<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
REGISTRATION NO. 333-26369
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
NEXTEL COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4812 36-3939651
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------
1505 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102
(703) 394-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
THOMAS J. SIDMAN, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
NEXTEL COMMUNICATIONS, INC.
1505 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102
(703) 394-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------
Copies to:
<TABLE>
<S> <C>
LISA A. STATER, ESQ. RANDALL G. RAY, ESQ.
JONES, DAY, REAVIS & POGUE GARDERE & WYNNE L.L.P.
3500 ONE PEACHTREE CENTER 1601 ELM STREET
303 PEACHTREE STREET SUITE 3000
ATLANTA, GEORGIA 30308 DALLAS, TEXAS 75201
(404) 521-3939 (214) 999-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this Registration Statement.
------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
[PCI LETTERHEAD LOGO]
, 1997
Dear PCI Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Meeting"), of Pittencrieff Communications, Inc., a Delaware corporation
("PCI"), to be held at the offices of PCI, One Village Drive, Suite 500,
Abilene, Texas 79606, at 10:00 a.m., local time, on , 1997. A
Notice of Special Meeting of Stockholders, a Proxy Statement/Prospectus (which
describes in detail the matters that will be considered and voted on at the
Meeting), PCI's most recent annual and quarterly reports and a form of proxy
relating to the Meeting are enclosed with this letter.
At the Meeting, you will be asked to consider and take action upon a
proposal to approve an Amended and Restated Agreement of Merger and Plan of
Reorganization, dated as of December 3, 1996 (the "Merger Agreement"), among
PCI, Nextel Communications, Inc., a Delaware corporation ("Nextel"), Nextel
Finance Company, a Delaware corporation and a wholly owned subsidiary of Nextel
("NFC"), and DCI Merger Inc., a Delaware corporation and a wholly owned
subsidiary of NFC ("Merger Sub"), pursuant to which, among other things, (a)
Merger Sub will merge with and into PCI, with PCI being the surviving
corporation (the "Merger") and (b) all of the outstanding shares and rights to
acquire shares of common stock, $.01 par value per share, of PCI ("PCI Common
Stock") will be converted into shares or rights to acquire shares, as
appropriate, of Class A Common Stock, $.001 par value per share, of Nextel
("Nextel Common Stock") using a basic exchange ratio of 3.17 shares of PCI
Common Stock for one share of Nextel Common Stock, subject to adjustment as
provided in the Merger Agreement, and less the amount of any fractional shares,
which will be paid in cash, unless Nextel, in its sole discretion, determines to
round up such fractional share interests to the nearest whole share.
Details of the proposed Merger, the Merger Agreement and other important
information related thereto are set forth in the accompanying Proxy
Statement/Prospectus, which you are urged to read carefully. A copy of the
Merger Agreement is also attached to the Proxy Statement/Prospectus as Appendix
A.
Your Board of Directors has unanimously determined that the terms of the
Merger are fair to, and in the best interests of, PCI and its stockholders, has
approved the Merger Agreement and recommends that you vote FOR approval of the
Merger Agreement. The Board of Directors has been advised by Morgan Stanley &
Co. Incorporated that, in its opinion, the consideration to be paid by Nextel
pursuant to the Merger Agreement is fair, from a financial point of view, to PCI
stockholders as of the date of such opinion. A copy of such opinion, including
information with respect to the assumptions made, matters considered and
limitations on the review undertaken, is attached to the Proxy
Statement/Prospectus as Appendix B.
It is important that your shares be represented at the Meeting whether or
not you plan to attend. You should complete, sign and date the enclosed form of
proxy and return the form of proxy in the enclosed postage prepaid envelope. If
you attend the Meeting, you may revoke the proxy and vote in person if you wish,
even if you have previously returned your form of proxy. Your prompt cooperation
will be greatly appreciated.
Sincerely,
Warren D. Harkins
Chairman of the Board,
President and Chief Executive Officer
Abilene, Texas
, 1997
<PAGE> 3
PITTENCRIEFF COMMUNICATIONS, INC.
ONE VILLAGE DRIVE, SUITE 500
ABILENE, TEXAS 79606
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1997
------------------------
TO THE STOCKHOLDERS OF PITTENCRIEFF COMMUNICATIONS, INC.:
Notice is hereby given that a Special Meeting of Stockholders (the
"Meeting") of Pittencrieff Communications, Inc., a Delaware corporation ("PCI"),
will be held at the offices of PCI, One Village Drive, Suite 500, Abilene, Texas
79606, on , , 1997, at 10:00 a.m., local time, for the following
purpose:
To consider and vote upon a proposal to approve an Amended and Restated
Agreement of Merger and Plan of Reorganization, dated as of December 3,
1996 (the "Merger Agreement"), among PCI, Nextel Communications, Inc., a
Delaware corporation ("Nextel"), Nextel Finance Company, a Delaware
corporation and a wholly owned subsidiary of Nextel ("NFC"), and DCI Merger
Inc., a Delaware corporation and a wholly owned subsidiary of NFC ("Merger
Sub"), pursuant to which, among other things (a) Merger Sub will merge with
and into PCI, with PCI being the surviving corporation (the "Merger") and
(b) all of the outstanding shares and rights to acquire shares of Common
Stock, $.01 par value per share, of PCI ("PCI Common Stock") will be
converted into shares or rights to acquire shares, as appropriate, of Class
A Common Stock, $.001 par value per share, of Nextel ("Nextel Common
Stock") using a basic exchange ratio of 3.17 shares of PCI Common Stock for
one share of Nextel Common Stock, subject to adjustment as provided in the
Merger Agreement, and less the amount of any fractional shares, which will
be paid in cash, unless Nextel, in its sole discretion, determines to round
up such fractional share interests to the nearest whole share.
The Board of Directors of PCI has unanimously approved the Merger proposal
and has determined that the Merger is fair to, and in the best interests of, PCI
and its stockholders. Accordingly, the Board of Directors unanimously recommends
that you vote FOR approval of the Merger Agreement.
Approval of the Merger Agreement will require the affirmative vote of the
holders of record of a majority of the shares of PCI Common Stock outstanding
and entitled to vote thereon at the Meeting. Only stockholders of record at the
close of business on , 1997, are entitled to notice of, and to vote at,
the Meeting, or any postponements or adjournments thereof. A list of
stockholders entitled to vote at the Meeting will be available for examination
at the offices of PCI in Abilene, Texas, for at least ten days before the
Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO FILL
IN, DATE AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF PCI AND TO MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
REVOKE THE PROXY AT ANY TIME BEFORE THE PROXY IS EXERCISED BY DELIVERING WRITTEN
NOTICE OF REVOCATION TO THE SECRETARY OF PCI, BY DELIVERING A SUBSEQUENTLY DATED
PROXY, OR BY ATTENDING THE MEETING, WITHDRAWING THE PROXY AND VOTING YOUR SHARES
PERSONALLY.
By Order of the Board of Directors,
C. G. Whitten
Secretary
Abilene, Texas
, 1997
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED JULY 25, 1997
PROXY STATEMENT
OF
PITTENCRIEFF COMMUNICATIONS, INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
------------------------
PROSPECTUS
OF
NEXTEL COMMUNICATIONS, INC.
CLASS A COMMON STOCK,
PAR VALUE $.001 PER SHARE
This Proxy Statement/Prospectus is being furnished to holders of Common
Stock, $.01 par value per share ("PCI Common Stock"), of Pittencrieff
Communications, Inc., a Delaware corporation ("PCI"), as a proxy statement in
connection with the solicitation of proxies by the Board of Directors of PCI
(the "PCI Board") for use at a Special Meeting of Stockholders (the "Meeting")
of PCI to be held on , 1997, at the offices of PCI, One Village Drive,
Suite 500, Abilene, Texas 79606, commencing at 10:00 a.m., local time, and at
any postponements or adjournments thereof for the purpose set forth herein and
in the accompanying Notice of Special Meeting of Stockholders of PCI.
This Proxy Statement/Prospectus also constitutes the prospectus of Nextel
Communications, Inc., a Delaware corporation ("Nextel"), with respect to shares
of Class A Common Stock, $.001 par value per share, of Nextel ("Nextel Common
Stock") to be issued in connection with the Merger (as defined below), in
exchange for all of the outstanding shares and rights to acquire shares of PCI
Common Stock. Pursuant to the terms of the Amended and Restated Agreement of
Merger and Plan of Reorganization, dated as of December 3, 1996 (the "Merger
Agreement"), among PCI, Nextel, Nextel Finance Company, a Delaware corporation
and a wholly owned direct subsidiary of Nextel ("NFC"), and DCI Merger Sub, a
Delaware corporation and a wholly owned subsidiary of NFC ("Merger Sub"), (a)
Merger Sub will merge with and into PCI, with PCI being the surviving
corporation (the "Merger") and (b) all of the outstanding shares and rights to
acquire shares of PCI Common Stock will be converted into shares or rights to
acquire shares of Nextel Common Stock using a basic exchange ratio of 3.17
shares of PCI Common Stock for one share of Nextel Common Stock, subject to
adjustment as provided in the Merger Agreement, and less the amount of any
fractional shares, which will be paid in cash, unless Nextel, in its sole
discretion, determines to round up such fractional share interests to the
nearest whole share. For information concerning possible adjustments to the
exchange ratio, see "The Merger -- Terms of the Merger -- Adjustments to Merger
Consideration." Because the actual exchange ratio will be determined at the time
of the closing of the Merger, holders of PCI Common Stock will not know at the
time of the Meeting the exact number of shares of Nextel Common Stock they will
receive in the Merger. (For illustrative examples, see "Summary -- C. The
Merger -- Terms of the Merger -- Conversion of PCI Common Stock in the Merger").
Beginning on , 1997, and continuing until the date of the Meeting,
PCI stockholders may call a toll-free number, 800-599-7241, for a recorded
message stating the estimated number of shares of PCI Common Stock to be
exchanged for each share of Nextel Common Stock, which will be based upon the
Nextel Closing Price (as defined herein) as of July 31, 1997 and adjustments to
the Basic Value Cap(as defined herein) as described therein.
Outstanding and unexercised options and warrants to purchase shares of PCI
Common Stock will be assumed by Nextel upon consummation of the Merger such that
the holder will have the right to purchase the number of shares of Nextel Common
Stock into which the shares of PCI Common Stock subject to such options and
warrants would have been converted in the Merger and the exercise price shall be
ratably adjusted.
As a result of the Merger, it is presently anticipated that holders of
shares of PCI Common Stock or rights to acquire shares of PCI Common Stock will
receive an aggregate of up to 8,782,403 shares of Nextel Common Stock, subject
to adjustment as provided in the Merger Agreement. Based upon the number of
shares of Nextel Common Stock outstanding on June 30, 1997, and assuming the
consummation of the Merger on such date and the issuance of 8,782,403 shares of
Nextel Common Stock in the Merger, such shares would have represented
approximately 3.2% of the Nextel Common Stock which would have been outstanding
on such date. As more fully discussed herein, the PCI Board will have the right,
but not the obligation, to terminate the Merger Agreement if the Nextel Closing
Price on the day before the scheduled date of the closing is less than $14.00
unless Nextel elects, in its sole discretion, to deliver that number of shares
of Nextel Common Stock with an aggregate value based on the Nextel Closing Price
on the day of the closing equal to the product of $14.00 multiplied by the total
number of shares of Nextel Common Stock that would be issued or issuable under
the terms of the Merger Agreement. The Nextel Closing Price means the arithmetic
average of the closing sales price for Nextel Common Stock on the Nasdaq Stock
Market National Market (the "Nasdaq NM") for the twenty (20) trading days
immediately preceding the date on which the Nextel Closing Price is to be
determined. An aggregate of up to 9,221,523 shares of Nextel Common Stock have
been registered pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), for issuance in connection with the Merger.
Shares of Nextel Common Stock and PCI Common Stock are currently approved
for quotation on the Nasdaq NM under the symbols "NXTL" and "PITC,"
respectively. On , 1997, the reported closing sale prices of a
share of Nextel Common Stock and a share of PCI Common Stock on the Nasdaq NM
were $ and $ , respectively.
This Proxy Statement/Prospectus and the related Notice of Special Meeting
and form of proxy are first being mailed on or about , 1997, to PCI
stockholders of record at the close of business on , 1997 (the
"Record Date"). There were shares of PCI Common Stock outstanding at the
close of business on the Record Date. Only PCI stockholders of record on the
Record Date will be entitled to notice of, and to vote at, the Meeting.
SEE "RISK FACTORS," BEGINNING ON PAGE 22 OF THIS PROXY
STATEMENT/PROSPECTUS, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PCI STOCKHOLDERS IN DETERMINING HOW TO VOTE ON THE MERGER
AGREEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1997.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................................... 4
SUMMARY............................................................................... 6
A. THE PARTIES TO THE MERGER..................................................... 6
Nextel...................................................................... 6
PCI......................................................................... 10
B. THE MEETING................................................................... 11
C. THE MERGER.................................................................... 11
Recommendation of the PCI Board; Opinion of Financial Advisor............... 11
Interests of Certain PCI Persons in Matters to be Acted Upon................ 12
Terms of the Merger......................................................... 12
Accounting Treatment........................................................ 18
Federal Income Tax Consequences............................................. 18
No Appraisal Rights......................................................... 18
D. COMPARATIVE PER SHARE DATA.................................................... 19
E. SUMMARY FINANCIAL DATA........................................................ 20
Nextel Communications, Inc. Selected Consolidated Financial Data............ 20
Pittencrieff Communications, Inc. Selected Consolidated Financial Data...... 21
RISK FACTORS.......................................................................... 22
Adjustments to Exchange Ratio; No Assurance of Minimum Price of Nextel Common
Stock........................................................................... 22
Possible Volatility of Price of Nextel Common Stock.............................. 22
History of and Future Expectations of Losses and Negative Cash Flow.............. 22
Risks of Implementation of Digital Mobile Networks............................... 22
Implementation of Digital Mobile Networks Subject to Risks of Developing
Technology...................................................................... 23
Nextel to Require Additional Financing........................................... 25
Success of Nextel is Dependent on its Ability to Compete......................... 29
Ability to Manage Growth......................................................... 31
Reliance on One Principal Supplier in Implementation of Digital Mobile
Networks........................................................................ 32
Nextel's Prospects Are Dependent on Governmental Regulation...................... 33
Nextel's Assets Primarily Consist of Intangible FCC Licenses..................... 33
Nextel Susceptible to Control by Significant Stockholders........................ 33
Potential Dilution from Pending and Future Transactions.......................... 35
Shares Eligible for Future Sale.................................................. 35
Dividend Policy Limits Expectation of Future Dividends........................... 36
Potential Conflict of Interest Relationship With Motorola........................ 36
Concerns About Mobile Communications Health Risk May Affect Prospects of
Nextel.......................................................................... 36
Forward Looking Statements....................................................... 36
CERTAIN MARKET INFORMATION............................................................ 37
Nextel........................................................................... 37
PCI.............................................................................. 38
THE MEETING........................................................................... 38
THE MERGER............................................................................ 39
Background of the Merger......................................................... 39
Reasons of PCI for Engaging in the Merger; Recommendation of the PCI Board....... 42
Opinion of Financial Advisor of PCI.............................................. 44
Reasons of Nextel for Engaging in the Merger..................................... 48
Terms of the Merger.............................................................. 48
Effective Time.............................................................. 48
General Effects of the Merger............................................... 48
General..................................................................... 48
Conversion of Shares........................................................ 49
Adjustments to Merger Consideration......................................... 49
Additional Consideration in Lieu of Termination............................. 52
Fractional Shares........................................................... 52
Stock Option Plans.......................................................... 52
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Warrants.................................................................... 52
Exchange of Certificates.................................................... 52
Payment of Dividends........................................................ 53
Limitations on Transferability of Nextel Common Stock....................... 53
Hart-Scott-Rodino........................................................... 53
Federal Communications Commission........................................... 54
Castle Tower Transactions................................................... 54
Representations and Warranties of PCI....................................... 54
Representations and Warranties of Nextel.................................... 54
Conditions; Waiver.......................................................... 54
No Solicitation............................................................. 55
Indemnification of Officers and Directors of PCI............................ 55
Participation in FCC Auction................................................ 55
Termination................................................................. 56
Accounting Treatment............................................................. 56
Federal Income Tax Consequences.................................................. 56
No Appraisal Rights.............................................................. 58
INTERESTS OF CERTAIN PERSONS IN EACH OF NEXTEL AND PCI................................ 59
Security Ownership of Certain Beneficial Owners and Management of Nextel......... 59
Security Ownership of Certain Beneficial Owners and Management of PCI............ 61
Interests of Certain PCI Persons in Matters to be Acted Upon..................... 63
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF NEXTEL COMMON STOCK AND PCI
COMMON STOCK........................................................................ 64
Introduction..................................................................... 64
Authorized Capital Stock......................................................... 65
Board or Stockholder Approved Preferred Stock.................................... 65
Terms of Nextel Preferred Stock.................................................. 65
Class A Preferred Stock..................................................... 65
Class B Preferred Stock..................................................... 66
Class C Preferred Stock..................................................... 67
Series D Preferred Stock.................................................... 67
Voting Rights.................................................................... 67
Number of Directors.............................................................. 68
Election of Board of Directors................................................... 69
Vote on Merger, Consolidation or Sale of Substantially All Assets................ 70
Special Meetings of Stockholders................................................. 70
Stockholder Action by Written Consent............................................ 70
Amendment of Certificate of Incorporation........................................ 71
Amendment of By-laws............................................................. 71
Certain Limitations Related to the McCaw Transaction............................. 71
Liability and Indemnification of Officers and Directors.......................... 72
Dissenters' Rights............................................................... 72
Payment of Dividends............................................................. 73
Distributions Upon Liquidation................................................... 73
Compromise and Reorganization.................................................... 73
STOCKHOLDER PROPOSALS................................................................. 74
OTHER MATTERS......................................................................... 74
CERTAIN LEGAL MATTERS................................................................. 74
EXPERTS............................................................................... 74
Appendix A -- AMENDED AND RESTATED AGREEMENT OF MERGER AND PLAN OF REORGANIZATION..... A-1
Appendix B -- OPINION OF FINANCIAL ADVISOR............................................ B-1
</TABLE>
3
<PAGE> 7
AVAILABLE INFORMATION
Each of Nextel and PCI is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by each of Nextel and PCI with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also may be obtained by mail from the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Additionally, the Commission maintains a Web site on the
Internet, that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
and that is located at http://www.sec.gov.
Nextel has filed with the Commission a Registration Statement on Form S-4
(including the exhibits and amendments thereto, the "Registration Statement")
pursuant to the requirements of the Securities Act, which includes the proxy
statement of PCI with respect to the Merger Agreement and the prospectus of
Nextel with respect to the shares of Nextel Common Stock offered hereby. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission and to which reference is hereby
made, including PCI's Annual Report on Form 10-K for the year ended December 31,
1996 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
which are being delivered herewith. Statements made in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or other document filed or incorporated by reference as
an exhibit to the Registration Statement or as an exhibit to documents
incorporated by reference in this Proxy Statement/Prospectus (see "Incorporation
of Certain Information By Reference"), reference is made to the respective
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Copies of
the Registration Statement together with exhibits may be inspected at the office
of the Commission in Washington, D.C. without charge and copies thereof may be
obtained therefrom upon payment of a prescribed fee.
All information contained in this Proxy Statement/Prospectus relating to
PCI has been supplied by PCI, information regarding the Merger proposal has been
supplied by PCI and/or Nextel and all other information has been supplied by
Nextel. References to PCI and Nextel in this Proxy Statement/Prospectus mean the
respective corporations and, in each case, its consolidated subsidiaries except
as the context may otherwise indicate.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NEXTEL OR PCI. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS OR THE
AFFAIRS OF NEXTEL OR PCI SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS REGARDING
NEXTEL BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL
REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO NEXTEL
COMMUNICATIONS, INC., 1505 FARM CREDIT DRIVE, MCLEAN, VIRGINIA
4
<PAGE> 8
22102, ATTENTION: INVESTOR RELATIONS, TELEPHONE: (703) 394-3500. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,
1997.
The information in the following documents filed by Nextel with the
Commission (File No. 0-19656) pursuant to the Exchange Act is incorporated by
reference in this Proxy Statement/Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1996
filed with the Commission on March 31, 1997;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
dated and filed with the Commission on May 15, 1997;
(c) Current Reports on Form 8-K: (i) dated and filed with the
Commission on January 21, 1997, (ii) dated and filed with the Commission on
February 7, 1997, (iii) dated and filed with the Commission on March 18,
1997, (iv) dated and filed with the Commission on April 15, 1997, (v) dated
June 2, 1997, and filed with the Commission on June 3, 1997, (vi) dated and
filed with the Commission on June 17, 1997, (vii) dated and filed with the
Commission on July 9, 1997, (viii) dated and filed with the Commission on
July 16, 1997 and (ix) dated July 21, 1997 and filed with the Commission on
July 22, 1997; and
(d) Proxy Statement, dated as of April 18, 1997, filed in definitive
form on April 21, 1997 with the Commission with respect to the information
required to be included herein by Items 401 (management), 402 (executive
compensation) and 404 (certain relationships and related transactions) of
Regulation S-K promulgated under the Securities Act and the Exchange Act;
and
(e) Registration Statement on Form S-1, as amended, dated as of
January 27, 1992 (No. 33-43415), with respect to the information contained
under the heading "Description of Capital Stock" which was incorporated by
reference into the Registration Statement on Form 8-A, dated January 16,
1992.
All documents filed by Nextel pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part thereof from the date of filing of such documents.
The information in the following documents filed by PCI with the Commission
(File No. 0-21840) pursuant to the Exchange Act, copies of which are being
delivered herewith, is incorporated by reference in this Proxy
Statement/Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1996
filed with the Commission on March 31, 1997; and
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
filed with the Commission on May 9, 1997.
Any statements made herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
The information relating to Nextel and PCI contained in this Proxy
Statement/Prospectus should be read together with the information in the
documents incorporated by reference.
5
<PAGE> 9
SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements,
including the notes thereto, included or incorporated by reference into this
Proxy Statement/Prospectus, including the appendices hereto.
On July 28, 1995, NEXTEL Communications, Inc., a corporation organized
under the laws of the State of Delaware in 1987 ("Old Nextel"), was merged with
ESMR, Inc. ("ESMR"), until then a wholly owned subsidiary of Motorola, Inc.
("Motorola"). ESMR was the surviving corporation in the merger (the "Motorola
Transaction") and succeeded to Old Nextel's assets and liabilities. ESMR changed
its name to Nextel Communications, Inc., effective upon consummation of the
Motorola Transaction. References herein to Nextel for periods prior to July 28,
1995 refer to Old Nextel as the predecessor to the business and operations of
Nextel. Unless the context requires otherwise, references to Nextel are intended
to include Nextel Communications, Inc. and its consolidated subsidiaries.
Information contained herein gives effect to the acquisition of
approximately 1,220,000 shares of Nextel Common Stock by Digital Radio L.L.C.
(the "McCaw Investor") on April 5, 1995, an additional acquisition of 8,163,265
shares of Nextel's Class A Convertible Redeemable Preferred Stock, par value
$.01 per share (the "Class A Preferred Stock"), and 82 shares of Nextel's Class
B Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), by the McCaw Investor and the consummation of related transactions on
July 28, 1995 (the "McCaw Transaction"), the merger of OneComm Corporation
("OneComm") with and into Nextel on July 28, 1995 (the "OneComm Transaction"),
the consummation of the Motorola Transaction on July 28, 1995, the merger of a
subsidiary of Nextel with American Mobile Systems Incorporated ("AMS") on July
31, 1995 (the "AMS Transaction") and the merger of Dial Page, Inc. ("Dial Page")
with and into Nextel on January 30, 1996 (the "Dial Page Transaction").
A. THE PARTIES TO THE MERGER
NEXTEL
Overview
Nextel's business consists principally of providing a wide array of digital
and analog wireless communications services to its customers in the United
States, in each case utilizing frequencies licensed to its subsidiaries by the
Federal Communications Commission ("FCC"). Nextel provides a differentiated
package of integrated digital wireless communications services under the Nextel
brand name to customers of the various networks constructed and operated by
Nextel's subsidiaries in and around major metropolitan population centers
throughout the country. Collectively, Nextel's operations constitute one of the
largest integrated wireless communications networks utilizing a single digital
transmission technology currently offering commercial service in the United
States. Through its digital and analog wireless communications networks, Nextel
is the leading provider of specialized mobile radio ("SMR") wireless
communications services in nearly all 48 states in the continental United States
and in Hawaii. Nextel has significant SMR spectrum holdings in and around every
major business and population center in the country, including all of the top 50
metropolitan market areas in the United States.
Nextel's operating revenues primarily arise from its digital and analog
wireless communications businesses in the United States, particularly the mobile
telephone service and two-way radio service and, to a lesser extent, from sales
and maintenance of related equipment. Nextel's business plans and efforts are to
a large extent directed toward replacing the traditional analog SMR systems that
it currently operates with advanced mobile communications systems employing
digital technology with a multi-site configuration permitting frequency reuse
("Digital Mobile networks"). A customer using Nextel's Digital Mobile network is
able to access mobile telephone services, two-way dispatch (marketed as Nextel's
Direct Connect(SM) service), paging and alphanumeric short-messaging service,
and in the future is expected to be able to access data transmission. Nextel is
implementing its Digital Mobile networks utilizing digital technology developed
by Motorola (such technology is referred to as the "integrated Digital Enhanced
Network" or "iDEN"). As of
6
<PAGE> 10
June 30, 1997, Nextel's Digital Mobile networks were operating in major
metropolitan market areas throughout the United States in which approximately
50% of the total United States population lives or works.
Prior to the second quarter of 1996, Nextel implemented its Digital Mobile
networks in its market areas using Motorola's first generation iDEN technology.
During that time frame, Nextel encountered certain technology and system
performance issues relating primarily to the voice transmission quality of the
mobile telephone service. In response to these issues, Nextel and Motorola took
action on several fronts to address system performance issues in general, and
voice transmission quality concerns in particular. See "Risk
Factors -- Implementation of Digital Mobile Networks Subject to Risks of
Developing Technology." Additionally, Nextel, together with Motorola, in 1995
began pursuing a program directed toward the development and deployment of
modifications to the first generation iDEN technology platform, which
modifications were targeted specifically at improving the voice transmission
quality of the mobile telephone service. Nextel commenced the full-scale
commercial launch of its first Digital Mobile networks incorporating the
modified iDEN technology (referred to herein as "Reconfigured iDEN") in the
Chicago metropolitan market late in the third quarter of 1996. Subsequently in
1996, Nextel commenced full-scale commercial launches of the Reconfigured iDEN
Digital Mobile networks in the Atlanta, Boston, Denver, Detroit and Las Vegas
metropolitan market areas, in each case accompanied by an aggressive regionally
focused marketing campaign. During the first half of 1997, Nextel commenced
commercial launches of its Reconfigured iDEN technology on the Nextel national
digital network throughout the Pacific Northwest, metropolitan Washington, D.C.
and in cities in North Carolina, New York, Maryland, Missouri, California,
Texas, Kansas, Oklahoma, Pennsylvania and Minnesota, including Seattle,
Portland, Charlotte, Raleigh/Durham, Greensboro, Winston-Salem, New York,
Baltimore, St. Louis, Los Angeles, San Francisco, San Diego, Houston,
Dallas/Fort Worth, Kansas City, Wichita, Topeka, Oklahoma City, Tulsa,
Philadelphia and Minneapolis/St. Paul.
In January 1997, Nextel announced the introduction of its national digital
network and indicated that it will not charge roaming fees for its customers
traveling anywhere on the national digital network. Nextel's national digital
network will enable Nextel's mobile telephone customers to "roam" throughout the
markets covered by the network at the same airtime rate charged in their home
markets. As a result, the Nextel national Digital Mobile network provides the
same mobile telephone functionality and related features offered to customers in
their home markets and eliminates the complex dialing procedures, access fees
and higher per-minute airtime rates frequently encountered by "roaming"
customers of cellular providers. Additionally, Nextel announced a new billing
policy, pursuant to which Nextel bills its mobile telephone service customers
based on the actual number of seconds of airtime used after the first minute, in
contrast to the common cellular industry practice of rounding all calls up to
the next minute.
Since December 31, 1994, the number of subscriber units in service on
Nextel's Digital Mobile network has increased substantially, reflecting
acquisitions, the commencement of Digital Mobile network service in certain
markets and increased sales in markets in which Digital Mobile network services
are provided. As a result, the number of subscriber units in service on Nextel's
Digital Mobile network increased from 13,500 at December 31, 1994, to 85,000 at
December 31, 1995, to 300,300 at December 31, 1996 and to 624,400 at June 30,
1997. Nextel's business and marketing strategy for its Digital Mobile networks
continues to be based on, and reflect, a principal focus on multi-service
business users in its markets with Digital Mobile networks.
During 1996 and into early 1997, Nextel also significantly expanded its
operations and investments involving wireless communications service providers
outside the United States, which are conducted under or are coordinated by or
through McCaw International, Ltd. ("McCaw International"), an indirect, wholly
owned subsidiary of Nextel. With the exception of the equity interests held by
Nextel and by McCaw International in Clearnet Communications, Inc. ("Clearnet"),
a major provider of analog and digital SMR wireless communications services
throughout Canada, and the holder of one of the two nationwide personal
communications services ("PCS") licenses awarded in Canada, McCaw
International's subsidiaries or other entities in which McCaw International
holds equity or equivalent interests own and operate wireless communications
systems in Latin America and Asia. McCaw International's operating companies
currently provide a variety of analog or digital wireless communications
services (including analog SMR dispatch and
7
<PAGE> 11
interconnect, paging and alphanumeric short-messaging and digital mobile
telephone services) in certain major metropolitan areas in Argentina, Brazil,
Mexico, the Philippines and Shanghai, China.
Nextel's principal executive and administrative facility is located at 1505
Farm Credit Drive, McLean, Virginia 22102, and its telephone number is (703)
394-3000.
Business Plan
Nextel is implementing its recently revised business plan, which
contemplates an accelerated deployment during 1997 and 1998 of the Reconfigured
iDEN technology platform throughout markets in the United States in which Nextel
plans to establish Digital Mobile networks (including primary connecting routes
between certain markets). Nextel estimates that system infrastructure and other
system capital costs to be incurred during the period from March 31, 1997
through 1998 to implement the business plan would be approximately $1.45
billion. See "Risk Factors -- Nextel to Require Additional Financing." Nextel
believes that the implementation of the accelerated build-out contemplated by
its business plan will better position Nextel both to achieve its strategic
objectives relating to its U.S. operations and to prepare for emerging
competition in the wireless communications industry, especially from certain
current operators that, on their existing cellular frequencies or on PCS
frequencies, are in the process of converting their wireless communications
systems to digital technology formats and are moving to provide "nationwide
coverage" on the resulting systems. Nextel believes that a significant strategic
advantage may exist in being "first to market," particularly in comparison to
the new "entrepreneur block" PCS licensees and other existing or potential
regional wireless communications service providers, which may encounter
significant financial and other challenges in replicating or overtaking Nextel's
industry position assuming Nextel successfully concludes its nationwide Digital
Mobile network build-out plan and develops a sufficient customer base in its
markets. Although Nextel already has taken a number of significant steps in
anticipation of implementing this business plan (including obtaining
modifications to certain terms contained in the Nextel Indentures to provide the
flexibility required to assemble and utilize the necessary financing for such
business plan), and further actions currently are underway to reach that
objective, several of the actions that must be taken to enable Nextel to
implement its business plan are dependent on certain actions by or responses
from third parties, which as yet have not been secured. See "Risk
Factors -- Nextel to Require Additional Financing" and "-- Forward Looking
Statements."
Recent Developments
Preferred Stock Issuance. On July 21, 1997, Nextel completed the sale of
500,000 shares of 13% Series D Exchangeable Preferred Stock (the "Series D
Preferred Stock") with a liquidation preference of $1,000 per share. Nextel
received approximately $482,000,000 in net cash proceeds from the sale of the
Series D Preferred Stock.
Dividends on the Series D Preferred Stock accrue at an annual rate of 13%
of the liquidation preference, are cumulative from the date of issuance and are
payable quarterly in cash or, on or prior to July 15, 2002, at the sole option
of Nextel, in additional shares of Series D Preferred Stock. The Series D
Preferred Stock is mandatorily redeemable on July 15, 2009 at the liquidation
preference plus accrued and unpaid dividends, and is redeemable in whole or in
part, at the option of Nextel, at any time after December 15, 2005, at a price
equal to the liquidation preference plus accrued and unpaid dividends, and, in
certain circumstances, after July 15, 2002 at specified redemption prices. Up to
35% of the Series D Preferred Stock may be redeemed on or prior to July 15,
2000, in whole or in part, at the option of Nextel, in certain circumstances, at
113% of the liquidation preference plus accrued and unpaid dividends from the
proceeds of one or more sales of Nextel Common Stock. The Series D Preferred
Stock is also exchangeable, in whole but not in part, at the option of Nextel,
at any time after December 15, 2005 and in certain circumstances sooner, into
Nextel subordinated debentures.
The shares of Series D Preferred Stock were issued in a private placement
transaction and have not been registered with the Commission under the
Securities Act, and may not be sold absent registration or an applicable
exemption from the registration requirements. In connection with the issuance of
the Series D
8
<PAGE> 12
Preferred Stock, Nextel has agreed to use its best efforts to file with the
Commission and cause to become effective a registration statement with respect
to a registered offer to exchange the then outstanding Series D Preferred Stock
for an equal number of shares of 13% Series D Exchangeable Preferred Stock that
have been registered pursuant to the Securities Act (the "Exchange Offer"). In
the event that the Exchange Offer is not consummated prior to specified dates,
the dividend accrual rate applicable to the Series D Preferred Stock will
increase by specified amounts until the Exchange Offer is consummated or certain
other requirements are met.
Terms of the Series D Preferred Stock are set forth in the Certificate of
Designation, which has been filed with the Commission, and is incorporated by
reference herein.
Consent Solicitation. Under the terms of Nextel's public indentures (the
"Former Version Indentures") as in effect prior to June 13, 1997, relating to
Nextel's five outstanding issues of Senior Redeemable Discount Notes (the
"Nextel Notes"), Nextel and its subsidiaries that are "restricted subsidiaries"
for purposes of such Indentures (the "restricted subsidiaries") could not have
incurred debt (other than certain categories of "Permitted Debt" (as defined in
such Indentures)) unless certain tests were met. Because such terms of the
Former Version Indentures could have had the effect of limiting Nextel's ability
to borrow the funds necessary to implement its business plan, Nextel sought the
consent of the holders of the Nextel Notes to certain amendments to the Former
Version Indentures pursuant to a consent solicitation (the "Consent
Solicitation"). On June 13, 1997, Nextel obtained the consent of the requisite
number of holders of the Nextel Notes to certain amendments and waivers to
specific provisions of the Former Version Indentures. Also on that date, Nextel
and the Trustee under such Former Version Indentures executed supplemental
indentures (the "Supplemental Indentures") to each of the Former Version
Indentures implementing such amendments and waivers. The Former Version
Indentures, as amended and modified by their respective Supplemental Indentures,
are referred to herein as the "Nextel Indentures." The amendments include, among
other things, certain modifications to the debt incurrence limitations of the
Former Version Indentures to allow Nextel to incur additional indebtedness, by
(i) increasing the amount of permitted debt by $350 million and providing
additional flexibility to allocate the total amount of permitted debt among the
existing categories of permitted debt, (ii) allowing Nextel to incur
indebtedness in excess of such permitted debt, in the period prior to January 1,
2000, based on the amount and timing of any net cash proceeds received by Nextel
from new equity issuances (such new equity issuances include the net cash
proceeds received by Nextel in connection with the issuance of the Series D
Preferred Stock, but would exclude equity funds from several currently
identified sources, including most significantly equity investment proceeds
scheduled to be received from affiliates of Craig O. McCaw in 1997 in connection
with the Option Commitment (as defined below)), and (iii) making Nextel's
ability to incur additional indebtedness on or after January 1, 2000 a function
of satisfaction of a new interest coverage ratio test. See "Risk
Factors -- Nextel to Require Additional Financing." The Supplemental Indentures
also authorize Nextel to transfer to its unrestricted subsidiary group the
approximate 17% equity interest in Clearnet currently held directly by Nextel,
which Nextel intends to accomplish in the near future, and also implemented
certain technical amendments.
In connection with the Consent Solicitation, Nextel has made consent
payments totalling approximately $67,150,000 to validly consenting holders of
the Nextel Notes (the "Consenting Holders"). On June 4, 1997, Nextel filed a
registration statement on Form S-3 with the Commission relating to the offering
of approximately 4.2 million shares of Nextel Common Stock exclusively to
Consenting Holders. Nextel intends to commence the offering of such Nextel
Common Stock to the Consenting Holders at a per share price of $16.14 when such
registration statement is declared effective by the Commission. At the date
hereof, Nextel is not able to predict how many of the shares of Nextel Common
Stock will be subscribed for by Consenting Holders.
The foregoing statements relating to the Nextel Indentures are summaries of
the relevant provisions and do not purport to be complete. Where reference is
made to particular provisions of the Nextel Indentures, such provisions,
including the definitions of certain terms, are incorporated by reference as
part of such summaries, and are qualified in their entirety by such reference.
Each of the Former Version Indentures and the Supplemental Indentures has
previously been filed with the Commission, and each of the Former Version
9
<PAGE> 13
Indentures, as amended and supplemented by the appropriate Supplemental
Indenture, is incorporated by reference herein.
McCaw Investor Exercise Commitment. Nextel has entered into an agreement
with the McCaw Investor pursuant to which the McCaw Investor has committed (the
"Option Commitment") to exercise in full its currently outstanding option (the
"First Option") to purchase 15,000,000 shares of Nextel Common Stock for an
aggregate purchase price of $232,500,000, with the consummation thereof
scheduled to occur on or before July 28, 1997 (the "Option Closing"). In
consideration for the Option Commitment and a payment of a nominal purchase
price, Nextel agreed to issue to the McCaw Investor a contingent equity
instrument (the "CEI"), which, at any time between the Option Closing and July
28, 1999, may be converted, without any additional consideration, into a number
of shares of Nextel Common Stock to be determined using a formula based upon the
average closing price for a share of Nextel Common Stock during the 20 trading
days immediately preceding the Option Closing (the "Average Trading Price"). The
number of shares of Nextel Common Stock into which the CEI may be converted
ranges from no shares, if the Average Trading Price is equal to $15.50 or more,
to a maximum of 1,607,143 shares, if the Average Trading Price is $14.00 or
less. The Option Closing is subject to certain limited conditions. In connection
with the foregoing, the McCaw Investor also agreed to provide up to $50,000,000
in debt financing (subject to certain conditions) to Nextel (the "McCaw Investor
Borrowings"). See "Risk Factors -- Nextel to Require Additional Financing." At
the present time, however, Nextel is not taking steps to meet the conditions to
access the McCaw Investor Borrowings.
On March 20, 1997, Nextel completed the purchase from an affiliate of
Comcast Corporation ("Comcast") of an option to acquire 25,000,000 shares of
Nextel Common Stock, at an exercise price of $16.00 per share (the "Comcast
Option"), for an aggregate purchase price of $25,000,000. In connection with the
agreements relating to the Option Commitment, Nextel reached an agreement with
an affiliate of Craig O. McCaw (such affiliate, the "Purchaser"), pursuant to
which the Purchaser acquired, for an aggregate purchase price of $25,000,000, an
option, in replacement of the Comcast Option, to purchase 25,000,000 shares of
Nextel Common Stock (the "New Option"), 15,000,000 of which are purchasable at
an exercise price of $16.00 per share and the remaining 10,000,000 of which are
purchasable at an exercise price of $18.00 per share, at any time through July
28, 1998. The New Option, and any shares of Nextel Common Stock issued upon
exercise thereof, are transferable, subject to certain limitations. In addition,
one direct transferee of the Purchaser will be entitled to designate one nominee
for election to Nextel's Board of Directors, provided that such party (i) has
exercised the transferred portion of the New Option and continues to own at
least 10,000,000 shares of Nextel Common Stock obtained on such exercise, (ii)
is not an affiliate of Craig O. McCaw and (iii) does not hold a 5% or greater
equity ownership interest in any entity that provides terrestrial-based wireless
communications services in competition with Nextel in any of its markets. Shares
issuable upon exercise of the New Option will be entitled to certain demand and
piggyback registration rights, which would be assignable to transferees in
certain circumstances. The arrangements pertinent to the New Option, the Option
Commitment and the McCaw Investor Borrowings are set forth in definitive
agreements entered into among the relevant parties effective as of June 16,
1997, which definitive agreements have been filed with the Commission and are
incorporated by reference herein.
As indicated, the consummation of certain of the above described
transactions remains subject to certain conditions, and accordingly, there can
be no assurance that these potential transactions will be consummated. See "Risk
Factors -- Forward Looking Statements."
PCI
PCI is a leading provider of analog SMR wireless communications services in
the United States and as of December 31, 1996, serviced approximately 92,000
subscriber units on approximately 6,000 SMR channels providing coverage in
Texas, New Mexico, Oklahoma, Arizona, Colorado, North Dakota and South Dakota.
The analog SMR services currently offered by PCI are a cost-effective
alternative to cellular mobile telephone service for high-volume subscribers.
PCI provides subscribers with both mobile telephone interconnect (mobile radio
to public switched telephone network) and dispatch (base to fleet)
communications, but
10
<PAGE> 14
concentrates on mobile telephone service, which produces significantly higher
average revenues per subscriber unit than dispatch service.
Historically, PCI has focused on channel positions and subscriber bases in
rural areas and small to medium-sized cities, because acquisition and operation
costs in these areas are generally lower and usage rates per capita are
generally higher. Since 1994, however, PCI has expanded its business strategy to
include major metropolitan areas. Technology has continued to improve with the
availability of enhanced analog technology and increased commercial operation of
Digital Mobile networks. In 1996, PCI continued to expand its strategy and
significantly increased channel positions in Dallas-Fort Worth, Houston, San
Antonio and Austin, Texas. As a result, PCI has focused its efforts on
increasing its analog SMR subscriber base in and around these Texas metropolitan
areas.
On January 16, 1996, PCI completed the merger of the SMR businesses of
Advanced MobileComm, Inc. ("AMI"), a Fidelity Capital company, and a number of
related and unrelated companies (collectively referred to as the "AMI Parties")
into PCI (the "Transaction"). Upon consummation of the Transaction, PCI added
approximately 18,000 subscriber units and 3,000 granted SMR channels, including
increased channel positions in major metropolitan areas in Texas. Also on
January 16, 1996, Pittencrieff Communications, Inc., a Texas corporation ("Old
PCI"), merged with and into PCI, with PCI being the surviving corporation, for
the purpose of changing the state of domicile of Old PCI from Texas to Delaware.
References herein to PCI for periods prior to January 16, 1996, refer to Old PCI
and its subsidiaries as the predecessor to the business and operations of PCI.
Unless the context otherwise requires, references to PCI are intended to include
PCI and its subsidiaries.
PCI's principal executive and administrative facility is currently located
at One Village Drive, Suite 500, Abilene, Texas 79606, and its telephone number
is (915) 690-5800.
B. THE MEETING
The Meeting will be held on , 1997 at 10:00 a.m., local
time, at the offices of PCI, One Village Drive, Suite 500, Abilene, Texas 79606.
The purpose of the Meeting is to consider and take action upon a proposal to
approve the Merger Agreement. The PCI Board has fixed the close of business on
, 1997, as the Record Date for the determination of stockholders
entitled to vote at the Meeting. The presence at the Meeting, in person or by
proxy, of the holders of a majority of the issued and outstanding shares of PCI
Common Stock will constitute a quorum for the transaction of business. The
Merger Agreement must be approved by holders of a majority of the issued and
outstanding shares of PCI Common Stock. As of the Record Date, the directors and
executive officers of PCI and their affiliates beneficially owned approximately
[42.3%] of the outstanding shares of PCI Common Stock (excluding 477,160 shares
which may be acquired upon exercise of options that are exercisable as of the
Record Date or within 60 days thereafter), which includes [10,952,859] shares
owned by AMI or for which AMI has voting rights pursuant to a voting agreement.
Holders or the persons with the right to vote all of such shares have advised
PCI that they presently intend to vote such shares in favor of the Merger
Agreement. See "The Meeting."
Approval of the Merger Agreement by the stockholders of Nextel is not
required by Nextel's Certificate of Incorporation, Delaware law or the Merger
Agreement. NFC, the sole stockholder of Merger Sub, has approved the Merger
Agreement on behalf of Merger Sub.
C. THE MERGER
RECOMMENDATION OF THE PCI BOARD; OPINION OF FINANCIAL ADVISOR
The PCI Board has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, PCI and its
stockholders. The PCI Board considered several factors in approving the Merger
Agreement. Among these factors, the PCI Board reviewed the opinion of Morgan
Stanley & Co. Incorporated ("Morgan Stanley") dated October 2, 1996, regarding
the fairness, from a financial point of view, of the consideration to be
received pursuant to the Merger Agreement by the
11
<PAGE> 15
stockholders of PCI. The PCI Board also considered the historical market prices
and trading information for both the PCI Common Stock and the Nextel Common
Stock. The PCI Board has continued to evaluate these factors, including Morgan
Stanley's opinion dated the date of this Proxy Statement/Prospectus and the
volatility in the market prices of both the Nextel Common Stock and the PCI
Common Stock in determining its recommendation to PCI's stockholders. A copy of
Morgan Stanley's opinion, including the information with respect to the
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Appendix B. BASED UPON THE FACTORS CONSIDERED, THE PCI
BOARD UNANIMOUSLY RECOMMENDS THAT PCI'S STOCKHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT. See "The Merger -- Reasons of PCI for Engaging in the Merger;
Recommendation of the PCI Board" and "-- Opinion of Financial Advisor of PCI."
INTERESTS OF CERTAIN PCI PERSONS IN MATTERS TO BE ACTED UPON
Certain executive officers and directors of PCI have interests in the
Merger that differ from those of PCI stockholders generally. Such interests
include continuing indemnification against certain liabilities, severance
payments and vesting of options. As a result, such executive officers and
directors could be more likely to favor consummation of the Merger than
stockholders generally. See "Interests of Certain Persons in each of Nextel and
PCI -- Interests of Certain PCI Persons in Matters to be Acted Upon."
TERMS OF THE MERGER
The following is a summary of certain of the terms and conditions of the
Merger Agreement, a copy of which is attached hereto as Appendix A.
Effective Time. The Merger shall become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of PCI in accordance with
the applicable provisions of the Delaware General Corporation Law (the "DGCL")
and (ii) a certificate of merger (the "Certificate of Merger"), executed in
accordance with the relevant provisions of the DGCL, is filed with the Secretary
of State of Delaware (the time the Merger becomes effective being referred to
herein as the "Effective Time of the Merger" or the "Closing"). Assuming
satisfaction of the conditions to consummation of the Merger, including approval
of the Merger by stockholders of PCI, it is anticipated that the Closing will
occur as promptly as practicable after the Meeting. See "The Merger -- Terms of
the Merger -- Effective Time."
General Effects of the Merger. At the Effective Time of the Merger, Merger
Sub will merge with and into PCI, which will be the surviving corporation (the
"Surviving Corporation") and a wholly owned indirect subsidiary of Nextel. After
the Effective Time of the Merger, the Certificate of Incorporation and By-laws
of Merger Sub as in effect immediately prior thereto shall constitute the
Certificate of Incorporation and By-laws of the Surviving Corporation. See "The
Merger -- Terms of the Merger -- General Effects of the Merger."
General. At the Effective Time of the Merger, shares (and rights to
acquire shares) of PCI Common Stock shall be converted into shares (and rights
to acquire shares) of Nextel Common Stock on the basis of 3.17 shares of PCI
Common Stock for each share of Nextel Common Stock (the "Basic Exchange Ratio"),
subject to adjustment as provided in the Merger Agreement. The Basic Exchange
Ratio was derived, in part, based upon the number of shares of PCI Common Stock
outstanding and issuable pursuant to rights to acquire such shares outstanding
on July 1, 1996. The maximum value of Nextel Common Stock to be issued pursuant
to the Merger in respect of outstanding shares and rights to acquire shares of
PCI Common Stock shall be $170,000,000 (the "Basic Value Cap"). The Basic Value
Cap is subject to reduction to reflect (i) shortfalls in channels delivered
pursuant to the Merger Agreement, (ii) negative cash flow of PCI, (iii) negative
working capital of PCI, (iv) the amount by which the exercise price of certain
derivative securities (including the cash that would have been received in
cashless exercise transactions) exercised prior to the Effective Time of the
Merger exceeds cash received upon such exercise and held by PCI at the Effective
Time of the Merger and (v) the amount by which severance payments exceed certain
limits specified in the Merger Agreement. In the event that the Basic Value Cap
is adjusted, or if the number of shares of PCI Common Stock outstanding and
issuable pursuant to rights to acquire such shares exceeds the
12
<PAGE> 16
number outstanding and issuable on July 1, 1996, the Basic Exchange Ratio will
be adjusted. See "The Merger -- Terms of the Merger -- Adjustments to Merger
Consideration."
Conversion of PCI Common Stock in the Merger. The following tables
illustrate the exchange ratio, number of shares of Nextel Common Stock issuable
in the Merger, the aggregate value of the merger consideration and the adjusted
exchange ratio based on various assumptions including the indicated Nextel
Closing Price. The aggregate value of the merger consideration will vary based
upon the number of shares of PCI Common Stock outstanding at the time of the
Merger, the Nextel Closing Price and any adjustments to the Basic Value Cap made
at the Effective Time of the Merger. If the Nextel Closing Price is greater than
or equal to $14.00 on the date prior to the Closing, Nextel will issue an
aggregate of up to 8,782,403 shares of Nextel Common Stock to PCI stockholders.
The actual number of shares of Nextel Common Stock that will be issued in the
Merger (assuming that the Nextel Closing Price is greater than or equal to
$14.00 or, if less than $14.00, that the PCI Board does not elect to terminate
the Merger Agreement) will be calculated by dividing the number of shares of PCI
Common Stock outstanding at the Effective Time of the Merger by the Basic
Exchange Ratio, as adjusted. Pursuant to the terms of the Merger Agreement, the
Basic Value Cap and the Basic Exchange Ratio, and thus the consideration to be
received by PCI stockholders in the Merger, will be adjusted under certain
circumstances, more fully described herein. See "The Merger -- Terms of the
Merger -- Adjustments to the Merger Consideration."
The following table indicates, assuming that (i) the number of shares of
PCI Common Stock outstanding on a fully diluted basis is 27,840,219 and (ii)
there is no adjustment to the Basic Value Cap and based upon the assumed Nextel
Closing Price indicated, the aggregate number of shares of Nextel Common Stock
which would be issuable in the Merger, the resulting aggregate value of the
consideration received in the Merger and the resulting adjusted exchange ratio.
<TABLE>
<CAPTION>
ASSUMED NEXTEL NUMBER OF NEXTEL SHARES AGGREGATE VALUE OF ADJUSTED
CLOSING PRICE TO BE ISSUED CONSIDERATION EXCHANGE RATIO
- -------------- ----------------------- ------------------ --------------
<S> <C> <C> <C>
$25.00 6,800,000 $170,000,000 4.09
$24.00 7,083,333 $170,000,000 3.93
$23.00 7,391,304 $170,000,000 3.77
$22.00 7,727,273 $170,000,000 3.60
$21.00 8,095,238 $170,000,000 3.44
$20.00 8,500,000 $170,000,000 3.28
$19.35 8,782,403 $169,939,498 3.17
$18.00 8,782,403 $158,083,254 3.17
$17.00 8,782,403 $149,300,851 3.17
$16.00 8,782,403 $140,518,448 3.17
$15.00 8,782,403 $131,736,045 3.17
$14.00 8,782,403 $122,953,642 3.17
$13.50(1) 8,782,403 $118,562,441 3.17
$13.50(2) 9,107,677 $122,953,642 3.06
</TABLE>
- ---------------
(1) Assumes that the PCI Board does not terminate the Merger Agreement.
(2) Assumes that the PCI Board elects to terminate the Merger Agreement and that
Nextel elects to deliver shares of Nextel Common Stock with an aggregate
value equal to the product of $14.00 multiplied by the total number of
shares of Nextel Common Stock otherwise issuable.
13
<PAGE> 17
The following table indicates, assuming (i) that the number of shares of
PCI Common Stock outstanding on a fully diluted basis is 27,840,219 and (ii)
adjustments to the Basic Value Cap totaling $5,000,000 (which have been assumed
for illustrative purposes only), and based upon the assumed Nextel Closing Price
indicated, the aggregate number of shares of Nextel Common Stock which would be
issuable in the Merger, the resulting aggregate value of the consideration
received in the Merger and the resulting adjusted exchange ratio.
<TABLE>
<CAPTION>
ASSUMED NEXTEL NUMBER OF NEXTEL SHARES AGGREGATE VALUE OF ADJUSTED
CLOSING PRICE TO BE ISSUED CONSIDERATION EXCHANGE RATIO
- -------------- ----------------------- ------------------ --------------
<S> <C> <C> <C>
$25.00 6,600,000 $165,000,000 4.22
$24.00 6,875,000 $165,000,000 4.05
$23.00 7,173,913 $165,000,000 3.88
$22.00 7,500,000 $165,000,000 3.71
$21.00 7,857,143 $165,000,000 3.54
$20.00 8,250,000 $165,000,000 3.37
$19.35 8,524,097 $164,941,278 3.27
$18.00 8,524,097 $153,433,747 3.27
$17.00 8,524,097 $144,909,650 3.27
$16.00 8,524,097 $136,385,552 3.27
$15.00 8,524,097 $127,861,455 3.27
$14.00 8,524,097 $119,337,358 3.27
$13.50(1) 8,524,097 $115,075,310 3.27
$13.50(2) 8,839,804 $119,337,358 3.15
</TABLE>
- ---------------
(1) Assumes that the PCI Board does not terminate the Merger Agreement.
(2) Assumes that the PCI Board elects to terminate the Merger Agreement and that
Nextel elects to deliver shares of Nextel Common Stock with an aggregate
value equal to the product of $14.00 multiplied by the total number of
shares of Nextel Common Stock otherwise issuable.
Based on PCI's unaudited financial statements included in its Quarterly
Report on Form 10-Q for the period ended March 31, 1997, a copy of which is
enclosed with this Proxy Statement/Prospectus and assuming aggregate adjustments
to the Basic Value Cap of $164,811 based upon the following: (i) no adjustments
for shortfalls in channels delivered pursuant to the Merger Agreement; (ii) no
negative cash flow of PCI, as calculated pursuant to the Merger Agreement, for
the period from April 1, 1996 through the last day of the calendar quarter then
most recently ended; (iii) no negative working capital of PCI based on the
unaudited consolidated balance sheet of PCI as of the last day of the calendar
month then most recently ended; (iv) no adjustments required as a result of
option or warrant exercises; and (v) an adjustment for additional severance
amounts totalling $164,811 and based on the Nextel Closing Price on July 15,
1997 of $20.03, the Basic Exchange Ratio would be adjusted to 3.28 and the
number of shares of Nextel Common Stock issuable (assuming 27,840,219 shares of
PCI Common Stock outstanding on a fully diluted basis) would have been 8,479,041
and the aggregate consideration received by PCI stockholders would have been
$169,835,189.
Beginning on , 1997, and continuing until the
date of the Meeting, PCI stockholders may call a toll-free number, 800-599-7241,
for a recorded message stating the estimated number of shares of PCI Common
Stock to be exchanged for each share of Nextel Common Stock. The estimated
number will be based upon the Nextel Closing Price as of July 31, 1997 and the
adjustments to the Basic Value Cap as described therein. The actual number of
shares of Nextel Common Stock to be issued to PCI stockholders and the actual
exchange ratio will be determined as of the Closing Date of the Merger.
Right to Terminate if Nextel Closing Price is Less Than $14.00. In the
event that the Nextel Closing Price on the day before the scheduled date of the
Closing is less than $14.00, the PCI Board shall have the right to terminate the
Merger Agreement unless Nextel elects to deliver shares of Nextel Common Stock
with an aggregate value equal to the product of $14.00 multiplied by the total
number of shares of Nextel Common Stock issuable with respect to shares of PCI
Common Stock outstanding or issuable pursuant to rights to
14
<PAGE> 18
acquire such shares outstanding on the day of the Closing (the "Value Floor").
If this termination right is triggered and Nextel does not elect to deliver
additional shares of Nextel Common Stock, the PCI Board does not intend to
resolicit PCI stockholders to ratify its decision to proceed with or terminate
the Merger Agreement. In considering whether or not to proceed with or terminate
the Merger Agreement, the PCI Board will exercise its fiduciary duty in good
faith to determine if the Merger is fair to, and in the best interests of, PCI
and its stockholders at that time. Such a determination will be based upon the
facts and circumstances existing if and when the termination right is triggered,
which factors cannot be accurately predicted at this time. See "The
Merger -- Terms of the Merger -- Additional Consideration in Lieu of
Termination."
Fractional Shares. No fractional share of Nextel Common Stock or
certificates or scrip therefor will be issued as a result of the conversion of
issued and outstanding PCI Common Stock into Nextel Common Stock, but in lieu of
each fractional interest there shall be made a payment in cash therefor, without
interest, at a pro rata price based on the Nextel Closing Price on the date of
the Closing; provided however, that Nextel may (in its sole and absolute
discretion) deliver to persons otherwise entitled to receive fractional share
interests a number of whole shares, determined by rounding up to the nearest
whole share. The Nextel Closing Price means the arithmetic average of the
closing sales price for Nextel Common Stock on the Nasdaq NM for the twenty (20)
trading days immediately preceding the date on which the Nextel Closing Price is
to be determined. See "The Merger -- Terms of the Merger -- Fractional Shares."
Stock Option Plans. Each director and employee stock option to purchase
PCI Common Stock (a "PCI Stock Option") outstanding immediately prior to the
Effective Time of the Merger will be converted at the Effective Time of the
Merger into an issued and outstanding option of Nextel in accordance with the
terms of the PCI 1993 Stock Option Plan, the PCI 1994 Non-Employee Director
Stock Option Plan, the PCI 1996 Stock Option Plan and the PCI 1996 Non-Employee
Director Stock Option Plan (collectively, the "PCI Option Plans"), so that from
and after the Effective Time of the Merger, each such PCI Stock Option may be
exercised only for shares of Nextel Common Stock, and each such PCI Stock Option
shall at the Effective Time of the Merger be converted into an option to
purchase the number of shares of Nextel Common Stock into which the number of
shares of PCI Common Stock obtainable upon exercise of such option would have
been converted, if exercised prior to the Effective Time of the Merger at an
exercise price equal to the exercise price per share of PCI Common Stock at
which such PCI Stock Option is exercisable immediately prior to the Effective
Time of the Merger, multiplied by the Basic Exchange Ratio, as adjusted pursuant
to the Merger Agreement; provided however, that in the case of each PCI Stock
Option which is an incentive stock option, the Basic Exchange Ratio shall be
adjusted for such option, if necessary, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of the
Internal Revenue Code of 1986, as amended (the "Code"). See "The Merger -- Terms
of the Merger -- Stock Option Plans."
Warrants. At the Effective Time of the Merger, PCI's outstanding warrants
(each a "Warrant") to purchase shares of PCI Common Stock shall be assumed by
Nextel. Each Warrant shall thereafter evidence a warrant to purchase the number
of shares of Nextel Common Stock into which the number of shares of PCI Common
Stock issuable pursuant to such Warrant would have been converted in the Merger
at an exercise price per share equal to the amount (rounded up to the next whole
cent) arrived at by dividing the aggregate exercise price under such Warrant by
the number of shares of Nextel Common Stock purchaseable thereunder, unless
exchanged at Closing for warrants of Nextel pursuant to an agreement with the
holder of any such Warrant. See "The Merger -- Terms of the Merger -- Warrants."
Exchange of Certificates. Prior to the Effective Time of the Merger,
Nextel shall designate a bank or trust company to act as exchange agent in the
Merger (the "Exchange Agent"). Promptly after the Effective Time of the Merger,
Nextel shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time of the
Merger represented outstanding shares of PCI Common Stock (the "Certificates"),
a letter of transmittal and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Nextel
Common Stock and any cash payable in lieu of fractional share interests. Upon
surrender to the Exchange Agent of a Certificate or Certificates, together with
a letter of transmittal duly executed, and such other documents as the Surviving
Corporation or the Exchange Agent may reasonably request, a holder of a
Certificate shall be entitled to receive in exchange therefor a portion of
Nextel Common Stock as set forth in the Merger Agreement and any
15
<PAGE> 19
cash payable in lieu of any fractional share interest (the "Merger
Consideration"). Subsequent to the Effective Time of the Merger and until
surrendered, a holder's Certificates for capital stock of PCI shall be deemed
for all corporate purposes, other than the payment of dividends, to evidence the
number of whole shares of Nextel Common Stock into which such shares have been
converted by the Merger and the right to receive any cash payable in lieu of any
fractional share interests resulting therefrom. See "The Merger -- Terms of the
Merger -- Exchange of Certificates."
Payment of Dividends. Unless and until any outstanding Certificates for
shares of PCI capital stock are surrendered, no dividend payable to holders of
record of Nextel Common Stock as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of any such Certificate, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for Nextel Common Stock issued in exchange therefor the amount of
dividends, if any, but without interest, that have theretofore become payable
subsequent to the Effective Time of the Merger with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange. See "The Merger -- Terms of the Merger -- Payment
of Dividends."
Limitations on Transferability of Nextel Common Stock. Shares of Nextel
Common Stock received by certain persons deemed to be "affiliates" of PCI for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
PCI receiving Nextel Common Stock issued in the Merger may not sell such shares
except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. See "The Merger -- Terms of the
Merger -- Limitations on Transferability of Nextel Common Stock."
Hart-Scott-Rodino. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), which provide that certain acquisition transactions (including the
Merger) may not be consummated until certain information has been furnished to
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and the Federal Trade Commission (the "FTC") and certain waiting period
requirements have been satisfied. Nextel and PCI filed the required information
and material with the Antitrust Division and the FTC in December 1996 and the
waiting period has expired. Satisfaction of the waiting period requirement will
not preclude the Antitrust Division, the FTC or any other party either before or
after the Effective Time of the Merger from challenging or seeking to delay or
enjoin the Merger on antitrust or other grounds. There can be no assurance that
such a challenge, if made, would not be successful. See "The Merger -- Terms of
the Merger -- Hart-Scott-Rodino."
Federal Communications Commission. The transfer of control of the licenses
granted by the FCC and held by PCI and certain pending applications of PCI,
which will occur as a result of the Merger, is subject to prior FCC approval
pursuant to the requirements of the Communications Act of 1934, as amended (the
"Communications Act"), and the rules of the FCC. See "The Merger -- Terms of the
Merger -- Federal Communications Commission."
Castle Tower Transactions. PCI sold substantially all the communications
towers used in its business to Castle Tower Corporation (formerly known as
Castle Communications Corporation, "Castle"), and, simultaneously leased back
space on the towers pursuant to purchase and sale and license agreements (the
"Castle Agreements"). Pursuant to the Merger Agreement, Castle and PCI were
required to amend the Castle Agreements effective at the Effective Time of the
Merger, among other things, to settle and release (subject to certain indemnity
arrangements) all claims that Castle may have had related to the Castle
Agreements and to indemnify Nextel against any such claims. Castle and PCI
entered into an amendment of the Castle Agreements, which will become effective
at the Effective Time of the Merger with respect to such matters. It is a
condition to the consummation of the Merger that Nextel and Castle enter into a
Site Commitment Agreement (the "Site Agreement"). Nextel and Castle have entered
into the Site Agreement pursuant to which Nextel has committed that it and its
subsidiaries will provide Castle with the opportunity to purchase from Nextel
and lease back up to 50 of 230 specified communications towers or monopoles and
an option to acquire or build and lease back up to 250 additional communications
towers or monopoles in specified geographic areas, principally representing
highway corridors. Castle has agreed in the Site Agreement that
16
<PAGE> 20
before leasing space on a site offered to Castle under the Site Agreement to a
third party who owns or has access to other communications sites, Castle will
use its best efforts to include in the lease to that third party a requirement
that, for each site that Castle makes available to such third party, Nextel will
be granted the right, on commercially reasonable terms, to locate Nextel
equipment at a site available to the third party. See "The Merger -- Terms of
the Merger -- Castle Tower Transactions."
Representations and Warranties. In addition to customary representations
and warranties with regard to corporate organization and authority, and
capitalization, the Merger Agreement contains certain representations and
warranties by each of PCI and Nextel. See "The Merger -- Terms of the
Merger -- Representations and Warranties of PCI" and "-- Representations and
Warranties of Nextel."
Conditions; Waiver. The obligations of Nextel and PCI to consummate, or
cause to be consummated, the Merger are subject to the satisfaction or waiver of
certain conditions, including the approval of the Merger Agreement by holders of
the requisite shares of PCI Common Stock. See "The Merger -- Terms of the
Merger -- Conditions; Waiver."
No Solicitation. PCI has agreed, subject to certain exceptions, that prior
to the Effective Time of the Merger, PCI and its representatives shall not,
directly or indirectly, encourage (including by way of furnishing information),
solicit, initiate, participate in or otherwise be a party to any discussions or
negotiations with any corporation, partnership, person or other entity or group
concerning any transaction that constitutes, or may reasonably be expected to
lead to, any tender or exchange offer, proposal, other than a proposal by Nextel
or any of its affiliates, for a merger, share exchange or other business
combination involving PCI or any proposal or offer to acquire in any manner a
substantial equity interest in PCI or a substantial portion of the assets of PCI
(a "Takeover Proposal"). See "The Merger -- Terms of the Merger -- No
Solicitation."
Indemnification of Officers and Directors of PCI. Nextel has agreed that
for a period of three years from the Effective Time of the Merger, it will cause
the Surviving Corporation to provide the then current and former directors and
officers of PCI indemnification in accordance with the current provisions of the
Certificate of Incorporation and By-Laws of PCI with respect to matters existing
or occurring at or prior to the Effective Time of the Merger. See "Comparison of
Rights of Holders of Each of Nextel Common Stock and PCI Common
Stock -- Liability and Indemnification of Officers and Directors." Additionally,
Nextel has agreed to cause the Surviving Corporation to use all reasonable
efforts to maintain director and officer insurance comparable to that maintained
by PCI at the Effective Time of the Merger for a period of three years from the
Effective Time of the Merger. See "The Merger -- Terms of the
Merger -- Indemnification of Officers and Directors of PCI."
Participation in FCC Auction. In the event that, pursuant to FCC rules,
the filing deadline for eligibility to participate in the 800 MHz SMR block
license auction established by the FCC in the First Report and Order, PR Docket
No. 93-144, released December 15, 1995 (the "EA Auction") occurs prior to the
earlier of the Effective Time of the Merger or the expiration or termination of
the Merger Agreement, PCI and Nextel (or a designated subsidiary of Nextel) have
agreed to form a consortium to participate in bidding in the EA Auction for
block licenses in certain Bureau of Economic Analysis Economic Areas (each, an
"EA") identified in the Merger Agreement (the "Overlap EAs"). Nextel will
determine and control all aspects of the consortium's bidding strategy and
participation (including, without limitation, determining the amount of the
joint bids to be submitted by the consortium, the EAs in which to bid and
whether to top competing bids) and will be responsible for funding the
consortium's bids. Neither party will bid for block licenses in the Overlap EAs
except via the consortium and PCI will not bid for block licenses in EAs outside
of the Overlap EAs. Nextel is free to bid for block licenses outside of the
Overlap EAs individually or in consortia formed with other parties, and without
reference to the consortium procedures agreed to by Nextel and PCI. Nextel will
be entitled to retain the right to all channels included in block licenses the
consortium is awarded pursuant to the EA Auction, if any, subject to the option
of PCI to purchase certain channels in any Overlap EA for the price paid by the
consortium. See "The Merger -- Terms of the Merger -- Participation in FCC
Auction."
Termination. The Merger Agreement may be terminated and the transactions
contemplated thereby abandoned by mutual written consent of the Boards of
Directors of Nextel and PCI or by written notice by either party to the other of
the occurrence of certain events, including by PCI if the Merger has not
occurred
17
<PAGE> 21
by December 31, 1997, subject to extension in certain circumstances. See "The
Merger -- Terms of the Merger -- Termination."
ACCOUNTING TREATMENT
The Merger is expected to be accounted for under the "purchase acquisition"
method of accounting in accordance with generally accepted accounting principles
("GAAP"). Under the "purchase acquisition" method, any amount paid over the fair
market value of the acquired company's assets is reflected on the buyer's
balance sheet as goodwill. See "The Merger -- Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Code, in which case no gain or loss generally would be recognized by the
stockholders of PCI on the exchange of their shares of PCI Common Stock in the
Merger (except with respect to any cash received by such stockholders in lieu of
fractional shares). It is expected that PCI will receive an opinion of its
counsel at the Closing to the effect that the Merger will be treated as a
tax-free reorganization for federal income tax purposes, which opinion would be
based on certain assumptions and representations. No rulings have been (or will
be) requested from the Internal Revenue Service with respect to any tax matters.
Treatment of the Merger as a tax-free reorganization under the Code is not a
condition to the obligations of Nextel or PCI to consummate the Merger. If the
Merger is not treated as a reorganization under the Code or it is later
determined that the Merger did not qualify as a reorganization under the Code,
the PCI stockholders would recognize taxable gain or loss in the Merger equal to
the difference between the fair market value of the Nextel Common Stock they
received and their tax basis in the PCI Common Stock. Each PCI stockholder
should consult his own tax advisor concerning the tax consequences of the Merger
in his particular individual circumstances. See "The Merger -- Terms of the
Merger -- Conditions; Waiver" and " -- Federal Income Tax Consequences."
NO APPRAISAL RIGHTS
Because PCI Common Stock is listed on the Nasdaq NM, the holders of shares
of PCI Common Stock will not be entitled to appraisal rights pursuant to Section
262 of the DGCL in connection with the Merger. See "The Merger -- No Appraisal
Rights."
18
<PAGE> 22
D. COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for Nextel and PCI on
a historical and pro forma combined basis, giving effect to the Merger using the
purchase method of accounting, as well as equivalent pro forma per share data
for PCI. The unaudited pro forma combined per share data provided below is not
necessarily indicative of the results of operations or the financial position
which would have occurred had the Merger been consummated on the indicated dates
or which may be attained in the future and should be read in conjunction with
the historical consolidated financial statements of Nextel and PCI, which are
incorporated by reference in this Proxy Statement/Prospectus. The unaudited pro
forma combined per share data below is shown for illustrative purposes only and
assumes an adjusted exchange ratio of 3.17 resulting in the anticipated issuance
of 8,782,403 shares of Nextel Common Stock to PCI stockholders. The actual
number of shares of Nextel Common Stock to be issued to PCI stockholders will be
determined as of the Closing Date. See "The Merger -- Terms of the
Merger -- Conversion of Shares."
NEXTEL COMMUNICATIONS, INC. -- HISTORICAL
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Per Share Data:
Book Value............................................ $ 11.02 $10.26
Cash Dividends Declared............................... $ -- $ --
Net Loss.............................................. $ 2.50 $ 0.93
</TABLE>
PITTENCRIEFF COMMUNICATIONS, INC. -- HISTORICAL
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Per Share Data:
Book Value............................................ $5.82 $ 5.76
Cash Dividends Declared............................... $ -- $ --
Net Loss.............................................. $0.29 $ 0.06
</TABLE>
NEXTEL COMMUNICATIONS, INC. AND
PITTENCRIEFF COMMUNICATIONS, INC. -- PRO FORMA COMBINED
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Per Share Data:
Book Value............................................ $ 11.34 $10.59
Cash Dividends Declared............................... $ -- $ --
Net Loss.............................................. $ 2.45 $ 0.91
</TABLE>
PITTENCRIEFF COMMUNICATIONS, INC. -- EQUIVALENT PRO FORMA
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Per Share Data:
Book Value............................................ $ 3.58 $ 3.34
Cash Dividends Declared............................... $ -- $ --
Net Loss.............................................. $ 0.77 $ 0.29
</TABLE>
19
<PAGE> 23
E. SUMMARY FINANCIAL DATA
NEXTEL COMMUNICATIONS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data set forth below for the periods indicated
should be read in conjunction with the consolidated financial statements,
related notes and other financial information appearing in Nextel's Annual
Report on Form 10-K for the year ended December 31, 1996, and Nextel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, incorporated herein by
reference. The financial information for the fiscal years ended March 31, 1993
and 1994, the nine months ended December 31, 1994 and the years ended December
31, 1995 and 1996 have been derived from the audited consolidated financial
statements of Nextel. The report of Deloitte & Touche, LLP, independent
auditors, for the year ended December 31, 1996 has been incorporated herein by
reference. See "Experts." The financial information for the three months ended
March 31, 1996 and 1997 is derived from the unaudited financial statements of
Nextel and, in the opinion of Nextel, includes all adjustments, consisting only
of normal recurring accruals, considered necessary for a fair presentation of
such information. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. See
"Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED ENDED YEAR ENDED THREE MONTHS ENDED
MARCH 31, DECEMBER 31, DECEMBER 31, MARCH 31,
-------------------------- ------------ ---------------------------- ----------------------------
1993 1994 1994(1) 1995 1996 1996 1997
----------- ----------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA(2):
Revenues............ $ 53,002 $ 67,928 $ 74,857 $ 171,703 $ 332,938 $ 68,318 $ 110,676
Cost of
operations......... 20,979 28,666 51,406 151,718 247,717 57,299 58,161
Selling, general and
administrative
expenses........... 18,971 41,107 85,077 193,321 330,256 65,289 132,376
Expenses related to
corporate
reorganization(3)... -- -- -- 17,372 -- -- --
Depreciation and
amortization....... 25,942 58,398 94,147 236,178 400,831 92,674 110,203
----------- ----------- ------------ ------------ ------------ ------------ ------------
Operating loss... (12,890) (60,243) (155,773) (426,886) (645,866) (146,944) (190,064)
Interest income
(expense), net..... 1,324 (18,101) (41,454) (89,509) (206,480) (42,796) (71,285)
Other income
(expense),
net(4)(5).......... 924 3 33 (15,372) (10,866) -- 1,063
Income tax
benefit............ 1,027 21,437 71,345 200,602 307,192 71,022 39,436
----------- ----------- ------------ ------------ ------------ ------------ ------------
Net loss............ $ (9,615) $ (56,904) $ (125,849) $ (331,165) $ (556,020) $ (118,718) $ (220,850)
=========== =========== ============ ============ ============ ============ ============
Net loss per
share.............. $ (0.16) $ (0.73) $ (1.25) $ (2.31) $ (2.50) $ (.56) (.93)
=========== =========== ============ ============ ============ ============ ============
Number of shares
used in
computations(6).... 58,736,000 78,439,000 100,639,000 143,283,000 222,779,000 213,653,000 237,496,000
=========== =========== ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31, AS OF MARCH 31,
-------------------------- -------------------------------------------- ----------------------------
1993 1994 1994 1995 1996 1996 1997
----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents(7)..... $ 17,083 $ 483,483 $ 301,679 $ 340,826 $ 139,681 $ 470,432 $ 638,215
Marketable
securities......... 14,768 426,113 172,313 68,443 5,012 26,276 5,102
Current assets...... 39,932 921,983 504,248 504,661 309,097 600,587 856,686
Intangible assets,
net................ 144,666 889,912 1,451,780 3,549,622 4,076,300 3,996,333 4,280,604
Total assets........ 333,557 2,229,832 2,918,985 5,547,256 6,472,439 6,265,755 7,435,652
Long-term debt(8)... 55,024 1,113,268 1,193,096 1,687,829 2,783,041 2,128,243 3,720,427
Stockholders'
equity(9).......... 255,224 846,304 1,268,575 2,945,141 2,808,138 3,208,049 2,779,177
</TABLE>
- ---------------
(1) Effective December 31, 1994, Nextel changed its fiscal year end from March
31 to December 31. Accordingly, the income statement data is presented for
the transition period from April 1, 1994 to December 31, 1994.
(2) See Note 2 to the Notes to Nextel's consolidated financial statements for a
description of acquisitions.
(3) See Note 2 to the Notes to Nextel's consolidated financial statements.
(4) Other expenses in 1995 include a $15.0 million write-down of the investment
in Corporacion Mobilcom S.A. de C.V. as a result of the devaluation of the
Mexican peso.
(5) Other expenses in 1996 primarily reflect equity in the losses of certain
foreign investments accounted for under the equity method. (See Note 2 to
the Notes to Nextel's consolidated financial statements.)
(6) Includes the weighted average number of shares of Nextel Common Stock
outstanding during the respective periods.
(7) Includes approximately $480 million of cash and cash equivalents held by
McCaw International and its subsidiaries as of March 31, 1997, which are not
available, due to restrictions contained in the indenture related thereto
(the "MIL Indenture"), to fund any of the cash needs of Nextel's domestic
Digital Mobile and analog SMR businesses.
(8) Excludes the current portions of long-term debt. See Note 6 to the Notes to
Nextel's consolidated financial statements.
(9) See Notes 10 and 11 to the Notes to Nextel's consolidated financial
statements.
20
<PAGE> 24
PITTENCRIEFF COMMUNICATIONS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below are derived from
the consolidated financial statements of PCI. The consolidated financial
statements of PCI as of December 31, 1992, 1993, 1994, 1995 and 1996, and for
the years then ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The consolidated financial statements of PCI as of
December 31, 1995 and 1996, and for each of the years in the three-year period
ended December 31, 1996, and KPMG Peat Marwick LLP's report thereon are
incorporated by reference from PCI's Annual Report on Form 10-K for the year
ended December 31, 1996, which is being delivered herewith. The selected
consolidated financial data as of March 31, 1996 and 1997, and for the three
months then ended are derived from the unaudited consolidated financial
statements of PCI, which, in the opinion of PCI's management, include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the results of operations and financial condition of PCI
for the unaudited periods. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. The
selected consolidated financial data should be read in conjunction with the
consolidated financial statements, related notes and other financial information
appearing in PCI's Annual Report on Form 10-K for the year ended December 31,
1996 and PCI's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Radio services.................. $ 8,107 $ 15,121 $ 19,722 $ 20,895 $ 22,220 $ 5,380 $ 5,507
Rental income................... 3,396 3,686 3,096 2,708 1,871 514 397
Equipment and parts sales....... 5,061 9,272 9,811 12,454 11,939 3,246 2,289
------- -------- -------- -------- -------- -------- --------
Total revenues.......................... 16,564 28,079 32,629 36,057 36,030 9,140 8,193
Cost and expenses:
Cost of operations.............. 9,492 13,272 17,022 17,706 18,235 4,807 4,293
Cost of equipment and parts
sales......................... 3,070 6,357 8,330 9,923 10,341 2,733 1,954
General and administrative
expenses...................... 989 3,748 10,159 7,827 7,649 1,853 1,698
Depreciation and amortization... 1,858 3,053 6,524 7,941 9,708 2,093 2,090
------- -------- -------- -------- -------- -------- --------
Operating income (loss)................. 1,155 1,649 (9,406) (7,340) (9,903) (2,346) (1,842)
Other income (expense).................. 44 1,828 270 518 1,323 926 133
Reorganization expense.................. -- 593 4,189 -- -- -- --
Interest expense to affiliate........... 2,513 -- -- -- -- -- --
Interest expense, nonaffiliate.......... 382 417 1,497 2,578 3,293 559 937
------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes....... (1,696) 2,467 (14,822) (9,400) (11,873) (1,979) (2,646)
Income tax expense (benefit)............ (626) 1,077 (4,207) (3,656) (4,410) (732) (979)
------- -------- -------- -------- -------- -------- --------
Net income (loss)....................... $(1,070) $ 1,390 $(10,615) $ (5,744) $ (7,463) $ (1,247) $ (1,667)
======= ======== ======== ======== ======== ======== ========
Net income (loss) per common share and
share equivalent...................... $ (0.17) $ 0.15 $ (0.89) $ (0.41) $ (0.29) $ (0.05) $ (0.06)
======= ======== ======== ======== ======== ======== ========
Weighted average number of shares and
share equivalents outstanding......... 6,367 9,043 11,910 14,055 25,623
======= ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............... $ 2,390 $ 39,958 $ (6,798) $ 2,717 $ 5,298 $ 3,117 $ 4,559
Property and equipment, net............. 23,141 32,358 43,606 41,207 38,494 42,207 37,549
Total assets............................ 46,787 106,148 122,992 119,892 185,503 201,263 182,631
Current portion of long-term debt....... 950 943 1,319 2,276 1,853 2,134 1,820
Long-term debt and inter-company payable
to affiliate.......................... 34,561 -- -- -- -- -- --
Other long-term debt and finance
obligation, excluding current
portion............................... 1,468 2,040 2,574 13,596 12,125 13,504 11,874
Stockholders' equity (deficit)(1)....... (734) 93,586 96,612 95,790 152,384 157,599 150,717
</TABLE>
- ------------------
(1) No cash dividends have been declared or paid by PCI.
21
<PAGE> 25
RISK FACTORS
The following risk factors may affect the value of the Merger Consideration
as well as the value of shares of Nextel Common Stock and therefore should be
considered by stockholders of PCI, in conjunction with the other information
included and incorporated by reference in this Proxy Statement/Prospectus,
before making an investment decision. See also "-- Forward Looking Statements."
ADJUSTMENTS TO EXCHANGE RATIO; NO ASSURANCE OF MINIMUM PRICE OF NEXTEL COMMON
STOCK
The Basic Exchange Ratio of 3.17 shares of PCI Common Stock for each share
of Nextel Common Stock is subject to adjustment and the Basic Value Cap, which
is the maximum value of Nextel Common Stock to be issued pursuant to the Merger
in respect of outstanding shares and rights to acquire shares of PCI Common
Stock, is $170,000,000. Pursuant to the terms of the Merger Agreement, the Basic
Value Cap and the Basic Exchange Ratio, and thus the consideration to be
received by PCI stockholders in the Merger, will be subject to reduction in a
number of events described under "The Merger -- Terms of the Merger --
Adjustments to Merger Consideration."
Further, although the PCI Board shall have the right to terminate the
Merger Agreement in the event the Nextel Closing Price on the day before the
scheduled Closing is less than $14.00 (unless Nextel elects to deliver shares of
Nextel Common Stock with an aggregate value equal to the Value Floor), it is not
obligated to do so. Accordingly, there can be no assurance as to the actual
exchange ratio (i.e., the number of whole and fractional shares of PCI Common
Stock that would be convertible into a single share of Nextel Common Stock as a
result of the Merger) that would apply assuming consummation of the Merger, or
whether such actual exchange ratio would be greater or less than the Basic
Exchange Ratio.
POSSIBLE VOLATILITY OF PRICE OF NEXTEL COMMON STOCK
On October 2, 1996, the last trading day preceding the announcement of the
proposed Merger, the closing sales price of a share of Nextel Common Stock was
$18.125. From such date through July 15, 1997, the closing price per share of
the Nextel Common Stock has fluctuated from a low of $12.25 to a high of
$23.875. As is true for other issuers, the price of the Nextel Common Stock is
impacted by numerous factors including developments in its business, finances or
prospects or other occurrences directly relevant to Nextel, as well as overall
market trends, including trends in the wireless industry, and general economic
conditions. These factors may adversely affect the market price of Nextel Common
Stock. There can be no assurance the price of the Nextel Common Stock will not
decline between the date of the Meeting and the date of the Closing or
thereafter. Further, there can be no assurance that the market value of the
fractional share of Nextel Common Stock issuable in respect of a share of PCI
Common Stock will equal or exceed the then current market value of a share of
PCI Common Stock.
HISTORY OF AND FUTURE EXPECTATIONS OF LOSSES AND NEGATIVE CASH FLOW
The activities of Nextel since its inception in 1987 have been concentrated
on the acquisition and operation of SMR businesses and the development of
Digital Mobile networks. Nextel has incurred net losses since its inception,
including net losses of $556,020,000 and $331,165,000 for the years ended
December 31, 1996 and December 31, 1995, respectively, and $220,850,000 for the
quarter ended March 31, 1997. Nextel had an accumulated deficit totalling
$1,356,101,000 at March 31, 1997. Nextel anticipates that it will continue to
experience significant net losses and significant negative cash flow during the
ongoing start up phase of the Digital Mobile networks over the next several
years. Nextel's ability to arrange sufficient equity and/or debt financing or to
generate sufficient revenue to cover its operating and capital needs is subject
to a number of risks and contingencies. Accordingly, there can be no assurance
as to whether or when Nextel's operations will become profitable. See "-- Nextel
to Require Additional Financing" and "-- Forward Looking Statements."
RISKS OF IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
The implementation of Digital Mobile networks involves systems design, site
procurement, construction, electronics installation, receipt of necessary FCC
and other regulatory approvals, channel recovery (freeing a
22
<PAGE> 26
certain number of 800 MHz frequencies from SMR analog traffic) and initial
systems optimization prior to commencing commercial service. Each stage can take
from several weeks to several months and involves various risks and
contingencies, the outcome of which cannot be predicted. There can be no
assurance that Nextel will be able to implement Digital Mobile networks (where
such networks are not already in commercial operation) in any particular market
in accordance with its current plans and schedules. See "-- Forward Looking
Statements."
IMPLEMENTATION OF DIGITAL MOBILE NETWORKS SUBJECT TO RISKS OF DEVELOPING
TECHNOLOGY
Currently, there are three principal digital technology formats that are
being assessed or proposed for deployment or deployed currently by providers of
cellular telephone service or by certain entities that have been awarded PCS
licenses to provide wireless communications services in the United States. One
such format is known as the Time Division Multiple Access ("TDMA") digital
transmission technology, a version of which, known as "three-time slot TDMA" has
been deployed by AT&T Wireless Services, Inc. ("AT&T Wireless," formerly McCaw
Cellular Communications, Inc. ("McCaw Cellular")), a subsidiary of AT&T, and by
Southwestern Bell Mobile Systems in certain of their cellular system markets,
and is expected to be deployed by certain other cellular operators. The second
principal format is known as the Code Division Multiple Access ("CDMA") digital
transmission technology which has been deployed by PrimeCo Personal
Communications, Bell Atlantic/Nynex Mobile Services and Sprint PCS in certain of
their PCS markets and is expected to be deployed by certain other cellular and
PCS operators. The third principal format, known as GSM-PCS, is an updated,
up-banded, PCS version of the TDMA-based digital technology format known as
Global System for Mobile Communications that has become the standard for digital
cellular technology in Europe. GSM-PCS has been deployed by American Personal
Communications, a subsidiary of Sprint Spectrum, L.P., in its Washington,
D.C./Baltimore metropolitan market and Bell South in certain of its PCS markets,
and is expected to be deployed by certain other PCS operators. Although TDMA,
CDMA and GSM-PCS are digital transmission technologies, and thus share certain
basic characteristics and areas of contrast to analog transmission technology,
TDMA, CDMA and GSM-PCS are not compatible or interchangeable with each other.
The Motorola proprietary first generation iDEN technology originally
incorporated in Nextel's Digital Mobile networks is known as "six-time slot
TDMA." Although based on the TDMA technology format, this first generation iDEN
technology differs in a number of significant respects from the TDMA technology
versions being assessed or deployed by cellular operators and PCS licensees in
the United States, which differences may have important consequences.
Additionally, unlike the three-time slot TDMA technology format being utilized
for the mobile telephone function in the Reconfigured iDEN technology platform
or the three-time slot TDMA technology format being utilized by certain cellular
providers, the first generation iDEN technology, as well as the "six-time slot
TDMA" technology utilized for the two-way dispatch function in the Reconfigured
iDEN technology platform, can carry up to six (rather than three) voice and/or
control paths per channel.
Although Nextel believes that TDMA technology, on balance, is superior to
analog technology that is used in traditional SMR systems, the use of digital
technology in general involves certain performance trade-offs, for example, in
various characteristics affecting voice quality and fidelity. These trade-offs
may have an effect on customer acceptance of iDEN technology. The use of
six-time and three-time slot TDMA technology in combination with Nextel's re-use
of its licensed frequencies in a cellular-type system design permits Nextel to
utilize its current holdings of spectrum more efficiently. Efficient utilization
of spectrum is an important objective generally because less spectrum is
available in the SMR band than is or will be licensed to each cellular and
certain PCS operators in each market. Reconfigured iDEN, which is designed to
use three time slots per channel for the mobile telephone service, results in a
reduction in channel capacity compared to the capacity achievable using first
generation iDEN technology for mobile telephone service.
Any difference that may from time to time exist between the technology
deployed in Nextel's Digital Mobile networks and competitive technologies then
deployed by other wireless communications service providers, such as analog,
CDMA, TDMA, GSM-PCS or other transmission technology formats that may be
developed in the future, may affect customer acceptance of the services offered
by Nextel. In the future, a
23
<PAGE> 27
digital transmission technology other than TDMA may gain acceptance sufficient
to adversely affect the resources devoted by third parties to developing or
improving TDMA-based technologies. In addition, existing digital cellular
technology formats including cellular TDMA cannot currently be utilized on
Nextel's present SMR spectrum holdings. Accordingly, if any improvements were to
be made to such currently existing digital cellular technology formats, the
prospect of achievement of parallel improvements in the TDMA-based iDEN
technology presently utilized by Nextel is not certain. See "-- Forward Looking
Statements."
Customer acceptance of the services offered by Nextel will be affected not
only by technology-based differences, but also by the operational performance
and reliability of system transmissions on Nextel's Digital Mobile networks.
Nextel implemented Digital Mobile networks in its market areas using Motorola's
first generation iDEN technology prior to the second quarter of 1996. During
that time frame, Nextel encountered certain technology and system performance
issues with respect to system reliability (the percentage of time the system is
operating), system access (how often a user can gain access to the system) and
various characteristics affecting voice transmission quality of mobile telephone
services utilizing Nextel's Digital Mobile networks. Nextel provided discounts
and gave credits to customers in an effort to foster satisfactory customer
relations and delayed both its planned deployment of its Digital Mobile networks
and commencement of aggressive product and service marketing efforts pending
resolution of such system performance and voice quality issues. During this
period Nextel and Motorola also took actions to address system performance
issues in general, and voice transmission quality concerns in particular. These
actions consisted of efforts to enhance the performance of the first generation
iDEN networks in a number of areas that were believed to adversely affect system
performance, perceived voice transmission quality and customer satisfaction, and
included measures as diverse as improvements in system infrastructure and
subscriber equipment design and interaction, adjustments in cell site locations
and in radio frequency planning, development of enhanced network load and
traffic management and control systems, and development and deployment of more
sophisticated diagnostic and error correction software. These and other
measures, most of which can be categorized as systems optimization, are expected
to be ongoing activities connected with Nextel's operation of its Digital Mobile
networks. Moreover, Nextel expects that systems optimization, software loading
and planned maintenance activities will be ongoing components of its operation
of the Digital Mobile networks that will periodically require the scheduled
turndown of selected subsystems in Nextel's Digital Mobile networks during
periods of very low system traffic, typically at night or on weekend days. See
"-- Forward Looking Statements."
Nextel's objectives in carrying out the initial phase of system development
and technology enhancements were to achieve satisfactory performance levels in
the areas of system reliability and system access. Nextel believes that its
existing Digital Mobile networks (including both those utilizing the
Reconfigured iDEN technology and those continuing to use the first generation
iDEN technology), as operated at June 30, 1997, were demonstrating acceptable
performance levels in these areas. Nextel also believes that the successful
development and national deployment throughout Nextel's Digital Mobile networks
of the Reconfigured iDEN technology, with its accompanying improvements in the
voice quality of the mobile telephone service provided on Nextel's Digital
Mobile networks, should enable Nextel to aggressively market such services as
part of a competitive wireless communications services alternative to existing
cellular telephone services in its markets. See "-- Forward Looking Statements."
Motorola has advised Nextel that it contemplates continuing to install
software upgrades and Nextel anticipates it will continue to advise and consult
with Motorola concerning potential measures that could be taken to address any
issues concerning system performance issues and/or expressed customer
satisfaction levels as revealed by Nextel's continuing system testing and
customer surveys. To the extent Nextel's experience has been derived based on
customers in its markets employing the first generation iDEN technology, who are
primarily oriented to the two-way dispatch service, such experience should not
necessarily be regarded as an accurate predictor of Nextel's experience in the
future, particularly as Nextel continues to implement its planned nationwide
roll-out of the Reconfigured iDEN technology and as Nextel's customer base
expands beyond such group of initial customers. Any inability to address and
resolve satisfactorily performance issues that affect customer acceptance of
Digital Mobile network service could delay or adversely affect the successful
commercialization of the Digital Mobile networks and could adversely affect the
business
24
<PAGE> 28
and financial prospects of Nextel. If Nextel for any reason is unable to
implement Digital Mobile networks and provide service to its target customers
that is competitive with the services of other wireless communications
providers, Nextel would be unable, utilizing its existing analog SMR systems, to
provide mobile telephone services comparable to those provided by other wireless
communications services providers or to achieve significant further subscriber
growth. See "-- Forward Looking Statements."
Nextel anticipates that there will be an ongoing focus on systems and
technology optimization activities directed at achieving improvements in the
overall performance of the Digital Mobile networks and such technology
optimization activities will be a continuing component of normal Digital Mobile
network operation. Moreover, the satisfactory resolution of certain system
performance issues in a particular market or at a particular stage of operation
will not necessarily preclude the need to address those issues again, for
example, as a result of a significant increase in the number of subscribers
using the Digital Mobile networks, and future upgrades or modifications to the
Digital Mobile networks may have unexpected adverse effects on performance
issues previously addressed and resolved. Each of Motorola and Nextel believes,
however, that a large portion of the hardware and software adjustments developed
in the course of system development and technology optimization activities to
address particular issues, and the resulting system performance improvements
realized, should be applicable to similar issues in different markets.
Nevertheless, as is often the case in the deployment of wireless communications
networks, it should be expected that there will be market-specific
characteristics, such as local terrain, topography, the number of licensed
frequencies, the utilization of adjacent radio frequencies and other factors,
that will require customized optimization activities to address related system
performance issues successfully. See "-- Forward Looking Statements."
Pursuant to the second amendment to the existing equipment purchase
agreements between Nextel and Motorola entered into in connection with the McCaw
Transaction (the "Second Equipment Agreement Amendment"), Motorola agreed to use
its best efforts to develop, and Nextel agreed to implement, Reconfigured iDEN.
The Reconfigured iDEN development and deployment activities to date have
proceeded in a timely and satisfactory manner and Nextel believes that the
Reconfigured iDEN development program contemplated by the Second Equipment
Agreement is substantially complete. However, no assurance can be given that any
further modifications or enhancements to the Reconfigured iDEN technology will
be developed successfully, or that any such modifications or enhancements, if
developed, would be deployed in Nextel's Digital Mobile networks or, if
deployed, would perform successfully. Moreover, no assurance can be given that
the Reconfigured iDEN technology, as it currently exists or as it may be further
modified or enhanced in the future, will satisfy customer requirements, or that
Nextel's mobile telephone services utilizing such Reconfigured iDEN technology
will be regarded as competitive in the wireless communications services markets
as such markets currently exist and as they are expected to develop in the
future. See "-- Forward Looking Statements."
NEXTEL TO REQUIRE ADDITIONAL FINANCING
Nextel anticipates that, for the foreseeable future, it will be utilizing
significant amounts of its available cash for capital expenditures for the
construction of Digital Mobile networks, operating expenses relating both to the
Digital Mobile networks and to the analog SMR networks, potential acquisitions
(including the acquisition of rights to spectrum through the contemplated 800
MHz spectrum auction process), debt service requirements and other general
corporate expenditures. Nextel anticipates that its cash utilization for capital
expenditures and other investing activities and operating losses will continue
to exceed its cash flows from operating activities over the next several years.
During fiscal year 1996, Nextel's average monthly cash utilization rate for
investing activities (principally attributable to capital expenditures for the
build-out of the Digital Mobile networks) was approximately $33,390,000, and its
average monthly operating losses (exclusive of non-cash items) was approximately
$20,400,000. Such average monthly amounts are not necessarily representative of
Nextel's anticipated experience in such areas and are expected to increase
during 1997 and 1998 in connection with the implementation of Nextel's business
plan and the related accelerated construction of its Digital Mobile networks.
During the ongoing start up phase of its Digital Mobile networks, Nextel expects
that it will need to utilize its existing cash and funding from outside sources
to meet its cash needs resulting from such activities and losses. Nextel's
aggregate cash, cash equivalents and marketable securities
25
<PAGE> 29
at March 31, 1997 totaled approximately $643,317,000 (however, approximately
$479,995,000 of such amount represents cash, cash equivalents and marketable
securities held by McCaw International and its subsidiaries, which items are not
available, due to restrictions contained in the provisions of the MIL Indenture,
to fund any of the cash needs of Nextel's domestic Digital Mobile and analog SMR
businesses).
Nextel, NFC, and certain subsidiaries of Nextel entered into definitive
agreements, which became effective on September 30, 1996, with respect to a
secured credit facility arranged by Chase Securities, Inc., J.P. Morgan
Securities, Inc. and Toronto-Dominion Securities (USA), Inc. (the "Bank Credit
Facility"). Concurrently therewith, Nextel, NFC and certain subsidiaries of
Nextel entered into definitive agreements, which also became effective on
September 30, 1996, with respect to the amendment, restatement and consolidation
of the previously existing financing arrangements with Motorola and NTFC Capital
Corporation ("NTFC") (the "Vendor Credit Facility"; and collectively with the
Bank Credit Facility, the "Bank and Vendor Credit Facilities").
To fully implement an accelerated deployment of its Digital Mobile networks
in the period between March 31, 1997 and December 31, 1998 as described under
"Summary -- A. The Parties to the Merger -- Nextel -- Recent
Developments -- Business Plan," Nextel would need to obtain additional amounts
of debt or equity financing beyond that available under the Bank and Vendor
Credit Facilities currently in place. The Credit Agreement relating to the Bank
Credit Facility (the "Bank Credit Agreement") currently provides for up to
$1,655,000,000 of secured financing, consisting of a $1,085,000,000 revolving
loan and $570,000,000 in term loans. The Amended Restated and Consolidated
Credit Agreement relating to the Vendor Credit Facility (the "Vendor Credit
Agreement") provides for up to $345,000,000 of secured financing, consisting of
a $195,000,000 revolving loan and $150,000,000 in term loans. Borrowings under
the Bank Credit Facility and the Vendor Credit Facility are ratably secured by
liens on assets of the restricted subsidiaries under the terms of the Nextel
Indentures. At June 30, 1997, Nextel had drawn approximately $1,441,000,000 of
its available financing under the Bank Credit Facility, leaving an aggregate of
approximately $214,000,000 available for borrowing under such facility, and had
drawn $227,000,000 of its available financing under the Vendor Credit Facility,
leaving an aggregate of approximately $118,000,000 available for borrowing under
such facility, subject in each case to the satisfaction or waiver of applicable
borrowing conditions.
The Bank Credit Agreement contemplates that, with the consent of the
lenders holding a majority of the outstanding loans and available commitments
under the Bank Credit Agreement and the Vendor Credit Agreement, Nextel may
borrow up to an additional $250,000,000 (subject to certain limitations) under
the Bank Credit Facility (the "Additional Bank Borrowings"). Nextel and certain
lenders have entered into a commitment letter and a related term sheet dated
July 11, 1997 setting forth the terms and conditions on which Nextel could gain
access to the $250,000,000 in Additional Bank Borrowings. Such commitment letter
and related term sheet have been filed with the Commission, and are incorporated
by reference herein. The Bank Credit Agreement and the Vendor Credit Agreement
also contemplate that borrowings under the Vendor Credit Facility may be
increased by up to $50,000,000, subject to certain limitations (the "Additional
Vendor Borrowings"). The remaining funds available for borrowings under the Bank
and Vendor Credit Facilities (including, if successfully structured, the
increased amounts contemplated pursuant to the Additional Bank Borrowings and
the Additional Vendor Borrowings) may be drawn upon prior to the final maturity
date of such facilities in 2003, although the amount available under such
facilities will be reduced to reflect scheduled amortization commencing in 2001.
Nextel has also reached an understanding with Motorola regarding the terms
and conditions pursuant to which Nextel could access up to an additional
$450,000,000 of equipment financing through Motorola (the "Additional Motorola
Financing") consisting of (i) $50,000,000 in Additional Vendor Borrowings, (ii)
up to $200,000,000 in secured borrowings (which could be drawn through March
1999 and only as a term loan) that are to be second in ranking to the borrowings
made pursuant to both the Vendor Credit Agreement and Nextel's existing Bank
Credit Agreement (the "Second Secured Borrowings") and (iii) up to an additional
$200,000,000 in borrowings that would be required to be ratably secured on an
equal ranking with borrowings pursuant to the Vendor Credit Agreement and such
existing Bank Credit Agreement (the "Senior Secured Borrowings"). Availability
of the Additional Motorola Financing is subject to a number of conditions
including, among others, with respect to the Second Secured Borrowings, the
prior borrowing of all amounts
26
<PAGE> 30
available under the Vendor Credit Agreement (including the $50,000,000 in
Additional Vendor Borrowings pursuant thereto described above) and under the
Bank Credit Agreement (including, with respect to the second $100,000,000 of the
Second Secured Borrowings, the borrowing of $250,000,000 in Additional Bank
Borrowings pursuant to the Bank Credit Agreement described above), Nextel's
receipt of $232,500,000 in equity contributions from the exercise of the First
Option by the McCaw Investor (the "McCaw Option Proceeds") (see "Summary -- A.
The Parties to the Merger -- Nextel -- Recent Developments -- McCaw Investor
Exercise Commitment"), and the receipt of the approval of a majority of the
secured parties under the Vendor Credit Agreement and the Bank Credit Agreement.
The availability of the Senior Secured Borrowings is subject to a number of
additional conditions, including the unanimous approval of the secured parties
under the Bank Credit Agreement and the Vendor Credit Agreement. Nextel is not
currently taking steps to meet such additional conditions and, accordingly,
Nextel has assumed for planning purposes that none of the funds constituting the
Senior Secured Borrowings will be available during 1997 and 1998.
The Company has obtained written commitments from the relevant lending
parties, and has obtained certain of the required consents and approvals of
third parties required to access the Additional Bank Borrowings, the Additional
Vendor Borrowings and the Second Secured Borrowings. Nextel and the relevant
lending parties contemplate negotiating and entering into appropriate definitive
agreements implementing the terms of the financing arrangements relating to the
Additional Bank Borrowings, the Additional Vendor Borrowings and the Second
Secured Borrowings, as described above, and Nextel is now or shortly will
commence seeking the remaining consents and approvals required to gain access to
such additional financing. The availability of all of such additional
financing is also subject to Nextel's satisfying certain requirements under
the Nextel Indentures, which require Nextel to issue new equity for cash as a
condition to obtaining access to all amounts not constituting "Permitted
Indebtedness" (as such term is defined in the Nextel Indentures) under the
Bank Credit Facility and the Vendor Credit Facility, the Additional Bank
Borrowings, the Additional Vendor Borrowings and the Second Secured Borrowings
referred to above. Nextel's receipt of the $482,000,000 in net cash proceeds
from the issuance of the Series D Preferred Stock (the "Preferred Stock
Proceeds") is sufficient to enable Nextel to access all such funding sources
under the requirements of the Nextel Indentures.
To the extent any of the aforementioned proceeds from equity issuances or
financing arrangements are not available or are not sufficient to meet Nextel's
funding needs, it will be necessary for Nextel to obtain alternate sources of
financing. See "-- Forward Looking Statements." Assuming (i) that Nextel secures
access to all of the available funds under the Bank Credit Facility and the
Vendor Credit Facility, and enters into appropriate definitive agreements to
obtain access to the $250,000,000 in Additional Bank Borrowings and to the
$50,000,000 in Additional Vendor Borrowings, (ii) that Nextel can obtain access
to the $200,000,000 in Second Secured Borrowings, (iii) that the First Option is
exercised and Nextel receives the McCaw Option Proceeds and (iv) that the New
Option is exercised and Nextel receives the proceeds therefrom, Nextel believes
that such amounts, coupled with Nextel's available cash and cash equivalents
(including the Preferred Stock Proceeds), will provide funds that in the
aggregate are expected to be substantially sufficient to implement Nextel's
business plan and meet the other cash needs of its domestic business activities
through the end of 1998. Thereafter Nextel may require substantial additional
financing. See "-- Forward Looking Statements."
The availability of borrowings pursuant to the Bank Credit Facility and the
Vendor Credit Facility is, and the availability of the Additional Bank
Borrowings, the Additional Vendor Borrowings and the Second Secured Borrowings,
if structured successfully, is expected to be, subject to certain conditions,
and there can be no assurance that such conditions will be met. Moreover, there
can be no assurance that the Additional Bank Borrowings, the Additional Vendor
Borrowings or the Second Secured Borrowings will be available, that the New
Option will be exercised and that Nextel will receive the proceeds therefrom, or
that any of the other outstanding options, including the First Option, will be
exercised. The Bank Credit Facility, the Vendor Credit Facility and the Nextel
Indentures contain and will continue to contain provisions that operate to limit
the amount of borrowings that may be incurred by Nextel. In addition, Nextel's
capital needs, and its ability to adequately address those needs through debt or
equity funding sources, are subject to a variety of factors that cannot
presently be predicted with certainty, such as the commercial success of
Nextel's Digital Mobile networks incorporating the Reconfigured iDEN technology,
the amount and timing of Nextel's capital
27
<PAGE> 31
expenditures and operating losses and the market price of the Nextel Common
Stock. See "-- Forward Looking Statements."
Nextel currently is aware of numerous factors and considerations, any one
or more of which could have a material effect on the timing and/or amount of the
future funding to be required by Nextel, but Nextel cannot currently quantify
with precision either the magnitude or the certainty of the effects associated
with any such factors. These factors include: (i) the timing of the anticipated
800 MHz spectrum auction process, and the amounts required to be bid to acquire
any or all of the available spectrum blocks in the major metropolitan market
areas where Nextel currently operates, or currently plans to operate, its
Digital Mobile network and the amounts that may be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks that
may be acquired by Nextel in the 800 MHz spectrum auction process; (ii) the cash
amounts received by Nextel in connection with its offering of Nextel Common
Stock to Consenting Holders, if any, assuming consummation of the currently
contemplated offering of Nextel Common Stock as described above (see
"Summary -- A. The Parties to the Merger -- Nextel -- Recent
Developments -- Consent Solicitation"); (iii) the uncertainty with respect to
the success and/or timing of the continuing development and deployment
activities relating to the Reconfigured iDEN technology format and, assuming
successful and timely completion of such efforts, the uncertainty with respect
to the success of commercial introduction and customer acceptance of Nextel's
Digital Mobile services in new market areas using such technology; (iv) the
potential commercial opportunities and risks associated with implementation of
Nextel's accelerated business plan; and (v) the net impact on Nextel's capital
budget of certain developments currently expected to increase capital needs
(e.g., the additional capital needed if Nextel acquires for cash additional
spectrum in certain markets to increase the capacity and/or efficiency of
Nextel's operating Digital Mobile networks in such markets, the additional
capital needed for more extensive construction of Digital Mobile networks in
additional market areas acquired or that may be acquired in the future and the
expenditures associated with analog SMR station construction requirements under
the currently effective FCC 800 MHz channel licensing approach) that may be
offset (whether wholly or partially) by other developments anticipated to (or to
have the potential to) reduce capital needs (e.g., co-location of antenna and/or
transmitter sites with other providers of wireless services in the relevant
markets, reductions in infrastructure and subscriber unit prices obtained from
Motorola pursuant to the Second Equipment Agreement Amendment and a new
agreement entered into on March 27, 1997, alternative and more economical means
for increasing system capacity, other than constructing additional cell sites
and/or installing additional base radios, such as use of so-called "smart
antennas," mini-cells and software-driven and/or system design performance
enhancements). Many of the foregoing involve elements wholly or partially beyond
Nextel's control or influence. Other considerations in addition to the factors
identified above may significantly affect Nextel's decisions to seek additional
financing, including general economic conditions, conditions in the
telecommunications and/or wireless communications industry and the feasibility
and attractiveness of structuring particular financings for specific purposes
(e.g., separate capital-raising activities with respect to international
activities and opportunities). See "-- Forward Looking Statements."
Nextel has had and may in the future have discussions with third parties
regarding potential equity investments and debt financing arrangements to
satisfy actual or anticipated financing needs. Pursuant to the Motorola
Transaction, Nextel has agreed, under certain circumstances, not to grant
superior governance rights to any third-party investor without Motorola's
consent, which may make securing equity investments more difficult. The ability
of Nextel to incur additional indebtedness (including in certain circumstances,
indebtedness incurred under the Bank Credit Agreement and/or under the Vendor
Credit Agreement) is and will be limited by the terms of the Nextel Indentures,
the Bank Credit Agreement and the Vendor Credit Agreement. The Bank Credit
Agreement and the Vendor Credit Agreement also require Nextel and its relevant
subsidiaries at specified times to maintain compliance with certain financial
covenants or ratios including certain covenants and ratios specifically related
to leverage.
At present, other than the existing equity or debt financing arrangements
that have been consummated and/or disclosed, Nextel has no commitments or
understandings with any third parties to obtain any material amount of
additional equity or debt financing. Moreover, no assurances can be made that
Nextel will be able to obtain any such additional financing in the amounts or at
the times such financing may be required, or that,
28
<PAGE> 32
if obtained, any such financing would be on acceptable terms. Nextel also
anticipates that it will continue to experience significant operating losses and
negative cash flows during the ongoing start up phase of the Digital Mobile
networks over the next several years. Accordingly, there can be no assurances as
to whether or when the operations of Nextel will become profitable. As a result
of Nextel's anticipated continuing losses, the uncertainty regarding the
exercise of options and warrants, the availability of financing under the Bank
and Vendor Credit Facilities and, if successfully structured and established,
under the Additional Bank Borrowings, the Additional Vendor Borrowings and the
Second Secured Borrowings, and the impact of Reconfigured iDEN and other matters
discussed above, there can be no assurance that Nextel will have adequate
capital to implement the nationwide build-out of its Digital Mobile networks in
accordance with its business plan. Failure to obtain such financing could result
in the delay or abandonment of some or all of Nextel's acquisition, development
and expansion plans and expenditures, which could have a material adverse effect
on its business prospects and limit Nextel's ability to make principal and
interest payments on its indebtedness. See "-- Forward Looking Statements."
SUCCESS OF NEXTEL IS DEPENDENT ON ITS ABILITY TO COMPETE
Nextel's success depends on its Digital Mobile networks' ability to compete
with other wireless communications systems in each relevant market and its
ability to successfully market integrated wireless communications services.
Nextel is continuing to focus its marketing efforts on attracting customers from
its previously identified targeted groups of potential subscribers, chiefly its
existing analog SMR subscribers and other business users, including current
users of multiple wireless communications services and those new users who may
be attracted to the combination of services made possible by its Digital Mobile
networks.
Following implementation of its Digital Mobile networks and completion of
related system optimization activities, Nextel's Digital Mobile networks will
compete with established and future wireless communications operators in its
efforts to attract customers, dealers and possibly resellers to its service in
each of the markets in which it operates a Digital Mobile network. Nextel
believes that following software upgrades and additional system optimization
efforts and equipment and technology enhancements that occurred during 1996 and
the commercial deployment of the Reconfigured iDEN technology, Nextel's Digital
Mobile networks will have the capacity, functionality and quality of service
necessary to be competitive with current wireless communications services in the
markets in which Nextel operates Digital Mobile networks. Nextel's ability to
compete effectively with other wireless communications service providers,
however, will depend on a number of factors, including the successful deployment
of the Reconfigured iDEN technology platform in its market areas, the continued
satisfactory performance of such technology, the establishment of roaming
service among such market areas and the development of cost effective direct and
indirect channels of distribution for its products and services. Although Nextel
has made significant progress in these areas to date, no assurance can be given
that such objectives will be achieved. See "-- Ability to Manage Growth" and
"-- Forward Looking Statements."
While Nextel believes that the mobile telephone service provided on its
Digital Mobile networks utilizing the Reconfigured iDEN technology is similar in
function to and achieves performance levels competitive with those being offered
by other current wireless communications services providers in Nextel's market
areas, there are (and will in certain cases continue to be) differences between
the services provided by Nextel and by cellular and/or PCS system operators and
the performance of their respective systems. As a result of these differences,
there can be no assurance that services provided on Nextel's Digital Mobile
networks will be competitive with those available from other providers of mobile
telephone services. As part of its marketing strategy, Nextel will continue to
emphasize the benefits to its customers of obtaining an integrated package of
services consisting of mobile telephone service, two-way dispatch, paging and
alphanumeric short-messaging service, and in the future, data transmission.
Neither PCS system operators nor cellular operators currently provide such
integrated services, but recent FCC rulings permit cellular operators to offer
two-way dispatch services. If either PCS system or cellular operators do provide
two-way dispatch services in the future, Nextel's competitive advantage from
using such a marketing strategy may be impaired.
Nextel currently offers its mobile telephone customers the ability to
"roam" among Nextel's existing Digital Mobile network market areas, which as of
June 30, 1997 represented coverage of areas in which
29
<PAGE> 33
approximately 50% of the United States population lives or works. Accordingly,
Nextel will not be able to provide roaming service comparable to that currently
available from cellular operators, which have roaming agreements covering each
other's markets throughout the United States, unless and until nationwide
Digital Mobile networks build-out is substantially completed. Additionally, PCS
operators throughout the United States are expected to have agreements to permit
roaming among their markets. Moreover, the cellular systems in each of Nextel's
markets, as well as in the markets in which Nextel expects to provide services
in the future, have been operational for a number of years, currently service a
significant subscriber base and typically have significantly greater financial
and other resources than those available to Nextel. As is true for cellular
operators, the interconnection of subscriber units with the public switched
telephone network requires Nextel to purchase certain exchange and
inter-exchange services from telephone companies and certain other common
carriers.
Subscriber units on the Digital Mobile networks are not compatible with
cellular or PCS systems, and vice versa. This lack of interoperability may
impede Nextel's ability to attract cellular or PCS subscribers or those new
mobile telephone subscribers that desire the ability to access different service
providers in the same market. Nextel currently markets a multi-function
subscriber unit that is (and is likely to remain) significantly more expensive
than analog handsets and is (and is likely to remain) somewhat more expensive
than digital cellular and PCS handsets that do not incorporate a comparable
multi-function capability. Accordingly, the prices expected to be charged to
Nextel for the subscriber handsets to be used by Nextel's customers will be
higher than those charged to operators for analog cellular handsets and may be
higher than those charged to operators for digital cellular handsets. Nextel's
multi-function subscriber units, however, are competitively priced compared to
multi-function (mobile telephone service and alphanumeric short-text messaging)
digital cellular and PCS handsets. During the transition to digital technology,
certain participants in the United States cellular industry are offering
subscriber units with dual mode (analog and digital) compatibility. There can be
no assurances that existing analog SMR customers will be willing to invest in
new subscriber equipment necessary to migrate to the Digital Mobile networks.
Over the past several years as the number of wireless communications providers
in Nextel's market areas has increased, the prices of such providers' wireless
service offerings to customers in those markets have generally been decreasing.
Nextel may encounter further market pressures to reduce its service offering
prices to respond to particular short term, market specific situations (such as
special introductory pricing packages that may be offered by new providers
launching their service in a market) or to remain competitive in the event that
wireless service providers generally continue to reduce the prices charged to
their customers. Moreover, because many of the cellular operators and certain of
the PCS operators in Nextel's markets have substantially greater financial
resources than Nextel, such operators may be able to offer prospective customers
equipment subsidies or discounts that are substantially greater than those, if
any, that could be offered by Nextel and may be able to offer services to
customers at prices that are below prices that Nextel is able to offer for
comparable services. Thus, Nextel's ability to compete based on the price of
subscriber units and service offerings will be limited. Nextel cannot predict
the competitive effect that any of these factors, or any combination thereof,
will have on Nextel. See "-- Forward Looking Statements."
Cellular operators and certain PCS operators and entities that have been
awarded PCS licenses each control more spectrum than is allocated for SMR
service in each of the relevant market areas. Each cellular operator is licensed
to operate 25 MHz of spectrum and certain PCS licensees have been licensed for
30 MHz of spectrum in the markets in which they are licensed, while no more than
21.5 MHz is available in the 800 MHz band to all SMR systems, including Nextel's
systems, in those markets. The control of more spectrum gives cellular operators
and such PCS licensees the potential for more system capacity, and, therefore,
more subscribers, than SMR operators, including Nextel. Nextel believes that it
generally has adequate spectrum to provide the capacity needed on its Digital
Mobile networks for the foreseeable future. See "-- Forward Looking Statements."
Each of the markets in which Nextel's Digital Mobile networks operate or
will operate is serviced by multiple other wireless communications service
providers. In each of the markets where Nextel's Digital Mobile networks
operate, Nextel may compete with the two established cellular licensees in such
market and as many as six PCS licensees. The FCC has described PCS as a digital,
wireless communications system
30
<PAGE> 34
consisting of a variety of new mobile and portable services and technologies,
using small, lightweight units. PCS services may include portable, two-way voice
and data services. A substantial number of the entities that have been awarded
PCS licenses are current cellular communications service providers and joint
ventures of current and potential wireless communications service providers,
many of which have financial resources, subscriber bases and name recognition
greater than Nextel. PCS operators will likely compete with Nextel in providing
some or all of the services available through Nextel's Digital Mobile networks.
Additionally, Nextel expects that existing cellular service providers, some of
which have been operational for a number of years and have significantly greater
financial and technical resources, subscriber bases and name recognition than
Nextel, will continue to upgrade their systems to provide digital wireless
communications services competitive with Nextel's Digital Mobile networks.
Nextel also expects to face competition from other technologies and services
developed and introduced in the future. Nextel cannot predict how these
technologies will develop or what impact, if any, they will have on Nextel's
ability to compete for wireless communications services customers. See
"-- Forward Looking Statements."
Nextel currently anticipates that it will rely more heavily on indirect
distribution channels to achieve greater market penetration for its digital
wireless service offerings. As Nextel expands its retail subscriber base through
increased reliance on indirect distribution channels, the average revenue per
subscriber unit may decrease.
ABILITY TO MANAGE GROWTH
As a result of acquisitions, the commencement of Digital Mobile network
service in certain markets and increased sales in markets in which Digital
Mobile network services are provided, the number of subscriber units in service
on Nextel's Digital Mobile network has increased substantially over the past
several years.
The ability of Nextel to continue to add increasing numbers of subscribers
on its Digital Mobile network is dependent on a variety of factors. Among the
more important of such factors is Nextel's ability to successfully plan for
additional system capacity in its market areas at levels adequate to accommodate
anticipated new subscribers and the related increases in system usage. One
important factor influencing system capacity is the amount of spectrum available
to Nextel in a particular market area. Although Nextel intends to continue to
pursue opportunities to acquire additional SMR spectrum in its market areas,
Nextel believes that its present holdings of 800 MHz spectrum are generally
adequate for the current and reasonably foreseeable operation of its Digital
Mobile network.
Additionally, Nextel requires that a sufficient quantity of cell sites,
system infrastructure equipment and subscriber units, of the appropriate models
and types, be available to meet the demands and preferences of potential
subscribers to the Digital Mobile network. To date, Nextel has been able to
secure sufficient cell sites at appropriate locations in its markets to meet
planned system coverage and capacity targets, and also has been able to obtain
adequate quantities of base radios and other system infrastructure equipment
from Motorola and other suppliers, and adequate volumes and mix of subscriber
units and related accessories from Motorola, to meet subscriber and system
loading rates. Although Nextel does not currently foresee (based on, among other
factors, its scheduled system construction and expansion activities and its
anticipated rates of customer and service usage growth) any significant supply
problems in the near term, Motorola is the sole supplier of system
infrastructure equipment and subscriber units and most of the related equipment
required by Nextel to construct and operate its Digital Mobile network, and
there can be no assurance that such supply problems or related issues will not
occur in the future.
Nextel's ability to successfully add customers on its Digital Mobile
network depends upon the adequacy and efficiency of its information systems,
business processes and related support functions. Nextel relies on its own
fulfillment processes and related information system resources to accomplish
tasks necessary to initiate service for prospective customers, such as
identifying and provisioning from inventory appropriate subscriber units and
desired accessories, programming subscriber units to support desired functions
and features, registering subscriber units to appropriate authorized users of
the Digital Mobile network and setting up appropriate customer accounts and
other billing records and data.
31
<PAGE> 35
Due to the multiple wireless service offering packages and the need to
create customized applications (for instance, programming multiple talk groups
for the Direct Connect service), the length of time from customer order to
commencement of service (the "activation cycle") on the Digital Mobile network
has been longer than the activation cycle typically encountered for "off the
shelf" cellular and PCS wireless service offerings. Nextel is currently taking
steps to refine, improve and scale-up its customer and service information
reporting, subscriber unit fulfillment, service activation and billing systems
and processes to meet the increased demands that are expected to be associated
with anticipated increases in subscriber growth and Digital Mobile network
wireless systems and service utilization. Nextel also is exploring alternatives
to shorten its Digital Mobile network activation cycle, such as
"pre-programming" subscriber units with standardized talk groups and potential
development with Motorola of an "over the air" programming capability for
digital subscriber units. Finally, Nextel's customer service functions must
continue to improve the efficiency and speed of their processes to adequately
respond to the needs of a growing customer base on the Digital Mobile network.
Customer reliance on Nextel's customer service functions may increase as more
Digital Mobile network customers are added through indirect distribution
channels.
There can be no assurance that the back-office and support systems and
processes discussed above will achieve levels of capacity, or improvements in
speed and efficiency, sufficient to meet actual customer and network growth and
demands, or will be able to do so on a timely basis. Any inability of Nextel to
timely meet Digital Mobile network capacity needs, to have access to suitable
cell sites and infrastructure and subscriber equipment in any one or more of its
market areas, or to develop when and as required improvements or expansions to
its systems and processes adequate to meet desired levels of customer activation
and demand for wireless services on the Digital Mobile network could decrease or
postpone subscriber growth, thereby adversely affecting Nextel's revenues,
business and prospects.
RELIANCE ON ONE PRINCIPAL SUPPLIER IN IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
Pursuant to existing equipment purchase agreements first entered into in
1991, as subsequently amended (such equipment purchase agreements, as amended,
being referred to herein as the "Equipment Purchase Agreements"), between Nextel
and Motorola, Motorola provides the iDEN infrastructure and subscriber handset
equipment to Nextel throughout its markets. Nextel expects that it will need to
rely on Motorola for the manufacture of a substantial portion of the equipment
necessary to construct its Digital Mobile networks and handset equipment for the
foreseeable future. The Equipment Purchase Agreements include a commitment from
Nextel to purchase from Motorola a significant amount of system infrastructure
equipment. Nextel has, among other things, agreed (subject to certain
conditions) to purchase and install iDEN equipment during the four-year and
six-year periods beginning on August 4, 1994 sufficient to cover 70% and 85%,
respectively, of the United States population. In addition, subject to the
applicable terms and conditions under the Second Equipment Agreement Amendment,
Nextel has agreed to deploy Reconfigured iDEN technology and, until August 4,
1999 and subject to certain conditions, to purchase from Motorola at least 50%
of the base radios Nextel purchases in any calendar year. See "-- Success of
Nextel is Dependent on its Ability to Compete" and "-- Forward Looking
Statements." Such commitments are in addition to amounts purchased from Motorola
or for which Nextel or companies acquired by Nextel had placed orders with
Motorola prior to August 4, 1994, which orders have become obligations of
Nextel.
The Second Equipment Agreement Amendment limits Nextel's ability, prior to
October 1, 1997 without Motorola's consent, to deploy a "Switch in Technology"
which, under the Second Equipment Agreement Amendment, is defined to mean a
decision by Nextel before August 4, 1999 to install and use digital radio
frequency technology as an alternative to iDEN on more than 25% of its SMR
channels in the 806-824 MHz band in one or more of its top 20 domestic markets,
or the utilization by Nextel of any of its SMR channels for voice interconnect
on certain United States cellular and/or PCS radio telephony standards. After
October 1, 1997, Nextel may not implement such a Switch in Technology unless (1)
Nextel determines that the iDEN or Reconfigured iDEN equipment fails to meet
certain performance specifications established in the Second Equipment Agreement
Amendment, which failure materially adversely affects the commercial viability
of the technology to provide reliable services as intended by Motorola and
Nextel, and Motorola does not cure such failure within six months after
receiving notice thereof, or (2) Nextel or the McCaw Investor offers to acquire
32
<PAGE> 36
the remainder of Motorola's shares of Nextel Common Stock at a per share price
of at least 110% of the average of the closing prices of the Nextel Common Stock
over the 30 trading days preceding the public announcement by Nextel of the
decision to implement such a Switch in Technology. In either case, if Motorola
manufactures (or elects to manufacture) the alternate technology Nextel elects
to deploy, Nextel must purchase 50% of its infrastructure requirements and 25%
of its subscriber equipment requirements from Motorola for three years, provided
such equipment is competitive in price and performance to the equipment
utilizing or incorporating such alternate technology then offered by other
manufacturers.
It is expected that for the next few years of Digital Mobile network
operations by Nextel, Motorola and competing manufacturers who are licensed by
Motorola will be the only manufacturers of subscriber equipment that is
compatible with Nextel's Digital Mobile networks. The Equipment Purchase
Agreements between Nextel and Motorola first entered into in 1991, as
subsequently amended by, among others, the amendment entered into in connection
with the Motorola Transaction (the "Prior Equipment Agreement Amendment")
provide for the licensing by Motorola of interfaces relating to infrastructure
and subscriber equipment and of additional manufacturers for subscriber
equipment. In connection with the Second Equipment Agreement Amendment, Motorola
further agreed to negotiate to enter into licenses with at least one alternative
manufacturer of iDEN infrastructure equipment. Currently, however, there are no
arrangements in effect with any additional manufacturers to supply Nextel with
alternative sources for either iDEN system infrastructure or subscriber
equipment.
NEXTEL'S PROSPECTS ARE DEPENDENT ON GOVERNMENTAL REGULATION
The licensing, operation, acquisition and sale of Nextel's SMR businesses
are regulated by the FCC. FCC regulations have undergone significant changes
during the last three years and continue to evolve as new FCC rules and
regulations are adopted pursuant to the Omnibus Budget Reconciliation Act of
1993 and the Telecommunications Act of 1996. Nextel's ability to conduct its
business is dependent, in part, on its compliance with FCC rules and
regulations. Future changes in regulation or legislation affecting Digital
Mobile network service and Congress' and the FCC's recent allocation of
additional Commercial Mobile Radio Services spectrum could materially adversely
affect Nextel's business. See "-- Forward Looking Statements."
NEXTEL'S ASSETS PRIMARILY CONSIST OF INTANGIBLE FCC LICENSES
Nextel's assets consist primarily of intangible assets, principally FCC
licenses, the value of which will depend significantly upon the success of
Nextel's business and the growth of the SMR and wireless communications
industries in general. In the event of default on indebtedness or liquidation of
Nextel, there can be no assurance that the value of these assets will be
sufficient to satisfy its obligations. Nextel had a negative net tangible book
value of $1,268,000,000 as of December 31, 1996.
NEXTEL SUSCEPTIBLE TO CONTROL BY SIGNIFICANT STOCKHOLDERS
Based on securities ownership information relating to Nextel as of June 30,
1997, and giving effect (on such date) to the conversion of the outstanding
shares of Nextel's preferred stock and Class B Non-Voting Common Stock, par
value $0.001 per share (the "Non-Voting Common Stock") and the exercise in full
of (i) three separate options held by the McCaw Investor exercisable for periods
of two, four and six years, respectively, from July 28, 1995, to acquire an
aggregate of up to 35,000,000 shares of Nextel Common Stock at exercise prices
ranging from $15.50 to $21.50 per share (the "McCaw Options"), (ii) the option
held by Eagle River, Inc., an affiliate of the McCaw Investor ("Eagle River"),
to purchase an aggregate of 1,000,000 shares of Nextel Common Stock at an
exercise price of $12.25, which option vests over a five-year period from April
4, 1995 (the "Incentive Option"), (iii) the New Option issued to an affiliate of
Craig O. McCaw to acquire 15,000,000 shares at $16.00 per share and 10,000,000
shares at $18.00 per share prior to July 29, 1998, (iv) the options granted on
July 28, 1995 to the McCaw Investor by Motorola to purchase up to 9,000,000
shares of Nextel Common Stock over a six-year period (the "McCaw
Investor/Motorola Options") and (v) a warrant held by Motorola to purchase
2,890,000 shares of Nextel Common Stock, the McCaw
33
<PAGE> 37
Investor would hold approximately 30.3% and Motorola would hold approximately
15.7% of the Nextel Common Stock that would be outstanding as of such date.
In connection with the consummation of the McCaw Transaction and pursuant
to the Securities Purchase Agreement dated as of April 4, 1995, as amended,
among Nextel, the McCaw Investor and Craig O. McCaw (the "McCaw Securities
Purchase Agreement"), the McCaw Investor has the right to designate not less
than 25% of the Board of Directors of Nextel (the "Nextel Board"). Additionally,
the McCaw Investor is entitled to have a majority of the members of the
Operations Committee of the Nextel Board selected from the McCaw Investor's
representatives on the Nextel Board. The Operations Committee has the authority
to formulate key aspects of Nextel's business strategy, including decisions
relating to the technology used by Nextel (subject to existing equipment
purchase agreements), acquisitions, the creation and approval of operating and
capital budgets and marketing and strategic plans, approval of financing plans,
endorsement of nominees to the Nextel Board and committees thereof and
nomination and oversight of certain executive officers. As a result, based upon
the McCaw Investor's stock ownership position, as well as its ability to
designate at least 25% of the members of the Nextel Board and control the
Operations Committee, the McCaw Investor is in a position to exert significant
influence over Nextel's affairs. The Nextel Board retains the authority to
override actions taken or proposed to be taken by the Operations Committee,
subject, in certain circumstances, to certain financial consequences. The
creation and existence of the Operations Committee does not change the normal
fiduciary duties of the Nextel Board, including fiduciary duties in connection
with any proposal to override any action of or to terminate the Operations
Committee, whether or not such action would give rise to such financial
consequences. Although Motorola is entitled to nominate two directors to the
Nextel Board, presently only one person designated by Motorola is a Nextel
director. Pursuant to an amendment to the Agreement and Plan of Contribution and
Merger dated as of April 4, 1995, by and among Nextel, Motorola and certain
subsidiaries of Motorola (the "Motorola Amendment"), Motorola has agreed to
support the decisions and recommendations of the Operations Committee and to
vote the shares of Nextel Common Stock held by it accordingly, subject to (1)
the right of any Motorola-designated Nextel directors to vote in a manner
consistent with their fiduciary duties and (2) the right of Motorola to vote its
shares as it determines necessary with respect to issues that conflict with
Motorola's corporate ethics or that present conflicts of interest, or in order
to protect the value or marketability of the shares of Nextel Common Stock held
by it.
Based upon their respective ownership positions, if the McCaw Investor and
Motorola chose to act together, such parties could have a sufficient voting
interest in Nextel, among other things, to (1) exert effective control over the
approval of amendments to Nextel's Restated Certificate of Incorporation, as
amended (the "Nextel Charter"), mergers, sales of assets or other major
corporate transactions as well as other matters submitted for stockholder vote,
(2) defeat a takeover attempt and (3) otherwise control whether particular
matters are submitted for a vote of the stockholders of Nextel. Although
Motorola has made certain commitments as described in the last sentence of the
preceding paragraph, Nextel is not aware of any current agreements among the
McCaw Investor and Motorola with respect to the ownership or voting of Nextel
Common Stock and neither Motorola nor the McCaw Investor has indicated to Nextel
that it has any present intention to seek to exercise such control. Pursuant to
the McCaw Securities Purchase Agreement, the McCaw Investor has agreed that it
will not vote for any nominee to the Nextel Board other than persons it is
entitled to designate under the terms of the securities it owns or of the McCaw
Securities Purchase Agreement. Upon request of Nextel, the McCaw Investor has
also agreed to cause shares of Nextel Common Stock, the voting of which is
controlled by it or its affiliates, to be voted in a manner proportionate to the
votes of other holders of Nextel Common Stock in the election of directors so
designated by the Nextel Board.
Each of the McCaw Investor and Motorola has and (subject to the terms of
applicable agreements between such parties and Nextel) may have an investment or
interest in entities that provide wireless telecommunications services that
could potentially compete with Nextel. Under the McCaw Securities Purchase
Agreement, the McCaw Investor, Craig O. McCaw and their Controlled Affiliates
(as defined in the McCaw Securities Purchase Agreement) may not, for a period of
time after consummation of the McCaw Transaction, participate in other two-way
terrestrial-based mobile wireless communications systems in the region that
includes any part of North America or South America unless such opportunities
have first been
34
<PAGE> 38
presented to and rejected by Nextel in accordance with the provisions of the
McCaw Securities Purchase Agreement. Such limitation is subject to certain
limited exceptions, including certain existing securities holdings and
relationships (and expressly including Craig O. McCaw's investment in AT&T
resulting from AT&T's acquisition of McCaw Cellular, which investment may not
exceed 3% of the outstanding stock of AT&T). Such restrictions terminate on the
later to occur of July 28, 2000 or one year after the termination of the
Operations Committee. See "-- Potential Conflict of Interest Relationship With
Motorola."
POTENTIAL DILUTION FROM PENDING AND FUTURE TRANSACTIONS
As indicated elsewhere in this Proxy Statement/Prospectus, Nextel has
commitments, and from time to time may enter into additional commitments, to
issue a substantial number of new shares of Nextel Common Stock. The shares that
are subject to such issuance commitments, to a large degree, either will be
issued in registered transactions and thus will be freely tradeable, or will be
subject to grants of registration rights which, if and when exercised, would
result in such shares becoming freely tradeable. Additionally, to incur debt in
excess of permitted debt levels prior to January 1, 2000, pursuant to the
amendments to the Nextel Indentures as described above (see "Summary -- A. The
Parties to the Merger -- Nextel -- Recent Developments -- Consent
Solicitation"), Nextel would be required to issue new equity.
As of June 30, 1997, there were approximately 266,553,585 shares of Nextel
Common Stock outstanding (assuming the conversion of the outstanding shares of
Nextel's Non-Voting Common Stock and Nextel's preferred stock), on a primary,
rather than a fully diluted, basis, and approximately 356,433,335 shares of
Nextel Common Stock would have been outstanding assuming the exercise of all
options (including employee options, warrants initially issued to Motorola to
purchase 3,000,000 shares, the options to purchase an aggregate of 36,000,000
shares pursuant to the McCaw Options and the Incentive Option and an aggregate
of 25,000,000 shares pursuant to the New Option), warrants and other existing
rights to acquire Nextel Common Stock outstanding on such date.
On April 29, 1996, the Commission declared effective Nextel's registration
statement on Form S-4, covering 10,000,000 shares of Nextel Common Stock, or
warrants to acquire such shares, which contemplates issuances from time to time
on a "shelf" basis in accordance with Rule 415(a)(1)(viii) promulgated under the
Securities Act in connection with acquisitions of other businesses, properties
or securities in business combination transactions. As of the date hereof,
Nextel has issued 186,621 shares of Nextel Common Stock pursuant to such
registration statement. Also on June 4, 1997, Nextel filed a registration
statement on Form S-3 with the Commission relating to the offering of
approximately 4,200,000 shares of Nextel Common Stock exclusively to Consenting
Holders as described above (see "Summary -- A. The Parties to the
Merger -- Nextel -- Recent Developments -- Consent Solicitation").
Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor was
granted anti-dilutive rights with respect to certain Nextel share issuances (the
"McCaw Purchase Right"). An increase in the number of shares of Nextel Common
Stock that will become available for sale in the public market may adversely
affect the market price of Nextel Common Stock and, as a result, could impair
Nextel's ability to raise additional capital through the sale of its equity
securities.
SHARES ELIGIBLE FOR FUTURE SALE
Existing holders of Nextel Common Stock generally may freely resell their
shares except to the extent that they are deemed to be affiliates of Nextel or
certain predecessor companies for purposes of Rule 144 or Rule 145 promulgated
under the Securities Act. Nextel has also granted registration rights with
respect to a significant number of its shares outstanding on a fully diluted
basis, including shares of Nextel Common Stock issuable upon conversion of
securities issued in, or upon exercise of options granted in, the Motorola
Transaction and the McCaw Transaction. The exercise of registration rights by
persons entitled thereto would permit such persons to sell such shares without
regard to the limitations of Rule 144. An increase in the number of shares of
Nextel Common Stock that will become available for sale in the public market may
adversely affect the market price of Nextel Common Stock and could, as a result,
impair Nextel's ability to raise additional capital through the sale of its
equity securities.
35
<PAGE> 39
DIVIDEND POLICY LIMITS EXPECTATION OF FUTURE DIVIDENDS
Nextel has not paid any dividends on Nextel Common Stock and does not plan
to pay dividends on Nextel Common Stock for the foreseeable future. The Nextel
Indentures, the Bank Credit Agreement and the Vendor Credit Agreement presently
prohibit, and are expected to operate so as to continue to prohibit, Nextel from
paying dividends. In addition, the collateral security mechanisms and related
provisions associated with the Bank and Vendor Credit Facilities limit the
amount of cash available to make dividends, loans and cash distributions to
Nextel from Nextel's subsidiaries that operate Digital Mobile networks in
Nextel's markets. Accordingly, while such restrictions are in place, any profits
generated by such subsidiaries will not be available to Nextel for, among other
purposes, payment of dividends.
POTENTIAL CONFLICT OF INTEREST RELATIONSHIP WITH MOTOROLA
Motorola and its affiliates have and currently are engaged in wireless
communications businesses, and may in the future engage in additional such
businesses, which are or may be competitive with some or all of the services
offered by Nextel's Digital Mobile networks, although the Motorola Land Mobile
Products Sector ("Motorola LMPS") may not, prior to July 28, 1998, make use
(with certain limited exceptions) of the customer lists conveyed by Motorola to
ESMR in connection with the Motorola Transaction to solicit subscribers for any
800 MHz SMR commercial mobile voice business owned or managed by Motorola LMPS
in the continental United States. Pursuant to the Second Equipment Agreement
Amendment, Motorola has agreed that until July 1998, Motorola LMPS will not
solicit other iDEN customers and neither Motorola LMPS nor Motorola's credit
corporation subsidiary will make any equity investment in, or provide
equipment/vendor financing to, certain iDEN customers with respect to purchases
of iDEN equipment.
In light of the competitive posture of Motorola, Nextel and Motorola have
agreed that any information relating to Nextel's business plans and projections
will be used by Motorola only for purposes of ensuring compliance with Nextel's
obligations under the various equipment purchase agreements and financing
agreements between Nextel and Motorola. Motorola has designated one director to
the Nextel Board and, hence, such director has access to Nextel's business plans
subject to certain confidentiality restrictions.
Although Nextel believes that its equipment purchase and financing
relationship with Motorola has been structured to reflect the realities of
purchasing and borrowing from a competitor, there can be no assurance that the
potential conflict of interest will not adversely affect Nextel in the future.
Moreover, Motorola's role as a significant stockholder of Nextel, in addition to
its role as a major creditor and supplier, also creates potential conflicts of
interest, particularly with regard to significant transactions.
CONCERNS ABOUT MOBILE COMMUNICATIONS HEALTH RISK MAY AFFECT PROSPECTS OF NEXTEL
Allegations have been made, but not proven, that the use of portable mobile
communications devices may pose health risks due to radio frequency emissions
from such devices. Studies performed by wireless telephone equipment
manufacturers have investigated these allegations, and a major industry trade
association and certain governmental agencies have stated publicly that the use
of such phones poses no undue health risk. The actual or perceived risk of
mobile communications devices could adversely affect Nextel through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber or through reduced financing available to the mobile communications
industry.
FORWARD LOOKING STATEMENTS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: A number of the matters and subject areas discussed in the foregoing
"Risk Factors" section 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 materially differ from
Nextel's actual future experience involving any one or more of such matters and
subject areas. Nextel has attempted to identify, in context, certain of the
factors that it currently believes may cause actual future experience and
results to differ from Nextel's current expectations regarding the relevant
matter or subject area. The operation and results of Nextel's wireless
communications business also may be
36
<PAGE> 40
subject to the effect of other risks and uncertainties in addition to the
relevant qualifying factors identified elsewhere in the foregoing "Risk Factors"
section, including, but not limited to, general economic conditions in the
geographic areas and occupational market segments that Nextel is targeting for
its Digital Mobile network service, the availability of adequate quantities of
system infrastructure and subscriber equipment and components to meet Nextel's
service deployment and marketing plans and customer demand, the success of
efforts to improve and satisfactorily address any issues relating to Digital
Mobile system performance, the successful nationwide deployment of the
Reconfigured iDEN technology, the ability to achieve market penetration and
average subscriber revenue levels sufficient to provide financial viability to
the Digital Mobile network business, Nextel's ability to timely and successfully
accomplish required scale-up of its billing, customer care and similar back-room
operations to keep pace with customer growth and increased system usage, access
to sufficient debt or equity capital to meet Nextel's operating and financing
needs, the quality and price of similar or comparable wireless communications
services offered or to be offered by Nextel's competitors, including providers
of cellular and PCS service, future legislative or regulatory actions relating
to SMR services, other wireless communications services or telecommunications
generally and other risks and uncertainties described from time to time in
Nextel's reports filed with the Commission, including the Annual Report on Form
10-K for the fiscal year ended December 31, 1996 and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.
CERTAIN MARKET INFORMATION
NEXTEL
Nextel Common Stock is traded on the Nasdaq NM under the symbol "NXTL."
Prior to February 3, 1997, Nextel Common Stock traded under the symbol "CALL."
The table below presents the quarterly high and low sale prices for Nextel
Common Stock as furnished by The Nasdaq Stock Market ("Nasdaq") for the periods
indicated. Nextel has not paid any dividends on Nextel Common Stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: HIGH LOW
------------------------------------------------------------------ ------- -------
<S> <C> <C>
1995
First Quarter................................................ $15.625 $ 9.375
Second Quarter............................................... $18.000 $13.000
Third Quarter................................................ $21.750 $14.000
Fourth Quarter............................................... $18.125 $13.875
1996
First Quarter................................................ $18.875 $13.500
Second Quarter............................................... $23.375 $16.750
Third Quarter................................................ $20.250 $14.375
Fourth Quarter............................................... $18.500 $12.750
1997
First Quarter................................................ $15.750 $12.875
Second Quarter............................................... $19.188 $12.250
Third Quarter (through , 1997)................. $ $
</TABLE>
The closing sales price for a share of Nextel Common Stock on October 2,
1996, the last trading day preceding the announcement of the proposed Merger,
was $18.125. As of June 30, 1997, there were approximately 3,066 holders of
record of shares of Nextel Common Stock. As of June 30, 1997, there was one
holder of record of shares of Nextel Non-Voting Common Stock, for which there is
no established public trading market, but which under certain circumstances may
be converted into an identical number of shares of Nextel Common Stock. See
"Comparison of Rights of Holders of Shares of Each of Nextel Common Stock and
PCI Common Stock -- Voting Rights."
37
<PAGE> 41
PCI
PCI Common Stock is traded on the Nasdaq NM under the symbol "PITC." The
following table presents the quarterly high and low sale prices for PCI Common
Stock as furnished by Nasdaq for the periods indicated. PCI has never declared a
dividend on PCI Common Stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: HIGH LOW
------------------------------------------------------------------ ------- -------
<S> <C> <C>
1995
First Quarter................................................ $6.250 $3.750
Second Quarter............................................... $7.000 $4.125
Third Quarter................................................ $6.250 $4.313
Fourth Quarter............................................... $4.625 $3.125
1996
First Quarter................................................ $5.5000 $3.375
Second Quarter............................................... $8.9375 $4.750
Third Quarter................................................ $6.8125 $3.625
Fourth Quarter............................................... $5.5000 $3.375
1997
First Quarter................................................ $4.4375 $3.375
Second Quarter............................................... $5.563 $3.313
Third Quarter (through , 1997)..................... $ $
</TABLE>
The closing sales price for a share of PCI Common Stock on October 2, 1996,
the last trading day preceding the announcement of the proposed Merger, was
$5.25. As of [July 21], 1997, there were approximately [937] holders of record
of shares of PCI Common Stock.
THE MEETING
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the PCI Board for the Meeting to be held on ,
1997 at the time and place and for the purpose set forth in the accompanying
Notice of Special Meeting.
Any PCI stockholder who has previously delivered a properly executed proxy
may revoke such proxy at any time before its exercise. A proxy may be revoked
either by (i) delivering to the Secretary of PCI prior to the Meeting either a
written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Meeting and voting in person, regardless of whether a
proxy has previously been given. All valid, unrevoked proxies will be voted as
directed. In the absence of any contrary directions, proxies will be voted in
favor of the proposal set forth in the Notice of Special Meeting.
Only holders of record of PCI Common Stock as of the close of business on
, 1997 will be entitled to vote at the Meeting. Each share of PCI Common
Stock is entitled to one vote on all matters on which stockholders may vote. The
presence at the Meeting, in person or by proxy, of the holders of a majority of
the issued and outstanding shares of PCI Common Stock will constitute a quorum
for the transaction of business. The Merger Agreement must be approved by
holders of a majority of the issued and outstanding shares of PCI Common Stock.
Abstentions will be counted in determining whether a quorum is present, will be
considered present and entitled to vote, and will thus have the effect of a
negative vote. If a proxy is returned by a broker or other stockholder who does
not have authority to vote, does not give authority to a proxy to vote or
withholds authority to vote on one or more matters as to any shares, such shares
will be considered present at the Meeting for purposes of determining a quorum,
but will not be considered for purposes of calculating the vote with respect to
such matters.
On the Record Date, there were [26,163,225] shares of PCI Common Stock
outstanding, [11,061,590] of which (excluding 477,160 shares which may be
acquired upon exercise of options that are exercisable as of the Record Date or
within 60 days thereafter), or approximately [42.3%], were beneficially owned by
directors
38
<PAGE> 42
and executive officers of PCI and their affiliates. Such beneficial ownership
includes [10,952,859] shares owned by AMI or for which AMI has voting rights
pursuant to a voting agreement. Holders or the persons with the right to vote
all of such shares have advised PCI that they presently intend to vote such
shares in favor of the Merger Agreement.
The proxy solicitation is being made primarily by mail, although proxies
may be solicited by personal interview, facsimile or other means of
communication. In addition, PCI has asked banks and brokers to forward copies of
the proxy materials to persons for whom they hold PCI Common Stock and to
request authority for execution of the proxies. PCI will reimburse the banks and
brokers for their reasonable out-of-pocket expenses in doing so. This Proxy
Statement/Prospectus and the proxy card are being mailed to stockholders on or
about , 1997.
Approval of the Merger Agreement by the stockholders of Nextel is not
required by the provisions of the Nextel Charter, Delaware law or the Merger
Agreement. NFC, the sole stockholder of Merger Sub, has approved the Merger
Agreement on behalf of Merger Sub.
THE MERGER
BACKGROUND OF THE MERGER
As a result of the participation of Nextel and PCI in the SMR industry and
their attendance at industry conferences, certain members of the respective
managements of each of Nextel and PCI had known each other prior to 1994. On
July 25, 1994, representatives of Nextel and PCI met to discuss a possible
transaction between the two companies, including the possibility of a merger.
Over the ensuing few weeks the companies executed a confidentiality agreement
and exchanged basic information regarding frequency positions and financial
operating information. These discussions ended due primarily to differences in
valuation of PCI.
In late July 1995, PCI approached Nextel regarding the possibility of
entering into a joint venture or other operating arrangement for the development
of digital systems in several markets in the southwestern United States.
On August 9, 1995, representatives of PCI met with representatives of
Nextel. PCI presented its approach for a possible joint venture, initially in El
Paso and New Mexico, which would involve the contribution of channels by both
parties, the build-out of the cell sites by Nextel and the use of a Nextel
switch under arm's-length contracts, and day-to-day management and marketing of
the system by PCI. The ownership of the joint venture was proposed to be based
upon each company's relative channel position. At the same meeting, Nextel
proposed the possibility of leasing frequencies from PCI, with Nextel operating
the system, and PCI acting as the marketing agent for the system. After some
discussion on the joint venture proposals, it was agreed that the parties needed
to gather the most recent information regarding their respective channel
positions and to develop a financial model of a possible joint venture in El
Paso and New Mexico. Among the matters also considered at this meeting was the
relationship between the potential joint venture and the upcoming 800 MHz
auctions. Among other things, the parties considered possible cooperative
bidding arrangements and the disposition of channels in the event the joint
venture did not come to fruition. Nextel indicated that it was willing to
consider a pre-auction arrangement but did not believe it to be imperative.
While no agreements were reached, the parties agreed to continue their
discussions. On August 10, 1995, Nextel and PCI entered into a Confidentiality
Agreement.
The parties reconvened on August 23, 1995. During this meeting, PCI again
proposed a joint venture that would allow PCI to obtain "ownership rights" to
certain markets where they had a stronger frequency position than Nextel. This
would be accomplished by PCI leasing frequencies from Nextel and building out
and operating digital systems in those markets, subject to meeting certain
operating standards upon which the parties would agree. Nextel rejected this
proposal, and the parties were unable to reach an agreement on a possible joint
venture. Finally, Nextel proposed an auction settlement with PCI which would
have resulted in joint bidding as a consortium in over-lap markets during the
auction with a pre-determined split of any
39
<PAGE> 43
licenses won. After some discussion, the parties were unable to reach an
agreement regarding the auction settlement and the meeting was concluded.
In late January 1996, Nextel was approached by PCI regarding a possible
investment in PCI. Specifically, it was suggested that Nextel could make an
initial investment in PCI with staged options to obtain control of PCI over
time. Warren Harkins, Chief Executive Officer of PCI, and John Willmoth, Vice
President-Strategy of Nextel, had a subsequent telephone conversation discussing
such proposal in late January, with Mr. Willmoth indicating to Mr. Harkins that
PCI's public valuation was likely to be a stumbling block to any potential
transaction because at the time Nextel viewed PCI as being fully valued, and
that there could be no discussions regarding 900 MHz given the ongoing auction
of 900 MHz licenses in which both parties were participating. With those
caveats, Nextel agreed to meet with PCI.
On February 7, 1996, Nextel, represented by Dennis Weibling, then the
acting President, and Mr. Willmoth, met with PCI, represented by Messrs. Warren
Harkins, C.G. Whitten, Senior Vice President and General Counsel, Thomas
Modisett, Chief Financial Officer, and George Hertz, then a director of PCI, at
a hotel in Irving, Texas. After discussing PCI's current channel position and
operating condition, the discussion turned to a possible merger between the
companies. While there was no specific discussion of valuation at this meeting,
the parties discussed the types of terms which might be acceptable. PCI's
representatives indicated that receiving registered shares of Nextel Common
Stock in any transaction was an important issue for PCI and that they wanted a
binding deal with as few conditions as possible because they needed certainty
prior to entering the 800 MHz auctions and would need to make some near term
technology decisions in the absence of a transaction with Nextel. Nextel
proposed a 30 day due diligence period followed by a fifteen day negotiating
period to determine if the parties could agree upon an acceptable transaction.
At the conclusion of the meeting, it was agreed that PCI's representatives would
prepare an outline of a term sheet and send the most recent financial statements
to Nextel to begin the due diligence process. The parties left the meeting with
the intention of reconvening on March 13, 1996.
Shortly after the February 7, 1996 meeting, Nextel contacted PCI to inform
PCI that Nextel would not be able to have any further discussions regarding a
merger until after the 900 MHz auctions were completed. It was agreed that the
parties would get back together once the auctions had concluded.
The 900 MHz auctions were concluded on or about April 22, 1996.
At a regular meeting of the PCI Board held on April 25, 1996 in Las Vegas,
Nevada, the directors, by consensus, agreed that PCI should pursue strategic
positions with Nextel, when appropriate, and at a regular meeting of the PCI
Board held on June 11, 1996 in Dallas at the offices of Gardere & Wynne, L.L.P.,
PCI's legal counsel ("Gardere & Wynne"), the directors directed the officers of
PCI to pursue such strategic positions with Nextel.
Between May 1, 1996 and July 3, 1996, several conversations were held
between Mr. Warren Harkins and James Hynes, a director of PCI, representing PCI,
and Mr. Willmoth, representing Nextel, in exploring the question of whether or
not Nextel was interested in pursuing a possible merger. Mr. Willmoth indicated
that Nextel was hesitant to engage in further discussion because PCI's stock
price had risen disproportionately relative to Nextel's stock price since the
February meeting. It was later agreed by the parties, however, that the parties
should meet again to explore the question of a possible merger.
On July 3, 1996, a meeting was held in Washington, D.C. between PCI and
Nextel representatives. PCI was represented by Messrs. Warren Harkins, Whitten,
Modisett and Dale Harkins, then Chief Operating Officer of PCI, and Nextel was
represented by Messrs. Weibling, Willmoth, Morgan O'Brien, Vice-Chairman of the
Nextel Board, Frank Ciavarella, Special Counsel (M&A), and Geoffrey Stearn,
Director of Corporate Strategy. Also in attendance at the meeting were Messrs.
Hynes and Donald S. Heaton, a director of PCI. At this meeting, early
discussions centered around a possible license rationalization, but the
conversation ultimately turned to a possible purchase by Nextel of PCI or a
merger of PCI into Nextel. After lengthy discussions, the parties agreed to
pursue a merger transaction and discussed general parameters including a
possible exchange ratio of three shares of PCI Common Stock for one share of
Nextel Common Stock, with a value cap of approximately $176 million, subject to
certain potential adjustments based upon relative channel
40
<PAGE> 44
ownership, the market price of Nextel Common Stock and other variables. The
parties agreed to a follow-up telephone conference call to be held on July 18,
1996.
On July 11, 1996, Mr. Warren Harkins sent a memorandum to Mr. Willmoth,
identifying the principal issues PCI proposed to discuss during the conference
call scheduled for July 18 and setting forth certain suggestions in connection
therewith, some of which were adopted in later negotiations. The issues
identified included valuation parameters, channels to be delivered by PCI and
the structure of the transaction.
The telephone conference call between the parties was held on July 18, 1996
as scheduled. Representing Nextel in the conference call were Daniel Akerson,
the newly elected Chairman of Nextel, Thomas J. Sidman, the General Counsel,
Messrs. Weibling, Willmoth, Ciavarella and Stearn, and representing PCI were
Messrs. Hynes, Heaton, Warren Harkins, Whitten, Modisett and Dale Harkins.
Various issues were discussed including the structure of the proposed
transaction and various valuation issues, including channel delivery
requirements and purchase price adjustments to reflect shortfalls. It was
tentatively agreed that the transaction would be effected through a tax-free
merger and that the value cap would be increased to approximately $186 million
to reflect PCI's fully-diluted shares outstanding. The parties agreed to
initiate due diligence and drafting of a merger agreement.
On August 2, 1996, a first draft of the merger agreement was distributed to
PCI and Gardere & Wynne by Jones, Day, Reavis & Pogue, counsel to Nextel ("Jones
Day").
On August 15, 1996, a meeting was held in Nextel's office in McLean,
Virginia with Messrs. Warren Harkins, Whitten, Modisett, Dale Harkins and
Heaton, together with a representative of Gardner, Carton & Douglas, PCI's FCC
counsel, representing PCI and Messrs. Willmoth, Ciavarella, Stearn, Sidman,
Deanne Campbell, then the Senior Manager of Corporate Strategy, and, for part of
the meeting, Steven Shindler, the Senior Vice President and Chief Financial
Officer, as well as representatives of Jones Day representing Nextel. The
meeting was held as a negotiation and drafting session. The principal
negotiations focused on issues of valuation and adjustments thereto. Valuation
in respect of channel delivery remained unresolved pending completion of
Nextel's due diligence review of PCI's license holdings.
By unanimous written consent of all of the directors of PCI, a resolution
was passed, effective August 20, 1996, authorizing the officers of PCI to engage
the services of Morgan Stanley to render a fairness opinion with regard to the
consideration to be paid to PCI stockholders in the transaction. Thereafter, on
August 27, 1996, PCI entered into an agreement with Morgan Stanley regarding
such engagement.
On August 29, 1996, the parties and their representatives who had attended
the August 15, 1996 meeting (except Mr. Heaton, Ms. Campbell and the
representative of Gardner, Carton & Douglas) met in Nextel's office in McLean,
Virginia, to further negotiate the merger agreement. At this meeting, the
parties agreed upon an exchange ratio of one share of Nextel Common Stock for
3.17 shares of PCI Common Stock and a value cap of $176 million based primarily
upon completion of Nextel's due diligence review of PCI's channel position. At
the conclusion of the meeting several issues remained unresolved including an
identification of the channels to be delivered by PCI, the treatment of
outstanding options and warrants to acquire PCI stock, employee compensation and
benefits and agreements to be entered into with Castle regarding amendment of
certain agreements between Castle and PCI.
Between August 30, 1996 and September 3, 1996, Mr. Willmoth and
representatives of PCI reached agreement on valuation issues, closing conditions
(which contemplated amendments to the Castle Agreements and certain favorable
responses from the FCC regarding PCI's filing for rejustification of extended
implementation of FCC licenses), the remaining issues relating to employee
benefits and the structure of the transaction.
On September 17 and 18, 1996, the parties met at the offices of Jones Day
in Washington, D.C. At the meeting, Messrs. Warren Harkins, Whitten and Modisett
represented PCI and Messrs. Willmoth and Ciavarella and Ms. Campbell, as well as
representatives of Jones Day, represented Nextel. The only remaining significant
issues related to completion of agreements with Castle and with certain
stockholders of PCI concerning the treatment of outstanding warrants and voting
rights.
41
<PAGE> 45
The Nextel Board considered the proposed merger, and authorized the
issuance and registration of an appropriate number of shares of Nextel Common
Stock upon an assumed consummation of such merger, at a meeting held on
September 17, 1996, subject to resolution in a manner satisfactory to the
Operations Committee of the Nextel Board of certain issues relating to the
existing agreement between Castle and PCI and a proposed new agreement between
Castle and Nextel.
In late September 1996, conference calls were held between Messrs. Weibling
and Hynes regarding the deletion of the extended implementation of the wide-area
filings as a condition precedent to closing and the final agreement with regard
to the implementation of the employment agreements of the executive officers of
PCI. The parties continued to finalize the representations and warranties in the
merger agreement, especially as they related to FCC licenses. Additionally, the
parties agreed that the Castle Agreements would be executed prior to the
consummation of the merger and the value cap was reduced to $170 million due to
amendments to the existing contracts between Castle and PCI and Nextel's
agreement to enter into a further site commitment with Castle, in return for
Castle's consent to such amendment.
On October 2, 1996, the Operations Committee of the Nextel Board approved
the terms of the agreement with Castle.
A special meeting of the PCI Board was held by telephonic conference call
on October 2, 1996. The directors reviewed the details of the proposed merger
agreement which had previously been distributed to the PCI Board and, along with
PCI's executive officers and legal counsel, discussed the merger in detail. In
addition, the PCI Board received a presentation concerning the fairness of the
transaction from Morgan Stanley, based upon written information from Morgan
Stanley previously sent to the directors, except for Mr. Hynes, who was out of
the country. Concerns were expressed by the directors relative to the provisions
in the merger agreement reducing the value cap in certain instances, but,
following discussion, the PCI Board was satisfied that such reductions were
limited and were more than offset by the value of the merger to the stockholders
of PCI. The representatives of Morgan Stanley presented their various analyses
of the proposed transaction with Nextel and advised the PCI Board that, subject
to the assumptions made, matters considered and limitations on the review
undertaken, in their opinion, the consideration to be paid pursuant to the
merger agreement was fair, from a financial point of view, to the stockholders
of PCI. After much deliberation, and after carefully considering the positive
and negative aspects of the proposed merger, as well as the fairness opinion of
Morgan Stanley, the directors unanimously approved the Merger Agreement,
directed the officers of PCI to execute and deliver the Merger Agreement,
recommended approval of the Merger Agreement to the stockholders of PCI and
directed that the Merger Agreement be submitted to a vote of the stockholders
for their approval at a special meeting of the stockholders called for the
purpose of considering the same.
The Merger Agreement was thereafter executed in counterparts by PCI and
Nextel, and the execution of the Merger Agreement was announced on October 3,
1996 by issuance of a press release by Nextel.
On December 3, 1996, an Amended and Restated Agreement of Merger and Plan
of Reorganization was entered into by the parties, revising certain portions of
the originally executed Merger Agreement to clarify the position of the parties
in connection with the proposed 800 MHz auction, and to revise certain
provisions relating to the treatment in the Merger of existing PCI warrants.
REASONS OF PCI FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE PCI BOARD
The PCI Board has determined that the Merger is fair to, and in the best
interests of, PCI's stockholders. The PCI Board considered the following
material factors in approving the terms of the Merger Agreement:
(1) The Merger Agreement is the result of arm's-length negotiations
with Nextel and includes Nextel's agreement to issue shares of Nextel
Common Stock at a premium to the price per share of PCI Common Stock
(depending on the Basic Exchange Ratio and the Basic Value Cap).
(2) As a result of the Merger, PCI will benefit by becoming part of
Nextel, which has the largest geographic footprint of any SMR wireless
communications provider in the United States.
42
<PAGE> 46
(3) The PCI Board reviewed the historical and current financial
condition, results of operations, prospects and businesses of PCI and
Nextel before and after giving effect to the Merger.
(4) The PCI Board considered the then current market conditions,
historical market prices and trading information for both the PCI Common
Stock and the Nextel Common Stock.
(5) The Merger will benefit PCI's business and operations by providing
greater economies of scale as part of Nextel.
(6) The Merger will provide PCI's stockholders with an equity interest
in a larger, higher growth wireless communications provider with stronger
capitalization and with depth of management and technical personnel.
(7) It is expected that the Merger will afford PCI's stockholders the
opportunity to receive Nextel Common Stock in a tax-free transaction.
(8) Being part of a larger company with greater financial resources as
a result of the Merger is expected to be beneficial to many of the
employees of PCI.
(9) The Merger is expected to benefit PCI's subscribers because of
greater channel capacity, expanded features with digital build-out and
extended roaming capabilities.
(10) Without the Merger, PCI will face substantial financing
requirements in order to participate successfully in the EA Auction and to
accomplish a digital build-out within its geographic footprint in order to
maximize channel capacity and remain competitive with other SMR providers,
cellular providers and PCS providers.
(11) PCI will have greater ability to access capital as part of Nextel
in order to accomplish a digital build-out in markets within PCI's
geographic footprint.
(12) PCI is limited in its ability to compete effectively with other
wireless communications providers, including Nextel, cellular providers and
PCS providers with greater access to capital.
(13) The PCI Board received the opinion of Morgan Stanley that, as of
October 2, 1996, based on and subject to certain matters set forth in the
opinion, the consideration to be received by PCI's stockholders pursuant to
the Merger Agreement is fair from a financial point of view to PCI's
stockholders.
The PCI Board also took into account the following negative aspects of the
Merger Agreement:
(1) The Basic Value Cap limits the number of shares of Nextel Common
Stock that PCI's stockholders will receive in the Merger.
(2) Possible decreases in the Basic Value Cap (and proportionate
increases in the Basic Exchange Ratio) resulting from various possible
adjustments may decrease the number of shares of Nextel Common Stock that
PCI's stockholders will receive in the Merger.
(3) PCI's ability to expand its business is limited by the terms of
the Merger Agreement and in the event that the Merger is not consummated,
PCI's business could be adversely affected.
After taking into consideration the factors described above, the PCI Board
on October 2, 1996, unanimously approved the Merger Agreement. In view of the
wide variety of factors considered in its evaluation of the Merger Agreement and
the Merger, the PCI Board did not find it practicable to, and did not, quantify
or otherwise attempt to assign relative weights to specific factors considered
in reaching its determination.
The PCI Board has continued to evaluate these factors, including Morgan
Stanley's opinion dated the date of this Proxy Statement/Prospectus and the
volatility in the market prices of both the Nextel Common Stock and the PCI
Common Stock in determining its recommendation to PCI's stockholders. BASED UPON
THE FACTORS CONSIDERED, THE PCI BOARD UNANIMOUSLY RECOMMENDS THAT PCI'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
43
<PAGE> 47
OPINION OF FINANCIAL ADVISOR OF PCI
Engagement. Pursuant to an engagement letter dated August 27, 1996, PCI
retained Morgan Stanley to render an opinion regarding the fairness of the
consideration to be paid to PCI's stockholders in the Merger. The terms of the
Merger, including the consideration to be received by PCI's stockholders, were
determined through negotiations between PCI's management and Nextel's
management. Morgan Stanley was engaged by PCI for purposes of delivering a
fairness opinion and, as a result, did not participate in the structuring or
negotiation of the terms of the Merger. Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with respect to the
acquisition of PCI or its assets. The PCI Board did not impose any limitations
on the scope of the investigation of Morgan Stanley with respect to rendering
its opinion.
The PCI Board retained Morgan Stanley based upon Morgan Stanley's
experience and expertise. Morgan Stanley is a nationally recognized investment
banking and advisory firm. Morgan Stanley, as a part of its investment banking
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Pursuant to the terms of the
engagement letter, PCI agreed to pay Morgan Stanley a customary fee for
rendering the written opinion. The fee is due and payable upon completion of the
Merger and transfer of control of 50% or more of the PCI Common Stock. If the
Merger is not consummated, for any reason whatsoever, Morgan Stanley will
receive a $50,000 advisory fee for reimbursement of time and efforts expended.
The engagement letter also provides that PCI will reimburse Morgan Stanley for
its out-of-pocket expenses as incurred, including reasonable fees of outside
counsel and other professional advisors engaged with PCI's consent. In addition,
PCI agreed to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against certain liabilities and
expenses, including liabilities under the federal securities laws, incurred in
connection with Morgan Stanley's services.
In the past, Morgan Stanley and its affiliates have provided investment
banking and financing services for PCI and Nextel and have received fees for the
rendering of such services. Morgan Stanley is a full service securities firm
engaged in securities trading and brokerage activities, as well as providing
investment banking, financing and financial advisor services. In the ordinary
course of Morgan Stanley's trading and brokerage activities, Morgan Stanley or
its affiliates may at any time hold long or short positions and may trade or
otherwise effect transactions, for their own accounts or for the account of
customers, in debt or equity securities or senior loans of PCI or Nextel. In the
past two years, Morgan Stanley has provided financial advisory and underwriting
services for Nextel for which it has received aggregate fees of approximately
$18,700,000. In addition, in the past two years, Morgan Stanley has provided
financial advisory services to PCI for which it has received a fee of $250,000.
Opinion. At the October 2, 1996 meeting of the PCI Board, Morgan Stanley
made a presentation concerning the fairness of the transaction and rendered its
oral opinion that, as of such date and based upon and subject to the various
considerations set forth in its opinion, the consideration to be received by the
holders of PCI Common Stock pursuant to the Merger Agreement was fair from a
financial point of view to such holders. Morgan Stanley confirmed its oral
opinion by delivery to the PCI Board of a written opinion dated October 2, 1996.
Subsequently, in connection with this Proxy Statement/Prospectus, Morgan Stanley
again issued such a written opinion dated the date of this Proxy
Statement/Prospectus.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, WHICH SETS FORTH,
AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED
AND LIMITATIONS ON THE SCOPE OF REVIEW BY MORGAN STANLEY IN RENDERING ITS
OPINION, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS. MORGAN
STANLEY'S OPINION IS ADDRESSED TO THE PCI BOARD AND DIRECTED TO THE FAIRNESS OF
THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF PCI COMMON STOCK IN THE
MERGER FROM A FINANCIAL POINT OF VIEW. IT DOES NOT ADDRESS ANY OTHER ASPECT OF
THE MERGER, NOR DOES IT CONSTITUTE A RECOMMENDATION AS TO HOW PCI'S STOCKHOLDERS
SHOULD VOTE AT THE MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION, WHICH IS
44
<PAGE> 48
ATTACHED HERETO AS APPENDIX B. PCI'S STOCKHOLDERS ARE URGED TO READ MORGAN
STANLEY'S OPINION IN ITS ENTIRETY.
Analysis. In rendering its opinion, Morgan Stanley, among other things:
(i) reviewed certain publicly available financial statements and other
information regarding PCI and Nextel, respectively; (ii) reviewed certain
internal financial statements and other financial and operating data concerning
PCI prepared by the managements of PCI and Nextel, respectively; (iii) analyzed
certain financial projections concerning PCI and Nextel prepared by the
managements of PCI and Nextel, respectively; (iv) discussed the past and current
operations and financial condition and the prospects of PCI and Nextel with the
managements of PCI and Nextel, respectively; (v) reviewed the reported prices
and trading activity for PCI Common Stock and Nextel Common Stock; (vi) compared
the financial performance of PCI and Nextel and the prices and trading activity
of PCI Common Stock and Nextel Common Stock with that of certain other
comparable publicly-traded companies and their securities; (vii) reviewed the
financial terms, to the extent publicly available, of certain comparable
acquisition transactions; (viii) discussed with the managements of PCI and
Nextel the strategic rationale for the Merger and certain benefits expected to
be derived from the Merger; (ix) reviewed the Merger Agreement and certain
related documents; and (x) considered such other factors as deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for purposes of its opinion. Morgan Stanley assumed
that the financial projections were reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of PCI's and
Nextel's senior management of the future financial performance of PCI and
Nextel, respectively. Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of PCI or Nextel, nor was it furnished
with any such appraisals. Morgan Stanley's opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, the date of the opinion. Morgan Stanley's
opinion was necessarily based on economic, market and other conditions as in
effect on, and the information made available to Morgan Stanley as of, the date
of its opinion.
The following is a brief summary of certain analyses performed by Morgan
Stanley in connection with the preparation of its opinion and reviewed with the
PCI Board as part of Morgan Stanley's oral presentation to the PCI Board on
October 2, 1996.
PCI Common Stock Performance. Morgan Stanley's analysis of PCI Common
Stock performance consisted of a historical analysis of closing prices and
trading volumes from June 23, 1993, to September 30, 1996. During the period
from June 23, 1993, to December 31, 1993, PCI Common Stock achieved a high of
$40.25 and a low of $14.00. Morgan Stanley noted that approximately 50% of the
volume of PCI Common Stock traded below a PCI Common Stock price of
approximately $20.00 per share. During the period from January 1, 1994 to
December 31, 1994, PCI Common Stock achieved a high of $29.25 and a low of
$5.00. Morgan Stanley noted that approximately 50% of the volume of PCI Common
Stock traded below a PCI Common Stock price of approximately $15.00 per share.
During the period from January 1, 1995, to December 31, 1995, PCI Common Stock
achieved a high of $6.625 and a low of $3.313. Morgan Stanley noted that
approximately 50% of the volume of PCI Common Stock traded below a PCI Common
Stock price of approximately $5.00 per share. During the period from January 1,
1996, to September 30, 1996, PCI Common Stock achieved a high of $8.625 and a
low of $3.438. Morgan Stanley noted that approximately 50% of the volume of PCI
Common Stock traded below a PCI Common Stock price of approximately $5.10 per
share. PCI Common Stock closed at a price of $5.375 on September 30, 1996.
Nextel Common Stock Performance. Morgan Stanley's analysis of Nextel
Common Stock performance consisted of a historical analysis of closing prices
and trading volumes from June 23, 1993, to September 30, 1996. During the period
from June 23, 1993, to December 31, 1993, Nextel Common Stock achieved a high of
$54.375 and a low of $26.75. During the period from January 1, 1994, to December
31, 1994, Nextel Common Stock achieved a high of $46.25 and a low of $13.50.
During the period from January 1, 1995, to December 31, 1995, Nextel Common
Stock achieved a high of $20.50 and a low of $9.625. During the period from
January 1, 1996, to September 30, 1996, Nextel Common Stock achieved a high of
$23.375 and a low of $13.50. Nextel Common Stock closed at a price of $18.50 on
September 30, 1996.
45
<PAGE> 49
Trading Ratio Analysis. Morgan Stanley reviewed the historical ratios of
the daily closing prices per share of PCI Common Stock to those of Nextel Common
Stock (the "Historical Trading Ratios") for the period from June 23, 1994,
through September 30, 1996, and the average of such Historical Trading Ratios
for the one-month, three-month, six-month, and twelve-month periods ending on
September 30, 1996, which was the last trading date prior to Morgan Stanley's
presentation to the PCI Board. Morgan Stanley compared the Historical Trading
Ratios to the Basic Exchange Ratio. The analysis showed that on September 30,
1996, the Historical Trading Ratio was approximately 3.442, and that the
averages of the Historical Trading Ratios were 3.658 during the one-month
period, 3.447 during the three-month period, 3.205 during the six-month period
and 3.532 during the twelve-month period, in each case ending on September 30,
1996, compared to the Basic Exchange Ratio of 3.17.
Premiums Paid in Comparable Telecommunications Transactions. Morgan
Stanley reviewed the premiums paid in comparable telecommunications transactions
from the period from January 1, 1991, to September 30, 1996, specifically
reviewing transactions between $50 million and $250 million in total aggregate
value. A total of 23 transactions were reviewed in various sectors of the
telecommunications business, including SMR, cellular and paging sectors. The
transactions consisted of the following acquisitions: (i) Com Systems Inc. by
Resurgens Communications Group; (ii) Australian Consolidated Investments by
Rossington Holdings Pty. Ltd.; (iii) Fleet Call Inc. by Comcast; (iv) C-TEC
Corp. by RCN Corp (Peter Kiewit Sons); (v) Orient Telecom & Technology by NYNEX
Corp.; (vi) Nextel by Nippon Telegraph & Telephone; (vii) VMX Inc. by Octel
Communications Corp.; (viii) Centex Telemanagement Inc. by MFS Communications
(Peter Kiewit Sons); (ix) Premiere Page, Inc. by USA Mobile Communications; (x)
Keptel Inc. by ANTEC; (xi) American Mobile Systems, Inc. by Nextel; (xii) WCT
Communications, Inc. by Rochester Telephone Corp.; (xiii) Pacific Telecom
(PacifiCorp) by PacifiCorp; (xiv) ConferTech International by ALC Communications
Corp.; (xv) Flextech PLC (United Artists) by Investor Group; (xvi) Cellular
Technical Services Co. by shareholders; (xvii) Nationwide Cellular Services by
MCI Communications Corp.; (xviii) Nextel by investor group; (xix) Hutchison
Whampoa Ltd. by investor group; (xx) Cellular Communications Inc. by investor
group; (xxi) Network Express Inc. by Cabletron Systems Inc.; (xxii) Time
Engineering Bhd by Renoung Bhd (Fleet Holdings/UMNO); and (xxiii) Telebit Corp.
by Cisco Systems, Inc. For the purpose of this analysis, Morgan Stanley reviewed
the premiums to unaffected stock price four weeks prior to the announcement of
the transaction. The following data resulted from this analysis of the
telecommunications transactions: approximately 11.1% had premiums between 0% and
9% above the unaffected stock price; approximately 27.8% had premiums between
10% and 19% above the unaffected stock price; approximately 11.0% had premiums
between 20% and 29% above the unaffected stock price; approximately 11.1% had
premiums between 30% and 39% above the unaffected stock price; approximately
11.1% had premiums between 40% and 49% above the unaffected stock price; and
approximately 27.8% had premiums of more than 50% above the unaffected stock
price. According to this analysis, Morgan Stanley estimated that the median
premium paid was approximately 23.7% above the unaffected stock price and the
mean premium paid was approximately 45.3% above the unaffected stock price.
Morgan Stanley then compared this comparable transactions information to the
implied premium paid under the terms of the Merger, which on September 30, 1996,
was approximately 15.4%.
Discounted Cash Flow Analysis. Morgan Stanley calculated ranges of the
implied equity value of the SMR businesses of PCI by means of a cash flow
analysis as follows. Morgan Stanley calculated ranges of the implied equity
value of PCI based upon the sum of the present value of PCI's 10-year stream of
unleveraged free cash flow and the present value of its fiscal year 2006
terminal values which, in turn, was based on a range of multiples of PCI's
projected fiscal year 2006 earnings before interest, taxes, depreciation and
amortization ("EBITDA") less its net debt. In conducting its analysis, Morgan
Stanley relied upon certain financial projections provided by PCI. PCI's
projections were based on traditional cellular build-out scenarios in seven
markets in Texas and Oklahoma, and the primary underlying assumptions were with
respect to penetration, access charges, customer churn, marketing and operating
costs and capital expenditures. PCI assumed annual penetration rates, including
penetration in the first five years of 1% of existing wireless customers and 10%
of new wireless customers, based on data obtained from various wireless industry
publications. PCI assumed access charges that would be competitive with cellular
and PCS and that customer churn would be consistent with wireless industry
experience. With respect to marketing and operating costs, PCI assumed such
costs
46
<PAGE> 50
would be similar to current cellular operations. PCI based capital expenditure
forecasts on estimates provided to PCI by its suppliers. Morgan Stanley used
PCI's projections and applied discount rates ranging from 18% to 22% and
multiples of terminal EBITDA ranging from 6 to 8 times. Based on this analysis,
Morgan Stanley derived a range of the implied equity value of PCI of $67 million
to $179 million, or $2.47 to $6.64 per share, and the value implied by the Basic
Exchange Ratio as of September 30, 1996 was $5.639 per share.
Comparable Transaction Analysis. Morgan Stanley reviewed the financial
terms, to the extent publicly available, of 16 merger and acquisition
transactions in the SMR industry. Morgan Stanley noted that of these
transactions, six merger and acquisition transactions were deemed to be more
comparable to the Merger for purposes of this analysis. The six transactions
reviewed in chronological order of public announcement, were as follows:
Nextel's merger with OneComm; Nextel's acquisition of Motorola's 800 MHz SMR
businesses; Nextel's acquisition of Comcast's Philadelphia SMR business;
Nextel's merger with Dial Page; Nextel's acquisition of the remaining interest
in AMS; and PCI's acquisition of the Texas SMR businesses of AMI and other
parties in the Transaction.
Morgan Stanley reviewed the prices paid in such transactions in terms of
(i) the aggregate value of such transactions as a multiple of population and
(ii) the aggregate value of such transactions as a multiple of channels and each
in terms of share prices at both the time of announcement and at present. Morgan
Stanley noted that, given the differences in the characteristics of each of the
transactions, the disparity in the multiples associated with such transactions
did not provide a meaningful indication of value. Morgan Stanley noted that no
transaction used in the analysis of selected comparable business transactions
described above was identical to the Merger.
Comparable Company Financial Analysis. Morgan Stanley reviewed and
analyzed certain publicly available financial and market information for Nextel,
the only company Morgan Stanley deemed comparable for purposes of this analysis.
Such financial and market information included (i) market value and aggregate
value and (ii) the ratios of aggregate value to subscribers, channels and
population, each pro forma for the latest announced transactions. Morgan Stanley
informed the PCI Board that given the disparity in size and spectrum depth that
the financial analysis of comparable company did not provide a meaningful
indication of value.
In connection with its opinion dated the date of this Proxy
Statement/Prospectus, Morgan Stanley confirmed the appropriateness of this
reliance on the analyses used to render its October 2, 1996, opinion by
performing procedures to update certain such analyses and by reviewing the
assumptions upon which such analyses were based and the factors considered in
connection therewith.
In connection with the review of the Merger by the PCI Board, Morgan
Stanley performed a variety of financial comparative analyses for purposes of
its opinion given therewith. The summary set forth above does not purport to be
a complete description of the presentation by Morgan Stanley to PCI's Board or
the analyses performed by Morgan Stanley in arriving at its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portions of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting for any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of PCI.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of PCI or Nextel. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
fairness opinion and were provided to the PCI Board in connection with the
delivery of Morgan Stanley's written opinion. The analyses do not purport to be
appraisals or to reflect the prices at which businesses or assets might actually
be sold. Because such estimates are
47
<PAGE> 51
inherently subject to uncertainty, none of PCI, Nextel, Morgan Stanley or any
other person assumes responsibility for their accuracy. In addition, as
described above, Morgan Stanley's opinion and presentation to the PCI Board was
one of many factors taken into consideration by the PCI Board in making its
determination to approve the Merger. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the opinion of the PCI
Board with respect to the value of PCI.
REASONS OF NEXTEL FOR ENGAGING IN THE MERGER
The Nextel Board believes that the acquisition of PCI, which will expand
its overall spectrum position in the southwestern United States, will be
beneficial to obtaining key objectives of Nextel's business plan. In addition,
the acquisition will enable Nextel to offer customers a region-wide network
throughout the southwest.
TERMS OF THE MERGER
The following summary of the terms and conditions of the Merger Agreement
is qualified in its entirety by reference to the full terms of the Merger
Agreement, which is attached hereto as Appendix A and is hereby incorporated by
reference herein.
Effective Time. The Merger shall become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of PCI in accordance with
the applicable provisions of the DGCL and (ii) the Certificate of Merger,
executed in accordance with the relevant provisions of the DGCL, is filed with
Secretary of State of Delaware (the time the Merger becomes effective being
referred to herein as the "Effective Time of the Merger" or the "Closing").
General Effects of the Merger. At the Effective Time of the Merger, Merger
Sub will merge with and into PCI, which will be the Surviving Corporation and a
wholly owned indirect subsidiary of Nextel. After the Effective Time of the
Merger, the Certificate of Incorporation and By-laws of Merger Sub as in effect
immediately prior thereto shall constitute the Certificate of Incorporation and
By-laws of the Surviving Corporation.
General. At the Effective Time of the Merger, shares (and rights to
acquire shares) of PCI Common Stock shall be converted into shares (and rights
to acquire shares) of Nextel Common Stock on the basis of 3.17 shares of PCI
Common Stock for each share of Nextel Common Stock (the "Basic Exchange Ratio"),
subject to adjustment as provided in the Merger Agreement. The Basic Exchange
Ratio was derived, in part, based upon the number of shares of PCI Common Stock
outstanding and issuable pursuant to rights to acquire such shares outstanding
on July 1, 1996. The maximum value of Nextel Common Stock to be issued pursuant
to the Merger in respect of outstanding shares and rights to acquire shares of
PCI Common Stock shall be $170,000,000 (the "Basic Value Cap"). The Basic Value
Cap is subject to reduction to reflect (i) shortfalls in channels delivered
pursuant to the Merger Agreement, (ii) negative cash flow of PCI, (iii) negative
working capital of PCI, (iv) the amount by which the exercise price of certain
derivative securities (including the cash that would have been received in
cashless exercise transactions) exercised prior to the Effective Time of the
Merger exceeds cash received upon such exercise and held by PCI at the Effective
Time of the Merger and (v) the amount by which severance payments exceed certain
limits specified in the Merger Agreement. In the event that the Basic Value Cap
is adjusted, or if the number of shares of PCI Common Stock outstanding and
issuable pursuant to rights to acquire such shares exceed the number outstanding
on July 1, 1996, the Basic Exchange Ratio will be adjusted. See "-- Adjustments
to Merger Consideration."
In the event that the Nextel Closing Price on the day before the scheduled
date of the Closing is less than $14.00, the PCI Board shall have the right to
terminate the Merger Agreement unless Nextel elects to deliver shares of Nextel
Common Stock with an aggregate value equal to the product of $14.00 multiplied
by the total number of shares of Nextel Common Stock issuable with respect to
shares of PCI Common Stock outstanding or issuable pursuant to rights to acquire
such shares outstanding on the day of the Closing (the "Value Floor"). See
"-- Additional Consideration in Lieu of Termination."
48
<PAGE> 52
Conversion of Shares. At the Effective Time of the Merger, all the
outstanding shares of PCI Common Stock shall be converted into shares of Nextel
Common Stock using the Basic Exchange Ratio of 3.17:1.00, so that three and
seventeen hundredths shares of PCI Common Stock are converted into one share of
Nextel Common Stock, subject to the adjustments described below. The Basic Value
Cap, or maximum value of Nextel Common Stock to be issued pursuant to the Merger
at the Effective Time of the Merger with respect to the PCI Share Base (as
defined below) and the Dilutive PCI Common Equivalents (as defined below; and
together with the PCI Share Base (without adjustment for any instrument that may
have expired without exercise, exchange or conversion into PCI Common Stock),
the "Actual PCI Common Equivalents"), shall be $170,000,000. The "PCI Share
Base" is 27,840,219, which equals the total number of shares of PCI Common Stock
(i) outstanding as of July 1, 1996 ("July 1 Shares") and (ii) issuable upon
exercise of warrants or options, or upon exchange or conversion of convertible
instruments outstanding as of July 1, 1996 ("July 1 Derivatives"), and excluding
(y) all treasury shares and (z) all other shares, rights to acquire shares or
other issuance commitments for shares of PCI Common Stock that are not July 1
Shares or July 1 Derivatives (without adjustment for any instrument that may
have expired without exercise, exchange or conversion into PCI Common Stock).
"Dilutive PCI Common Equivalents" are any shares of PCI Common Stock or options,
warrants, convertible or exchangeable instruments or other commitments to issue
PCI Common Stock outstanding at the Effective Time of the Merger that are not
July 1 Shares or July 1 Derivatives. The Basic Value Cap is subject to
adjustments described below (see "-- Adjustments to Merger Consideration"). The
maximum number of shares of Nextel Common Stock to be issued in connection with
the Merger at the Effective Time of the Merger shall be 8,782,403, subject to
adjustment only in the event Nextel elects to deliver additional shares to avert
a termination of the Merger Agreement (see "-- Additional Consideration in Lieu
of Termination") or for changes to the capitalization of Nextel (see
"-- Adjustments to Merger Consideration -- Other Adjustments").
Adjustments to Merger Consideration. Pursuant to the terms of the Merger
Agreement, the Basic Value Cap and the Basic Exchange Ratio, and thus the
consideration to be received by PCI stockholders in the Merger, will be adjusted
under certain circumstances (see "Summary -- C. The Merger -- Terms of the
Merger -- Conversion of PCI Common Stock in the Merger" for tables illustrating
certain adjustments), as follows:
(a) Value Cap Adjusted for Channels Not Delivered. If at the time of the
Closing the number of Channels Delivered (as defined below) by PCI is (i) less
than 95% of the number of Channels identified in the Merger Agreement in any
metropolitan statistical area ("MSA") (each such MSA, a "Shortfall Market") or
(ii) fewer than 3,000 Channels with regard to the market areas ("Non-core
Markets") not identified in the Merger Agreement (each such Channel, a "Non-core
Market Channel"), then (A) for each Shortfall Market the Channel value set forth
in the Merger Agreement for that Shortfall Market shall be multiplied by the
difference between the number of Channels identified in the Merger Agreement for
that Shortfall Market minus the number of Channels Delivered in that Shortfall
Market and (B) except as provided in clause (iii) of the next paragraph, for the
Non-core Market Channels, the shortfall, if any, between 3,000 and the number of
Non-core Market Channels Delivered shall be multiplied by $3,000 (the product of
each calculation, a "Market Adjustment"). The sum of all such Market Adjustments
shall be subtracted from the Basic Value Cap.
On May 20, 1997, the FCC responded to PCI's filings for rejustification of
its extended implementation authority by granting PCI 24 months from the date of
such response to construct any Extended Implementation Channels; accordingly,
such Extended Implementation Channels will be deemed constructed as required by
clause (iii) in the definition of "Channel" below for purposes of determining
whether such Extended Implementation Channels are Delivered regardless of when
the date of the Closing occurs, so long as any postponements of the date of the
Closing are not caused by the action or inaction of PCI.
A "Channel" shall be "Delivered" by PCI if at the Effective Time of the
Merger: (i) the FCC license for such channel has been granted to PCI by a Final
Order (as defined herein); (ii) there is a Final Order approving a transfer of
control of that license to Nextel; (iii) if unconstructed or deconstructed,
there are at least 180 days remaining before the construction or reconstruction
deadline applicable to that channel; (iv) in the case of a channel counted
towards or applicable to an MSA market target, such channel is located within
49
<PAGE> 53
25 miles of the core of the applicable MSA, except as otherwise provided in the
Merger Agreement; (v) in the case of a channel counted towards or applicable to
an MSA market target, there is no co-channel license located within 55 miles of
the channel, except for co-channel licenses that are PCI licenses or licenses
controlled by Nextel, except as otherwise provided in the Merger Agreement; (vi)
the channel is either (A) a land mobile 800 MHz frequency, being one of the 430
frequencies allocated for SMR, or (B) a frequency in an MSA identified in the
Merger Agreement and allocated for public safety, industrial land transportation
or business where the radio service classification has been converted to
commercial service classification (i.e., YX or GX radio service type) or (C) a
frequency in a Non-core Market allocated for public safety, industrial land
transportation or business; (vii) the channel is granted pursuant to a primary
license; (viii) in the case of a channel counted towards or applicable to an MSA
market target, such channel is a discrete frequency within the applicable market
and not subject to any cross border frequency sharing or channel coordination or
similar arrangement, taking into account all frequencies deemed Delivered
pursuant to the Merger Agreement in that market; (ix) the license for or
including the channel is not subject to (A) any agreement to be sold to a third
party or (B) any option or right of first refusal in favor of any third party;
(x) there is no contract right of any third party or FCC order otherwise
encumbering or limiting the use of the license; (xi) no consideration is due to
any person in connection with the channel; and (xii) the channel is not subject
to any finders' preference action (other than the pending appeal of a favorable
FCC ruling) or otherwise included within any proceeding commenced or assessed by
a third party (other than Nextel) or any regulatory agency, including, without
limitation, the FCC, that could result in a take-back, termination, cancellation
or nonrenewal of the relevant licenses.
Any consent or approval granted or an order entered by the FCC shall be a
"Final Order" when a sufficient number of days shall have elapsed from the date
of entry or grant thereof without the filing of any adverse request, petition or
appeal by any party or third party or by the FCC (on its own motion) with
respect to such consent, approval or order, or any aspect or portion thereof, or
any resubmissions of any applications or requests for any of such consents,
approvals or orders (or affected aspects or portions thereof) shall have been
reaffirmed or upheld and the applicable period for seeking further
administrative or judicial review shall have expired without the filing of any
action, petition or request for further review.
(b) Value Cap Adjusted for Negative Cash Flow. If Adjusted EBITDA Earnings
(as defined below) of PCI for the period from April 1, 1996 to the last day of
the calendar quarter most recently ended before the Effective Time of the Merger
is negative, that amount shall be annualized (i.e. adjusted to equal the loss
that PCI would have experienced in a 12-month period at that rate of loss), and
that annualized amount shall be subtracted from the Basic Value Cap. In the
event the Effective Time of the Merger occurs after October 2, 1997, so long as
any postponements thereof are not caused by the action or inaction of PCI, there
shall be no such adjustment in the Basic Value Cap. "Adjusted EBITDA Earnings"
means PCI's earnings from continuing operations as shown on the unaudited
consolidated financial statements that are prepared by PCI in the ordinary
course of business consistent with past practice (i) before interest expense,
taxes, depreciation, amortization, other income and expense, all determined in
accordance with past practices, to the extent consistent with GAAP, and (ii)
without reduction for reasonable accounting, legal, printing and financial
advisory fees, special employee incentive bonuses (as agreed to by Nextel from
time to time) and expenses associated with the Merger (the "Transaction Costs")
so long as the Transaction Costs in the aggregate for the period through and
including the Closing (regardless whether GAAP would reflect them in that
period) do not exceed $1,500,000, all determined in accordance with past
practices, to the extent consistent with GAAP.
(c) Value Cap Adjusted for Negative Working Capital. Based on the
unaudited consolidated balance sheet of PCI as of the month-end preceding the
Effective Time of the Merger prepared by PCI in the ordinary course of business,
consistent with past practices, if the working capital of PCI is negative, the
negative amount of such working capital shall be subtracted from the Basic Value
Cap. Working capital is the result obtained by subtracting current liabilities
from current assets, subject to certain adjustments as set forth in the Merger
Agreement.
(d) Value Cap Adjusted for Option/Warrant Exercise. If at the Effective
Time of the Merger, PCI does not have cash in an amount equal to the aggregate
exercise price or other consideration due upon
50
<PAGE> 54
exercise, exchange or conversion under the terms of the July 1 Derivatives (as
those instruments were in effect on July 1, 1996) exercised prior to the
Effective Time of the Merger, or has issued any shares of PCI Common Stock in
respect of any July 1 Derivatives in any cashless exercise transaction, the
Basic Value Cap shall be reduced by the difference between the amount of cash
that should have been received upon such exercise and the actual amount of cash
received upon such exercise and held at the Effective Time of the Merger.
(e) Value Cap Adjusted for Severance Amounts. If the aggregate amount paid
or to be paid or other value given to Messrs. Dale E. Harkins, Warren D.
Harkins, Thomas R. Modisett, Bradley B. Waldrip and C.G. Whitten, each an
executive officer of PCI, as severance (see "Interests of Certain Persons in
Each of Nextel and PCI -- Interests of Certain PCI Persons in Matters to be
Acted Upon"), whether pursuant to existing commitments or otherwise, excluding
(i) bonuses earned in 1996 or debt forgiven in 1996 up to an aggregate of
$222,871, and (ii) bonuses earned in 1997 up to 35% of the salary of each such
executive as in effect on the date of the Merger Agreement, prorated through the
date of the Closing, exceeds $1,260,000, then the amount of such excess shall be
subtracted from the Basic Value Cap.
(f) Value Cap Adjusted if Closing Occurs After 1997. For purposes of
calculating adjustments to the Basic Exchange Ratio, if any, if the Effective
Time of the Merger occurs after December 31, 1997, then, so long as any
postponements of the Effective Time of the Merger are not caused by the action
or inaction of PCI, any adjustments made to the Basic Value Cap shall be reduced
to equal one half of the adjustments otherwise calculated pursuant to the Merger
Agreement.
(g) Asset Value and Dilution Adjustments to Exchange Ratio. If there are
any reductions to the Basic Value Cap as described above or if there are any
Dilutive PCI Common Equivalents at the Effective Time of the Merger then, in
lieu of the Basic Exchange Ratio, the exchange ratio shall equal:
(i) 3.17; multiplied by
(ii) the quotient of (A) the Basic Value Cap of $170,000,000, divided
by (B) the Basic Value Cap minus the sum of any reductions thereto
(the "Adjusted Value Cap"); multiplied by
(iii) the quotient of (Y) the Actual PCI Common Equivalents, divided by
(Z) the PCI Share Base.
(h) Additional Value Cap Adjustment. If, at the Effective Time of the
Merger:
(a) (i) the PCI Share Base or, if higher, (ii) the Actual PCI Common
Equivalents; divided by
(b) the Basic Exchange Ratio or the exchange ratio determined in
accordance with (g) above, as applicable; multiplied by
(c) the Nextel Closing Price,
is greater than the lower of (y) the Basic Value Cap or (z) the Adjusted Value
Cap, then the exchange ratio shall be further adjusted to equal:
(A) (i) the PCI Share Base or, if higher, (ii) the Actual PCI Common
Equivalents; multiplied by
(B) the Nextel Closing Price; divided by
(C) (i) the Basic Value Cap or, if lower, (ii) the Adjusted Value Cap.
(i) Other Adjustments. In the event of any change in the terms of the
authorized capital stock of Nextel (other than a change solely in the number of
shares), or the declaration or payment of any share dividend or share
distribution by Nextel to its stockholders, or any distribution of cash,
property or securities by Nextel to its stockholders, or any split,
reclassification, recapitalization, subdivision or exchange in respect of the
outstanding capital stock of Nextel, then appropriate adjustments shall be made
to the number of shares of Nextel Common Stock issuable in the Merger to place
each of Nextel, NFC and Merger Sub and PCI and the holders of PCI Common Stock
in the same posture as if the Effective Time of the Merger had occurred
immediately prior to the occurrence of the event giving rise to such adjustment.
Further, in the event of any change in the terms of the authorized capital stock
of PCI, or any distribution of securities by PCI to its
51
<PAGE> 55
stockholders, or any split, reclassification, recapitalization, subdivision or
exchange in respect of the outstanding stock of PCI, appropriate adjustments
shall be made to place each of Nextel, NFC and Merger Sub and PCI and the
holders of PCI Common Stock in the same posture as if the Effective Time of the
Merger had occurred immediately prior to the occurrence of the event giving rise
to such adjustment; provided however, that no such adjustment shall be made for
redemptions, repurchases or other cancellation or retirement of outstanding
shares of PCI Common Stock or rights to acquire shares of PCI Common Stock.
Additional Consideration in Lieu of Termination. If the PCI Board elects
to terminate the Merger Agreement because the Nextel Closing Price on the day
before the scheduled date of the Closing is less than $14.00, Nextel may elect
to deliver shares of Nextel Common Stock with an aggregate value, based on the
Nextel Closing Price on the day of the Closing equal to the product of (i)
$14.00, multiplied by (ii) the total number of shares of Nextel Common Stock
that would be issued or issuable with respect to the Actual PCI Common
Equivalents as otherwise determined under the terms of the Merger Agreement (the
"Value Floor"), in which case the PCI Board will not have the right to terminate
the Merger Agreement. If Nextel makes such election, the Actual PCI Common
Equivalents shall be converted into shares of Nextel Common Stock in the ratio
that (i) the Actual PCI Common Equivalents, bears to (ii) the quotient of the
Value Floor divided by the Nextel Closing Price on the date of the Closing.
Fractional Shares. No fractional share of Nextel Common Stock or
certificates or scrip therefor will be issued as a result of the conversion of
issued and outstanding PCI Common Stock into Nextel Common Stock, but in lieu of
each fractional interest there shall be made a payment in cash therefor, without
interest, at a pro rata price based on the Nextel Closing Price on the date of
the Closing; provided however, that Nextel may (in its sole and absolute
discretion) deliver to persons otherwise entitled to receive fractional share
interests a number of whole shares, determined by rounding up to the nearest
whole share, and thereupon shall be relieved of any obligation to make cash
payments to such persons in lieu of any fractional share interests.
Stock Option Plans. Each PCI Stock Option outstanding immediately prior to
the Effective Time of the Merger will be converted at the Effective Time of the
Merger into an issued and outstanding option of Nextel in accordance with the
terms of the PCI Stock Option Plans, so that from and after the Effective Time
of the Merger, each such PCI Stock Option may be exercised only for shares of
Nextel Common Stock notwithstanding any contrary provision of the PCI Option
Plans or stock option agreements executed in connection therewith, and each such
PCI Stock Option shall at the Effective Time of the Merger be converted into an
option to purchase the number of shares of Nextel Common Stock into which the
number of shares of PCI Common Stock obtainable upon exercise of such option
would have been converted, if exercised prior to the Effective Time of the
Merger, at an exercise price equal to the exercise price per share of PCI Common
Stock at which such PCI Stock Option is exercisable immediately prior to the
Effective Time of the Merger, multiplied by the Basic Exchange Ratio, as
adjusted pursuant to the Merger Agreement; provided however, that in the case of
each PCI Stock Option which is an incentive stock option, the Basic Exchange
Ratio shall be adjusted for such option, if necessary, so as not to constitute a
modification, extension or renewal of the option, within the meaning of Section
424(h) of the Code.
Warrants. At the Effective Time of the Merger, PCI's outstanding Warrants
to purchase shares of PCI Common Stock shall be assumed by Nextel. Each Warrant
shall thereafter evidence a warrant to purchase the number of shares of Nextel
Common Stock into which the number of shares of PCI Common Stock issuable
pursuant to such Warrant would have been converted in the Merger at an exercise
price per share equal to the amount (rounded up to the next whole cent) arrived
at by dividing the aggregate exercise price under such Warrant by the number of
shares of Nextel Common Stock purchasable thereunder, unless exchanged at
Closing for warrants of Nextel pursuant to an agreement with the holder of any
such Warrant.
Exchange of Certificates. Immediately prior to the Effective Time of the
Merger, Nextel shall cause to be delivered to the Exchange Agent the shares of
Nextel Common Stock necessary to make payment for each share of the capital
stock of PCI being converted by reason of the Merger and sufficient cash to make
payments in lieu of issuance of fractional shares, if applicable. Promptly after
the Effective Time of the Merger, Nextel shall cause the Exchange Agent to mail
to each holder of record of a certificate or certificates that immediately prior
to the Effective Time of the Merger represented outstanding shares of PCI Common
52
<PAGE> 56
Stock (the "Certificates"), a letter of transmittal and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Nextel Common Stock and any cash payable in respect of
fractional share interests, if applicable.
Upon surrender to the Exchange Agent of a Certificate or Certificates,
together with a letter of transmittal duly executed, and such other documents as
the Surviving Corporation or the Exchange Agent may reasonably request, a holder
of a Certificate shall be entitled to receive in exchange therefor a portion of
Nextel Common Stock as set forth in the Merger Agreement and any cash payable in
lieu of any fractional share interest (the "Merger Consideration"). If Nextel
Common Stock is to be issued to a person other than the person in whose name the
Certificates are registered, it shall be a condition of issuance that the
Certificates surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such issuance shall pay all transfer
and other taxes required by reason of the receipt by a person other than the
registered holder of the Certificates surrendered, or establish to the
reasonable satisfaction of the Surviving Corporation or the Exchange Agent that
such tax has been paid or is not applicable.
Subsequent to the Effective Time of the Merger and until surrendered, a
holder's Certificates for PCI Common Stock shall be deemed for all corporate
purposes, other than the payment of dividends, to evidence the number of whole
shares of Nextel Common Stock into which such shares have been converted by the
Merger and the right to receive any cash payable for any fractional share
interests resulting therefrom, if applicable.
Notwithstanding the foregoing, neither Nextel, NFC nor Merger Sub shall be
liable to any holder of Certificates formerly representing shares of PCI Common
Stock for any property properly delivered or amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Payment of Dividends. Unless and until any outstanding Certificates for
shares of PCI Common Stock are surrendered, no dividend payable to holders of
record of Nextel Common Stock as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of any such Certificate, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for Nextel Common Stock issued in exchange therefor the amount of
dividends, if any, but without interest, that have theretofore become payable
subsequent to the Effective Time of the Merger with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange.
Limitations on Transferability of Nextel Common Stock. Shares of Nextel
Common Stock received by certain persons deemed to be "affiliates" of PCI for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
PCI receiving Nextel Common Stock issued in the Merger may not sell such shares
except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. It is a condition to the obligation of
Nextel to consummate the Merger that Nextel shall have received from each
affiliate of PCI a letter agreement confirming that such person will not sell or
otherwise dispose of the shares of Nextel Common Stock received by such person
as a result of the Merger other than in compliance with Rule 145 or pursuant to
a registration statement or pursuant to any other available exemptions from the
registration requirements of the Securities Act. In general, directors, officers
and substantial beneficial owners of a corporation's securities may be deemed to
be "affiliates" of a corporation.
Hart-Scott-Rodino. The Merger is subject to the requirements of the HSR
Act, which provide that certain acquisition transactions (including the Merger)
may not be consummated until certain information has been furnished to the
Antitrust Division and the FTC and certain waiting period requirements have been
satisfied. Nextel and PCI filed the required information and material with the
Antitrust Division and the FTC in December 1996 and the waiting period has
expired. Satisfaction of the waiting period requirement will not preclude the
Antitrust Division, the FTC or any other party either before or after the
Effective Time of the Merger from challenging or seeking to delay or enjoin the
Merger on antitrust or other grounds. There can be no assurance that such a
challenge, if made, would not be successful.
53
<PAGE> 57
Federal Communications Commission. The transfer of control of the licenses
granted by the FCC and held by PCI and certain pending applications of PCI,
which will occur as a result of the Merger, is subject to prior FCC approval
pursuant to the requirements of the Communications Act, and the rules of the
FCC.
Castle Tower Transactions. PCI sold substantially all the communications
towers used in its business to Castle, and, simultaneously leased back space on
the towers pursuant to the Castle Agreements. Pursuant to the Merger Agreement,
Castle and PCI were required to amend the Castle Agreements, effective at the
Effective Time of the Merger, among other things, to settle and release (subject
to certain indemnity arrangements) all claims that Castle may have had related
to the Castle Agreements and to indemnify Nextel against any such claims. Castle
and PCI entered into an amendment of the Castle Agreements, which will become
effective at the Effective Time of the Merger with respect to such matters. It
is a condition to the consummation of the Merger that Nextel and Castle enter
into the Site Agreement. Nextel and Castle have entered into the Site Agreement
pursuant to which Nextel has committed that it and its subsidiaries will provide
Castle with the opportunity to purchase from Nextel and lease back up to 50 of
230 specified communications towers or monopoles and an option to acquire or
build and lease back up to 250 additional communications towers or monopoles in
specified geographic areas, principally representing highway corridors. Castle
has agreed in the Site Agreement that before leasing space on a site offered to
Castle under the Site Agreement to a third party who owns or has access to other
communications sites, Castle will use its best efforts to include in the lease
to that third party a requirement that, for each site that Castle makes
available to such third party, Nextel will be granted the right, on commercially
reasonable terms, to locate Nextel equipment at a site available to the third
party.
Representations and Warranties of PCI. In addition to customary
representations and warranties with regard to corporate organization and
authority, and capitalization, the Merger Agreement contains representations and
warranties by PCI regarding (i) compliance with laws, (ii) absence of conflicts
with any applicable laws, rules or regulations of any tribunal, charter
documents or any other agreement, indenture or other instruments, (iii)
litigation matters, (iv) intellectual property matters, (v) insurance matters,
(vi) assets, (vii) financial statements, (viii) liabilities, (ix) transactions
not in the ordinary course of business, (x) capital projects, (xi) tax matters,
(xii) bank accounts and employee matters, (xiii) title to real and personal
property, (xiv) absence of defaults under material contracts, (xv) documents
filed by PCI with the Commission, (xvi) brokers, (xvii) special contractual
liabilities and warranty matters, (xviii) employee benefit matters, (xix)
regulatory matters including representations as to channel position, (xx)
accuracy of information provided in the disclosure schedules to the Merger
Agreement, (xxi) accuracy of information provided by PCI for inclusion in the
Registration Statement and (xxii) compliance with the terms of the Castle
Agreements.
Representations and Warranties of Nextel. In addition to customary
representations and warranties with regard to corporate organization and
authority, and capitalization, the Merger Agreement contains representations and
warranties by Nextel and Merger Sub regarding (i) absence of conflicts with any
applicable laws, rules or regulations of any tribunal, charter documents, or any
agreement, indenture or other instruments, (ii) documents filed by Nextel with
the Commission and (iii) accuracy of information provided by Nextel for
inclusion in the Registration Statement.
Conditions; Waiver. The obligations of Nextel and PCI to consummate, or
cause to be consummated, the Merger are subject to the satisfaction or waiver of
the following conditions: (i) the approval of the Merger Agreement and the
transactions referred to therein by the stockholders of PCI; (ii) the expiration
or termination of all waiting periods under the HSR Act; (iii) the procurement
of all necessary approvals, clearances and consents of governmental and
regulatory authorities and certain approvals and consents of third parties
required in connection with the Merger (including all required FCC approvals and
consents, which shall be deemed to be obtained only when they have become Final
Orders); (iv) the absence of certain legal or regulatory proceedings with
respect to the Merger; (v) the Registration Statement shall have become
effective under the Securities Act and no stop order suspending such
effectiveness shall have been issued or threatened with respect thereto and
shares of Nextel Common Stock shall have been registered or shall be exempt from
registration under all applicable blue sky laws; and (vi) the shares of Nextel
Common Stock issuable in the Merger shall have been listed or approved for
listing upon notice of issuance by the Nasdaq NM.
54
<PAGE> 58
The obligation of Nextel to consummate, or cause to be consummated, the
transactions contemplated by the Merger Agreement is subject to the satisfaction
or waiver of the following additional conditions: (i) the representations and
warranties of PCI shall be true and correct, and each of the covenants and
agreements of PCI to be performed as of or prior to the Closing shall have been
performed; (ii) receipt of a certificate signed by PCI's President certifying
that certain conditions to the Merger have been fulfilled; (iii) receipt of
certain legal opinions from counsel to PCI; (iv) FCC action on PCI's filing(s)
for rejustification of its extended implementation authority; (v) absence of any
liabilities or obligations of PCI except Permitted Liabilities (as defined in
the Merger Agreement); (vi) receipt of letters from KPMG Peat Marwick LLP
addressed to Nextel regarding information about PCI included in the Registration
Statement; (vii) receipt of certificates signed by PCI's President and Secretary
certifying that the material contained in the Registration Statement regarding
PCI contains no material misstatement of fact and does not omit to state any
material fact necessary to make the statements made not misleading; (viii)
receipt of letters from affiliates of PCI regarding compliance with Rule 145;
(ix) no stockholder of PCI shall be entitled to exercise dissenter's or
appraisal rights under the DGCL; (x) PCI shall be the sole owner of certain
subsidiaries; (xi) PCI and Castle shall have amended the Castle Agreements; and
(xii) Nextel and Castle shall have entered into the Site Agreement.
The obligation of PCI to consummate the transactions contemplated by the
Merger Agreement is subject to the satisfaction or waiver of the following
additional conditions: (i) the representations and warranties of Nextel shall be
true and correct, and each of the covenants and agreements of Nextel to be
performed as of or prior to the Closing shall have been duly performed; (ii)
receipt of a certificate signed by an officer of Nextel certifying that certain
conditions to the Merger have been fulfilled; and (iii) receipt of a legal
opinion from counsel to Nextel.
No Solicitation. PCI has agreed that prior to the Effective Time of the
Merger, PCI and its representatives shall not, directly or indirectly, encourage
(including by way of furnishing information), solicit, initiate, participate in
or otherwise be a party to any discussions or negotiations with any corporation,
partnership, person or other entity or group concerning any transaction that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal.
Neither the PCI Board nor any committee thereof shall withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Nextel, the approval or
recommendation by the PCI Board of the Merger or the Merger Agreement or approve
or recommend, or propose to approve or recommend, any Takeover Proposal or any
other acquisition of outstanding shares of PCI Common Stock other than pursuant
to the Merger or the Merger Agreement; provided, however, that PCI may furnish
information to, or enter into discussions or negotiations with, any unsolicited
corporation, partnership, person or other entity or group, or take any action
described above, if and only to the extent that the PCI Board shall have
determined in good faith, after receiving written advice of its outside counsel,
that such action would be required under applicable law in the exercise of its
fiduciary duties. PCI will immediately notify Nextel if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, PCI.
Indemnification of Officers and Directors of PCI. Nextel has agreed that
for a period of three years from the Effective Time of the Merger, it will cause
the Surviving Corporation to provide the then current and former directors and
officers of PCI indemnification in accordance with the current provisions of the
Certificate of Incorporation and By-Laws of PCI with respect to matters existing
or occurring at or prior to the Effective Time of the Merger. See "Comparison of
Rights of Holders of Each of Nextel Common Stock and PCI Common
Stock -- Liability and Indemnification of Officers and Directors." Additionally,
Nextel has agreed to cause the Surviving Corporation to use all reasonable
efforts to maintain director and officer insurance comparable to that maintained
by PCI at the Effective Time of the Merger for a period of three years from the
Effective Time of the Merger.
Participation in FCC Auction. In the event that, pursuant to FCC rules,
the filing deadline for eligibility to participate in the EA Auction established
by the FCC in the First Report and Order, PR Docket No. 93-144, released
December 15, 1995, occurs prior to the earlier of the Effective Time of the
Merger or the expiration or termination of the Merger Agreement, PCI and Nextel
(or a designated subsidiary of Nextel) have agreed to form a consortium to
participate in bidding in the EA Auction for block licenses in the Overlap
55
<PAGE> 59
EAs identified in the Merger Agreement. Nextel will determine and control all
aspects of the consortium's bidding strategy and participation (including,
without limitation, determining the amount of the joint bids to be submitted by
the consortium, the EAs in which to bid, and whether to top competing bids) and
will be responsible for funding of the consortium's bids. Neither party will bid
for block licenses in the Overlap EAs except via the consortium and PCI will not
bid for block licenses in EAs outside of the Overlap EAs. Nextel is free to bid
for block licenses outside of the Overlap EAs individually or in consortia
formed with other parties, and without reference to the consortium procedures
agreed to by Nextel and PCI. Nextel will be entitled to retain the right to all
channels included in block licenses the consortium is awarded pursuant to the EA
Auction, if any, subject to the option of PCI to purchase certain channels in
any Overlap EA for the price paid by the consortium.
Termination. The Merger Agreement may be terminated and the transactions
contemplated thereby abandoned: (i) by mutual written consent of the Nextel
Board and the PCI Board; (ii) by PCI by written notice to Nextel on December 31,
1997 if the Closing has not occurred on or before such date so long as any
postponements of the date of the Closing are not caused principally by the
action or inaction of PCI; (iii) prior to the Closing, by written notice to PCI
from Nextel authorized by the Nextel Board, if (A) there is a material breach of
any representation, warranty, covenant or agreement on the part of PCI, or if a
representation or warranty of PCI shall be untrue in any material respect (a
"Terminating PCI Breach"), except that, if such Terminating PCI Breach is
curable by PCI through the exercise of its reasonable best efforts, then, for up
to 30 days, but only as long as PCI continues to exercise such reasonable best
efforts, Nextel may not terminate the Merger Agreement, (B) any governmental or
regulatory consent or approval required for consummation of the transactions
contemplated thereby is denied by or in a final order or other final action
issued or taken by the appropriate governmental or regulatory authority, agency
or similar body or (C) consummation of any of the transactions contemplated
thereby is enjoined, prohibited or otherwise restrained by the terms of a final,
non-appealable order or judgment of a court of competent jurisdiction; (iv)
prior to the Closing, by written notice to Nextel from PCI authorized by the PCI
Board, if (A) there is a material breach of any representation, warranty,
covenant or agreement on the part of Nextel, or if a representation or warranty
of Nextel shall be untrue in any material respect (a "Terminating Nextel
Breach"), except that, if such Terminating Nextel Breach is curable by Nextel
through the exercise of its reasonable best efforts then for up to 30 days, but
only as long as Nextel continues to exercise such reasonable best efforts, PCI
may not terminate the Merger Agreement, (B) any governmental or regulatory
consent or approval required for consummation of the transactions contemplated
thereby is denied by or in a final order or other final action issued or taken
by the appropriate governmental or regulatory authority, agency or similar body,
(C) consummation of any of the transactions contemplated thereby is enjoined,
prohibited or otherwise restrained by the terms of a final, non-appealable order
or judgment of a court of competent jurisdiction or (D) the Nextel Closing Price
is below $14.00 and Nextel does not elect to deliver shares of Nextel Common
Stock with an aggregate value equal to the Value Floor; and (v) by Nextel by
written notice to PCI during the 30 day period commencing on March 1, 1997, if
PCI, Nextel and Castle have not entered into certain agreements relating to the
Castle Agreements so long as any failure to enter into such agreements has not
been caused by the action or inaction of Nextel, which notice was not given
during such 30 day period.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for under the "purchase acquisition"
method of accounting in accordance with GAAP. Under the "purchase acquisition"
method, any amount paid over the fair market value of the acquired company's
assets is reflected on the buyer's balance sheet as goodwill.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations of the Merger that are generally applicable to PCI stockholders.
This discussion is based on currently existing provisions of the Code, existing
and proposed regulations promulgated under the Code by the Treasury Department
("Treasury
56
<PAGE> 60
Regulations") and current administrative rulings and court decisions, all of
which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to Merger Sub, NFC, Nextel, PCI or
the PCI stockholders as described herein.
The Merger has been structured with the intent that it be treated as a
reorganization for federal income tax purposes so that no gain or loss will be
recognized by the PCI stockholders upon consummation of the Merger, except with
respect to cash received in lieu of fractional shares. It is expected that at
the Closing PCI will receive a written opinion (the "Tax Opinion") of Gardere &
Wynne, substantially to the effect that, on the basis of certain facts and
representations, the following are the federal income tax consequences of the
Merger:
(1) The Merger will constitute a reorganization in accordance with
Section 368(a) of the Code and Nextel, NFC and PCI will each be a "party to
the reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by the PCI stockholders upon
their receipt in the Merger of the Nextel Common Stock solely in exchange
for their PCI Common Stock;
(3) Each PCI stockholder's tax basis in the Nextel Common Stock to be
received (including fractional share interests deemed received) in the
Merger will be the same as the tax basis (determined at the time of the
Merger) that such stockholder had in the PCI Common Stock exchanged for
such Nextel Common Stock;
(4) Each PCI stockholder's holding period of the Nextel Common Stock
to be received (including the fractional share interests deemed received)
in the Merger will include the period during which the recipient held the
PCI Common Stock exchanged for the Nextel Common Stock, provided that the
stockholder's PCI Common Stock was held as a capital asset at the time of
the Merger;
(5) PCI will not recognize income, gain or loss as a result of the
Merger; and
(6) A PCI stockholder who receives cash in the Merger in lieu of a
fractional share of Nextel Common Stock will be treated as if the
fractional share were distributed in the Merger and then as having received
a cash distribution in redemption of such fractional share, resulting in
income, gain or loss upon receipt of such cash that will be taxed as
provided in Section 302 of the Code.
In connection with the Tax Opinion, Gardere & Wynne will make such factual
assumptions as are customary in similar tax opinions. The Tax Opinion cannot be
relied upon if any such factual assumption is, or later becomes, inaccurate. No
ruling from the Internal Revenue Service concerning the tax consequences of the
Merger has been (or will be) requested, and the Tax Opinion will not be binding
upon the Internal Revenue Service or the courts.
Treatment of the Merger as a tax-free reorganization under the Code is not
a condition to the obligations of Nextel or PCI to consummate the Merger. See
"The Merger -- Terms of the Merger -- Conditions; Waiver." If the Merger is not
treated as a reorganization under the Code or it is later determined that the
Merger did not qualify as a reorganization under the Code, the PCI stockholders
would recognize taxable gain or loss in the Merger equal to the difference
between the fair market value of the Nextel Common Stock they received and their
tax basis in the PCI Common Stock.
The foregoing summary of material federal income tax consequences is not
intended to constitute advice regarding the federal income tax consequences of
the Merger to any holder of PCI Common Stock. This summary does not discuss tax
consequences under the laws of foreign, state or local governments or of any
other jurisdiction or tax consequences to categories of stockholders that may be
subject to special rules, such as foreign persons, tax-exempt entities,
insurance companies, financial institutions and dealers in stocks and
57
<PAGE> 61
securities. In addition, the foregoing may not be applicable to a holder of
shares of PCI Common Stock who received such shares as employee compensation or
pursuant to the exercise of an employee stock option. Each holder of PCI Common
Stock is urged to consult its own tax advisors as to the specific consequences
of the Merger, including the applicable federal, state, local and foreign tax
consequences to them of the Merger in light of their particular circumstances.
NO APPRAISAL RIGHTS
Because PCI Common Stock is listed on the Nasdaq NM, the holders of shares
of PCI Common Stock will not be entitled to appraisal rights pursuant to Section
262 of the DGCL in connection with the Merger.
58
<PAGE> 62
INTERESTS OF CERTAIN PERSONS IN EACH OF NEXTEL AND PCI
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NEXTEL
The following table sets forth, as of June 30, 1997 (the "Nextel Ownership
Date"), the amount and percentage of shares of each class of Nextel's capital
stock that are deemed under the rules of the Commission to be "beneficially
owned" by (i) each director of Nextel, (ii) the Chief Executive Officer and each
of the four other most highly compensated executive officers of Nextel for the
year ended December 31, 1996, (iii) all directors and executive officers of
Nextel as a group and (iv) each person or "group" (as such term is used in
Section 13(d)(3) of the Exchange Act) known by Nextel to be the beneficial owner
of more than five percent of the outstanding shares of each class of Nextel's
capital stock. The table also sets forth the percentage of shares of each class
of Nextel's capital stock that will be deemed under the rules of the Commission
to be beneficially owned by such individuals and entities immediately after the
Effective Time of the Merger assuming that the ownership interests in such
shares do not otherwise change from those which existed on the Nextel Ownership
Date and assuming the issuance of 8,782,403 shares of Nextel Common Stock as a
result of the Merger.
<TABLE>
<CAPTION>
APPROXIMATE % OF CLASS(2)
TITLE OF CLASS OF AMOUNT AND NATURE -------------------------
THE COMPANY'S OF BENEFICIAL BEFORE AFTER
NAME OF BENEFICIAL OWNER CAPITAL STOCK OWNERSHIP(1) THE MERGER THE MERGER
- ------------------------------------- --------------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C>
Daniel F. Akerson.................... Class A Common Stock 200,000(3) * *
Brian D. McAuley..................... Class A Common Stock 1,429,785(4) * *
Morgan E. O'Brien.................... Class A Common Stock 1,206,476(5) * *
Keith J. Bane........................ Class A Common Stock 0(6) * *
Robert Cooper........................ Class A Common Stock 50,000 * *
Timothy M. Donahue................... Class A Common Stock 76,000(7) * *
William E. Conway, Jr................ Class A Common Stock 97,865(8) * *
Craig O. McCaw....................... Class A Common Stock 92,483,723(9) 28.3% 27.5%(18)
Keisuke Nakasaki..................... Class A Common Stock 0(10) * *
Masaaki Torimoto..................... Class A Common Stock 0(11) * *
Dennis M. Weibling................... Class A Common Stock 92,483,723(12) 28.3% 27.5%(18)
Robert S. Foosaner................... Class A Common Stock 242,000(13) * *
All directors and executive officers
as a group (19 persons)............ Class A Common Stock 96,004,838(14) 29.2% 28.5%
5% Stockholders:
- -------------------------------------
Digital Radio, L.L.C................. Class A Common Stock 92,483,723(15) 28.3% 27.5%(18)
2320 Carillon Point................ Class A Preferred Stock 8,163,265 100.0% 100.0%
Kirkland, Washington 98033......... Class B Preferred Stock 82 100.0% 100.0%
Motorola, Inc........................ Class A Common Stock 60,890,000(16) 22.6% 21.9%
1303 East Algonquin Road........... Class B Common Stock 17,830,000 100.0% 100.0%
Schaumburg, Illinois 60196
Putnam Investments, Inc.............. Class A Common Stock 15,340,145(17) 5.8% 5.6%
1 P.O. Box Square
Boston, Massachusetts 02109
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Under the rules of the Commission, a person is deemed to be the beneficial
owner of a security if such person, directly or indirectly, has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial
59
<PAGE> 63
owner of any securities if that person has the right to acquire beneficial
ownership within 60 days of the Nextel Ownership Date. Accordingly, more
than one person may be deemed to be a beneficial owner of the same
securities. Unless otherwise indicated by footnote, the named individuals
have sole voting and investment power with respect to the shares of
Nextel's capital stock beneficially owned.
(2) Represents the voting power of the number of shares of each of class of
capital stock beneficially owned as of the Nextel Ownership Date and
immediately following consummation of the Merger by each named person or
group, expressed as a percentage of (a) all shares of Nextel's capital
stock of the indicated class actually outstanding as of such date (in the
case of the Class A Common Stock, giving effect to the conversion of
Nextel's preferred stock and Nextel's Class B Common Stock), plus (b) all
other shares of capital stock deemed outstanding as of such date pursuant
to Rule 13d-3(d)(1) under the Exchange Act.
(3) Includes 200,000 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. Akerson upon the
exercise of non-qualified stock options.
(4) Includes 454,000 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. McAuley upon the
exercise of nonqualified stock options. Also includes ownership of 18,000
shares of Class A Common Stock that are held by Mr. McAuley's minor
children. Mr. McAuley resigned from the Nextel Board and as an executive
officer of Nextel as of January 8, 1997.
(5) Includes 553,477 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. O'Brien upon the
exercise of nonqualified stock options.
(6) Mr. Bane, who is Executive Vice President and President, Americas Region of
Motorola, disclaims beneficial ownership of all securities of Nextel held
by Motorola. See note 16.
(7) Includes 75,000 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. Donahue upon the
exercise of non-qualified stock options.
(8) Includes 1,667 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. Conway upon the exercise
of non-qualified stock options.
(9) Mr. McCaw, who is an equity owner and controlling person of the McCaw
Investor, disclaims beneficial ownership of all securities of Nextel held
by the McCaw Investor, except to the extent of his pecuniary interest
therein. See note 15.
(10) Mr. Nakasaki, who is President and Chief Executive Officer of NTT America,
Inc., a subsidiary of Nippon Telegraph and Telephone Corporation ("NTT"),
disclaims beneficial ownership of all shares of Class A Common Stock held
by NTT. As of the Nextel Ownership Date, NTT held 1,532,959 shares.
(11) Mr. Torimoto, who is Vice President of Panasonic Communications and Systems
Company, disclaims beneficial ownership of all shares of Class A Common
Stock held by Matsushita Communication Industrial Co., Ltd. ("Matsushita").
As of the Nextel Ownership Date, Matsushita held 3,000,000 shares.
(12) Mr. Weibling, who is President of Eagle River, an affiliate of the McCaw
Investor, disclaims beneficial ownership of all securities of Nextel held
by the McCaw Investor, except to the extent of his pecuniary interest
therein. See note 15.
(13) Includes 192,000 shares of Class A Common Stock obtainable as of the Nextel
Ownership Date or within 60 days thereafter by Mr. Foosaner upon the
exercise of non-qualified stock options.
(14) Includes an aggregate of 1,651,894 shares of Class A Common Stock
obtainable as of the Nextel Ownership Date or within 60 days thereafter by
directors and executive officers as a group upon the exercise of
non-qualified stock options or other stock purchase rights. See also notes
15 and 16.
(15) Comprised of (i) 5,593,846 shares of Class A Common Stock beneficially
owned by the McCaw Investor, (ii) 35,000,000 shares of Class A Common Stock
obtainable as of the Nextel Ownership Date or within 60 days thereafter
upon the exercise of certain options, (iii) 400,000 shares of Class A
Common Stock obtainable as of the Nextel Ownership Date or within 60 days
thereafter upon the exercise of a portion of the Incentive Option granted
to Eagle River, (iv) 24,489,877 shares of Class A
60
<PAGE> 64
Common Stock, which represents the conversion of the 8,163,265 shares of
Class A Preferred Stock and the 82 shares of Nextel's Class B Convertible
Preferred Stock, par value $0.01 per share (the "Class B Preferred Stock")
held by the McCaw Investor, (v) 25,000,000 shares of Class A Common Stock
issuable pursuant to the New Option issued to an affiliate of Craig O.
McCaw as of June 16, 1997 and (vi) 2,000,000 shares of Class A Common Stock
issuable pursuant to an option issued to the McCaw Investor by Motorola.
See Note 16.
(16) Assuming conversion of the Class B Common Stock held by Motorola. Comprised
of (i) 40,170,000 shares of Class A Common Stock beneficially owned by
Motorola, (ii) 17,830,000 shares of Class B Common Stock beneficially owned
by Motorola and (iii) 2,890,000 shares of Class A Common Stock obtainable
as of the Nextel Ownership Date or within 60 days thereafter upon exercise
of a warrant. Motorola granted the McCaw Investor an option to acquire
9,000,000 shares included herein, 2,000,000 shares of which are purchasable
for a thirty day period commencing July 28, 1997. Does not give effect to
the potential exercise of such option.
(17) As reported in the most recent Schedule 13G filed by Putnam Investments,
Inc. ("Putnam"), Putnam does not have sole voting power over the shares of
Class A Common Stock beneficially owned by Putnam.
(18) Assumes that the McCaw Investor does not elect to exercise its
anti-dilutive rights with respect to the Merger.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PCI
The following table sets forth as of June 30, 1997 (the "PCI Ownership
Date") (unless otherwise indicated) the amount and percentage of shares of PCI's
Common Stock that are deemed under the rules of the Commission to be
"beneficially owned" by (i) each director of PCI, (ii) the Chief Executive
Officer and each of the four other most highly compensated executive officers of
PCI, (iii) all directors and executive officers of PCI as a group and (iv) each
person or "group" (as such term is used in Section 13(d)(3) of the
61
<PAGE> 65
Exchange Act) known by PCI to be the beneficial owner of more than 5% of the
outstanding shares of PCI Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF APPROXIMATE %
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------------------- ----------------------- -------------
<S> <C> <C>
Lance C. Cawley.................................. 0 --
Warren D. Harkins................................ 165,434(2) *
Dale E. Harkins.................................. 160,957(3) *
Dale N. Hatfield................................. 16,500(4) *
Donald S. Heaton................................. 10,978,859(5) 42.0%
Herbert T. Hensley............................... 18,000(4) *
James P. Hynes................................... 10,978,859(5) 42.0%
William C. Kennedy, Jr........................... 15,000(4) *
Thomas R. Modisett............................... 95,932(6) *
Bradley B. Waldrip............................... 20,462(7) *
C. G. Whitten.................................... 86,106(8) *
All directors and executive officers as a group
(11 persons)................................... 11,445,800(5)(9) 43.4%
5% Stockholders:
- -------------------------------------------------
Elliott Associates, L.P.......................... 2,222,200(10) 8.5%
712 Fifth Avenue, 36th Floor
New York, New York 10019
South Mountain Communications Company............ 1,478,787 5.7%
5344 North 91st Ave.
Glendale, Arizona 85305
Advanced MobileComm, Inc......................... 10,978,859(11) 42.0%
82 Devonshire St.
Boston, Massachusetts 02109
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of PCI Common Stock.
(1) Under the rules of the Commission, a person is deemed to be the beneficial
owner of a security if such person, directly or indirectly, has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days of the PCI Ownership Date.
Accordingly, more than one person may be deemed to be a beneficial owner of
the same securities. Unless otherwise indicated by footnote, the named
individuals have sole voting and investment power with respect to the
shares of the Company's capital stock beneficially owned.
(2) Includes options to purchase 135,432 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(3) Includes options to purchase 105,432 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(4) Includes options to purchase 15,000 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(5) Deemed to beneficially own 6,373,378 shares of PCI Common Stock that are
beneficially owned by AMI and 4,605,481 shares of PCI Common Stock for
which AMI has voting rights pursuant to a voting agreement.
62
<PAGE> 66
(6) Includes options to purchase 90,432 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(7) Includes options to purchase 27,932 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(8) Includes options to purchase 72,932 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(9) Includes options to purchase 477,160 shares of PCI Common Stock that are
exercisable as of the PCI Ownership Date or within 60 days thereafter.
(10) Elliott Associates, L.P. ("Elliott"), filed a Schedule 13D with the
Commission dated January 31, 1997, which has been amended as of June 11,
1997, on behalf of itself, Westgate International, L.P. ("Westgate"), and
Martley International, Inc. ("Martley"). Elliott reported sole voting and
dispositive power over 1,325,800 shares of PCI Common Stock. Westgate and
Martley reported shared voting and dispositive power over 896,400 shares of
PCI Common Stock. Martley is the investment manager for Westgate and
expressly disclaims equitable ownership of and pecuniary interest in any
PCI Common Stock. The business address of Martley is 712 Fifth Avenue, 36th
Floor, New York, New York 10019; the business address of Westgate is c/o
Midland Bank Trust Corporation (Cayman) Limited, P.O. Box 1109, Mary
Street, Grand Cayman, Cayman Islands, British West Indies.
(11) Includes 4,605,481 shares of PCI Common Stock for which AMI has voting
rights pursuant to a voting agreement. Excludes currently exercisable
warrants held by AMI's indirect parent, FMR Corp., to purchase an aggregate
of 500,000 shares of PCI Common Stock.
INTERESTS OF CERTAIN PCI PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of PCI Common Stock should be aware that
the directors and executive officers of PCI have interests in the Merger in
addition to their interests as stockholders of PCI generally, as described
below.
Nextel has agreed that for a period of three years from the Effective Time
of the Merger, it will cause the Surviving Corporation to provide the then
current and former directors and officers of PCI indemnification in accordance
with the current provisions of the Certificate of Incorporation and By-Laws of
PCI with respect to matters existing or occurring at or prior to the Effective
Time of the Merger. See "Comparison of Rights of Holders of Each of Nextel
Common Stock and PCI Common Stock -- Liability and Indemnification of Officers
and Directors." Additionally, Nextel has agreed to cause the Surviving
Corporation to use all reasonable efforts to maintain director and officer
insurance comparable to that maintained by PCI at the Effective Time of the
Merger for a period of three years from the Effective Time of the Merger.
On February 22, 1996, PCI entered into an employment agreement (each an
"Employment Agreement," and collectively the "Employment Agreements") with each
of Messrs. Dale E. Harkins, Warren D. Harkins, Thomas R. Modisett, Bradley B.
Waldrip and C.G. Whitten (the "Officers") for a term of two years. The
Employment Agreements provide that the employment of the Officers shall
terminate upon a change in control, such as the Merger. Upon such termination,
each Officer will be paid two times his base salary, all PCI Stock Options held
by the Officer will automatically vest, each Officer will receive a special
bonus in the form of repayment of one-half of such Officer's indebtedness to
PCI, as evidenced by a promissory note dated June 9, 1995 (plus an additional
amount to pay income taxes due on such special bonus), to the extent not
previously paid, and such Officer shall receive title to the automobile provided
to the Officer by PCI. Each Officer's indebtedness has subsequently been repaid.
The base salary of each Officer for purposes of the Employment Agreements is as
follows: Mr. D. Harkins: $125,000; Mr. W. Harkins: $150,000; Mr. Modisett:
$125,000; Mr. Waldrip: $100,000; and Mr. Whitten: $130,000. Notwithstanding such
termination, each Officer has agreed to continue working on a month-to-month
basis for PCI or any successor entity for up to 90 days following such
termination, as mutually agreed upon by the Officer and PCI or any successor
entity, in order to provide an orderly transition period. If an Officer
continues working during the transition period, he will be paid his monthly
portion of base salary in effect at the time of the change of control for each
month of the transition period.
63
<PAGE> 67
In June 1994, PCI made loans to each of its then executive officers to
facilitate their exercise, before the exchange transaction which resulted in the
liquidation of PCI's former indirect parent, Pittencrieff plc ("PLC"), of
options they held to acquire PLC shares. The following Officers borrowed from
PCI the amounts shown below: Mr. D. Harkins: $79,518; Mr. W. Harkins: $115,616;
Mr. Modisett: $82,205; and Mr. Whitten: $72,201. Each loan bore interest at a
market interest rate of prime plus one percent per annum and was due and payable
12 months from the date the respective loan was drawn down. At the time, Mr.
Waldrip was not an executive officer of PCI; however, PCI also made a loan to
him for the same purpose in the amount of $30,000, which bore interest at 6% per
annum and was due and payable on the same terms. PCI extended the maturity of
each of the loans to the Officers, initially, until June 1996 and subsequently
until June 1997, under the same terms and conditions and added all accrued and
unpaid interest to the outstanding principal balance. The Compensation Committee
of the PCI Board awarded special bonuses to each of the Officers in recognition
of their efforts and achievements in 1995 and 1996. The bonuses were effective
and payable April 1, 1996, and January 1, 1997, in the form of an aggregate
repayment of the principal balance and accrued and unpaid interest of each
Officer's outstanding indebtedness to PCI and cash payments as a gross-up for
income taxes payable on the special bonuses. The gross bonus paid to each
Officer for 1995 and 1996, respectively, is as follows: Mr. D. Harkins: $66,513
and $71,631; Mr. W. Harkins: $96,083 and $104,524; Mr. Modisett: $68,997 and
$74,307; Mr. Waldrip: $30,036 and $29,826; and Mr. Whitten: $60,580 and $65,240.
Certain of such amounts will be aggregated to determine whether the Basic Value
Cap will be adjusted for payment of severance to the Officers as described under
"The Merger -- Terms of the Merger -- Adjustments to Merger
Consideration -- Value Cap Adjusted for Severance Amounts."
In order to participate in the FCC's auction of 900 MHz SMR channels, FMR
Corp., the indirect parent of AMI, provided a $1 million auction loan to PCI in
November 1995. The note was due on demand and required interest payable monthly
at the prime rate plus 2%. The auction loan was replaced with a new note on
January 31, 1996, in the principal amount of $2,523,463 which was subsequently
repaid from the proceeds of a revolving loan received from Wells Fargo Bank
(Texas), N.A. in March 1996. FMR Corp. has provided a letter of credit in
connection with the revolving loan and has received currently exercisable
warrants to purchase an aggregate of 500,000 shares of PCI Common Stock, at an
average weighted exercise price of $4.61 per share, in consideration thereof.
Pursuant to the term of the Merger Agreement, the revolving loan will be repaid
prior to the Effective Time of the Merger, and accordingly, the letter of credit
provided by FMR Corp. will be released.
Hatfield Associates, Inc., a consulting firm in which Mr. Dale Hatfield, a
director of PCI, is a principal, has performed consulting services for Nextel
since January 1996 for which it was paid less than $15,000 during 1996, and such
services continue to be provided in 1997. Hatfield Associates, Inc. has not
provided any consulting services to Nextel with respect to the Merger Agreement
or the Merger.
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
NEXTEL COMMON STOCK AND PCI COMMON STOCK
INTRODUCTION
PCI and Nextel are each incorporated under the laws of the state of
Delaware. The holders of shares of PCI Common Stock, whose rights as
stockholders are currently governed by Delaware law, the certificate of
incorporation of PCI (the "PCI Charter") and by-laws of PCI (the "PCI By-laws"),
will, upon the exchange of their shares pursuant to the Merger, become holders
of shares of Nextel Common Stock, and their rights as such will be governed by
Delaware law, the Nextel Charter and the by-laws of Nextel (the "Nextel
By-laws"). Summarized below are the material differences between the rights of
holders of shares of PCI Common Stock and the rights of holders of shares of
Nextel Common Stock resulting from differences in their governing documents and
the application of Delaware law thereto.
Nextel and holders of shares of its capital stock have entered into certain
agreements that may affect the rights of holders of shares of Nextel Common
Stock under its charter documents and Delaware law. Pursuant to such agreements,
certain significant holders have under certain circumstances certain rights to
designate
64
<PAGE> 68
nominees to be elected to the Nextel Board. See "-- Election of Board of
Directors." In addition, the equity securities issued to the McCaw Investor in
the McCaw Transaction, and the agreements relating to such transaction, grant to
the McCaw Investor certain rights generally relating to corporate governance
topics, including rights to designate a number of directors to the Nextel Board
and rights of such directors to representation on the Operations Committee of
the Nextel Board. See "-- Terms of Nextel Preferred Stock."
The following summary does not purport to be a complete statement of the
rights of holders of shares of Nextel Common Stock under applicable Delaware
law, the Nextel Charter and the Nextel By-laws or a comprehensive comparison
with the rights of the holders of shares of PCI Common Stock under applicable
Delaware law, the PCI Charter and the PCI By-laws, or a complete description of
the specific provisions referred to herein. This summary is qualified in its
entirety by reference to the DGCL and the governing corporate instruments of
Nextel and PCI, to which holders of shares of PCI Common Stock are referred.
AUTHORIZED CAPITAL STOCK
The DGCL requires that a corporation's certificate of incorporation set
forth the total number of shares of all classes of stock which the corporation
has authority to issue and a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof. The PCI Charter provides that PCI has authority to issue 51,000,000
shares of capital stock divided into (i) 50,000,000 shares of PCI Common Stock
and (ii) 1,000,000 shares of preferred stock ("PCI Preferred Stock"). The Nextel
Charter provides that Nextel has authority to issue 613,883,948 shares of
capital stock divided into six classes as follows: (i) 515,000,000 shares of
Nextel Class A Common Stock, (ii) 35,000,000 shares of Nextel Class B Non-Voting
Common Stock, (iii) 26,941,933 shares of Class A Preferred Stock, (iv) 82 shares
of Class B Preferred Stock, (v) 26,941,933 shares of Class C Convertible
Redeemable Preferred Stock ("Class C Preferred Stock"), (vi) 1,600,000 shares of
Series D Preferred Stock and (vii) 8,400,000 shares of Preferred Stock, par
value $.01 per share (the "Nextel Undesignated Preferred Stock"). The rights,
preferences, privileges and restrictions of the Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Series D Preferred Stock are
summarized in "-- Terms of Nextel Preferred Stock."
BOARD OR STOCKHOLDER APPROVED PREFERRED STOCK
The DGCL permits a corporation's certificate of incorporation to allow its
board of directors to issue, without stockholder approval, series of preferred
or preference stock and to designate their rights, preferences, privileges and
restrictions. Although the Nextel Charter grants such power to the Nextel Board
with respect to the Nextel Undesignated Preferred Stock, there are at present no
shares of such Nextel Undesignated Preferred Stock outstanding or subject to any
issuance commitment. The PCI Charter also grants such power to the PCI Board;
however, there are at present no shares of PCI Preferred Stock outstanding or
subject to any issuance commitment.
TERMS OF NEXTEL PREFERRED STOCK
Pursuant to the terms of the McCaw Securities Purchase Agreement, Nextel
issued to the McCaw Investor 8,163,265 shares of Class A Preferred Stock, each
with a stated value of $36.75 per share, which shares are convertible into an
equal number of shares of Class C Preferred Stock (such shares of Class A
Preferred Stock and any shares of Class C Preferred Stock issued upon conversion
being convertible into approximately 24,500,000 shares of Nextel Common Stock in
the aggregate), and 82 shares of Class B Preferred Stock, convertible into an
equal number of shares of Nextel Common Stock. In addition, Nextel has issued
shares of the Series D Preferred Stock. Certain of the significant terms of each
class of preferred stock are summarized below.
Class A Preferred Stock. The Class A Preferred Stock is the primary
mechanism for providing the McCaw Investor with the economic benefits and
corporate governance rights contemplated by the McCaw Securities Purchase
Agreement. Holders of Class A Preferred Stock, voting separately as a class, are
entitled to elect three members of the Nextel Board or, if greater than three,
that number of directors (rounded up to the nearest whole number) equal to 25%
of the entire Nextel Board (the "Class A Directors"), subject to the
65
<PAGE> 69
termination of such rights if the McCaw Investor's equity interest in Nextel
falls below specified levels. For so long as the Operations Committee is in
existence, the McCaw Investor is entitled to have a majority of the members of
the Operations Committee be Class A Directors or directors designated by the
McCaw Investor pursuant to the terms of the Class B Preferred Stock or the McCaw
Securities Purchase Agreement. With respect to matters other than the election
of directors, shares of Class A Preferred Stock vote together as a class with
shares of Nextel Common Stock and each such share of Class A Preferred Stock is
entitled to a number of votes equal to the number of shares of Nextel Common
Stock into which such share is convertible.
Each share of Class A Preferred Stock is convertible at the election of the
holder thereof into three shares of Nextel Common Stock, subject to certain
adjustments. Upon the occurrence of certain events, the shares of Class A
Preferred Stock are automatically converted into shares of Nextel Common Stock.
In addition, shares of Class A Preferred Stock are automatically converted into
shares of Class C Preferred Stock on a one-for-one basis upon the occurrence of
certain events including certain reductions in the McCaw Investor's ownership
interest below specified levels and foreclosure by a secured party upon shares
of Class A Preferred Stock pledged to such secured party. Shares of Class A
Preferred Stock are also redeemable at the option of Nextel upon the occurrence
of certain events constituting a Change in Control (as defined in the terms of
the Nextel Charter creating and authorizing issuance of the Class A Preferred
Stock) at a redemption price equal to the stated value of the Class A Preferred
Stock plus the amount of any accrued or declared but unpaid dividends thereon.
The Operations Committee consists of five members, three of whom are
entitled to be selected from among the McCaw Investor's representatives on the
Nextel Board as described above. The Operations Committee has the authority to
formulate key aspects of Nextel's business strategy, including decisions
relating to the technology used by Nextel (subject to existing equipment
purchase agreements), acquisitions, the creation and approval of operating and
capital budgets and marketing and strategic plans, approval of financing plans,
endorsement of nominees to the Nextel Board and nomination and oversight of
certain executive officers. The Nextel Board, by a majority vote, may override
actions taken or proposed by the Operations Committee, although doing so would
give rise to a $25,000,000 liquidated damages payment to the McCaw Investor, the
commencement of accrual of a 12% dividend payable on the stated value of all
outstanding shares of Class A Preferred Stock (an aggregate stated value of
approximately $300,000,000) and the immediate vesting of the options granted
pursuant to the McCaw Incentive Option Agreement. However, the Nextel Board, by
a defined super-majority vote, retains the power to override actions taken or
proposed by the Operations Committee without triggering the obligation to make a
liquidated damages payment, or to commence dividend accruals with respect to the
Class A Preferred Stock or to accelerate the vesting of the options granted
pursuant to the McCaw Incentive Option Agreement. In addition, the Nextel Board
also may act to terminate the Operations Committee, although such action by the
Nextel Board would, in certain circumstances, result in the obligation to make
such a liquidated damages payment and result in the commencement of such
dividend accrual and the accelerated vesting of the related options. The McCaw
Securities Purchase Agreement, the Nextel Charter and the Nextel By-laws also
delineate a number of circumstances, chiefly involving or resulting from certain
events with respect to the McCaw Investor or Craig O. McCaw, in which the
Operations Committee could be terminated but such liquidated damages payment,
dividend accrual and vesting of options would not be required. Except for the
accrual of the 12% dividend in the circumstances described above, shares of
Class A Preferred Stock are entitled to dividends only to the extent declared or
paid with respect to Nextel Common Stock in amounts equal to the amounts that
would be received had the Class A Preferred Stock been converted into Nextel
Common Stock. Upon liquidation, dissolution or winding up of Nextel, the holders
of Class A Preferred Stock are entitled to receive a liquidation preference
equal to the stated value of the Class A Preferred Stock plus any accrued but
unpaid dividends thereon.
Class B Preferred Stock. The purpose of the Class B Preferred Stock is to
provide a protection for the McCaw Investor's right to proportionate
representation on the Nextel Board (to the extent not provided by the McCaw
Investor's ownership of Class A Preferred Stock) and to establish a mechanism
for the payment of the liquidated damages payment contemplated by the McCaw
Securities Purchase Agreement in the event that the Nextel Board takes certain
actions with respect to the Operations Committee that give rise to such
66
<PAGE> 70
payment. Shares of Class B Preferred Stock are automatically converted on a
one-for-one basis to shares of Nextel Common Stock if the McCaw Investor's
equity interest in Nextel falls below specified levels or if certain transfers
of Class B Preferred Stock occur.
Class C Preferred Stock. The purpose of the Class C Preferred Stock is to
protect the economic attributes of the Class A Preferred Stock in the event that
certain events resulting in the termination of the corporate governance rights
associated with the Class A Preferred Stock occur. The terms of the Class C
Preferred Stock are substantially the same as the terms of the Class A Preferred
Stock except that holders of Class C Preferred Stock have no special voting
rights in the election of directors (including the appointment of directors to
the Operations Committee) and are not entitled to the 12% dividend in the
circumstances in which shares of Class A Preferred Stock would be entitled to
such dividend.
Series D Preferred Stock. The Series D Preferred Stock was issued in a
private placement completed on July 21, 1997. The Series D Preferred Stock ranks
on a parity with the Class A Preferred Stock, the Class B Preferred Stock and
the Class C Preferred Stock, except that Series D Preferred Stock is junior with
respect to dividend accruals and payments on the Class A Preferred Stock and the
$25,000,000 cash payment on the Class B Preferred Stock that are described
above, which are required upon certain occurrences. Dividends on the Series D
Preferred Stock are cumulative at 13% per annum and are payable quarterly in
cash or, on or prior to July 15, 2002, at the sole option of Nextel, in
additional shares of Series D Preferred Stock. In the event that the Exchange
Offer is not consummated prior to specified dates, the dividend accrual rate
applicable to the Preferred Stock will increase by specified amounts until the
Exchange Offer is consummated or certain other requirements are met. The Series
D Preferred Stock is mandatorily redeemable on July 15, 2009 and may be redeemed
at the option of Nextel in whole or in part after December 15, 2005 and, in
certain circumstances, after July 15, 2002 at specified redemption prices. The
Series D Preferred Stock is also exchangeable, in whole but not in part, at the
option of Nextel at any time after December 15, 2005 and in certain
circumstances sooner, into Nextel subordinated debentures.
VOTING RIGHTS
The DGCL states that, unless a corporation's certificate of incorporation
or by-laws specifies otherwise, (i) each share of its capital stock is entitled
to one vote, (ii) a majority of voting power of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at a
stockholders meeting and (iii) in all matters other than the election of
directors, the affirmative vote of the majority of the voting power of shares,
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter, shall be the act of the stockholders.
Holders of shares of PCI capital stock are entitled to one vote in person
or by proxy for each share held by the stockholder. As described in "-- Election
of Board of Directors," one stockholder has the right to designate a number of
the management nominees to the PCI Board. Although no shares of PCI Preferred
Stock have been issued, the PCI Charter provides that the PCI Board shall have
the power to fix by resolution the voting rights, if any, of the shares of PCI
Preferred Stock.
As described in "-- Terms of Nextel Preferred Stock," holders of shares of
Nextel Class A Preferred Stock and Nextel Class B Preferred Stock issued in the
McCaw Transaction are entitled to elect a number of directors to the Nextel
Board.
Except as required by law with respect to shares of each of Nextel Class A
Preferred Stock, Nextel Class B Preferred Stock and Nextel Class C Preferred
Stock, and except with respect to matters as to which shares of Nextel Class A
Preferred Stock and Nextel Class B Preferred Stock will vote separately as a
class, the holders of shares of Nextel Common Stock are entitled to one vote per
share on all matters to be voted on by the stockholders of Nextel. The holders
of shares of Nextel Non-Voting Common Stock have no right to vote on any matters
to be voted on by the stockholders of Nextel, except that the holders of shares
of Nextel Non-Voting Common Stock have the right to vote as a separate class
(with each share having one vote) on any merger, consolidation, reorganization
or reclassification of Nextel or its shares of capital stock, any amendment to
the Nextel Charter or any liquidation, dissolution or winding up of Nextel (each
such event being a "Fundamental Change"), but only in which shares of Nextel
Non-Voting Common Stock would be
67
<PAGE> 71
treated differently than shares of Nextel Common Stock. Holders of Nextel
Non-Voting Common Stock are not entitled to such a class vote with regard to a
Fundamental Change in which the only difference in such treatment is that the
holders of shares of Nextel Common Stock would be entitled to receive equity
securities with full voting rights and the holders of shares of Nextel
Non-Voting Common Stock would be entitled to receive equity securities which
have voting rights substantially identical to the voting rights of shares of
Nextel Non-Voting Common Stock and which are convertible upon any Voting
Conversion Event (as defined below), on a share for share basis, into the voting
securities to which the holders of the shares of Nextel Common Stock are
entitled, but which are otherwise identical to such voting securities.
Shares of Nextel Non-Voting Common Stock can be converted into shares of
Nextel Common Stock if such shares are being or have been distributed, disposed
of or sold (or are expected to be distributed, disposed of or sold) in
connection with a Voting Conversion Event. A "Voting Conversion Event" is
defined as (i) any public offering or public sale of securities of Nextel
(including a public offering registered under the Securities Act and a public
sale pursuant to Rule 144 or any similar rule then in force), (ii) any sale of
securities of Nextel to a person or group of persons (as used here and
subsequently in this paragraph, within the meaning of the Exchange Act) if,
after such sale, such person or group of persons in the aggregate would own or
control securities which possess in the aggregate the ordinary voting power to
elect a majority of the members of the Nextel Board if such sale had been
approved by the Nextel Board or a committee thereof, (iii) any sale of
securities of Nextel to a person or group of persons if, after such sale, such
person or group of persons in the aggregate would own or control securities of
Nextel (excluding any shares of Nextel Non-Voting Common Stock being converted
and disposed of in connection with such Voting Conversion Event) that possess in
the aggregate the ordinary voting power to elect a majority of the members of
the Nextel Board, (iv) any sale of securities of Nextel to a person or group of
persons if, after such sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than two percent (2%)
of the outstanding securities of any class of voting securities of Nextel and
(v) any distribution, disposition or sale of any securities of Nextel to a
person or group of persons in connection with a merger, consolidation or similar
transaction if, after such transaction, such person or group of persons would
own or control securities which constitute in the aggregate the ordinary voting
power to elect a majority of the surviving corporation's directors, provided the
transaction had been approved by the Nextel Board or a committee thereof. If any
shares of Nextel Non-Voting Common Stock are converted into shares of Nextel
Common Stock in connection with a Voting Conversion Event and any such shares of
Nextel Common Stock are not actually distributed, disposed of or sold pursuant
to such Voting Conversion Event, such shares of Nextel Common Stock that were
not so distributed, disposed of or sold shall be promptly converted back into
the same number of shares of Nextel Non-Voting Common Stock.
Holders of the Series D Preferred Stock have no voting rights except as
provided by law or by the Nextel Charter; provided however, that in the event of
certain defaults, said holders will have the right to elect two directors to the
Nextel Board. See "-- Election of Board of Directors."
NUMBER OF DIRECTORS
Under the DGCL, unless a corporation's certificate of incorporation
specifies the number of directors, such number shall be fixed by, or in the
manner provided in, its by-laws. If a corporation's certificate of incorporation
expressly authorizes its board of directors to amend its by-laws, its board of
directors may change the authorized number of directors by an amendment to the
corporation's by-laws, if fixed therein, or in such manner as is provided
therein. If such certificate of incorporation specifies the number of directors,
the number of directors can only be changed by amending the certificate of
incorporation.
The PCI Charter provides that the number of the board of directors shall be
fixed from time to time exclusively by the PCI Board pursuant to a resolution
adopted by a majority of the total number of directors. The PCI By-laws
currently provide that the number of members of the board of directors shall be
not less than one. The PCI By-laws give AMI or its designees on the PCI Board
the right to designate three of the management nominees for election to the PCI
Board, subject to reductions in the number of AMI designees upon reductions in
the number of outstanding shares of PCI Common Stock held by AMI. See
"-- Election of Board of Directors." The Nextel By-laws provide that the number
of members of the Nextel Board shall be
68
<PAGE> 72
established from time to time by resolution of the Nextel Board or by the
stockholders. Nextel is a party to certain agreements with certain of its
stockholders that entitle specified stockholders to name certain nominees to be
elected to the Nextel Board and might require Nextel to increase the size of the
Nextel Board. See "-- Election of Board of Directors." Pursuant to the terms of
the McCaw Securities Purchase Agreement, Nextel cannot increase the size of the
Nextel Board to be greater than sixteen (16) members.
The number of directors on the PCI Board is currently eight and on the
Nextel Board is currently ten.
ELECTION OF BOARD OF DIRECTORS
The DGCL provides that a corporation's directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at a meeting and entitled to vote on the election of directors. Additionally,
with respect to Nextel, shares of Class A Preferred Stock and Class B Preferred
Stock have certain rights to vote separately as a class to elect members of the
Nextel Board. See "-- Terms of Nextel Preferred Stock." Under the DGCL,
stockholders of a corporation cannot elect directors by cumulative voting unless
the corporation's certificate of incorporation so provides. Neither the PCI
Charter nor the Nextel Charter provides for cumulative voting. See "-- Voting
Rights."
Nextel has entered into agreements with certain stockholders that permit
such stockholders to designate nominees to be elected to the Nextel Board and
certain employment agreements with its key executives that contemplate the
election of such executives to the Nextel Board. Pursuant to the Stock Purchase
Agreement (the "Matsushita Stock Purchase Agreement"), dated as of December 9,
1991, by and between Nextel and Matsushita, Nextel agreed that Matsushita would
be entitled to designate one member of the Nextel Board if at the time of such
appointment Matsushita or its affiliates own more than 1,500,000 shares of
Nextel Common Stock. Each of the Matsushita Stock Purchase Agreement and the
Stock Purchase Agreement (the "NTT Stock Purchase Agreement") dated as of
January 20, 1994 between Nextel and NTT, respectively, provides that Nextel
will, among other things (i) include the person(s) designated to become a Nextel
Board member under the terms of such agreement (the "Designees") to the slate of
nominees proposed to Nextel's stockholders for election to the Nextel Board, and
recommend to the stockholders the Designees' election to the Nextel Board and
(ii) during any period prior to such election, increase the size of the Nextel
Board to create a vacancy for such Designees and promptly appoint such Designees
to the Nextel Board. Pursuant to the Agreement and Plan of Contribution, dated
August 4, 1994, as amended, relating to the Motorola Transaction (the "Motorola
Agreement"), Motorola is entitled to designate two directors, although currently
Motorola has only designated one such director. The terms of the Motorola
Agreement contemplate that Motorola may grant to certain transferees acquiring
shares of Nextel Common Stock from it the right to designate not more than one
additional nominee to the Nextel Board pursuant to each such agreement. Pursuant
to the McCaw Securities Purchase Agreement, the McCaw Investor is currently
entitled to nominate three designees for appointment to the Nextel Board in
order to bring its total representation on the Nextel Board to not less than
25%. In addition, pursuant to certain terms of the understanding between Nextel
and an affiliate of Craig O. McCaw relating to the New Option, one direct
transferee designated by the Purchaser of the New Option will be entitled to
designate one nominee for election to the Nextel Board subject to certain
conditions. See "Summary -- A. The Parties to the Merger -- Nextel -- Recent
Developments -- McCaw Investor Exercise Commitment." In the event that dividends
on the Series D Preferred Stock are not paid for four consecutive quarters or
six quarters (whether or not consecutive) or upon certain other events
(including failure to pay the mandatory redemption price when due), then the
number of directors constituting the Nextel Board will be adjusted to permit the
holders of the majority of the then outstanding Series D Preferred Stock, voting
separately as a class, to elect two directors. Finally, the employment
agreements between Nextel and each of Messrs. O'Brien and McAuley contemplate
that they will serve as members of the Nextel Board, but in the case of Mr.
McAuley, his agreement was effectively amended to reflect his resignation as a
director of Nextel in January 1997.
Pursuant to the Contribution Agreement dated as of September 5, 1995, by
and among PCI, AMI and the AMI Parties (the "AMI Agreement"), PCI agreed that
AMI would be entitled to designate three of the management nominees for election
to the PCI Board. The PCI By-laws grant AMI such right, provided that AMI's
right to designate such nominees shall (i) be reduced from three to two at such
time as PCI holds less
69
<PAGE> 73
than twenty percent of the shares of PCI Common Stock outstanding on the date on
which AMI first became a holder of record of shares of PCI Common Stock (the
"Initial Acquisition Date"), (ii) be reduced from two to one at such time as AMI
holds less than ten percent of PCI Common Stock outstanding on the Initial
Acquisition Date, (iii) at any time after the second anniversary of the Initial
Acquisition Date, be reduced to one if at such time AMI holds less than fifteen
percent of the then outstanding shares of PCI Common Stock and (iv) terminate at
such time as AMI holds less than three percent of the shares of PCI Common Stock
outstanding on the Initial Acquisition Date.
The DGCL permits, but does not require, the adoption of a "classified"
board of directors with staggered terms under which part of the board of
directors is elected each year for a maximum term of three years. In general,
under the DGCL, any or all of the directors of a corporation may be removed,
with or without cause, by vote of the holders of a majority of the shares then
entitled to vote at an election of directors, except that the DGCL authorizes
removal of a member of a classified board by the stockholders only for cause.
Neither the PCI Charter nor the PCI By-laws provides for such a
"classified" board. The Nextel Charter divides the members of the Nextel Board
into three classes, as nearly equal in number as possible. Each class of
directors is elected for a staggered three-year term to the Nextel Board. The
McCaw Investor has the right, as holder of all outstanding shares of Class A
Preferred Stock, to elect not less than 25% of the total number of members of
the Nextel Board (or three directors, if greater), and thereafter to vote to
remove, replace or re-elect any such director.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale
of substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote; neither the Nextel Charter nor the
PCI Charter contains such a provision.
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special stockholder meetings of a corporation may be called
by its board of directors and by any person or persons authorized to do so by
its certificate of incorporation or by-laws. Under the PCI By-laws, special
meetings of the stockholders for any purpose or purposes, unless otherwise
prescribed by statute or by the PCI Charter, may be called at any time by the
Chief Executive Officer or by order of the PCI Board and shall be called by the
Chairman of the Board, the Chief Executive Officer or the Secretary at the
request in writing of a majority of the PCI Board. Such request shall state the
purpose of the proposed special meeting. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Under the Nextel By-laws, special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Nextel
Charter, may be called by the President and shall be called by the President or
Secretary at the request in writing of a majority of the Nextel Board or at the
request in writing of stockholders owning a majority of the capital stock of
Nextel issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the DGCL, any action by a corporation's stockholders must be taken at
a meeting of such stockholders, unless a consent in writing setting forth the
action so taken is signed by the stockholders having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Actions by written
consent, however, may not be taken if otherwise provided in the certificate of
incorporation. The PCI By-laws prohibit stockholders from acting by written
consent and any actions of the PCI stockholders must be taken at an annual or
special meeting of such stockholders duly called by or under the authority of
the Chief Executive Officer or the PCI Board; provided, however, that if at any
time PCI has ten or less stockholders, any action required to be, or which may
be, taken at any annual or special meeting of stockholders may be taken without
a meeting, if a
70
<PAGE> 74
consent in writing is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize such
action. The Nextel Charter provides that, subject to certain rights granted to
any class or series of stock having a preference over shares of Nextel Common
Stock (the shares of Nextel Class A Preferred Stock, Class B Preferred Stock and
Class C Preferred Stock have the right, as to matters upon which they are
entitled to vote separately as a class, to take such action by written consent
in lieu of a meeting) and Nextel Non-Voting Common Stock, any action required or
permitted to be taken by Nextel stockholders must be effected at a duly called
annual or special meeting of such stockholders and may not be effected by any
consent in writing of such stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL allows amendment of a corporation's certificate of incorporation
if its board of directors adopts a resolution setting forth the amendment
proposed, declaring its advisability, and the stockholders thereafter approve
such proposed amendment either at a special meeting called by the board for the
purpose of approval of such amendment by the stockholders or, if so directed by
the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved by a majority of the outstanding
shares entitled to vote. The holders of the outstanding shares of a class are
entitled to vote as a separate class upon a proposed amendment, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but not affect the entire class, then only the
shares of the series so affected by the amendment will be considered a separate
class for the purposes of a vote on the amendment. Under the DGCL, a
corporation's certificate of incorporation also may require, for action by the
board or by the holders of any class or series of voting securities, the vote of
a greater number or proportion than is required by the DGCL and the provision of
the certificate of incorporation requiring such greater vote cannot be altered,
amended or repealed except by such greater vote.
The PCI Charter requires the affirmative vote of 80% of the total number of
votes of the then outstanding shares of voting stock of PCI, voting together as
a single class, to amend or repeal, or to adopt any provisions inconsistent with
certain provisions of the PCI Charter (including those provisions relating to
responses by the PCI Board to tender offers and merger proposals, limitation of
director liability and amendment to the PCI Charter). The Nextel Charter does
not contain provisions requiring a vote greater than that specified in the DGCL
to amend the Nextel Charter.
AMENDMENT OF BY-LAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's by-laws
resides with the stockholders entitled to vote thereon, and with the directors
of such corporation if such power is conferred upon the board of directors by
the certificate of incorporation. The Nextel Charter authorizes the Nextel Board
to make, alter, amend or repeal the Nextel By-laws without any action on the
part of the stockholders. The PCI Charter requires the affirmative vote of 80%
of the total number of votes of the then outstanding shares entitled to vote at
any regular or special meeting of stockholders or action by the PCI Board for
the adoption, amendment or repeal of the PCI By-laws. The provision of the PCI
By-laws regarding AMI's right to designate nominees to the PCI Board may only be
amended by the affirmative vote of two-thirds or more of
the whole PCI Board or otherwise in accordance with the PCI Charter.
CERTAIN LIMITATIONS RELATED TO THE MCCAW TRANSACTION
With respect to certain provisions of the Nextel Charter and the Nextel
By-laws amended upon consummation of the McCaw Transaction, any future actions
proposed to be taken in the nature of modifications to or affecting such
provisions may require the consent, approval or vote of the McCaw Investor
and/or its affiliates, in addition to any other required Nextel stockholder or
Nextel Board action.
71
<PAGE> 75
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders,
except for liability (i) for any breach of the director's duty of loyalty to
such corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. Both the Nextel Charter and the PCI
Charter provide that, to the full extent provided by law, a director will not be
personally liable for monetary damages to such corporation or its stockholders
for or with respect to any acts or omissions in the performance of his or her
duties as a director of such corporation.
Under the DGCL, directors and officers as well as other individuals may be
indemnified against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation as a derivative action) if
they acted in a manner they reasonably believed to be in, or not opposed to, the
best interest of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. The PCI Charter, the Nextel Charter and the Nextel By-laws provide to
directors and officers indemnification to the full extent provided by law,
thereby affording the directors and officers of PCI and Nextel the protections
available to directors and officers of Delaware corporations. Article VII of the
Nextel By-laws also provides that expenses incurred by a person in defending a
civil or criminal action, suit or proceeding by reason of the fact that he or
she is or was a director or officer shall be paid in advance of the final
disposition of such action, suit or proceeding, upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Nextel as authorized by relevant Delaware law. Section 5 of Article Thirteenth
of the PCI Charter provides that expenses incurred in defending a civil or
criminal action, suit or proceeding shall be paid by PCI in advance of the final
disposition of such action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the person who is a party to such action, suit or proceeding
by reason of the fact that he or she is or was a director, officer, employee or
agent of PCI, or was serving at the request of PCI as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, to repay such amount if it shall ultimately be determined he
or she is not entitled to be indemnified by PCI as authorized in the PCI
Charter.
DISSENTERS' RIGHTS
Under the DGCL, a stockholder of a corporation participating in certain
merger and similar transactions may, under certain circumstances, receive cash
in the amount of the fair value of such holder's shares (as determined by a
court) in lieu of the consideration such holder would otherwise receive in the
merger or similar transaction. Unless a corporation's certificate of
incorporation provides otherwise, the DGCL does not require that such
dissenters' rights of appraisal be afforded with respect to a merger or
consolidation (i) to stockholders of a corporation, the shares of which are
either listed on a national securities exchange or the Nasdaq NM or widely held
(by more than 2,000 stockholders), if the stockholders of such corporation
receive only shares of the surviving corporation or of a listed or widely held
corporation (plus cash in lieu of any fractional shares), or (ii) to
stockholders of a corporation surviving a merger, if no vote of such
stockholders is required to approve the merger because, pursuant to Section
251(f) of the DGCL, the agreement of merger does not amend the certificate of
incorporation of the surviving corporation, each share of stock of the surviving
corporation outstanding immediately prior to the effective date of the merger is
to be identical to outstanding or treasury shares of the surviving corporation
after the effective date of the merger and the number of shares of common stock
into which securities to be issued in the merger can be converted does not
exceed 20% of the shares of common stock of the surviving corporation
outstanding immediately prior to the merger. The Nextel Charter and the PCI
Charter do not provide for appraisal rights and thus holders of shares of Nextel
Common Stock and PCI Common Stock, respectively (in light of the fact that such
shares are traded on the Nasdaq NM), may not be entitled to appraisal rights in
certain circumstances.
72
<PAGE> 76
PAYMENT OF DIVIDENDS
The DGCL permits the payment of dividends and the redemption of shares out
of paid-in, earned or other surplus. Under the DGCL, if a dividend is paid out
of capital surplus, stockholders need not be so notified, and dividends may also
be paid out of net profits for the fiscal year in which declared or out of net
profits for the preceding fiscal year, even if the corporation surplus accounts
show a deficit.
Holders of PCI Common Stock are entitled to receive dividends out of funds
legally available therefor, as
may be declared and made payable by the PCI Board. PCI has not paid any
dividends on PCI Common Stock in the past and has no plan to pay any dividends
on such stock for the foreseeable future.
Shares of Nextel Preferred Stock are entitled to the dividend rights and
preferences summarized above under the heading "-- Terms of Nextel Preferred
Stock." In addition (but subject to such preferred stock dividend rights and
preferences), the Nextel Charter provides that the Nextel Board may declare and
pay dividends on shares of Nextel Common Stock and Nextel Non-Voting Common
Stock (collectively, the "Nextel Capital Stock"), payable in cash, or otherwise,
only after payment in full of, or the setting apart for payment in full of,
dividends declared upon shares of Nextel Preferred Stock at the time
outstanding, to the extent of any preference to which such stock is entitled,
for all present and past dividend periods, and after compliance with the
provisions for any sinking or purchase fund or funds for any shares of any
series of Nextel Preferred Stock. The holders of shares of Nextel Preferred
Stock will not be entitled to share in such dividends paid to holders of shares
of Nextel Capital Stock, subject to the provisions of the resolution or
resolutions creating any series of Nextel Preferred Stock. If dividends are
declared on the shares of Nextel Capital Stock which are payable in shares of
Nextel Capital Stock, dividends will be declared which are payable at the same
rate on shares of both classes of Nextel Capital Stock. However, such dividends
payable in shares of Nextel Common Stock will be payable only to holders of
shares of Nextel Common Stock and such dividends payable in shares of Nextel
Non-Voting Common Stock will be payable only to holders of shares of Nextel Non-
Voting Common Stock.
DISTRIBUTIONS UPON LIQUIDATION
The Nextel Charter provides that in the event of any liquidation,
dissolution or winding up of Nextel or upon the distribution of the assets of
Nextel, all assets and funds of Nextel remaining (after the payment to the
holders of shares of Nextel Preferred Stock of the full preferential amounts to
which they shall be entitled pursuant to the Nextel Charter and/or the
resolution or resolutions creating any series thereof) shall be divided and
distributed among the holders of shares of Nextel Capital Stock ratably, except
as may otherwise be provided in any such resolution or resolutions.
The PCI Charter provides that, to the extent provided in the resolution or
resolutions adopted by the PCI Board providing for the issue of any series of
PCI Preferred Stock, in the event of any liquidation, dissolution or winding up
of the affairs of PCI, before any payment or distribution of the assets of PCI
shall be made to or set apart for the holders of any class of capital stock
ranking junior to the PCI Preferred Stock, the holders of the shares of the
Preferred Stock shall be entitled to receive payment at the rate fixed in the
resolution or resolutions providing for the issue of the respective series of
PCI Preferred Stock.
COMPROMISE AND REORGANIZATION
The DGCL permits a corporation to provide in its certificate of
incorporation that whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of creditors and/or stockholders or
any class of stockholders, a Delaware court of equitable jurisdiction may, upon
appropriate application, order a meeting of such creditors or class of creditors
and/or stockholders or class of stockholders. If a majority in number
representing three-fourths in value of such creditors or class of creditors,
and/or of such stockholders or class or stockholders, agrees to any compromise
or arrangement and to any reorganization of the corporation as a consequence of
such compromise or arrangement, such compromise or arrangement and such
reorganization shall, if sanctioned by the court to which application was made,
be binding on all such creditors or class of creditors, and/or all such
stockholders or class of stockholders and the corporation. Neither the PCI
Charter nor the Nextel Charter contains such a provision.
73
<PAGE> 77
STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders intended to be
presented at PCI's 1997 annual meeting of stockholders must be received by PCI
by June 2, 1997 for inclusion in PCI's proxy materials relating to such meeting.
In the event the Merger is consummated, there will not be a 1997 annual meeting
of stockholders of PCI.
OTHER MATTERS
The management of PCI knows of no other matters that may come before the
Meeting. However, if matters other than those referred to above should properly
come before the Meeting, it is the intention of the persons named on the
enclosed form of proxy to vote such proxy in accordance with their best
judgment.
CERTAIN LEGAL MATTERS
The validity of the shares of Nextel Common Stock offered hereby will be
passed upon for Nextel by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain
tax matters in connection with the Merger have been passed upon for PCI by
Gardere & Wynne, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements and related financial statement
schedules of Nextel incorporated in this Proxy Statement/Prospectus by reference
from Nextel's Annual Report on Form 10-K for the year ended December 31, 1996,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements and schedule of PCI as of December
31, 1995 and 1996, and for each of the years in the three-year period ended
December 31, 1996, have been incorporated by reference herein from PCI's Annual
Report on Form 10-K for the year ended December 31, 1996, in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of that firm as experts
in accounting and auditing.
74
<PAGE> 78
APPENDIX A
AMENDED AND RESTATED
AGREEMENT OF MERGER AND PLAN
OF REORGANIZATION
DATED AS OF
DECEMBER 3, 1996
BY AND BETWEEN
NEXTEL COMMUNICATIONS, INC.,
NEXTEL FINANCE COMPANY,
DCI MERGER INC.
AND
PITTENCRIEFF COMMUNICATIONS, INC.
A-1
<PAGE> 79
AMENDED AND RESTATED
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I. -- CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK;
TREATMENT OF OPTIONS AND WARRANTS...................................................... A-9
1.1 Exchange Ratio and Conversion of Shares....................................... A-9
1.2 Value Cap Adjusted for Channels Not Delivered................................. A-10
1.3 Value Cap Adjusted for Negative Cash Flow..................................... A-11
1.4 Value Cap Adjusted for Negative Working Capital............................... A-11
1.5 Value Cap Adjusted for Option/Warrant Exercise................................ A-12
1.6 Value Cap Adjusted for Severance Amounts...................................... A-12
1.6A Settlement with Castle Tower.................................................. A-12
1.7 Value Cap Adjusted if Closing Occurs After 1997............................... A-12
1.8 Asset Value and Dilution Adjustments to Exchange Ratio........................ A-12
1.9 Value Cap Adjustment.......................................................... A-13
1.10 Additional Consideration in Lieu of Termination............................... A-13
1.11 Nextel Closing Price.......................................................... A-13
1.12 Other Adjustments............................................................. A-13
1.13 Terms of the Merger........................................................... A-13
1.14 Effective Time; Effects of the Merger......................................... A-14
1.15 Certificate of Incorporation and Bylaws....................................... A-14
1.16 Directors and Officers........................................................ A-14
1.17 Exchange Agent................................................................ A-14
1.18 Surrender of Certificates and Delivery of Merger Consideration................ A-14
1.19 No Fractional Shares.......................................................... A-15
1.20 Rights of Holders of Certificates............................................. A-15
1.21 Assumption of Stock Options................................................... A-16
1.22 Warrants...................................................................... A-17
ARTICLE II. -- REPRESENTATIONS AND WARRANTIES OF PCI................................... A-17
2.1 Corporate Organization........................................................ A-17
2.2 Subsidiaries and Other Entities............................................... A-18
2.3 Corporate Authorization....................................................... A-18
2.4 Capital Stock................................................................. A-18
2.5 Options....................................................................... A-19
2.6 Compliance with Laws.......................................................... A-19
2.7 No Conflict................................................................... A-20
2.8 Litigation.................................................................... A-20
2.9 Insurance..................................................................... A-20
2.10 Intellectual Property......................................................... A-21
2.11 Assets........................................................................ A-21
2.12 Financial Statements.......................................................... A-21
2.13 Liabilities................................................................... A-21
2.14 Transactions Not in the Ordinary Course....................................... A-22
2.15 Capital Projects.............................................................. A-22
2.16 Taxes......................................................................... A-22
2.17 Bank Accounts; Employees...................................................... A-22
2.18 Real Estate................................................................... A-23
2.19 Title to Properties........................................................... A-23
2.20 Contracts..................................................................... A-23
2.21 Compliance with Securities Laws............................................... A-24
</TABLE>
A-2
<PAGE> 80
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
2.22 Brokers....................................................................... A-24
2.23 Special Liabilities; Warranties............................................... A-24
2.24 Employee Benefit Matters...................................................... A-24
2.25 Materially Correct............................................................ A-26
2.26 Information................................................................... A-26
2.27 Regulatory Matters............................................................ A-26
2.28 Schedule Disclosure........................................................... A-29
2.29 Information in Registration Statement......................................... A-29
2.30 Castle Tower Agreements....................................................... A-29
ARTICLE III. -- REPRESENTATIONS AND WARRANTIES OF NEXTEL AND
MERGER SUB............................................................................. A-29
3.1 Corporate Organization; Authorization......................................... A-29
3.2 Capital Stock................................................................. A-30
3.3 Common Stock; Registration.................................................... A-30
3.4 No Conflict................................................................... A-30
3.5 Information................................................................... A-30
3.6 Information in Registration Statement......................................... A-30
ARTICLE IV. -- COVENANTS OF PCI........................................................ A-31
4.1 Conduct of Business........................................................... A-31
4.2 Reasonable Efforts............................................................ A-31
4.3 Inspection.................................................................... A-31
4.4 SEC Registration.............................................................. A-32
4.5 Antitrust Filing.............................................................. A-32
4.6 Restraint on Solicitations.................................................... A-32
4.7 Best Efforts.................................................................. A-33
4.8 Stockholder Approval.......................................................... A-33
4.9 Affiliates.................................................................... A-33
4.10 Update Information............................................................ A-33
ARTICLE V. -- COVENANTS OF NEXTEL...................................................... A-33
5.1 Antitrust Filing.............................................................. A-33
5.2 Registration Statement........................................................ A-33
5.3 Current Public Information.................................................... A-34
5.4 Offer to Warrant Holders...................................................... A-34
5.5 Directors and Officers Indemnification........................................ A-34
5.6 Employee Matters.............................................................. A-34
ARTICLE VI. -- JOINT COVENANTS......................................................... A-35
6.1 Confidentiality............................................................... A-35
6.2 Standstill Agreement.......................................................... A-35
6.3 Trading Prohibitions.......................................................... A-36
6.4 Substitute of Subsidiary...................................................... A-36
6.5 Support of Transactions....................................................... A-36
6.6 Cooperation Concerning Extended Implementation Channels....................... A-36
6.7 Auction Participation......................................................... A-36
ARTICLE VII. -- CLOSING................................................................ A-37
7.1 Filing........................................................................ A-37
7.2 Closing....................................................................... A-38
ARTICLE VIII. -- CONDITIONS TO OBLIGATIONS............................................. A-38
8.1 Conditions to Obligations of Nextel and PCI................................... A-38
8.2 Conditions to Obligations of Nextel........................................... A-39
8.3 Conditions to the Obligations of PCI.......................................... A-39
</TABLE>
A-3
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE IX. -- TERMINATION/EFFECTIVENESS............................................... A-40
9.1 Termination................................................................... A-40
9.2 Effect........................................................................ A-41
ARTICLE X. -- MISCELLANEOUS............................................................ A-41
10.1 Waiver........................................................................ A-41
10.2 Notices....................................................................... A-41
10.3 Assignment.................................................................... A-42
10.4 Rights of Third Parties....................................................... A-42
10.5 Reliance...................................................................... A-42
10.6 Expenses...................................................................... A-42
10.7 Construction.................................................................. A-42
10.8 Captions; Counterparts........................................................ A-42
10.9 Entire Agreement.............................................................. A-42
10.10 Amendments.................................................................... A-43
10.11 Publicity..................................................................... A-43
</TABLE>
A-4
<PAGE> 82
DEFINITIONS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Actual PCI Common Equivalents....................................................... A-10
Adjusted EBITDA Earnings............................................................ A-11
Adjusted Value Cap.................................................................. A-12
Affiliate........................................................................... A-33
Agreement........................................................................... A-9
AMI................................................................................. A-9
Asset List.......................................................................... A-21
Awarded License..................................................................... A-37
Basic Exchange Ratio................................................................ A-9
Basic Value Cap..................................................................... A-10
By-Laws............................................................................. A-14
Castle.............................................................................. A-29
Castle License Agreement............................................................ A-29
Castle Purchase Agreement........................................................... A-29
CERCLA.............................................................................. A-19
Certificate of Incorporation........................................................ A-14
Certificate of Merger............................................................... A-14
Certificates........................................................................ A-14
Channel............................................................................. A-11
Closing............................................................................. A-38
Code................................................................................ A-9
Communications Act.................................................................. A-28
Constituent Corporations............................................................ A-14
Contaminants........................................................................ A-19
Converted Nextel Shares............................................................. A-16
Converted Per Share Price........................................................... A-16
Current Payables.................................................................... A-21
DCI................................................................................. A-9
Defined benefit plan................................................................ A-24
Defined contribution plan........................................................... A-25
Delivered........................................................................... A-11
Dilutive PCI Common Equivalents..................................................... A-10
EA.................................................................................. A-36
EA Auction.......................................................................... A-36
Effective Time of the Merger........................................................ A-14
Employee Plan....................................................................... A-25
ERISA............................................................................... A-24
ESMR................................................................................ A-28
Excess parachute payments........................................................... A-26
Exchange Agent...................................................................... A-14
Executive........................................................................... A-35
Extended Implementation Channel..................................................... A-10
FCC................................................................................. A-26
FCC License......................................................................... A-26
Fiduciaries......................................................................... A-25
Final Order......................................................................... A-38
First Agreement..................................................................... A-9
FMR................................................................................. A-9
GAAP................................................................................ A-11
</TABLE>
A-5
<PAGE> 83
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
GCL................................................................................. A-14
Hazardous Substances................................................................ A-19
HSR Act............................................................................. A-32
Immaterial.......................................................................... A-27
July 1 Derivatives.................................................................. A-10
July 1 Shares....................................................................... A-10
June 30 Balance Sheet............................................................... A-21
Market Adjustment................................................................... A-10
Material............................................................................ A-30
Merger.............................................................................. A-9
Merger Consideration................................................................ A-15
Merger Subs......................................................................... A-9
Morgan Stanley...................................................................... A-18
MSA................................................................................. A-10
Multiemployer plan.................................................................. A-24
Multiple employer plan.............................................................. A-24
Nasdaq NM........................................................................... A-13
Nextel.............................................................................. A-9
Nextel Closing Price................................................................ A-13
Nextel Common Stock................................................................. A-9
Nextel Cure Period.................................................................. A-40
Nextel Plan......................................................................... A-17
Nextel Reports...................................................................... A-30
Nextel Sub.......................................................................... A-9
NFC................................................................................. A-9
Non-core Market Channel............................................................. A-10
Overlap EAs......................................................................... A-36
PCI................................................................................. A-9
PCI Common Stock.................................................................... A-9
PCI Cure Period..................................................................... A-40
PCI Information..................................................................... A-32
PCI Management Agreement............................................................ A-26
PCI Option Plans.................................................................... A-16
PCI Reports......................................................................... A-26
PCI Share Base...................................................................... A-10
PCI Stock Options................................................................... A-16
PCI/PCI Subs........................................................................ A-22
Permitted Liabilities............................................................... A-22
Permitted Liens..................................................................... A-23
Pollutants.......................................................................... A-19
Potentially responsible party....................................................... A-19
Qualifying Extended Implementation Channel.......................................... A-10
Registration Statement.............................................................. A-32
SEC................................................................................. A-26
Securities Act...................................................................... A-17
Shortfall Market.................................................................... A-10
SMR................................................................................. A-11
SMR License......................................................................... A-27
SMR System.......................................................................... A-27
SMR Units........................................................................... A-27
STA................................................................................. A-27
</TABLE>
A-6
<PAGE> 84
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
States.............................................................................. A-21
Subsidiaries........................................................................ A-17
Surviving Corporation............................................................... A-14
Takeover Proposal................................................................... A-33
Terminating Nextel Breach........................................................... A-40
Terminating PCI Breach.............................................................. A-40
Third-Party Management Agreement.................................................... A-27
To the knowledge of PCI............................................................. A-42
To the knowledge of the Subsidiaries................................................ A-42
Transaction Costs................................................................... A-11
Unfavorable FCC Response............................................................ A-10
Value Floor......................................................................... A-13
Voting stock........................................................................ A-30
Warrants............................................................................ A-17
Welfare Benefit Fund................................................................ A-25
</TABLE>
A-7
<PAGE> 85
ANNEXES
<TABLE>
<S> <C> <C>
Annex A -- Form of Letter Concerning Compliance with Rule 145
Annex B -- Blue Sky
Annex C-1 -- Form of Opinion of Gardere & Wynne, L.L.P.
Annex C-2 -- Form of Opinion of Gardner, Carton & Douglas
Annex D -- Form of Nextel Warrant
Annex E -- Form of Opinion of Jones, Day, Reavis & Pogue
Annex F -- Letter Agreement between Nextel Communications, Inc. and Castle Tower
Corporation
</TABLE>
A-8
<PAGE> 86
AMENDED AND RESTATED AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
Amended and Restated Agreement of Merger and Plan of Reorganization dated
as of December 3, 1996 ("Agreement") by and among NEXTEL COMMUNICATIONS, INC., a
Delaware corporation ("Nextel"), NEXTEL FINANCE COMPANY, a Delaware corporation
and a wholly owned subsidiary of Nextel formerly known as Dispatch
Communications, Inc. ("NFC"), DCI MERGER INC., a Delaware corporation and a
wholly owned subsidiary of NFC ("Merger Sub") and PITTENCRIEFF COMMUNICATIONS,
INC., a Delaware corporation ("PCI").
PLAN OF REORGANIZATION
Nextel, through NFC and Merger Sub, and PCI intend to enter into a tax-free
plan of reorganization under the Internal Revenue Code of 1986, as amended (the
"Code").
The plan of reorganization will consist of the merger of Merger Sub with
and into PCI, with PCI being the surviving corporation. This merger ("Merger")
will be consummated in accordance with the terms and conditions hereof and will
be consummated at the "Effective Time of the Merger" as defined herein.
Nextel has caused NFC to form Merger Sub solely for the purpose of
consummating the Merger.
Nextel, NFC, Merger Sub and PCI entered into an Agreement of Merger and
Plan of Reorganization dated as of October 2, 1996 (the "First Agreement").
Simultaneously with the execution of the First Agreement, PCI has delivered
to Nextel (i) an executed letter agreement from Castle Tower Corporation, (ii) a
waiver of preemptive rights from Advanced MobileComm, Inc. ("AMI") pursuant to
that certain Contribution Agreement, dated as of September 5, 1995, as
subsequently amended, among PCI, Pittencrieff Communications, Inc., a Texas
corporation, AMI and each of the other sellers named therein, which waiver shall
be effective at the Effective Time of the Merger, and (iii) a confirmation from
AMI that the Voting Agreement and Proxy dated January 16, 1996 shall terminate
in accordance with its terms pursuant to Section 4(ii) thereof effective at the
Effective Time of the Merger.
Simultaneously with the execution of the First Agreement, FMR Corp., a
Massachusetts corporation ("FMR"), has agreed that, among other things, at the
Effective Time of the Merger, FMR will exchange its warrants to purchase capital
stock of PCI for a warrant to purchase Class A (Voting) Common Stock of Nextel,
par value $.001 per share ("Nextel Common Stock"), in the form of Annex D.
The parties to the First Agreement desire to amend certain provisions and
restate the First Agreement and, accordingly, the parties have entered into this
Agreement. All schedules to this Agreement set forth information as of October
2, 1996.
AGREEMENT
In order to consummate the plan of reorganization, and in consideration of
the mutual agreements hereinafter contained, Nextel, NFC, Merger Sub and PCI
agree as follows:
ARTICLE I.
CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK;
TREATMENT OF OPTIONS AND WARRANTS
1.1 Exchange Ratio and Conversion of Shares. At the Effective Time of the
Merger (as defined herein), all the outstanding shares of common stock of PCI,
par value $.01 per share ("PCI Common Stock") shall be converted into shares of
Nextel Common Stock using an exchange ratio of 3.17:1.0, so that three and
seventeen one hundredths shares of PCI Common Stock are converted into one share
of Nextel Common Stock (the "Basic Exchange Ratio"), subject to the adjustments
described in this Article I. As of July 1,
A-9
<PAGE> 87
1996, (i) the total number of shares of PCI Common Stock outstanding ("July 1
Shares"), plus (ii) the total number of shares of PCI Common Stock issuable upon
exercise of warrants or options, or upon exchange or conversion of convertible
instruments (regardless of whether they were on July 1 or are at the Effective
Time of the Merger "in the money") as set forth on Schedule 2.5(a) ("July 1
Derivatives"), and excluding (y) all treasury shares, and (z) all other shares,
rights to acquire shares or other issuance commitments for shares of PCI Common
Stock that are not July 1 Shares or July 1 Derivatives, was 27,840,219 (the "PCI
Share Base"). The maximum value of Nextel Common Stock to be issued hereunder at
the Effective Time of the Merger with respect to (a) the PCI Share Base (without
adjustment for any instrument that may have expired without exercise, exchange
or conversion into PCI Common Stock), and (b) any PCI Common Stock, or options,
warrants, convertible or exchangeable instruments or other commitments to issue
PCI Common Stock outstanding at the Effective Time of the Merger that are not
July 1 Shares or July 1 Derivatives (such additional PCI Common Stock or
issuance commitments, the "Dilutive PCI Common Equivalents"; and together with
the PCI Share Base (without adjustment for any instrument that may have expired
without exercise, exchange or conversion into PCI Common Stock), the "Actual PCI
Common Equivalents") shall be $170,000,000 (the "Basic Value Cap"). The maximum
number of shares of Nextel Common Stock to be issued hereunder at the Effective
Time of the Merger shall be 8,782,403, subject to adjustment only in the event
Nextel elects to deliver additional shares to avert a termination of this
Agreement pursuant to Section 1.10, or for changes to the capitalization of
Nextel pursuant to Section 1.12.
1.2 Value Cap Adjusted for Channels Not Delivered. (a) If at the time of
the Closing (as defined herein) the number of Channels Delivered by PCI is (i)
less than 95% of the number of Channels set forth on Schedule 1.2 in any
metropolitan statistical area ("MSA") identified on Schedule 1.2 (each such MSA,
a "Shortfall Market"), or (ii) fewer than 3,000 Channels with regard to the
market areas not listed on Schedule 1.2 (each such Channel, a "Non-core Market
Channel"), then (A) for each Shortfall Market the Channel value set forth on
Schedule 1.2 for that Shortfall Market shall be multiplied by the difference
between the number of Channels set forth on Schedule 1.2 for that Shortfall
Market minus the number of Channels Delivered in that Shortfall Market and (B)
except as provided in Section 1.2(b)(iii), for the Non-core Market Channels, the
shortfall, if any, between 3,000 and the number of Non-core Market Channels
Delivered shall be multiplied by $3,000 (the product of each calculation, a
"Market Adjustment"). The sum of all such Market Adjustments shall be subtracted
from the Basic Value Cap.
(b) If the FCC (as defined herein) responds to PCI's filings for
rejustification of its extended implementation authority by granting PCI less
than twenty four (24) months from the date of such FCC response to construct any
Channel that had extended implementation authority (an "Unfavorable FCC
Response") then (i) each extended implementation channel identified on Schedule
2.27 ("Extended Implementation Channel") that received an Unfavorable FCC
Response and is located within 25 miles of an MSA will be deemed constructed as
required by clause 1.2(d)(iii) for purposes of determining whether such Extended
Implementation Channels are Delivered, and if all other criteria set forth in
Section 1.2(d) for that Channel to be Delivered have been met, such Extended
Implementation Channel (the "Qualifying Extended Implementation Channel") will
be counted toward the Channel targets set forth on Schedule 1.2(a), provided,
however, that the total number of Qualifying Extended Implementation Channels in
any MSA shall not exceed the number of Extended Implementation Channels for such
MSA identified on Schedule 1.2, (ii) an amount equal to the lesser of (A)
$3,000,000, or (B) the product of $3,658 multiplied by the number of Extended
Implementation Channels receiving an Unfavorable FCC Response, will be
subtracted from the Basic Value Cap, and (iii) the target for Non-core Market
Channels shall be reduced from 3,000 to 1,800 and the shortfall, if any, between
1,800 and the number of Non-core Market Channels Delivered shall be multiplied
by $5,000 to determine the Market Adjustment, if any, for the Non-core Market
Channels.
(c) If the FCC responds to PCI's filings for rejustification of its
extended implementation authority by granting PCI twenty-four (24) months or
more from the date of such response to construct any Extended Implementation
Channel, that Extended Implementation Channel will be deemed constructed as
required by clause 1.2(d)(iii) for purposes of determining whether such Extended
Implementation Channel is Delivered regardless of when the date of the Closing
occurs, so long as any postponements of the date of the Closing are not caused
by the action or inaction of PCI.
A-10
<PAGE> 88
(d) A "Channel" shall be "Delivered" by PCI if at the Effective Time of the
Merger: (i) the FCC license for such channel has been granted to PCI or a PCI
Subsidiary by a Final Order (as defined herein); (ii) there is a Final Order
approving a transfer of control of that license to Nextel; (iii) if
unconstructed or deconstructed, there are at least 180 days remaining before the
construction or reconstruction deadline applicable to that channel; (iv) in the
case of a channel counted towards or applicable to an MSA market target, such
channel is located within 25 miles of the core of the applicable MSA, except as
otherwise provided on Schedule 1.2; (v) in the case of a channel counted towards
or applicable to an MSA market target, there is no co-channel license located
within 55 miles of the channel, except for co-channel licenses that are PCI, PCI
Subsidiaries, or licenses controlled by Nextel, except as otherwise provided on
Schedule 1.2; (vi) the channel is either (x) a land mobile 800 MHz frequency,
being one of the 430 frequencies allocated for specialized mobile radio ("SMR"),
or (y) a frequency in an MSA identified on Schedule 1.2 and allocated for public
safety, industrial land transportation or business where the radio service
classification has been converted to commercial service classification (i.e., YX
or GX radio service type) or (z) a frequency in a Non-core Market allocated for
public safety, industrial land transportation or business; (vii) the channel is
granted pursuant to a primary license; (viii) in the case of a channel counted
towards or applicable to an MSA market target, such channel is a discrete
frequency within the applicable market and not subject to any cross border
frequency sharing or channel coordination or similar arrangement, taking into
account all frequencies deemed Delivered pursuant to this Agreement in that
market; (ix) the license for or including the channel is not subject to (A) any
agreement to be sold to a third party, or (B) any option or right of first
refusal in favor of any third party; (x) there is no contract right of any third
party or FCC order otherwise encumbering or limiting the use of the license;
(xi) no consideration is due to any person in connection with the channel; and
(xii) the channel is not subject to any finders' preference action (other than
the pending appeal of a favorable FCC ruling) or otherwise included within any
proceeding commenced or assessed by a third party (other than Nextel) or any
regulatory agency, including, without limitation, the FCC, that could result in
a take-back, termination, cancellation or nonrenewal of the relevant licenses.
1.3 Value Cap Adjusted for Negative Cash Flow. If Adjusted EBITDA Earnings
for the period from April 1, 1996 to the last day of the calendar quarter most
recently ended before the Effective Time of the Merger is negative, that amount
shall be annualized (i.e., adjusted) to equal the loss that PCI would have
experienced in a 12-month period at that rate of loss, and that annualized
amount shall be subtracted from the Basic Value Cap. In the event the Effective
Time of the Merger is more than one year from the date of the First Agreement,
so long as any postponements of the date of the Closing are not caused by the
action or inaction of PCI, there shall be no value cap adjustment pursuant to
this Section 1.3. "Adjusted EBITDA Earnings" means PCI's earnings from
continuing operations as shown on the unaudited consolidated financial
statements that are prepared by PCI in the ordinary course of business
consistent with past practice, (a) before interest expense, taxes, depreciation,
amortization, other income and expense, all determined in accordance with past
practices, to the extent consistent with GAAP (as herein defined), and (b)
without reduction for reasonable accounting, legal, printing and financial
advisory fees, special employee incentive bonuses (as agreed to by Nextel from
time to time) and expenses associated with the Agreement and the transactions
contemplated hereby (the "Transaction Costs") so long as the Transaction Costs
in the aggregate for the period through and including the Closing (regardless
whether GAAP would reflect them in that period) do not exceed $1,500,000, all
determined in accordance with past practices, to the extent consistent with
GAAP.
1.4 Value Cap Adjusted for Negative Working Capital. (a) Based on the
unaudited consolidated balance sheet of PCI as of the month-end preceding the
Effective Time of the Merger prepared by PCI in the ordinary course of business,
consistent with past practices, if the working capital (herein defined) of PCI
is negative, the negative amount of such working capital shall be subtracted
from the Basic Value Cap. The terms used in this Section shall have the meaning
given to those terms in current use in the accounting profession in the United
States under Generally Accepted Accounting Principles ("GAAP"). For the purposes
of this Section, with the exceptions herein listed, working capital shall mean
the result obtained by subtracting current liabilities from current assets.
A-11
<PAGE> 89
(b) For purposes of calculating working capital pursuant to this Section,
(i) the long term portion of the long term debt of PCI shall be included in the
current liabilities; (ii) all accounts and/or notes receivable from the five
executive officers of PCI shall be excluded from the current assets; (iii)
discounts on notes payable shall be excluded from the current liabilities (thus
increasing current liabilities); (iv) both (A) the Transaction Costs that were
paid on or before the period reflected on the balance sheet, and (B) the
Transaction Costs that have not been paid on or before the period reflected on
the balance sheet (regardless whether GAAP would reflect them as current
liabilities as of that date) shall, up to an aggregate maximum for all amounts
under this clause (iv) of $1,500,000, be excluded from the current liabilities;
(v) all severance costs that have been incurred or are estimated to be incurred
as a result of the Merger and change of control effected thereby shall be
included in the current liabilities of PCI under the provisions of this Section
(regardless whether GAAP would reflect them as current liabilities as of that
date); (vi) any cash advanced by Nextel pursuant to Section 6.6 and any
expenditures of those funds shall be excluded from either current assets or
current liabilities, as applicable; and (vii) any cash that was received upon
the exercise of any July 1 Derivatives (as those instruments were in effect on
July 1, 1996) prior to the Effective Time of the Merger will be excluded from
current assets.
1.5 Value Cap Adjusted for Option/Warrant Exercise. If at the Effective
Time of the Merger, PCI (on a consolidated basis) does not have cash in an
amount equal to the aggregate exercise price or other consideration due upon
exercise, exchange or conversion under the terms of the July 1 Derivatives (as
those instruments were in effect on July 1, 1996) exercised prior to the
Effective Time of the Merger, or has issued any shares of PCI Common Stock in
respect of any July 1 Derivatives in any cashless exercise transaction, the
Basic Value Cap shall be reduced by the difference between the amount of cash
that should have been received upon such exercise and the actual amount of cash
received upon such exercise and held at the Effective Time of the Merger.
1.6 Value Cap Adjusted for Severance Amounts. If the aggregate amount paid
or to be paid or other value given to the five executives identified in Section
5.6(b) as described therein whether pursuant to existing commitments or
otherwise, excluding (i) bonuses earned in 1996 or debt forgiven in 1996 up to
an aggregate of $222,871, and (ii) bonuses earned in 1997 up to 35% of the
salary of each such executive as in effect on the date of the First Agreement,
prorated through the date of the Closing, exceeds $1,260,000, then the amount of
such excess shall be subtracted from the Basic Value Cap.
1.6A Settlement with Castle Tower. Prior to Closing, PCI shall enter into
a settlement and release agreement with Castle (as defined below) pursuant to
which Castle shall settle and release all claims arising under the Castle
Purchase Agreement (as defined below).
1.7 Value Cap Adjusted if Closing Occurs After 1997. For purposes of the
exchange ratio adjustments, if any, to be made pursuant to Sections 1.8 and 1.9,
if the date of the Closing occurs after December 31, 1997, then, so long as any
postponements of the date of the Closing are not caused by the action or
inaction of PCI, any adjustments made to the Basic Value Cap pursuant to
Sections 1.2, 1.4, 1.5 and 1.6 shall be reduced to equal one half of the
adjustments otherwise calculated pursuant to those Sections.
1.8 Asset Value and Dilution Adjustments to Exchange Ratio. If there are
any reductions to the Basic Value Cap under Section 1.2, 1.3, 1.4, 1.5, 1.6 or
1.7 or if there are any Dilutive PCI Common Equivalents at the Effective Time of
the Merger then, in lieu of the Basic Exchange Ratio set forth in Section 1.1,
the exchange ratio shall equal:
(i) 3.17; multiplied by
(ii) the quotient of (A) the Basic Value Cap of $170,000,000, divided
by (B) the Basic Value Cap minus the sum of any reductions pursuant to
Sections 1.2, 1.3, 1.4, 1.5 and 1.6, or, if Section 1.7 is applicable,
one-half of such sum (the "Adjusted Value Cap"); multiplied by
(iii) the quotient of (Y) the Actual PCI Common Equivalents, divided
by (Z) the PCI Share Base.
A-12
<PAGE> 90
1.9 Value Cap Adjustment. If, at the Effective Time of the Merger:
(a) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI Common
Equivalents; divided by
(b) (i) the Basic Exchange Ratio of 3.17 or, if Section 1.8 applies,
(ii) the exchange ratio calculated under Section 1.8; multiplied by
(c) the Nextel Closing Price,
is greater than the lower of (y) the Basic Value Cap, or (z) the Adjusted Value
Cap, then the exchange ratio shall be further adjusted to equal:
(A) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI Common
Equivalents; multiplied by
(B) the Nextel Closing Price; divided by
(C) (i) the Basic Value Cap, or, if lower, (ii) the Adjusted Value
Cap.
1.10 Additional Consideration in Lieu of Termination. (a) If the Board of
Directors of PCI has elected (as contemplated by Section 9.1(d)(iv)) to
terminate this Agreement because the Nextel Closing Price on the day before the
scheduled date of the Closing is less than $14.00, Nextel may elect to deliver
shares of Nextel Common Stock with an aggregate value, based on the Nextel
Closing Price on the day of the Closing equal to the product of (i) $14,
multiplied by (ii) the total number of shares of Nextel Common Stock that would
be issued or issuable with respect to Actual PCI Common Equivalents as otherwise
determined under this Article I (the "Value Floor").
(b) If Nextel makes the election contemplated by Section 1.10(a), then: (i)
the termination election made by the PCI Board of Directors under Section
9.1(d)(iv) shall be automatically rescinded and cancelled; (ii) the Merger shall
proceed pursuant to this Agreement; and (iii) in lieu of the exchange ratio set
forth in Section 1.1 or calculated and adjusted under Section 1.8 or 1.9, the
Actual PCI Common Equivalents shall be converted into shares of Nextel Common
Stock in the ratio that (i) Actual PCI Common Equivalents, bears to (ii) the
quotient of the Value Floor divided by the Nextel Closing Price on the date of
the Closing.
1.11 Nextel Closing Price. As used in this Agreement, the "Nextel Closing
Price" shall be the arithmetic average of the closing sales price for Nextel
Common Stock on the Nasdaq National Market (the "Nasdaq NM") for the 20 trading
days immediately preceding the date on which the Nextel Closing Price is to be
determined.
1.12 Other Adjustments. Nextel and PCI agree that in the event of any
change in the terms of the authorized capital stock of Nextel (other than a
change solely in the number of shares), or the declaration or payment of any
share dividend or share distribution by Nextel to its stockholders, or any
distribution of cash, property or securities by Nextel to its stockholders
(other than regular quarterly cash dividends payable out of earnings), or any
split, reclassification, recapitalization, subdivision or exchange in respect of
the outstanding stock of Nextel, then appropriate adjustments shall be made to
the number of shares of Nextel Common Stock issuable in the Merger, as set forth
in Section 1.1, to place each of Nextel, NFC, and Merger Sub, PCI and the
holders of PCI Common Stock in the same posture as if the Effective Time of the
Merger had occurred immediately prior to the occurrence of the event giving rise
to such adjustment. Further, Nextel and PCI agree that in the event of any
change in the terms of the authorized capital stock of PCI, or any distribution
of securities by PCI to its stockholders, or any split, reclassification,
recapitalization, subdivision or exchange in respect of the outstanding stock of
PCI, appropriate adjustments shall be made to place each of Nextel, Merger Sub,
PCI and the holders of PCI Common Stock in the same posture as if the Effective
Time of the Merger had occurred immediately prior to the occurrence of the event
giving rise to such adjustment. No adjustment shall be made pursuant to the
preceding sentence for redemptions, repurchases or other cancellation or
retirement of outstanding shares of PCI Common Stock or rights to acquire shares
of PCI Common Stock.
1.13 Terms of the Merger. Upon the terms and subject to the conditions set
forth herein, and in accordance with the General Corporation Law of the State of
Delaware ("GCL"), as soon as practicable following the satisfaction (or, to the
extent permitted, the waiver) of the conditions set forth in Article VIII,
A-13
<PAGE> 91
Merger Sub and PCI shall cause a Certificate of Merger (the "Certificate of
Merger") to be executed and filed with the Secretary of State of Delaware as
provided in Section 251 of the GCL. The Certificate of Merger shall provide that
Merger Sub shall be merged with and into PCI (the "Merger"). Following the
Merger, PCI shall continue as the surviving corporation (the "Surviving
Corporation").
1.14 Effective Time; Effects of the Merger. The Merger shall become
effective when both (a) this Agreement shall be adopted and approved by the
stockholders of PCI in accordance with the applicable provisions of the GCL and
(b) the Certificate of Merger, executed in accordance with the relevant
provisions of the GCL, is filed with the Secretary of State of Delaware (the
time the Merger becomes effective being referred to as the "Effective Time of
the Merger"). Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time of the Merger: the separate existence of Merger
Sub shall cease; the Surviving Corporation shall possess all assets and property
of every description, and all interests therein, wherever located, and the
rights, privileges, immunities, powers, franchises and authority, of a public as
well as of a private nature, of each of Merger Sub and PCI (the "Constituent
Corporations"); all obligations belonging to or due each of the Constituent
Corporations shall be vested in, and become the obligations of, the Surviving
Corporation without further act or deed; title to any real estate or any
interest therein vested in either of the Constituent Corporations shall not
revert or in any way be impaired by reason of the Merger; all rights of
creditors and all liens upon any property of any of the Constituent Corporations
shall be preserved unimpaired, and the Surviving Corporation shall be liable for
all of the obligations of each of the Constituent Corporations; and any claim
existing, or action or proceeding pending, by or against either of the
Constituent Corporations may be prosecuted to judgment with right of appeal, as
if the Merger had not taken place.
1.15 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Merger Sub as in effect immediately preceding the Effective
Time of the Merger shall constitute the Certificate of Incorporation of the
Surviving Corporation (the "Certificate of Incorporation") within the meaning of
the GCL Section 104. The By-Laws of Merger Sub as in effect immediately
preceding the Effective Time of the Merger shall constitute the By-Laws of the
Surviving Corporation (the "By-Laws") until amended in accordance with
applicable law and the Certificate of Incorporation.
1.16 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time of the Merger shall be the directors and
officers of the Surviving Corporation at the Effective Time of the Merger and
shall hold office from the Effective Time of the Merger until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as
otherwise provided by law.
1.17 Exchange Agent. Prior to the Effective Time of the Merger, Nextel
shall designate a bank or trust company to act as exchange agent in the Merger
(the "Exchange Agent"). Prior to the Effective Time of the Merger, Nextel shall
contribute to NFC the shares of Nextel Common Stock necessary to make payment
for each share of the capital stock of PCI being converted by reason of the
Merger. Immediately thereafter, NFC shall contribute such shares of Nextel
Common Stock to Merger Sub and Merger Sub will immediately prior to or at the
Effective Time of the Merger deliver to the Exchange Agent such shares of Nextel
Common Stock.
1.18 Surrender of Certificates and Delivery of Merger Consideration.
(a) Promptly after the Effective Time of the Merger, Nextel shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time of the Merger represented
outstanding shares of PCI Common Stock (the "Certificates") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in form approved by Nextel and
the Exchange Agent) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Nextel
Common Stock and cash for fractional shares. Upon surrender to the Exchange
Agent of a Certificate or Certificates, together with a letter of transmittal
duly executed (in the approved form), and such other documents as the Surviving
Corporation or the Exchange Agent may reasonably request, a holder of a
Certificate shall be entitled to receive in exchange therefor a portion of
A-14
<PAGE> 92
Nextel Common Stock as set forth in Section 1.1, as adjusted pursuant to this
Article I (the "Merger Consideration").
(b) The stock transfer books of PCI shall be closed at the Effective Time
of the Merger and no transfer of capital stock of PCI outstanding prior to the
Effective Time of the Merger shall be registered on the stock transfer books of
the Surviving Corporation. If Nextel Common Stock is to be issued to a person
other than the person in whose name the Certificates are registered, it shall be
a condition of issuance that the Certificates surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such issuance shall pay all transfer and other taxes required by reason of the
receipt by a person other than the registered holder of the Certificates
surrendered, or establish to the reasonable satisfaction of the Surviving
Corporation or the Exchange Agent that such tax has been paid or is not
applicable.
(c) At any time following ninety days after the Effective Time of the
Merger, Nextel shall be entitled to require the Exchange Agent to deliver to
Nextel any Nextel Common Stock which had been made available to the Exchange
Agent by or on behalf of Nextel or the Surviving Corporation and which has not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to Nextel (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Nextel
Common Stock payable upon due surrender of their Certificates. Notwithstanding
the foregoing, Nextel shall not be liable to a holder of Certificates for
amounts delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws. Nextel shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of
shares.
(d) If any Certificates shall not have been surrendered prior to one year
after the Effective Time of the Merger (or immediately prior to such earlier
date on which any payment in respect thereof would otherwise escheat to or
become the property of any governmental unit or agency), the payment in respect
of such Certificates shall, to the extent permitted by applicable law, become
the property of Nextel, free and clear of all claims of interest of any person
previously entitled thereto.
(e) Certificates, if and when presented to the Exchange Agent or the
Surviving Corporation after the Effective Time of the Merger, shall be cancelled
and exchanged for the consideration provided for, and in accordance with, the
procedures set forth in this Section.
1.19 No Fractional Shares. Notwithstanding any other provision of this
Agreement (but subject to the final sentence of this Section 1.19), no
fractional share of Nextel Common Stock or certificates or scrip therefor shall
be issued as a result of the conversion of issued and outstanding capital stock
of PCI into Nextel Common Stock, but in lieu of each fractional interest there
shall be made a payment in cash therefor, without interest, at a pro rata price
based on the Nextel Closing Price. The Surviving Corporation shall provide (or
shall cause one or more of its Affiliates to provide) the Exchange Agent with
sufficient cash to make such payments, and, thereafter, the Surviving
Corporation shall cause the Exchange Agent to make such payments to the holders
of Certificates in cash, without interest, on the surrender of their
Certificates. Wherever in this Agreement it is contemplated that, in connection
with the Merger, cash payment shall be made in lieu of fractional share
interests to persons otherwise entitled to receive such fractional share
interests, Nextel may (in its sole and absolute discretion) deliver to such
persons a number of whole shares, determined by rounding up to the nearest whole
share, and thereupon shall be relieved of any obligation hereunder to make cash
payments to such persons in lieu of any fractional share interests.
1.20 Rights of Holders of Certificates.
(a) At the Effective Time of the Merger, the holders of Certificates for
shares of capital stock of PCI (other than certificates representing shares held
in PCI's treasury, which shall be automatically cancelled pursuant to the
Merger) shall cease to have any rights as stockholders of PCI, and their sole
rights shall pertain to the shares of Nextel Common Stock into which their
shares of PCI capital stock shall have been converted by the Merger. After the
Effective Time of the Merger, each holder of outstanding Certificates for shares
of capital stock of PCI shall be entitled upon surrender of the same duly
transmitted to the Exchange Agent to receive in exchange therefor certificates
representing the number of whole shares of Nextel Common
A-15
<PAGE> 93
Stock into which such holder's shares of capital stock of PCI shall have been
converted by the Merger, plus (if applicable) cash in lieu of fractional shares.
(b) Pending surrender and exchange under this Agreement, a holder's
Certificates for capital stock of PCI shall be deemed for all corporate
purposes, other than the payment of dividends, to evidence the number of whole
shares of Nextel Common Stock into which such shares have been converted by the
Merger and, subject to the last sentence of Section 1.19, the right to receive
cash for any fractional interests resulting therefrom. Subject to Section
1.18(d), unless and until any outstanding Certificates for shares of PCI capital
stock are surrendered, no dividend (stock or cash) payable to holders of record
of Nextel Common Stock as of any date subsequent to the Effective Time of the
Merger shall be paid to the holder of any such Certificate, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for Nextel Common Stock issued in exchange therefor the amount of
dividends, if any, but without interest, that have theretofore become payable
subsequent to the Effective Time of the Merger with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange.
1.21 Assumption of Stock Options.
(a) Schedules 2.5(a) and 2.5(b) set forth a list of each director and
employee stock option outstanding on the date of the First Agreement, whether or
not fully exercisable (collectively, the "PCI Stock Options"), to purchase PCI
Common Stock heretofore granted or assumed by PCI pursuant to any stock option,
stock purchase or similar plan adopted, assumed or maintained at any time by
PCI, any of its controlled Affiliates or any of their respective predecessors in
interest, including but not limited to the PCI 1993 Stock Option Plan, the PCI
1994 Non-Employee Director Stock Option Plan, the PCI 1996 Stock Option Plan,
and the PCI 1996 Non-Employee Director Stock Option Plan, each as amended and in
effect on the date of the First Agreement (collectively the "PCI Option Plans").
Schedules 2.5(a) and 2.5(b) also set forth with respect to each PCI Stock Option
the option exercise price, the number of shares subject to the option, any
related stock appreciation rights, the dates of grant, vesting, exercisability
and expiration of the option and whether the option is an incentive stock option
or a non-qualified stock option. All rights under the PCI Stock Options shall be
treated as provided in this Section 1.21, and to the extent the terms of the PCI
Option Plans and/or of any related agreements are inconsistent with the
treatment to be accorded to the PCI Stock Options pursuant to this Section 1.21,
then PCI shall cause the PCI Option Plans and/or any related agreements with
affected participants to be amended, and all required third party, governmental
and regulatory body consents or approvals to such amendments to be procured,
such that all such inconsistencies shall be eliminated by the Effective Time of
the Merger.
(b) Each PCI Stock Option outstanding immediately prior to the Effective
Time of the Merger shall be converted at the Effective Time of the Merger into
an issued and outstanding option of Nextel in accordance with the terms of the
PCI Option Plans, so that (i) from and after the Effective Time of the Merger,
each such PCI Stock Option may be exercised only for shares of Nextel Common
Stock notwithstanding any contrary provision of the PCI Option Plans or stock
option agreements executed in connection therewith, (ii) each such PCI Stock
Option shall at the Effective Time of the Merger become an option to purchase a
number of shares of Nextel Common Stock equal to the quotient arrived at by
dividing the number of shares of PCI Common Stock subject to such option
immediately prior to the Effective Time, by the Basic Exchange Ratio, as
adjusted pursuant to Article I ("Converted Nextel Shares"), and (iii) the
exercise price per share of Nextel Common Stock at which each such PCI Stock
Option is exercisable shall be the amount (rounded up to the next whole cent)
arrived at by multiplying the exercise price per share of PCI Common Stock at
which such PCI Stock Option is exercisable immediately prior to the Effective
Time by the Basic Exchange Ratio, as adjusted pursuant to Article I (the
"Converted Per Share Price"); provided, however, that, notwithstanding the
foregoing, Nextel shall not issue or pay for any fractional share otherwise
issuable upon any exercise by any holder of PCI Stock Options that are so
converted, and provided further, however, that in the case of each PCI Stock
Option which is an incentive stock option, the Basic Exchange Ratio shall be
adjusted for such option, if necessary, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of the
Code. All PCI Stock Options converted into issued and outstanding options of
Nextel pursuant to the preceding sentence, except those PCI Stock Options held
by directors who are not also
A-16
<PAGE> 94
employees or consultants of PCI or any of its subsidiaries, shall be so
converted into issued and outstanding options under Nextel's Amended and
Restated Incentive Equity Plan, as amended May 13, 1996 (the "Nextel Plan").
(c) The Board of Directors of PCI and/or of the Surviving Corporation, as
appropriate, shall take such action as may be required under the PCI Option
Plans and the Compensation Committee of the Board of Directors of Nextel shall
take such action as may be required under the Nextel Plan to effectuate the
foregoing. Prior to the Effective Time of the Merger, Nextel shall reserve for
issuance the number of shares of Nextel Common Stock necessary to satisfy the
obligations of Nextel under this Section 1.21, and within five (5) business days
after the Effective Time of the Merger, Nextel shall register such shares
pursuant to the Securities Act of 1933, as amended (the "Securities Act"). Prior
to the Effective Time of the Merger, PCI, and thereafter the Surviving
Corporation, as may be appropriate, shall take such actions as are necessary to
effect the provisions of this Section 1.21 and to preserve for the holders of
PCI Stock Options the benefits to be provided pursuant to this Section 1.21.
Notwithstanding anything in this Section 1.21(c), neither PCI nor Nextel shall
have any liability for failing to take (or to cause to be taken) actions in
respect of any stock option plan or related agreement that would violate (in any
material respect) the terms thereof or would be prohibited by applicable law.
1.22 Warrants. At the Effective Time of the Merger, PCI's outstanding
warrants (the "Warrants") to purchase shares of PCI Common Stock shall be
assumed by Nextel. Each Warrant shall thereafter evidence a warrant to purchase
the number of shares of Nextel Common Stock into which the number of shares of
PCI Common Stock issuable pursuant to such Warrant would have been converted in
the Merger at an exercise price per share equal to the amount (rounded up to the
next whole cent) arrived at by dividing the aggregate exercise price under such
Warrant by the number of shares of Nextel Common Stock purchasable thereunder,
unless exchanged at the Closing for warrants of Nextel pursuant to agreements
with the warrant holders as described in the Recitals or as contemplated by
Section 5.4.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF PCI
PCI represents and warrants to Nextel that:
2.1 Corporate Organization.
(a) PCI has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the State of Delaware and has the corporate
power and authority to own or lease its properties and to conduct its business
as it has been and is now being conducted. The copies of the Certificate of
Incorporation of PCI, certified by the Secretary of the State of Delaware, and
its By-Laws, certified by the Secretary of PCI, previously delivered by PCI to
Nextel, are true, correct and complete.
(b) The subsidiaries of PCI are listed on the Schedules with reference to
this Section (collectively, the "Subsidiaries"). Each of the Subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the state of its incorporation, as set forth on the Schedules
with reference to this Section and has the corporate power and authority to own
or lease its properties and to conduct its business as it has been and is now
being conducted. The copies of the Certificate of Incorporation of each
Subsidiary, certified by the Secretary of State of the state of its
incorporation, and its By-Laws, certified by such Subsidiary's Secretary,
previously delivered by PCI to Nextel, are true, correct and complete.
(c) PCI and each Subsidiary are duly licensed or qualified and in good
standing as a foreign corporation in all jurisdictions identified on the
Schedules with reference to this Section and such jurisdictions are the only
ones in which their ownership of property or the character of their activities
is such as to require them to be so licensed or qualified.
A-17
<PAGE> 95
2.2 Subsidiaries and Other Entities.
(a) All the outstanding capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable. PCI owns all the
issued and outstanding capital stock of each Subsidiary. Except as set forth on
the Schedules with reference to this Section, PCI holds all the issued and
outstanding capital stock of each Subsidiary free and clear of any mortgage,
pledge, security interest, encumbrance, lien, claim or charge of any kind. As of
the Closing, PCI shall hold all the issued and outstanding capital stock of each
Subsidiary free and clear of any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind.
(b) There are no warrants, options, subscriptions, other convertible
instruments, and no commitments, obligations, or agreement (whether firm or
conditional) pursuant to which PCI or any Subsidiary is or may be obligated to
issue, transfer, deliver or sell shares of capital stock of any Subsidiary or
other securities of any Subsidiary.
(c) Except for the Subsidiaries, and except as set forth in the Schedules
with reference to this Section, none of PCI or the Subsidiaries has any direct
or indirect subsidiaries, nor do any of them own, directly or indirectly, any
partnership, equity, profit, participation or similar ownership interest in any
corporations, partnerships, joint ventures, trusts, unincorporated
organizations, associations or similar entities.
2.3 Corporate Authorization.
(a) The Board of Directors of PCI, by unanimous vote of all directors at a
meeting duly called and held, has (i) determined that the Merger is fair to and
in the best interests of the stockholders of PCI and (ii) resolved to submit
this Agreement to and recommend approval of this Agreement by the stockholders
of PCI.
(b) PCI has all necessary corporate power and authority to enter into this
Agreement and to perform all of the obligations to be performed by it hereunder.
The execution, delivery and performance of this Agreement by PCI has been duly
authorized by PCI, and, upon the execution and delivery hereof by, respectively,
Nextel, NFC and Merger Sub, this Agreement will constitute the valid and legally
binding obligations of PCI, enforceable against PCI in accordance with its
terms, except as enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors' rights
generally, by equitable principles of general applicability with respect to the
availability of equitable remedies, or by public policies applicable to
securities laws.
(c) The Board of Directors of PCI received an opinion of Morgan Stanley &
Co. Incorporated ("Morgan Stanley"), its financial advisor, at or before the
Board meeting (prior to the approval vote) described in Section 2.3(a) above, to
the effect that the consideration to be received by PCI's stockholders in the
Merger is fair to the stockholders from a financial point of view. PCI has
provided Nextel with a correct and complete copy of the engagement letter
between Morgan Stanley and PCI.
2.4 Capital Stock. The entire authorized capital stock of PCI consists
solely of 50,000,000 shares of PCI Common Stock, of which 26,162,225 shares are
issued and outstanding as of the date of the First Agreement, and 1,000,000
shares of preferred stock, par value $.01 per share, none of which are issued or
outstanding. All of the outstanding shares of PCI Common Stock (and any shares
issuable pursuant to presently outstanding options, if exercised and purchased
at the applicable exercise price) were duly authorized and will be, when issued
and the option price paid (if applicable), validly issued, fully paid and
nonassessable. Except as set forth in the Schedules with reference to this
Section, none of the capital stock or other securities of PCI is entitled or
subject to preemptive rights or registration rights. Other than the requisite
vote of PCI stockholders to consummate the Merger, the authorization or consent
of no person is required in order to consummate the transactions contemplated
herein by virtue of any such person having an equitable or beneficial interest
in the PCI Common Stock. Except as set forth on the Schedules with reference to
this Section, there are not now, and at the Effective Time of the Merger there
will not be, any voting trusts or other agreements or understandings to which
PCI is a party or is bound with respect to the voting of PCI Common Stock. To
the knowledge of PCI, all outstanding shares of PCI Common Stock were offered,
sold and issued in compliance with all applicable laws and regulations.
A-18
<PAGE> 96
2.5 Options. (a) PCI has set forth on the Schedules with reference to this
Section all warrants, options, subscriptions and other convertible instruments
or agreements pursuant to which PCI was obligated as of July 1, 1996 to issue,
transfer, deliver or sell shares of PCI Common Stock and the exercise or
purchase price of each such warrant, option, subscription, convertible
instrument or agreement. Except as set forth in the Schedules with reference to
this Section, as of July 1, 1996, no options or warrants to purchase shares of
PCI Common Stock have ever been granted, except for employee options that have
been exercised or have terminated without exercise prior to July 1, 1996,
pursuant to the terms of the respective PCI Option Plans. Except as set forth in
the Schedules with reference to this Section, as of July 1, 1996, there were no
commitments or obligations of PCI, either firm or conditional, to issue, deliver
or sell, whether under offers, stock option agreements, stock bonus agreements,
stock purchase plans, incentive compensation plans, warrants, conversion rights
or otherwise, any authorized but unissued shares, or treasury shares, of PCI
Common Stock or other securities of PCI.
(b) PCI has set forth on the Schedules with reference to this Section all
warrants, options, subscriptions and other convertible instruments or agreements
pursuant to which PCI was or is obligated as of July 1, 1996, as of the date
hereof, and as of the Closing to issue, transfer, deliver or sell shares of PCI
Common Stock, which are not set forth on Schedule 2.5(a). Additionally, set
forth on such Schedule with reference to this Section are the exercise or
purchase price of each warrant, option, subscription, convertible instrument or
agreement set forth thereon.
2.6 Compliance with Laws. Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's ability to
perform, in any material respect, its obligations under this Agreement or any
other document or instrument to which PCI is a party in connection with the
transactions contemplated herein, or as set forth in the Schedules with
reference to this Section, to the knowledge of PCI, (i) neither PCI nor any
Subsidiary is currently in violation (nor is any of them currently liable or
otherwise currently responsible with respect to prior violations) of any
statute, law or regulation applicable to any of their presently or formerly
owned properties or to the conduct of their current or past businesses; (ii)
none of the processes followed, results obtained, services provided or products
made, modified or installed by any of them (in the ordinary course of their
businesses or otherwise), or by any managers with respect to SMR Licenses (as
defined herein) held by any of PCI or its Subsidiaries (pursuant to Third Party
Management Agreements (as defined herein) or otherwise) or by PCI or its
Subsidiaries in the management or operation of SMR Licenses managed by any of
them (pursuant to PCI Management Agreements or otherwise), violate any statute,
law or regulation applicable thereto; (iii) none of (a) the businesses of PCI or
any Subsidiary, (b) the processes, results, services or products performed, sold
or otherwise made available by PCI or any Subsidiary, (c) the processes,
results, services or products performed, sold or otherwise made available by any
manager with respect to SMR Licenses held by PCI or any Subsidiary (pursuant to
Third Party Management Agreements or otherwise) or (d) the processes, results,
services or products performed, sold or otherwise made available by PCI or any
Subsidiary in the management or operation of SMR Licenses managed by any of them
(pursuant to PCI Management Agreements or otherwise) violates any applicable law
or regulation relating to air, water or noise pollution or employee health and
safety or the production, storage, labeling, transportation or disposition of
solid waste or hazardous or toxic substances; (iv) PCI, its Subsidiaries, each
of the managers with respect to SMR Licenses held by PCI or a Subsidiary, and
PCI and its Subsidiaries in their capacities as managers under PCI Management
Agreements, has each timely obtained all licenses and permits and timely filed
all reports required to be filed under any such applicable laws or regulations;
(v) neither PCI, its Subsidiaries nor any other person has stored, dumped or
otherwise disposed of any chemical substances, including any "Hazardous
Substances," "Pollutants" or "Contaminants" (as such terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA")) on, beneath or about any of the properties of PCI or its
Subsidiaries; (vi) none of PCI, its Subsidiaries or any of their respective
managers (with respect to SMR Licenses held by PCI or a Subsidiary) has received
written notice that it is a "potentially responsible party" under any
environmental law or of any violation of any environmental, zoning or other land
use ordinance, law or regulation relating to the operation of its or their
businesses, or to any of the processes followed, results obtained, services
provided or products made, modified or installed (in the ordinary course of its
or their
A-19
<PAGE> 97
businesses or otherwise), including, but not limited to, the Toxic Substances
Control Act of 1976, as amended, the Resource Conservation Recovery Act of 1976,
as amended, the Clean Air Act, as amended, the Federal Water Pollution Control
Act, as amended, CERCLA or the Occupational Safety and Health Act of 1970, as
amended, nor are PCI and any Subsidiary aware of any such violation. PCI has
listed in the Schedules with reference to this Section all environmental reports
known to PCI or its Subsidiaries relating to any owned or leased real property
of PCI or its Subsidiaries and has previously delivered to Nextel a true,
correct and complete copy of each report so listed.
2.7 No Conflict. Except as set forth in the Schedules with reference to
this Section and subject to the adoption and approval of this Agreement by the
stockholders of PCI, the execution and delivery of this Agreement by PCI and the
consummation of the transactions contemplated hereby do not, and will not
constitute an event which, after notice or lapse of time or both would (a)
violate any provision of, or result in the breach of, or accelerate or permit
the acceleration of the performance required by: (i) the terms of, any
applicable law, rule or regulation of any governmental body, except where any
such violation, breach, acceleration, termination or creation, individually or
in the aggregate, would not have a material adverse effect upon the business,
financial condition, results of operation, liabilities or assets of PCI and the
Subsidiaries, taken as a whole, and would not impair PCI's ability to perform,
in any material respect, its obligations under this Agreement or any other
document or instrument to which PCI is a party in connection with the
transactions contemplated herein, (ii) the Certificate of Incorporation or
By-Laws of PCI or any Subsidiary; (iii) any indenture, material agreement, or
other material instrument to which PCI or any Subsidiary is a party or by which
PCI or any Subsidiary may be bound; or (iv) any order, judgment or decree
applicable to any of them, except where any such violation, breach,
acceleration, termination, creation or order, individually or in the aggregate,
would not have a material adverse effect upon the business, financial condition,
results of operation, liabilities or assets of PCI and the Subsidiaries, taken
as a whole, and would not impair PCI's ability to perform, in any material
respect, its obligations under this Agreement or any other document or
instrument to which PCI is a party in connection with the transactions
contemplated herein, or (b) terminate or result in the termination of any
indenture, material agreement or other material instrument, or result in the
creation of any lien, charge or encumbrance upon any of the properties or assets
of PCI or any Subsidiary under any agreement to which any of them is a party,
except where any such violation, breach, acceleration, termination or creation,
individually or in the aggregate, would not have a material adverse effect upon
the business, financial condition, results of operation, liabilities or assets
of PCI and the Subsidiaries, taken as a whole, and would not impair PCI's
ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which PCI is a party in
connection with the transactions contemplated herein.
2.8 Litigation. Except as set forth in the Schedules with reference to
this Section, there are no actions, suits, proceedings, claims or investigations
formally instituted and pending or, to the knowledge of PCI and its
Subsidiaries, threatened against or specifically affecting PCI or any Subsidiary
or involving any of their properties or assets, at law or in equity, or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitration panel or alternative dispute resolution body, except where the
outcome of any such actions, suits, proceedings, claims or investigations,
individually or in the aggregate, would not have a material adverse effect upon
the business, financial condition, results of operation, liabilities or assets
of PCI and the Subsidiaries, taken as a whole, and would not impair PCI's
ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which PCI is a party in
connection with the transactions contemplated herein. Except as set forth in
such Schedule, neither PCI nor any Subsidiary is subject to or is in default
under, any order, writ, injunction or decree of any court or Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, or any arbitration panel or alternative dispute resolution
body.
2.9 Insurance. Set forth in the Schedules with reference to this Section
is a list of (a) all insurance policies held by PCI or any Subsidiary
(indicating the insurer, type, amount and term of coverage, deductible,
description of vehicles, latest property insurable values by location (100%
replacement value), workers' compensation payroll (separately for clerical,
sales and technical employees), and additional named insureds
A-20
<PAGE> 98
with respect to each such policy); and (b) to the knowledge of PCI, all claims
pending under any of such insurance policies. Except as set forth in such
Schedule, all of these policies are in full force and effect and all premiums
due thereon have been paid or accrued and there are no retroactive
experience-based premium adjustment features in any policy.
2.10 Intellectual Property. Except for the name of PCI and except as set
forth in the Schedules with reference to this Section, to the knowledge of PCI,
there are no patents or patent applications; trademarks, service marks, trade
dress, trade names, corporate names or any applications to register any of the
foregoing marks or names; copyrights or copyright registrations; or any
licenses, other than software licenses acquired solely through the purchase of
the underlying software, to or from third parties with respect to any of the
foregoing (including, without limiting the generality of the foregoing, all
computer software, data and documentation) relating to PCI's or the
Subsidiaries' business as now conducted or as presently proposed to be
conducted. To the knowledge of PCI, except as set forth in the Schedules with
reference to this Section, (i) neither of PCI nor any Subsidiary has infringed,
misappropriated or otherwise conflicted with any proprietary rights of any third
parties; (ii) PCI is not aware of any infringement, misappropriation or conflict
which will occur as a result of the continued operation of PCI's or the
Subsidiaries' business as now conducted or as presently proposed to be
conducted; and (iii) neither PCI nor any Subsidiary has received any notices of
any infringement or misappropriation from any third party.
2.11 Assets. PCI has delivered to Nextel a Schedule (which makes reference
to this Section) that lists all fixed capital assets owned by PCI (including,
without limitation, all repeater and ancillary equipment necessary for the
operation of the business of PCI, all assets located at each site, all office
equipment and furniture owned by PCI and all other material tangible assets
owned by PCI) (the "Asset List"). The assets on the Asset List include
substantially all of the tangible assets presently used by PCI in the conduct of
its business in Arizona, California, Colorado, New Mexico, North Dakota,
Oklahoma, South Dakota and Texas (collectively, the "States").
2.12 Financial Statements. PCI has previously delivered to Nextel the
following financial statements (including any notes thereto), all of which have
been prepared in accordance with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the consolidated
financial position of PCI and its Subsidiaries, at the dates stated in such
financial statements and the results of their operations for the periods stated
therein (subject in the case of the financial statements referenced in paragraph
(b) to the absence of notes and to normal year-end adjustments):
(a) a Consolidated Balance Sheet at December 31, 1995, and a
Consolidated Statement of Operations, Statement of Stockholders' Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 1995
which have been audited by and that are accompanied by the report of KPMG
Peat Marwick LLP; and
(b) a Consolidated Balance Sheet at June 30, 1996 and a Consolidated
Statement of Operations, and a Consolidated Statement of Cash Flows for the
six months ended June 30, 1996.
2.13 Liabilities. PCI and its Subsidiaries do not have any liability or
obligation, secured or unsecured (whether accrued, absolute, contingent or
otherwise), except:
(i) trade payables and accrued expenses incurred in the ordinary
course of business and consistent with past practices for which the stated
due date has not passed ("Current Payables");
(ii) those liabilities or obligations (for which the stated due date
has not passed) relating to operating contracts or leases entered into in
the ordinary course of business consistent with past practice;
(iii) liabilities and obligations of the type shown on PCI's balance
sheet at June 30, 1996 that was previously delivered to Nextel (the "June
30 Balance Sheet") and any increase in the amount of such liabilities after
June 30, 1996 was either (1) consented to in writing by Nextel, or (2)
incurred by PCI or any Subsidiary in the ordinary course of business after
such date;
(iv) the Transaction Costs which shall not exceed $1,500,000; and
A-21
<PAGE> 99
(v) other liabilities or obligations that do not exceed $10,000
individually and do not exceed $100,000 in the aggregate or that are set
forth in the Schedules with reference to this Section specifically
identified and agreed to by Nextel as Permitted Liabilities for purposes of
this Agreement (and, to the extent reasonably ascertainable, have been
identified by type, source and dollar amount) (the liabilities and
obligations described in this clause and clauses (i) through (iv) above,
collectively, the "Permitted Liabilities").
2.14 Transactions Not in the Ordinary Course. Except as set forth on the
Schedules with reference to this Section, since July 1, 1996 until the date of
the First Agreement neither PCI nor any Subsidiary has (a) incurred any
liability or obligation not in the ordinary course of business or entered into
any transaction other than in the ordinary course of business the value of which
did not exceed $10,000 individually and did not exceed $100,000 in the
aggregate; (b) declared or made any payment or distribution to stockholders or
other holders of equity or other similar ownership or participation interests,
including stock splits, stock dividends and profit distributions, or purchased
or redeemed any shares or other equity or other similar ownership or
participation interests except as provided for in this Agreement; (c) mortgaged,
pledged or subjected to lien, charge or any other encumbrance, any of its
assets, tangible or intangible; (d) sold or transferred, or agreed to sell or
transfer, or acquired or agreed to acquire any SMR Licenses; (e) sold or
transferred any of its other assets, tangible or intangible, the value of which
did not exceed $10,000 individually and did not exceed $100,000 in the aggregate
except, in each case, in the ordinary course of business; (f) cancelled any
debts or claims except in each case in the ordinary course of business; (g)
increased the rate of compensation of any officer or of any employee receiving
(giving effect to such increase) more than $50,000 per annum or paid or declared
any bonus (excluding fixed-formula compensation incentive payments such as may
be paid to certain sales employees from time to time), except as set forth in
the Schedules with reference to this Section; (h) agreed to or amended or
instituted any employment contract, bonus plan, stock option plan, profit
sharing plan, pension plan, retirement plan or other similar arrangement or
plan, except as set forth in the Schedules with reference to this Section.
2.15 Capital Projects. Set forth in the Schedules with reference to this
Section is a description of all capital projects currently committed for or
authorized by PCI for (i) SMR Systems (as defined herein) and (ii) all other
capital projects involving the expenditure of more than $50,000 in any single
case or more than $200,000 in the aggregate.
2.16 Taxes. Except as set forth in the Schedules with reference to this
Section, the Subsidiaries have been included in a consolidated Federal income
tax return filed by PCI. Except as set forth in the Schedules with reference to
this Section, (i) PCI, on behalf of itself and its Subsidiaries (collectively,
"PCI/PCI Subs"), has accurately prepared and has duly and timely filed with all
appropriate Federal, foreign, state and local governmental agencies, all tax
returns and reports required to be filed by it; (ii) all taxes owed or withheld,
or which may be claimed to be owed or required to be withheld, to or for the
benefit of any governmental agency for or with respect to the periods covered by
such returns and reports or with respect to any period (or portions thereof)
ending at or before the Closing, and all interest, penalties, assessments and
deficiencies connected therewith, have been or will be timely paid in full or
provided for in full; (iii) PCI/PCI Subs has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any taxes; (iv) PCI/PCI Subs is not a party to any pending audit, inquiry,
action or proceeding, nor has PCI/PCI Subs been notified of the inception of any
such audit, inquiry, action or proceeding by any Federal, foreign, state or
local governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality for the assessment or collection of taxes; (v) no deficiency or
assessment notices or reports or statements of tax due have been received by
PCI/ PCI Subs in respect of any of its tax returns; and (vi) to the best of
PCI's knowledge, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will have no material
effect upon the tax treatment of any previously consummated transaction in which
PCI acquired all or any part of the assets or capital stock of another entity.
2.17 Bank Accounts; Employees. Set forth in the Schedules with reference
to this Section is a complete list of (a) all banks in which PCI or any
Subsidiary has an account or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto; (b) the current fixed annual
rate of compensation
A-22
<PAGE> 100
(plus total cash compensation broken down between fixed and bonus components for
fiscal year 1995) as of the date of such list for each of the five (5) then
highest paid employees of PCI and each Subsidiary for the current fiscal year
and a summary of the basis on which each such person is compensated if such
basis is other than exclusively a fixed salary rate; (c) the names of all
persons holding powers of attorney from PCI and each Subsidiary and a summary
statement of the terms thereof; and (d) the name of each person who is an
"affiliate" of PCI for purposes of Rule 145 under the Securities Act.
2.18 Real Estate. The Schedules with reference to this Section list all
real estate, real estate options and leaseholds owned or held by PCI or any
Subsidiary. Except for matters that individually and in the aggregate will not
have a material adverse effect on the business, financial condition, results of
operations, liabilities or assets of PCI and its Subsidiaries, taken as a whole,
and that will not impair PCI's or the Subsidiaries' ability to perform, in any
material respect, its or their obligations under this Agreement or any other
document or instrument to which PCI or a Subsidiary is a party in connection
with the transactions contemplated herein, or as set forth on the Schedules with
reference to this Section, there are no title defects, issues of validity or
enforceability, deficiencies in rights of possession or use or similar matters
relating to or affecting any real estate owned or leased, or which is subject to
an option to buy, sell or lease, of or by PCI or any Subsidiary.
Except for Permitted Liens (as defined herein), for matters that
individually and in the aggregate will not have a material adverse effect on the
business, financial condition, results of operations, liabilities or assets of
PCI and its Subsidiaries, taken as a whole, and that will not impair PCI's or
the Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth in the Schedules with reference to this Section, PCI or
a Subsidiary, as the case may be, has good and marketable title in fee simple to
all real estate owned by it and good leasehold interests in all of its
leaseholds, none of which interests will be materially and adversely affected by
the transactions contemplated hereby, and each lease with an initial term of
more than one year is, to the knowledge of PCI and its Subsidiaries, enforceable
against the lessor thereunder and PCI or its Subsidiary, as the case may be,
enjoys quiet possession of all leaseholds.
2.19 Title to Properties. Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth on the Schedules with reference to this Section, each of
PCI and its Subsidiaries has good title to all of its personal properties and
assets, tangible and intangible (including, without limitation, those on the
Asset List). Except for liens or encumbrances set forth in the Schedules with
reference to this Section (which identifies those that will be removed prior to
the Closing), none of such properties or assets is subject to any lien or
encumbrance other than (a) any liens securing Current Payables, (b) any liens or
encumbrances connected with operating leases entered into in the ordinary course
of business consistent with past practice, (c) such other encumbrances that do
not secure indebtedness and do not materially detract from the value of, or
interfere with the present or future use of, the property subject thereto and
affected thereby or otherwise materially impair the business, financial
condition, results of operations or operations of PCI and its Subsidiaries,
taken as a whole, or (d) as otherwise disclosed to and approved by Nextel in
writing (collectively, "Permitted Liens").
2.20 Contracts. Except as set forth in the Schedules with reference to
this Section, neither PCI nor any Subsidiary (nor any of their properties) is a
party to or bound by any (a) agreement or other arrangement not made in the
ordinary course of business, involving payments or receipts in excess of $25,000
individually or more than $100,000 in the aggregate; (b) employment or
consulting contract; (c) contract with any labor union; (d) employee bonus,
pension, profit-sharing, retirement, stock purchase or other benefit or welfare
plan or agreement; (e) lease or management agreement relating to the use or
operation of an SMR Channel; (f) other lease with respect to real or personal
property, whether as lessor or lessee, involving lease payments in excess of
$50,000 per annum or $200,000 in the aggregate; (g) contract or commitment for
the purchase of
A-23
<PAGE> 101
raw materials or supplies or the sale of products involving more than $50,000
per annum or $200,000 in the aggregate; (h) indenture, agreement, note,
mortgage, guaranty or other writing which evidences or relates to any loan of
money to, or indebtedness for money borrowed by, PCI or any Subsidiary; (i)
license agreement or other contract or agreement relating to patents,
trademarks, trade names, techniques or copyrights or applications for any
thereof, inventions, trade secrets or other proprietary know-how or technical
assistance; (j) any loan to officers, directors or employees of PCI or any
Subsidiary (all of which loans will be repaid in full by the Closing); or (k)
any agreement relating to any direct or indirect acquisition of SMR Licenses in
the case of any of the foregoing, whether written or oral (and, in the case of
oral commitments, with PCI providing an accurate written summary of all material
terms to Nextel). Except for matters that individually and in the aggregate will
not have a material adverse effect on the business, financial condition, results
of operations, liabilities or assets of PCI and its Subsidiaries, taken as a
whole, and that will not impair PCI's or the Subsidiaries' ability to perform,
in any material respect, its or their obligations under this Agreement or any
other document or instrument to which PCI or a Subsidiary is a party in
connection with the transactions contemplated herein, or as set forth in such
Schedule, to the knowledge of PCI, neither PCI nor any Subsidiary, nor any other
party thereto, is in default under the terms of any commitments described in
Subsections (a) through (k) of this Section.
2.21 Compliance with Securities Laws. PCI has complied with all applicable
Federal and state securities laws and regulations with regard to the
registration, offer and sale of the PCI Common Stock registered under the shelf
registration statement on Form S-4 (Registration No. 33-83810).
2.22 Brokers. Except for fees paid to Morgan Stanley, neither PCI nor any
Subsidiary has directly or indirectly dealt with anyone acting in the capacity
of a finder or broker and none of them has incurred nor will they incur any
obligation for any finder's or broker's fee or commission in connection with
this Agreement or the Merger.
2.23 Special Liabilities; Warranties. Except for matters that individually
and in the aggregate will not have a material adverse effect on the business,
financial condition, results of operations, liabilities, or assets of PCI and
its Subsidiaries, taken as a whole, and that will not impair PCI's or its
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth on the Schedules with reference to this Section, (i)
neither PCI nor any Subsidiary has any liability under any contracts under which
the consideration to be paid or received by PCI or a Subsidiary is determined in
whole or in part based on profits or operating results, nor are there any
contingent payments owing to any person in connection with the acquisition of
any business, entity, frequency or channel by PCI or a Subsidiary; (ii) neither
PCI nor any Subsidiary has extended any warranties to their respective
customers, except those that each of them is authorized to extend on behalf of
product manufacturers; (iii) neither PCI nor any Subsidiary is now subject to
any outstanding, pending or, to the knowledge of PCI, threatened claims based on
warranty coverage; and (iv) there are no pending or threatened claims by any
manufacturer or vendor of equipment to disallow or invalidate manufacturers'
warranty coverage.
2.24 Employee Benefit Matters. Except as set forth on the Schedules with
reference to any particular subsection of this Section, to the knowledge of PCI:
(a) PCI does not have and never has had any obligation to contribute
to any "multiemployer plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or any
"multiple employer plan" described in Section 210(a) of ERISA or Section
413(c) of the Code. PCI does not maintain, contribute to, or have any
liability under or with respect to any plan or arrangement, whether or not
terminated, which provides or provided medical, health, life insurance of
other welfare-type benefits for current or future retired or terminated
employees (except for limited continued medical benefit coverage required
to be provided under Section 4980B of the Code or as required under
applicable state law). PCI does not maintain, contribute to or have any
liability under or with respect to any employee plan which is a "defined
benefit plan" (as defined in Section 3(35) of ERISA), whether or not
terminated. PCI does not maintain, contribute to or have any liability
under or
A-24
<PAGE> 102
with respect to any employee plan which is a "defined contribution plan"
(as defined in Section 3(34) of ERISA), whether or not terminated.
(b) PCI does not maintain, contribute to or have any liability under
or with respect to any plan or arrangement providing benefits to current or
former employees or directors, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated (any such plan or arrangement, an
"Employee Plan"). For purposes of this Section 2.24, "PCI" includes all
organizations that now are or that have been, within the past six years,
under common control with PCI pursuant to Section 414(b) or (c) of the
Code. PCI previously has delivered to Nextel true, complete and correct
copies of each of the Employee Plans, including all amendments thereto, and
any other documents or other instruments relating thereto reasonably
requested by Nextel.
(c) All Employee Plans are being, and have been, maintained, operated
and administered in all material respects in accordance with their
respective terms and in compliance with all applicable laws.
(d) No Employee Plan is funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code.
(e) There have been no prohibited transactions or breaches of any of
the duties imposed on "fiduciaries" (within the meaning of Section 3(21) of
ERISA) by ERISA with respect to any Employee Plan that could reasonably be
expected to result in PCI or any Subsidiary becoming liable directly or
indirectly (by indemnification or otherwise) for any material excise tax,
penalty or other liability under ERISA or the Code.
(f) There are no actions or claims pending or, to the knowledge of PCI
or any Subsidiary, threatened, with respect to any Employee Plan (other
than routine claims for benefits), and there are no investigations or
audits of any Employee Plan by any governmental authority currently pending
and there have been no such investigations or audits that have been
concluded that resulted in any liability of PCI and its Subsidiaries that
has not been fully discharged.
(g) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee
Plan have been paid. With respect to any insurance policy providing funding
for benefits under any Employee Plan, (x) there is no liability of PCI and
its Subsidiaries, in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or other actual or contingent
liability, nor would there be any such liability if such insurance policy
was terminated on the date hereof, and (y) no insurance company issuing any
such policy is in receivership, conservatorship, liquidation or similar
proceeding and, to the knowledge of PCI and its Subsidiaries, no such
proceedings with respect to any insurer are imminent.
(h) Each Employee Plan that is a group health plan subject to Section
4980B of the Code (or which was subject to Section 162(k) of the Code) has
been operated in material compliance with the continuation coverage
requirements of Section 4980B of the Code and Section 162(k) of the Code,
as applicable, and Part 6 of Subtitle B of Title I of ERISA.
(i) Each Employee Plan that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance with the secondary
payer requirements of Section 1862(b)(1) of such Act.
(j) The execution, delivery and performance of this Agreement will
not, solely in and of itself, (i) constitute a stated triggering event
under any Employee Plan that will result in any payment (whether of
severance pay or otherwise) becoming due from PCI or any Subsidiary to any
present or former officer, employee, director, shareholder or consultant,
or former employee (or dependents of any thereof), or (ii) accelerate the
time of payment or vesting, or increase the amount, of compensation due to
any employee, officer, director, shareholder or consultant of PCI or any
Subsidiary.
A-25
<PAGE> 103
(k) Neither PCI nor any Subsidiary has agreed or committed to make any
amendments to any of the Employee Plans not already embodied in the
documents comprising any such Employee Plan, other than any amendments
required by law.
(l) All contributions, transfers, and payments by PCI or any
Subsidiary in respect of any Employee Plan have been or are fully
deductible under the Code.
(m) PCI's financial statements at and for the six months ended June
30, 1996 contain and, at and for the period ending on the Closing, will
contain adequate accruals for (i) bonuses, sales commissions and vacation
pay earned but not received as of such dates and (ii) incurred or
continuing but unpaid claims under Employee Plans not funded by insurance.
(n) No Employee Plan provides benefits to any individual who is not a
current or former employee of PCI or a Subsidiary, or the dependents or
other beneficiaries of any such individual.
(o) Except as set forth on Schedule 2.24(o), no "excess parachute
payments" within the meaning of Section 280G of the Code will be made in
connection with or as a result of the Merger (without regard to whether any
such payment might be reasonable compensation for personal services
performed or to be performed in the future).
2.25 Materially Correct. Article II of this Agreement together with the
Schedules referenced herein does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
disclosures contained therein in the light of the circumstances under which they
are made, not misleading.
2.26 Information. PCI has made available to Nextel each registration
statement, schedule, report, proxy statement or information statement it has
filed with the Securities and Exchange Commission (the "SEC") since January 1,
1994, including, without limitation, (a) PCI's Annual Report on Form 10-K for
the years ended December 31, 1994 and December 31, 1995, including all documents
incorporated by reference therein, and (b) PCI's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 and any Report on Form 8-K filed since
December 31, 1995 (collectively, the "PCI Reports"). The PCI Reports, taken as a
whole and taken together with information previously furnished by PCI to Nextel,
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. As used in this Section 2.26, "material" means material to the
business, financial condition, results of operations, liabilities or assets of
PCI and its Subsidiaries taken as a whole. PCI has delivered to Nextel on or
prior to the date of the First Agreement all private placement, confidential
offering or similar memoranda and other offering or solicitation materials used
at any time by PCI or anyone acting on its behalf in connection with any offer
or sale of securities of PCI.
2.27 Regulatory Matters.
(a) Definitions. For purposes of this Agreement, the following terms shall
have the indicated meanings:
"FCC" shall mean the Federal Communications Commission or any
successor thereto.
"FCC LICENSE" shall mean any paging, mobile telephone, SMR or other
license, permit, consent, certificate of compliance, franchise, approval or
authorization of any type granted or issued by the FCC, including, without
limitation, any of the foregoing authorizing the acquisition, construction
or operation of an SMR System (as defined herein), radio paging system or
other radio communications system.
"PCI MANAGEMENT AGREEMENT" shall mean any management or other
agreement (other than a loading agreement) pursuant to which PCI or a
Subsidiary agrees to manage or to perform other services (other than
loading) with respect to SMR Licenses held by another person in exchange
for either the right to receive a portion of the revenues derived from such
SMR Licenses or the right to purchase such SMR Licenses or any loading
agreement pursuant to which such Subsidiary is loading SMR Licenses held by
another person in exchange for either the right to receive a portion of the
revenues derived from
A-26
<PAGE> 104
such SMR Licenses in excess of 25% of the aggregate revenues derived from
such SMR Licenses or the right to purchase such SMR Licenses.
A fact or circumstance shall be "Immaterial" for purposes of this Section
if such fact or circumstance would not result in the cancellation, revocation,
termination, adverse modification or any other material adverse effect on any
800 MHz FCC license; the cancellation, revocation, termination, adverse
modification or any other material adverse effect on 5% or more of the
frequencies in any category of service set forth on Schedule 2.27; or any other
material adverse effect on any other right granted or enjoyed by PCI, with
respect to the FCC frequencies.
"SMR LICENSE" shall mean an FCC License authorizing the construction,
ownership and operation of an SMR system in the 800 or 900 MHz band issued
pursuant to 47 CFR Part 90 of the Rules and Regulations of the FCC.
"SMR SYSTEM" shall mean an SMR system licensed under 47 CFR Part 90 of
the Rules and Regulations of the FCC.
"SMR UNITS" shall mean the number of mobile and control stations
(within the meaning of 47 CFR Part 90 of the Rules and Regulations of the
FCC) subscribing to SMR Systems licensed to or managed by PCI or a
Subsidiary excluding, however, any such units which are subject to a
Third-Party Management Agreement if the respective third party has a right
to purchase the SMR Licenses which are subject to such Third-Party
Management Agreement.
"THIRD-PARTY MANAGEMENT AGREEMENT" shall mean any management or other
agreement (other than a loading agreement) pursuant to which a person
(other than PCI or a Subsidiary) is managing SMR Licenses held by PCI or a
Subsidiary or any loading agreement pursuant to which a person (other than
PCI or a Subsidiary) is loading SMR Licenses held by PCI or a Subsidiary in
exchange for the right to receive a portion of the revenues derived from
such SMR Licenses in excess of 25% of the aggregate revenues derived from
such SMR Licenses.
(b) License Information. Schedule 2.27 sets forth a true and complete list
of the following information, which need not with respect to the information
called for by clause (ii) below include Immaterial information, for each FCC
License issued to or operated by PCI or its Subsidiaries (including all FCC
Licenses subject to a PCI Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses), the name of the
licensee, the name of the seller(s), the call sign, the transmitter
location (by site coordinates and city), the category or type of service
(e.g., paging, SMR, etc.), the frequency or frequencies authorized, and
operating entity;
(ii) in the case of SMR Licenses, the number of channels authorized,
the number of channels constructed, whether the license is for a
conventional or trunked SMR System, the applicable loading date, whether
the SMR License is subject to a Finders Preference, whether the SMR License
is operating under Special Temporary Operating Authority ("STA") and the
applicable STA expiration date, and whether the SMR License is managed by
PCI pursuant to a PCI Management Agreement or by any other persons pursuant
to a Third-Party Management Agreement;
(iii) each holder of any such FCC License that is neither wholly owned
by PCI nor owned entirely by unaffiliated persons and managed by PCI; and
(iv) for all FCC Licenses (including SMR Licenses), whether such FCC
Licenses are subject to rights of first refusal, options and other such
rights or obligations in existence on the date of the First Agreement,
including, without limitation, entitlements to acquire additional ownership
interests, which may affect the ownership interests of PCI.
(c) Condition of Systems. All of the properties, equipment and systems
owned and/or operated by PCI and related to the FCC licenses set forth on
Schedule 2.27 are, and, to the knowledge of PCI, any such properties, equipment
and systems added in connection with any contemplated system expansion or
construction prior to the Closing will be, in compliance with all standards or
rules imposed by any
A-27
<PAGE> 105
governmental agency or authority (including, without limitation, the FCC, the
Federal Aviation Administration and (if applicable), any public utilities
commission or other state or local governments or instrumentalities) applicable
to PCI or its operation of the properties, equipment and systems or as imposed
under any agreements with customers, except for any non-compliance that is,
individually or in the aggregate Immaterial. To the knowledge of PCI, all of the
equipment and systems owned and/or operated by PCI are in good repair and
working order, ordinary wear and tear excepted. In addition to the other
representations and warranties set forth herein which are expressly based upon
PCI's knowledge, with regard to the 450 MHz FCC Licenses set forth on Schedule
2.27, the representations in this Section 2.27(c) are made to the best of PCI's
knowledge.
(d) Fees; License Compliance. PCI has paid all franchise, license or other
fees and charges which have become due in respect of its business and has made
appropriate provision as is required by generally accepted accounting
principles, consistently applied, for any such fees and charges which have
accrued. Except for Immaterial matters or as set forth in Schedule 2.27, PCI has
duly secured all necessary permits, licenses, consents and authorizations from,
and has filed all required registrations, applications, reports and other
documents with, the FCC and, if applicable, any public utilities commission and
other entity exercising jurisdiction over the SMR businesses, radio paging
businesses and other radio communications businesses of PCI or the construction
of delivery systems therefor, as such businesses are currently conducted. PCI or
a Subsidiary holds or has the contractual right to obtain the FCC Licenses
specified on Schedule 2.27 and, except for matters that are, individually or in
the aggregate Immaterial, or as indicated in such Schedule, all such FCC
Licenses are valid and in full force and effect without conditions except for
such conditions as are stated on the FCC License or as are generally applicable
to holders of similarly situated FCC Licenses. PCI has filed with the FCC prior
to any applicable deadline a complete and accurate application for
rejustification of any unconstructed or deconstructed FCC License related to
previously granted or requested wide area Enhanced Specialized Mobile Radio
("ESMR") licenses. Except as set forth on Schedule 2.27, with regard to FCC
Licenses related to wide area ESMR frequencies, neither PCI nor any of its
Subsidiaries is subject to a short space agreement or any other agreement, FCC
waiver or otherwise applicable regulations encumbering or limiting the use of
such FCC License. Except for Immaterial matters or as set forth on Schedule
2.27, all applicable loading requirements with respect to any SMR Licenses
listed on such Schedule have been met and PCI has taken every reasonable action
to cause the same to be loaded in compliance with FCC regulations. Except
matters that are, individually or in the aggregate Immaterial, or as set forth
on Schedule 2.27, to the knowledge of PCI no event has occurred and is
continuing which could (i) result in the revocation, termination or adverse
modification of any FCC License listed on such Schedule or (ii) adversely affect
any rights of PCI thereunder. Except as indicated on Schedule 2.27, PCI has no
reason to believe and no knowledge that all of the FCC Licenses specified on
Schedule 2.27 will not be renewed in the ordinary course. Except with regard to
any planned enhanced SMR Systems of PCI and except as shown on Schedule 2.27,
PCI has sufficient time, materials, equipment, contract rights and other
required resources to complete, in a timely fashion and in full, construction of
all the SMR Systems, radio paging and other radio communications systems
associated with the FCC Licenses listed on Schedule 2.27 in compliance with all
applicable technical standards and construction requirements and deadlines.
Except for matters that are, individually or in the aggregate Immaterial, or as
set forth on Schedule 2.27, the current ownership and operation by PCI of such
SMR Systems, radio paging and other radio communications systems comply with the
Communications Act of 1934, as amended (the "Communications Act"), and all
applicable rules, regulations and policies of the FCC. In addition to the other
representations and warranties set forth herein which are expressly based upon
PCI's knowledge, with regard to the 450 MHz FCC Licenses set forth on Schedule
2.27, the representations in this Section 2.27(d) are made to the best of PCI's
knowledge.
(e) Management Agreements. Set forth on Schedule 2.27(e) is a complete and
correct list of all PCI Management Agreements (and associated option agreements,
if any) and Third-Party Management Agreements to which PCI or any Subsidiary is
a party that correctly identifies the manager under each such agreement and the
holder of the SMR Licenses which are the subject of such agreements, the
transmitter locations (by address), and number of channels covered by such SMR
Licenses, the term of such agreements, any options or calls (and the respective
option or call prices as well as the time period in which any option or call
must be exercised or made) in favor of any party to such agreements to purchase
or sell any interest in
A-28
<PAGE> 106
such SMR Licenses and the respective fees or revenues payable or receivable
under any such agreements. Except for matters that are, individually or in the
aggregate, Immaterial or as set forth on Schedule 2.27(e) to the knowledge of
PCI and its Subsidiaries, the terms of all such PCI Management Agreements and
Third-Party Management Agreements and the operation of each SMR System pursuant
thereto comply with the Communications Act and all applicable rules, regulations
and policies of the FCC. Except for matters that are, individually or in the
aggregate Immaterial, or as set forth on Schedule 2.27(e), none of the channels
licensed to PCI or its Subsidiaries are subject to a Third Party Management
Agreement. Each PCI Management Agreement includes an option allowing PCI or a
Subsidiary to purchase the channels that are subject to that agreement and no
such option will be adversely affected by the Merger.
(f) Discrete Frequency Application. PCI has provided Nextel access to, and
prior to December 16, 1996 will have delivered to Nextel a true and correct copy
of, each Request for Rule Waiver and related digital mobile system application
and each general cover letter related to an ESMR application, as filed with the
FCC, and any correspondence relating to any frequency sent to the FCC and all
supplemental or related materials filed or sent in connection therewith by or on
behalf of PCI, all materials submitted to the FCC and/ or to PCI in connection
therewith by any third party, and any written communication issued by the FCC or
any FCC staff member in response to, or otherwise in connection with, any of the
foregoing.
2.28 Schedule Disclosure. Regardless of any qualifications or limitations
on the representations and warranties set forth in this Article II regarding
materiality, PCI has used all reasonable best efforts to list and/ or describe
on the Schedules all matters required to be listed and/or described by the
representations and warranties set forth herein.
2.29 Information in Registration Statement. The information, regarding
PCI, its subsidiaries and affiliates, included in the Registration Statement
referred to in Sections 4.4 and 5.2 of this Agreement will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
2.30 Castle Tower Agreements. PCI, a certain PCI Subsidiary and Castle
Tower Corporation, formerly known as Castle Communications Corporation
("Castle"), entered into that certain License Agreement dated as of January 10,
1995, as amended, (the "Castle License Agreement") and that certain Purchase and
Sale Agreement dated as of December 23, 1994, as amended, (the "Castle Purchase
Agreement"). Except as set forth in the Schedules with reference to this
Section, (i) there are no actions, suits or proceedings, formally instituted,
pending or threatened, against PCI or any of its affiliates related to the
Castle Purchase Agreement or the Castle License Agreement, and (ii) all radio
communications equipment, including base stations, antennae, poles, dishes or
masts, cabling or wiring and accessories used therewith, leased to or owned by
PCI and located on property owned by Castle is currently in compliance with the
technical standards relating to frequency compatibility, radio interference
protection, antenna type and location and physical installation set forth on
Exhibit B to the License Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
NEXTEL AND MERGER SUB
Nextel and Merger Sub, jointly and severally, represent and warrant to PCI
that:
3.1 Corporate Organization; Authorization. (a) Each of Nextel and Merger
Sub has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has the corporate power and
authority to own or lease its properties and to conduct its business as it is
now being conducted.
(b) Each of Nextel and Merger Sub has all necessary corporate power and
authority to enter into this Agreement and to perform all of the obligations to
be performed by it hereunder. The execution, delivery and performance of this
Agreement by Nextel and Merger Sub have been duly authorized by Nextel and
Merger
A-29
<PAGE> 107
Sub, respectively, and upon the execution and delivery hereof by Nextel and
Merger Sub, this Agreement will constitute the valid and legally binding
obligations of Nextel and Merger Sub, enforceable against each of them in
accordance with its terms.
3.2 Capital Stock. The entire authorized capital stock of Nextel consists
solely of (a) 515,000,000 shares of Nextel Common Stock, of which 337,899,220
shares were issued and outstanding as of August 30, 1996, (b) 35,000,000 shares
of Class B Non-Voting Common Stock, par value $.001 per share, of which
17,830,000 shares were issued and outstanding as of August 30, 1996, (c)
10,000,000 shares of preferred stock, par value $.01 per share, of which (i)
8,163,265 Class A shares, (ii) 82 Class B shares and (iii) no other Preferred
shares of any other Class were issued and outstanding as of August 30, 1996. At
the Effective Time of the Merger, the shares of Nextel Common Stock issued by
reason of the Merger will be duly authorized, validly issued, fully paid and
nonassessable, and their issuance in connection with the Merger will be
registered under the Securities Act and registered or exempt from registration
under applicable state securities laws and such shares of Nextel Common Stock
will be listed on the Nasdaq NM. At the Effective Time of the Merger, Nextel
will have a sufficient number of authorized but unissued shares of Nextel Common
Stock reserved under the Nextel Plan for issuance upon conversion and exercise
of the PCI Stock Options.
3.3 Common Stock; Registration. At the Closing, the shares of Nextel
Common Stock issued by reason of the Merger will be duly authorized, validly
issued, fully paid and nonassessable, will be registered under the Securities
Act, and will be "voting stock" within the meaning of Section 368(a)(1)(B) of
the Code.
3.4 No Conflict. The execution and delivery of this Agreement by Nextel
and Merger Sub and the consummation of the transactions contemplated hereby do
not and will not violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by the terms
of, any applicable law, rule or regulation of any governmental body, the Amended
and Restated Certificate of Incorporation or the Amended and Restated By-Laws of
Nextel, or the Certificate of Incorporation or the By-Laws of Merger Sub or any
agreement, indenture or other instrument to which Nextel or Merger Sub is a
party or by which Nextel or Merger Sub may be bound, or of any order, judgment
or decree applicable to it, or terminate or result in the termination of any
such agreement, indenture or instrument, or result in the creation of any lien,
charge or encumbrance upon any of the properties or assets of Nextel or Merger
Sub under any agreement to which either of them is a party, or constitute an
event which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a lien, charge or
encumbrance, except where any such violation, breach, acceleration, termination
or creation would not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of Nextel and its
subsidiaries, taken as a whole, or would not impair Nextel's or Merger Sub's
ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which Nextel or Merger Sub is a
party in connection with the transactions contemplated herein.
3.5 Information. Nextel has delivered to PCI each registration statement,
schedule, report, proxy statement or information statement it has filed with the
SEC from January 1, 1996 to the date of the First Agreement, including, without
limitation, (a) Nextel's Annual Report on Form 10-K for the year ended December
31, 1995 and (b) Nextel's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, (collectively, the "Nextel Reports"). As of the date of the First
Agreement, the Nextel Reports, taken as a whole and taken together with any
other information previously furnished by Nextel to PCI (except for any
forecasts or projections or forward-looking estimates or similar predictive
information contained therein), did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. As used in this Section, "material" means
material to the business, financial condition, results of operations,
liabilities or assets of Nextel and its subsidiaries, taken as a whole. The
representation made in this Section shall also be deemed to be made by Nextel to
PCI immediately prior to the Closing, but with reference to all information
furnished by Nextel to PCI prior to the Closing.
3.6 Information in Registration Statement. The information, except
information regarding PCI, its Subsidiaries and affiliates, included in the
Registration Statement referred to in Sections 4.4 and 5.2 of this
A-30
<PAGE> 108
Agreement will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV.
COVENANTS OF PCI
4.1 Conduct of Business. (a) From the date of the First Agreement until
the Effective Time of the Merger, PCI shall conduct its business, and shall
cause each Subsidiary to conduct such Subsidiary's business, only in the
ordinary course and, without limiting the generality of the foregoing, neither
PCI nor any Subsidiary shall, without the written consent of Nextel: (i) except
as permitted by Section 4.1(b), dispose or contract to dispose of any SMR
Channels or FCC Licenses except as may occur as a result of an FCC enforcement
action or otherwise required under law; (ii) except as set forth on a Schedule
that refers to this Section, dispose of or contract to dispose of any other
assets, tangible or intangible, except in the ordinary course of business,
consistent with past practice and, with respect to capital assets, in connection
with the replacement of the asset being disposed of; (iii) except as set forth
in Section 4.7 or as permitted by Section 4.1(b), acquire or contract to acquire
any SMR Channels or FCC Licenses or any rights to acquire any SMR Channels or
FCC Licenses or acquire or contract to acquire, directly or indirectly, any
interest in an entity that has any interest in SMR Channels or FCC Licenses;
(iv) voluntarily incur any absolute or contingent debt obligation except in the
ordinary course of business under currently existing lines of credit; (v) enter
into any lease or contract for the purchase or sale of real estate or of any
interest therein; (vi) encumber any property or other assets except for
encumbrances constituting Permitted Liens or encumbrances of which Nextel is
promptly notified in writing and which will be removed prior to the Closing;
(vii) declare or pay any dividend or purchase or redeem any of its shares, notes
or other securities or make any other distribution to shareholders; (viii) other
than in accordance with normal compensation adjustment policies (all of which,
including year-end bonuses, are included in the Schedules), increase the rate of
remuneration to any of its directors, officers, employees or other
representatives, or agree to do so or fail to pay any year-end bonuses then owed
included on such Schedule prior to the Effective Time of the Merger; (ix) except
for obtaining stockholder approval of the 1996 Stock Option Plan and the 1996
Non-Employee Director Stock Option Plan, amending the 1994 Non-Employee Director
Stock Option Plan to eliminate automatic granting of PCI Options or as permitted
by Section 5.6(a), adopt any new or amend any existing employee benefit plan or
any employment agreement or amend any PCI Stock Option once implemented except
as set forth in Section 1.21(a); (x) form or cause to be formed any subsidiary;
(xi) issue, sell, distribute or dispose of any shares, notes or other securities
of PCI or offer to sell or sell any PCI Common Stock registered pursuant to
PCI's shelf registration statement on Form S-4 (Registration No. 33-83810) or
commit itself to do so; (xii) make any commitments for capital improvements; or
(xiii) fail to keep its properties insured substantially to the same extent as
they are currently insured.
(b) PCI may dispose of or contract to dispose of any non-SMR Channel or FCC
License that is within 25 miles of an MSA market identified on Schedule 1.2 but
does not meet the criteria set forth in Section 1.2(d)(vi)(y) in exchange for
SMR Channels or FCC Licenses that enable PCI to Deliver additional Channels. PCI
may acquire third-party FCC Licenses that are located within 55 miles of a PCI
controlled license, but PCI may not pay more than $10,000 per frequency so
acquired.
4.2 Reasonable Efforts. PCI shall, and shall cause each Subsidiary to, use
all reasonable efforts to preserve intact its business organization and to
preserve its goodwill as to customers, suppliers and others having business
relations with it.
4.3 Inspection. PCI shall, and shall cause each Subsidiary to, permit
representatives of Nextel, during normal business hours, to examine PCI's and
each Subsidiary's properties, books, contracts, tax returns and other records,
and shall furnish such representatives with all such information concerning such
affairs as they may reasonably request.
A-31
<PAGE> 109
4.4 SEC Registration. (a) PCI shall use its reasonable best efforts to,
and shall use its reasonable best efforts to cause each Subsidiary to, furnish
to Nextel such information about PCI and each Subsidiary (including their
respective affiliates) as may be necessary to enable Nextel to prepare and file
with the SEC a Registration Statement on Form S-4 under the Securities Act and
the rules and regulations promulgated thereunder, in respect of the shares of
Nextel Common Stock to be issued by reason of the Merger (such registration
statement, the prospectus included therein and the proxy statement to be
furnished to the holders of PCI Common Stock, in each case together with any
amendments or supplements thereto, the "Registration Statement"). PCI shall use
its reasonable best efforts so that the PCI Information (as defined below)
included in the Registration Statement shall not, at the time the Registration
Statement is declared effective, at the time the proxy statement/prospectus
contained therein is first mailed to PCI's stockholders, or at the time of the
meeting of the stockholders of PCI to approve the Merger, contain any untrue
statement of a material fact, omit to state any material fact required to be
stated therein, or omit any material fact necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time
any event or circumstance should come to the attention of PCI with respect to
the PCI Information which is required to be set forth in an amendment or
supplement to the Registration Statement, PCI will immediately notify Nextel and
shall assist Nextel in appropriately amending or supplementing the Registration
Statement in the manner contemplated in Section 5.2(b). An amendment or
supplement may be accomplished, to the extent permitted by law, rule or
regulation, by including such information in a filing under the Exchange Act
that is incorporated by reference into the Registration Statement. The
Registration Statement insofar as it relates to information concerning PCI, its
Subsidiaries, or any of their respective businesses, assets, directors,
affiliates, officers or shareholders that is supplied by PCI for inclusion in
the Registration Statement, including incorporation by reference to SEC filings
(the "PCI Information"), will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that PCI shall have no liability or obligation for any
information other than the PCI Information.
(b) PCI shall instruct its accountants to deliver and shall use its
reasonable best efforts to cause its accountants, KPMG Peat Marwick LLP, to
deliver to Nextel letters dated at the time the Registration Statement becomes
effective and as of the Closing, addressed to Nextel, each containing such
matters as are customarily contained in auditors' letters regarding information
about PCI and its Subsidiaries expressly for inclusion in the Registration
Statement, and in a form and substance reasonably satisfactory to Nextel.
4.5 Antitrust Filing. In connection with the transactions contemplated by
this Agreement, PCI (and, to the extent required, its affiliates) shall promptly
file or cause to be filed any reports, documents, filings or other data required
to be filed by PCI pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act") and the rules and regulations promulgated thereunder,
and shall use its best efforts to respond as promptly as practicable to all
inquiries received for additional information or documentation.
4.6 Restraint on Solicitations. From the date of the First Agreement until
the Effective Time of the Merger, neither PCI nor any of its respective
directors, officers, employees, affiliates, representatives or agents, shall
directly or indirectly, encourage (including by way of furnishing information),
solicit, initiate, participate in or otherwise be a party to any discussions or
negotiations with any corporation, partnership, person or other entity or group
concerning any transaction that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal (as defined herein). Neither the Board of
Directors of PCI nor any committee thereof shall (a) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Nextel, the approval or
recommendation by the Board of Directors of PCI of the Merger or this Agreement
or (b) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or any other acquisition of outstanding shares of PCI Common Stock
other than pursuant to the Merger or this Agreement. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent the Board of
Directors of PCI from furnishing information to, or entering into discussions or
negotiations with, any unsolicited corporation, partnership, person or other
entity or group, or taking any action described in clauses (a) and (b) of the
preceding sentence, if and only to the extent that the Board of Directors of PCI
shall have determined in good faith, after receiving written advice of its
outside counsel, that such action would be required under applicable law in the
exercise of its fiduciary duties. PCI will immediately notify Nextel if any such
inquiries or proposals
A-32
<PAGE> 110
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, PCI.
As used in this Agreement, "Takeover Proposal" shall mean any tender or exchange
offer, proposal, other than a proposal by Nextel or any of its affiliates, for a
merger, share exchange or other business combination involving PCI or any
proposal or offer to acquire in any manner a substantial equity interest in PCI
or a substantial portion of the assets of PCI.
4.7 Best Efforts. PCI shall, and shall cause each Subsidiary to, use its
reasonable best efforts (i) to obtain prior to Closing all of the SMR licenses
or applications being sought by PCI and/or a Subsidiary that are on file with
and pending approval from the FCC prior to Closing, including all frequencies or
applications pending as of the date of the First Agreement for wide area ESMR
filings and all finder's preference applications, and (ii) to obtain as promptly
as practicable and in any event prior to Closing all FCC approvals or consents
necessary to permit the consummation of the transactions contemplated by this
Agreement. PCI shall obtain the amendments, consents and approvals regarding the
PCI Stock Options and/or any related agreements contemplated by Section 1.21(a).
4.8 Stockholder Approval. After the Registration Statement has become
effective, PCI shall use its reasonable best efforts to promptly furnish a copy
of the proxy statement/ prospectus included therein to each stockholder of PCI
and to call and convene a special meeting to obtain promptly any approvals of
the PCI stockholders required in connection with the transactions contemplated
by this Agreement.
4.9 Affiliates.
(a) PCI shall use all reasonable efforts to cause each person who is an
"affiliate" of PCI for purposes of Rule 145 under the Securities Act to deliver
to Nextel prior to the date of PCI's stockholders' meeting a written agreement
substantially in the form attached hereto as Annex A.
4.10 Update Information. Not earlier than ten (10) and not less than five
(5) days before the date scheduled for Closing, PCI shall correct and supplement
in writing any information furnished on Schedules that, to the knowledge of PCI,
is incorrect or incomplete (or otherwise expressly contemplated by Article II of
this Agreement), and shall promptly furnish such corrected and supplemented
information to Nextel, so that such information shall be correct and complete at
the time such updated information is so provided. Thereafter, to the Closing,
PCI shall notify Nextel in writing of any changes or supplements to the updated
information needed, to the knowledge of PCI, to make such information correct
and complete at all times to the Closing. It is agreed that the furnishing of
such corrected and supplemental information, in and of itself, shall not create
any presumption that such information constitutes or evidences the existence of
a material change or any breach or violation by PCI of any provision of this
Agreement.
ARTICLE V.
COVENANTS OF NEXTEL
5.1 Antitrust Filing. In connection with the transactions contemplated by
this Agreement, Nextel shall promptly file or cause to be filed any reports,
documents, filings or other data required to be filed by Nextel pursuant to the
HSR Act and the rules and regulations promulgated thereunder, and shall use its
best efforts to respond as promptly as practicable to all inquiries received for
additional information or documentation.
5.2 Registration Statement.
(a) Nextel shall file the Registration Statement and use its reasonable
best efforts to cause such Registration Statement to become effective as
promptly as practicable, and shall use its reasonable best efforts to take any
action required to be taken to comply in all material respects with any
applicable federal or state securities laws in connection with the issuance of
Nextel Common Stock in the Merger; except that such covenant of Nextel is made,
as to those portions of the Registration Statement containing or required to
contain PCI Information, assuming and relying on timely and full compliance with
Section 4.4.
(b) Nextel shall use its reasonable best efforts so that the information
included in the Registration Statement, shall not, at the time the Registration
Statement is declared effective, at the time the proxy
A-33
<PAGE> 111
statement/prospectus contained therein is first mailed to PCI's stockholders, or
at the time of the meeting of the stockholders of PCI to approve the Merger,
contain any untrue statement of a material fact, omit to state any material fact
required to be stated therein, or omit to state any material fact necessary in
order to make the statements therein not misleading; except that such covenant
of Nextel is made, as to those portions of the Registration Statement containing
or required to contain PCI Information, assuming and relying on timely and full
compliance with Section 4.4. If at any time prior to the Effective Time any
event or circumstance should come to the attention of Nextel which is required
to be set forth in an amendment or supplement to the Registration Statement,
Nextel will use its reasonable best efforts to appropriately amend or supplement
the Registration Statement. An amendment or supplement may be accomplished, to
the extent permitted by law, rule or regulation, by including such information
in a filing under the Exchange Act that is incorporated by reference into the
Registration Statement. The Registration Statement and all other documents
required to be filed by Nextel with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that Nextel shall have no liability or obligation for any PCI
Information.
5.3 Current Public Information. Nextel shall use all reasonable efforts to
file all reports required to be filed by it under the Securities Act or the
Securities Exchange Act of 1934 and the rules and regulations adopted by the SEC
thereunder and shall use all reasonable efforts to take such further action as
may be necessary to ensure that the requirements of Rule 144(c) under the
Securities Act are satisfied such as to enable any "affiliates" of PCI (for
purposes of Rule 145 under the Securities Act) to offer or sell the shares of
Nextel Common Stock received by them in the Merger pursuant to paragraph (d) of
Rule 145 (subject to compliance with the provisions of paragraphs (e), (f) and
(g) of Rule 144).
5.4 Offer to Warrant Holders. Nextel shall offer to each holder of a
warrant listed on Schedule 2.5(a) (other than FMR, Corp.) the opportunity to
exchange its warrant at the Closing for a warrant to purchase shares of Nextel
Common Stock in the form attached as Annex D. Any terms and conditions
negotiated by Nextel with any warrant holder shall not give any other warrant
holder the right to comparable terms and conditions. Nextel's offer pursuant to
this Section 5.4 shall expire at the time the Registration Statement is filed
with the SEC.
5.5 Directors and Officers Indemnification. (a) For a period of three
years from and after the Effective Time of the Merger, Nextel shall cause the
Surviving Corporation to indemnify and hold harmless each present and former
director and officer of PCI against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, proceeding, investigation or action,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time of
the Merger, whether asserted or claimed prior to, at or after the Effective Time
of the Merger, to the fullest extent that PCI would have been permitted under
the Certificate of Incorporation or By-Laws of PCI in effect immediately prior
to the Effective Time of the Merger to indemnify such person (including the
advancing of expenses as incurred to the fullest extent permitted under
applicable law; provided that the person to whom such expenses are advanced
provides an undertaking to the Surviving Corporation to repay such advances if
it is ultimately determined that such person is not entitled to
indemnification).
(b) For a period of three years from and after the Effective Time of the
Merger, Nextel shall cause the Surviving Corporation to use all reasonable
efforts to maintain director and officer insurance comparable to that maintained
by PCI at the Effective Time of the Merger. After the third anniversary of the
Closing, the Surviving Corporation may terminate such insurance provided that
the Board of Directors of the Surviving Corporation reasonably determines that
the Surviving Corporation has the financial ability to satisfy its
indemnification obligations under this Section 5.5.
5.6 Employee Matters. (a) If any individual who is employed by PCI at the
Effective Time of the Merger whose employment with the Surviving Corporation
(and all affiliates of the Surviving Corporation) is involuntarily terminated by
the Surviving Corporation or an affiliate without cause (as defined below)
during the six-month period immediately after the Effective Time of the Merger
then (y) such individual shall
A-34
<PAGE> 112
receive a severance payment, subject to applicable withholding and other taxes,
in an amount equal to (i) three (3) times such employee's monthly salary, plus
(ii) an additional week's salary for each year that such employee had been
employed by PCI, plus (iii) an amount equal to the unvested employer's
contributions made or accrued on or before the date of the Closing to the PCI
401(k) Plan for the account of that employee and (z) all issued and outstanding
options of Nextel held by such employee shall automatically vest. For purposes
of this Section, termination without cause shall mean the termination of any
employee's employment with the Surviving Corporation and all affiliates of the
Surviving Corporation other than a termination for one or more of the following
reasons: (i) willful, knowing and intentional violation of an express direction
or rule or regulation of general application; (ii) theft, misappropriation or
embezzlement of the employer's funds; (iii) conviction of a felony; or (iv)
repeated and consistent failure to be present at work during regular hours
without a valid reason therefor.
(b) In accordance with the terms and provisions of the executive employment
agreements dated as of February 22, 1996 and presently in existence between PCI
and each of Dale E. Harkins, Warren D. Harkins, Thomas R. Modisett, C.G. Whitten
and Bradley B. Waldrip (each, an "Executive"), the employment of each Executive
shall be terminated upon the occurrence of a "change of control" as defined
therein, and, upon such termination, the Surviving Corporation will pay and make
available to each Executive, all of the severance payments and rights provided
for in Section 2.2(e) of each such agreement.
(c) At the Effective Time of the Merger, all issued and outstanding options
of PCI held by non-employee directors of PCI shall automatically vest.
ARTICLE VI.
JOINT COVENANTS
6.1 Confidentiality.
(a) Except (i) for the use of information as required in connection with
Nextel's Registration Statement, (ii) for any other governmental filing required
in order to complete the transactions contemplated herein, and (iii) as Nextel
and PCI may agree or consent in writing, all information received by PCI and
Nextel and their respective representatives pursuant to the terms of this
Agreement shall be kept in strictest confidence by the receiving party and its
representatives. If the transactions contemplated hereby shall fail to be
consummated, all copies of documents or extracts thereof containing information
and data as to one of the other parties, including all information prepared by
the receiving party or such receiving party's representatives, shall be turned
over to the party furnishing same, except that such information prepared by the
receiving party or such receiving party's representatives may be destroyed at
the option of the receiving party, with notice of such destruction (or return)
to be confirmed in writing to the disclosing party. Any information not so
destroyed (or returned) will remain subject to these confidentiality provisions
(notwithstanding any termination of this Agreement) until the second anniversary
of the date of the First Agreement.
(b) The foregoing confidentiality provisions shall not apply to such
portions of the information received which (i) are or become generally available
to the public through no action by the receiving party or by such party's
representatives or (ii) are or become available to the receiving party on a
nonconfidential basis from a source, other than the disclosing party or its
representatives, which the receiving party believes, after reasonable inquiry,
is not prohibited from disclosing such portions to it by a contractual, legal or
fiduciary obligation, and shall not apply to any disclosure by Nextel of any
information disclosed by PCI, so long as such disclosure occurs after the
Closing.
6.2 Standstill Agreement. From the date of the First Agreement until the
Effective Time of the Merger, neither PCI, nor any representatives of PCI,
acting on its behalf or in concert with it, will directly or indirectly (i)
acquire, or offer, propose or agree to acquire, by purchase or otherwise, any
Nextel Common Stock, or (ii) participate in or encourage the formation of any
partnership, syndicate or other group which owns or seeks or offers to acquire
beneficial ownership of, any Nextel Common Stock.
A-35
<PAGE> 113
6.3 Trading Prohibitions. PCI hereby acknowledges that as a result of
disclosures by Nextel contemplated under this Agreement, PCI and its affiliates
may, from time to time, have material, non-public information concerning Nextel
and other companies. PCI confirms that it and its affiliates are aware and PCI
has advised its representatives that (i) the United States securities laws may
prohibit a person who has material, non-public information from purchasing or
selling securities of any company to which such information relates, and (ii)
material non-public information shall not be communicated to any other person
except as permitted herein.
6.4 Substitute of Subsidiary. Nextel has the option to substitute any
wholly-owned direct or indirect subsidiary of Nextel either for NFC or Merger
Sub in connection with the Merger, provided that such substitution does not
adversely affect the interests of PCI or its stockholders. If Nextel makes such
an election, each reference to NFC or Merger Sub, as applicable, herein shall be
deemed to refer to the new subsidiary.
6.5 Support of Transactions. Nextel, PCI and their respective affiliates
shall each (i) use his or its reasonable best efforts to assemble, prepare and
file any information (and, as needed, to supplement such information) as may be
reasonably necessary to obtain as promptly as practicable all governmental and
regulatory consents required under Article VIII, (ii) exert his or its
reasonable best efforts to obtain all material consents and approvals of third
parties that either of Nextel, PCI or their respective affiliates are
responsible to obtain in order to consummate the Merger, (iii) take such other
action as may reasonably be necessary or as another party may reasonably request
to satisfy the conditions of Article VIII or otherwise to comply with this
Agreement, and (iv) provide the other parties, and such other party's employees,
officers, accountants, lawyers, financial advisors and other representatives
with access to its personnel, properties, business and records under all
reasonable circumstances.
6.6 Cooperation Concerning Extended Implementation Channels. Nextel, PCI
and their respective controlled affiliates agree to cooperate and to use their
respective best efforts to achieve the maximum amount of time from the FCC for
construction of the Extended Implementation Channels. Accordingly, PCI agrees to
present reasonably in advance of any proposed filing with the FCC a draft for
review by Nextel and either (i) to make such changes as are proposed by Nextel
or (ii) to discuss any changes proposed by Nextel that will not be made in the
filing. Further, Nextel, PCI and their respective controlled affiliates shall
cooperate with regard to any design, engineering, zoning, equipment selection or
construction efforts to achieve construction of such Extended Implementation
Channels as economically as possible and in full compliance with all applicable
rules and regulations of the FCC. Nextel may, in its sole discretion, advance
cash to PCI to enable PCI to construct channels on which there is at any time
prior to Closing less than six months remaining to construct Extended
Implementation Channels after the FCC has responded to PCI's filings for
rejustification of its extended implementation grants.
6.7 Auction Participation.
(a) Definitions. For purposes of this Section, the following terms shall
have the following indicated meanings:
(i) "EA" means Bureau of Economic Analysis Economic Area, the
defined market-based service areas in which blocks of SMR spectrum are
proposed to be assigned pursuant to the EA Auction.
(ii) "EA AUCTION" means the 800 MHz SMR block license auction
established by the FCC in the First Report and Order, PR Docket No.
93-144, released December 15, 1995.
(iii) "OVERLAP EAS" means the following EAs: 127 (Dallas/Ft.
Worth); 128 (Abilene); 129 (San Angelo); 130 (Austin); 131 (Houston);
132 (Corpus Christi); 133 (McAllen); 134 (San Antonio); 135
(Odessa-Midland); 136 (Hobbs); 137 (Lubbock); 138 (Amarillo); 157 (El
Paso); and 87 (Beaumont).
(b) Formation of Consortium. In the event that, pursuant to FCC rules, the
filing deadline for eligibility to participate in the EA Auction occurs prior to
the earlier of the Effective Time of the Merger or
A-36
<PAGE> 114
the expiration or termination of this Agreement, PCI and Nextel or a designated
subsidiary (hereinafter referred to as "Nextel") shall form a consortium to
participate in bidding in the EA Auction for block licenses in the Overlap EAs.
Nextel shall determine and control all aspects of the consortium's bidding
strategy and participation (including, without limitation, determining the
amount of the joint bids to be submitted by the consortium, the EAs in which to
bid, and whether to top competing bids) and shall be responsible for funding
100% of the consortium's bids. Neither party shall bid for block licenses in the
Overlap EAs except via the consortium and PCI shall not bid for block licenses
in EAs outside of the Overlap EAs. Nextel shall be free to bid for block
licenses outside of the Overlap EAs individually or in consortia formed with
other parties, and without reference to the consortium procedures set forth
herein.
(c) Awarded Channels. Nextel shall be entitled to retain the right to all
channels included in block licenses the consortium is awarded pursuant to the EA
Auction, if any (each, an "Awarded License") subject to the PCI purchase option
hereinafter described. In the event of the termination or expiration of this
Agreement prior to the Effective Time of the Merger but after the formation of
the consortium, PCI shall have the right to purchase an aggregate of twenty (20)
channels in each Overlap EA in which an Awarded License is granted (but no more
than twenty (20) channels in any Overlap EA), exercisable by written notice to
Nextel within thirty (30) days after the later of (i) such expiration or
termination, and (ii) the grant of the Awarded License to the consortium;
provided that (A) the consortium is granted Awarded License(s) including more
than twenty (20) channels in the Overlap EA with respect to which PCI wishes to
exercise its purchase option; and (B) if the disaggregation of channels from an
Awarded License would be necessary to permit the assignment and sale of such
channels to PCI, such disaggregation of channels included in licenses granted
pursuant to the EA Auction is permitted under FCC rules. The purchase price
payable to Nextel upon the exercise of such option shall be an amount in cash
equal to the auction bid price paid by the consortium for such channels. The
channels sold to PCI upon an exercise of the purchase option shall be chosen by
Nextel and shall be contiguous channels included in an Awarded License. The
parties shall use all reasonable efforts to effect the assignment to PCI of any
channels with respect to which the purchase option is exercised (including,
without limitation, cooperation in the submission of applications for the
assignment or transfer of control of subject channels required under applicable
FCC rules) promptly following such exercise. Such purchase option is applicable
only to the rights to use of spectrum in the Overlap EAs which may be obtained
by the consortium in the EA Auction (if any), and shall not apply to existing
channel holdings of Nextel or its subsidiaries or channel holdings that Nextel
or its subsidiaries may acquire other than as an Awarded License in the EA
Auction.
(d) Further Assurances; Regulatory Compliance. The provisions of this
Agreement reflect the intention of the parties with respect to their
participation in the EA Auction, but such provisions are based on certain
assumptions regarding the procedures and rules adopted by the FCC pursuant to
which the EA Auction will be conducted (including, without limitation, the
permissibility of parties bidding jointly via a consortium for block licenses in
specified EAs, but individually and without reference to the consortium in other
EAs). If, however, such procedures and rules vary from those assumed by the
parties hereto, such that the provisions of this Agreement are inapposite or
otherwise unworkable, the parties agree to negotiate in good faith to amend this
Agreement in order to provide an alternate manner of cooperating in their
participation in the EA Auction in the Overlap EAs to carry out the intent of
the parties set forth herein. Notwithstanding the foregoing, if any provision
herein does not comport with regulations adopted by the FCC, such provision will
be null and void. The parties will extend all reasonable good faith efforts to
act in conformance with the intent of this Agreement but under no circumstances
will this Agreement be interpreted as requiring either party to take any action
prohibited, or fail to take any action required, by FCC regulations.
ARTICLE VII.
CLOSING
7.1 Filing. As soon as all of the conditions set forth in Article VIII of
this Agreement have either been fulfilled or waived, the Boards of Directors of
Nextel, NFC, Merger Sub and PCI hereby direct their officers
A-37
<PAGE> 115
forthwith to file and record all relevant documents with the appropriate
government officials to effectuate the Merger.
7.2 Closing. The Closing shall, unless another date or place is agreed to
in writing by the parties hereto, take place at a location and time mutually
agreed upon by Nextel and PCI at the earliest practicable date, and such date,
time and location shall be confirmed in writing by such parties not less than
ten (10) days prior to the scheduled date of the Closing. The term "Closing,"
when used in this Agreement, means the Effective Time of the Merger.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS
8.1 Conditions to Obligations of Nextel and PCI. The obligations of Nextel
and PCI to consummate, or cause to be consummated, the Merger are subject to the
satisfaction of the following conditions, any one or more of which may be waived
in writing by such parties:
(a) The stockholders of PCI shall have taken all necessary action to
authorize, approve and adopt this Agreement and the transactions referred
to herein.
(b) All waiting periods under the HSR Act and the regulations
promulgated thereunder applicable to the Merger shall have expired or been
terminated.
(c) All necessary approvals, clearances and consents of governmental
and regulatory authorities required to be procured by Nextel and PCI in
connection with the Merger (including all required FCC approvals and
consents, which shall be deemed to be obtained for purposes of this
Agreement only when they have become Final Orders), and all material
approvals and consents of third parties that are required to be obtained in
connection with the transactions contemplated by this Agreement or the
Merger Agreement, shall have been procured. Any consent or approval granted
or an order entered by the FCC shall be a "Final Order" when a sufficient
number of days shall have elapsed from the date of entry or grant thereof
without the filing of any adverse request, petition or appeal by any party
or third party or by the FCC (on its own motion) with respect to such
consent, approval or order, or any aspect or portion thereof, or any
resubmissions of any applications or requests for any of such consents,
approvals or orders, or, if challenged, that such consent, approval or
order (or affected aspects or portions thereof) shall have been reaffirmed
or upheld and the applicable period for seeking further administrative or
judicial review shall have expired without the filing of any action,
petition or request for further review.
(d) There shall not be in force any order or decree, statute, rule or
regulation nor shall there be on file any complaint by a governmental
agency seeking an order or decree, restraining, enjoining or prohibiting
the consummation of the Merger, and neither Nextel nor NFC nor Merger Sub
nor PCI nor any of its Subsidiaries shall have received notice from any
governmental agency that it has determined to institute any suit or
proceeding to restrain or enjoin the consummation of the Merger or to
nullify or render ineffective this Agreement if consummated, or to take any
other action which would result in the prohibition or material change in
the Merger.
(e) Nextel's Registration Statement shall have become effective under
the Securities Act and no stop order suspending such effectiveness shall
have been issued or threatened with respect thereto.
(f) The registration statements or other filings as may be required
under applicable blue sky laws pursuant to Annex B shall have become
effective, and no stop order shall be threatened or in effect with respect
thereto.
(g) The shares of Nextel Common Stock issuable in the Merger shall
have been listed or approved for listing upon notice of issuance by the
Nasdaq NM.
A-38
<PAGE> 116
8.2 Conditions to Obligations of Nextel. The obligation of Nextel to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional conditions,
any one or more of which may be waived in writing by Nextel:
(a) Each of the representations and warranties of PCI contained in
this Agreement shall be true and correct both on the date of the First
Agreement and as of the Closing, as if made anew at and as of that time,
and each of the covenants and agreements of PCI and its Subsidiaries to be
performed as of or prior to the Closing shall have been duly performed,
except in each case for changes after the date of the First Agreement which
are contemplated or expressly permitted by this Agreement.
(b) PCI shall have delivered to Nextel a certificate signed by its
President, dated the Closing, certifying, in form reasonably satisfactory
to Nextel and to its counsel that, to the best of the knowledge and belief
of such officer, the conditions specified in Section 8.1 as they relate to
PCI and in subsection 8.2(a), (d), (e), (i) and (j) have been fulfilled.
(c) Nextel shall have received opinions, dated the Closing, from
Gardere & Wynne, L.L.P. in the form of Annex C-1 and from Gardner, Carton &
Douglas, in the form of Annex C-2.
(d) The FCC shall have acted on PCI's filing(s) for rejustification of
its extended implementation authority.
(e) PCI shall have no liabilities or obligations except Permitted
Liabilities.
(f) Nextel shall have received letters from KPMG Peat Marwick LLP,
dated as of the date the Registration Statement becomes effective and as of
the Closing, addressed to Nextel, containing such matters as are
customarily contained in auditors' letters regarding information about PCI
and its Subsidiaries expressly for inclusion in the Registration Statement,
and in form and substance reasonably satisfactory to Nextel.
(g) At the time the Registration Statement becomes effective, and also
at the Closing, PCI and its Subsidiaries shall have furnished to Nextel
certificates, dated as of said times and signed by its President and
Secretary, to the effect that to the best of the knowledge and belief of
the signing persons the material contained in the Registration Statement
which relates to PCI and its Subsidiaries, contains, as of the date of each
of such certificates, no material misstatement of fact and does not omit to
state any material fact necessary to make the statements made not
misleading.
(h) Nextel shall have received from each "affiliate" of PCI (as
defined in Rule 145 under the Securities Act) a Rule 145 Letter in the form
of Annex A.
(i) No stockholder of PCI shall be entitled to exercise dissenter's or
appraisal rights under the GCL.
(j) PCI shall be the sole owner of each entity listed on Schedule
2.2(b).
(k) Nextel and Castle shall have entered into definitive agreements
that are consistent with the terms set forth in Annex F.
8.3 Conditions to the Obligations of PCI. The obligation of PCI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived in writing by PCI:
(a) Each of the representations and warranties of Nextel contained in
this Agreement shall be true and correct in all material respects both on
the date of the First Agreement and as of the Closing, as if made anew at
and as of that time, and each of the covenants and agreements of Nextel to
be performed as of or prior to the Closing shall have been duly performed,
except in each case for changes after the date of the First Agreement which
are contemplated or expressly permitted by this Agreement.
(b) Nextel shall have delivered to PCI a certificate signed by an
officer of Nextel, dated the Closing, certifying, in form reasonably
satisfactory to PCI and its counsel, to the effect that to the best of
A-39
<PAGE> 117
the knowledge and belief of such officer, the conditions specified in
Section 8.1 as they relate to Nextel and in subsection 8.3(a) have been
fulfilled.
(c) PCI shall have received an opinion, dated the Closing, from Jones,
Day, Reavis & Pogue in the form of Annex E.
ARTICLE IX.
TERMINATION/EFFECTIVENESS
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of the parties authorized by their
respective Boards of Directors, at any time prior to the Closing.
(b) By PCI by written notice to Nextel on December 31, 1997 if the
Closing has not occurred on or before such date so long as any
postponements of the date of the Closing are not caused principally by the
action or inaction of PCI.
(c) Prior to the Closing, by written notice to PCI from Nextel
authorized by the Board of Directors of Nextel, if (i) there is a material
breach of any representation, warranty, covenant or agreement on the part
of PCI or any Subsidiary set forth in this Agreement, or if a
representation or warranty of PCI shall be untrue in any material respect,
in either case such that the condition specified in Sections 8.2(a) or
8.2(b) would not be satisfied at Closing (a "Terminating PCI Breach"),
except that, if such Terminating PCI Breach is curable by PCI through the
exercise of its reasonable best efforts, then, for up to thirty (30) days,
but only as long as PCI continues to exercise such reasonable best efforts,
Nextel may not terminate this Agreement under this Section 9.1(c)(i) (the
number of days elapsed prior to any such cure, the "PCI Cure Period"), (ii)
any governmental or regulatory consent or approval required for
consummation of the transactions contemplated hereby is denied by or in a
final order or other final action issued or taken by the appropriate
governmental or regulatory authority, agency or similar body or (iii)
consummation of any of the transactions contemplated hereby is enjoined,
prohibited or otherwise restrained by the terms of a final, non-appealable
order or judgment of a court of competent jurisdiction. If any amendments,
consents and approvals with respect to stock option agreements for the PCI
Stock Options have not been obtained by October 30, 1996, such failure
shall be a material breach of a covenant for purposes of this Section
9.1(c).
(d) Prior to the Closing, by written notice to Nextel from PCI
authorized by its Board of Directors, if (i) there is a material breach of
any representation, warranty, covenant or agreement on the part of Nextel
set forth in this Agreement, or if a representation or warranty of Nextel
shall be untrue in any material respect, in either case such that the
condition specified in Sections 8.3(a) or 8.3(b) would not be satisfied at
Closing (a "Terminating Nextel Breach"), except that, if such Terminating
Nextel Breach is curable by Nextel through the exercise of its reasonable
best efforts then for up to 30 days, but only as long as Nextel continues
to exercise such reasonable best efforts, PCI may not terminate this
Agreement under this Section 9.1(d)(i) (the number of days elapsed prior to
any such cure, the "Nextel Cure Period"), (ii) any governmental or
regulatory consent or approval required for consummation of the
transactions contemplated hereby is denied by or in a final order or other
final action issued or taken by the appropriate governmental or regulatory
authority, agency or similar body, (iii) consummation of any of the
transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a
court of competent jurisdiction or (iv) the Nextel Closing Price is below
$14.00 and Nextel does not adjust the Exchange Ratio, as provided in
Section 1.10.
(e) By Nextel by written notice to PCI during the thirty (30) day
period commencing on March 1, 1997, if Nextel and Castle have not entered
into the agreements contemplated by Section 8.2(k) so long as any failure
to enter into such agreements has not been caused by the action or inaction
of Nextel.
A-40
<PAGE> 118
9.2 Effect. Any termination of this Agreement, however effected, shall not
release either Nextel or PCI from any liability or other consequences arising
from any breach or violation by any such party of the terms of this Agreement
prior to the effective time of such termination, nor shall any such termination
release any party from its obligations or duties under this Agreement which, by
their terms and/or expressed intent, may require performance subsequent to any
such termination, and all provisions of this Agreement which set forth such
obligations or duties (including, without limitation, Section 6.1 and, to the
extent provided therein, in Section 10.6) and such other general or procedural
provisions which may be relevant to any attempt to enforce such obligations or
duties, shall survive any such termination of this Agreement until such
obligations or duties shall have been performed or discharged in full.
ARTICLE X.
MISCELLANEOUS
10.1 Waiver. Any party to this Agreement may, at any time prior to the
Closing, by action taken by its Board of Directors, or officers thereunto duly
authorized, waive any of the terms or conditions of this Agreement or agree to
an amendment or modification to this Agreement by an agreement in writing
executed in the same manner (but not necessarily by the same persons) as this
Agreement.
10.2 Notices. All notices and other communications among the parties shall
be in writing and shall be deemed to have been duly given when (i) delivered in
person, or (ii) five days after posting in the United States mail having been
sent registered or certified mail return receipt requested, or (iii) delivered
by telecopy, which must be received in its entirety during normal business
hours, meaning between the hours of 10:00 a.m. and 6:00 p.m., McLean, Virginia
time, and promptly confirmed by delivery in person or post as aforesaid in each
case, with postage prepaid, addressed as follows:
(a) If to Nextel, to:
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Attention: General Counsel
Telephone No.: (703) 394-3000
Telecopier No.: (703) 394-3001
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Jeanne M. Rickert, Esq.
Telephone No.: (216) 586-3939
Telecopier No.: (216) 579-0212
A-41
<PAGE> 119
(b) If to PCI, to:
1 Village Drive, Suite 500
Abilene, Texas 79606
Attention: General Counsel
Telephone No.: (915) 690-5800
Telecopier No.: (915) 690-5831
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 3000
Dallas, Texas 75201
Attention: Randall G. Ray, Esq.
Telephone No.: (214) 999-4544
Telecopier No.: (214) 999-4667
or to such other address or addresses as the parties may from time to time
designate in writing.
10.3 Assignment. Except as provided in Section 6.4, no party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other parties. Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
10.4 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto, or any subsidiary of Nextel
joining this Agreement under the circumstances described in Section 6.4, any
right or remedies under or by reason of this Agreement.
10.5 Reliance. Each of the parties to this Agreement shall be deemed to
have relied upon the accuracy of the written representations and warranties made
to it in or pursuant to this Agreement, notwithstanding any investigations
conducted by or on its behalf or notice, knowledge or belief to the contrary.
10.6 Expenses. Nextel shall bear its own expenses incurred in connection
with this Agreement and the transactions herein contemplated whether or not such
transactions shall be consummated, including, without limitation, all fees of
its legal counsel and accountants. PCI and its Subsidiaries shall bear their own
legal, financial advisory and accounting fees and expenses incurred in
connection with this Agreement and the transactions herein contemplated if such
transactions shall be consummated. In no event will the expenses borne by PCI
and the Subsidiaries include expenses incurred by PCI's stockholders or the
officers and directors of PCI and its Subsidiaries in connection with the
transactions herein contemplated.
10.7 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or Annexes refer to the Sections, Articles and
Annexes to this Agreement. As used in this Agreement, the phrase "to the
knowledge of PCI" or "to the knowledge of the Subsidiaries" shall comprehend
those matters that are, known to any of the executive officers of PCI.
10.8 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.9 Entire Agreement. This Agreement (together with the Schedules to this
Agreement), constitutes the entire agreement among the parties and supersedes
any other agreements, whether written or oral, that may have been made or
entered into by or among Nextel or its subsidiaries and PCI or its Subsidiaries
or by any Director or Directors or officer or officers of such parties relating
to the transactions contemplated hereby, or incident hereto. No representations,
warranties, covenants, understandings, agreements, oral or otherwise,
A-42
<PAGE> 120
relating to the transactions contemplated by this Agreement exist between the
parties except as expressly set forth in this Agreement.
10.10 Amendments. This Agreement may be amended or modified in whole or in
part, only by a duly authorized agreement in writing executed in the same manner
as this Agreement and which makes reference to this Agreement.
10.11 Publicity. All press releases or other public communications of any
nature whatsoever relating to the transactions contemplated by this Agreement,
and the method of the release for publication thereof, shall be subject to the
prior mutual approval of Nextel and PCI which approval shall not be unreasonably
withheld by any party; provided, however, that, subject to compliance with
Section 6.1, nothing herein shall prevent any party from publishing such press
releases or other public communications as such party may consider necessary in
order to satisfy such party's legal or contractual obligations.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to be duly
executed as of the date first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ JOHN H. WILLMOTH
------------------------------------
Title: Vice President -- Strategy
NEXTEL FINANCE COMPANY
By: /s/ JOHN H. WILLMOTH
------------------------------------
Title: Vice President
DCI MERGER INC.
By: /s/ JOHN H. WILLMOTH
------------------------------------
Title: Vice President
PITTENCRIEFF COMMUNICATIONS, INC.
By: /s/ C. G. WHITTEN
------------------------------------
Title: Senior Vice President and
General Counsel
A-43
<PAGE> 121
APPENDIX B
FORM OF OPINION OF FINANCIAL ADVISOR
, 1997
Board of Directors
Pittencrieff Communications, Inc.
One Village Drive, Suite 500
Abilene, Texas 79606
Members of the Board:
We understand that Pittencrieff Communications, Inc. ("Pittencrieff" or the
"Company"), Nextel Communications, Inc. ("Nextel"), Nextel Finance Company,
Inc., a wholly owned subsidiary of Nextel ("NFC"), and DCI Merger Inc. ("Merger
Sub"), a wholly owned subsidiary of NFC, have entered into an Amended and
Restated Agreement of Merger and Plan of Reorganization, dated as of December 3,
1996 (the "Merger Agreement"), which provides, among other things, for the
merger (the "Merger") of Merger Sub with and into Pittencrieff. Pursuant to the
Merger, Pittencrieff will become a wholly owned indirect subsidiary of Nextel
and all of the issued and outstanding shares of common stock, par value $.01 per
share, of the Company (the "Pittencrieff Common Stock"), will be converted into
shares of Class A Common Stock, par value $.001 per share of Nextel (the "Nextel
Common Stock") using an exchange ratio of 3.17 shares of Pittencrieff Common
Stock to 1 share of Nextel Common Stock, subject to adjustment in certain
circumstances as set forth in the Merger Agreement. The terms and conditions of
the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Pittencrieff Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of Pittencrieff and Nextel, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Pittencrieff prepared
by the managements of Pittencrieff and Nextel, respectively;
(iii) analyzed certain financial projections concerning Pittencrieff
and Nextel prepared by the managements of Pittencrieff and
Nextel, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of Pittencrieff and Nextel with the managements
of Pittencrieff and Nextel, respectively;
(v) reviewed the reported prices and trading activity for the
Pittencrieff Common Stock and the Nextel Common Stock;
(vi) compared the financial performance of Pittencrieff and Nextel and
the prices and trading activity of the Pittencrieff Common Stock
and the Nextel Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) discussed with the managements of Pittencrieff and Nextel the
strategic rationale for the Merger and certain benefits expected
to be derived from the Merger;
(ix) reviewed the Merger Agreement and certain related documents; and
(x) considered such other factors as we have deemed appropriate.
B-1
<PAGE> 122
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the Company's and Nextel's senior
management of the future financial performance of the Company and Nextel,
respectively. We have not assumed responsibility for conducting a physical
inspection of the properties or facilities of Pittencrieff or Nextel and we have
not made any independent valuation or appraisal of the assets or liabilities of
the Company or Nextel, nor have we been furnished with any such appraisals. We
have also assumed that the transaction described in the Merger Agreement will be
consummated on the terms therein. Our opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to us, as of the date hereof.
As you are aware, we were engaged by the Company for purposes of delivering this
opinion, and, as a result, we did not participate in the structuring or the
negotiation of the terms of the Merger. In addition, we were not authorized to
solicit, and did not solicit, interest from any party with respect to the
acquisition of the Company or any of its assets.
We have rendered this opinion to the Board of Directors of Pittencrieff in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services to the Company and Nextel and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by Pittencrieff with the Securities and Exchange Commission
with respect to the Merger. In addition, we express no opinion and make no
recommendation as to how the holders of Pittencrieff Common Stock should vote at
the stockholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Pittencrieff Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------------
B-2
<PAGE> 123
PROXY
PITTENCRIEFF COMMUNICATIONS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS ________, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned (i) acknowledges receipt of the Notice dated ________,
1997, of a Special Meeting of Stockholders of Pittencrieff Communications,
Inc., a Delaware corporation ("PCI"), to be held on ________, 1997, at 10:00
a.m., local time, at the offices of PCI at One Village Drive, Suite 500,
Abilene, Texas 79606, and the Proxy Statement/Prospectus in connection
therewith; and (ii) appoints Warren D. Harkins and C.G. Whitten, and each of
them, the undersigned's proxies with full power of substitution, for and in the
name, place and stead of the undersigned, to vote upon and act with respect to
all of the shares of Common Stock of PCI standing in the name of the
undersigned on ____________, 1997, or with respect to which the undersigned is
entitled to vote and act, at the meeting and at any postponements or
adjournments thereof, and the undersigned directs that this proxy be voted as
set forth on the reverse.
If more than one of the proxies named herein shall be present in person
or by substitute at the meeting or at any postponements or adjournments
thereof, both of the proxies so present and voting, either in person or by
substitute, shall exercise all of the powers hereby given.
This proxy when properly executed will be voted in the manner directed.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
(Continued and to be signed on reverse side)
- FOLD AND DETACH HERE -
<PAGE> 124
<TABLE>
<S> <C>
The undersigned hereby revokes any proxy or proxies heretofore I plan to attend
given to vote upon or act with respect to such Common Stock and the meeting.
hereby ratifies and confirms all that the proxies, their
substitutes or any of them may lawfully do by virtue hereof. [ ]
</TABLE>
1. Proposal to approve the Amended and Restated Agreement of Merger and Plan of
Reorganization, dated as of December 3, 1996, among PCI, Nextel
Communications, Inc., Nextel Finance Company and DCI Merger Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In the discretion of the proxies, on any other matters that may properly
come before the meeting or any postponements or adjournments thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date this proxy and sign your name exactly as it appears hereon. Where
there is more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add your title as such.
If executed by a corporation, the proxy should be signed by a duly authorized
officer.
Please mark, sign, date and return your proxy promptly in the enclosed envelope
whether or not you plan to attend the Special Meeting. No postage is required.
You may nevertheless vote in person if you do attend.
Dated , 1997
-----------------------------------------------------------------
- ----------------------------------------------------------------------------
Signature of Stockholder
- ----------------------------------------------------------------------------
Signature of Stockholder
- ----------------------------------------------------------------------------
Title, if applicable
- FOLD AND DETACH HERE -
<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Set forth below is a description of certain provisions of the Restated
Certificate of Incorporation, (the "Nextel Charter"), of Nextel Communications,
Inc. ("New Nextel," and, together with "Old Nextel," its predecessor corporation
of the same name, "Nextel"), the Amended and Restated By-laws of Nextel (the
"Nextel By-laws") and the Delaware General Corporation Law (the "DGCL"). This
description is intended as a summary only and is qualified in its entirety by
reference to the Nextel Charter, the Nextel By-laws and the DGCL.
Elimination of Liability in Certain Circumstances. The Nextel Charter
provides that, to the full extent provided by law, a director will not be
personally liable to Nextel or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties as a director. The DGCL
provides that a corporation may limit or eliminate a director's personal
liability for monetary damages to the corporation or its stockholders, except
for liability (i) for any breach of the director's duty of loyalty to such
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
While Article 7 of the Nextel Charter provides directors with protection
from awards for monetary damages for breaches of the duty of care, it does not
eliminate the directors' duty of care. Accordingly, Article 7 will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of the duty of care. The provisions of
Article 7 as described above apply to officers of Nextel only if they are
directors of Nextel and are acting in their capacity as directors, and does not
apply to officers of Nextel who are not directors.
Indemnification and Insurance. Under the DGCL, directors and officers as
well as other employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation as a derivative action) if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Article 6 of the Nextel Charter and Article VII of the Nextel By-laws
provide to directors and officers indemnification to the full extent provided by
law, thereby affording the directors and officers of Nextel the protections
available to directors and officers of Delaware corporations. Article VII of the
Nextel By-laws also provides that expenses incurred by a person in defending a
civil or criminal action, suit or proceeding by reason of the fact that he or
she is or was a director or officer shall be paid in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Nextel as authorized by relevant Delaware law. Nextel has obtained directors and
officers liability insurance providing coverage to its directors and officers.
On September 12, 1991, the Board of Directors of Nextel unanimously adopted
resolutions authorizing Nextel to enter into an Indemnification Agreement (the
"Indemnification Agreement") with each director of Nextel. Nextel has entered
into an Indemnification Agreement with each of the directors other than its
three most recently elected directors, Daniel F. Akerson, Timothy M. Donahue and
William E. Conway, Jr.
One of the purposes of the Indemnification Agreements is to attempt to
specify the extent to which persons entitled to indemnification thereunder (the
"Indemnitees") may receive indemnification under circumstances in which
indemnity would not otherwise be provided by the DGCL. Pursuant to the
Indemnification Agreements, an Indemnitee is entitled to indemnification as
provided by Section 145 of the
II-1
<PAGE> 126
DGCL and to indemnification for any amount which the Indemnitee is or becomes
legally obligated to pay relating to or arising out of any claim made against
such person because of any act, failure to act or neglect or breach of duty,
including any actual or alleged error, misstatement or misleading statement,
which such person commits, suffers, permits or acquiesces in while acting in the
Indemnitee's position with Nextel. The Indemnification Agreements are in
addition to and are not intended to limit any rights of indemnification which
are available under the Nextel Charter or the Nextel By-laws, any policy of
insurance or otherwise. Nextel is not required under the Indemnification
Agreements to make payments in excess of those expressly provided for in the
DGCL in connection with any claim against the Indemnitee:
(i) which results in a final, nonappealable order directing the
Indemnitee to pay a fine or similar governmental imposition which Nextel is
prohibited by applicable law from paying; or
(ii) based upon or attributable to the Indemnitee gaining in fact a
personal profit to which he was not legally entitled including, without
limitation, profits made from the purchase and sale by the Indemnitee of
equity securities of Nextel which are recoverable by Nextel pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and profits arising from transactions in publicly traded
securities of Nextel which were effected by the Indemnitee in violation of
Section 10(b) of the Exchange Act or Rule 10b-5 promulgated thereunder.
In addition to the rights to indemnification specified therein, the
Indemnification Agreements are intended to increase the certainty of receipt by
the Indemnitee of the benefits to which he or she is entitled by providing
specific procedures relating to indemnification.
The Indemnification Agreements are also intended to provide increased
assurance of indemnification by prohibiting Nextel from adopting any amendment
to the Nextel Charter or the Nextel By-laws which would have the effect of
denying, diminishing or encumbering the Indemnitee's rights pursuant thereto or
to the DGCL or any other law as applied to any act or failure to act occurring
in whole or in part prior to the effective date of such amendment.
ITEM 21. EXHIBITS.
Pursuant to Item 601 of Regulation S-K, 17 C.F.R. sec. 229.601(b)(2),
Nextel has excluded from Exhibit 2.1 the annexes to the Merger Agreement which
are listed following the table of contents. Nextel agrees to furnish copies of
such instruments to the Commission upon request.
Pursuant to Item 601 of Regulation S-K, 17 C.F.R. sec.
229.601(b)(4)(iii)(A), Nextel has excluded from Exhibit No. 4 instruments
defining the rights of holders of long-term debt with respect to debt that does
not exceed 10% of the total assets of Nextel. Nextel agrees to furnish copies of
such instruments to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Amended and Restated Agreement of Merger and Plan of Reorganization, dated as of
December 3, 1996, by and among Nextel Communications, Inc., Nextel Finance Company,
DCI Merger Inc. and Pittencrieff Communications, Inc. (included as Appendix A to
the Proxy Statement/ Prospectus contained in Part I of this Registration
Statement).
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, 1995 as Exhibits
No. 4.1.1 and 4.1.2 to Nextel's Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement No. 33-91716 on Form S-4 (the "Nextel S-8 Registration
Statement") and incorporated herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as Exhibit No. 4.2
to the Nextel S-8 Registration Statement and incorporated herein by reference).
4.3 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated August 15,
1993 (the "August Indenture") (filed on December 23, 1993 as Exhibit No. 4.13 to
the Registration Statement on Form S-4 of the Company, No. 33-73388 and
incorporated herein by reference).
</TABLE>
II-2
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
4.4 -- Form of Note issued pursuant to the August Indenture (included in Exhibit No. 4.3).
4.5 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of
February 15, 1994 (the "February Indenture") (filed on March 1, 1994 as Exhibit No.
4.1 to the Form 8-K Current Report of Old Nextel dated February 16, 1994 and
incorporated herein by reference).
4.6 -- Form of Note issued pursuant to the February Indenture (included in Exhibit No.
4.5).
4.7 -- Supplemental Indenture, dated as of June 30, 1995 to the August Indenture between
Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit 4.1 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.8 -- Supplemental Indenture, dated as of June 30, 1995 to the February Indenture between
Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit 4.2 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.9 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known as
Nextel), as Successor by Merger to Old Nextel and The Bank of New York (relating to
the August Indenture) (filed on November 14, 1995 as Exhibit 4.3 to the Quarterly
Report on Form 10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.10 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known as
Nextel), as Successor by Merger to Old Nextel and The Bank of New York (relating to
the February Indenture) (filed on November 14, 1995 as Exhibit 4.4 to the Quarterly
Report on Form 10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.11 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank
of New York (relating to the August Indenture) (filed on June 17, 1997 as Exhibit
4.1 to Nextel's Current Report on Form 8-K dated June 17, 1997 (the "June 17 Form
8-K") and incorporated herein by reference).
4.12 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank
of New York (relating to the February Indenture) (filed on June 17, 1997 as Exhibit
4.2 to the June 17 Form 8-K and incorporated herein by reference).
4.13 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13,
1994, between OneComm (formerly called CenCall Communications Corp.) and The Bank
of New York (the "OneComm Indenture") (filed on June 7, 1995 as Exhibit No. 99.2 to
Old Nextel's Registration Statement No. 33-93182 on Form S-4 (the "OneComm S-4
Registration Statement") and incorporated herein by reference).
4.14 -- Form of Note issued pursuant to the OneComm Indenture (included in Exhibit 4.11).
4.15 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Indenture between
OneComm (formerly called CenCall Communications Corp.) and The Bank of New York
(filed on November 14, 1995 as Exhibit 10.12 to the Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by reference).
4.16 -- Second Supplemental Indenture dated as of July 28, 1995 between Nextel (formerly
known as ESMR, Inc.), as successor to OneComm, and The Bank of New York (relating
to the OneComm Indenture) (filed on November 14, 1995 as Exhibit 10.13 to the Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
4.17 -- Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank
of New York (relating to the OneComm Indenture) (filed on June 17, 1997 as Exhibit
4.5 to the June 17 Form 8-K and incorporated herein by reference).
</TABLE>
II-3
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
4.18 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25,
1994, between Dial Call and The Bank of New York (the "2004 Indenture") (filed on
June 7, 1995 as Exhibit 99.4 to the OneComm S-4 Registration Statement and
incorporated herein by reference).
4.19 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.3 to
Nextel's Registration Statement No. 33-80021 on Form S-4 (the "Dial Page S-4
Registration Statement") and incorporated herein by reference).
4.20 -- Second Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.26 to the Annual Report on Form 10-K of Nextel for the
year ended December 31, 1995 (the "1995 Form 10-K") and incorporated herein by
reference).
4.21 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on April
1, 1996 as Exhibit 4.27 to the 1995 Form 10-K and incorporated herein by
reference).
4.22 -- Fourth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The
Bank of New York (relating to the 2004 Indenture) (filed on June 17, 1997 as
Exhibit 4.3 to the June 17 Form 8-K and incorporated herein by reference).
4.23 -- Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993,
between Dial Call and The Bank of New York (the "2005 Indenture") (filed as Exhibit
99.3 to the OneComm S-4 Registration Statement and incorporated herein by
reference).
4.24 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on April 1, 1996 as Exhibit 4.29 to the
1995 Form 10-K and incorporated herein by reference).
4.25 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.4 to
the Dial Page S-4 Registration Statement and incorporated herein by reference).
4.26 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.31 to the 1995 Form 10-K and incorporated herein by
reference).
4.27 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on April
1, 1996 as Exhibit 4.32 to the 1995 Form 10-K and incorporated herein by
reference).
4.28 -- Fifth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank
of New York (relating to the 2005 Indenture) (filed on June 17, 1997 as Exhibit 4.4
to the June 17 Form 8-K and incorporated herein by reference).
4.29 -- Indenture for Senior Discount Notes due 2007, dated as of March 6, 1997, between
McCaw International and The Bank of New York, as Trustee (the "McCaw Indenture")
(filed on March 31, 1997 as Exhibit 4.24 to Nextel's Annual Report on Form 10-K for
the year ended December 31, 1996 (the "1996 Form 10-K") and incorporated herein by
reference).
4.30 -- Form of Note issued pursuant to the McCaw Indenture (included in Exhibit 4.24).
4.31 -- Warrant Agreement, dated as of March 6, 1997, between McCaw International and The
Bank of New York (filed on March 31, 1997 as Exhibit 4.26 to the 1996 Form 10-K and
incorporated herein by reference).
</TABLE>
II-4
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, NFC, the Restricted
Companies party thereto, the Lenders party thereto, Toronto-Dominion (Texas) Inc.,
as Administrative Agent, and The Chase Manhattan Bank, as Collateral Agent (the
"Bank Credit Agreement") (filed on October 1, 1996 as Exhibit 99.1 to Nextel's
Current Report on Form 8-K dated September 27, 1996 (the "September 27 Form 8-K")
and incorporated herein by reference).
4.33 -- Amendment No. 1 dated as of March 24, 1997 to the Bank Credit Agreement (filed on
July 9, 1997 as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated July 9,
1997 (the "July 9 Form 8-K") and incorporated herein by reference).
4.34 -- Amended, Restated and Consolidated Credit Agreement dated as of September 27, 1996
among Nextel, NFC, the Restricted Companies party thereto and the Vendors party
thereto (the "Vendor Credit Agreement") (filed on October 1, 1996 as Exhibit 99.2
to the September 27 Form 8-K and incorporated herein by reference).
4.35 -- Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit Agreement (filed on
July 9, 1997 as Exhibit 99.2 to the July 9 Form 8-K and incorporated herein by
reference).
4.36 -- Option Exercise and Lending Commitment Agreement by and between Nextel and Digital
Radio, L.L.C., dated as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.1 to
the July 9 Form 8-K and incorporated herein by reference).
4.37 -- Contingent Equity Instrument by and between Digital Radio, L.L.C. and Nextel dated
as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.2 to the July 9 Form 8-K
and incorporated herein by reference).
4.38 -- Option Purchase Agreement by and among Nextel and Unrestricted Subsidiary Funding
Company and Option Acquisition, L.L.C., dated as of June 16, 1997 (filed on July 9,
1997 as Exhibit 10.3 to the July 9 Form 8-K and incorporated herein by reference).
4.39 -- Option Agreement (First New Option) by and between Option Acquisition, L.L.C. and
Nextel, dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.4 to the
July 9 Form 8-K and incorporated herein by reference).
4.40 -- Option Agreement (Second New Option) by and between Option Acquisition, L.L.C. and
Nextel, dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.5 to the
July 9 Form 8-K and incorporated herein by reference).
4.41 -- Certificate of Designation for 13% Series D Exchangeable Preferred Stock (filed on
July 22, 1997 as Exhibit 4.1 to Nextel's Current Report on Form 8-K dated July 21,
1997 and incorporated herein by reference).
+5 -- Form of Opinion of Jones, Day, Reavis & Pogue re validity.
*8 -- Opinion of Gardere & Wynne, L.L.P. re tax matters.
13.1 -- Annual Report on Form 10-K of Pittencrieff Communications, Inc. (filed on March 31,
1997 (File No. 0-21840) and incorporated herein by reference).
13.2 -- Quarterly Report on Form 10-Q for Pittencrieff Communications, Inc. (filed on May
9, 1997 (File No. 0-21840) and incorporated herein by reference).
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23.2 -- Consent of Gardere & Wynne, L.L.P. (included in Exhibit 8).
+23.3 -- Consent of Deloitte & Touche LLP.
+23.4 -- Consent of KPMG Peat Marwick LLP.
+23.5 -- Form of consent of Morgan Stanley & Co. Incorporated.
*24.1 -- Powers of Attorney (excluding William G. Arendt).
+24.2 -- Power of Attorney of William G. Arendt.
</TABLE>
II-5
<PAGE> 130
- ---------------
* Previously filed.
+ Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b)(i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(ii)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is
II-6
<PAGE> 131
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(iii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of McLean, in
the Commonwealth of Virginia, on the 24th day of July, 1997.
Nextel Communications, Inc.
By: /s/ THOMAS J. SIDMAN
------------------------------------
THOMAS J. SIDMAN
VICE PRESIDENT AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Chairman of the Board, Chief
- ------------------------------------------------ Executive Officer and Director
DANIEL F. AKERSON (Principal Executive Officer)
* Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial
STEVEN M. SHINDLER Officer)
* Vice President and Controller
- ------------------------------------------------ (Principal Accounting Officer)
WILLIAM G. ARENDT
* Vice Chairman of the Board and
- ------------------------------------------------ Director
MORGAN E. O'BRIEN
* President, Chief Operating Officer
- ------------------------------------------------ and Director
TIMOTHY M. DONAHUE
* Director
- ------------------------------------------------
KEITH J. BANE
* Director
- ------------------------------------------------
ROBERT COOPER
* Director
- ------------------------------------------------
CRAIG O. MCCAW
* Director
- ------------------------------------------------
KEISUKE NAKASAKI
* Director
- ------------------------------------------------
MASAAKI TORIMOTO
* Director
- ------------------------------------------------
DENNIS M. WEIBLING
* Director
- ------------------------------------------------
WILLIAM E. CONWAY, JR.
/s/ THOMAS J. SIDMAN* Attorney-in-fact July 24, 1997
- ------------------------------------------------
THOMAS J. SIDMAN
</TABLE>
II-8
<PAGE> 133
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------- ----
<C> <C> <S> <C>
2.1 -- Amended and Restated Agreement of Merger and Plan of Reorganization,
dated as of December 3, 1996, by and among Nextel Communications,
Inc., Nextel Finance Company, DCI Merger Inc. and Pittencrieff
Communications, Inc. (included as Appendix A to the Proxy
Statement/Prospectus contained in Part I of this Registration
Statement).......................................................... Not applicable
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31,
1995 as Exhibits No. 4.1.1 and 4.1.2 to Nextel's Post-Effective
Amendment No. 1 on Form S-8 to Registration Statement No. 33-91716
on Form S-4 (the "Nextel S-8 Registration Statement") and
incorporated herein by reference). ................................. Not applicable
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as
Exhibit 4.2 to the Nextel S-8 Registration Statement and
incorporated herein by reference). ................................. Not applicable
4.3 -- Indenture between Old Nextel and The Bank of New York, as Trustee,
dated August 15, 1993 (the "August Indenture") (filed on December
23, 1993 as Exhibit No. 4.13 to the Registration Statement on Form
S-4 of the Company, No. 33-73388 and incorporated herein by
reference). ........................................................ Not applicable
4.4 -- Form of Note issued pursuant to the August Indenture (included in
Exhibit No. 4.3). .................................................. Not applicable
4.5 -- Indenture between Old Nextel and The Bank of New York, as Trustee,
dated as of February 15, 1994 (the "February Indenture") (filed on
March 1, 1994 as Exhibit No. 4.1 to the Form 8-K of Old Nextel dated
February 16, 1994 and incorporated herein by reference). ........... Not applicable
4.6 -- Form of Note issued pursuant to the February Indenture (included in
Exhibit No. 4.5). .................................................. Not applicable
4.7 -- Supplemental Indenture, dated as of June 30, 1995 to the August
Indenture between Old Nextel and The Bank of New York (filed on
November 14, 1995 as Exhibit 4.1 to the Quarterly Report on Form
10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference). ................................. Not applicable
4.8 -- Supplemental Indenture, dated as of June 30, 1995 to the February
Indenture between Old Nextel and The Bank of New York (filed on
November 14, 1995 as Exhibit 4.2 to the Quarterly Report on Form
10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference). ................................. Not applicable
4.9 -- Second Supplemental Indenture, dated as of July 28, 1995 between
ESMR (now known as Nextel), as Successor by Merger to Old Nextel and
The Bank of New York (relating to the August Indenture) (filed on
November 14, 1995 as Exhibit 4.3 to the Quarterly Report on Form
10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference). ................................. Not applicable
4.10 -- Second Supplemental Indenture, dated as of July 28, 1995 between
ESMR (now known as Nextel), as Successor by Merger to Old Nextel and
The Bank of New York (relating to the February Indenture) (filed on
November 14, 1995 as Exhibit 4.4 to the Quarterly Report on Form
10-Q of Nextel for the quarter ended September 30, 1995 and
incorporated herein by reference). ................................. Not applicable
4.11 -- Third Supplemental Indenture, dated as of June 13, 1997 between
Nextel and The Bank of New York (relating to the August Indenture)
(filed on June 17, 1997 as Exhibit 4.1 to Nextel's Current Report on
Form 8-K dated June 17, 1997 (the "June 17 Form 8-K") and
incorporated herein by reference)................................... Not applicable
</TABLE>
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------- ----
<C> <C> <S> <C>
4.12 -- Third Supplemental Indenture, dated as of June 13, 1997 between
Nextel and The Bank of New York (relating to the February Indenture)
(filed on June 17, 1997 as Exhibit 4.2 to the June 17 Form 8-K and
incorporated herein by reference)................................... Not applicable
4.13 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of
January 13, 1994, between OneComm (formerly called CenCall
Communications Corp.) and The Bank of New York (the "OneComm
Indenture") (filed on June 7, 1995 as Exhibit No. 99.2 to Old
Nextel's Registration Statement No. 33-93182 on Form S-4 (the
"OneComm S-4 Registration Statement") and incorporated herein by
reference). ........................................................ Not applicable
4.14 -- Form of Note issued pursuant to the OneComm Indenture (included in
Exhibit 4.11). ..................................................... Not applicable
4.15 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm
Indenture between OneComm (formerly called CenCall Communications
Corp.) and The Bank of New York (filed on November 14, 1995 as
Exhibit 10.12 to the Form 10-Q for the quarter ended September 30,
1995 and incorporated herein by reference). ........................ Not applicable
4.16 -- Second Supplemental Indenture dated as of July 28, 1995 between
Nextel (formerly known as ESMR, Inc.), as successor to OneComm, and
The Bank of New York (relating to the OneComm Indenture) (filed on
November 14, 1995 as Exhibit 10.13 to the Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by reference). .... Not applicable
4.17 -- Third Supplemental Indenture, dated as of June 13, 1997 between
Nextel and The Bank of New York (relating to the OneComm Indenture)
(filed on June 17, 1997 as Exhibit 4.5 to the June 17 Form 8-K and
incorporated herein by reference). ................................. Not applicable
4.18 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of
April 25, 1994, between Dial Call and The Bank of New York (the
"2004 Indenture") (filed on June 7, 1995 as Exhibit 99.4 to the
OneComm S-4 Registration Statement and incorporated herein by
reference). ........................................................ Not applicable
4.19 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004
Indenture between Dial Call and The Bank of New York (filed on
December 5, 1995 as Exhibit 99.3 to Nextel's Registration Statement
No. 33-80021 on Form S-4 (the "Dial Page S-4 Registration
Statement") and incorporated herein by reference). ................. Not applicable
4.20 -- Second Supplemental Indenture, dated as of January 30, 1996, to the
2004 Indenture between Dial Page (as successor to Dial Call) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.26 to the
Annual Report on Form 10-K of Nextel for the year ended December 31,
1995 (the "1995 Form 10-K") and incorporated herein by
reference). ........................................................ Not applicable
4.21 -- Third Supplemental Indenture, dated as of January 30, 1996, to the
2004 Indenture between Nextel (as successor to Dial Page) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.27 to the 1995
Form 10-K and incorporated herein by reference). ................... Not applicable
4.22 -- Fourth Supplemental Indenture, dated as of June 13, 1997 between
Nextel and The Bank of New York (relating to the 2004 Indenture)
(filed on June 17, 1997 as Exhibit 4.3 to the June 17 Form 8-K and
incorporated herein by reference). ................................. Not applicable
</TABLE>
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------- ----
<C> <C> <S> <C>
4.23 -- Indenture for Senior Discount Notes due 2005, dated as of December
22, 1993, between Dial Call and The Bank of New York (the "2005
Indenture") (filed as Exhibit 99.3 to the OneComm S-4 Registration
Statement and incorporated herein by reference). ................... Not applicable
4.24 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005
Indenture between Dial Call and The Bank of New York (filed on April
1, 1996 as Exhibit 4.29 to the 1995 Form 10-K and incorporated
herein by reference). .............................................. Not applicable
4.25 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005
Indenture between Dial Call and The Bank of New York (filed on
December 5, 1995 as Exhibit 99.4 to the Dial Page S-4 Registration
Statement and incorporated herein by reference). ................... Not applicable
4.26 -- Third Supplemental Indenture, dated as of January 30, 1996, to the
2005 Indenture between Dial Page (as successor to Dial Call) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.31 to the 1995
Form 10-K and incorporated herein by reference). ................... Not applicable
4.27 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the
2005 Indenture between Nextel (as successor to Dial Page) and The
Bank of New York (filed on April 1, 1996 as Exhibit 4.32 to the 1995
Form 10-K and incorporated herein by reference). ................... Not applicable
4.28 -- Fifth Supplemental Indenture, dated as of June 13, 1997 between
Nextel and The Bank of New York (relating to the 2005 Indenture)
(filed on June 17, 1997 as Exhibit 4.4 to the June 17 Form 8-K and
incorporated herein by reference). ................................. Not applicable
4.29 -- Indenture for Senior Discount Notes due 2007, dated as of March 6,
1997, between McCaw International and The Bank of New York, as
Trustee (the "McCaw Indenture") (filed on March 31, 1997 as Exhibit
4.24 to Nextel's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K") and incorporated herein by
reference). ........................................................ Not applicable
4.30 -- Form of Note issued pursuant to the McCaw Indenture (included in
Exhibit 4.24)....................................................... Not applicable
4.31 -- Warrant Agreement, dated as of March 6, 1997, between McCaw
International and The Bank of New York (filed on March 31, 1997 as
Exhibit 4.26 to the 1996 Form 10-K and incorporated herein by
reference). ........................................................ Not applicable
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, NFC,
the Restricted Companies party thereto, the Lenders party thereto,
Toronto-Dominion (Texas) Inc., as Administrative Agent, and The
Chase Manhattan Bank, as Collateral Agent (the "Bank Credit
Agreement") (filed on October 1, 1996 as Exhibit 99.1 to Nextel's
Current Report on Form 8-K dated September 27, 1996 (the "September
27 Form 8-K") and incorporated herein by reference). ............... Not applicable
4.33 -- Amendment No. 1 dated as of March 24, 1997 to the Bank Credit
Agreement (filed on July 9, 1997 as Exhibit 99.1 to Nextel's Current
Report on Form 8-K dated July 9, 1997 (the "July 9 Form 8-K") and
incorporated herein by reference) .................................. Not applicable
4.34 -- Amended, Restated and Consolidated Credit Agreement dated as of
September 27, 1996 among Nextel, NFC, the Restricted Companies party
thereto (the "Vendor Credit Agreement") and the Vendors party
thereto (filed on October 1, 1996 as Exhibit 99.2 to the September
27 Form 8-K and incorporated herein by reference). ................. Not apllicable
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ -------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
4.35 -- Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit
Agreement (filed on July 9, 1997 as Exhibit 99.2 to the July 9 Form
8-K and incorporated herein by reference) .......................... Not applicable
4.36 -- Option Exercise and Lending Commitment Agreement by and between
Nextel and Digital Radio, L.L.C., dated as of June 16, 1997 (filed
on July 9, 1997 as Exhibit 10.1 to the July 9 Form 8-K and
incorporated herein by reference). ................................. Not applicable
4.37 -- Contingent Equity Instrument by and between Digital Radio, L.L.C.
and Nextel dated as of June 16, 1997 (filed on July 9, 1997 as
Exhibit 10.2 to the July 9 Form 8-K and incorporated herein by
reference). ........................................................ Not applicable
4.38 -- Option Purchase Agreement by and among Nextel and Unrestricted
Subsidiary Funding Company and Option Acquisition, L.L.C., dated as
of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the July
9 Form 8-K and incorporated herein by reference). .................. Not applicable
4.39 -- Option Agreement (First New Option) by and between Option
Acquisition, L.L.C. and Nextel, dated as of June 18, 1997 (filed on
July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated
herein by reference). .............................................. Not applicable
4.40 -- Option Agreement (Second New Option) by and between Option
Acquisition, L.L.C. and Nextel, dated as of June 18, 1997 (filed on
July 9, 1997 as Exhibit 10.5 to the July 9 Form 8-K and incorporated
herein by reference). .............................................. Not applicable
4.41 -- Certificate of Designation for 13% Series D Exchangeable Preferred
Stock (filed on July 22, 1997 as Exhibit 4.1 to Nextel's Current
Report on Form 8-K dated July 21, 1997 and incorporated herein by
reference) ......................................................... Not applicable
+5 -- Form of Opinion of Jones, Day, Reavis & Pogue re validity. .........
*8 -- Opinion of Gardere & Wynne, L.L.P. re tax matters. .................
13.1 -- Annual Report on Form 10-K of Pittencrieff Communications, Inc.
(filed on March 31, 1997 (File No. 0-21840) and incorporated herein
by reference). ..................................................... Not applicable
13.2 -- Quarterly Report on Form 10-Q for Pittencrieff Communications, Inc.
(filed on May 9, 1997 (File No. 0-21840) and incorporated herein by
reference). ........................................................
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5). .....
23.2 -- Consent of Gardere & Wynne, L.L.P. (included in Exhibit 8). ........
+23.3 -- Consent of Deloitte & Touche LLP. ..................................
+23.4 -- Consent of KPMG Peat Marwick LLP. ..................................
+23.5 -- Form of consent of Morgan Stanley & Co. Incorporated. ..............
*24.1 -- Powers of Attorney (excluding William G. Arendt). ..................
+24.2 -- Power of Attorney of William G. Arendt. ............................
</TABLE>
- ---------------
* Previously filed.
+ Filed herewith.
<PAGE> 1
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
(404) 521-3939
July __, 1997
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
Gentlemen:
We have acted as counsel to Nextel Communications, Inc., a
Delaware corporation (the "Company"), in connection with the registration of
9,221,523 shares of Common Stock, $.001 par value per share, of the Company (the
"Shares"), to be issued by the Company pursuant to a Registration Statement on
Form S-4 (Registration No. 333-26369) (the "Registration Statement"), filed
with the Securities and Exchange Commission.
We have examined originals or certified or photostatic copies
of such records of the Company, certificates of officers of the Company, and
public officials and such other documents as we have deemed relevant or
necessary as the basis of the opinion set forth below in this letter. In such
examination, we have assumed the genuineness of all signatures, the conformity
to original documents submitted as certified or photostatic copies, and the
authenticity of originals of such latter documents. Based on the foregoing, we
are of the following opinion:
The Shares have been duly authorized and, when issued
by the Company as contemplated in the Proxy
Statement/Prospectus, will be validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and the reference to this Firm under the heading
"Certain Legal Matters" in the Proxy Statement/Prospectus constituting part of
the Registration Statement.
Sincerely,
/s/ JONES, DAY, REAVIS & POGUE
-----------------------------
Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration to Statement No. 333-26369 of Nextel Communications, Inc. on Form
S-4 of our report dated March 20, 1997, except for Note 13, as to which the
date is March 27, 1997, appearing in the Annual Report on Form 10-K of Nextel
Communications, Inc. for the year ended December 31, 1996, and to the
references to us under the headings "Summary Financial Data" and "Experts" in
the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
McLean, Virginia
July 24, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Pittencrieff Communications, Inc.
We consent to the use of our report incorporated herein by reference and
to the reference to our firm under the headings "Pittencrieff Communications,
Inc. Selected Consolidated Financial Data" and "Experts" in the Proxy
Statement/Prospectus.
KPMG Peat Marwick LLP
Dallas, Texas
July 24, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF
MORGAN STANLEY & CO. INCORPORATED
June [ ], 1997
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of
Nextel Communications, Inc. ("Nextel") on Form S-4, with respect to the shares
of Class A Common Stock, par value $.001 per share of Nextel, of our opinion
letter appearing as Appendix B to the Proxy Statement/Prospectus which is part
of the Registration Statement, and to the references to our firm name therein.
In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations adopted by the Securities
and Exchange Commission thereunder, nor do we admit that we are experts with
respect to any part of the Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
-------------------------------
[Name]
[Title]
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
NEXTEL COMMUNICATIONS, INC.
The undersigned, a director and/or officer of Nextel
Communications, Inc., a Delaware corporation (the "Company"), which Company
intends to file with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 a Registration Statement on Form S-4
in connection with the acquisition of Pittencrieff Communications, Inc.
registering shares of the Company's Class A Common Stock, par value $.001 per
share, does hereby constitute and appoint Steven M. Shindler, Thomas D. Hickey,
John H. Willmoth and Thomas J. Sidman, and each of them, each with full power
to act without the other and with full power of substitution and
resubstitution, as attorneys or attorney to sign and file in his or her name,
place and stead, in any and all capacities, such Registration Statement, any
and all amendments and exhibits thereto, and any and all other documents to be
filed with the Securities and Exchange Commission pertaining to or relating to
such Registration Statement, or any other document with any state securities
commission or other regulatory authority with respect to the securities covered
by such Registration Statement, with full power and authority to do and perform
any and all acts and things whatsoever required and necessary to be done,
hereby ratifying and approving the acts of said attorneys and each of them and
any substitute or substitutes.
July 24, 1997
/s/ William G. Arendt
-------------------------------
William G. Arendt
Vice President and Controller
(Principal Accounting
Officer)
