -- (8,912) --
-------- -------- -------- --------
Comprehensive income........................ $(72,666) $(15,486) $(98,194) $(26,982)
======== ======== ======== ========
</TABLE>
ESMR NETWORK EQUIPMENT SALES AND RELATED COSTS: The loss generated from the
sale of subscriber units used in the Company's digital enhanced specialized
mobile radio ("ESMR") network primarily results from the Company's subsidy of
digital subscriber units and represents marketing costs for the Company's ESMR
network. Equipment sales revenue and related cost of sales digital subscriber
units and related digital
8
<PAGE> 9
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
accessories, including current period order fulfillment and installation related
expenses are classified within selling, general and administrative expenses as
follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Equipment sales.......................................... $1,496 $1,496
Cost of equipment sales.................................. 1,865 1,865
------ ------
$ (369) $ (369)
====== ======
</TABLE>
NEW ACCOUNTING STANDARD: In June 1998, the Financial Accounting Standard
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires that a company recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 is effective for fiscal quarters of
fiscal years beginning after June 15, 1999. The Company has not evaluated the
effects of this change on its financial position or results of operations.
NOTE 2 -- SIGNIFICANT TRANSACTIONS; PRO FORMA INFORMATION
NEXTEL BRAZIL: On January 30, 1997, Nextel Communications purchased 81% of
the issued and outstanding capital stock of Wireless Ventures of Brazil, Inc.
("WVB") from Telcom Ventures, Inc. and affiliates (collectively "Telcom
Ventures") in exchange for $186.3 million in Nextel Communications Class A
Common Stock. Nextel Communications' investment in WVB was simultaneously
contributed to the Company, and WVB changed its name to McCaw International
(Brazil), Ltd. ("Nextel Brazil").
MCS: On September 26, 1997, Nextel S.A., a subsidiary of Nextel Brazil
that is the indirect holder of substantially all of Nextel Brazil's specialized
mobile radio channels and related operating assets in Brazil, acquired 49% of
the capital stock of MCS Radio Telefonia, Ltda. ("MCS"), an indirect wholly
owned subsidiary of Motorola, Inc. ("Motorola"), an option to purchase the
remaining 51% of the capital stock of MCS upon receipt of the approval of the
applicable Brazilian regulatory authorities and certain assets of MCS. Upon the
approval of the Brazilian regulatory authorities, the option for the remaining
51% will be exercisable for approximately $3.2 million. In exchange, Motorola,
through a wholly owned subsidiary, acquired 5% of the outstanding capital stock
of Nextel S.A. Immediately subsequent to the acquisition, the Company, through
its 81% equity interest in Nextel Brazil and Nextel Brazil's 95% equity interest
in Nextel S.A., held a 77% equity interest in Nextel S.A.
NEXTEL MEXICO: During the year ended December 31, 1997, through a series
of transactions, the Company increased its equity interest in Comunicaciones
Nextel de Mexico S.A., de C.V. ("Nextel Mexico") from 30.1% to 100% for
consideration equal to approximately $132.2 million.
NEXTEL ARGENTINA: On May 6, 1997, the Company contributed its 100%
ownership interest in Nextel Argentina S.R.L. ("Nextel Argentina") into Nextel
International (Argentina), Ltd. (the "Argentina Joint Venture"), a joint venture
between the Company and Wireless Ventures of Argentina, L.L.C. ("WVA"). WVA's
contribution included all of the outstanding common stock of a paging company
and two companies that own SMR licenses in Argentina (collectively the "WVA
Entities"). During 1997, Nextel Argentina and the WVA Entities were merged, with
Nextel Argentina being the surviving entity (the merged entities are herein
collectively referred to as "Nextel Argentina" subsequent to the formation of
the Argentina Joint Venture). The Company had a 50% voting interest, shared
equally in the profits and losses of the Argentina Joint Venture, and accounted
for its investment in the Argentina Joint Venture under the equity method of
accounting.
9
<PAGE> 10
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SIGNIFICANT TRANSACTIONS; PRO FORMA INFORMATION -- (CONTINUED)
On January 30, 1998, the Company acquired the remaining 50% interest in the
Argentina Joint Venture from WVA for a purchase price of $46 million in cash. As
a result of the purchase, the Company increased its effective ownership interest
in Nextel Argentina from 50% to 100%. The acquisition is accounted for as a
purchase and, accordingly, the Company consolidated the accounts of Nextel
Argentina commencing February 1, 1998. The carrying value of the Company's
investment in Nextel Argentina as of January 30, 1998 was approximately $63.0
million and was allocated to the net assets acquired based on their preliminary
estimated fair values, including licenses and goodwill, which are being
amortized over their estimated useful lives of 20 years.
NEXTEL PERU: On January 29, 1998, the Company acquired a 70.1% interest in
Comunicaciones Nextel del Peru S.A. ("Nextel Peru," formerly known as Valorcom
S.A.), a Peruvian wireless telecommunications company, for $27.9 million, which
was paid in the form of capital contributions from January 29, 1998 to July 30,
1998. Nextel Peru, through its subsidiaries, holds licenses to operate 138 SMR
channels in the greater Lima area. Motorola, through an indirect wholly owned
subsidiary, holds a 19.9% interest in Nextel Peru. The acquisition is accounted
for as a purchase and, accordingly, the Company consolidated the accounts of
Nextel Peru commencing February 1, 1998. The purchase price was allocated to the
net assets acquired based on their preliminary estimated fair values, including
licenses and goodwill, which are being amortized over their estimated useful
lives of 20 years. Nextel Peru's historical operations are insignificant
relative to the results of the Company.
NEXTEL PHILIPPINES: In February 1998, the Company reached an agreement in
principle with the three groups of local shareholders of Infocom Communications
Network, Inc. ("Nextel Philippines"), including the Gotesco group (the "Gotesco
Group" and together with the other local shareholders, the "Philippines
Shareholders"), and finalized such agreements in April 1998 (the "Philippines
Partner Agreements"). Pursuant to the Philippines Partner Agreements (i) the
Philippines Shareholders agreed to vote for the election of new, professional
senior management of Nextel Philippines; (ii) the Company purchased existing
shareholder loans of the Philippines Shareholders totaling approximately $19.6
million, which loans bear interest at 18% per annum and are convertible into
equity of Nextel Philippines; (iii) the Company may, at its option, fund Nextel
Philippines' future capital needs, estimated to be $50 million for fiscal year
1998, pursuant to loans that, at the option of the Company, may be converted
into equity of Nextel Philippines; (iv) the Gotesco Group obtained the right to
put its 20% interest to the Company for approximately $9.4 million, beginning in
January 1999 (the "Gotesco Put"); and (v) the Company has the right to call the
Gotesco Group's 20% interest for approximately $11.6 million, if the Gotesco
Group does not exercise the Gotesco Put. The ability of the Company to convert
shareholders loans into equity, satisfy the Gotesco Put or call the Gotesco
Group's 20% interest is subject to applicable Philippines foreign ownership
rules.
On June 26, 1998, the Company and the Gotesco Group entered into an
Agreement to Accelerate Put Rights (the "Gotesco Put Acceleration Agreement")
pursuant to which the exercise date of the Gotesco Put was accelerated from
January 1999 to August 21, 1998. The Company also agreed to pay the Gotesco
Group (i) $500,000 upon the delivery of irrevocable proxies covering the voting
rights on the shares of Nextel Philippines owned by the Gotesco Group to a third
party or parties selected mutually by the Company and the Gotesco Group; (ii)
$500,000 to the Gotesco Group upon the conclusion of the Nextel Philippines
annual shareholder meeting, provided that the Gotesco Group's shares of Nextel
Philippines are voted in favor of the corporate governance provisions of the
Philippines Partner Agreements at such annual meeting; and (iii) $8,000,000 upon
the transfer of the shares covered by the Gotesco Put to a qualified third-party
purchaser in accordance with Philippines law, which transfer shall occur no
later than August 21, 1998. The Company is
10
<PAGE> 11
NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SIGNIFICANT TRANSACTIONS; PRO FORMA INFORMATION -- (CONTINUED)
in discussion with several Philippine groups regarding the purchase of an equity
interest in Nextel Philippines, including the purchase of the shares covered by
the Gotesco Put and the Gotesco Put Acceleration Agreement. Pursuant to the
Gotesco Put Acceleration Agreement, the Gotesco Group pledged its shares of
Nextel Philippines to the Company, delivered such shares to an escrow agent and
granted irrevocable proxies covering the voting rights on such shares to third
parties selected mutually by the Company and the Gotesco Group. As of July 31,
1998 the Company had made the two payments of $500,000 to the Gotesco Group due
upon execution and delivery of the Gotesco Put Acceleration Agreement and upon
the conclusion of the Nextel Philippines annual shareholders meeting.
J-COM: On March 17, 1998, the Company purchased a 21% equity interest in
J-Com Co., Ltd., an ESMR provider in Japan ("J-Com"), for a purchase price of
Y77.2 million (approximately $593,000 based on the exchange rate on the date of
purchase) (the "Japan Acquisition"). The Company also provided a shareholder
loan of Y4.1 billion (approximately $31.5 million based on the exchange rate on
the date of purchase) to J-Com. J-Com has a contractual right to provide service
in Japan under a sublicense covering more than 125 million people. DJSMR
Business Partnership, a Japanese partnership in which an affiliate of Motorola
is the majority partner, holds a 49% equity interest in J-Com. J-Com's
historical operations are insignificant relative to the results of the Company.
The Company's investment in J-Com is accounted for under the equity method.
PRO FORMA INFORMATION: The following summarized pro forma (unaudited)
information assumes the Nextel Brazil, MCS, Nextel Mexico and Nextel Argentina
transactions had occurred on January 1, 1997 (dollars in thousands, except for
share data).
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 1997
------------ -----------
<S> <C> <C>
Revenues................................................... $ 6,437 $ 12,317
=========== ===========
Net loss................................................... $ (20,792) $ (35,882)
=========== ===========
Net loss per share......................................... $ (0.57) $ (0.98)
=========== ===========
Weighted average shares outstanding........................ 36,500,000 36,500,000
=========== ===========
</TABLE>
The above amounts consolidate the historical results of Nextel Brazil, MCS,
Nextel Mexico and Nextel Argentina prior to the acquisitions and reflect
adjustments for the recognition of the minority ownership interests and the
amortization of licenses and goodwill. Pro forma information for the three and
six months ended June 30, 1998 does not differ materially from historical
results. The pro forma information is not necessarily indicative of the results
that would actually have occurred had the transactions been consummated on the
date indicated, nor is it necessarily indicative of future operating results of
the Company.
NOTE 3 -- FINANCING ARRANGEMENTS
MARCH 1998 OFFERING: On March 12, 1998, the Company completed a private
placement offering (the "March 1998 Offering") of its 12 1/8% Senior Discount
Notes due 2008 (the "March 1998 Notes"). The March 1998 Offering generated
aggregate net proceeds to the Company of approximately $387 million. The March
1998 Notes are noncallable for five years and require no cash interest payments
for the first five years. On August 4, 1998, the Company commenced an exchange
offer (the "Exchange Offer") for the March 1998 Notes pursuant to a registration
statement declared effective by the Commission on such date. The Exchange Offer
is scheduled to expire on September 2, 1998 and the exchange is expected to be
consummated as soon as
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NEXTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- FINANCING ARRANGEMENTS -- (CONTINUED)
practicable thereafter. The Exchange Offer is intended to satisfy the Company's
obligations under a registration rights agreement entered into between the
Company and the initial purchasers of the March 1998 Notes on behalf of the
holders of the March 1998 Notes.
ISSUANCE OF PREFERRED STOCK: On March 12, 1998, in connection with the
March 1998 Offering, a wholly owned subsidiary of Nextel Communications
transferred to the Company 6,777,778 Class D Shares of Clearnet in exchange for
906.32 shares of the Company's Series A Preferred Stock. As a result of such
transaction (the "Clearnet Transaction"), the Company currently owns 583,104
Class A Shares and 7,790,741 Class D Shares of Clearnet (each Class D Share is
convertible at the option of the holder into one Class A Share). Additionally,
the Company issued 82.54 shares of Series A Preferred Stock to a wholly owned
subsidiary of Nextel Communications for consideration of $8,254,000.
The Series A Preferred Stock was issued at an original liquidation
preference of $100,000 per share and thereafter the liquidation preference on
the Series A Preferred Stock accretes at an annual rate equal to 13.625%. At
June 30, 1998, the accreted liquidation preference on the Series A Preferred
Stock totaled $103,003,000. Except as required by law, the holders of the Series
A Preferred Stock are not entitled to receive dividends or other distributions.
The Company has the right at any time to redeem the Series A Preferred Stock in
full (or with the consent of the holder of the affected shares of Series A
Preferred Stock, in part) at a redemption price equal to 100% of the accreted
liquidation preference thereof on the redemption date and under certain
circumstances, the holders of the Series A Preferred Stock have the right to
exchange the Series A Preferred Stock for shares of the Company's Series B
Redeemable Preferred Stock, par value $10.00 per share (the "Series B Preferred
Stock"), having a liquidation preference equal to the accreted liquidation
preference of the Series A Preferred Stock so exchanged.
The Series B Preferred Stock to be issued in exchange for shares of Series
A Preferred Stock will have an initial annual dividend rate equal to 13.625%,
increasing to 18.00% as of March 13, 2010. The Series B Preferred Stock will
have terms substantially similar to those of the Series A Preferred Stock,
except for the right to elect one director to the Company's Board of Directors
and the accrual of cumulative dividends payable quarterly in cash. In addition,
the Company may not issue shares of Series B Preferred Stock, except in exchange
for shares of Series A Preferred Stock, without the consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock, voting together as a class.
ARGENTINA CREDIT FACILITY: As of February 27, 1998, Nextel Argentina
entered into an $83 million senior secured credit facility (the "Argentina
Credit Facility") with The Chase Manhattan Bank, which facility, as amended on
May 8, 1998, was increased to $100.0 million. Borrowings under the Argentina
Credit Facility are subject to the satisfaction or waiver of certain conditions.
Loans under the Argentina Credit Facility will bear interest at a rate equal to
either (i) the ABR plus 2.75% (ABR is the highest of the prime rate, the base CD
rate plus 1% or the federal funds rate plus 0.5%) or (ii) the Eurodollar rate
plus 3.75% (the Eurodollar rate is the LIBO rate multiplied by the statutory
reserve rate). The loans under the Argentina Credit Facility will be repaid in
quarterly installments beginning September 30, 2000 and ending March 31, 2003.
The first nine installments will be equal to 1/18 of the then-outstanding
balance and the final installment will be in an amount equal to the
then-outstanding balance. As of June 30, 1998, borrowings under the Argentina
Credit Facility totaled $21.0 million and bore interest at approximately 9.5%.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following discussion of the condensed consolidated financial condition
and results of operations of Nextel International, Inc. ("Nextel International"
or the "Company"), an indirectly wholly owned subsidiary of Nextel
Communications, Inc. ("Nextel Communications"), for the three-month and
six-month periods ended June 30, 1998 and 1997 should be read in conjunction
with the Company's condensed consolidated financial statements and notes thereto
appearing elsewhere in Part I of this report and the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 ("1997 Form 10-K").
Nextel International, through its operating subsidiaries and affiliates,
provides wireless communications services in five of the largest cities in Latin
America and three of the largest cities in Asia. The Company's markets cover
approximately 373 million people, approximately 131 million of which are in
Latin America. Nextel International is the largest specialized mobile radio
("SMR") service provider in Brazil and Mexico, and holds the largest SMR channel
position in Argentina.
The Company's strategy is focused on using its leading analog dispatch or
SMR channel positions in its principal markets, together with Nextel
Communications' experience and supplier relationships, to upgrade its services
from analog dispatch to digital enhanced specialized mobile radio ("ESMR")
services. The Company intends to use digital "iDEN(TM)" (integrated Digital
Enhanced Network) technology developed by Motorola, Inc. ("Motorola") to provide
its ESMR services. The Company, through its operating subsidiaries or
affiliates, launched commercial ESMR service under the brand name "Nextel(TM)"
in Sao Paulo and Buenos Aires during the second quarter of 1998 and Rio de
Janeiro and Manila during July 1998. Additionally, the Company's Japanese
affiliate, J-Com Co., Ltd. ("J-Com"), introduced a multi-functional commercial
ESMR service under the brand name "Nexnet(TM)" in the Kanto region of Japan
(which includes Tokyo) in July 1998. The Company currently plans to launch
commercial ESMR service in Mexico City during the third quarter of 1998 and the
greater Lima area in 1999. The timing of the Company's currently planned launch
schedule depends on a number of factors, some of which are beyond the Company's
control. See 1997 Form 10-K, Part I, Item 1, "The Company's Operations and
Investments."
The Company owns majority controlling interests in wireless communications
services companies in Brazil, Mexico, Argentina and Peru and owns equity
interests and actively participates in the management of wireless communications
services companies in the Philippines and Japan. In addition, the Company owns
an approximately 15% equity interest in Clearnet Communications Inc., a Canadian
wireless communications services company ("Clearnet"), and has a contractual
right through its Chinese joint venture to receive 12.1% of the profits
generated by a Global System for Mobile communications ("GSM") network in
Shanghai, China (the "Shanghai GSM System"). The wireless communications
services companies that the Company owns or has interests in and the right to
receive profits in the Shanghai GSM System are referred to herein as the
"Operating Companies." The Company does not actively participate in the
management or in the formulation of the business plans or policies of Clearnet
or the Shanghai GSM System and considers them passive investments.
As of June 30, 1998, Nextel's proportionate share of international digital
subscriber units in service, based on its ownership interests in the Operating
Companies, is estimated to be approximately 67,000, which includes total digital
subscriber units on networks currently in operation in Argentina, Brazil,
Canada, Japan, and Shanghai, China. Total international digital subscriber units
in service for the Operating Companies is estimated to be approximately 357,000
as of June 30, 1998.
FISCAL QUARTER TRANSACTIONS AND DEVELOPMENTS
PHILIPPINES. In February 1998, the Company reached an agreement in
principle with the three groups of local shareholders of Nextel Philippines (the
"Philippines Shareholders"), including the Gotesco group (the "Gotesco Group")
which owns a 20% interest in Infocom Communications Network, Inc. ("Nextel
Philippines"), and finalized such agreements in April 1998 (the "Philippines
Partner Agreements"). Pursuant to the Philippines Partner Agreements (i) the
Nextel Philippines corporate governance arrangements were
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restructured to give the Company increased minority shareholder rights and the
Philippines Shareholders agreed to vote for the election of new, professional
senior management of Nextel Philippines; (ii) the Company purchased existing
shareholder loans of the Philippines Shareholders totaling approximately $19.6
million, which loans bear interest at 18% per annum and are convertible into
equity of Nextel Philippines; (iii) the Company may, at its option, fund Nextel
Philippines' future capital needs, currently estimated to be $50 million for
fiscal year 1998, pursuant to loans that, at the option of the Company, may be
converted into equity of Nextel Philippines; (iv) the Gotesco Group obtained the
right to put its 20% interest to the Company for approximately $9.4 million,
beginning in January 1999 (the "Gotesco Put"); and (v) the Company has the right
to call the Gotesco Group's 20% interest for approximately $11.6 million, if the
Gotesco Group does not exercise the Gotesco Put. The ability of the Company to
convert shareholders' loans into equity, satisfy the Gotesco Put or call the
Gotesco Group's 20% interest is subject to applicable Philippines foreign
ownership rules. Despite the provisions of the Philippines Partner Agreements,
two of the Philippines Shareholders, Jetcom, Inc. ("Jetcom") and Foodcamp
Industries and Marketing, Inc. ("Foodcamp"), have taken actions or failed to
take actions to effect the terms of such agreement, including the failure to
convene a meeting of the board of directors of Nextel Philippines and a vote on
the election of the senior management of such company and other steps necessary
to complete the restructuring of Nextel Philippines' corporate governance
framework in accordance with the Philippines Partner Agreements. On June 19,
1998, the Company sent a written notice to such shareholders asserting the
Company's belief that such shareholders have failed to perform their respective
obligations under the Philippines Partner Agreements and informing such
shareholders that the Company will pursue all remedies available to it under the
Philippines Partner Agreements and applicable laws in order to enforce its
rights. These shareholders have sent written responses to the Company's letter
in which they denied all of the Company's assertions.
On June 26, 1998, the Company and the Gotesco Group entered into an
Agreement to Accelerate Put Rights (the "Gotesco Put Acceleration Agreement")
pursuant to which the exercise date of the Gotesco Put was accelerated from
January 1999 to August 21, 1998. The Company also agreed to pay the Gotesco
Group (i) $500,000 upon the delivery of irrevocable proxies covering the voting
rights on the shares of Nextel Philippines owned by the Gotesco Group to a third
party or parties selected mutually by the Company and the Gotesco Group; (ii)
$500,000 to the Gotesco Group upon the conclusion of the Nextel Philippines
annual shareholder meeting, provided that the Gotesco Group's shares of Nextel
Philippines are voted in favor of the corporate governance provisions of the
Philippines Partner Agreements at such annual meeting; and (iii) $8,000,000 upon
the transfer of the shares covered by the Gotesco Put to a qualified third-party
purchaser in accordance with Philippines law, which transfer shall occur no
later than August 21, 1998. The Company is in discussion with several Philippine
groups regarding the purchase of an equity interest in Nextel Philippines,
including the purchase of the shares covered by the Gotesco Put and the Gotesco
Put Acceleration Agreement. Pursuant to the Gotesco Put Acceleration Agreement,
the Gotesco Group pledged its shares of Nextel Philippines to the Company,
delivered such shares to an escrow agent and granted irrevocable proxies
covering the voting rights on such shares to third parties selected mutually by
the Company and the Gotesco Group. As of July 31, 1998, the Company had made the
two payments of $500,000 to the Gotesco Group due upon execution and delivery of
the Gotesco Put Acceleration Agreement and upon the conclusion of the Nextel
Philippines annual shareholders meeting.
On July 13, 1998, Nextel Philippines held the 1998 annual shareholders
meeting and organizational board of directors meeting pursuant to which certain
corporate governance provisions of the Philippines Partner Agreements were
implemented, including the appointment of new, professional senior management.
Immediately prior to the meetings, the Philippines Securities and Exchange
Commission (the "ROP SEC") issued a temporary restraining order (the "TRO") upon
petition of one of the Philippines Shareholders and certain individual
shareholders who hold shares in Nextel Philippines in their capacity as members
of the board of directors of Nextel Philippines representing the interests of
Jetcom and Foodcamp (collectively, the "Petitioners"). The Petitioners requested
the nullification of the amendments of the bylaws of Nextel Philippines
contemplated by the corporate governance provisions of the Philippines Partner
Agreements (the "Bylaw Amendments") and the TRO enjoined Nextel Philippines from
implementing such Bylaw Amendments for a 72-hour period. The Petitioners further
requested that a preliminary injunction be issued with the same effect pending a
trial on the merits with respect to the validity of the Bylaw Amendments. On
July 15,
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1998, pursuant to the agreement of Nextel Philippines and the Petitioners and
confirmed by the ROP SEC, (a) the TRO was permitted to expire and (b) pending a
trial on the merits as to the validity of the Bylaw Amendments (i) the
Petitioners agreed to withdraw their petition for a preliminary injunction and
(ii) Nextel Philippines agreed that the provisions of the Bylaw Amendments
granting the Company certain veto rights (the "Company Veto Rights") would not
be implemented.
In addition, on July 11, 1998, the Company received a letter from counsel
to Jetcom and Foodcamp alleging that the Company had engaged a public relations
firm to undertake an advertising campaign on behalf of Nextel Philippines and
that pursuant to such campaign the Company issued misleading press releases
regarding the launching of commercial ESMR services by Nextel Philippines,
including press releases stating that the Company and Nextel Philippines
intended to provide cellular services. The letter stated, among other things,
that the Company's retention of the public relations firm was unauthorized, that
while Nextel Philippines' franchise includes authorization to operate a cellular
system its provisional authority ("PA") does not permit such operations, that
the Company has been informed by Nextel Philippines' management not to use the
word cellular in describing its telecommunications services and that as a
consequence of the foregoing, several telecommunication companies have initiated
legal proceedings that place Nextel Philippines' PA in jeopardy. The letter
states that Jetcom and Foodcamp intend to hold the Company liable for any and
all damages as a result of the foregoing. The Company denies the substance of
the allegations in the letter described above and specifically denies that the
Company or any agent of the Company authorized the issuance of the press
releases in question.
Although the Company believes that the provisions of the Philippines
Partner Agreements are enforceable against each of the Philippines Shareholders
and that the Company will eventually be successful in any litigation against
Jetcom and Foodcamp regarding such agreements, there can be no assurance that
the Company will prevail in any arbitration or legal action against Jetcom and
Foodcamp or that such claims will be resolved in a timely manner. To the extent
the Company is not successful in resolving these issues with Jetcom and
Foodcamp, the Company may decide not to continue to fund Nextel Philippines. Any
failure to resolve the legal issues among the shareholders of Nextel Philippines
in a timely manner, and any resulting decision by the Company not to continue to
provide additional funding to Nextel Philippines, would have a material adverse
effect on Nextel Philippines' business, prospects, financial condition and
results of operation. The Company does not believe that any of the Philippines
Shareholders intend to fund Nextel Philippines in fiscal year 1998. Any lack of
funding of Nextel Philippines, either from the Company, the Philippines
Shareholders or other sources, would have a material adverse effect on Nextel
Philippines' business, prospects, financial condition and results of operation,
including its ability to meet its obligations, and, accordingly, on the value of
the Company's investment in Nextel Philippines.
MEXICO. On June 30, 1998, the Mexican Federal Telecommunications
Commission ("COFETEL") issued a press release in which it ordered Comunicaciones
Nextel de Mexico S.A. de C.V. ("Nextel Mexico") to cease its pre-launch
marketing campaign for its ESMR services because, according to the COFETEL press
release, Nextel Mexico's SMR concessions did not authorize the Company to offer
the services specified in Nextel Mexico's marketing materials. On July 8, 1998,
Nextel Mexico received a letter from COFETEL containing such order. Prior to
receipt of COFETEL's order, and based on the press reports regarding COFETEL's
press release, Nextel Mexico had ceased its pre-launch marketing campaign. On
July 9, 1998, Nextel Mexico sent a written reply to COFETEL in which it informed
COFETEL that the Company had ceased its pre-launch marketing campaign and
intended to revise its pre-launch marketing campaign to insure that any terms
describing its ESMR services were consistent with its SMR licenses. After
meeting with COFETEL, Nextel Mexico revised the language in its pre-launch
marketing campaign and, with COFETEL's authorization, resumed its pre-launch
marketing campaign. Although the Company believes that its licenses authorize
all of the services contemplated to be offered on its ESMR network and that
COFETEL will not have any further objections to Nextel Mexico's marketing
campaigns, there can be no assurance that COFETEL will accept Nextel Mexico's
interpretation of its SMR licenses or that COFETEL will not object to Nextel
Mexico's future marketing campaigns.
INDONESIA. On June 26, 1998, the Company and PT Gunung Sewu Kencana
("GSK") agreed to amend the preliminary agreement entered into by the two
parties in connection with the Company's right to purchase
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a 37.5% interest in PT Mitra Kencana Telekomunindo, an Indonesian SMR
licenseholder owned by GSK ("MKT"), to extend the deadline for receipt of
regulatory approvals from June 30, 1998 to December 31, 1998. Although the
Company believes that MKT presents it with significant opportunities to expand
its SMR network in Asia, the Company does not intend to make any substantial
investment in MKT until the economic and political conditions in Indonesia, in
particular, and the economic conditions in Asia generally, have stabilized.
POST FISCAL QUARTER-END TRANSACTIONS AND DEVELOPMENTS
EXCHANGE OFFER. On August 4, 1998, the Company commenced an exchange offer
(the "Exchange Offer") for its 12 1/8% Senior Discount Notes due 2008 (the
"March 1998 Notes") pursuant to a registration statement declared effective by
the Securities and Exchange Commission (the "Commission") on such date. The
Exchange Notes were originally offered and sold by the Company in March 1998 in
a private placement transaction (the "March 1998 Offering") that was exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The Exchange Offer is scheduled to expire on September 2, 1998 and the
exchange is expected to be consummated as soon as practicable thereafter. The
Exchange Offer is intended to satisfy the Company's obligations under a
registration rights agreement entered into between the Company and the initial
purchasers of the March 1998 Notes on behalf of the holders of the March 1998
Notes.
ORGANIZATIONAL CHANGES. On July 1, 1998, the Company announced a series of
organizational changes. The Company announced the creation of two regional
operating groups to oversee its Operational Companies in Latin America and Asia
and the creation of an International Service Center based in McLean, Virginia to
provide centralized functions for the Operating Companies. The Company named
Brian A. Vincent, formerly Vice President of Business Development of the
Company, as its President, Asia-Pacific Region, to be based in Seattle,
Washington, and Jose Felipe as its President, Latin America Region, to be based
in Miami, Florida. Prior to joining the Company, Mr. Felipe served in various
senior management positions at AT&T Corp. ("AT&T") and Lucent Technologies,
Inc., including most recently as regional president of AT&T for Puerto Rico and
the Virgin Islands. The Company named Thomas J. Truesdale, formerly Vice
President of International Operations of the Company, as its Vice President,
International Service Center.
The Company also named Mark R. Sobol to the position of Vice President of
International Operations. Prior to joining the Company, Mr. Sobol served as an
advisor to the senior management of several telecommunications companies in the
U.S. and Latin America, including AT&T Wireless Services, Inc. Additionally, the
Company nominated and Nextel Mexico elected William S. Roberts, formerly Vice
President of Country Operations of the Company, as President of Nextel Mexico.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 vs. Six Months Ended June 30, 1997
Revenues increased $13.7 million to $17.7 million for the six months ended
June 30, 1998 from $4.0 million for the six months ended June 30, 1997. Costs
and expenses related to revenues increased $5.5 million to $7.0 million for the
six months ended June 30, 1998, compared to $1.5 million for the six months
ended June 30, 1997. The increases were attributable primarily to the
acquisition of controlling interests in Nextel Mexico, MCS Radio Telefonia Ltd.
("MCS") and Nextel Argentina S.R.L. ("Nextel Argentina") in August 1997,
September 1997 and January 1998, respectively (collectively, the "Purchase
Transactions"). For the periods presented subsequent to the Purchase
Transactions, the results of Nextel Mexico, MCS and Nextel Argentina are
included in the Company's consolidated financial statements. See Part I, Item 1,
"Notes to Condensed Consolidated Interim Financial Statements--Note 2." For the
six months ended June 30, 1997, substantially all of the revenues and costs and
expenses related to revenues result from the five months of SMR operations of
McCaw International (Brazil), Ltd. and its subsidiaries and affiliates ("Nextel
Brazil") included in the Company's consolidated financial statements.
Revenues and costs and expenses related to revenues are expected to
continue to increase because the Company launched commercial ESMR services in
Sao Paulo and Buenos Aires in the second quarter of 1998 and Rio de Janeiro in
the third quarter of 1998. Additionally, the Company plans to launch commercial
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ESMR service in Mexico City during the third quarter of 1998. The commercial
ESMR launches in Manila and the Kanto region of Japan in the third quarter of
1998 will not affect revenues or costs and expenses related to revenues because
Nextel Philippines and J-Com are accounted for under the equity method.
Selling, general and administrative expenses increased $29.7 million to
$40.0 million for the six months ended June 30, 1998, compared to $10.3 million
for the six months ended June 30, 1997. The increase is attributable primarily
to the effect of the Purchase Transactions as well as increased costs in Nextel
Brazil necessary to support its launch of commercial ESMR service including
sales, marketing and administrative support costs.
Selling, general and administrative expenses are expected to continue to
increase because the Company intends to market its ESMR services aggressively in
each of its geographic regions and to increase staffing and other administrative
support activities to support the planned expansion of the Company's commercial
ESMR service. Additionally, the Company includes the loss resulting from the
sale of digital subscriber units in selling, general and administrative
expenses, as the loss represents primarily marketing costs for the commercial
ESMR services. The Company expects to continue to offer partial subsidies and
discounts on its sale and installation of digital subscriber units in programs
designed to stimulate both new subscriber growth and the migration of
subscribers from the Company's existing analog SMR systems to its ESMR networks.
Depreciation and amortization expense increased $13.2 million to $19.9
million for the six months ended June 30, 1998, compared to $6.7 million for the
six months ended June 30, 1997. The increase is attributable primarily to the
effect of the Purchase Transactions. The Company expects depreciation and
amortization expense to increase significantly in future periods due to
depreciation on fixed assets placed in service upon commencement of commercial
ESMR service in each of its markets.
Interest income increased $0.4 million to $9.4 million for the six months
ended June 30, 1998, compared to $9.0 million for the six months ended June 30,
1997. The increase was attributable primarily to income recognized on the
investment of the then-remaining net proceeds from the Company's offering and
issuance in March 1997 (the "March 1997 Offering") of units consisting of senior
discount notes due 2007 (the "March 1997 Notes") and detachable warrants to
purchase up to 1% of the Company's outstanding common stock. See "-- Liquidity
and Capital Resources."
Interest expense increased $22.0 million to $44.4 million for the six
months ended June 30, 1998, compared to $22.4 million for the six months ended
June 30, 1997. The increase is attributable primarily to interest expense
associated with the March 1997 Notes and the March 1998 Notes.
Loss from equity method investments decreased $1.7 million to $2.2 million
for the six months ended June 30, 1998, compared to $3.9 million for the six
months ended June 30, 1997. The decrease was attributable primarily to the
effect of the Purchase Transactions. As of June 30, 1998, the only Operating
Companies being accounted for under the equity method were Nextel Philippines
and J-Com.
Other expense totaling $2.2 million for the six months ended June 30, 1998
consists primarily of a $2.2 million foreign currency transaction loss
recognized on the Company's Japanese yen-denominated loan to J-Com resulting
from the decrease in value of the Japanese yen relative to the U.S. dollar.
Minority interest increased $2.2 million to $3.5 million for the six months
ended June 30, 1998, compared to $1.3 million for the six months ended June 30,
1997. The increase is attributable primarily to increase in both the net loss
and minority ownership interest of Nextel Brazil.
Income tax benefit increased $8.5 million to $10.6 million for the six
months ended June 30, 1998, compared to $2.1 million for the six months ended
June 30, 1997. The increase is attributable primarily to the effect of the
Purchase Transactions and, to a lesser extent, increased tax net operating
losses in Brazil.
Three Months Ended June 30, 1998 vs. Three Months Ended June 30, 1997
Revenues increased $6.7 million to $9.2 million for the three months ended
June 30, 1998 from $2.5 million for the three months ended June 30, 1997. Costs
and expenses related to revenues increased $2.7 million to $3.4 million for the
three months ended June 30, 1998, compared to $0.7 million for the three
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months ended June 30, 1997. The increases were attributable primarily to the
Purchase Transactions. For the three months ended June 30, 1997, substantially
all of the revenues and costs and expenses related to revenues result from the
three months of SMR operations of Nextel Brazil included in the Company's
consolidated financial statements.
Selling, general and administrative expenses increased $18.6 million to
$24.8 million for the three months ended June 30, 1998, compared to $6.2 million
for the three months ended June 30, 1997. The increase is attributable primarily
to the effect of the Purchase Transactions as well as increased costs in Nextel
Brazil necessary to support its launch of commercial ESMR service, including
sales, marketing and administrative support costs.
Selling, general and administrative expenses are expected to continue to
increase because the Company intends to market its ESMR services aggressively in
each of its geographic regions and increase staffing and other administrative
support activities to support the planned expansion of the Company's commercial
ESMR service. Additionally, the Company includes the loss resulting from the
sale of digital subscriber units in selling, general and administrative
expenses, as the loss represents primarily marketing costs for the commercial
ESMR services. The Company expects to continue to offer partial subsidies and
discounts on its sale and installation of digital subscriber units in programs
designed to stimulate both new subscriber growth and the migration of
subscribers from the Company's existing analog SMR systems to its ESMR networks.
Depreciation and amortization expense increased $6.6 million to $10.7
million for the three months ended June 30, 1998, compared to $4.1 million for
the three months ended June 30, 1997. The increase is attributable primarily to
the effect of the Purchase Transactions. The Company expects depreciation and
amortization expense to increase significantly in future periods due to
depreciation on fixed assets placed in service upon commencement of commercial
ESMR service in each of its markets.
Interest income decreased $1.1 million to $5.1 million for the three months
ended June 30, 1998, compared to $6.2 million for the three months ended June
30, 1997. The decrease was attributable primarily to a decrease in the average
outstanding balance of cash, cash equivalents and marketable securities for the
three months ended June 30, 1998, as compared to the three months ended June 30,
1997. The decrease in the average outstanding balance of cash, cash equivalents
and marketable securities is attributable to increased activity in the Company's
capital expenditure program.
Interest expense increased $8.6 million to $25.4 million for the three
months ended June 30, 1998, compared to $16.8 million for the three months ended
June 30, 1997. The increase is attributable primarily to interest expense
associated with the March 1998 Notes.
Loss from equity method investments decreased $1.1 million to $0.9 million
for the three months ended June 30, 1998, compared to $2.0 million for the three
months ended June 30, 1997. The decrease was attributable primarily to the
effect of the Purchase Transactions. As of June 30, 1998, the only Operating
Companies being accounted for under the equity method were Nextel Philippines
and J-Com.
Other expense totaling $3.4 million for the three months ended June 30,
1998 consists primarily of a $2.2 million foreign currency transaction loss
recognized on the Company's Japanese yen-denominated loan to J-Com resulting
from the decrease in value of the Japanese yen relative to the U.S. dollar.
Minority interest increased $1.4 million to $2.3 million for the three
months ended June 30, 1998, compared to $0.9 million for the three months ended
June 30, 1997. The increase is attributable primarily to the increase in both
the net loss and minority ownership interest of Nextel Brazil.
Income tax benefit increased $4.6 million to $6.2 million for the three
months ended June 30, 1998, compared to $1.6 million for the three months ended
June 30, 1997. The increase is attributable primarily to the effect of the
Purchase Transactions and, to a lesser extent, increased tax net operating
losses in Brazil.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred net losses of approximately $177.1 million from
inception through June 30, 1998. These losses resulted from operating expenses
required to support the development of the Company's
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wireless communications networks, other start-up costs and the fact that through
June 30, 1998 only $30.8 million of consolidated revenues had been recognized.
The Company expects to continue to incur increasing losses and negative
operating cash flows as it continues to build out and upgrade its existing
wireless communications networks.
Prior to March 1997, funds necessary to finance the Company's activities
were provided to the Company by its parent, which is an unrestricted subsidiary
of Nextel Communications, in the form of equity contributions. Since March 1997
and through June 30, 1998, the Company's activities have been financed primarily
with the net proceeds of the March 1997 Offering and the March 1998 Offering
and, to a lesser extent, from vendor financing, including the existing secured
equipment financing facilities obtained from Motorola. Nextel Communications is
not obligated to provide any additional funding to the Company.
Net cash used in operating activities for the six months ended June 30,
1998 was approximately $60.7 million. Net cash used in investing activities for
the six months ended June 30, 1998 was approximately $222.4 million. Net cash
provided by financing activities for the six months ended June 30, 1998 was
approximately $456.9 million. Working capital as of June 30, 1998 increased to
$292.7 million compared to $223.3 million at December 31, 1997. The cash used in
operating activities primarily represents cash used to fund operating losses and
pay value-added taxes on the purchase of switches and other infrastructure
equipment. The cash used in investing activities primarily represented
investments in the Operating Companies to fund the build-out of the Company's
ESMR networks, to fund the Company's initial investment in Comunicaciones Nextel
del Peru S.A. ("Nextel Peru," formerly Valorcom S.A.) and J-Com and to acquire
the remaining 50% interest in Nextel Argentina. The cash provided by financing
activities and the increase in working capital are primarily a result of the
Company receiving approximately $387 million of net proceeds from the March 1998
Offering and borrowings by the Company under the Brazil Motorola Financing and
the Argentina Credit Facility (each as defined below) of approximately $41.7
million and $21.0 million, respectively. As a result of the above activities,
cash and cash equivalents increased approximately $173.8 million during the six
months ended June 30, 1998.
As described in the 1997 Form 10-K, the Company has estimated its funding
requirements for fiscal year 1998 will be approximately $810 million (the "1998
Plan"). These amounts consist primarily of the costs of building the Company's
ESMR networks, including the purchase of switches and other equipment, the
acquisition of cell sites, the costs of constructing the networks and loading
subscribers, the acquisition of licenses and investments and funding of
operating losses. The Company has estimated that approximately $227 million of
such requirements in fiscal year 1998 will be related to expenditures in Brazil,
$161 million in Argentina, $152 million in Mexico, $29 million in Peru and $74
million in the Philippines. See 1997 Form 10-K, Part I, Item 1,
"Business -- 1998 Plan."
Through June 30, 1998, the Company's total cash expenditures for its
business activities described in the 1998 Plan, including system and related
capital expenditures, were approximately $460 million. Such expenditures were
consistent with the levels estimated by the Company in the 1998 Plan. The
Company's total cash expenditures for fiscal year 1998, however, may be subject
to the effect of certain risks and uncertainties, as identified or referred to
in the 1997 Form 10-K. See also "-- Foward-Looking Statements."
In November 1996, Nextel Communications, the Company and Motorola entered
into a binding memorandum of understanding regarding the provision of equipment
financing by Motorola, including the Motorola Financings (the "Motorola MOU").
In June 1997 and October 1997, pursuant to the Motorola MOU, the Company and
Motorola entered into definitive agreements for financing the purchase of up to
$14.7 million and $125 million of equipment and related services by Nextel
Philippines (the "Philippines Motorola Financing") and Nextel Brazil (the
"Brazil Motorola Financing"), respectively. The existing secured equipment
financing facilities obtained from Motorola under the Motorola MOU and any
additional financing arrangements obtained from Motorola under the Motorola MOU
are referred to herein collectively as the "Motorola Financings." In February
1998, Nextel Argentina entered into an $83 million senior secured credit
facility, which facility, as amended on May 8, 1998, was increased to $100
million (the "Argentina
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<PAGE> 20
Credit Facility"). The terms and conditions of the Motorola MOU, the Philippines
Motorola Financing, the Brazil Motorola Financing and the Argentina Credit
Facility are described in the 1997 Form 10-K.
As of June 30, 1998, all of the $14.7 million available under the
Philippine Motorola Financing had been borrowed and approximately $92.0 million
had been borrowed under the Brazil Motorola Financing, with the remaining $33.0
million available for future borrowings. As of June 30, 1998, $21.0 million had
been borrowed under Argentina Credit Facility, with the remaining $79.0 million
available for future borrowing.
The Company believes that the net proceeds from the March 1998 Offering,
together with available cash, cash equivalents and marketable securities and
borrowings expected to be available under the existing Motorola Financings and
the Argentina Credit Facility, will be sufficient to fund the Company's current
operations, including the planned expansion of its existing operations and any
funding of Nextel Philippines' capital needs by the Company pursuant to the
Philippines Partner Agreements, during fiscal year 1998; however, there can be
no assurance that such funds will be sufficient. If, among other things, the
Company's plans change, its assumptions regarding its funding needs associated
with the further build-out, expansion and enhancement of its ESMR network at the
Operating Company level prove to be inaccurate, the other shareholders in
certain of the Operating Companies do not fund their expected capital
requirements, it consummates acquisitions or investments in addition to those
currently contemplated or at higher prices than currently contemplated, it
increases its existing equity ownership interests in certain of the Operating
Companies beyond those currently contemplated, it experiences growth in its
business or subscriber base greater than that which was anticipated in
developing the 1998 Plan, it experiences unanticipated costs or competitive
pressures, the Operating Companies are unable to access funds under the existing
Motorola Financings and/or the Argentina Credit Facility, or the net proceeds
from the March 1998 Offering, together with any other funds available to the
Company and the Operating Companies or any other borrowings, otherwise prove to
be insufficient to meet cash needs through fiscal year 1998, the Company may be
required to seek additional capital sooner than currently anticipated. The
availability of borrowings under the existing Motorola Financings and under the
Argentina Credit Facility are subject to the satisfaction or waiver of certain
conditions. The Company will also require significant additional capital in
years subsequent to fiscal year 1998 to fund the build-out of new ESMR networks
in the Company's licensed markets, expansion and enhancement of its existing
ESMR networks, the acquisitions of additional licenses and investments in new
markets and operating losses and for other general corporate purposes. To the
extent the Company's then-existing financing sources are insufficient to meet
such needs, the Company may seek to raise such additional capital from public or
private equity or debt sources. There can be no assurance that the Company will
be able to raise such capital on satisfactory terms, if at all. Additionally,
the Company and certain of the Operating Companies may incur indebtedness only
in compliance with the terms of covenants contained in the indentures governing
the March 1997 Notes and the March 1998 Notes. See "-- Forward-Looking
Statements."
In the future, the Company may consider obtaining financing from various
sources, including vendor financing provided by equipment suppliers (including
the Motorola Financings), project financing from commercial banks and
international agencies such as International Finance Corporation and Overseas
Private Investment Corporation, bank lines of credit and sales of equity and
debt issued by the Operating Companies and/or the Company. To the extent the
Company issues debt, its leverage and debt service obligations will increase.
There can be no assurance that the Company will be able to raise such capital on
satisfactory terms, if at all.
The Company owns 100% of Nextel Mexico and Nextel Argentina, 81% of Nextel
Brazil (or approximately 77% of Nextel S.A.) and 70.1% of Nextel Peru. The
Company's other assets consist of minority ownership interests in Nextel
Philippines and J-Com, passive minority investment stakes in the Shanghai GSM
System and Clearnet and as of June 30, 1998, cash, cash equivalents and
marketable securities of approximately $336.2 million consisting primarily of
net cash proceeds remaining from the March 1998 Offering. Even though the
Company participates in the management of the Operating Companies (except for
Clearnet and the Shanghai GSM System) and has certain contractual rights
designed to protect its interests as a minority shareholder, it cannot control
the outcome of matters submitted to the shareholders of the Operating Companies
in which it has less than a majority interest. In addition, the Company may be
unable to
20
<PAGE> 21
access the cash flow of its affiliated companies because (i) it does not have
the requisite control to cause such entities to pay dividends and (ii)
substantially all of such entities are parties to or expected to become parties
to vendor financing or other borrowing agreements that severely restrict the
payment of dividends, and such entities are likely to continue to be subject to
such restrictions and prohibitions for the foreseeable future. The existing
Motorola Financings and the Argentina Credit Facility restrict the payment of
dividends to the Company by the Operating Companies that have debt outstanding
thereunder. Any future vendor or bank financings are likely to include similar
covenants restricting the payment of dividends. See 1997 Form 10-K, Part I, Item
1, "Business -- Risk Factors -- Substantial Indebtedness; Ability to Service
Debt; Refinancing Risks."
FORWARD-LOOKING STATEMENTS
"SAFE HARBOR" STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. A number of the matters and subject areas discussed in the foregoing
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that are not historical or current facts deal with potential future
circumstances and developments. The discussion of such matters and subject areas
is qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may differ materially from the Company's actual
future experience involving any one or more of such matters and subject areas.
The Company has attempted to identify, in context, certain of the factors that
it currently believes may cause actual future experience and results to differ
from the Company's current expectations regarding the relevant matter or subject
area. The operations and results of the Company's business also may be subject
to the effect of other risks and uncertainties in addition to the relevant
qualifying factors identified in the 1997 Form 10-K, Part I, Item 1,
"Business -- Risk Factors," including, but not limited to, general economic
conditions in Latin America and Asia, as a result of the recent Asian economic
crisis, and in the market segments that the Company is targeting for SMR and
ESMR commercial services, future legislation or regulation by governmental
entities in the markets in which the Operating Companies conduct their business,
the availability of adequate quantities of system infrastructure and subscriber
equipment and components to meet the Company's service deployment and marketing
plans and customer demand, access to sufficient debt and equity financing to
meet the Company's operating and financial needs, the successful deployment and
performance of the iDEN technology, the ability to achieve market penetration
and average subscriber revenue levels sufficient to provide financial viability
to the Company's wireless communications business, the Company's ability to
accomplish required scale-up of its billing, customer care and similar
administrative support timely and successfully to keep pace with anticipated
customer growth and increased system usage, the quality and price of similar or
comparable wireless communications services offered or to be offered by the
Company's competitors in each market, including providers of cellular and
personal communications services, other wireless communications services or
telecommunications generally and other risks and uncertainties described from
time to time in the Company's reports filed with the Commission.
21
<PAGE> 22
PART II
ITEM 1. LEGAL PROCEEDINGS.
On June 19, 1998, the Company sent a written notice to Jetcom and Foodcamp,
two of the Philippines Shareholders, asserting the Company's belief that such
shareholders have failed to perform their respective obligations under the
Philippines Partner Agreements and informing such shareholders that the Company
will pursue all remedies available to it under the Philippines Partner
Agreements and applicable laws in order to enforce its rights. In addition,
immediately prior to the Nextel Philippines annual shareholders meeting on July
13, 1998, the ROP SEC issued a TRO in favor of the Petitioners. The Petitioners
requested the nullification of the amendments of the bylaws of Nextel
Philippines contemplated by the corporate governance provisions of the
Philippines Partner Agreements and the TRO enjoined Nextel Philippines from
implementing such Bylaw Amendments for a 72-hour period. The Petitioners further
requested that a preliminary injunction be issued with the same effect pending a
trial on the merits with respect to the validity of the Bylaw Amendments. On
July 15, 1998, pursuant to the agreement of Nextel Philippines and the
Petitioners and confirmed by the ROP SEC (a) the TRO was permitted to expire and
(b) pending a trial on the merits as to the validity of the Bylaw Amendments (i)
the Petitioners agreed to withdraw their petition for a preliminary injunction
and (ii) Nextel Philippines agreed that the Company Veto Rights would not be
implemented. See Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Fiscal Quarter Transactions and
Developments -- Philippines."
Other than the proceeding described above, neither the Company nor the
Company's subsidiaries are party to any material litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<C> <S>
3.1 Restated Articles of Incorporation of the Company.
3.2 Restated Bylaws of the Company.
*10.1 Amendment No. 1 and Waiver, dated May 8, 1998, among Nextel
Argentina S.R.L., the Lenders named therein and the Chase
Manhattan Bank as Administrative Agent.
*10.2 Restructuring Agreement, dated as of April 2, 1998, by and
among Foodcamp Industries and Marketing, Inc., Chan Chon
Siong, Nextel International, Inc., Top Mega Enterprises,
Ltd. and Infocom Communications Network, Inc.
*10.3 Restructuring Agreement, dated as of April 2, 1998, by and
among Gotesco Properties Inc., Jose C. Go, Joel T. Go,
Nextel International, Inc., Top Mega Enterprises, Ltd. and
Infocom Communications Network, Inc.
*10.4 Restructuring Agreement, dated as of April 2, 1998, by and
among Jetcom Inc., Nextel International, Inc., Top Mega
Enterprises, Ltd. and Infocom Communications Network, Inc.
*10.5 Pledge Agreement, dated as of April 2, 1998, by and among
Infocom Communications Network, Inc., Nextel International,
Inc. and Jetcom, Inc.
*10.6 Form of Credit Agreement between Infocom Communications
Network, Inc. and the shareholders listed on Exhibit A
attached thereto, as amended from time to time.
*10.7 Agreement to Accelerate Put Rights, dated June 26, 1998,
among Gotesco Properties Inc., Jose C. Go, Joel T. Go,
Nextel International, Inc. and Top Mega Enterprises Ltd.
10.8 Employment Agreement dated June 23, 1998 between the Company
and Mark R. Sobol.
10.9 Employment Agreement dated May 20, 1998 between the Company
and Jose Felipe.
**27 Financial Data Schedule.
</TABLE>
- ---------------
* Filed as an exhibit to the Company's Registration Statement on Form S-4 (No.
333-55877), as amended, originally filed with the Commission on June 3, 1998
and incorporated herein by reference.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.
(b) Reports on Form 8-K.
None
22
<PAGE> 23
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
NEXTEL INTERNATIONAL, INC.
BY: /s/ DAVID E. ROSTOV
------------------------------------
David E. Rostov
Vice President and
Chief Financial Officer
(Principal Accounting Officer)
August 13, 1998
23
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<C> <S>
3.1 Restated Articles of Incorporation of the Company.
3.2 Restated Bylaws of the Company.
*10.1 Amendment No. 1 and Waiver, dated May 8, 1998, among Nextel
Argentina S.R.L., the Lenders named therein and the Chase
Manhattan Bank as Administrative Agent.
*10.2 Restructuring Agreement, dated as of April 2, 1998, by and
among Foodcamp Industries and Marketing, Inc., Chan Chon
Siong, Nextel International, Inc., Top Mega Enterprises Ltd.
and Infocom Communications Network, Inc.
*10.3 Restructuring Agreement, dated as of April 2, 1998, by and
among Gotesco Properties Inc., Jose C. Go, Joel T. Go,
Nextel International, Inc., Top Mega Enterprises, Ltd. and
Infocom Communications Network, Inc.
*10.4 Restructuring Agreement, dated as of April 2, 1998, by and
among Jetcom Inc., Nextel International, Inc., Top Mega
Enterprises, Ltd. and Infocom Communications Network, Inc.
*10.5 Pledge Agreement, dated as of April 2, 1998, by and among
Infocom Communications Network, Inc., Nextel International,
Inc. and Jetcom, Inc.
*10.6 Form of Credit Agreement between Infocom Communications
Network, Inc. and the shareholders listed on Exhibit A
attached thereto, as amended from time to time.
*10.7 Agreement to Accelerate Put Rights, dated June 26, 1998,
among Gotesco Properties Inc., Jose C. Go., Joel T. Go,
Nextel International, Inc. and Top Mega Enterprises Ltd.
10.8 Employment Agreement dated June 23, 1998 between the Company
and Mark R. Sobol.
10.9 Employment Agreement dated May 20, 1998 between the Company
and Jose Felipe.
**27 Financial Data Schedule.
</TABLE>
- ---------------
* Filed as an exhibit to the Company's Registration Statement on Form S-4 (No.
333-55877), as amended, originally filed with the Commission on June 3, 1998
and incorporated herein by reference.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act of 1933, as
amended.
24
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
NEXTEL INTERNATIONAL, INC.
Pursuant to RCW 23B.10.070, the following constitutes Restated Articles
of Incorporation of the undersigned, a Washington corporation. These Restated
Articles of Incorporation correctly set forth without change the corresponding
provisions of the Articles of Incorporation as heretofore amended and supersede
the original Articles of Incorporation and all amendments thereto.
ARTICLE I. NAME
The name of this corporation is Nextel International, Inc.
ARTICLE II. PURPOSES
This corporation is organized to engage in any business, trade or
activity which may be conducted lawfully by a corporation organized
under the Washington Business Corporation Act.
ARTICLE III. SHARES
This corporation is authorized to issue a total of 73,003,750
shares of all classes of capital stock, divided into three classes as
follows:
73,000,000 shares of common stock without par value
1,250 shares of Series A Exchangeable Redeemable Preferred
Stock, par value $10.00
2,500 shares of Series B Redeemable Preferred Stock, par value
$10.00
A. Terms Of Series A Exchangeable Redeemable Preferred
Stock
1. Series A Stated Value.
1.1 Each share of Series A Exchangeable Redeemable
Preferred Stock (the "Series A Preferred Stock") will have a stated
liquidation value of $100,000 (the "Series A Stated Value"), which
Series A Stated Value will increase annually as set forth in Section
1.2.
PAGE 1
<PAGE> 2
This corporation will issue fractional shares of Series A Preferred
Stock upon the original issuance, transfer or exchange of a Series A
Preferred Stock share, unless this corporation and the holder of such
Series A Preferred Stock share agree upon a payment in lieu of any such
fractional share.
1.2 The Series A Stated Value will increase at an annual
rate of accretion equal to 13.625% (the "Rate of Accretion"), which
increase will be calculated semiannually on June 30 and on December 31
of each year during which any shares of Series A Preferred Stock remain
outstanding (each a "Semiannual Calculation Date"). All such increases
will be cumulative and will be calculated by multiplying the Series A
Stated Value as of the immediately prior Semiannual Calculation Date
(or in the case of the first semiannual increase on June 30, 1998, by
the original Series A Stated Value as set forth in Section 1.1) by
106.8125%, the product of which will constitute the Series A Stated
Value until the next such semiannual calculation. All calculations
required hereunder will be computed on the basis of a 360-day year of
12 30-day months.
2. Dividends. The Series A Preferred Stock has no profit
participation or dividend rights, except as required by law.
3. Series A Liquidation Rights.
3.1 In the event of any liquidation, dissolution or
winding up of the business of this corporation, whether voluntary or
involuntary, each holder of Series A Preferred Stock is entitled to
receive, for each share thereof, out of assets of this corporation
legally available therefor, a preferential amount in cash equal to (and
not more than) the sum of (A) the Series A Stated Value as of the
immediately prior Semiannual Calculation Date, plus (B) an amount equal
to the amount of all legally required dividends or distributions
thereon, if any, payable pursuant to Section 2, plus (C) any Interim
Accreted Value. "Interim Accreted Value" means, for purposes of this
Section 3.1, an amount equal to (i) the Rate of Accretion expressed as
a daily rate from the immediately prior Semiannual Calculation Date
through the effective date of the liquidation, dissolution or winding
up, multiplied by (ii) the Series A Stated Value as of the immediately
prior Semiannual Calculation Date. All preferential amounts to be paid
to the holders of any outstanding shares of Series A Preferred Stock
and Series B Preferred Stock in
PAGE 2
<PAGE> 3
connection with a liquidation, dissolution or winding up will be paid
before the payment or setting apart for payment of any amount for, or
the distribution of any assets of this corporation to, the holders of
(x) any series of Preferred Stock whose terms provide that the holders
of Series A Preferred Stock should receive preferential payment with
respect to such distribution (to the extent of such preference) or (y)
common stock. If in any such distribution the assets of this
corporation are insufficient to pay the holders of the outstanding
shares of the Series A Preferred Stock (and the holders of any Series B
Preferred Stock and any other class or series of capital stock ranking
on a parity with the Series A Preferred Stock as to distributions in
the event of a liquidation, dissolution or winding up of this
corporation) the full amounts to which they may be entitled, such
holders will share ratably in any distribution of assets in accordance
with the sums which would be payable on such distribution if all sums
payable thereon were paid in full. In liquidation, shares of Series A
Preferred Stock and Series B Preferred Stock will rank on a pari passu
basis.
3.2 Holders of shares of Series A Preferred Stock will
not be entitled to receive any amounts with respect to any liquidation,
dissolution or winding up of this corporation other than the amounts
provided in this Section 3. Neither a merger nor consolidation of this
corporation into or with another corporation nor a merger or
consolidation of any other corporation into or with this corporation,
nor a sale, transfer, mortgage, pledge or lease of all or any part of
the assets of this corporation will be deemed to be a liquidation,
dissolution or winding up of this corporation for purposes of this
Section 3.
4. Series A Voting Rights.
4.1 On matters as to which they are entitled to vote, the
holders of Series A Preferred Stock will be entitled to the number of
votes per share (calculated as of the date of any such vote) that is
equal to the Series A Stated Value as of the immediately prior
Semiannual Calculation Date divided by 100,000. The holders of Series A
Preferred Stock will vote separately as a class on all matters as to
which they are entitled to vote, except as otherwise provided herein.
Any action that may be taken hereunder by the holders of the Series A
Preferred Stock at a meeting may be taken by the written consent of the
holders of shares of Series A Preferred Stock outstanding and entitled
to vote thereon.
PAGE 3
<PAGE> 4
4.2 Unless it has been approved by the vote of the
holders of a majority of the shares of Series A Preferred Stock and
Series B Preferred Stock outstanding, voting together as if they
constituted a single class, no amendment to the Restated Articles of
Incorporation of this corporation can become effective if it (A)
creates or authorizes the creation of any class or series of capital
stock (other than the Series B Preferred Stock) ranking on parity with
or superior to the Series A Preferred Stock or the Series B Preferred
Stock in any respect or (B) alters or changes the powers, preferences
or rights of shares of Series A Preferred Stock or Series B Preferred
Stock in a manner adverse to the holders of Series A Preferred Stock
and Series B Preferred Stock.
4.3 Unless holders of a majority of the shares of Series
A Preferred Stock and Series B Preferred Stock outstanding, voting
together as if they constituted a single class, have given their
approval, this corporation is not authorized to merge, reorganize,
recapitalize, consolidate or consummate a share exchange (each a
"Transaction") if (A) the GAAP Net Worth of the successor or resulting
entity on a pro forma basis after giving effect to the Transaction (and
any related transactions) is not equal to or greater than the GAAP Net
Worth of this corporation immediately prior to the Transaction, or (B)
the priority of the Series A Preferred Stock or the Series B Preferred
Stock in the capital stock of the successor or resulting entity will
rank on parity with or junior to any class or series of capital stock
that has been created or issued without the approval of the Series A
Preferred Stock and the Series B Preferred Stock pursuant to Section
4.2. "GAAP Net Worth" means the net worth of this corporation or any
successor or resulting entity, as the case may be, calculated in
accordance with generally accepted accounting principles, as in effect
from time to time, on a basis consistent with past practice.
4.4 No dividend or other distribution will be declared or
paid on the common stock or any other stock of this corporation ranking
junior to or ranking pari passu with the Series A Preferred Stock
(except any outstanding Series B Preferred Stock) without the prior
consent of the holders of a majority of the shares of Series A
Preferred Stock outstanding, and until any legally required
dividends or distributions owing on the Series A Preferred Stock have
been paid in full.
PAGE 4
<PAGE> 5
4.5 In addition to the voting rights set forth herein,
the holders of Series A Preferred Stock will be entitled to exercise
such voting rights as may be provided to them under Washington law to
the extent such voting rights are not inconsistent with those set forth
herein. Nothing herein should be read or construed as limiting such
voting rights.
5. Exchange for Series B Preferred Stock.
5.1 Series A Exchange Right.
5.1.1 Each holder of Series A Preferred Stock may, at any
time following a Exchange Trigger Event, exchange any or all of such
holder's shares of Series A Preferred Stock into such number of fully
paid and non-assessable shares of Series B Preferred Stock as equals
(A) the sum of the Series A Stated Value as of the immediately prior
Semiannual Calculation Date plus any Interim Accreted Value of such
Series A Preferred Stock, multiplied by (B) the number of shares of
Series A Preferred Stock being exchanged, divided by (C) the Series B
Stated Value (as defined in Section 1 of the Terms of Series B
Redeemable Preferred Stock). For purposes of this Section 5.1.1,
"Interim Accreted Value" means an amount equal to (i) the Rate of
Accretion expressed as a daily rate from the immediately prior
Semiannual Calculation Date through the date of exchange, multiplied by
(ii) the Series A Stated Value as of the immediately prior Semiannual
Calculation Date. To the extent necessary, this corporation will issue
fractional shares of Series B Preferred Stock upon any exchange
pursuant to this Section 5, unless this corporation and the holder of
the Series A Preferred Stock being exchanged agree upon a payment in
lieu of any such fractional share. In order to exercise the exchange
privilege under this Section 5.1.1, a holder of shares of Series A
Preferred Stock must give written notice to this corporation at its
principal office stating the holder's name and address and the number
of shares of Series A Preferred Stock such holder elects to exchange.
5.1.2 "Exchange Trigger Event" means (A) the
recapitalization or reorganization of this corporation; (B) a
registered, underwritten public offering of any capital stock of this
corporation; (C) the sale or other disposition by Nextel
Communications, Inc., a Delaware corporation ("Nextel Communications")
or a wholly owned subsidiary of Nextel Communications, of shares of
common stock of this
PAGE 5
<PAGE> 6
corporation or (D) the issuance of shares of common stock by this
corporation, such that following any event covered by clause (C) or (D)
above, Nextel Communications owns less than fifty percent (50%) of this
corporation's outstanding shares of common stock.
5.1.3 At such time as any certificate or certificates
representing the Series A Preferred Stock that has been exchanged are
surrendered to this corporation, this corporation will issue and
deliver a certificate or certificates representing the appropriate
number of shares of Series B Preferred Stock (calculated pursuant to
Section 5.1.1) to each former holder of Series A Preferred Stock
participating in the exchange. In case of the exchange under Section
5.1.1 of only a part of the shares of Series A Preferred Stock
represented by a certificate surrendered to this corporation, this
corporation will forthwith issue and deliver a new certificate for the
number of shares of Series A Preferred Stock that have not been
exchanged. Until any certificate or certificates representing Series A
Preferred Stock that has been exchanged are surrendered and a
certificate or certificates representing the Series B Preferred Stock
into which such Series A Preferred Stock has been exchanged has been
issued and delivered, the certificate or certificates representing the
shares of Series A Preferred Stock that have been exchanged will
represent the shares of Series B Preferred Stock into which such shares
of Series A Preferred Stock have been exchanged. This corporation will
pay all documentary, stamp or similar issue or transfer tax, if any,
due on the issue of shares of Series B Preferred Stock issuable upon
exchange of the Series A Preferred Stock.
6. Redemption.
6.1 Corporation's Right to Redeem. This corporation may
(A) in its sole discretion and at any time, redeem all shares of the
Series A Preferred Stock outstanding or (B) with the prior consent of
the holders of a majority of such shares outstanding, redeem a portion
of the Series A Preferred Stock then outstanding, on a pro rata basis,
in either case at a total per share redemption price equal to the sum
of the Series A Stated Value as of the immediately prior Semiannual
Calculation Date plus any Interim Accreted Value. "Interim Accreted
Value," for purposes of this Section 6.1, means an amount equal to (i)
the Rate of Accretion expressed as a daily rate from the immediately
prior
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Semiannual Calculation Date through the Series A Redemption Date,
multiplied by (ii) the Series A Stated Value as of the immediately
prior Semiannual Calculation Date.
6.2 Series A Redemption Notice.
6.2.1 Subject to the requirements of Section 6.1, this
corporation may call all or a portion of the outstanding shares of
Series A Preferred Stock for redemption and set a date for the
redemption (the "Series A Redemption Date"). Notice of such proposed
redemption (the "Series A Redemption Notice") must be mailed at least
45 days prior to the Series A Redemption Date to all holders of shares
of Series A Preferred Stock at their respective addresses as the same
appear on the stock record books of this corporation. Each Series A
Redemption Notice will state (A) the Series A Redemption Date, (B) the
Series A Redemption Price, (C) the place or places where such shares of
Series A Preferred Stock are to be surrendered, and (D) that legally
required dividends or distributions, if any, on shares of Series A
Preferred Stock to be redeemed will cease to accrue on the Series A
Redemption Date. No defect in any such notice as to any shares of
Series A Preferred Stock will affect the proceedings for the redemption
of any shares of Series A Preferred Stock.
6.2.2 Upon surrender in accordance with the Series A
Redemption Notice of the certificates for any shares of Series A
Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors so requires and the notice so
states), such shares of Series A Preferred Stock will be redeemed by
this corporation, which will make payment to the surrendering holder in
an amount equal to the product of the applicable Series A Redemption
Price multiplied by the number of shares of Series A Preferred Stock
being surrendered by such holder for redemption.
6.3 Payment Prior to Series A Redemption Date.
6.3.1 If a Series A Redemption Notice is duly given as
provided for above, or if this corporation has given to the bank or
trust company hereinafter referred to irrevocable authorization to give
or complete such Series A Redemption Notice, and if prior to the
applicable Series A Redemption Date the funds necessary for such
redemption have been deposited by this corporation with a bank or trust
company in good
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standing (which bank or trust company will have been identified in a
written notice given to the holders whose shares of Series A Preferred
Stock are to be redeemed), organized under the laws of the United
States of America or a State thereof, having a capital surplus and
undivided profits aggregating at least $100,000,000 according to its
last published statement of condition, in trust for the pro rata
benefit of the holders of the shares of Series A Preferred Stock so
called for or otherwise subject to redemption, so as to be, and to
continue to be, available therefor, then, notwithstanding that any
certificate for shares of Series A Preferred Stock so called for or
otherwise subject to redemption may not have been surrendered for
cancellation, all shares of Series A Preferred Stock so called for or
otherwise subject to redemption will no longer be deemed to be
outstanding on and after such Series A Redemption Date, and all rights
with respect to such shares will forthwith cease and terminate at the
close of business on such Series A Redemption Date, except only the
right of the holders thereof to receive, out of the funds so set aside
in trust, the amount payable on redemption thereof, without interest.
Any interest accrued on any funds so deposited will be the property of
this corporation and will be paid to this corporation from time to
time.
6.3.2 Any funds set aside or deposited, as the case may be,
in accordance with Section 6.3.1 that remain unclaimed at the end of
one year from the applicable Series A Redemption Date will be released
or repaid to this corporation, after which the holders of the shares of
Series A Preferred Stock so called for redemption will look only to
this corporation for payment of the amount payable on redemption
thereof, without interest, subject to the applicable law of escheat.
7. Other Provisions.
7.1 Issuance of Shares. This corporation will not issue,
or enter into any commitment to issue, shares of Series A Preferred
Stock except (A) pursuant to the terms of any agreement in effect on
the date that the Articles of Amendment of the Restated Articles of
Incorporation of this corporation establishing the powers, preferences
and rights of the Series A Preferred Stock were originally filed with
the Secretary of State of the State of Washington, or (B) such other
issuances or issuance commitments as have been approved in advance by
the vote of the holders of a majority of the shares of Series A
Preferred Stock and Series B Preferred Stock outstanding, voting
together as if they
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constituted a single class.
7.2 Cancellation of Shares of Series A Preferred Stock.
No share or shares of Series A Preferred Stock acquired by this
corporation for any reason can be reissued, and all such shares will be
canceled, retired and eliminated from the shares of Series A Preferred
Stock which this corporation is authorized to issue.
7.3 Reservation of Shares. This corporation will at all
times reserve from its authorized Series B Preferred Stock a sufficient
number of shares to provide for exchange of all shares of Series A
Preferred Stock from time to time outstanding.
7.4 Notices. This corporation will provide to each holder
of shares of Series A Preferred Stock a copy of any materials delivered
to the holders of any other shares of this corporation's capital stock
by or on behalf of this corporation at the same time such materials are
being delivered to such other holders.
7.5 Record Holders. This corporation and its transfer
agent, if any, for the shares of Series A Preferred Stock, may deem and
treat the record holder of any shares of Series A Preferred Stock as
the sole true and lawful owner thereof for all purposes, and neither
this corporation nor any such transfer agent will be affected by any
notice to the contrary.
B. Terms of Series B Redeemable Preferred Stock
1. Series B Stated Value. Each share of Series B
Redeemable Preferred Stock (the "Series B Preferred Stock") will have a
liquidation preference at a stated value, calculated at the time the
first share(s) of Series A Preferred Stock are exchanged into share(s)
of Series B Preferred Stock, equal to the Series A Stated Value as of
the immediately prior Semiannual Calculation Date plus an amount equal
to any Interim Accreted Value (the "Series B Stated Value"). "Interim
Accreted Value," for the purposes of this Section 1, means an amount
equal to (i) the Rate of Accretion expressed as a daily rate from the
immediately prior Semiannual Calculation Date through the date of
exchange, multiplied by (ii) the Series A Stated Value as of the
immediately prior Semiannual Calculation Date. This corporation will
issue fractional shares of Series B Preferred Stock upon the original
issuance, transfer or exchange of a Series B Preferred Stock share,
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unless this corporation and the holder of such Series B Preferred Stock
share agree upon a payment in lieu of any such fractional share. All
future issuances of Series B Preferred Stock, following the first such
issuance, will be made at the Series B Stated Value.
2. Dividends.
2.1(a) Beginning on their date of issuance, holders of
Series B Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends on each share of Series B Preferred Stock
outstanding held by them, at a rate per annum equal to 13.625% of the
Series B Stated Value, or a daily rate of 0.0378% of the Series B
Stated Value (the "Daily Rate"). Such dividends will be cumulative,
whether or not earned or declared, and will be payable quarterly in
arrears on March 31, June 30 and September 30, December 31 (each a
"Distribution Date") of each year or portion thereof ending on or prior
to March 12, 2010 (such twelve-year period, the "Initial Term") during
which any shares of Series B Preferred Stock remain outstanding and
also shall be payable in arrears on March 12, 2010 with respect to the
period from January 1, 2010 to March 12, 2010 if any shares of Series B
Preferred Stock remain outstanding.
(b) During each twelve-month period beginning on March
13, 2010 and on each subsequent March 13 (each, a "Subsequent Year"),
holders of Series B Preferred Stock will be entitled to receive, when,
as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on each share of Series B Preferred Stock
outstanding held by them, at a rate per annum equal to 18.00% of the
Series B Stated Value, or a daily rate of 0.0500% of the Series B
Stated Value (the "Subsequent Year Daily Rate"). Such dividends will be
cumulative, whether or not earned or declared, and will be payable on
June 12, September 12, and December 12, March 12 in each such
Subsequent Year, commencing on June 12, 2010 (each, a "Subsequent Year
Distribution Date") if any shares of Series B Preferred Stock remain
outstanding.
2.2 Dividends on the Series B Preferred Stock will be
will be computed on the basis of a 360-day year of twelve 30-day
months.
2.3 References herein to the "Appropriate Year" shall
mean a year during the Initial Term or a Subsequent Year, as
appropriate to the
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context. References herein to the "Appropriate Daily Rate" shall mean
the Daily Rate or a Subsequent Year Daily Rate, as appropriate to the
context. References herein to an "Appropriate Distribution Date" shall
mean a Distribution Date or a Subsequent Year Distribution Date, as
appropriate to the context.
2.4 Dividends payable on the outstanding shares of Series
B Preferred Stock shall be paid in cash or, at the option of this
corporation, in additional fully paid and non-assessable shares of
Series B Preferred Stock having an aggregate Series B Stated Value
equal to the amount of such dividends ("PIK Dividend Shares");
PROVIDED, THAT, PIK Dividend Shares may not be issued to pay any amount
of accrued but unpaid dividends or distributions due pursuant to
Section 3 below, or any amount of accrued but unpaid dividends or
distributions due pursuant to Section 5 below. All PIK Dividend Shares,
from and after their issuance on the Appropriate Distribution Date,
shall have the same rights and privileges as any other outstanding
shares of Series B Preferred Stock.
3. Series B Liquidation Rights.
3.1 In the event of any liquidation, dissolution or
winding up of the business of this corporation, whether voluntary or
involuntary, each holder of Series B Preferred Stock will be entitled
to receive, for each share thereof, out of assets of this corporation
legally available therefor, a preferential amount in cash equal to (and
not more than) the sum of (A) the Series B Stated Value plus (B) an
amount equal to the amount of all declared (or due to be declared), but
unpaid dividends or distributions thereon, if any, payable pursuant to
Section 2.1 during each Appropriate Year, plus an amount equal to the
Appropriate Daily Rate multiplied by the Series B Stated Value,
multiplied by the number of days since the immediately prior
Appropriate Distribution Date. All preferential amounts to be paid to
the holders of any outstanding shares of Series B Preferred Stock and
Series A Preferred Stock in connection with such liquidation,
dissolution or winding up will be paid before the payment or setting
apart for payment of any amount for, or the distribution of any assets
of this corporation to, the holders of (i) any other series of
preferred stock whose terms provide that the holders of Series B
Preferred Stock should receive preferential payment with respect to
such distribution (to the extent of such preference) or (ii) common
stock. If in any such distribution the assets of this corporation are
insufficient to pay the holders of the outstanding shares
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of the Series B Preferred Stock (and the holders of any Series A
Preferred Stock and any class or series of capital stock ranking on a
parity with the Series B Preferred Stock as to distributions in the
event of a liquidation, dissolution or winding up of this corporation)
the full amounts to which they may be entitled, such holders will share
ratably in any distribution of assets in accordance with the sums which
would be payable upon such distribution if all sums payable thereon
were paid in full. In liquidation, shares of Series B Preferred Stock
and Series A Preferred Stock will rank on a pari passu basis.
3.2 Holders of shares of Series B Preferred Stock will
not be entitled to receive any amounts with respect to any liquidation,
dissolution or winding up of this corporation other than the amounts
provided in this Section 3. Neither a merger nor consolidation of this
corporation into or with another corporation nor a merger or
consolidation of any other corporation into or with this corporation,
nor a sale, transfer, mortgage, pledge or lease of all or any part of
the assets of this corporation will be deemed to be a liquidation,
dissolution or winding up of this corporation for purposes of this
Section 3.
4. Series B Voting Rights.
4.1 On all matters as to which they are entitled to vote,
the holders of Series B Preferred Stock will be entitled to the number
of votes per share (calculated as of the date of any such vote) that is
equal to the Series B Stated Value divided by 100,000. The holders of
Series B Preferred Stock will vote separately as a class on all matters
as to which they are entitled to vote, except as otherwise provided
herein. Any action that may be taken hereunder by the holders of the
Series B Preferred Stock at a meeting may be taken by the written
consent of the holders of shares of Series B Preferred Stock
outstanding and entitled to vote thereon.
4.2 Immediately following the issuance of any shares of
Series B Preferred Stock, the number of Directors constituting the
Board of Directors will be adjusted to permit the holders of the
majority of the then outstanding shares of Series B Preferred Stock,
voting separately as a class, to elect one additional Director to the
Board of Directors (the "Series B Director"). The Series B Director's
initial term will expire at the next regularly scheduled meeting of the
holders of the common stock of this corporation, at which meeting the
holders of shares of
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Series B Preferred Stock outstanding voting separately as a class will
be entitled to elect one Director. Any individual elected to the Board
of Directors by vote of the Series B Preferred Stock pursuant to this
Section 4.2 is referred to herein as a "Series B Director."
4.3 A Series B Director may only be removed from office
by the vote of the holders of a majority of shares of Series B
Preferred Stock outstanding, voting separately as a class. Except as
set forth in Section 4.7, any vacancy for the Series B Director
position may be filled only by the vote of the holders of a majority of
shares of Series B Preferred Stock outstanding, voting separately as a
class.
4.4 If dividends on the Series B Preferred Stock are in
arrears and unpaid for four consecutive quarterly periods or for any
six quarterly periods (whether or not consecutive) (each, a "Dividend
Default"), then the number of Directors constituting the Board of
Directors will be adjusted to permit the holders of the majority of the
then outstanding shares of Series B Preferred Stock, voting separately
as a class, to elect an additional Director (the "Series B Default
Director"). For the purpose of determining the number of quarterly
periods for which accrued dividends have not been paid, any accrued and
unpaid dividend that is subsequently paid will not be treated as
unpaid.
4.5 The right of the holders of Series B Preferred Stock
to elect the Series B Default Director as described above will continue
until such time as all accumulated dividends that are in arrears on the
Series B Preferred Stock are paid in full, at which time the term of
any Series B Default Director elected pursuant to Section 4.4 hereof
will terminate and the number of Directors constituting the Board of
Directors will be reduced to the number necessary to reflect the
termination of the right of the holders of the Series B Preferred Stock
to elect a Series B Default Director, subject always to the same
provisions for the renewal and divestment of such special voting rights
in the case of any future Dividend Default. At any time after voting
power to elect a Series B Default Director has become vested and is
continuing in the holders of shares of the Series B Preferred Stock
pursuant to Section 4.4 hereof, or if a vacancy exists in the office of
the Series B Default Director elected by the holders of shares of the
Series B Preferred Stock, an officer of this corporation may, and upon
the written request of the record holders of at least 25% of the shares
of Series B Preferred Stock then outstanding addressed to the secretary
of this corporation must, call
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a special meeting of the holders of the Series B Preferred Stock, for
the purpose of electing a new Series B Default Director. If such
meeting is called by an officer of this corporation within 30 days
after personal service of said written request upon the secretary of
this corporation, or within 30 days after mailing the same within the
United States by certified mail, addressed to the secretary of this
corporation at its principal executive offices, then the holders of
record of at least 25% of the shares of the Series B Preferred Stock
outstanding may designate in writing one of their number to call such
meeting at the expense of this corporation, and such meeting may be
called by the person so designated upon the notice required for the
annual meetings of shareholders of this corporation and will be held at
the place for holding the annual meetings of shareholders or such other
place in the United States as may be designated in such notice.
Notwithstanding the provisions of this Section 4.5, no such special
meeting need be called if any such request is received less than 40
days before the day fixed for the next ensuing annual or special
meeting of shareholders of this corporation. This corporation will
provide any holder of shares of the Series B Preferred Stock so
designated access to the lists of holders of shares of the Series B
Preferred Stock for purposes of calling a meeting pursuant to the
provisions of this Section 4.5.
4.6 At any meeting held for the purpose of electing a
Series B Director or a Series B Default Director, the presence in
person or by proxy of the holders of at least a majority of the shares
of Series B Preferred Stock outstanding will be required to constitute
a quorum of such Series B Preferred Stock.
4.7 Any vacancy occurring in the office of the Series B
Director can be filled by a then serving Series B Default Director, if
any, and any vacancy occurring in the office of the Series B Default
Director, if applicable, can be filled by any then serving Series B
Director, in either case unless and until the holders of a majority of
the shares of Series B Preferred Stock outstanding elect another person
to fill any such vacancy.
4.8 Upon the redemption of the last share of Series B
Preferred Stock then outstanding, the number of Directors constituting
the Board of Directors will be adjusted to eliminate any then existing
Series B Director or Series B Default Director seats, subject always to
the provisions of this Section 4 for the renewal and divestment of such
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special Series B Preferred Stock voting rights on the subsequent
issuance of any shares of Series B Preferred Stock.
4.9 Unless it has been approved by the vote of the
holders of a majority of shares of Series A Preferred Stock and Series
B Preferred Stock outstanding, each voting together as if they
constituted a single class, no amendment to the Restated Articles of
Incorporation of this corporation can become effective if it (A)
creates or authorizes the creation of any class or series of capital
stock (other than the Series A Preferred Stock) ranking on parity with
or superior to the Series A Preferred Stock or the Series B Preferred
Stock in any respect or (B) alters or changes the powers, preferences
or rights of shares of Series B Preferred Stock in a manner adverse to
the holders of the Series A Preferred Stock or the Series B Preferred
Stock.
4.10 Unless holders of a majority of shares of Series A
Preferred Stock and Series B Preferred Stock outstanding, voting
together as if they constituted a single class, have given their
approval, this corporation is not authorized to participate or engage
in any Transaction if (A) the GAAP Net Worth of the successor or
resulting entity on a pro forma basis after giving effect to the
Transaction (and any related transactions) is not equal to or greater
than the GAAP Net Worth of this corporation immediately prior to the
Transaction or (B) the priority of the Series B Preferred Stock in the
capital stock of the successor or resulting entity is on parity with or
junior to any class or series of capital stock that has been created or
issued without the approval of the Series A Preferred Stock and Series
B Preferred Stock pursuant to Section 4.9.
4.11 No dividend or other distribution will be declared or
paid on the common stock or any other stock of this corporation ranking
junior to or ranking pari passu with the Series B Preferred Stock
(except as required by law on any outstanding Series A Preferred Stock)
without the prior consent of the holders of a majority of the shares of
Series B Preferred Stock outstanding and until any dividends or
distributions owing on the Series B Preferred Stock have been paid in
full.
4.12 In addition to the voting rights set forth herein,
the holders of Series B Preferred Stock will be entitled to exercise
such voting rights as may be provided to them under Washington law to
the extent such voting rights are not inconsistent with those set forth
herein. Nothing
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herein should be read or construed as limiting such voting rights.
5. Redemption of Series B Preferred Stock.
5.1 Corporation's Right to Redeem. This corporation may
(A) in its sole discretion and at any time, redeem all shares of the
Series B Preferred Stock outstanding, or (B) with the consent of the
holders of a majority of such shares outstanding, redeem a portion of
the Series B Preferred Stock then outstanding, on a pro rata basis, in
either case at a total per share redemption price equal to the sum of
the Series B Stated Value, plus an amount equal to the amount of all
declared (or due to be declared), but unpaid dividends or distributions
thereon, if any, payable pursuant to Section 2.1, through the
immediately prior Appropriate Distribution Date, plus an amount equal
to the product of the Appropriate Daily Rate multiplied by the Series B
Stated Value, multiplied by the number of days since the immediately
prior Appropriate Distribution Date (the "Series B Redemption Price").
5.2 Series B Redemption Notice.
5.2.1 Subject to the provisions of Section 5.1, this
corporation may call all or a portion of the outstanding shares of
Series B Preferred Stock for redemption and set a date for the
redemption (the "Series B Redemption Date"). Notice of a proposed
redemption pursuant to Section 5.1 (each such notice a "Series B
Redemption Notice") must be mailed at least 45 days prior to the Series
B Redemption Date to all holders of shares of Series B Preferred Stock
at their respective addresses as the same appear on the stock record
books of this corporation. Each Series B Redemption Notice will state
(A) the Series B Redemption Date, (B) the Series B Redemption Price,
(C) the place or places where such shares of Series B Preferred Stock
are to be surrendered, and (D) that dividends on shares of Series B
Preferred Stock to be redeemed will cease to accrue on the Series B
Redemption Date. No defect in any such notice as to any shares of
Series B Preferred Stock will affect the proceedings for the redemption
of any shares of Series B Preferred Stock.
5.2.2 Upon surrender in accordance with the Series B
Redemption Notice of the certificates for any shares of Series B
Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors so requires and the notice so
states), such
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shares of Series B Preferred Stock will be redeemed by this
corporation, which will make payment to the surrendering holder in an
amount equal to the product of the applicable Series B Redemption
Price, multiplied by the number of shares of Series B Preferred Stock
being surrendered by such holder for redemption.
5.3 Payment Prior to Series B Redemption Date.
5.3.1 If a Series B Redemption Notice is duly given as
provided for above, or if this corporation has given to the bank or
trust company hereinafter referred to irrevocable authorization to give
or complete such Series B Redemption Notice, and if prior to the
applicable Series B Redemption Date the funds necessary for such
redemption will have been deposited by this corporation with a bank or
trust company in good standing (which bank or trust company will have
been identified in a written notice given to the holders whose shares
of Series B Preferred Stock are to be redeemed), organized under the
laws of the United States of America or a State thereof, having a
capital surplus and undivided profits aggregating at least $100,000,000
according to its last published statement of condition, in trust for
the pro rata benefit of the holders of the shares of Series B Preferred
Stock so called for or otherwise subject to redemption, so as to be,
and to continue to be, available therefor, then, notwithstanding that
any certificate for shares of Series B Preferred Stock so called for or
otherwise subject to redemption may not have been surrendered for
cancellation, all shares of Series B Preferred Stock so called for or
otherwise subject to redemption will no longer be deemed to be
outstanding on and after such Series B Redemption Date and all rights
with respect to such shares will forthwith cease and terminate at the
close of business on such Series B Redemption Date, except only the
right of the holders thereof to receive, out of the funds so set aside
in trust, the amount payable on redemption thereof, without interest.
Any interest accrued on any funds so deposited will be the property of
this corporation and will be paid to this corporation from time to
time.
5.3.2 Any funds set aside or deposited, as the case may be,
in accordance with Section 5.3.1 that remain unclaimed at the end of
one year from the applicable Series B Redemption Date will be released
or repaid to this corporation, after which the holders of the shares of
Series B Preferred Stock so called for redemption will look only to
this corporation for payment of the amount payable on redemption
thereof,
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without interest, subject to the applicable law of escheat.
6. Other Provisions.
6.1 Issuance of Shares. This corporation will not issue,
or enter into any commitment to issue, shares of Series B Preferred
Stock except (A) in exchange of shares of Series A Preferred Stock on
the terms and subject to the conditions set forth in the Terms of
Series A Exchangeable Redeemable Preferred Stock, or (B) as PIK
Dividend Shares as contemplated in accordance with Section 2.4 above,
or (C) such other issuances or issuance as have been approved in
advance by the vote of the holders of a majority of the shares of any
Series A Preferred Stock and Series B Preferred Stock outstanding,
voting together as if they constituted a single class.
6.2 Cancellation of Shares of Series B Preferred Stock.
No share or shares of Series B Preferred Stock acquired by this
corporation for any reason will be reissued, and all such shares will
be canceled, retired and eliminated from the shares of Series B
Preferred Stock which this corporation is authorized to issue.
6.3 Reservation of Shares. This corporation will at all
times reserve from its authorized Series B Preferred Stock a sufficient
number of shares to provide for exchange of all shares of Series A
Preferred Stock from time to time outstanding and for payment of the
maximum amount of PIK Dividend Shares issuable in respect of all Shares
of Series B Preferred Stock from time to time outstanding.
6.4 Notices. This corporation will provide to each holder
of shares of Series B Preferred Stock a copy of any materials delivered
to the holders of any other shares of this corporation's capital stock
by or on behalf of this corporation at the same time such materials are
being delivered to such other holders.
6.5 Record Holders. This corporation and its transfer
agent, if any, for the Series B Preferred Stock, may deem and treat the
record holder of any shares of Series B Preferred Stock as the sole
true and lawful owner thereof for all purposes, and neither this
corporation nor any such transfer agent will be affected by any notice
to the contrary.
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ARTICLE IV. NO PREEMPTIVE RIGHTS
Except as may otherwise be provided by the Board of Directors, no
preemptive rights shall exist with respect to shares of stock or
securities convertible into shares of stock of this corporation.
ARTICLE V. NO CUMULATIVE VOTING
At each election for directors, every shareholder entitled to vote at
such election has the right to vote in person or by proxy the number of
shares held by such shareholder for as many persons as there are
directors to be elected. No cumulative voting for directors shall be
permitted.
ARTICLE VI. BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws or adopt new Bylaws. Nothing herein shall deny the
concurrent power of the shareholders to adopt, alter, amend or repeal
the Bylaws.
ARTICLE VII. REGISTERED AGENT AND OFFICE
The name of the registered agent of this corporation and the address of
its registered office are Lawco of Washington, Inc., 1201 Third Avenue,
40th Floor, Seattle, Washington 98101-3099.
ARTICLE VIII. DIRECTORS
The number of directors of this corporation shall be determined in the
manner specified by the Bylaws and may be increased or decreased from
time to time in the manner provided therein. At the time of the
restatement of these Articles of Incorporation, the following persons
are serving as the directors of this corporation are as follows:
Name Address
Daniel F. Akerson 1505 Farm Credit Drive
McLean, VA 22102
Timothy M. Donahue 1505 Farm Credit Drive
McLean, VA 22102
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Keith D. Grinstein 1191 Second Avenue, Suite 1600
Seattle, WA 98101
C. James Judson 2320 Carillon Point
Kirkland, WA 98033
Craig O. McCaw 2320 Carillon Point
Kirkland, WA 98033
Steven M. Shindler 1505 Farm Credit Drive
McLean, VA 22102
Dennis M. Weibling 2320 Carillon Point
Kirkland, WA 98033
ARTICLE IX. INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
C. James Judson 2600 Century Square
1501 4th Avenue
Seattle, WA 98101-1688
ARTICLE X. LIMITATION OF DIRECTORS' LIABILITY
A director shall have no liability to the corporation or its
shareholders for monetary damages for conduct as a director, except for
acts or omissions that involve intentional misconduct or for conduct
violating RCW 23B.08.302, or for any transaction from which the
director will personally receive a benefit in money, property or
services to which the director is not legally entitled. If the
Washington Business Corporation Act is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability
of directors, then the liability of a director shall be eliminated or
limited to the full extent permitted by the Washington Business
Corporation Act, as so amended. Any repeal or modification of this
Article shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification occurring prior to such repeal or modification.
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ARTICLE XI. SHAREHOLDER ACTIONS
Any action required or permitted to be taken at a shareholders' meeting
may be taken without a meeting or a vote if either:
(i) the action is taken by all shareholders entitled to
vote on the action; or
(ii) So long as this corporation is not a public company,
the action is taken by shareholders holding of record, or otherwise
entitled to vote, in the aggregate not less than the minimum number of
votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote on the action were present
and voted.
To the extent the Washington Business Corporation Act requires prior
notice of any such action to be given to nonconsenting or nonvoting
shareholders, such notice shall be made prior to the date on which the
action becomes effective, as required by the Washington Business
Corporation Act. The form of the notice shall be sufficient to apprise
the nonconsenting or nonvoting shareholder of the nature of the action
to be effected, in a manner approved by the Directors of this
corporation or by the committee or officers to whom the Board has
delegated that responsibility.
These Restated Articles of Incorporation do not contain an amendment to
the Articles of Incorporation.
These Restated Articles of Incorporation do not contain any amendment
to the Articles of Incorporation requiring shareholder approval. The date of
adoption of the Restated Articles of Incorporation by the Board of Directors is
July 10, 1998.
PAGE 21
<PAGE> 22
These Restated Articles of Incorporation are executed by said
corporation by its duly authorized officer.
DATED July 29, 1998.
NEXTEL INTERNATIONAL, INC.
By /s/ HENG PIN-KIANG
------------------
Heng-Pin Kiang
Vice President
PAGE 22
<PAGE> 23
CERTIFICATE ACCOMPANYING
RESTATED ARTICLES OF INCORPORATION
OF
NEXTEL INTERNATIONAL, INC.
Pursuant to RCW 23B.10.070, the foregoing constitutes Restated Articles
of Incorporation of the undersigned, a Washington corporation. The Restated
Articles of Incorporation supersede the original Articles of Incorporation and
all amendments thereto.
The Restated Articles of Incorporation do not contain an amendment to
the Articles of Incorporation and were duly adopted by the Board of Directors.
This certificate accompanying the Restated Articles of Incorporation is
executed by said corporation by its duly authorized officer.
DATED July 29, 1998.
NEXTEL INTERNATIONAL, INC.
By HENG-PIN KIANG
---------------
Heng-Pin Kiang
Vice President
PAGE 23
<PAGE> 1
Exhibit 3.2
RESTATED BYLAWS
OF
NEXTEL INTERNATIONAL, INC.
AS OF JULY 10, 1998
<PAGE> 2
AMENDMENTS
<TABLE>
<CAPTION>
Date of
Section Effect of Amendment Amendment
------- ------------------- ---------
<S> <C> <C>
3.17 Addition of Audit Committee 11/14/97
2.14 Amended to permit action by less than unanimous 7/10/98
consent of shareholders.
3.18 Addition of Plan Administration Committee 7/10/98
</TABLE>
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<PAGE> 3
CONTENTS
<TABLE>
<S> <C>
SECTION 1. OFFICES..................................................................................1
SECTION 2. SHAREHOLDERS.............................................................................1
2.1 Annual Meeting..........................................................................1
2.2 Special Meetings........................................................................1
2.3 Meetings by Communication Equipment.....................................................1
2.4 Date, Time and Place of Meeting.........................................................2
2.5 Notice of Meeting.......................................................................2
2.6 Waiver of Notice........................................................................2
2.7 Fixing of Record Date for Determining Shareholders......................................3
2.8 Voting Record...........................................................................3
2.9 Quorum..................................................................................3
2.10 Manner of Acting.......................................................................4
2.11 Proxies................................................................................4
2.12 Voting of Shares.......................................................................4
2.13 Voting for Directors...................................................................4
2.14 Action by Shareholders Without a Meeting...............................................5
SECTION 3. BOARD OF
DIRECTORS...................................................................................5
3.1 General Powers..........................................................................5
3.2 Number and Tenure.......................................................................6
3.3 Annual and Regular Meetings.............................................................6
3.4 Special Meetings........................................................................6
3.5 Meetings by Communications Equipment....................................................6
3.6 Notice of Special Meetings..............................................................7
3.6.1 Personal Delivery...........................................................7
3.6.2 Delivery by Mail............................................................7
3.6.3 Delivery by Private Carrier.................................................7
3.6.4 Facsimile Notice............................................................7
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
3.6.5 Delivery by Telegraph.......................................................7
3.6.6 Oral Notice.................................................................8
3.7 Waiver of Notice........................................................................8
3.7.1 In Writing.................................................................8
3.7.2 By Attendance...............................................................8
3.8 Quorum..................................................................................8
3.9 Manner of Acting........................................................................8
3.10 Presumption of Assent..................................................................9
3.11 Action by Board or Committees Without a Meeting........................................9
3.12 Resignation............................................................................9
3.13 Removal................................................................................9
3.14 Vacancies..............................................................................10
3.15 Executive and Other Committees.........................................................10
3.15.1 Creation of Committees.....................................................10
3.15.2 Authority of Committees....................................................10
3.15.3 Quorum and Manner of Acting................................................11
3.15.4 Minutes of Meetings........................................................11
3.15.5 Resignation................................................................11
3.15.6 Removal....................................................................11
3.16 Compensation...........................................................................11
3.17 Audit Committee........................................................................12
SECTION 4. OFFICERS.................................................................................12
4.1 Appointment and Term....................................................................12
4.2 Resignation.............................................................................13
4.3 Removal.................................................................................13
4.4 Contract Rights of Officers.............................................................13
4.5 Chairman of the Board...................................................................13
4.6 President...............................................................................13
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
4.7 Vice President..........................................................................13
4.8 Secretary...............................................................................14
4.9 Treasurer...............................................................................14
4.10 Salaries...............................................................................14
SECTION 5. CERTIFICATES FOR SHARES AND THEIR TRANSFER...............................................15
5.1 Issuance of Shares......................................................................15
5.2 Certificates for Shares.................................................................15
5.3 Stock Records...........................................................................15
5.4 Restriction on Transfer.................................................................15
5.5 Transfer of Shares......................................................................16
5.6 Lost or Destroyed Certificates..........................................................16
SECTION 6. BOOKS AND RECORDS........................................................................16
SECTION 7. SEAL.....................................................................................17
SECTION 8. INDEMNIFICATION..........................................................................17
8.1 Right to Indemnification................................................................17
8.2 Restrictions on Indemnification.........................................................18
8.3 Advancement of Expenses.................................................................18
8.4 Right of Indemnitee to Bring Suit.......................................................19
8.5 Procedures Exclusive....................................................................19
8.6 Nonexclusivity of Rights................................................................19
8.7 Insurance, Contracts and Funding........................................................19
8.8 Indemnification of Employees and Agents of the Corporation..............................20
8.9 Persons Serving Other Entities..........................................................20
SECTION 9. AMENDMENTS...............................................................................20
</TABLE>
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<PAGE> 6
BYLAWS
SECTION 1. OFFICES
The principal office of the corporation shall be located at the
principal place of business or such other place as the Board of Directors
("Board") may designate. The corporation may have such other offices, either
within or without the State of Washington, as the Board may designate or as the
business of the corporation may require from time to time.
SECTION 2. SHAREHOLDERS
2.1 ANNUAL MEETING
The annual meeting of the shareholders shall be held during the month
of January in each year at on a date chosen by the President or the Board for
the purpose of electing Directors and transacting such other business as may
properly come before the meeting. If the day fixed for the annual meeting is a
legal holiday at the place of the meeting, the meeting shall be held on the next
succeeding business day.
2.2 SPECIAL MEETINGS
The Chairman of the Board, the President or the Board may call special
meetings of the shareholders for any purpose. Further, a special meeting of the
shareholders shall be held if the holders of not less than 10% of all the votes
entitled to be cast on any issue proposed to be considered at such special
meeting have dated, signed and delivered to the Secretary one or more written
demands for such meeting, describing the purpose or purposes for which it is to
be held.
2.3 MEETINGS BY COMMUNICATION EQUIPMENT
Shareholders may participate in any meeting of the shareholders by any
means of communication by which all persons participating in the meeting can
hear each other during the meeting. Participation by such means shall constitute
presence in person at a meeting
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2.4 DATE, TIME AND PLACE OF MEETING
Except as otherwise provided herein, all meetings of shareholders,
including those held pursuant to demand by shareholders as provided herein,
shall be held on such date and at such time and place, within or without the
State of Washington, designated by or at the direction of the Board.
2.5 NOTICE OF MEETING
Written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called shall be given by or at the direction of the Board, the Chairman of the
Board, the President or the Secretary to each shareholder entitled to notice of
or to vote at the meeting not less than 10 nor more than 60 days before the
meeting, except that notice of a meeting to act on an amendment to the Articles
of Incorporation, a plan of merger or share exchange, the sale, lease, exchange
or other disposition of all or substantially all of the corporation's assets
other than in the regular course of business or the dissolution of the
corporation shall be given not less than 20 nor more than 60 days before such
meeting. Such notice may be transmitted by mail, private carrier, personal
delivery, telegraph, teletype or communications equipment which transmits a
facsimile of the notice to like equipment which receives and reproduces such
notice. If these forms of written notice are impractical in the view of the
Board, the Chairman of the Board, the President or the Secretary, written notice
may be transmitted by an advertisement in a newspaper of general circulation in
the area of the corporation's principal office. If such notice is mailed, it
shall be deemed effective when deposited in the official government mail,
first-class postage prepaid, properly addressed to the shareholder at such
shareholder's address as it appears in the corporation's current record of
shareholders. Notice given in any other manner shall be deemed effective when
dispatched to the shareholder's address, telephone number or other number
appearing on the records of the corporation. Any notice given by publication as
herein provided shall be deemed effective five days after first publication.
2.6 WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder under
the provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice and delivered to the corporation, whether before
or after the date and time of the meeting, shall be deemed equivalent to the
giving of such notice. Further, notice of the time, place and purpose of any
meeting will be deemed to be waived by any shareholder by attendance thereat in
person or by proxy, unless such shareholder
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<PAGE> 8
at the beginning of the meeting objects to holding the meeting or transacting
business at the meeting.
2.7 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS
For the purpose of determining shareholders entitled (a) to notice of
or to vote at any meeting of shareholders or any adjournment thereof, (b) to
demand a special meeting, or (c) to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board may fix
a future date as the record date for any such determination. Such record date
shall be not more than 70 days, and in case of a meeting of shareholders not
less than 10 days prior to the date on which the particular action requiring
such determination is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting, the
record date shall be the day immediately preceding the date on which notice of
the meeting is first given to shareholders. Such a determination shall apply to
any adjournment of the meeting unless the Board fixes a new record date, which
it shall do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. If no record date is set for the
determination of shareholders entitled to receive payment of any stock dividend
or distribution (other than one involving a purchase, redemption, or other
acquisition of the corporation's shares) the record date shall be the date the
Board authorizes the stock dividend or distribution.
2.8 VOTING RECORD
At least 10 days before each meeting of shareholders, an alphabetical
list of the shareholders entitled to notice of such meeting shall be made,
arranged by voting group and by each class or series of shares therein, with the
address of and number of shares held by each shareholder. This record shall be
kept at the principal office of the corporation for 10 days prior to such
meeting, and shall be kept open at such meeting, for the inspection of any
shareholder or any shareholder's agent.
2.9 QUORUM
A majority of the votes entitled to be cast on a matter by the holders
of shares that, pursuant to the Articles of Incorporation or the Washington
Business Corporation Act, is entitled to vote and be counted collectively upon
such matter, represented in person or by proxy, shall constitute a quorum of
such shares at a meeting of shareholders. If less than a majority of such votes
is represented at a meeting, a majority of the votes so represented may adjourn
the meeting from time to time without further notice if the new date, time or
place is announced at the meeting
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<PAGE> 9
before adjournment. Any business may be transacted at a reconvened meeting that
might have been transacted at the meeting as originally called, provided a
quorum is present or represented thereat. Once a share is represented for any
purpose at a meeting other than solely to object to holding the meeting or
transacting business thereat, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment thereof (unless a new record date
is or must be set for the adjourned meeting) notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
2.10 MANNER OF ACTING
If a quorum is present, action on a matter other than the election of
Directors shall be approved if the votes cast in favor of the action by the
shares entitled to vote and be counted collectively upon such matter exceed the
votes cast against such action by the shares entitled to vote and be counted
collectively thereon, unless the Articles of Incorporation or the Washington
Business Corporation Act require a greater number of affirmative votes.
2.11 PROXIES
A shareholder may vote by proxy executed in writing by the shareholder
or by his or her attorney-in-fact or agent. Such proxy shall be effective when
received by the Secretary or other officer or agent authorized to tabulate
votes. A proxy shall become invalid 11 months after the date of its execution,
unless otherwise provided in the proxy. A proxy with respect to a specified
meeting shall entitle the holder thereof to vote at any reconvened meeting
following adjournment of such meeting but shall not be valid after the final
adjournment thereof.
2.12 VOTING OF SHARES
Except as provided in the Articles of Incorporation or in Section 2.13
hereof, each outstanding share entitled to vote with respect to a matter
submitted to a meeting of shareholders shall be entitled to one vote upon such
matter.
2.13 VOTING FOR DIRECTORS
Each shareholder entitled to vote at an election of Directors may vote,
in person or by proxy, the number of shares owned by such shareholder for as
many persons as there are Directors to be elected and for whose election such
shareholder has a right to vote. Unless otherwise provided in the Articles of
Incorporation, the candidates
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<PAGE> 10
elected shall be those receiving the largest number of votes cast, up to the
number of Directors to be elected.
2.14 ACTION BY SHAREHOLDERS WITHOUT A MEETING
Any action that may or is required to be taken at a meeting of the
shareholders may be taken without a meeting by unanimous consent if one or more
written consents setting forth the action so taken shall be signed by all the
shareholders entitled to vote with respect to the matter. Action may also be
taken by less than unanimous consent. Action by less than unanimous consent may
be taken if one or more written consents describing the action taken shall be
signed by shareholders holding of record or otherwise entitled to vote in the
aggregate not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
on the action were present and voted. If not otherwise fixed by the Board, the
record date for determining shareholders entitled to take action without a
meeting is the date the first shareholder consent is signed. A shareholder may
withdraw a consent only by delivering a written notice of withdrawal to the
corporation prior to the time that consents sufficient to authorize taking the
action have been delivered to the corporation. Every written consent shall bear
the date of signature of each shareholder who signs the consent. A written
consent is not effective to take the action referred to in the consent unless,
within 60 days of the earliest dated consent delivered to the corporation,
written consents signed by a sufficient number of shareholders to take action
are delivered to the corporation. Unless the consent specifies a later effective
date, actions taken by written consent of the shareholders are effective when
(a) consents sufficient to authorize taking the action are in possession of the
corporation and (b) the period of advance notice required by the Articles of
Incorporation to be given to any nonconsenting or nonvoting shareholders has
been satisfied. Any such consent shall be inserted in the minute book as if it
were the minutes of a meeting of the shareholders. (THIS SECTION AMENDED 7/10/98
BY VOTE OF THE BOARD OF DIRECTORS.)
SECTION 3. BOARD OF DIRECTORS
3.1 GENERAL POWERS
All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation shall be managed under the
direction of, the Board, except as may be otherwise provided in these Bylaws,
the Articles of Incorporation or the Washington Business Corporation Act.
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3.2 NUMBER AND TENURE
The Board shall be composed of not less than one nor more than ten
Directors, the specific number to be set by resolution of the Board or the
shareholders. The number of Directors may be changed from time to time by
amendment to these Bylaws, but no decrease in the number of Directors shall have
the effect of shortening the term of any incumbent Director. Unless a Director
dies, resigns, or is removed, his or her term of office shall expire at the next
annual meeting of shareholders; provided, however, that a Director shall
continue to serve until his or her successor is elected or until there is a
decrease in the authorized number of Directors. Directors need not be
shareholders of the corporation or residents of the State of Washington, and
need not meet any other qualifications.
3.3 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after
and at the same place as the annual meeting of shareholders. By resolution the
Board, or any committee thereof, may specify the time and place either within or
without the State of Washington for holding regular meetings thereof without
notice other than such resolution.
3.4 SPECIAL MEETINGS
Special meetings of the Board or any committee designated by the Board
may be called by or at the request of the Chairman of the Board, the President,
the Secretary or, in the case of special Board meetings, any one Director and,
in the case of any special meeting of any committee designated by the Board, by
the Chairman thereof. The person or persons authorized to call special meetings
may fix any place either within or without the State of Washington as the place
for holding any special Board or committee meeting called by them.
3.5 MEETINGS BY COMMUNICATIONS EQUIPMENT
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by, or conduct the meeting
through the use of, any means of communication by which all Directors
participating in the meeting can hear each other during the meeting.
Participation by such means shall constitute presence in person at a meeting.
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3.6 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day
and hour of the meeting shall be given to a Director in writing or orally.
Neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice of such meeting.
3.6.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be effective
if delivered to a Director at least two days before the meeting.
3.6.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective if
deposited in the official government mail at least five days before the meeting,
properly addressed to a Director at his or her address shown on the records of
the corporation, with postage thereon prepaid.
3.6.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be deemed
effective when dispatched to a Director at his or her address shown on the
records of the corporation at least three days before the meeting.
3.6.4 FACSIMILE NOTICE
If notice is delivered by wire or wireless equipment which transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched at
least two days before the meeting to a Director at his or her telephone number
or other number appearing on the records of the corporation.
3.6.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company for
delivery to a Director at his or her address shown on the records of the
corporation at least three days before the meeting.
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3.6.6 ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice
shall be deemed effective if personally given to the Director at least two days
before the meeting.
3.7 WAIVER OF NOTICE
3.7.1 IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice and delivered to the corporation, whether before
or after the date and time of the meeting, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board or any committee designated by
the Board need be specified in the waiver of notice of such meeting.
3.7.2 BY ATTENDANCE
A Director's attendance at or participation in a Board or committee
meeting shall constitute a waiver of notice of such meeting, unless the Director
at the beginning of the meeting, or promptly upon his or her arrival, objects to
holding the meeting or transacting business thereat and does not thereafter vote
for or assent to action taken at the meeting.
3.8 QUORUM
A majority of the number of Directors fixed by or in the manner
provided in these Bylaws shall constitute a quorum for the transaction of
business at any Board meeting but, if less than a majority is present at a
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice.
3.9 MANNER OF ACTING
If a quorum is present when the vote is taken, the act of the majority
of the Directors present at a Board meeting shall be the act of the Board,
unless the vote of a greater number is required by these Bylaws, the Articles of
Incorporation or the Washington Business Corporation Act.
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3.10 PRESUMPTION OF ASSENT
A Director of the corporation who is present at a Board or committee
meeting at which any action is taken shall be deemed to have assented to the
action taken unless (a) the Director objects at the beginning of the meeting, or
promptly upon the Director's arrival, to holding the meeting or transacting any
business thereat, (b) the Director's dissent or abstention from the action taken
is entered in the minutes of the meeting, or (c) the Director delivers written
notice of the Director's dissent or abstention to the presiding officer of the
meeting before its adjournment or to the corporation within a reasonable time
after adjournment of the meeting. The right of dissent or abstention is not
available to a Director who votes in favor of the action taken.
3.11 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action which could be taken at a meeting of the Board or of any
committee created by the Board may be taken without a meeting if one or more
written consents setting forth the action so taken are signed by each of the
Directors or by each committee member either before or after the action is taken
and delivered to the corporation. Action taken by written consent of Directors
without a meeting is effective when the last Director signs the consent, unless
the consent specifies a later effective date. Any such written consent shall be
inserted in the minute book as if it were the minutes of a Board or a committee
meeting.
3.12 RESIGNATION
Any Director may resign at any time by delivering written notice to the
Chairman of the Board, the President, the Secretary or the Board. Any such
resignation is effective upon delivery thereof unless the notice of resignation
specifies a later effective date and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
3.13 REMOVAL
At a meeting of shareholders called expressly for that purpose, one or
more members of the Board, including the entire Board, may be removed with or
without cause (unless the Articles of Incorporation permit removal for cause
only) by the holders of the shares entitled to elect the Director or Directors
whose removal is sought if the number of votes cast to remove the Director
exceeds the number of votes cast not to remove the Director.
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3.14 VACANCIES
Unless the Articles of Incorporation provide otherwise, any vacancy
occurring on the Board may be filled by the shareholders, the Board or, if the
Directors in office constitute fewer than a quorum, by the affirmative vote of a
majority of the remaining Directors. Any vacant office held by a Director
elected by the holders of one or more classes or series of shares entitled to
vote and be counted collectively thereon shall be filled only by the vote of the
holders of such class or series of shares. A Director elected to fill a vacancy
shall serve only until the next election of Directors by the shareholders.
3.15 EXECUTIVE AND OTHER COMMITTEES
3.15.1 CREATION OF COMMITTEES
The Board, by resolution adopted by the greater of a majority of the
Directors then in office and the number of Directors required to take action in
accordance with these Bylaws, may create standing or temporary committees,
including an Executive Committee, and appoint members thereto from its own
number and invest such committees with such powers as it may see fit, subject to
such conditions as may be prescribed by the Board, these Bylaws and applicable
law. Each committee must have two or more members, who shall serve at the
pleasure of the Board.
3.15.2 AUTHORITY OF COMMITTEES
Each committee shall have and may exercise all of the authority of the
Board to the extent provided in the resolution of the Board creating the
committee and any subsequent resolutions pertaining thereto and adopted in like
manner, except that no such committee shall have the authority to: (1) authorize
or approve a distribution except according to a general formula or method
prescribed by the Board, (2) approve or propose to shareholders actions or
proposals required by the Washington Business Corporation Act to be approved by
shareholders, (3) fill vacancies on the Board or any committee thereof, (4)
adopt, amend or repeal Bylaws, (5) amend the Articles of Incorporation pursuant
to RCW 23B.10.020, (6) approve a plan of merger not requiring shareholder
approval, or (7) authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights, preferences and
limitations of a class or series of shares except that the Board may authorize a
committee or a senior executive officer of the corporation to do so within
limits specifically prescribed by the Board.
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3.15.3 QUORUM AND MANNER OF ACTING
A majority of the number of Directors composing any committee of the
Board, as established and fixed by resolution of the Board, shall constitute a
quorum for the transaction of business at any meeting of such committee but, if
less than a majority is present at a meeting, a majority of such Directors
present may adjourn the meeting from time to time without further notice. Except
as may be otherwise provided in the Washington Business Corporation Act, if a
quorum is present when the vote is taken the act of a majority of the members
present shall be the act of the committee.
3.15.4 MINUTES OF MEETINGS
All committees shall keep regular minutes of their meetings and shall
cause them to be recorded in books kept for that purpose.
3.15.5 RESIGNATION
Any member of any committee may resign at any time by delivering
written notice thereof to the Chairman of the Board, the President, the
Secretary or the Board. Any such resignation is effective upon delivery thereof,
unless the notice of resignation specifies a later effective date, and the
acceptance of such resignation shall not be necessary to make it effective.
3.15.6 REMOVAL
The Board may remove any member of any committee elected or appointed
by it but only by the affirmative vote of the greater of a majority of the
Directors then in office and the number of Directors required to take action in
accordance with these Bylaws.
3.16 COMPENSATION
By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, or a fixed
sum for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
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3.17 AUDIT COMMITTEE.
The Audit Committee shall consist of two or more Directors. The members
of the Audit Committee shall be designated and appointed by the Board. The Audit
Committee may review with the corporation's management the internal auditors and
the independent auditors the corporation's policies and procedures with respect
to internal control; review significant accounting matters, approve the audited
financial statements prior to distribution, approve any significant changes in
the corporation's accounting principles or financial reporting practices, review
independent auditor services, and recommend to the Board of Directors the firm
of independent auditors to audit the corporation's consolidated financial
statements. (THIS SECTION ADDED 11/14/97 BY VOTE OF THE BOARD OF DIRECTORS.)
3.18 PLAN ADMINISTRATION COMMITTEE.
The Plan Administration Committee shall consist of two or more
Directors. The members of the Plan Administration Committee shall be designated
and appointed by the Board. The Plan Administration Committee shall act as the
Plan Administrator of the 1997 Nextel International, Inc. Stock Option Plan and
of the Nextel International, Inc. Stock Appreciation Rights Plan, as such plans
may be amended from time to time. (THIS SECTION ADDED 7/10/98 BY VOTE OF THE
BOARD OF DIRECTORS.)
SECTION 4. OFFICERS
4.1 APPOINTMENT AND TERM
The officers of the corporation shall be those officers appointed from
time to time by the Board or by any other officer empowered to do so. The Board
shall have sole power and authority to appoint executive officers. As used
herein, the term "executive officer" shall mean the President, any Vice
President in charge of a principal business unit, division or function or any
other officer who performs a policy-making function. The Board or the President
may appoint such other officers and assistant officers to hold office for such
period, have such authority and perform such duties as may be prescribed. The
Board may delegate to any other officer the power to appoint any subordinate
officers and to prescribe their respective terms of office, authority and
duties. Any two or more offices may be held by the same person. Unless an
officer dies, resigns or is removed from office, he or she shall hold office
until his or her successor is appointed.
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4.2 RESIGNATION
Any officer may resign at any time by delivering written notice thereof
to the corporation. Any such resignation is effective upon delivery thereof,
unless the notice of resignation specifies a later effective date, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
4.3 REMOVAL
Any officer may be removed by the Board at any time, with or without
cause. An officer or assistant officer, if appointed by another officer, may be
removed by any officer authorized to appoint officers or assistant officers.
4.4 CONTRACT RIGHTS OF OFFICERS
The appointment of an officer does not itself create contract rights.
4.5 CHAIRMAN OF THE BOARD
If appointed, the Chairman of the Board shall perform such duties as
shall be assigned to him or her by the Board from time to time and shall preside
over meetings of the Board and shareholders unless another officer is appointed
or designated by the Board as chairman of such meetings. In the absence of the
Chairman of the Board, the Vice Chairman (or the President if no Vice Chairman
has been appointed) shall perform the duties of the Chairman of the Board.
4.6 PRESIDENT
If appointed, the President shall be the chief executive officer of the
corporation unless some other officer is so designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of the
Chairman of the Board and Vice Chairman, and, subject to the Board's control,
shall supervise and control all of the assets, business and affairs of the
corporation. In general, the President shall perform all duties incident to the
office of President and such other duties as are prescribed by the Board from
time to time. If no Secretary has been appointed, the President shall have
responsibility for the preparation of minutes of meetings of the Board and
shareholders and for authentication of the records of the corporation.
4.7 VICE PRESIDENT
In the event of the death of the President or his or her inability to
act, the Vice President who is designated by the Board as the successor to the
President, or if no
Page 13
<PAGE> 19
Vice President is so designated, the Vice President first elected to office,
shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Vice Presidents shall perform such other duties
as from time to time may be assigned to them by the President or by or at the
direction of the Board.
4.8 SECRETARY
If appointed, the Secretary shall be responsible for preparation of
minutes of the meetings of the Board and shareholders, maintenance of the
corporation records and stock registers, and authentication of the corporation's
records and shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the President or by or at the direction of the Board. In the absence of
the Secretary, an Assistant Secretary may perform the duties of the Secretary.
4.9 TREASURER
If appointed, the Treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in banks,
trust companies or other depositories selected in accordance with the provisions
of these Bylaws, and in general perform all of the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
or her by the President or by or at the direction of the Board. In the absence
of the Treasurer, an Assistant Treasurer may perform the duties of the
Treasurer. If required by the Board, the Treasurer or any Assistant Treasurer
shall give a bond for the faithful discharge of his or her duties in such amount
and with such surety or sureties as the Board shall determine.
4.10 SALARIES
The salaries of the officers shall be fixed from time to time by the
Board or by any person or persons to whom the Board has delegated such
authority. No officer shall be prevented from receiving such salary by reason of
the fact that he or she is also a Director of the corporation.
Page 14
<PAGE> 20
SECTION 5. CERTIFICATES FOR SHARES AND THEIR
TRANSFER
5.1 ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the
Board, or by a committee designated by the Board to the extent such committee is
empowered to do so.
5.2 CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed,
either manually or in facsimile, by any two officers of the corporation and
shall include on their face written notice of any restrictions which may be
imposed on the transferability of such shares. All certificates shall be
consecutively numbered or otherwise identified.
5.3 STOCK RECORDS
The stock transfer books shall be kept at the principal office of the
corporation or at the office of the corporation's transfer agent or registrar.
The name and address of each person to whom certificates for shares are issued,
together with the class and number of shares represented by each such
certificate and the date of issue thereof, shall be entered on the stock
transfer books of the corporation. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes.
5.4 RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
shares of the corporation shall bear a legend on the face of the certificate, or
on the reverse of the certificate if a reference to the legend is contained on
the face, which reads substantially as follows:
"The securities evidenced by this certificate have not been
registered under the Securities Act of l933, as amended, or
any applicable state law, and no interest therein may be sold,
distributed, assigned, offered, pledged or otherwise
transferred unless (a) there is an effective registration
statement under such Act and applicable state securities laws
covering any such
Page 15
<PAGE> 21
transaction involving said securities or (b) this corporation
receives an opinion of legal counsel for the holder of these
securities (concurred in by legal counsel for this
corporation) stating that such transaction is exempt from
registration or this corporation otherwise satisfies itself
that such transaction is exempt from registration."
5.5 TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the
stock transfer books of the corporation pursuant to authorization or document of
transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and cancelled.
5.6 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
corporation as the Board may prescribe.
SECTION 6. BOOKS AND RECORDS
The corporation shall:
(a) Keep as permanent records minutes of all meetings of its
shareholders and the Board, a record of all actions taken by the shareholders or
the Board without a meeting, and a record of all actions taken by a committee of
the Board exercising the authority of the Board on behalf of the corporation.
(b) Maintain appropriate accounting records.
(c) Maintain a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders, in
alphabetical order by class of shares showing the number and class of shares
held by each; provided, however, such record may be maintained by an agent of
the corporation.
(d) Maintain its records in written form or in another form
capable of conversion into written form within a reasonable time.
Page 16
<PAGE> 22
(e) Keep a copy of the following records at its principal office:
1. the Articles of Incorporation and all amendments
thereto as currently in effect;
2. the Bylaws and all amendments thereto as currently in
effect;
3. the minutes of all meetings of shareholders and
records of all action taken by shareholders without a
meeting, for the past three years;
4. the financial statements described in Section
23B.16.200(1) of the Washington Business Corporation
Act, for the past three years;
5. all written communications to shareholders generally
within the past three years;
6. a list of the names and business addresses of the
current Directors and officers; and
7. the most recent annual report delivered to the
Washington Secretary of State.
SECTION 7. SEAL
The Board may provide for a corporate seal which shall consist of the
name of the corporation, the state of its incorporation and the year of its
incorporation.
SECTION 8. INDEMNIFICATION
8.1 RIGHT TO INDEMNIFICATION
Each person who was, is or is threatened to be made a named party to or
is otherwise involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
Director or officer of the corporation or, that being or having been such a
Director or officer or an employee of the corporation, he or she is or was
serving at the request of the corporation as a Director, officer, partner,
trustee, employee or agent of another corporation or of a partnership, joint
venture, trust, employee benefit plan or other enterprise (hereinafter
Page 17
<PAGE> 23
an "indemnitee"), whether the basis of a proceeding is alleged action in an
official capacity as such a Director, officer, partner, trustee, employee or
agent or in any other capacity while serving as such a Director, officer,
partner, trustee, employee or agent, shall be indemnified and held harmless by
the corporation against all expense, liability and loss (including counsel fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be paid in
settlement) actually and reasonably incurred or suffered by such indemnitee in
connection therewith, and such indemnification shall continue as to an
indemnitee who has ceased to be a Director, officer, partner, trustee, employee
or agent and shall inure to the benefit of the indemnitee's heirs, executors and
administrators. Except as provided in subsection 8.2 of this Section with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if a proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in this Section shall be a contract right.
8.2 RESTRICTIONS ON INDEMNIFICATION
No indemnification shall be provided to any such indemnitee for acts or
omissions of the indemnitee finally adjudged to be intentional misconduct or a
knowing violation of law, for conduct of the indemnitee finally adjudged to be
in violation of Section 23B.08.310 of the Washington Business Corporation Act,
for any transaction with respect to which it was finally adjudged that such
indemnitee personally received a benefit in money, property or services to which
the indemnitee was not legally entitled or if the corporation is otherwise
prohibited by applicable law from paying such indemnification, except that if
Section 23B.08.560 or any successor provision of the Washington Business
Corporation Act is hereafter amended, the restrictions on indemnification set
forth in this subsection 8.2 shall be as set forth in such amended statutory
provision.
8.3 ADVANCEMENT OF EXPENSES
The right to indemnification conferred in this Section shall include
the right to be paid by the corporation the expenses incurred in defending any
proceeding in advance of its final disposition (hereinafter an "advancement of
expenses"). An advancement of expenses shall be made upon delivery to the
corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of
such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses
under this subsection 8.3.
Page 18
<PAGE> 24
8.4 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 8.1 or 8.3 of this Section is not paid in
full by the corporation within sixty days after a written claim has been
received by the corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If successful in whole or in part, in
any such suit or in a suit brought by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. The
indemnitee shall be presumed to be entitled to indemnification under this
Section upon submission of a written claim (and, in an action brought to enforce
a claim for an advancement of expenses, where the required undertaking has been
tendered to the corporation) and thereafter the corporation shall have the
burden of proof to overcome the presumption that the indemnitee is so entitled.
8.5 PROCEDURES EXCLUSIVE
Pursuant to Section 23B.08.560(2) or any successor provision of the
Washington Business Corporation Act, the procedures for indemnification and
advancement of expenses set forth in this Section are in lieu of the procedures
required by Section 23B.08.550 or any successor provision of the Washington
Business Corporation Act.
8.6 NONEXCLUSIVITY OF RIGHTS
The right to indemnification and the advancement of expenses conferred
in this Section shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation or Bylaws of the corporation or the parent company of this
corporation (if any), general or specific action of the Board, contract or
otherwise.
8.7 INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect
itself and any Director, officer, partner, trustee, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Washington Business Corporation Act. The corporation
may enter into contracts with any Director, officer,
Page 19
<PAGE> 25
partner, trustee, employee or agent of the corporation in furtherance of the
provisions of this Section and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section.
8.8 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees and agents or any class
or group of employees and agents of the corporation (i) with the same scope and
effect as the provisions of this Section with respect to the indemnification and
advancement of expenses of Directors and officers of the corporation; (ii)
pursuant to rights granted pursuant to, or provided by, the Washington Business
Corporation Act; or (iii) otherwise consistent with law.
8.9 PERSONS SERVING OTHER ENTITIES
Any person who, while a Director, officer or employee of the
corporation, is or was serving (a) as a Director or officer of another foreign
or domestic corporation of which a majority of the shares entitled to vote in
the election of its Directors is held by the corporation or (b) as a partner,
trustee or otherwise in an executive or management capacity in a partnership,
joint venture, trust or other enterprise of which the corporation or a wholly
owned subsidiary of the corporation is a general partner or has a majority
ownership shall be deemed to be so serving at the request of the corporation and
entitled to indemnification and advancement of expenses under subsections 8.1
and 8.3 of this Section.
SECTION 9. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board, except that the Board may not repeal or amend any Bylaw
that the shareholders have expressly provided, in amending or repealing such
Bylaw, may not be amended or repealed by the Board. The shareholders may also
alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the
Board may be amended, repealed, altered or modified by the shareholders.
Page 20
<PAGE> 1
EXHIBIT 10.8
June 23, 1998
Mr. Mark Sobol
1215 20th Ave. East
Seattle, Washington 98112
Dear Mr. Sobol:
This letter confirms our mutual understanding of the terms and conditions
applying to your employment with Nextel International, Inc. ("Nextel
International"). Please recognize that this letter is not to be construed as an
employment contract. We look forward to your contribution as a key member of
the team responsible for developing international wireless opportunities.
I outline below the specific terms and conditions regarding the offered
position:
Title: Vice President, International Operations
Compensation Level: EX2
Reporting to: President and Chief Executive Officer
Start Date: July 1
Location: Seattle, Washington
Compensation: $155,000 per year, paid bi-monthly
Bonus: You are eligible to receive in cash a bonus
of up to 40% of your base salary based on
your achievement of specific objectives.
Payout is expected to occur during the
first quarter of each year and will be
prorated during your first year.
Equity: You will be recommended for 25,000 Nextel
International options. Additionally, and
subject to Board of Director approval, you
will be awarded 15,000 shares of Class A
Common Stock ("Shares") of Nextel
Communications, Inc. ("Nextel") in
accordance with the Nextel Option Plan.
These options constitute incentive options
as defined by the Internal Revenue Code.
The options will be granted at the market
price as of the close on the later of the
date on which you agreed to employment and
the date your option grant is approved by
the Nextel Compensation Committee. These
options will vest over four years in
accordance with the Nextel Option Plan.
Expenses: Any expenses that you incur on behalf of
Nextel International which are directly
related to your work will be reimbursed
based on properly
<PAGE> 2
Mark Sobol
June 23,1998
Page 2
completed documentation and approvals in
accordance with applicable procedures.
Benefits: You are eligible for the standard Nextel
Communications, Inc. (the parent of Nextel
International) Benefit Plan commensurate
with your title and salary.
Performance Review: Your performance will be reviewed on
an annual basis at which time you will be
eligible for a merit increase in your
compensation subject, of course, to the
absolute discretion of the Company's
management.
Your responsibilities will be in accordance with those discussed in your
interview. We believe that you will make a valuable addition to our team and
look forward to working with you. Please do not hesitate to contact me if you
have any questions or require additional information.
Finally, you represent to us that, to the best of your knowledge, you have
never been discharged or asked to leave an employer for reasons of personal
integrity or performance.
Please sign below where indicated and return this letter to me. A copy is
enclosed for your records.
Sincerely,
/s/ DAVID J. WILSON
David J. Wilson
Director, Human Resources
Nextel International, Inc.
I accept the offer of employment contained in this letter and hereby agree that
I have read and understand the terms contained herein.
/s/ MARK SOBOL
- ------------------------------
Mark Sobol
Dated:
------------------------
<PAGE> 1
EXHIBIT 10.9
May 20,1998
Mr. Jose Felipe
711 Seaview Drive
Juno Beach, Florida 33408
Dear Mr. Felipe:
This letter confirms our mutual understanding of the terms and conditions
applying to your employment with Nextel International, Inc. ("Nextel
International"). Please recognize that this letter is not to be construed as an
employment contract. We look forward to your contribution as a key member of
the team responsible for developing international wireless opportunities.
I outline below the specific terms and conditions regarding the offered
position:
Title: Region President, Latin America
Compensation Level: EX2
Reporting to: Keith Grinstein
Start Date: July 1, 1998, or a mutually agreed upon
date
Location: Miami, Florida
Compensation: $200,000 per year, paid bi-monthly
Bonus: You are eligible to receive a cash bonus
of $125,000 based on your achievement of
specific objectives. ($62,500, which
represents one-half of your yearly cash
bonus is guaranteed for calendar year
1998). Payout is expected to occur during
the first quarter of each year.
Signing Bonus: You will receive a one time signing bonus
of $35,000.
Equity: You will be recommended for 60,000 Nextel
International options. Also, you will be
recommended for 30,000 options of Nextel
Communications, Inc. This recommendation
will be presented to the Compensation
Committee of the Board of Directors at the
first meeting after your employment start
date. Additionally, you will be recommended
for 30,000 options of Nextel
Communications, Inc. at the first
Compensation Committee of the Board of
Directors meeting in calendar year 1999.
<PAGE> 2
Jose Felipe
May 20,1998
Page 2
Expenses: Any expenses that you incur on behalf of
Nextel International which are directly
related to your work will be reimbursed
based on properly completed documentation
and approvals in accordance with applicable
procedures.
Benefits: You are eligible for the standard Nextel
Communications, Inc. (the parent of Nextel
International) Benefit Plan commensurate
with your title and salary.
Performance Review: Your performance will be reviewed on an
annual basis at which time you will be
eligible for a merit increase in your
compensation subject, of course, to the
absolute discretion of the Company's
management.
Severance: Because of the risk associated with your
move, you will receive one year's base
salary if you are severed within one year
from your start date for any reason other
than dismissal for cause.
Miscellaneous: Upon receipt of invoice, Nextel
International will pay $27,500 for expenses
associated with your daughter's education
in calendar year 1998.
Your responsibilities will be in accordance with those discussed in your
interview. We believe that you will make a valuable addition to our team and
look forward to working with you. Please do not hesitate to contact me if you
have any questions or require additional information.
You also represent to us you are not, and by accepting the offer of employment
in this letter you will not be, in breach of any provisions of any noncompete,
confidentiality, employment or other agreement to which you are a party.
Finally, you represent to us that, to the best of your knowledge, you have
never been discharged or asked to leave an employer for reasons of personal
integrity or performance.
Please sign below where indicated and return this letter to me. A copy is
enclosed for your records.
Sincerely,
/s/ DAVID J. WILSON
David J. Wilson
Director, Human Resources
Nextel International, Inc.
I accept the offer of employment contained in this letter and hereby agree that
I have read and understand the terms contained herein.
/s/ JOSE FELIPE
- ---------------------------------
Jose Felipe
Dated:
--------------------------
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