<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1997
REGISTRATION NO. 333-39411
================================================================================
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)
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DELAWARE 4812 36-3939651
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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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:
LISA A. STATER, ESQ.
JONES, DAY, REAVIS & POGUE
3500 ONE SUNTRUST PLAZA
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308
(404) 521-3939
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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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED NOVEMBER 12, 1997
NEXTEL COMMUNICATIONS, INC.
OFFER TO EXCHANGE
ALL OUTSTANDING SHARES OF
SERIES D EXCHANGEABLE PREFERRED STOCK,
MANDATORILY REDEEMABLE 2009
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
FOR
SHARES OF
SERIES D EXCHANGEABLE PREFERRED STOCK,
MANDATORILY REDEEMABLE 2009
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
---------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON DECEMBER 18, 1997 UNLESS EXTENDED
---------------------
Nextel Communications, Inc., a Delaware corporation ("Nextel" or the
"Company"), hereby offers upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its outstanding shares of
Series D Exchangeable Preferred Stock (the "Old Preferred Stock") for an equal
number of shares of newly issued Series D Exchangeable Preferred Stock (the
"Exchange Preferred Stock"). The form and terms of the Exchange Preferred Stock
will be the same as the form and terms of the Old Preferred Stock except that
the Exchange Preferred Stock will be registered under the Securities Act of
1933, as amended (the "Securities Act"), and will not bear legends restricting
the transfer thereof. The Exchange Preferred Stock will be entitled to the
benefits of the Certificate of Designation, filed with the Secretary of State of
the State of Delaware on July 17, 1997, governing the Preferred Stock (the
"Certificate of Designation"). The Exchange Preferred Stock and the Old
Preferred Stock are sometimes referred to collectively herein as the "Preferred
Stock."
Dividends on the Exchange Preferred Stock will be cumulative from the last
dividend payment on the Old Preferred Stock and are payable quarterly in cash
or, on or prior to July 15, 2002, at the sole option of Nextel, in additional
shares of Exchange Preferred Stock, on each January 15, April 15, July 15 and
October 15. Nextel is required to redeem the Exchange Preferred Stock at the
liquidation preference of $1,000 per share, plus accrued and unpaid dividends on
July 15, 2009. The Exchange Preferred Stock will be redeemable, in whole or in
part, at the option of Nextel, at any time on or 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 the redemption prices set
forth herein. The Exchange Preferred Stock will be 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 13% Senior Subordinated Debentures due 2009
(the "Exchange Debentures") of Nextel. If issued, the Exchange Debentures will
be redeemable, in whole or in part, at the option of Nextel at any time on or
after July 15, 2002, at the redemption prices stated herein. In addition, in
certain circumstances, up to 35% of the Preferred Stock or the Exchange
Debentures originally issued may be redeemed on or prior to July 15, 2000, in
whole or in part, at the option of Nextel, at 113% of the liquidation preference
or principal amount thereof, as the case may be, plus accrued and unpaid
dividends or interest, as the case may be, from the proceeds of one or more
sales of Nextel's common stock.
(continued on next page)
---------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 15 OF THIS PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY ELIGIBLE HOLDERS IN
EVALUATING THE EXCHANGE OFFER.
---------------------
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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 12, 1997.
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(continued from previous page)
Nextel will accept for exchange any and all shares of Old Preferred Stock
which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York
City time, on December 18, 1997 (if and as extended, the "Expiration Date").
Tenders of shares of Old Preferred Stock may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum number of shares of Old Preferred Stock being
tendered for exchange. In the event the Exchange Offer is terminated, the Old
Preferred Stock not accepted for exchange will be returned without expense to
the tendering holder as promptly as practicable thereafter.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, including "Exxon Capital Holdings Corporation" (available May 13,
1988), "Morgan Stanley & Co. Incorporated" (available June 5, 1991) (the "Morgan
Stanley Letter"), "Mary Kay Cosmetics, Inc." (available June 5, 1991), "Warnaco,
Inc." (available October 11, 1991) and "K-III Communications Corp." (available
May 14, 1993), Nextel believes that the shares of Exchange Preferred Stock
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by a holder thereof (other than (i) a broker-dealer who
purchased shares of Exchange Preferred Stock directly from Nextel or (ii) a
person that is an affiliate of Nextel (within the meaning of Rule 405 under the
Securities Act)) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder or any other
such person is acquiring the shares of Exchange Preferred Stock in its ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the shares
of Exchange Preferred Stock. Holders of shares of Old Preferred Stock wishing to
participate in the Exchange Offer must represent to Nextel that such conditions
have been met. Holders of Old Preferred Stock who tender their shares of Old
Preferred Stock in the Exchange Offer with the intention to participate in a
distribution of the Exchange Preferred Stock may not rely upon the Morgan
Stanley Letter or other similar letters.
Each broker-dealer that receives shares of Exchange Preferred Stock for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such shares of Exchange Preferred
Stock. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter," within the meaning of the Securities Act, in connection with
resales of shares of Exchange Preferred Stock received in exchange for shares of
Old Preferred Stock where such shares of Old Preferred Stock were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. Nextel has agreed, subject to certain conditions, that, for a period
of 90 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "The Exchange
Offer -- Resale of the Exchange Preferred Stock" and "Plan of Distribution."
Nextel believes that none of the registered holders of the shares of Old
Preferred Stock is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of Nextel. Prior to this Exchange Offer, there has been no
public market for the shares of Old Preferred Stock. The Old Preferred Stock has
traded on the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market. Nextel does not intend to list the shares of Exchange
Preferred Stock on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an active
market for the shares of Exchange Preferred Stock will develop. To the extent
that a market for the shares of Exchange Preferred Stock does develop, the
market value of the shares of Exchange Preferred Stock will depend on market
conditions (including yields on alternative investments), general economic
conditions, Nextel's financial condition and other conditions. Such conditions
may cause the Exchange Preferred Stock, to the extent that it is actively
traded, to trade at a significant discount from its liquidation value. Nextel
has not entered into any arrangement or understanding with any person to
distribute the shares of Exchange Preferred Stock to be received in the Exchange
Offer.
Nextel will not receive any proceeds from the Exchange Offer. Nextel has
agreed to bear the expenses of the Exchange Offer. No underwriter is being used
in connection with the Exchange Offer.
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION................................................................. iii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................................... iii
SUMMARY............................................................................... 1
RISK FACTORS.......................................................................... 15
THE EXCHANGE OFFER.................................................................... 34
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................... 42
DESCRIPTION OF EXCHANGE PREFERRED STOCK............................................... 45
DESCRIPTION OF EXCHANGE DEBENTURES.................................................... 72
TERMS OF EXISTING NEXTEL PREFERRED STOCK.............................................. 84
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS............................... 85
PLAN OF DISTRIBUTION.................................................................. 94
LEGAL MATTERS......................................................................... 95
EXPERTS............................................................................... 95
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AVAILABLE INFORMATION
Nextel 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 Commission. The
reports, proxy statements and other information filed by Nextel 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 with respect to the shares of
Exchange Preferred Stock offered hereby. This 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. Statements made in this 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
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.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY NEXTEL. THIS 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 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 PROSPECTUS OR THE
AFFAIRS OF NEXTEL 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 PROSPECTUS INCORPORATES CERTAIN DOCUMENTS 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 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 22102,
ATTENTION: INVESTOR RELATIONS, TELEPHONE: (703) 394-3500. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER 11,
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 Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1996
filed with the Commission on March 31, 1997;
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(b) Quarterly Reports on Form 10-Q for the quarters ended (i) March
31, 1997 dated and filed with the Commission on May 15, 1997 and (ii) June
30, 1997 dated and filed with the Commission on August 12, 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, (ix) dated July 21, 1997 and filed with the Commission on
July 22, 1997, (x) dated and filed with the Commission on September 5,
1997, (xi) dated and filed with the Commission on September 9, 1997, (xii)
dated and filed with the Commission on September 22, 1997 and (xiii) dated
and filed with the Commission on October 23, 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.
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 Prospectus and prior to
the termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
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 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 Prospectus.
The information relating to Nextel contained in this Prospectus should be
read together with the information in the documents incorporated by reference.
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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
Prospectus.
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's Class A Common Stock, par value $.001
per share (the "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").
THE COMPANY
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
1
<PAGE> 8
September 30, 1997, Nextel's Digital Mobile networks were operating in major
metropolitan market areas throughout the United States in which approximately
60% 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 -- Risk
Factors Relating to Nextel -- 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 and has since
deployed the Reconfigured iDEN technology throughout its Digital Mobile
networks. To date, the Company's Digital Mobile network is operational in
markets in which approximately 60% of the United States population lives or
works, providing coverage in and around major metropolitan areas, including New
York, Los Angeles, Chicago, Washington, D.C., Atlanta, Boston, Denver, Detroit,
Dallas/Fort Worth, Houston, San Francisco, Miami/Fort Lauderdale, Tampa/St.
Petersburg, Orlando, Jacksonville, Pittsburgh, Cleveland, Columbus, Salt Lake
City, Phoenix, Tucson and Spokane. Later in 1997, the Company plans to expand
network coverage to other major metropolitan areas, including San Antonio,
Cincinnati and Austin. Based on its current plans and construction schedules,
the Company expects that its Digital Mobile network will be operational in
markets in which approximately 85% of the United States population lives or
works by the end of 1998.
Since December 31, 1994, the number of subscriber units in service on
Nextel's Digital Mobile network has increased significantly, reflecting the
commencement of Digital Mobile network service in certain markets, increased
sales in markets in which Digital Mobile network services are provided and, to a
limited extent, acquisitions. 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
946,600 at September 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 1997, Nextel significantly expanded its business activities
to include operations and investments involving wireless communications service
providers outside of the United States, which are conducted under or are
coordinated by or through Nextel International, Inc. (formerly known as McCaw
International, Ltd., "Nextel International"), an indirect, wholly owned
subsidiary of Nextel. With the exception of the equity interests held by Nextel
and by Nextel 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 30 MHz personal
communications services ("PCS") licenses awarded in Canada, Nextel
International's subsidiaries or other entities in which Nextel International
holds equity or equivalent interests own and operate wireless communications
systems in Latin America and Asia. Nextel International's operating companies
currently provide a variety of analog or digital wireless communications
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 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 the Company intends to
establish Digital Mobile networks (including primary connecting routes
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<PAGE> 9
between certain markets). Nextel has estimated that system infrastructure and
other system capital costs to be incurred during the period from March 31, 1997
through the end of 1998 to implement the business plan would be approximately
$1.45 billion. See "Risk Factors -- Risk Factors Relating to Nextel -- 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. Nextel already has taken a number of significant
steps to implement this business plan (including obtaining modifications to
certain terms contained in the Old Indentures (as herein defined) 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. Nextel's ability to fully implement its business plan will depend,
among other things, on certain actions by third parties, which cannot be
assured. See "Risk Factors -- Risk Factors Relating to Nextel -- Nextel to
Require Additional Financing" and "-- Forward Looking Statements."
RECENT DEVELOPMENTS
October Notes Issuance. On October 22, 1997, Nextel completed the sale of
$1,129,100,000 principal amount at maturity of Senior Serial Redeemable Discount
Notes due 2007 (the "October Notes"). The issue price of the October Notes,
which mature on October 31, 2007, was $619.96 per $1,000 principal amount at
maturity (generating approximately $700,000,000 in aggregate gross proceeds),
representing a yield to maturity of 9.75% computed on a semi-annual bond
equivalent basis from the date of issuance. Nextel received approximately
$682,000,000 in net cash proceeds from the sale of the October Notes (the
"October Notes Proceeds").
Cash interest will not accrue on the October Notes prior to October 31,
2002 and will be payable on April 30 and October 31 of each year, commencing
April 30, 2003, at a rate of 9.75% per annum. The October Notes are redeemable,
at the option of Nextel at any time, in whole or in part, on or after October
31, 2002, at specified redemption prices plus accrued and unpaid interest. In
addition, in the event of one or more sales by Nextel prior to October 31, 2000
of at least $125,000,000 of its capital stock, a portion of the October Notes
not to exceed a maximum of 33 1/3% of the aggregate accreted value of the
outstanding October Notes may be redeemed at Nextel's option within 180 days
after such sale from the net cash proceeds thereof at 109.75% of such accreted
value on the date of redemption. The October Notes are senior unsecured
indebtedness of Nextel and rank pari passu in right of payment with all
unsubordinated, unsecured indebtedness of Nextel, including indebtedness
evidenced by the Old Senior Notes (as defined below) and the September Notes (as
defined below), and will be senior in right of payment to all subordinated
indebtedness of Nextel.
The October Notes 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 October Notes, 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 October Notes for notes of equal value that have
been registered pursuant to the Securities Act (the "October Notes Exchange
Offer"). In the event that the October Notes Exchange Offer is not consummated
prior to specified dates, additional incremental interest on the accreted value
of the October Notes will accrue until the October Notes Exchange Offer is
consummated or certain other requirements are met.
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<PAGE> 10
The terms of the October Notes are set forth in the related indenture (the
"October Indenture") which has been filed with the Commission and is
incorporated by reference herein.
September Notes Issuance. On September 17, 1997, Nextel completed the sale
of $840,000,000 principal amount at maturity of Senior Redeemable Discount Notes
due 2007 (the "September Notes" and together with the October Notes, the "New
Senior Notes"). The issue price of the September Notes, which mature on
September 15, 2007, was $595.57 per $1,000 principal amount at maturity
(generating approximately $500,300,000 in aggregate gross proceeds),
representing a yield to maturity of 10.65% computed on a semi-annual bond
equivalent basis from the date of issuance. Nextel received approximately
$486,000,000 in net cash proceeds from the sale of the September Notes (the
"September Notes Proceeds").
Cash interest will not accrue on the September Notes prior to September 15,
2002 and will be payable on March 15 and September 15 of each year, commencing
March 15, 2003, at a rate of 10.65% per annum. The September Notes are
redeemable, at the option of Nextel at any time, in whole or in part, on or
after September 15, 2002, at specified redemption prices plus accrued and unpaid
interest. In addition, in the event of one or more sales by Nextel prior to
September 15, 2000 of at least $125,000,000 of its capital stock, a portion of
the September Notes not to exceed a maximum of 33 1/3% of the aggregate accreted
value of the outstanding September Notes may be redeemed at Nextel's option
within 180 days after such sale from the net cash proceeds thereof at 110.65% of
such accreted value on the date of redemption. The September Notes are senior
unsecured indebtedness of Nextel and rank pari passu in right of payment with
all unsubordinated, unsecured indebtedness of Nextel, including indebtedness
evidenced by the Old Senior Notes and by the October Notes, and will be senior
in right of payment to all subordinated indebtedness of Nextel.
The September Notes 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 September Notes, 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 September Notes for notes of equal value that have
been registered pursuant to the Securities Act (the "September Notes Exchange
Offer"). In the event that the September Notes Exchange Offer is not consummated
prior to specified dates, additional incremental interest on the accreted value
of the September Notes will accrue until the September Notes Exchange Offer is
consummated or certain other requirements are met.
The terms of the September Notes are set forth in the related indenture
(the "September Indenture" and together with the October Indenture, the "New
Indentures") which has been filed with the Commission and is incorporated by
reference herein.
Additional Credit Facilities. Nextel, Nextel Finance Company, a wholly
owned subsidiary of Nextel ("NFC"), and certain subsidiaries of Nextel have
entered into definitive agreements which became effective on September 4, 1997
with respect to $500,000,000 in additional financing, increasing Nextel's total
secured financing capacity under its financing agreements to $2.5 billion. These
agreements provided for (i) amendments to the existing secured credit facility
with certain banks (as so amended, the "Bank Credit Facility") pursuant to which
$250,000,000 in additional term loans (the "Additional Bank Borrowings") were
made to the Company, (ii) amendments to the existing secured credit facility
with Motorola, NTFC Capital Corporation and certain other lenders (as so
amended, the "Vendor Credit Facility") pursuant to which $50,000,000 in
additional term loans (the "Additional Vendor Borrowings") will be made
available to the Company, subject to the satisfaction or waiver of applicable
borrowing conditions, and (iii) a new credit facility pursuant to which up to
$200,000,000 in additional secured term loans (that are to be second in ranking
to the borrowings made pursuant to the Bank Credit Facility and the Vendor
Credit Facility) will be made available to the Company by Motorola through March
31, 1999 (the "Second Secured Borrowings"), subject to the satisfaction or
waiver of applicable borrowing conditions. Borrowings under the Bank Credit
Facility and the Vendor Credit Facility (together, the "Bank and Vendor Credit
Facilities") are ratably secured by liens on assets of Nextel's domestic
operating subsidiaries. The Second Secured Borrowings are secured (on a second
priority basis) by the same collateral package securing amounts outstanding
under the Bank Credit Facility and the Vendor Credit Facility.
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<PAGE> 11
Giving effect to these amendments and to the agreement relating to Second
Secured Borrowings (the "Second Vendor Financing Agreement"), the agreement
related to the Bank Credit Facility (the "Bank Credit Agreement") provides for
up to $1,905,000,000 of secured financing (consisting of a $1,085,000,000
revolving loan and $820,000,000 in term loans), the agreement related to the
Vendor Credit Facility (the "Vendor Credit Agreement") provides for up to
$395,000,000 of secured financing (consisting of a $195,000,000 revolving loan
and $200,000,000 in term loans), and the Second Vendor Financing Agreement
provides for up to $200,000,000 of Second Secured Borrowings, for a total of up
to $2.5 billion in secured financing. The indebtedness incurred upon issuance of
the October Notes may, under certain circumstances described elsewhere herein,
limit the Company's ability to incur indebtedness otherwise available for
incurrence pursuant to the Bank Credit Facility, the Vendor Credit Facility
and/or the Second Vendor Financing Agreement. See "Risk Factors -- Risk Factors
Relating to Nextel -- Nextel to Require Additional Financing."
Exercise of First Motorola Option by McCaw Investor. On September 3, 1997,
the McCaw Investor acquired 2,000,000 shares of Common Stock from Motorola
pursuant to the exercise of an option granted by Motorola, at a per share price
of $15.50 (the "First Motorola Option"). The First Motorola Option was granted
to the McCaw Investor by Motorola in 1995 in connection with the consummation of
the McCaw Transaction.
Issuance of Old Preferred Stock. On July 21, 1997, Nextel completed the
sale of 500,000 shares of the Old 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 Old Preferred Stock (the "Preferred Stock
Proceeds"). Nextel elected to pay the first quarterly dividend on the Series D
Preferred Stock in kind, resulting in the issuance of an additional 15,167
shares of Series D Preferred Stock on October 15, 1997. The Company has filed a
registration statement, of which this Prospectus is a part, in satisfaction of
certain obligations to exchange the Old Preferred Stock for the Exchange
Preferred Stock, which will have the same form and terms as the Old Preferred
Stock except that the Exchange Preferred Stock will be registered under the
Securities Act and will not bear legends restricting the transfer thereof. See
"Description of Exchange Preferred Stock." In the event that the Preferred Stock
Exchange Offer is not consummated prior to specified dates, the dividend accrual
rate applicable to the Old Preferred Stock will increase by specified amounts
until the Exchange Offer is consummated or certain other requirements are met.
See "Risk Factors -- Risk Factors Related to Preferred Stock and Exchange
Offer -- Failure to Exchange Old Preferred Stock."
Terms of the 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 five outstanding issues
of Senior Redeemable Discount Notes outstanding prior to 1997 (the "Old Senior
Notes"), issued pursuant to respective public indentures as in effect prior to
June 13, 1997 (the "Former Version Indentures"), 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 Old
Senior 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 Old Senior 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 "Old Indentures" and are
referred to collectively with the New Indentures as the "Nextel Indentures." The
Old Senior Notes are referred to collectively with the New Senior Notes as the
"Nextel Notes." The amendments include, among other things, certain
modifications to the debt incurrence limitations of such indentures to allow
Nextel to incur additional indebtedness, by (i) increasing the amount of
permitted debt by $350,000,000 and providing additional flexibility to allocate
the total amount of permitted debt among the existing categories
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<PAGE> 12
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 proceeds of new equity issuances include the Preferred Stock Proceeds, but
would exclude equity funds from several identified sources, including most
significantly equity investment proceeds received from affiliates of Craig O.
McCaw ("Mr. McCaw") in connection with the exercise of the First Option (as
defined below) and also the Subscription Proceeds (as defined below) received by
Nextel), and (iii) making Nextel's ability to incur additional indebtedness on
and after January 1, 2000 a function of satisfaction of a new interest coverage
ratio test. See "Risk Factors -- Risk Factors Related to Nextel -- Nextel to
Require Additional Financing." The Supplemental Indentures also authorize Nextel
to transfer to its unrestricted subsidiary group the equity interest in Clearnet
currently held directly by Nextel and implemented certain technical amendments.
The foregoing statements relating to the Old Indentures are summaries of
the relevant provisions and do not purport to be complete. Where reference is
made to particular provisions of the Old 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 Indentures, as amended
and supplemented by the appropriate Supplemental Indenture, is incorporated by
reference herein.
In connection with the Consent Solicitation, Nextel made consent payments
totalling approximately $67,151,000 to validly consenting holders of the Old
Senior Notes (the "Consenting Holders"). On August 8, 1997, the Commission
declared effective Nextel's registration statement on Form S-3 relating to the
offering of approximately 4,161,000 shares of Common Stock exclusively to
Consenting Holders. Pursuant to such registration statement, Nextel offered such
Common Stock to the Consenting Holders at a per share cash price of $16.14. Such
offering expired on September 9, 1997, and approximately 3,945,000 of the
offered shares of Common Stock were subscribed for by Consenting Holders for an
aggregate purchase price of approximately $63,700,000 (the "Subscription
Proceeds").
McCaw Investor Option Exercise. In April 1997, Nextel and the McCaw
Investor reached a preliminary agreement (which was confirmed in definitive
agreements entered into in June 1997) pursuant to which the McCaw Investor
committed to exercise in full the outstanding option that was scheduled to
expire on July 28, 1997 (the "First Option") to purchase 15,000,000 shares of
Common Stock for an aggregate purchase price of $232,500,000 (the "McCaw Option
Proceeds"). The McCaw Investor exercised the First Option on July 28, 1997. 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 -- Risk Factors Relating to
Nextel -- 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
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 commitment to exercise the First Option, Nextel
reached an agreement with an affiliate of Mr. 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 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 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 Common Stock obtained on such
exercise, (ii) is not an affiliate of Mr. 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
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<PAGE> 13
be assignable to transferees in certain circumstances. There can be no assurance
that the Purchaser or any transferee will elect to exercise the New Option. See
"Risk Factors -- Forward Looking Statements." The arrangements pertinent to the
New Option, the exercise of the First Option and the McCaw Investor Borrowings
are set forth in definitive agreements entered into among the relevant parties,
which definitive agreements have been filed with the Commission, and are
incorporated herein by reference.
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... Nextel is offering to exchange one share of
Exchange Preferred Stock for each share of Old
Preferred Stock that is properly tendered and
accepted in the Exchange Offer. Nextel will issue
the Exchange Preferred Stock on or promptly after
the Expiration Date. There are currently 515,167
shares of Old Preferred Stock outstanding, which
includes 500,000 shares of Old Preferred Stock
originally issued on July 21, 1997 and an
additional 15,167 shares of Old Preferred Stock
issued as dividends thereon on October 15, 1997.
See "The Exchange Offer."
RESALE OF EXCHANGE
PREFERRED STOCK............ Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, including "Exxon Capital
Holdings Corporation" (available May 13, 1988),
the Morgan Stanley Letter, "Mary Kay Cosmetics,
Inc." (available June 5, 1991), "Warnaco, Inc."
(available October 11, 1991) and "K-III
Communications Corp." (available May 14, 1993),
the Company believes that shares of Exchange
Preferred Stock issued pursuant to the Exchange
Offer in exchange for shares of Old Preferred
Stock may be offered for resale, resold and
otherwise transferred by any holder thereof
(other than any such holder that is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such shares of Exchange Preferred
Stock are acquired in the ordinary course of such
holder's or any other such person's business and
that such holder or any other such person has no
arrangement or understanding with any person to
participate in the distribution of such shares of
Exchange Preferred Stock. Holders of Old
Preferred Stock who tender their shares of Old
Preferred Stock in the Exchange Offer with the
intention to participate in a distribution of the
Exchange Preferred Stock may not rely upon the
Morgan Stanley Letter or other similar letters.
In the event that the Company's belief is
inaccurate, holders of shares of Exchange
Preferred Stock who transfer shares of Exchange
Preferred Stock in violation of the prospectus
delivery provisions of the Securities Act and
without an exemption from registration thereunder
may incur liability thereunder. The Company does
not assume or indemnify holders against such
liability. The Exchange Offer is not being made
to, nor will Nextel accept surrenders for
exchange from, holders of shares of Old Preferred
Stock (i) in any jurisdiction in which the
Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction or (ii) if any
holder is engaged or intends to engage in a
distribution of the Exchange Preferred Stock.
Each broker-dealer that receives shares of
Exchange Preferred Stock for its own account in
exchange for shares of Old Preferred Stock,
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<PAGE> 14
where such shares of Old Preferred Stock were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must, among other things, acknowledge
that it will deliver a prospectus in connection
with any resale of such shares of Exchange
Preferred Stock. The Company has not entered into
any arrangement or understanding with any person
to distribute the shares of Exchange Preferred
Stock to be received in the Exchange Offer. See
"The Exchange Offer -- Resale of the Exchange
Preferred Stock" and "Plan of Distribution."
EXPIRATION DATE............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on December 18, 1997 unless
extended, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is extended. Nextel will
accept for exchange any and all shares of Old
Preferred Stock which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The shares of
Exchange Preferred Stock issued pursuant to the
Exchange Offer will be delivered promptly after
the Expiration Date. See "The Exchange
Offer -- Expiration Date; Extension; Amendments."
CONDITIONS TO THE EXCHANGE
OFFER.................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer would be materially impaired due
to any legal or governmental action, any new law,
statute, rule or regulation, any interpretation
by the staff of the Commission of any existing
law, statute, rule or regulation or the failure
to obtain any necessary approvals of governmental
agencies or holders of shares of Old Preferred
Stock. The Company does not expect any of the
foregoing conditions to occur, although there can
be no assurance that such conditions will not
occur. See "The Exchange Offer -- Conditions."
PROCEDURES FOR TENDERING
OLD PREFERRED STOCK........ Each holder of Old Preferred Stock wishing to
participate in the Exchange Offer must complete,
sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Old Preferred Stock and any other required
documentation to First Chicago Trust Company of
New York as transfer agent for the Preferred
Stock (the "Transfer Agent") at the address set
forth herein. By executing the Letter of
Transmittal, each holder will represent to Nextel
that, among other things, the Exchange Preferred
Stock acquired pursuant to the Exchange Offer is
being obtained in the ordinary course of business
of the person receiving such Exchange Preferred
Stock, whether or not such person has an
arrangement or understanding with any person to
participate in the distribution of such Exchange
Preferred Stock, and that neither the holder nor
any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of
the Company. If the holder is a broker-dealer
that will receive Exchange Preferred Stock for
its own account in exchange for Old Preferred
Stock that was acquired as a result of
market-making or other trading activities, such
holder will be required to acknowledge in the
Letter of Transmittal that such holder will
deliver a prospectus in connection with any
resale
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<PAGE> 15
of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus,
such holder will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. See "The Exchange
Offer -- Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... Any beneficial owner whose Old Preferred Stock is
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Preferred Stock
in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender such Old Preferred
Stock on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Old
Preferred Stock on such owner's own behalf, such
owner must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Preferred Stock, either make appropriate
arrangements to register ownership of the Old
Preferred Stock in such owner's name or obtain a
properly completed stock power from the
registered holder. The transfer of registered
ownership may take considerable time and may not
be able to be completed prior to the Expiration
Date. See "The Exchange Offer -- Procedures for
Tendering."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Old Preferred Stock who wish to tender
their Old Preferred Stock and whose Old Preferred
Stock is not immediately available or who cannot
deliver their Old Preferred Stock or the Letter
of Transmittal to the Transfer Agent prior to the
Expiration Date, must tender their Old Preferred
Stock according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.......... Tenders of Old Preferred Stock may be withdrawn at
any time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
DIVIDENDS ON THE EXCHANGE
PREFERRED STOCK AND THE
OLD PREFERRED STOCK...... Dividends on each share of Exchange Preferred Stock
will accrue from the last dividend payment on the
Old Preferred Stock. No additional dividends will
be paid on Old Preferred Stock tendered and
accepted for exchange.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS........... For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Preferred Stock for the Old Preferred
Stock, as well as the ownership of the Exchange
Preferred Stock and, if applicable, the Exchange
Debentures, see "Certain United States Federal
Income Tax Considerations."
TRANSFER AGENT............. First Chicago Trust Company of New York is serving
as the Transfer Agent in connection with the
Exchange Offer. Its telephone number is
201-938-7899. The address of the Transfer Agent
is as set forth in "The Exchange
Offer -- Transfer Agent."
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<PAGE> 16
THE EXCHANGE PREFERRED STOCK
SECURITIES OFFERED......... 515,167 shares of Exchange Preferred Stock.
DIVIDENDS.................. Dividends are cumulative from the last dividend
payment date on the Old Preferred Stock 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 Exchange
Preferred Stock, on each January 15, April 15,
July 15 and October 15. For U.S. federal income
tax purposes, distributions with respect to the
Exchange Preferred Stock are not expected to
qualify as dividends and will be treated as a
return of capital until Nextel has earnings and
profits as determined under applicable U.S.
federal income tax principles. See "Certain
United States Federal Income Tax Considerations."
LIQUIDATION PREFERENCE..... $1,000 per share, plus accrued and unpaid
dividends.
VOTING..................... Holders of the Exchange Preferred Stock have no
voting rights except as provided by law and as
provided in Nextel's Restated Certificate of
Incorporation, as amended (the "Certificate of
Incorporation"), or in the Certificate of
Designation. In the event that dividends 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 Nextel's
Board of Directors will be adjusted to permit the
holders of a majority of the then outstanding
Preferred Stock, voting separately as a class, to
elect two directors. See "Description of Exchange
Preferred Stock -- Voting Rights."
MANDATORY REDEMPTION....... Nextel is required to redeem the Exchange Preferred
Stock on July 15, 2009 (subject to the legal
availability of funds therefor) at a redemption
price equal to the liquidation preference, plus
accrued and unpaid dividends to the redemption
date. See "Description of Exchange Preferred
Stock -- Mandatory Redemption."
OPTIONAL REDEMPTION........ After December 15, 2005 (the "Optional Redemption
Date"), the Exchange Preferred Stock is
redeemable, at the option of Nextel, in whole or
in part, at a price equal to the liquidation
preference, plus accrued and unpaid dividends;
provided that if prior to the Optional Redemption
Date the Old Senior Notes are redeemed,
repurchased or repaid in full, the Exchange
Preferred Stock may be redeemed after July 15,
2002 at the redemption prices set forth herein,
plus accrued and unpaid dividends to the
redemption date. In addition, if the Old Senior
Notes are redeemed, repurchased or repaid in
full, up to 35% of the Preferred Stock originally
issued may be redeemed on or prior to July 15,
2000, at the option of Nextel, at 113% of the
liquidation preference thereof, plus accrued and
unpaid dividends to the redemption date, with the
proceeds of one or more sales of Common Stock.
See "Description of Exchange Preferred
Stock -- Optional Redemption."
RANKING.................... The Exchange Preferred Stock ranks (i) senior to
all common stock of Nextel and to all other
capital stock of Nextel unless the terms of such
stock expressly provide that it ranks senior to
or on a parity with the Exchange Preferred Stock;
(ii) on a parity (except for contingent dividend
payment amounts and $25,000,000 in lump sum cash
amount constituting certain "Special Payments" on
the Company's Class A
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<PAGE> 17
Preferred Stock and Class B Preferred Stock,
respectively, as described under "Terms of
Existing Nextel Preferred Stock") with Nextel's
outstanding classes of preferred stock (and any
other classes or series of preferred stock into
which such shares may be converted or for which
such shares may be exchanged) and with any
capital stock of Nextel the terms of which
expressly provide that it will rank on a parity
with the Exchange Preferred Stock; and (iii)
junior to all preferred stock of Nextel the terms
of which expressly provide that such stock ranks
senior to the Exchange Preferred Stock. As of the
date hereof, all outstanding common stock of
Nextel ranks junior to the Exchange Preferred
Stock and all outstanding preferred stock of
Nextel ranks on a parity with the Exchange
Preferred Stock (except in the case of the
Special Payments, as to which the Exchange
Preferred Stock ranks junior). See "Description
of Exchange Preferred Stock -- Ranking."
OPTIONAL EXCHANGE
FEATURE.................... The Exchange Preferred Stock is exchangeable into
Exchange Debentures at any time at the option of
Nextel, in whole but not in part, after the
Optional Redemption Date, or earlier following
the redemption, repurchase or repayment of the
Old Senior Notes in full subject to (i) such
exchange being permitted under Nextel's
instruments and agreements governing indebtedness
and (ii) the conditions therefor described in the
Certificate of Designation being satisfied. See
"Description of Exchange Preferred
Stock -- Exchange" and "Description of Exchange
Debentures."
CERTAIN COVENANTS.......... The Certificate of Designation contains certain
covenants which, among other things, restrict the
ability of the Company and its restricted
subsidiaries to: incur additional indebtedness;
pay dividends or make distributions in respect of
their capital stock; make investments or make
certain other restricted payments; enter into
certain transactions with stockholders or
affiliates; incur senior subordinated
indebtedness; and consolidate, merge or sell all
or substantially all of its assets. See
"Description of Exchange Preferred
Stock -- Certain Covenants."
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein to
occur no sooner than the Optional Redemption Date
or, if earlier, the day after the repurchase,
redemption or repayment of the Old Senior Notes
in full), Nextel will be required to make an
offer to purchase the Exchange Preferred Stock at
a purchase price equal to 101% of the liquidation
preference thereof, plus accrued dividends to the
date of purchase. See "Description of Exchange
Preferred Stock -- Change of Control."
THE EXCHANGE DEBENTURES
EXCHANGE DEBENTURES........ 13% Senior Subordinated Debentures due July 15,
2009 in an aggregate principal amount equal to
the aggregate liquidation preference of, and
accrued but unpaid dividends on, the Preferred
Stock outstanding on the Exchange Debenture Issue
Date (as defined herein).
INTEREST; INTEREST PAYMENT
DATES.................... Interest will be payable at a rate of 13% per annum
on January 15 and July 15 of each year,
commencing with the first of such dates to occur
after the Exchange Debenture Issue Date. On or
prior to July 15, 2002, Nextel may pay interest
on the Exchange Debentures by issuing additional
Exchange Debentures.
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<PAGE> 18
OPTIONAL REDEMPTION........ On or after July 15, 2002, the Exchange Debentures
are redeemable at the option of Nextel, in whole
or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest to the
redemption date. In addition, at any time, or
from time to time, on or prior to July 15, 2000,
Nextel may, at its option, redeem Exchange
Debentures having an aggregate principal amount
equal to up to 35% of the liquidation preference
of the Old Preferred Stock initially issued at a
redemption price equal to 113% of the principal
amount thereof, plus accrued and unpaid interest
to the redemption date, with the proceeds of one
or more sales of Common Stock. See "Description
of Exchange Debentures -- Optional Redemption."
RANKING.................... The Exchange Debentures will be senior subordinated
indebtedness of Nextel that is subordinated in
right of payment to the prior payment when due of
the principal of, and premium, if any, and
accrued and unpaid interest on, all existing and
future Senior Debt (as defined herein) of Nextel
(including indebtedness under Nextel's bank and
vendor credit facilities and the Nextel Notes)
and senior in right of payment to the prior
payment when due of the principal of, and
premium, if any, and accrued and unpaid interest
on, all subordinated indebtedness of Nextel, if
any, other than senior subordinated indebtedness.
In addition, the Exchange Debentures will be
effectively subordinated to all liabilities of
Nextel's subsidiaries. See "Risk Factors -- Risk
Factors Related to Preferred Stock and Exchange
Offer -- Ranking of Preferred Stock and Exchange
Debentures."
CERTAIN COVENANTS.......... The indenture under which the Exchange Debentures
will be issued (the "Exchange Indenture") will
contain certain covenants which, among other
things, will restrict the ability of the Company
and its restricted subsidiaries to: incur
additional indebtedness; pay dividends or make
distributions in respect of their capital stock;
make investments or make certain other restricted
payments; enter into certain transactions with
stockholders or affiliates, incur senior
subordinated indebtedness; and consolidate, merge
or sell all or substantially all of its assets.
See "Description of Exchange
Debentures -- Certain Covenants."
REGISTRATION
REQUIREMENTS............... The Exchange Debentures may not be issued unless
such issuance is registered under the Securities
Act or is exempt from registration.
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein),
Nextel will be required to make an offer to
purchase the Exchange Debentures at a purchase
price equal to 101% of their principal amount
thereof, plus accrued and unpaid interest to the
date of purchase. See "Description of Exchange
Debentures -- Change of Control."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
an investment in the Exchange Preferred Stock, see "Risk Factors."
12
<PAGE> 19
SUMMARY FINANCIAL DATA
The summary 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 June 30, 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 nine
months ended December 31, 1994 and the years ended December 31, 1995 and 1996
has been incorporated by reference. See "Experts." The financial information for
the six months ended June 30, 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 the 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 SIX MONTHS
ENDED ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, DECEMBER 31, JUNE 30,
----------------------- ------------ ------------------------- -------------------------
1993 1994 1994(1) 1995 1996 1996 1997
---------- ---------- ------------ ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2):
Revenues....................... $ 53,002 $ 67,928 $ 74,857 $ 171,703 $ 332,938 $ 145,937 $ 256,614
Cost of operations............. 20,979 28,666 51,406 151,718 247,717 122,427 122,654
Selling, general and
administrative expenses...... 18,971 41,107 85,077 193,321 330,256 144,045 314,355
Expenses related to corporate
reorganization(3)............ -- -- -- 17,372 -- -- --
Depreciation and
amortization................. 25,942 58,398 94,147 236,178 400,831 186,829 224,704
------- -------- -------- -------- -------- -------- --------
Operating loss................. (12,890) (60,243) (155,773) (426,886) (645,866) (307,364) (405,099)
Interest income (expense),
net.......................... 1,324 (18,101) (41,454) (89,509) (206,480) (93,532) (160,170)
Other income (expense),
net(4)(5).................... 924 3 33 (15,372) (10,866) -- (3,134)
Income tax benefit............. 1,027 21,437 71,345 200,602 307,192 152,150 85,930
------- -------- -------- -------- -------- -------- --------
Net loss....................... $ (9,615) $ (56,904) $ (125,849) $ (331,165) $ (556,020) $ (248,746) $ (482,473)
======= ======== ======== ======== ======== ======== ========
Net loss per share............. $ (0.16) $ (0.73) $ (1.25) $ (2.31) $ (2.50) $ (1.13) $ (2.01)
Number of shares used in
computations(6).............. 58,736,000 78,439,000 100,639,000 143,283,000 222,779,000 219,279,000 239,591,000
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges and Preferred Stock
dividends(7)................. -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
AS OF MARCH 31, AS OF DECEMBER 31, ---------------------------
--------------------- ------------------------------------ PRO FORMA
1993 1994 1994 1995 1996 ACTUAL AS ADJUSTED(8)
-------- ---------- ---------- ---------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(9)....... $ 17,083 $ 483,483 $ 301,679 $ 340,826 $ 139,681 $ 538,783 $1,786,963
Marketable securities(10).......... 14,768 426,113 172,313 68,443 5,012 72,712 72,712
Current assets..................... 39,932 921,983 504,248 504,661 309,097 894,393 2,142,573
Intangible assets, net............. 144,666 889,912 1,451,780 3,549,622 4,076,300 4,238,168 4,238,168
Total assets....................... 333,557 2,229,832 2,918,985 5,547,256 6,472,439 7,828,824 9,127,261
Long-term debt(11)................. 55,024 1,113,268 1,193,096 1,687,829 2,783,041 4,336,264 4,838,540
Series D Preferred Stock........... -- -- -- -- -- -- 500,000
Stockholders' equity(12)........... 255,224 846,304 1,268,575 2,945,141 2,808,138 2,572,584 2,868,745
</TABLE>
(footnotes on next page)
13
<PAGE> 20
- ---------------
(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
the year ended December 31, 1996 for a description of acquisitions.
(3) See Note 2 to the Notes to Nextel's consolidated financial statements for
the year ended December 31, 1996.
(4) Other expenses in 1995 include a $15,000,000 write-down of the investment
in Corporacion Mobilcom S.A. de C.V. ("Mobilcom") as a result of the
devaluation of the Mexican peso.
(5) Other expenses in 1996 and 1997 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 for the
year ended December 31, 1996.)
(6) Weighted average number of shares of Common Stock outstanding during the
respective periods.
(7) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income tax benefits, plus fixed charges
less income (loss) from equity method investments. Fixed charges consist of
interest on all indebtedness, amortization of debt expense and that portion
of rental expense which the Company believes to be representative of
interest. The deficiency of earnings to cover fixed charges for the fiscal
years ended March 31, 1993 and 1994 was $12,800,000 and $86,100,000,
respectively, for the nine months ended December 31, 1994 was $218,500,000,
for the years ended December 31, 1995 and 1996 was $562,800,000 and
$884,900,000, respectively, and for the six months ended June 30, 1996 and
1997 was $413,700,000 and $588,200,000, respectively.
(8) Gives pro forma effect to the receipt of (i) $232,500,000 in McCaw Option
Proceeds, (ii) $482,000,000 in Preferred Stock Proceeds, (iii) $250,000,000
in proceeds of Additional Bank Borrowings, (iv) $486,000,000 in September
Notes Proceeds, (v) $63,700,000 in Subscription Proceeds and (vi)
$682,000,000 in October Notes Proceeds as if they occurred on June 30,
1997, and the application of a portion thereof to repay the portion of the
aggregate $1,918,000,000 in outstanding borrowings on such date under the
Bank Credit Facility and the Vendor Credit Facility (which outstanding
borrowings include the $250,000,000 of Additional Bank Borrowings on a pro
forma basis) to the extent such amounts may be reborrowed, with the
remaining $1,248,000,000 being available for general corporate purposes
including the repayment of borrowings made subsequent to June 30, 1997.
(9) Includes approximately $379,076,000 of cash and cash equivalents held by
Nextel International and its subsidiaries as of June 30, 1997 from the
offering of the 10-year discount notes (the "NI Notes") completed in March
1997, which are not available to fund any of the cash needs of Nextel's
domestic Digital Mobile and analog SMR businesses due to the restrictions
contained in the indenture related thereto (the "NI Indenture").
(10) Includes approximately $69,962,000 of marketable securities held by Nextel
International and its subsidiaries as of June 30, 1997 from the offering of
the NI Notes, which are not available to fund any of the cash needs of
Nextel's domestic Digital Mobile and analog SMR businesses due to the
restrictions contained in the NI Indenture.
(11) Excludes the current portions of long-term debt. See Note 6 to the Notes to
Nextel's consolidated financial statements for the year ended December 31,
1996.
(12) See Notes 10 and 11 to the Notes to Nextel's consolidated financial
statements for the year ended December 31, 1996.
14
<PAGE> 21
RISK FACTORS
An investment in the Exchange Preferred Stock offered hereby involves a
high degree of risk. The specific factors set forth below, as well as the other
information included and incorporated by reference in this Prospectus, should be
considered when evaluating an investment in the Exchange Preferred Stock. See
also "-- Forward Looking Statements."
RISK FACTORS RELATING TO NEXTEL
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 approximately $556,020,000 for the year ended December
31, 1996 and approximately $482,473,000 for the six months ended June 30, 1997.
Nextel had an accumulated deficit totalling approximately $1,617,724,000 at June
30, 1997. Nextel anticipates that it will continue to experience significant net
losses and significant negative net 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 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. Such
formats are known as Time Division Multiple Access ("TDMA") digital transmission
technology, Code Division Multiple Access ("CDMA") digital transmission
technology and GSM-PCS, which is an updated, upbanded PCS version of the
TDMA-based digital technology format known as Global System for Mobile
Communications ("GSM"). 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.
15
<PAGE> 22
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
have had and may in the future 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 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 and the market
acceptance of TDMA-based technologies, such as iDEN. 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, as operated at September 30, 1997, were
demonstrating acceptable performance levels in these areas. Nextel also believes
that the successful national deployment throughout Nextel's Digital Mobile
networks of the Reconfigured iDEN technology, with its accompanying
16
<PAGE> 23
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 and PCS wireless communications
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 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 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 Amendment 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."
17
<PAGE> 24
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 at June 30, 1997
totalled approximately $611,495,000 (however, approximately $449,038,000 of such
amount represents cash, cash equivalents and marketable securities held by
Nextel International and its subsidiaries, which items are not available, due to
restrictions contained in the provisions of the NI Indenture, to fund any of the
cash needs of Nextel's domestic Digital Mobile and analog SMR businesses).
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 -- The Company -- Business Plan," Nextel would need to obtain
additional amounts of debt or equity financing beyond that available under the
Bank and Vendor Credit Facilities and the Second Vendor Financing Agreement
currently in place. The Bank Credit Agreement currently provides for up to
$1,905,000,000 of secured financing, the Vendor Credit Agreement currently
provides for up to $395,000,000 of secured financing and the Second Vendor
Financing Agreement currently provides for up to $200,000,000 in Second Secured
Borrowings, for an aggregate availability of $2,500,000,000, subject in each
case to the satisfaction or waiver of applicable borrowing conditions. At June
30, 1997, Nextel had drawn $1,441,000,000 of its available financing under the
Bank Credit Facility, and had drawn $227,000,000 of its available financing
under the Vendor Credit Facility. Subsequent to June 30, 1997, Nextel has
applied the aggregate of approximately $2,196,000,000 in Preferred Stock
Proceeds, September Notes Proceeds, October Notes Proceeds, McCaw Option
Proceeds, proceeds of the Additional Bank Borrowings and Subscription Proceeds
to repay a portion of the borrowings outstanding under the Bank and Vendor
Credit Facilities (to the extent the amounts so repaid would be available for
future borrowings thereunder) with the balance of such aggregate net proceeds
remaining available for general corporate purposes. Disregarding any limitations
imposed pursuant to the Old Indentures on the Company's ability to incur debt
under the Bank and Vendor Credit Facilities and/or the Second Vendor Financing
Agreement by reason of the indebtedness incurred upon issuance of the October
Notes, as of September 30, 1997 a total of $1,530,000,000 (giving effect to the
repayment of all revolving, but no term, loan amounts outstanding under the Bank
and Vendor Credit Facilities) of such $2,500,000,000 in aggregate availability
would be available for future borrowings by the Company. The remaining funds
available for borrowing under the Bank and Vendor Credit Facilities 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. The $200,000,000 in additional funds available
under the Second Vendor Financing Agreement may be drawn as term loans prior to
March 31, 1999 and will mature in 2003.
Nextel has also reached an understanding with Motorola regarding the terms
and conditions pursuant to which Nextel could access 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 Bank Credit Agreement and the
Vendor Credit Agreement (the "Senior Secured Borrowings"). The availability of
the Senior Secured Borrowings is subject to a number of 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
18
<PAGE> 25
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 availability of all of the above-described existing and additional
financing is subject to Nextel's satisfying certain requirements under the Old
Indentures, which require Nextel to issue new equity for cash as a condition to
obtaining access to all amounts not constituting "permitted debt" (as such term
is defined in the Old Indentures) under the Bank Credit Facility, the Vendor
Credit Facility and the Second Vendor Financing Agreement referred to above.
Nextel's receipt of the $482,000,000 in Preferred Stock Proceeds and option and
warrant exercise proceeds in the period from June 1, 1997 (the "Exercise
Proceeds") enabled Nextel to issue the September Notes and still have access to
the full $2,500,000,000 in funding available under the Bank Credit Facility, the
Vendor Credit Facility and the Second Vendor Financing Agreement under the
limitations on indebtedness contained in the Old Indentures. However, under such
limitations the issuance of the October Notes will restrict the Company's
ability to access, on approximately a dollar for dollar basis, the amount of
additional funding that would be available under the Bank and Vendor Credit
Facilities and the Second Vendor Financing Agreement unless either (i) the
proceeds from the issuance of the October Notes are applied to refinance a
portion of the Old Senior Notes in accordance with the Old Indentures (in which
case the indebtedness under the October Notes, to the extent the proceeds
thereof are applied to effect such refinancing, would constitute "permitted
debt" under the Old Indentures that would not reduce the amounts available under
the Bank and Vendor Credit Facilities or the Second Vendor Financing Agreement)
or (ii) the Company issues additional equity for cash that would support the
incurrence of additional debt under the Old Indentures. In the event the
proceeds from the issuance of the October Notes are not applied to refinance a
portion of the Old Senior Notes, such proceeds may be utilized to meet the
Company's funding requirements for the implementation of its business plan to
replace a portion of the borrowings available under the Bank and Vendor Credit
Facilities and/or the Second Vendor Financing Agreement, to the extent such
borrowings would be limited by the Old 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, the Vendor
Credit Facility and the Second Vendor Financing Agreement (or such funds are
replaced with the October Notes Proceeds as described above) and (ii) that the
New Option is exercised and Nextel receives the $420,000,000 in proceeds
therefrom (the "New Option Proceeds"), the Company believes that such amounts,
coupled with the Company's available cash and cash equivalents (including the
Preferred Stock Proceeds, the McCaw Option Proceeds, the September Notes
Proceeds and the Subscription Proceeds), will provide funds that in the
aggregate are expected to be sufficient to implement the Company's business plan
and meet the other currently anticipated 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, the
Vendor Credit Facility and the Second Vendor Financing Agreement is subject to
certain conditions, and there can be no assurance that such conditions will be
met. Moreover, there can be no assurance that the New Option will be exercised
and that Nextel will receive the proceeds therefrom, or that any of the other
outstanding options will be exercised. The Bank Credit Facility, the Vendor
Credit Facility, the Second Vendor Financing Agreement, the Nextel Indentures
and the terms of the Certificate of Designation relating to the Preferred Stock
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 expenditures and operating losses and the market
price of the 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
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factors. These factors include: (i) the timing of the contemplated 800 MHz
spectrum auction process (which commenced bidding on October 28, 1997), 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 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
network services in new market areas using such technology; (iii) the potential
commercial opportunities and risks associated with implementation of Nextel's
accelerated business plan; and (iv) 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 an 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, the Vendor Credit
Agreement and/or the Second Vendor Financing Agreement) is and will be limited
by the terms of the Nextel Indentures, the Certificate of Designation relating
to the Preferred Stock, the Bank Credit Agreement, the Vendor Credit Agreement
and the Second Vendor Financing Agreement. The Bank Credit Agreement, the Vendor
Credit Agreement and the Second Vendor Financing 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, if obtained, any such
financing would be on acceptable terms. Nextel also anticipates that it will
continue to experience significant operating losses and negative net 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 the Second Vendor Financing Agreement and the impact of
Reconfigured iDEN and other matters discussed above, there can be no assurance
that Nextel will have adequate capital to
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<PAGE> 27
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 the Company's acquisition, development
and expansion plans and expenditures, which could have a material adverse effect
on its business prospects and limit the Company's ability to make payments of
cash dividends on, or to pay the mandatory redemption price of, the Exchange
Preferred Stock, or to make principal and interest payments on the Exchange
Debentures, if issued, or its other indebtedness, including the amounts from
time to time outstanding under the Bank and Vendor Credit Facilities and the
Second Vendor Financing Agreement and amounts due on or in respect of any or all
of the Nextel Notes. 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
September 30, 1997 represented coverage of areas in which approximately 60% 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, certain PCS
operators throughout the United States have announced their intention to
implement agreements to permit roaming among their
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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 or 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.
Additionally, certain analog cellular system operators that directly or through
their affiliates also are constructing and operating digital PCS systems, have
announced their intention to make available to their customers dual mode/dual
band (800 MHz cellular/1900 MHz PCS) subscriber units, to combine the enhanced
feature set available on digital PCS systems within their digital service
coverage areas with the broader wireless coverage area available on the analog
cellular network. Nextel does not currently have comparable hybrid subscriber
units available to its customers.
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, nor can there be any assurance that a sufficient number
of customers or potential customers of Nextel's Digital Mobile systems will be
willing to accept system coverage limitations as a trade-off for the enhanced
multi-function wireless communications package provided by the Company on its
nationwide network. 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. The Company 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 currently and for the reasonably foreseeable future. See
"-- Forward Looking Statements."
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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 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."
The Company currently anticipates that it will rely more heavily on
indirect distribution channels to achieve greater market penetration for its
digital wireless service offerings. As the Company 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 the commencement of Digital Mobile network service in
certain markets and increased sales in markets in which Digital Mobile network
services are provided, and, to a limited extent, acquisitions, 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 subscriber units and
certain system infrastructure equipment and most of the related equipment
required by the Company 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
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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.
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. The Company is continuing to
take 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 have been experienced as a
result of the increases in subscriber growth and Digital Mobile network wireless
systems and service utilization that have occurred and are currently anticipated
to continue. The Company 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, the Company'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 or anticipated customer and
network growth and demands, or will be able to do so on a timely basis. Any
inability of the Company 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. See "-- Forward
Looking Statements."
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 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
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and/or PCS radio telephony standards. 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 the remainder of Motorola's shares of Common Stock at a per
share price of at least 110% of the average of the closing prices of the 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 regulations 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 net tangible book value
deficit of approximately $1.7 billion as of June 30, 1997.
Nextel Susceptible to Control by Significant Stockholders
Based on securities ownership information relating to Nextel as of
September 30, 1997, giving effect to the November 1997 amended Schedule 13D
filings by Craig O. McCaw and Wendy P. McCaw 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) two separate options held by the McCaw
Investor exercisable for periods of four and six years, respectively, from July
28, 1995, to acquire an aggregate of up to 15,082,722 shares of Common Stock at
exercise prices ranging from $18.50 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
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shares of 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 Mr. 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 5,430,803 shares of Common Stock over a six-year
period and (v) a warrant held by Motorola to purchase 2,890,000 shares of Common
Stock, entities controlled by Mr. McCaw would hold approximately 25.2% and
Motorola would hold approximately 15.6% of the 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 Mr. 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. Additionally, the McCaw Investor is entitled
to have a majority of the members of the Operations Committee of the Board of
Directors selected from the McCaw Investor's representatives on the Board of
Directors. 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 Board of Directors 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 Board of Directors and control the Operations
Committee, the McCaw Investor is in a position to exert significant influence
over Nextel's affairs. The Board of Directors 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 Board of Directors, 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 Board of
Directors, 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 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 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 the Certificate of Incorporation, 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 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 Board of Directors 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 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 Common Stock in the election of
directors so designated by the Board of Directors.
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
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telecommunications services that could potentially compete with Nextel. Under
the McCaw Securities Purchase Agreement, the McCaw Investor, Mr. 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 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 Mr. McCaw's
investment in AT&T resulting from AT&T's acquisition of McCaw Cellular
Communications, Inc., 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."
Commitments to Issue Additional Common Stock May Impair Ability to Raise
Capital
As indicated elsewhere in this Prospectus, Nextel has commitments, and from
time to time may enter into additional commitments, to issue a substantial
number of new shares of 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. Nextel has also granted registration rights with
respect to a significant number of its outstanding shares, including shares of
Common Stock issuable upon conversion of securities issued 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 under the Securities Act. An increase in
the number of shares of Common Stock that will become available for sale in the
public market may adversely affect the market price of Common Stock and, as a
result, could impair Nextel's ability to raise additional capital through the
sale of its equity securities.
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 Board of Directors 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.
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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.
RISK FACTORS RELATED TO PREFERRED STOCK AND EXCHANGE OFFER
Ability of Nextel to Pay Cash Dividends or Cash Interest
Cash dividends on the Preferred Stock are payable in 2002. Under the Old
Indentures, Nextel may pay cash dividends and make other distributions on or in
respect of its capital stock, including the Preferred Stock, only if certain
financial tests are met. In addition, the Bank and Vendor Credit Facilities and
the Second Vendor Financing Agreement 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, and provisions
contained in certain financing arrangements to which Nextel International and
its subsidiaries are parties operate to restrict transfers of funds between
Nextel International and its subsidiaries and the Company, so that, while such
restrictions are in place, any profits generated by such subsidiaries may not be
available to Nextel for, among other purposes, payment of dividends on the
Preferred Stock or interest on the Exchange Debentures. Currently, the
restrictions contained in the Old Indentures would prohibit Nextel from paying
dividends other than dividends payable in additional shares of Preferred Stock
and also would prohibit the issuance of the Exchange Debentures in exchange for
the Preferred Stock. There can be no assurance that Nextel's existing or future
financing agreements will permit Nextel to obtain access to sufficient sums to
pay cash dividends on the Preferred Stock commencing in 2002. In the event that
any of Nextel's financing agreements limit Nextel's ability to pay cash
dividends on the Preferred Stock when required, Nextel will need to refinance
amounts outstanding under such agreements to make such cash dividend payments.
There can be no assurance that Nextel will be able to refinance amounts
outstanding under such financing agreements. The failure of Nextel to pay cash
dividends on the Preferred Stock when required could result in a Voting Rights
Triggering Event (as herein defined). The successful implementation of Nextel's
strategy, including the accelerated roll out of the Digital Mobile networks,
obtaining and retaining a significant number of subscribers and increasing
market share, and achieving significant and sustained growth in the Company's
revenues and earnings from operations are necessary for the Company to be able
to meet its dividend and interest requirements. There can be no assurance that
the Company will be able to successfully implement its strategy or that the
Company will generate sufficient cash flow to meet its dividend, interest and
other payment requirements. If sufficient funds to meet such dividend, interest
and other payment requirements are not generated by the Company's operations,
Nextel may need to seek additional financing or refinance some or all of its
existing or future financings, including the Preferred Stock or the Exchange
Debentures. There can be no assurance that the Company will be able to obtain
such financing or refinancing on acceptable terms, or at all. See "-- Dependence
of Company on Subsidiaries for Cash to Pay Dividends and Interest, to Redeem
Preferred Stock and for Repayment of Exchange Debentures" and "Description of
Exchange Preferred Stock -- Voting Rights."
Under Delaware law, cash dividends on capital stock may only be paid from
"surplus" or if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. Until Nextel achieves
profitability, the ability of Nextel to pay cash dividends on the Preferred
Stock will require the availability of adequate "surplus," which is defined as
the excess, if any, of Nextel's net assets (total assets less total liabilities)
over its capital (generally the par value of its issued capital stock). As a
result, there can be no assurance that adequate surplus will be available to pay
cash dividends on the Preferred Stock or that, even if such surplus is
available, Nextel will have sufficient cash to pay dividends on the Preferred
Stock. In addition, under Delaware law, the Preferred Stock cannot be redeemed
if the redemption will cause any impairment of the capital of the corporation.
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Ranking of Preferred Stock and Exchange Debentures
The Preferred Stock will rank junior in right of payment to all present and
future indebtedness and other liabilities of the Company and, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, will rank
senior to all classes of common stock of the Company and on a parity (except for
certain "Special Payments" on the Company's Class A Preferred Stock and Class B
Preferred Stock, as to which the Preferred Stock will rank junior) with all
other currently outstanding preferred stock of Nextel. In the event of the
bankruptcy, liquidation or reorganization of the Company, the assets of the
Company will be available to pay obligations on the Preferred Stock only after
all then outstanding indebtedness and other liabilities of the Company have been
paid in full, and there may not be sufficient assets remaining to pay amounts
payable on any or all of the Preferred Stock then outstanding, particularly
because a majority of Nextel's assets are intangible assets. At June 30, 1997,
on a pro forma basis giving effect to certain transactions described herein the
Company had approximately $5,758,500,000 of accrued liabilities, trade payables
and indebtedness outstanding. See --"Description of Exchange Preferred
Stock -- Ranking."
If the Preferred Stock is exchanged for the Exchange Debentures, the
Exchange Debentures will be subordinated in right of payment to all Senior Debt
(as defined under "Description of Exchange Debentures -- Subordination") of the
Company, including the indebtedness under the Nextel Notes, the Bank and Vendor
Credit Facilities and the Second Vendor Financing Agreement, and senior in right
of payment to all future indebtedness of the Company, if any, that by its terms
provides that it is subordinated to the Exchange Debentures. In the event of the
bankruptcy, liquidation or reorganization of the Company, the assets of the
Company will be available to pay obligations on the Exchange Debentures only
after all Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Exchange Debentures
then outstanding. The Preferred Stock, the Exchange Debentures and the
agreements relating to Nextel's existing debt permit the incurrence of a
substantial amount of additional indebtedness. As of June 30, 1997, on a pro
forma basis giving effect to certain transactions described herein, the Company
and its subsidiaries had approximately $4,330,761,000 of Senior Debt outstanding
and an additional $1,530,000,000 available for secured borrowing under the Bank
Credit Facility and the Vendor Credit Facility. See " -- Risk Factors Relating
to Nextel -- Nextel to Require Additional Financing."
Dependence of Company on Subsidiaries for Cash to Pay Dividends and Interest,
to Redeem Preferred Stock and for Repayment of Exchange Debentures
Because substantially all of the operations of the Company are conducted
through subsidiaries, the Company's cash flow and, consequently, its ability to
pay dividends and interest in cash and to redeem the Preferred Stock and to
service its debt, including the Exchange Debentures, is dependent upon the cash
flow of its subsidiaries and the payment of funds by those subsidiaries to
Nextel in the form of loans, dividends or otherwise. The subsidiaries are
separate and distinct legal entities and will have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the terms of the Preferred Stock
or the Exchange Debentures or to make cash available for such purpose. The Bank
Credit Agreement, the Vendor Credit Agreement and the Second Vendor Financing
Agreement currently impose significant limits on, and are expected to continue
to significantly limit, the amount of cash available to pay dividends or make
loans and cash distributions to Nextel from Nextel's subsidiaries that operate
Digital Mobile networks in Nextel's market areas in the United States.
Similarly, the NI Indenture contains certain restrictive covenants that impose,
and financing arrangements to be entered into by Nextel International and the
entities in which Nextel International holds investments are expected to contain
certain restrictive covenants that impose, restrictions on dividends, loans,
advances and other payments to Nextel by Nextel International and such
subsidiaries. Accordingly, while such limitations are in place, profits
generated by such subsidiaries may not be available to Nextel (whether in the
form of loans, dividends or otherwise) for, among other purposes, the payment of
cash dividends on the Preferred Stock, cash interest on the Exchange Debentures
or any amounts due pursuant to the terms of the Preferred Stock or the Exchange
Debentures. The Certificate of Designation relating to the Preferred Stock and
the Exchange Indenture permit the Company and its subsidiaries to enter into
financing arrangements in the future, which may impose restrictions on
dividends, loans, advances and other payments by those subsidiaries. The Bank
Credit Agreement, the Vendor Credit Agreement, the Second Vendor Financing
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Agreement, the Old Indentures and the Certificate of Designation relating to the
Preferred Stock each contain certain restrictive covenants applicable to the
Company and certain of its subsidiaries, such as a limitation on debt that may
be incurred by the Company and its restricted subsidiaries, that may limit the
Company's ability to borrow funds to pay any amounts due pursuant to the
Preferred Stock and also contain limitations on certain defined "restricted
payments" (which term would include any cash dividends on the Preferred Stock
and exchanging the Preferred Stock for Exchange Debentures), which may operate
to restrict or prohibit the payment of amounts of cash dividends that the
Company may be required to pay on the Preferred Stock, even if sufficient funds
for that purpose otherwise could be borrowed by the Company. See "-- Effect of
Substantial Existing and Additional Indebtedness; Refinancing Risk."
Effect of Holding Company Structure
Because the Company is a holding company that conducts its business through
its subsidiaries, all existing and future liabilities of the Company's
subsidiaries, including borrowings under the Bank Credit Facility, the Vendor
Credit Facility and the Second Vendor Financing Agreement, indebtedness
evidenced by the NI Notes and trade payables, will be effectively senior to the
Exchange Debentures, if issued. As of June 30, 1997, the Company's subsidiaries
had outstanding indebtedness and trade payables and other accrued liabilities of
approximately $2.4 billion. Borrowings under the Bank Credit Facility, the
Vendor Credit Facility and the Second Vendor Financing Agreement are secured by
liens on assets of Nextel's restricted subsidiaries. Borrowings by Nextel
International or its subsidiaries or affiliates under any bank or vendor credit
facilities that such entities may enter into from time to time likewise may be
secured by liens on assets of Nextel International or of such subsidiaries and
affiliates, and may be guaranteed by such entities as well. See "-- Risk Factors
Relating to Nextel -- Nextel to Require Additional Financing."
The Preferred Stock and Exchange Indenture permit the incurrence of
additional indebtedness by the Company and its subsidiaries. Additional
indebtedness of the Company may rank senior to, pari passu with or subordinate
to, the Exchange Debentures while additional indebtedness of the subsidiaries
effectively will rank senior to the Exchange Debentures. The Company's
subsidiaries will have no obligation to pay amounts due under the Exchange
Debentures. Earnings generated by any of the Company's subsidiaries, as well as
the existing assets of each such subsidiary, will be used by such subsidiary to
fulfill its own direct debt service requirements, particularly where the
collateral security mechanisms associated with the debt agreements of such
subsidiary may restrict its ability to pay dividends or to make loans, advances
or other distributions to the Company or where the debt of such subsidiary may
be secured by its assets. See "-- Dependence of Company on Subsidiaries for Cash
to Pay Dividends and Interest, to Redeem Preferred Stock and for Repayment of
Exchange Debentures" and "-- Effect of Substantial Existing and Additional
Indebtedness; Refinancing Risk."
Effect of Substantial Existing and Additional Indebtedness; Refinancing Risk
At June 30, 1997, the Company had approximately $4.3 billion of long-term
debt, including current portion, of which approximately $2.2 billion is
represented by the Old Senior Notes. The September Notes and the October Notes,
at the dates of their issuance, evidenced $500,279,000 and $699,997,000 in long
term debt, respectively. The accretion of original issue discount on the Nextel
Notes will cause an increase in recorded liabilities from June 30, 1997 of
approximately $1,327,500,000. Cash interest payments will accrue with respect to
the Old Senior Notes beginning in 1998 and 1999 and will be payable commencing
in 1999. The Bank Credit Agreement, the Vendor Credit Agreement, the Second
Vendor Financing Agreement, the Certificate of Designation relating to the
Preferred Stock, the Exchange Indenture and the Nextel Indentures each limit,
but do not prohibit, the incurrence of additional indebtedness by the Company
and certain of its subsidiaries. See "-- Risk Factors Relating to
Nextel -- Nextel to Require Additional Financing." The Company anticipates that
it and its subsidiaries will incur substantial additional indebtedness in the
future in connection with the construction of its Digital Mobile networks and
funding cash flow deficits, including additional borrowings pursuant to the
terms of the Bank Credit Facility, the Vendor Credit Facility and the Second
Vendor Financing Agreement.
The level of the Company's and its subsidiaries' indebtedness could have
important consequences to the holders of the Preferred Stock and Exchange
Debentures, including the following: (i) the debt service
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requirements of any additional indebtedness could make it more difficult for the
Company to make payments of cash dividends on the Preferred Stock and interest
on the Exchange Debentures; (ii) a substantial portion of the Company's cash
flow from operations, if any, must be dedicated to the payment of principal and
interest on its indebtedness and other obligations, and will not be available
for use in its business; (iii) the level of indebtedness and related cash debt
service needs could limit the Company's flexibility in planning for, or reacting
to, changes in its business; (iv) the Company is expected to be more highly
leveraged than some of its competitors, which may place it at a competitive
disadvantage; and (v) the Company's high degree of indebtedness and related cash
debt service needs will make it more vulnerable in the event of a downturn in
its business.
The Nextel Notes, the NI Notes, the Bank Credit Facility, the Vendor Credit
Facility and the Second Secured Borrowings will mature prior to the mandatory
redemption date of the Preferred Stock and the maturity of the Exchange
Debentures. In addition, cash interest on certain of the Old Senior Notes
accrues beginning in 1998 and cash dividends on the Preferred Stock and cash
interest on the New Notes accrue beginning in 2002. The Company expects that it
may be necessary to refinance the Nextel Notes, the NI Notes, the Bank Credit
Facility, the Vendor Credit Facility and the Second Secured Borrowings at their
respective maturities and the Preferred Stock at its mandatory redemption date.
The Company's ability to refinance its indebtedness and the Preferred Stock will
depend, among other factors, on its financial condition at the time of the
refinancing, the restrictions contained in the instruments governing its other
indebtedness then outstanding and other factors beyond the Company's control,
including market conditions. There can be no assurance that the Company will be
able to refinance the Nextel Notes, the NI Notes, the Bank Credit Facility, the
Vendor Credit Facility, the Second Secured Borrowings, the Preferred Stock or
the Exchange Debentures. If the Nextel Notes, the NI Notes, the Bank Credit
Facility, the Vendor Credit Facility, the Second Secured Borrowings or the
Preferred Stock cannot be refinanced, it may cause a default under the Exchange
Debentures and under the Company's other outstanding indebtedness (including the
Nextel Notes and the Nextel Indentures) or a Voting Rights Triggering Event
under the Preferred Stock, and the Company may not, in such circumstances, be
able to meet its obligations under the Exchange Debentures or the Preferred
Stock.
Certain Federal Income Tax Consequences for Holders of Preferred Stock and
Exchange Debentures
and the Company
Distributions of cash or, to the extent of their issue price, distributions
of additional shares of Preferred Stock on the Preferred Stock will be treated
as dividends taxable as ordinary income to holders thereof to the extent of
Nextel's current and accumulated earnings and profits as determined under U.S.
federal income tax principles. Nextel presently does not have any current or
accumulated earnings and profits as determined under U.S. federal income tax
principles and it is unlikely to have current or accumulated earnings and
profits in the foreseeable future. As a result, until such time as Nextel does
have earnings and profits, distributions of cash and additional shares of
Preferred Stock on the Preferred Stock will be treated as a nontaxable return of
capital and will be applied against and reduce the adjusted tax basis (but not
below zero) in the hands of each holder of the shares of Preferred Stock on
which such distribution is made, thus increasing the amount of any gain (or
reducing the amount of any loss) which would otherwise be realized by such
holder upon the sale or other disposition of such shares of Preferred Stock. In
the case of distributions of additional shares of Preferred Stock, however, such
basis reduction largely should be offset on an overall standpoint by a
corresponding amount of tax basis for a holder in the additional shares of
Preferred Stock. Further, until such time, distributions with respect to the
Preferred Stock will not be treated as dividends for U.S. federal income tax
purposes and, thus, will not qualify for any dividends received deduction
generally available to U.S. corporate holders. U.S. holders would recognize gain
to the extent that any distribution were to exceed current or accumulated
earnings and profits and basis in the Preferred Stock.
Upon a redemption of Preferred Stock in exchange for Exchange Debentures,
the holder generally will have capital gain or loss equal to the difference
between the issue price of the Exchange Debentures received and the holder's
adjusted basis in the Preferred Stock redeemed, except to the extent all or a
portion of the Exchange Debentures received is treated as a dividend payment.
Because of Nextel's option through July 15,
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2002 to pay interest on the Exchange Debentures by issuing additional Exchange
Debentures, any Exchange Debentures issued prior to that date likely will be
treated as issued with original issue discount ("OID") for U.S. federal income
tax purposes, unless under special rules for interest holidays the amount of OID
is treated as de minimis. The holder would have to accrue all such OID into
income over the term of the Exchange Debentures, but would not treat the receipt
of stated interest on the Exchange Debentures as interest income for U.S.
federal income tax purposes. Exchange Debentures issued after such date may also
bear OID.
The Exchange Debentures may be subject to the rules for "applicable high
yield discount obligations" ("AHYDOS"), in which case Nextel's deduction for OID
on such Exchange Debentures will be substantially deferred, while a portion of
such deduction may be disallowed.
For a discussion of these and other tax issues, see "Certain United States
Federal Income Tax Considerations."
Absence of Public Market
The Exchange Preferred Stock is, and the Exchange Debentures (if issued)
will be, new issues of securities for which there is currently no active trading
market. If any such securities are traded after their initial issuance, they may
trade at a discount from their initial offering price, depending upon the
liquidity of such securities, the market for similar securities and other
factors, including general economic conditions and the financial condition,
performance of, and prospects for the Company. The Old Preferred Stock was sold
pursuant to an exemption from registration under applicable securities laws and
is subject to certain transfer restrictions; accordingly, no public market for
the Old Preferred Stock has developed.
Failure to Exchange Old Preferred Stock
The Exchange Preferred Stock will be issued in exchange for Old Preferred
Stock only after timely receipt by the Transfer Agent of such Old Preferred
Stock, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of shares of Old Preferred Stock
desiring to tender such shares in exchange for Exchange Preferred Stock should
allow sufficient time to ensure timely delivery. Neither the Transfer Agent nor
the Company are under any duty to give notification of defects or irregularities
with respect to tenders of Old Preferred Stock for exchange. Old Preferred Stock
that is not tendered or that is tendered but not accepted will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and will not retain any rights to
registration. See "The Exchange Offer -- Consequences of Failure to Exchange."
In addition, any holder of Old Preferred Stock who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Preferred
Stock will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer who holds Old Preferred Stock acquired for its own account as
a result of market making or other trading activities and who receives Exchange
Preferred Stock for its own account in exchange for such Old Preferred Stock
pursuant to the Exchange Offer, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Preferred Stock. To
the extent that shares of Old Preferred Stock are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
shares of Old Preferred Stock could be adversely affected due to the limited
number of shares of Old Preferred Stock that are expected to remain outstanding
following the Exchange Offer. See "Plan of Distribution" and "The Exchange
Offer."
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 of this Prospectus 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
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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
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 rates,
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 Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On July 21, 1997, 500,000 shares of the Old Preferred Stock were sold in a
private placement through certain entities (the "Placement Agents") to a limited
number of "Qualified Institutional Buyers" and "Institutional Accredited
Investors" (as such terms are defined under the Securities Act) (together, the
"Purchasers"). Additionally, on October 15, 1997, 15,167 additional shares of
Old Preferred Stock were issued as dividends on the then outstanding shares of
Old Preferred Stock. In connection with the sale of the Old Preferred Stock, the
Company and the Placement Agents entered into the Registration Rights Agreement,
dated July 21, 1997 (the "Registration Rights Agreement"), which requires the
Company, among other things, to use its best efforts to file with the Commission
a registration statement under the Securities Act covering the offer by the
Company to exchange all of the Old Preferred Stock for the Exchange Preferred
Stock and to cause such registration statement to become effective under the
Securities Act. The Company is further obligated, upon the effectiveness of that
registration statement, to offer each Holder of the Old Preferred Stock the
opportunity to exchange its shares thereof for an equal number of shares of
Exchange Preferred Stock. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. Such Registration Statement has been filed with the Commission, and the
Exchange Offer is being made thereunder, pursuant to the Registration Rights
Agreement to satisfy the Company's obligations thereunder. The term "Holder"
with respect to the Exchange Offer means any person in whose name Old Preferred
Stock is registered on the Company's books or any other person who has obtained
a properly completed assignment from the registered holder.
In order to participate in the Exchange Offer, a Holder must represent to
the Company, among other things, that (i) the Exchange Preferred Stock acquired
pursuant to the Exchange Offer is being obtained in the ordinary course of
business of the person receiving such Exchange Preferred Stock, whether or not
such person is the Holder, (ii) neither the Holder nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Preferred
Stock, (iii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Preferred Stock, and (iv) neither the Holder nor any such other person
is an "affiliate," as defined under Rule 405 promulgated under the Securities
Act, of the Company. In exchange for properly tendered Old Preferred Stock, the
Exchange Preferred Stock will be issued without a restrictive legend and may be
reoffered and resold by the Holder without restrictions or limitations under the
Securities Act.
RESALE OF THE EXCHANGE PREFERRED STOCK
Based on a previous interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), the Morgan Stanley Letter, "Mary Kay
Cosmetics, Inc." (available June 5, 1991), "Warnaco, Inc." (available October
11, 1991) and "K-III Communications Corp." (available May 14, 1993), the Company
believes that the Exchange Preferred Stock issued pursuant to the Exchange Offer
may be offered for resale, resold and otherwise transferred by any Holder of
such Exchange Preferred Stock (other than any such Holder that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Preferred Stock is acquired in the
ordinary course of such Holder's business and such Holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Preferred Stock. Any Holder who tenders in the Exchange Offer with the
intention of participating in a distribution of the Exchange Preferred Stock
cannot rely on such interpretation by the staff of the Commission as set forth
in the Morgan Stanley Letter and other similar letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. In the event that the Company's
belief regarding resale is inaccurate, Holders of the Exchange Preferred Stock
who transfer Exchange Preferred Stock in violation of the prospectus delivery
provisions of the Securities Act and without an exemption from registration
thereunder may incur liability thereunder. The Company does not assume or
indemnify Holders against such liability. The Exchange Offer is not being made
to, nor will the Company
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accept surrenders for exchange from, Holders of Old Preferred Stock in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction. Each
broker-dealer that receives Exchange Preferred Stock for its own account in
exchange for Old Preferred Stock, where such Old Preferred Stock was acquired by
such broker-dealer as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Preferred
Stock. In order to facilitate the disposition of Exchange Preferred Stock by
Participating Broker-Dealers, the Company has agreed, subject to certain
conditions, to make available this Prospectus, as it may be amended or
supplemented from time to time, for delivery by Participating Broker-Dealers to
satisfy their prospectus delivery obligations under the Securities Act. The
Company is obligated to deal with only one entity representing Participating
Broker-Dealers (the "Representative"), which shall be Morgan Stanley & Co.
Incorporated unless it elects not to act as the Representative. Accordingly, any
Holder that is a Participating Broker-Dealer must notify counsel to the
Representative at the telephone number set forth in the Letter of Transmittal
and comply with the procedures for Participating Broker-Dealers. Among other
things, the Representative will be required to confirm with the Company on a
weekly basis that the Prospectus is available. Accordingly, Participating
Broker-Dealers will be required to confirm such availability with the
Representative on a weekly basis. Pursuant to the Registration Rights Agreement,
the Company will not be required to amend or supplement the Prospectus for a
period exceeding 90 days after the Expiration Date except in certain
circumstances involving the suspension of the use thereof by the Company. The
Company has not entered into any arrangement or understanding with any person to
distribute the Exchange Preferred Stock to be received in the Exchange Offer.
See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date.
As of the date of this Prospectus, 515,167 shares of Old Preferred Stock
are outstanding. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered Holders of the Old Preferred Stock on the date
hereof. There will be no fixed record date for determining registered holders of
the Old Preferred Stock entitled to participate in the Exchange Offer; however,
Holders of the Old Preferred Stock must tender their certificates therefor prior
to the Expiration Date to participate.
The form and terms of the Exchange Preferred Stock will be the same as the
form and terms of the Old Preferred Stock except that the Exchange Preferred
Stock will be registered under the Securities Act and hence will not bear
legends restricting the transfer thereof. The Exchange Preferred Stock will
evidence the same rights, privileges and obligations as the Old Preferred Stock.
Following consummation of the Exchange Offer, all rights under the Registration
Rights Agreement accorded to holders of Old Preferred Stock, including the right
to receive additional dividends on the Old Preferred Stock to the extent and in
the circumstances specified therein, will terminate.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Securities Act, and the rules and regulations of the Commission
thereunder. Old Preferred Stock that is not tendered for exchange under the
Exchange Offer will remain outstanding and will be entitled to the rights as set
forth in the Certificate of Designation, including the right to receive
dividends at the rate of 13% per annum. Any Old Preferred Stock not tendered for
exchange will not retain any rights under the Registration Rights Agreement and
will remain subject to certain transfer restrictions. See "-- Consequences of
Failure to Exchange."
The Company shall be deemed to have accepted validly tendered Old Preferred
Stock when, as and if the Company shall have given oral or written notice
thereof to the Transfer Agent. The Transfer Agent will act as agent for the
tendering Holders for the purposes of receiving the Exchange Preferred Stock
from the Company. If any tendered Old Preferred Stock is not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Old
Preferred Stock will be returned, without expense, to the tendering Holder
thereof as promptly as practicable after the Expiration Date. See "-- Procedures
for Tendering."
35
<PAGE> 42
Holders who tender Old Preferred Stock in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange pursuant
to the Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time on
December 18, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Transfer
Agent of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date and will mail to the registered Holders an announcement thereof.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Preferred Stock, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under
"-- Conditions" shall not have been satisfied by giving oral or written notice
of such delay, extension or termination to the Transfer Agent or (ii) to amend
the terms of the Exchange Offer in any manner consistent with the Registration
Rights Agreement. Any such delay in acceptances, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered Holders. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered Holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Preferred
Stock properly tendered and will issue the Exchange Preferred Stock promptly
after acceptance of the Old Preferred Stock. See "-- Conditions" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Preferred Stock for exchange when, as and if the Company
shall have given oral or written notice thereof to the Transfer Agent.
In all cases, issuance of the Exchange Preferred Stock for Old Preferred
Stock that is accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Transfer Agent of a properly completed and duly
executed Letter of Transmittal and all other required documents; provided,
however, that the Company reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer. If any
tendered Old Preferred Stock is not accepted for any reason set forth in the
terms and conditions of the Exchange Offer, the Holder withdraws such previously
tendered Old Preferred Stock, or if Old Preferred Stock is submitted for a
greater number of shares than the Holder desires to exchange, then such
unaccepted, withdrawn or portion of non-exchanged Old Preferred Stock, as
appropriate, will be returned without expense to the tendering Holder thereof.
36
<PAGE> 43
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to exchange any Exchange Preferred Stock for any Old Preferred Stock
and may terminate the Exchange Offer before the acceptance of any Old Preferred
Stock for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any interpretation of any existing law, statute, rule or
regulation is issued by the staff of the Commission, which, in the
Company's reasonable judgment, might materially impair the ability of the
Company to proceed with the Exchange Offer; or
(c) any governmental approval or approval by Holders of the Old
Preferred Stock has not been obtained, which approval the Company shall, in
its reasonable judgment, deem necessary for the consummation of the
Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Old
Preferred Stock and return all tendered Old Preferred Stock to the tendering
Holders, (ii) extend the Exchange Offer and retain all Old Preferred Stock
tendered prior to the expiration of the Exchange Offer, subject, however, to the
rights of Holders who tendered such Old Preferred Stock to withdraw their
tendered Old Preferred Stock or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Preferred
Stock which has not been withdrawn. If such waiver constitutes a material change
to the Exchange Offer, the Company will promptly disclose such waiver by means
of a prospectus supplement that will be distributed to the registered Holders,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Transfer Agent prior
to the Expiration Date. In addition, either (i) certificates for such Old
Preferred Stock must be received by the Transfer Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Old Preferred Stock, if such procedure is available, into
the Transfer Agent's account at The Depository Trust Company ("DTC") pursuant to
the procedure for book-entry transfer described below must be received by the
Transfer Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Transfer Agent at the address set forth below under "Transfer
Agent" prior to the Expiration Date.
The tender by a Holder of Old Preferred Stock that is not withdrawn prior
to the Expiration Date will constitute an agreement between such Holder and the
Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD PREFERRED STOCK AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE TRANSFER AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE TRANSFER AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD PREFERRED STOCK
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMER-
37
<PAGE> 44
CIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR
SUCH HOLDERS.
Any beneficial owner whose Old Preferred Stock is registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender its Old Preferred Stock should contact the registered Holder promptly
and instruct such registered Holder to tender such Old Preferred Stock on such
beneficial owner's behalf. If such beneficial owner wishes to tender its Old
Preferred Stock on such owner's own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and delivering such owner's Old
Preferred Stock, either make appropriate arrangements to register ownership of
the Old Preferred Stock in such owner's name or obtain a properly completed
assignment from the registered Holder. The transfer of registered ownership of
Old Preferred Stock may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Preferred Stock tendered pursuant thereto is tendered (i) by a
registered Holder who has not completed the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the U.S. or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (each, an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Preferred Stock listed therein, such Old Preferred
Stock must be endorsed or accompanied by a properly completed stock power,
signed by such registered Holder as such registered Holder's name appears on
such Old Preferred Stock.
If the Letter of Transmittal or any Old Preferred Stock or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Preferred Stock and withdrawal of tendered
Old Preferred Stock will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Preferred Stock not properly tendered or any Old
Preferred Stock the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular Old
Preferred Stock. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Preferred Stock must be cured within such time
as the Company shall determine. Although the Company intends to notify Holders
of defects or irregularities with respect to tenders of Old Preferred Stock,
none of the Company, the Transfer Agent or any other person shall incur any
liability for failure to give such notification. Tenders of Old Preferred Stock
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Old Preferred Stock received by the Transfer Agent
that is not properly tendered and as to which the defects or irregularities have
not been cured or waived will be returned by the Transfer Agent to the tendering
Holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion, to
purchase or make offers for any Old Preferred Stock that remains outstanding
subsequent to the Expiration Date or, as set forth above under "-- Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable law
and the terms of its agreements relating to its outstanding indebtedness,
purchase Old Preferred Stock in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
38
<PAGE> 45
By tendering, each Holder will represent to the Company that, among other
things, (i) the Exchange Preferred Stock acquired pursuant to the Exchange Offer
is being obtained in the ordinary course of business of the person receiving
such Exchange Preferred Stock, whether or not such person is the Holder, (ii)
neither the Holder nor any such other person is engaging in or intends to engage
in a distribution of such Exchange Preferred Stock, (iii) neither the Holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Preferred Stock and (iv)
neither the Holder nor any such other person is an "affiliate," as defined in
Rule 405 of the Securities Act, of the Company. If the Holder is a Participating
Broker-Dealer that will receive shares of Exchange Preferred Stock for such
Holder's own account in exchange for shares of Old Preferred Stock that were
acquired as a result of market-making activities or other trading activities,
such Holder will be required to acknowledge in the Letter of Transmittal that
such Holder will deliver a prospectus in connection with any resale of such
Exchange Preferred Stock and otherwise agree to comply with the procedures
described above under "-- Resale of the Exchange Preferred Stock"; however, by
so acknowledging and delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
In all cases, issuance of Exchange Preferred Stock pursuant to the Exchange
Offer will be made only after timely receipt by the Transfer Agent of
certificates for such Old Preferred Stock or a timely Book-Entry Confirmation of
such Old Preferred Stock into the Transfer Agent's account at DTC, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Old Preferred Stock is not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Preferred
Stock is submitted for a greater number of shares than the Holder desires to
exchange, such unaccepted or non-exchanged Old Preferred Stock will be returned
without expense to the tendering Holder thereof (or, in the case of Old
Preferred Stock tendered by book-entry transfer into the Transfer Agent's
account at DTC pursuant to the book-entry transfer procedures described below,
such unaccepted or non-exchanged Old Preferred Stock will be credited to an
account maintained with DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Transfer Agent will make a request to establish an account with respect
to the Old Preferred Stock at DTC for the purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in DTC's systems may make book-entry delivery
of Old Preferred Stock by causing DTC to transfer such Old Preferred Stock into
the Transfer Agent's account at DTC in accordance with DTC's procedures for
transfer. However, although delivery of Old Preferred Stock may be effected
through book-entry transfer at DTC, the Letter of Transmittal or facsimile
thereof, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Transfer
Agent at the address set forth below under "Transfer Agent" on or prior to the
Expiration Date (unless the Holder complies with the guaranteed delivery
procedures described below).
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock is not immediately available or (ii) who cannot deliver their
Old Preferred Stock, the Letter of Transmittal or any other required documents
to the Transfer Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Transfer Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Old Preferred
Stock and the number of shares of Old Preferred Stock tendered and stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Preferred Stock in proper form for
39
<PAGE> 46
transfer or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Transfer Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Preferred Stock in proper form for transfer and other documents
required by the Letter of Transmittal are received by the Transfer Agent
within five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Transfer Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Preferred Stock according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Preferred Stock may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Preferred Stock in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Transfer Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Preferred Stock to be withdrawn (the
"Depositor"), (ii) identify the Old Preferred Stock to be withdrawn (including
the certificate number(s)), (iii) be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal by which such Old Preferred
Stock was tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Transfer Agent
register the transfer of such Old Preferred Stock in the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Preferred
Stock is to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Preferred Stock so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer, and
no Exchange Preferred Stock will be issued with respect thereto unless the Old
Preferred Stock so withdrawn is validly retendered. Any Old Preferred Stock that
has been tendered but that is not accepted for payment will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Preferred Stock may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement accorded to Holders of
Old Preferred Stock will terminate upon the consummation of the Exchange Offer
except with respect to the Company's duty to keep the Registration Statement
effective until the closing of the Exchange Offer and, for a period not to
exceed 90 days after the Expiration Date, to provide copies of the latest
version of this Prospectus to any broker-dealer that requests copies of such
Prospectus in the Letter of Transmittal for use in connection with any resale by
such broker-dealer of Exchange Preferred Stock received for its own account
pursuant to the Exchange Offer in exchange for Old Preferred Stock acquired for
its own account as a result of market-making or other trading activities,
subject to the conditions described above under "-- Resale of the Exchange
Preferred Stock."
40
<PAGE> 47
TRANSFER AGENT
First Chicago Trust Company of New York, the Transfer Agent, has been
appointed exchange agent for the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or the Letter of
Transmittal and requests for copies of the Notice of Guaranteed Delivery with
respect to the Old Preferred Stock should be addressed to the Transfer Agent as
follows:
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT COURIER:
----------------------------------------- -----------------------------------------
First Chicago Trust Company of New York First Chicago Trust Company of New York
Suite 4660 Suite 4680
P.O. Box 2569 14 Wall Street
Jersey City, New Jersey 07303-2569 8th Floor
New York, New York 10005
BY HAND: BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS
----------------------------------------- ONLY):
-----------------------------------------
First Chicago Trust Company of New York 201-222-4720
Tenders & Exchanges or
c/o The Depository Trust Company 201-222-4721
55 Water Street
DTC TAD
Vietnam Veterans Memorial Plaza
New York, New York 10041
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders in connection with the Exchange Offer
will be paid by the Company. The principal solicitation is being made by mail;
however, additional solicitation may be made by telecopier, telephone or in
person by officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Transfer Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$225,000. Such expenses include registration fees, fees and expenses of the
Transfer Agent, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Preferred Stock pursuant to the Exchange Offer. If, however,
certificates representing shares of Old Preferred Stock not tendered or accepted
for exchange are to be delivered to, or are to be issued in the name of, any
person other than the registered Holder of Old Preferred Stock tendered, or, if
tendered, the certificate representing Old Preferred Stock is registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of the Old
Preferred Stock pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered Holder or any other persons)
will be payable by the tendering Holder. If satisfactory evidence of payment of
such transfer taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Old
Preferred Stock are urged to consult their financial and tax advisors in making
their own decisions on what action to take.
Shares of Old Preferred Stock that are not exchanged for the Exchange
Preferred Stock pursuant to the Exchange Offer will not retain any rights under
the Registration Rights Agreement and will remain "restricted securities" within
the meaning of Rule 144(a)(3)(iv) of the Securities Act. Accordingly, such
shares may not
41
<PAGE> 48
be offered, sold, pledged or otherwise transferred except (i) to Nextel or any
subsidiary thereof, (ii) to a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (iii) in an offshore transaction complying with Rule
904 of Regulation S under the Securities Act, (iv) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder (if
available), (v) to "institutional accredited investors" in a transaction exempt
from the registration requirements of the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, and, in each case, in
accordance with all other applicable securities laws and the transfer
restrictions set forth in the Certificate of Designation, if any.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer.
TAX CONSEQUENCES
For a description of certain U.S. Federal income tax consequences to
holders of Old Preferred Stock of tendering in the Exchange Offer, see "Certain
United States Federal Income Tax Consequences -- Exchange of Old Preferred Stock
for Exchange Preferred Stock."
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 1997 (the "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 (except that the table reflects the
November 1997 amended Schedule 13D filings by Craig O. McCaw and Wendy P.
McCaw), (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
who continued to be executive officers of Nextel at the Ownership Date, (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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
TITLE OF CLASS OF OF
THE COMPANY'S BENEFICIAL APPROXIMATE %
NAME OF BENEFICIAL OWNER CAPITAL STOCK OWNERSHIP(1) OF CLASS(2)
- --------------------------------------------- --------------------- ------------ -------------
<S> <C> <C> <C>
Daniel F. Akerson............................ Class A Common Stock 200,000(3) *
Morgan E. O'Brien............................ Class A Common Stock 926,476(4) *
Keith J. Bane................................ Class A Common Stock --(5) *
Frank M. Drendel............................. Class A Common Stock 10,167(6) *
Timothy M. Donahue........................... Class A Common Stock 76,000(7) *
William E. Conway, Jr. ...................... Class A Common Stock 96,325(8) *
Craig O. McCaw............................... Class A Common Stock 77,658,786(9) 24.0%
Keisuke Nakasaki............................. Class A Common Stock --(10) *
Masaaki Torimoto............................. Class A Common Stock --(11) *
Dennis M. Weibling........................... Class A Common Stock 77,658,786(12) 24.0
Robert S. Foosaner........................... Class A Common Stock 242,000(13) *
All directors and executive officers as a
group (18 persons)......................... Class A Common Stock 79,476,221(14) 24.5
5% STOCKHOLDERS (NOT LISTED ABOVE)
</TABLE>
42
<PAGE> 49
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
TITLE OF CLASS OF OF
THE COMPANY'S BENEFICIAL APPROXIMATE %
NAME OF BENEFICIAL OWNER CAPITAL STOCK OWNERSHIP(1) OF CLASS(2)
- --------------------------------------------- --------------------- ------------ -------------
<S> <C> <C> <C>
Motorola, Inc. .............................. Class A Common Stock 58,890,000(15) 20.6
1303 East Algonquin Road Class B Common Stock 17,830,000 100.0
Schaumburg, Illinois 60196
Digital Radio, L.L.C. ....................... Class A Common Stock 52,258,786(16) 17.5
Class A Preferred
2300 Carillon Point Stock 7,905,981 100.0
Class B Preferred
Kirkland, Washington 98033 Stock 82 100.0
Option Acquisition, L.L.C. .................. Class A Common Stock 25,000,000(17) 8.1
2300 Carillon Point
Kirkland, Washington 98033
Putnam Investments, Inc. .................... Class A Common Stock 15,340,145(18) 5.4
1 P.O. Box Square
Boston, Massachusetts 02109
Wendy P. McCaw............................... Class A Common Stock 14,824,937(19) 5.2
c/o Lasher, Holzapfal, Sperry & Ebberson,
PLLC
2600 Two Union Square
601 Union Street
Seattle, Washington 98101
</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 owner of any securities if that person has the right to
acquire beneficial ownership within 60 days of the 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 Ownership Date 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 Non-Voting 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
Ownership Date or within 60 days thereafter by Mr. Akerson upon the
exercise of non-qualified stock options.
(4) Includes 553,477 shares of Class A Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. O'Brien upon the
exercise of non-qualified stock options.
(5) 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.
(6) Includes 1,667 shares of Class A Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. Drendel upon the
exercise of non-qualified stock options.
(7) Includes 75,000 shares of Class A Common Stock obtainable as of the
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
Ownership Date or within 60 days thereafter by Mr. Conway upon the exercise
of non-qualified stock options.
(9) Reflects the conversion of 257,284 shares of Class A Preferred Stock and
the transfer of 9,907,659 shares of Class A Common Stock and options to
purchase 4,917,278 shares of Class A Common Stock obtainable as of the
Ownership Date to Wendy P. McCaw pursuant to an agreement dated November 3,
43
<PAGE> 50
1997, as reflected in an amendment to her Schedule 13D dated November 3,
1997 and in an amendment to the Schedule 13D of Mr. McCaw. Comprised of (i)
52,258,786 shares of Class A Common Stock beneficially owned by the McCaw
Investor, (ii) 400,000 shares of Class A Common Stock obtainable as of the
Ownership Date upon the exercise of a portion of the Incentive Option
granted to Eagle River and (iii) 25,000,000 shares of Class A Common Stock
beneficially owned by Option Acquisition, L.L.C. Mr. McCaw, who is an
equity owner and controlling person of the McCaw Investor and Option
Acquisition, L.L.C., disclaims beneficial ownership of all securities of
Nextel held by the McCaw Investor and Option Acquisition, L.L.C., except to
the extent of his pecuniary interest therein. See notes 16 and 17.
(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 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 Ownership Date, Matsushita held 3,000,000 shares.
(12) Mr. Weibling, who is an officer of Option Acquisition, L.L.C. and President
of Eagle River, an affiliate of the McCaw Investor, disclaims beneficial
ownership of all securities of Nextel held by the McCaw Investor and by
Option Acquisition, L.L.C., except to the extent of his pecuniary interest
therein. See note 16.
(13) Includes 192,000 shares of Class A Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. Foosaner upon the
exercise of non-qualified stock options.
(14) Includes an aggregate of 1,243,061 shares of Class A Common Stock
obtainable as of the 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) Assuming conversion of the Non-Voting Common Stock held by Motorola.
Comprised of (i) 38,170,000 shares of Class A Common Stock beneficially
owned by Motorola, (ii) 17,830,000 shares of Non-Voting Common Stock
beneficially owned by Motorola and (iii) 2,890,000 shares of Class A Common
Stock obtainable as of the Ownership Date or within 60 days thereafter upon
exercise of a warrant.
(16) Comprised of (i) 13,458,039 shares of Class A Common Stock beneficially
owned by the McCaw Investor, (ii) 15,082,722 shares of Class A Common Stock
obtainable as of the Ownership Date or within 60 days thereafter upon the
exercise of certain options and (iii) 23,718,025 shares of Class A Common
Stock, which represents the conversion of the 7,905,981 shares of Class A
Preferred Stock and the 82 shares of Nextel's Class B Preferred Stock held
by the McCaw Investor. Eagle River Investments, L.L.C., the manager of the
McCaw Investor, also reports beneficial ownership of the shares
beneficially owned by the McCaw Investor. Excludes 4,917,278 shares of
Class A Common Stock obtainable as of the Ownership Date upon the exercise
of certain options currently held by Wendy P. McCaw which the McCaw
Investor has the right to exercise in the event Wendy P. McCaw does not
elect to exercise such options. See note 19.
(17) Includes 25,000,000 shares of Class A Common Stock obtainable as of the
Ownership Date upon the exercise of the New Option.
(18) 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.
(19) Comprised of 9,907,659 shares of Class A Common Stock beneficially owned by
Wendy P. McCaw and 4,917,278 shares of Class A Common Stock obtainable as
of the Ownership Date or within 60 days thereafter upon the exercise of
certain options. Excludes 7,619,677 shares of Class A Common Stock
obtainable as of the Ownership Date upon the exercise of certain options
currently held by the McCaw Investor which Wendy P. McCaw has the right to
exercise in the event the McCaw Investor does not elect to exercise such
options. See note 16.
44
<PAGE> 51
DESCRIPTION OF EXCHANGE PREFERRED STOCK
The form and terms of the Exchange Preferred Stock will be the same as the
form and terms of the Old Preferred Stock except that the Exchange Preferred
Stock will be registered under the Securities Act and hence will not bear
legends restricting the transfer thereof. The Exchange Preferred Stock will
evidence the same rights, privileges and obligations as the Old Preferred Stock.
Following consummation of the Exchange Offer, all rights under the Registration
Rights Agreement accorded to holders of the Old Preferred Stock, including the
right to receive additional dividends on the Old Preferred Stock to the extent
and in the circumstances specified therein, will terminate.
The summary contained herein of certain provisions of the Exchange
Preferred Stock does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Certificate of Designation, which has been
previously filed with the Commission and is incorporated herein by reference.
The definitions of certain terms used in the Certificate of Designation and in
the following summary are set forth under "-- Certain Definitions."
GENERAL
Pursuant to the Certificate of Incorporation, the Company has the authority
to issue 613,883,948 shares of capital stock, divided into six classes as
follows: (i) 515,000,000 shares of Class A Common Stock, (ii) 35,000,000 shares
of Class B 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 the Preferred Stock and (vii) 8,400,000 shares of preferred
stock, par value $.01 per share (the "Undesignated Preferred Stock"). The
Certificate of Incorporation of the Company authorizes the Board of Directors to
issue preferred stock from the Undesignated Preferred Stock from time to time in
one or more series, with such designations, voting powers, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions as may be determined by the Board of Directors. The
Certificate of Designation authorizes the issuance of up to 1,600,000 shares of
Series D Preferred Stock, with a liquidation preference of $1,000 per share. The
authorized Series D Preferred Stock consists of the 500,000 shares of the Old
Preferred Stock originally issued, additional shares of Old Preferred Stock used
to pay dividends on the Old Preferred Stock, the Exchange Preferred Stock
offered hereby and additional shares of Exchange Preferred Stock which may be
used to pay dividends on the Exchange Preferred Stock (collectively, the
"Preferred Stock"). The Preferred Stock is exchangeable, at the option of the
Company, into the Exchange Debentures, at any time after December 15, 2005, or
in certain circumstances, earlier, subject to the satisfaction of certain
conditions. See "-- Exchange" below. The Exchange Preferred Stock, when issued
by the Company in the Exchange Offer or to pay dividends on the Exchange
Preferred Stock, will be fully paid and nonassessable. Holders of Preferred
Stock do not have any subscription or preemptive rights related thereto. First
Chicago Trust Company of New York is the Transfer Agent and registrar for the
Preferred Stock (the "Registrar").
RANKING
The Exchange Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, rank: (i) senior to (A) all classes of common stock of the Company and
to (B) each other class of capital stock or series of preferred stock (other
than the Class C Preferred Stock) established after the Closing Date, the terms
of which do not expressly provide that it ranks senior to or on a parity with
the Exchange Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to, together with all classes of common stock of the Company, as the
"Junior Securities"); (ii) on a parity with (A) the Class A Preferred Stock
(except with respect to the Special Payments (as defined below)), the Class B
Preferred Stock (except with respect to the Special Payments) and the Class C
Preferred Stock; and (B) any class of capital stock or series of preferred stock
issued by the Company after the Closing Date, the terms of which expressly
provide that such class or series will rank on a parity with the Exchange
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"); (iii) junior with respect to the dividend accruals and
payments on the Class A Preferred
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<PAGE> 52
Stock and the $25,000,000 cash payment on the Class B Preferred Stock that are
described under "Terms of Existing Nextel Preferred Stock," which are required
upon certain occurrences (such payments and dividend rights of the Class A
Preferred Stock and Class B Preferred Stock, the "Special Payments"); and (iv)
subject to Preferred Stockholder Approval Rights (as defined below), junior to
each class of capital stock or series of preferred stock issued by the Company
and established after the Closing Date, the terms of which expressly provide
that such class or series will rank senior to the Exchange Preferred Stock as to
dividend distributions and distributions upon liquidation, winding-up and
dissolution of the Company (collectively referred to as "Senior Securities").
The Company may not issue any new class or series of Senior Securities without
the approval of the holders of at least a majority of the shares of Exchange
Preferred Stock then outstanding, voting or consenting, as the case may be,
separately as one class, except that the Company does not need the approval of
such holders to issue shares of Senior Securities (1) in respect of any dividend
or payment obligations that constitute Special Payments or (2) in exchange for,
or the proceeds of which are used to redeem or repurchase, any or all shares of
Exchange Preferred Stock then outstanding or Debt of the Company (such approval
rights, herein referred to as "Preferred Stockholder Approval Rights"); provided
that, solely in the case of Senior Securities issued in exchange for, or the
proceeds of which are used to redeem or repurchase, less than all shares of
Exchange Preferred Stock then outstanding, (a) the aggregate liquidation
preference of such Senior Securities shall not exceed the aggregate liquidation
preference of, premium and accrued and unpaid dividends on, and expenses in
connection with the refinancing of, the shares of Exchange Preferred Stock so
exchanged, redeemed or repurchased, (b) such Senior Securities shall not be
Redeemable Stock and (c) such Senior Securities shall not be entitled to the
payment of cash dividends prior to July 15, 2002. At the date hereof, the only
outstanding preferred stock (other than the 515,167 shares of Old Preferred
Stock previously issued) is the Class A Preferred Stock and the Class B
Preferred Stock which (except in the case of Special Payments with respect to
the Class A Preferred Stock and Class B Preferred Stock) is on a parity with the
Exchange Preferred Stock. Under certain circumstances, shares of Class A
Preferred Stock can be converted into shares of Class C Preferred Stock, which
would rank on a parity with the Exchange Preferred Stock, but neither the
issuance nor any exchange of shares of Class C Preferred Stock would require any
vote by holders of the Exchange Preferred Stock. See "Risk Factors -- Risks
Related to Preferred Stock and Exchange Offer -- Ranking of Preferred Stock and
Exchange Debentures" and "-- Effect of Holding Company Structure."
DIVIDENDS
Holders of Exchange Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends on the Exchange Preferred Stock at a rate per annum equal to
13% of the liquidation preference per share of Exchange Preferred Stock, payable
quarterly. All dividends will be cumulative, whether or not earned or declared,
on a daily basis from the date to which dividends have been paid on the Old
Preferred Stock and will be payable quarterly in arrears on January 15, April
15, July 15 and October 15 of each year. The Company elected to pay the first
quarterly dividend on the Old Preferred Stock in kind, resulting in the issuance
of an additional 15,167 shares of Old Preferred Stock on October 15, 1997. On
and before July 15, 2002, the Company may pay dividends, at its option, in cash
or in additional fully paid and nonassessable shares of Exchange Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends. After July 15, 2002, dividends may be paid only in cash. However, the
Existing Indentures restrict the payment of cash dividends by the Company, and
future agreements may provide for restrictions on the payment of cash dividends.
In addition, the collateral security mechanisms and the related provisions
associated with the Bank Credit Facility and Vendor Credit Facility limit the
amount of cash available to make dividends, loans and cash distributions to the
Company from its restricted subsidiaries and provisions contained in the NI
Indenture and in other loan documents to which Nextel International or its
subsidiaries are parties operate to restrict transfers of funds or value between
Nextel International and its subsidiaries and the Company and its Restricted
Subsidiaries. See "Risk Factors -- Risks Related to Preferred Stock and Exchange
Offer -- Ability of Nextel to Pay Cash Dividends or Cash Interest" and
"-- Dependence of Company on Subsidiaries for Cash to Pay Dividends and
Interest, to Redeem Preferred Stock and for Repayment of Exchange Debentures."
If any dividend (or portion thereof) payable on any dividend payment date after
July 15, 2002 is not declared or paid in full in cash on such dividend payment
46
<PAGE> 53
date, the amount of such dividend that is payable and that is not paid in cash
on such date will accrue interest at the dividend rate then applicable to the
Preferred Stock, compounding quarterly, until declared and paid in full.
Other than any amount constituting Special Payments, no full dividends may
be declared or paid or funds set apart for the payment of dividends on any
Parity Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid in full or declared and, if payable in
cash, a sum in cash is set apart for such payments on the Exchange Preferred
Stock. The making of Special Payments will not, in and of itself, require that
any dividend be declared or any dividend or other amount be paid or accrued in
respect of the Exchange Preferred Stock. Except as noted in the case of Special
Payments, if dividends are not fully paid, the Exchange Preferred Stock will
share dividends pro rata with the Parity Securities. No dividends may be paid or
set apart for such payment on Junior Securities (except dividends on Junior
Securities in additional shares of Junior Securities) and no Junior Securities
or Parity Securities may be repurchased, redeemed or otherwise retired nor may
funds be set apart for payment with respect thereto (except under certain
limited circumstances to permit the redemption of Junior Securities owned by
certain employees of the Company or its subsidiaries) if full cumulative
dividends shall not have been paid on the Exchange Preferred Stock.
OPTIONAL REDEMPTION
The Exchange Preferred Stock may be redeemed (subject to the restrictions
described below, contractual and other restrictions with respect thereto and to
the legal availability of funds therefor) at any time after the Optional
Redemption Date, at the Company's option, in whole or in part, upon not less
than 30 nor more than 60 days' prior written notice mailed by first-class mail
to each holder's registered address, at a redemption price equal to the amount
of the liquidation preference thereof, plus an amount equal to all accumulated
and unpaid dividends (including an amount in cash equal to a prorated dividend
for the period from the dividend payment date immediately prior to the
redemption date to the redemption date); provided, however, that in the event
that the Existing Senior Notes are repurchased, redeemed or repaid in full prior
to the Optional Redemption Date, the Exchange Preferred Stock may be redeemed
(subject to the restrictions described below, contractual and other restrictions
thereto and to the legal availability of funds therefor) at any time on or after
July 15, 2002, at the Company's option, in whole or in part, upon not less than
30 or more than 60 days' prior written notice mailed by first class mail to each
holder's registered address, at the redemption prices (expressed as a percentage
of the liquidation preference thereof) set forth below, plus an amount in cash
equal to all accumulated and unpaid dividends (including an amount in cash equal
to a prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date), if redeemed during the
12-month period beginning July 15 of each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 106.50%
2003........................................................... 103.25
2004 and thereafter............................................ 100.00
</TABLE>
In addition, on or prior to July 15, 2000, in the event that the Existing
Senior Notes are repurchased, redeemed or repaid in full (subject to the
restrictions described below, contractual and other restrictions with respect
thereto and to the legal availability of funds therefor), the Company may redeem
shares of Preferred Stock having an aggregate liquidation preference of up to
35% of the aggregate liquidation preference of the Old Preferred Stock
originally issued at a redemption price equal to 113% of the liquidation
preference, plus an amount in cash equal to a prorated dividend for the period
from the dividend payment date immediately prior to the redemption date to the
redemption date (subject to the right of holders of Exchange Preferred Stock on
relevant record dates to receive dividends due on relevant dividend payment
dates), with the proceeds of any sale of its common stock, provided that such
redemption date occurs within 180 days after consummation of such sale.
47
<PAGE> 54
No optional redemption of any shares of Exchange Preferred Stock may be
authorized or made unless prior thereto full unpaid cumulative dividends shall
have been paid or a sum set apart for such payment on the Exchange Preferred
Stock.
In the event of partial redemptions of Exchange Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company, except that the Company may redeem such shares held by any holder of
fewer than 100 shares without regard to such pro rata redemption requirement. If
any Exchange Preferred Stock is to be redeemed in part, the notice of redemption
that relates to such Exchange Preferred Stock shall state the portion of the
liquidation preference to be redeemed. New shares of Exchange Preferred Stock
having an aggregate liquidation preference equal to the unredeemed portion will
be issued in the name of the holder thereof upon cancellation of the original
certificate and, unless the Company fails to pay the redemption price on the
redemption date, after the redemption date, dividends will cease to accrue on
the shares of Exchange Preferred Stock called for redemption. The Existing
Indentures contain provisions that operate to limit the Company's ability to
effect an optional redemption of the Exchange Preferred Stock. Additionally,
provisions in the Company's Bank Credit Facility and Vendor Credit Facility, in
the NI Indenture and in other loan documents to which Nextel International or
its subsidiaries are parties operate to limit the funds available to the Company
from its restricted and unrestricted subsidiaries. See "Risk Factors -- Risks
Related to Preferred Stock and Exchange Offer -- Ability of Nextel to Pay Cash
Dividends or Cash Interest" and "-- Dependence of Company on Subsidiaries for
Cash to Pay Dividends and Interest, to Redeem Preferred Stock and for Repayment
of Exchange Debentures."
MANDATORY REDEMPTION
The Exchange Preferred Stock will be subject to mandatory redemption
(subject to the legal availability of funds therefor but without regard to any
contractual or other restrictions with respect thereto) in whole on July 15,
2009 at a price, payable in cash, equal to the liquidation preference thereof
plus all accumulated and unpaid dividends to the date of redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required
(subject to any contractual and other restrictions with respect thereto existing
on the Closing Date and the legal availability of funds therefor) to make an
Offer to Purchase to each holder of Exchange Preferred Stock to repurchase all
or any part of such holder's Exchange Preferred Stock at a cash purchase price
equal to 101% of the liquidation preference thereof, plus accrued and unpaid
dividends (if any) to the date of purchase (the "Change of Control Payment").
The Offer to Purchase must be made within 30 days following a Change of Control,
must remain open for at least 30 and not more than 40 days and must comply with
the requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
None of the provisions in the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors. The
Company could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. In
addition, under the definition of Change of Control, no Change of Control will
be deemed to occur until the day after the Optional Redemption Date, or sooner
if the Company had repurchased, redeemed or repaid all Existing Senior Notes.
There can be no assurance that the Company would have sufficient funds to pay
the purchase price for all Exchange Preferred Stock that the Company would be
required to purchase if a Change of Control with respect to the Exchange
Preferred Stock is deemed to occur. In the event that the Company were required
to purchase outstanding Exchange Preferred Stock pursuant to an Offer to
Purchase, the Company expects that it would need to seek third-party financing
to the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing. In addition, the Company's ability to purchase the Exchange Preferred
Stock may be limited by other then-existing agreements and by restrictions
imposed by Delaware law.
48
<PAGE> 55
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Exchange Preferred Stock will be entitled to be paid,
out of the assets of the Company available for distribution, $1,000 per share,
plus an amount in cash equal to accumulated and unpaid dividends thereon to the
date fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last dividend payment date to the
date fixed for liquidation, dissolution or winding-up), before any distribution
is made on any Junior Securities, including, without limitation, common stock of
the Company. However, neither the merger, consolidation or sale of all or
substantially all of the assets of the Company shall be deemed to be a
liquidation, dissolution or winding-up of the Company. If, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the amounts
payable with respect to the Exchange Preferred Stock and all other Parity
Securities are not paid in full, the holders of the Exchange Preferred Stock and
the Parity Securities will share equally and ratably (subject to the preference
of the holders of Class A Preferred Stock and Class B Preferred Stock to receive
any Special Payments then due and not paid in full) in any distribution of
assets of the Company in proportion to the full liquidation preference and
accumulated and unpaid dividends to which each is entitled. After payment of the
full amount of the liquidation preference and accumulated and unpaid dividends
to which they are entitled, the holders of Exchange Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Exchange
Preferred Stock, although such liquidation preference is substantially in excess
of the par value per share of such Exchange Preferred Stock. In addition, the
Company is not aware of any provision of Delaware law or any controlling
decision of the courts of the State of Delaware (the state of incorporation of
the Company) that requires a restriction upon the surplus of the Company solely
because the liquidation preference of the Exchange Preferred Stock exceeds its
par value. The fact that the liquidation preference of the Exchange Preferred
Stock exceeds its par value does not restrict the Company's use of surplus, and,
except in connection with the liquidation of the Company, no remedies are
available to holders of the Exchange Preferred Stock before or after the payment
of any dividend if the dividend would reduce the surplus of the Company to an
amount less than the difference between the liquidation preference of the
Exchange Preferred Stock and its par value.
VOTING RIGHTS
The holders of Exchange Preferred Stock will have no voting rights except
as provided by law or as set forth in the Certificate of Designation. The
Certificate of Designation provides that if (a) dividends on the Preferred Stock
are in arrears and unpaid (and if, after July 15, 2002, such dividends are not
paid in cash) for four consecutive quarterly periods or six quarterly periods
(whether or not consecutive), (b) the Company fails to discharge any redemption
obligation with respect to the Preferred Stock, (c) the Company fails to make an
Offer to Purchase (and complete such purchase) following a Change of Control, if
such Offer to Purchase is required by the provisions set forth above under the
caption "-- Change of Control," (d) a breach or violation of the provisions
described under the caption "-- Certain Covenants" occurs and such breach or
violation continues for a period of 60 consecutive days or more after notice
thereof to the Company by holders of 25% or more of the then outstanding shares
of Preferred Stock or (e) the Company fails to pay when due (subject to any
applicable grace period) the principal of, or if there is an acceleration of,
any Debt of the Company or any Restricted Subsidiary having an outstanding
principal amount of at least $25,000,000, individually or in the aggregate, then
the number of directors constituting the Board of Directors will be adjusted to
permit the holders of the majority of the then outstanding shares of Preferred
Stock, voting separately as a class, to elect two directors. Such voting rights
and the term of office of such elected directors will continue until such time
as all dividends in arrears on the Preferred Stock are paid in full (and, in the
case of dividends payable after July 15, 2002, paid in cash) and any failure,
breach or default referred to in clause (b), (c), (d) or (e) is remedied, at
which time the term of any directors elected pursuant to the provisions of this
paragraph shall terminate. For the purpose of determining the number of
quarterly periods for which accrued dividends have not been paid, any accrued
and unpaid dividend that is subsequently paid shall not be
49
<PAGE> 56
treated as unpaid. Each such event described in clauses (a) through (e) above is
referred to herein as a "Voting Rights Triggering Event." Within 15 days of the
time the Company becomes aware of the occurrence of any default referred to in
clause (d) or (e) above, the Company shall give written notice thereof to
holders of the Preferred Stock.
The Certificate of Designation provides that, upon the occurrence of a
Voting Rights Triggering Event, the number of directors constituting the Board
of Directors will be increased by two directors, whom the holders of the
Preferred Stock are entitled to elect. Whenever the right of the holders of the
Preferred Stock to elect directors shall cease, the number of directors
constituting the Board of Directors will be reduced to the number necessary to
reflect the termination of the right of the holders of the Preferred Stock to
elect directors. Any vacancy occurring in the office of a director elected by
the holders of Preferred Stock may be filled by the remaining director elected
by such holders unless and until such vacancy shall be filled by such holders.
The provisions of the Company's Certificate of Incorporation provide that
generally, the Operations Committee must approve a variety of matters that would
otherwise be put before the Board of Directors. The directors elected by the
holders of the Preferred Stock have no right to sit on the Operations Committee
or any other committee of the Board of Directors. The holders of the Class A
Preferred Stock are entitled to elect that number of directors (rounded up to
the nearest whole number) equal to 25% of the entire Board of Directors. In the
event the holders of Preferred Stock are entitled to elect two directors, the
McCaw Investor may be entitled to elect an additional director.
The Certificate of Designation also provides that, except as stated above
under "-- Ranking," the Company will not authorize any class of Senior
Securities without the affirmative vote or consent of the holders of at least a
majority of the shares of Preferred Stock then outstanding, voting or
consenting, as the case may be, separately as one class. The Certificate of
Designation also provides that the Company may not amend the Certificate of
Designation so as to affect adversely the specific rights, preferences,
privileges or voting rights of holders of shares of the Preferred Stock, or
increase the authorized number of shares of Preferred Stock, without the
affirmative vote or consent of the holders of at least a majority of the
outstanding shares of Preferred Stock, voting or consenting, as the case may be,
separately as one class. The holders of at least a majority of the outstanding
shares of Preferred Stock, voting or consenting, as the case may be, separately
as one class, may also waive compliance with any provision of the Certificate of
Designation. The Certificate of Designation also provides that, except as set
forth above, (a) the creation, authorization or issuance of any shares of Junior
Securities, Parity Securities or Senior Securities or (b) the increase or
decrease in the amount of authorized capital stock of any class, including any
other class or series of preferred stock, shall not require the consent of the
holders of Preferred Stock and shall not be deemed to affect adversely the
rights, preferences, privileges or voting rights of the holders of Preferred
Stock.
Under Delaware law, the holders of Preferred Stock are entitled to vote as
a class upon a proposed amendment to the Certificate of Incorporation, whether
or not entitled to vote thereon by the Certificate of Incorporation, if the
amendment would 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.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Certificate of Designation and Exchange
Indenture. Reference is made to the Certificate of Designation and Exchange
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
Whenever the Certificate of Designation or the Exchange Indenture requires
that a particular ratio or amount be calculated with respect to a specified
period after giving effect to certain transactions or events on a pro forma
basis, such calculation will be made as if the transactions or events occurred
on the first day of such period, unless otherwise specified. All accounting
terms not otherwise defined in the Certificate of Designation will have the
meanings ascribed to them in accordance with generally accepted accounting
principles (whether or not such is indicated in the Certificate of Designation)
and, except as otherwise expressly provided in the Certificate of Designation,
the term "generally accepted accounting principles," with respect to any
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computation required or permitted by the Certificate of Designation shall mean
such accounting principles as are generally accepted at the date of such
computation.
"Acquired Debt" means Debt of a Person existing at the time such Person
becomes a Restricted Subsidiary or assumed by the Company or a Restricted
Subsidiary in connection with the acquisition of assets from such Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. "Affiliate" shall be deemed to include, but only for
purposes of the "Transactions with Affiliates" covenant and without limiting the
application of the preceding sentence for the purpose of such or any other
purpose, any Person owning, directly or indirectly, (i) 10% or more of the
Company's outstanding common stock or (ii) securities having 10% or more of the
total voting power of the Company's Voting Stock. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. No individual shall be deemed to be controlled by
or under common control with any specified Person solely by virtue of his or her
status as an employee or officer of such specified Person or of any other Person
controlled by or under common control with such specified Person.
"Annualized Operating Cash Flow" means, for any fiscal quarter, the
Operating Cash Flow for such fiscal quarter multiplied by four.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a person shall be deemed to have beneficial ownership of all
securities that such person has a right to acquire within 60 days, provided that
a person shall not be deemed a beneficial owner of, or to own beneficially, any
securities if such beneficial ownership (1) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act and the applicable rules
and regulations thereunder and (2) is not also then reportable on Schedule 13D
(or any successor schedule) under the Exchange Act.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors (unless the context specifically requires that such resolution be
adopted by a majority of the Disinterested Directors, in which case by a
majority of such directors) and to be in full force and effect on the date of
such certification and delivered to the Transfer Agent, with respect to the
Preferred Stock, or the Trustee, with respect to the Exchange Debentures.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under lease of (or other Debt arrangements conveying the right
to use) real or personal property of such Person which are required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person determined in accordance with generally accepted
accounting principles and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of stock of, or other
ownership interests in, such Person.
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"Change of Control" means the occurrence of any of the following events:
(a) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act and the regulations thereunder) is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock or Total Common Equity of the Company; provided that no Change
of Control shall be deemed to occur pursuant to this clause (a) (x) if the
person is a corporation with outstanding debt securities having a maturity
at original issuance of at least one year and if such debt securities are
rated Investment Grade by S&P or Moody's for a period of at least 90
consecutive days, beginning on the date of such event (which period will be
extended up to 90 additional days for as long as the rating of such debt
securities is under publicly announced consideration for possible
downgrading by the applicable rating agency), or (y) if the person is a
corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national standing at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has publicly
announced that such corporation or debt thereof will be rated), unless
after such date but during such period debt securities of such corporation
having a maturity at original issuance of at least one year are rated
Investment Grade by S&P or Moody's and remain so rated for the remainder of
the period referred to in clause (x) above and (2) that, when determined as
of the Trading Day immediately before and the Trading Day immediately after
the date of such event, has Total Common Equity of at least $10 billion
(provided that, solely for the purpose of calculating Total Common Equity
as of such later Trading Day, the average Closing Price of the Common Stock
of such person shall be deemed to equal the Closing Price of such Common
Stock on such later Trading Day, subject to the last sentence of the
definition of "Total Common Equity"); or
(b) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is converted into or exchanged for (1) Voting Stock
(other than Redeemable Stock) of the surviving or transferee Person or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under the Exchange Indenture and (ii)
immediately after such transaction no person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act and the regulations
thereunder) is the Beneficial Owner, directly or indirectly, of more than
50% of the total Voting Stock or Total Common Equity of the surviving or
transferee Person; provided that no Change of Control shall be deemed to
occur pursuant to this clause (b), (x) if the surviving or transferee
Person or the person referred to in clause (b)(ii) is a corporation with
outstanding debt securities having a maturity at original issuance of at
least one year and if such debt securities are rated Investment Grade by
S&P or Moody's for a period of at least 90 consecutive days, beginning on
the date of such event (which period will be extended up to 90 additional
days for as long as the rating of such debt securities is under publicly
announced consideration for possible downgrading by the applicable rating
agency), or (y) if the surviving or transferee Person or such other person
is a corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national standing at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has publicly
announced that such corporation or debt thereof will be rated), unless
after such date but during such period debt securities of such corporation
having a maturity at original issuance of at least one year are rated
Investment Grade by S&P or Moody's and remain so rated for the remainder of
the period referred to in clause (x) above and (2) that, when determined as
of the Trading Day immediately before and the Trading Day immediately after
the date of such event, has Total Common Equity of at least $10 billion
(provided that, solely for the purpose of calculating Total Common Equity
as of such later Trading Day, the average Closing Price of the Common Stock
of such person shall be deemed to equal the Closing Price of such Common
Stock on such later Trading Day, subject to the last sentence of the
definition of "Total Common Equity"); or
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(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors (together with
any directors who are members of the Board of Directors on the date hereof
and any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company was approved by
a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors then in office.
Any event that would constitute a Change of Control pursuant to clause (a)
or (b) above (i) but for the proviso thereto shall not be deemed to be a Change
of Control until such time (if any) as the conditions described in such proviso
cease to have been met and (ii) if and to the extent resulting from any
restructuring transaction or any sale or assignment of all or substantially all
of the assets and liabilities of the Company to, or merger or consolidation of
the Company with, any Person (any such transaction, a "Restructuring
Transaction") effected at substantially the same time as and in connection with
any of the Permitted Transactions described in clause (i) of the definition of
the term "Permitted Transactions" shall not constitute a Change of Control so
long as the Persons who, immediately prior to the closing of such Restructuring
Transaction and the particular Permitted Transaction being consummated at
substantially the same time and in connection therewith (the "Restructuring
Closing"), were the Beneficial Owners, directly or indirectly, of more than 50%
of the total Voting Stock and more than 50% of the Total Common Equity of the
Company would remain, immediately after such Restructuring Closing (and after
taking into account all issuances of securities in such Restructuring
Transaction and related Permitted Transaction), the Beneficial Owners, directly
or indirectly, of more than 50% of the total Voting Stock and more than 50% of
the Total Common Equity of the Company (or the surviving transferee Person, as
the case may be); provided that, immediately after any transaction or
combination of transactions described in this clause (ii), no person (as such
term is used in Sections 13(d) and 14(a) of the Exchange Act and the regulations
thereunder) is the ultimate Beneficial Owner of more than 50% of the total
Voting Stock or more than 50% of the Total Common Equity of the Company (or the
surviving transferee Person, as the case may be) unless such person (as so
defined) was the Beneficial Owner of more than 50% of the total Voting Stock and
more than 50% of the Total Common Equity of the Company immediately before such
transaction or combination of transactions. Notwithstanding anything to the
contrary contained in the Certificate of Designation, no Change of Control shall
be deemed to occur under the Certificate of Designation until the earlier of the
day after (x) the Optional Redemption Date and (y) the date all Existing Senior
Notes are repurchased, redeemed or repaid in full, and if any Existing Senior
Notes are outstanding at the time of an occurrence of an event set forth in (a),
(b) or (c) above, such occurrence shall not be deemed to be a Change of Control
under the Certificate of Designation until such Existing Senior Notes are
repurchased, redeemed or repaid in full, in which case the day after the date on
which all Existing Senior Notes are so repaid, redeemed or repurchased will be
deemed to be the date on which such Change of Control occurred.
"Closing Date" means July 21, 1997, the date on which the Old Preferred
Stock was originally issued under the Certificate of Designation.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
Stock Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market but the issuer
is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or admitted to
trading is a Designated Offshore Securities Market (as defined in Rule 902(a)
under the Securities Act), the average of the reported closing bid and asked
prices regular way on such principal exchange, or, if such shares are not listed
or admitted to trading on any national securities exchange or quoted on the
Nasdaq Stock Market and the issuer and principal securities exchange do not meet
such requirements, the average of the closing bid and asked prices in the
over-the-
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counter market as furnished by any New York Stock Exchange member firm of
national standing that is selected from time to time by the Company for that
purpose.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Adjusted Net Income" and "Consolidated Adjusted Net Loss"
mean, for any period, the net income or net loss, as the case may be, of the
Company and its Restricted Subsidiaries for such period, all as determined on a
Consolidated basis in accordance with generally accepted accounting principles,
adjusted, to the extent included in calculating such net income or net loss, as
the case may be, by excluding without duplication (a) any after-tax gain or loss
attributable to the sale, conversion or other disposition of assets other than
in the ordinary course of business, (b) any after-tax gains resulting from the
write-up of assets and any loss resulting from the write-down of assets, (c) any
after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(d) any foreign exchange gain or loss, (e) all payments in respect of dividends
on shares of Preferred Capital Stock of the Company, (f) any other
extraordinary, non-recurring or unusual items incurred by the Company or any of
its Restricted Subsidiaries, (g) the net income (or loss) of any Person acquired
by the Company or any Restricted Subsidiary in a pooling-of-interests
transaction for any period prior to the date of such transaction and (h) all
income or losses of Unrestricted Subsidiaries and Persons (other than
Subsidiaries) accounted for by the Company using the equity method of accounting
except, in the case of any such income, to the extent of dividends, interest or
other cash distributions received directly or indirectly from any such
Unrestricted Subsidiary or Person.
"Consolidated Adjusted Net Income (Loss)" means, for any period, the
Company's Consolidated Adjusted Net Income or Consolidated Adjusted Net Loss for
such period, as applicable.
"Consolidated Debt to Annualized Operating Cash Flow Ratio" means, as at
any date of determination, the ratio of (i) the aggregate amount of Debt of the
Company and the Restricted Subsidiaries on a Consolidated basis outstanding as
at the date of determination to (ii) the Annualized Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate interest expense and fees and other financing costs in respect of Debt
(including amortization of original issue discount and non-cash interest
payments and accruals), the interest component in respect of Capital Lease
Obligations and any deferred payment obligations of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles and all commissions, discounts, other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs (including amortizations of discounts) associated with interest
rate swap and similar agreements and with foreign currency hedge, exchange and
similar agreements and the amount of dividends paid in respect of Redeemable
Stock.
"Consolidated Net Income" and "Consolidated Net Loss" mean, for any period,
the net income or net loss, as the case may be, of the Company and its
Restricted Subsidiaries for such period, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles, adjusted, to
the extent included in calculating such net income or net loss, as the case may
be, by excluding without duplication (a) any after-tax gain or loss attributable
to the sale, conversion or other disposition of assets other than in the
ordinary course of business, (b) any after-tax gains resulting from the write-up
of assets and any loss resulting from the write-down of assets, (c) any
after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(d) any foreign exchange gain or loss, (e) all payments in respect of dividends
on shares of Preferred Capital Stock of the Company, (f) any other
extraordinary, non-recurring or unusual items incurred by the Company or any of
its Restricted Subsidiaries, (g) the net income (or loss) of any Person acquired
by the Company or any Restricted Subsidiary in a pooling-of-interests
transaction for any period prior to the date of such transaction, (h) all income
or losses of Unrestricted Subsidiaries and Persons (other than Subsidiaries)
accounted for by the Company using the equity method of accounting except, in
the case of any such income, to the extent of
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dividends, interest or other cash distributions received directly or indirectly
from any such Unrestricted Subsidiary or Person and (i) the net income (but not
net loss) of any Restricted Subsidiary which is subject to restrictions which
prevent the payment of dividends or the making of distributions to the Company
but only to the extent of such restrictions.
"Consolidated Net Income (Loss)" means, for any period, the Company's
Consolidated Net Income or Consolidated Net Loss for such period, as applicable.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to the Company, no
effect shall be given to adjustments following the Closing Date to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company, if and to the extent that the
accounts of each such Restricted Subsidiary would normally be consolidated with
those of the Company in accordance with generally accepted accounting
principles; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in any Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Facility" means any credit facility (whether a term or revolving
type) of the type customarily entered into with banks, between the Company
and/or any of its Restricted Subsidiaries, on the one hand, and any banks or
other lenders, on the other hand (and any renewals, refundings, extensions or
replacements of any such credit facility), which credit facility is designated
by the Company as a "Credit Facility" for purposes of the Certificate of
Designation and the Exchange Indenture, as applicable, and shall include all
such credit facilities in existence on the Closing Date whether or not so
designated, to the extent that the aggregate principal balance of Debt that is
Incurred and outstanding under all Credit Facilities at any time does not exceed
$2.5 billion.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every Capital Lease Obligation of such Person, (vi) the
maximum fixed redemption or repurchase price of Redeemable Stock of such Person
at the time of determination plus accrued but unpaid dividends, (vii) every
obligation of such Person under interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements of such Person, and
(viii) every obligation of the type referred to in clauses (i) through (vii) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The amount of Debt of any Person
issued with original issue discount is the face amount of such Debt less the
unamortized portion of the original issue discount of such Debt at the time of
its issuance as determined in conformity with generally accepted accounting
principles, and money borrowed at the time of the Incurrence of any Debt in
order to pre-fund the payment of interest on such Debt shall be deemed not to be
"Debt."
"Default" means (a) with respect to the Preferred Stock, any event that is,
or after notice or passage of time, or both, would be, a Voting Rights
Triggering Event and (b) with respect to the Exchange Debentures, an event that
is, or after notice or passage of time, or both, would be, an Event of Default.
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"Digital Mobile" means a radio communications system that employs digital
technology with a multi-site configuration that will permit frequency reuse as
described in the offering memorandum related to the issuance of the Old
Preferred Stock.
"Digital Mobile-SMR Operating Cash Flow" means, for any fiscal quarter, (i)
the net income or loss, as the case may be, of the Company and its Restricted
Subsidiaries from its Digital Mobile and Specialized Mobile Radio businesses and
related activities and services for such fiscal quarter, plus (ii) depreciation
and amortization charged with respect thereto for such fiscal quarter, all as
determined on a Consolidated basis in accordance with generally accepted
accounting principles, adjusted, to the extent included in calculating such net
income or loss, by excluding (a) any after-tax gain or loss attributable to the
sale, conversion or other disposition of assets other than in the ordinary
course of business, (b) any gains resulting from the write-up of assets and any
loss resulting from the write-down of assets, (c) any gain or loss on the
repurchase or redemption of any securities (including in connection with the
early retirement or defeasance of any Debt), (d) any foreign exchange gain or
loss, (e) any other extraordinary, non-recurring or unusual items and (f) all
income or losses of Persons (other than Subsidiaries) accounted for by the
Company using the equity method of accounting, except, in the case of any such
income, to the extent of dividends, interest or other cash distributions
received directly or indirectly from any such Person, plus (iii) all amounts
deducted in calculating net income or loss for such fiscal quarter in respect of
interest expense and other financing costs and all income taxes, whether or not
deferred, applicable to such fiscal quarter, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles.
"Directed Investment" by the Company or any of its Restricted Subsidiaries
means any Investment for which the cash or property used for such Investment is
received by the Company from the issuance and sale (other than to a Restricted
Subsidiary) on or after June 1, 1997 of shares of its Capital Stock (other than
the Preferred Stock and Redeemable Stock), or any options, warrants or other
rights to purchase such Capital Stock (other than Redeemable Stock) designated
by the Board of Directors as a "Directed Investment" to be used for one or more
specified investments in the telecommunications business (including related
activities and services) and is so designated and used at any time within 365
days after the receipt thereof; provided that the aggregate amount of any such
Directed Investments may not at any time exceed fifty percent (50%) of the
aggregate amount of such cash or property received by the Company on or after
June 1, 1997 from any such issuance and sale or capital contribution; and
provided further that any proceeds from any such issuance or sale may not be
used for such an Investment if such proceeds were, prior to being designated for
use as a Directed Investment, (x) used to make a Restricted Payment or (y) used
as the basis for the Incurrence of Debt under clause (i) of the "Limitation on
Consolidated Debt" covenant unless and until the amount of any such Debt (I) is
treated as newly issued Debt and could be Incurred in accordance with the
"Limitation on Consolidated Debt" covenant (other than under clause (i) thereof)
or (II) has been repaid or refinanced with the proceeds of Debt Incurred in
accordance with the "Limitation on Consolidated Debt" covenant (other than under
clause (i) thereof) or (III) has otherwise been repaid and, in the circumstances
described in clauses (I) and (II), the Company delivers to the Transfer Agent,
with respect to the Preferred Stock, or the Trustee, with respect to the
Exchange Debentures, a certificate confirming that the requirements of such
clauses have been met.
"Disinterested Director" means, with respect to any proposed transaction
between the Company and an Affiliate thereof, a member of the Board of Directors
who is not an officer or employee of the Company, would not be a party to, or
have a financial interest in, such transaction and is not an officer, director
or employee of, and does not have a financial interest in, such Affiliate. For
purposes of this definition, no person would be deemed not to be a Disinterested
Director solely because such person holds Capital Stock of the Company.
"Existing Indentures" means the indentures relating to the Existing Senior
Notes.
"Existing Senior Notes" means the Company's $525,855,000 principal amount
at maturity of 11 1/2% Senior Redeemable Discount Notes Due 2003, $1,126,435,000
principal amount at maturity of 9 3/4% Senior Redeemable Discount Notes Due
2004, $541,830,000 principal amount at maturity of 12 1/4% Senior Redeemable
Discount Notes Due 2004, $111,165,000 principal amount at maturity of 10 1/4%
Senior
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Redeemable Discount Notes Due 2005 and $409,876,000 principal amount at maturity
of 10 1/8% Senior Redeemable Discount Notes Due 2004.
"Fair Market Value" means, for purposes of clause (i) of the "Limitation on
Consolidated Debt" covenant, the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; provided that (x) the Fair Market Value of any
security registered under the Exchange Act shall be the average of the closing
prices, regular way, of such security for the 20 consecutive trading days
immediately preceding the sale of Capital Stock and (y) in the event the
aggregate Fair Market Value of any other property received by the Company
exceeds $10,000,000, the Fair Market Value of such property shall be determined
by a nationally recognized investment banking firm and set forth in their
written opinion which shall be delivered to the Transfer Agent, with respect to
the Preferred Stock, or the Trustee, with respect to the Exchange Debentures.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of such
Person, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Debt of the payment of such Debt, or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume (pursuant
to a merger, consolidation, acquisition or other transaction), Guarantee or
otherwise become liable in respect of such Debt or other obligation or the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt or other obligation on the balance sheet of such
Person (and "Incurrence" and "Incurred", shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Debt shall not be deemed an Incurrence of such Debt; provided further,
however, that the accretion of original issue discount on Debt shall not be
deemed to be an Incurrence of Debt. Debt otherwise Incurred by a Person before
it becomes a Subsidiary of the Company shall be deemed to have been Incurred at
the time it becomes such a Subsidiary.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by, any other Person or the designation of a Subsidiary as an Unrestricted
Subsidiary; provided that a transaction will not be an Investment to the extent
it involves (i) the issuance or sale by the Company of its Capital Stock (other
than Redeemable Stock), including options, warrants or other rights to acquire
such Capital Stock (other than Redeemable Stock) or (ii) a transfer, assignment
or contribution by the Company of shares of Capital Stock (or any options,
warrants or rights to acquire Capital Stock), or all or substantially all of the
assets of, any Unrestricted Subsidiary of the Company to another Unrestricted
Subsidiary of the Company.
"Investment Grade" means a rating of at least BBB--, in the case of S&P, or
Baa3, in the case of Moody's.
"Licenses" means SMR licenses granted by the FCC that entitle the holder to
use the radio channels covered thereby, subject to compliance with FCC rules and
regulations, in connection with its SMR business.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement, encumbrance, preference,
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priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Marketable Securities" means:
(1) securities either issued directly or fully guaranteed or insured
by the government of the United States of America or any agency or
instrumentality thereof having maturities of not more than six months;
(2) time deposits and certificates of deposit, having maturities of
not more than six months from the date of deposit, of any domestic
commercial bank having capital and surplus in excess of $500,000,000 and
having outstanding long-term debt rated A or better (or the equivalent
thereof) by S&P or Aaa or better (or the equivalent thereof) by Moody's;
and
(3) commercial paper rated A-1 or the equivalent thereof by S&P or P-1
or the equivalent thereof by Moody's, and in each case maturing within six
months.
"Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Moody's Investors Service, Inc. ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
"Moody's" shall mean any other national recognized rating agency (other than
S&P) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Transfer Agent, with respect to the Preferred Stock, or the
Trustee, with respect to the Exchange Debentures.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his registered address
on the date of the Offer offering to purchase up to the liquidation preference
of Preferred Stock or principal amount of Exchange Debentures specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
the Certificate of Designation or Exchange Indenture, as the case may be).
Unless otherwise required by applicable law, the Offer shall specify an
expiration date (the " Offer to Purchase Expiration Date") of the Offer to
Purchase which shall be, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of shares of Preferred Stock
or Exchange Debentures within three Business Days after the Offer to Purchase
Expiration Date. The Company shall notify the Transfer Agent or Trustee, as
applicable, at least 15 days (or such shorter period as is acceptable to the
Transfer Agent or Trustee, as applicable), prior to the mailing of the Offer of
the Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's request, by the Transfer Agent or the
Trustee, as applicable, in the name and at the expense of the Company. The Offer
shall contain information concerning the business of the Company and its
Subsidiaries which, at a minimum, shall include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
required to be filed with the Transfer Agent pursuant to the Certificate of
Designation or the Trustee pursuant to the Exchange Indenture, as applicable
(which requirements may be satisfied by delivery of such documents together with
the Offer), (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring the
Company to make the Offer to Purchase), (iii) if required under applicable law,
pro forma financial information concerning, among other things, the Offer to
Purchase and the events requiring the Company to make the Offer to Purchase and
(iv) any other information required by applicable law to be included therein.
The Offer shall contain all instructions and materials necessary to enable such
holders to
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tender their shares of Preferred Stock or Exchange Debentures pursuant to the
Offer to Purchase. The Offer shall also state:
(1) the section of the Certificate of Designation or the Exchange
Indenture pursuant to which the Offer to Purchase is being made;
(2) the Offer to Purchase Expiration Date and the Purchase Date;
(3) the aggregate liquidation preference of the outstanding shares of
Preferred Stock or principal amount of the outstanding Exchange Debentures
offered to be purchased by the Company pursuant to the Offer to Purchase
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate liquidation preference of Preferred Stock or $1,000 principal
amount of Exchange Debentures accepted for payment (as specified pursuant
to the Certificate of Designation or the Exchange Indenture) (the "Purchase
Price");
(5) the holder may tender all or any portion of the Preferred Stock or
Exchange Debentures registered in the name of such holder and that any
portion of Preferred Stock or Exchange Debentures tendered must be tendered
in an integral multiple of $1,000 of liquidation preference or principal
amount, as the case may be;
(6) the place or places where the shares of Preferred Stock or
Exchange Debentures are to be surrendered for tender pursuant to the Offer
to Purchase;
(7) that dividends on any shares of Preferred Stock and interest on
any Exchange Debentures not tendered or tendered but not purchased by the
Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each share of Preferred Stock or Exchange Debenture being
accepted for payment pursuant to the Offer to Purchase;
(9) that each holder electing to tender shares of Preferred Stock or
Exchange Debentures pursuant to the Offer to Purchase will be required to
surrender such Preferred Stock or Exchange Debentures at the place or
places specified in the Offer prior to the close of business on the Offer
to Purchase Expiration Date (such Preferred Stock or Exchange Debentures
being, if the Company or the Transfer Agent or Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Transfer Agent or Trustee duly executed
by, the holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
the Preferred Stock or Exchange Debentures tendered if the Company (or its
Paying Agent) receives, not later than the close of business on the Offer
to Purchase Expiration Date, a facsimile transmission or letter setting
forth the name of the holder, the liquidation preference of the Preferred
Stock or principal amount of the Exchange Debentures the holder tendered,
the certificate number of the Preferred Stock or Exchange Debentures the
holder tendered and a statement that such holder is withdrawing all or a
portion of his tender;
(11) that the Company shall purchase all such shares of Preferred
Stock or Exchange Debentures duly tendered and not withdrawn pursuant to
the Offer to Purchase; and
(12) that in the case of any holder whose shares of Preferred Stock or
Exchange Debentures are purchased only in part, the Company shall execute,
and the Transfer Agent or Trustee shall authenticate and deliver to the
holder of such Preferred Stock or Exchange Debentures without service
charge, new shares of Preferred Stock or new Exchange Debentures, as the
case may be, of any authorized denomination as requested by such holder, in
an aggregate liquidation preference or principal amount equal to and in
exchange for the unpurchased portion of the aggregate liquidation
preference or principal amount of the Preferred Stock or Exchange
Debentures so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
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"Operating Cash Flow" means, for any fiscal quarter, (i) the Company's
Consolidated Adjusted Net Income (Loss) plus depreciation and amortization in
respect thereof for such fiscal quarter, plus (ii) all amounts deducted in
calculating Consolidated Adjusted Net Income (Loss) for such fiscal quarter in
respect of interest expense and other financing costs, including dividends paid
in respect of Redeemable Stock, and all income taxes, whether or not deferred,
applicable to such income period, all as determined on a Consolidated basis in
accordance with generally accepted accounting principles. For purposes of
calculating Operating Cash Flow for the fiscal quarter most recently completed
prior to any date on which an action is taken that requires a calculation of the
Operating Cash Flow to Consolidated Interest Expense Ratio or Consolidated Debt
to Annualized Cash Flow Ratio, (1) any Person that is a Restricted Subsidiary on
such date (or would become a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio) will be deemed to
have been a Restricted Subsidiary at all times during such fiscal quarter, (2)
any Person that is not a Restricted Subsidiary on such date (or would cease to
be a Restricted Subsidiary in connection with the transaction that requires the
determination of such ratio) will be deemed not to have been a Restricted
Subsidiary at any time during such fiscal quarter and (3) if the Company or any
Restricted Subsidiary shall have in any manner acquired (including through
commencement of activities constituting such operating business) or disposed
(including through termination or discontinuance of activities constituting such
operating business) of any operating business during or subsequent to the most
recently completed fiscal quarter, such calculation will be made on a pro forma
basis on the assumption that such acquisition or disposition had been completed
on the first day of such completed fiscal quarter.
"Operating Cash Flow to Consolidated Interest Expense Ratio" means, as at
any date of determination, the ratio of (i) the Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company to (ii)
the Consolidated Interest Expense of the Company and its Restricted Subsidiaries
for the most recently completed fiscal quarter of the Company.
"Permitted Debt" means:
(i) any Debt (including Guarantees thereof) outstanding on the Closing
Date and any accretion of original issue discount and accrual of interest
with respect to such Debt;
(ii) any Debt outstanding under a Credit Facility;
(iii) any Vendor Financing Debt or any other Debt Incurred to finance
the cost (including the cost of design, development, construction,
improvement, installation or integration) of equipment, inventory or
network assets acquired by the Company or any of its Restricted
Subsidiaries after the Closing Date;
(iv) Debt (A) to the Company or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Debt (other than to the Company or another Restricted Subsidiary) shall be
deemed, in each case, to constitute an Incurrence of such Debt not
permitted by this clause (iv);
(v) Debt (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under foreign currency
hedge, interest rate swap or similar agreements; provided that such
agreements (a) are designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (b) do not increase the Debt of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any Restricted Subsidiary
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary (other than
Guarantees of Debt Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(vi) renewals, refundings or extensions of any Debt referred to in
clause (i) or (iii) above or Incurred pursuant to clause (ii) of the
"Limitation on Consolidated Debt" covenant and any renewals,
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refundings or extensions thereof, plus (A) the amount of any premium
reasonably determined by the Company as necessary to accomplish such
renewal, refunding or extension and (B) such other fees and expenses of the
Company reasonably incurred in connection with the renewal, refunding or
extension, provided that such renewal, refunding or extension shall
constitute Permitted Debt only (a) to the extent that it does not result in
an increase in the aggregate principal amount (or, if such Debt provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, in an amount
not greater than such lesser amount) of such Debt (except as permitted by
clause (A) or (B) above), and (b) to the extent such renewed, refunded or
extended Debt does not mature prior to the Stated Maturity or have a
mandatory redemption date prior to the mandatory redemption date of the
Debt being renewed, refunded or extended or have an Average Life shorter
than the remaining Average Life of the Debt being renewed, refunded or
extended; and
(vii) Debt payable solely in, or mandatorily convertible into, Capital
Stock (other than Redeemable Stock) of the Company;
(viii) Debt (in addition to Debt permitted under clauses (i) through
(vii) above) in an aggregate principal amount outstanding at any time not
to exceed $950,000,000.
"Permitted Distribution" of a Person means (i) with respect to the
Preferred Stock, the redemption, repurchase, defeasance or other acquisition or
retirement for value of Junior Securities of the Company, in exchange for
(including any such exchange pursuant to the exercise of a conversion right or
privilege in connection with which cash is paid in lieu of the issuance of
fractional shares or scrip), or out of the proceeds of a substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of Junior
Securities of the Company (other than Redeemable Stock) and (ii) with respect to
the Exchange Debentures, (x) the exchange by such Person of Capital Stock (other
than Redeemable Stock) for outstanding Capital Stock and (y) the redemption,
repurchase, defeasance or other acquisition or retirement for value of Debt of
the Company that is subordinate in right of payment to the Exchange Debentures,
in exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu of
the issuance of fractional shares or scrip), or out of the proceeds of a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of, either (a) Capital Stock of the Company (other than Redeemable Stock) or (b)
Debt of the Company that is subordinate in right of payment to the Exchange
Debentures on subordination terms no less favorable to the holders of the
Exchange Debentures in their capacities as such than the subordination terms (or
other arrangement) applicable to the Debt that is redeemed, repurchased,
defeased or otherwise acquired or retired for value, provided that, in the case
of this clause (b), such new Debt does not mature prior to the Stated Maturity
or have a mandatory redemption date prior to the mandatory redemption date of
the Debt being redeemed, repurchased, defeased or otherwise acquired or retired
for value or have an Average Life shorter than the remaining Average Life of the
Debt being redeemed, repurchased, defeased or otherwise acquired or retired for
value.
"Permitted Investment" means any Investment in Marketable Securities.
"Permitted Transaction" means (i) any transaction pursuant to agreements
(whether or not definitive, and regardless of whether binding or non-binding)
existing on the Closing Date and described in or incorporated by reference into
the offering memorandum related to the issuance of the Old Preferred Stock and
(ii) any transaction or transactions with any vendor or vendors of property or
materials used in the telecommunications business (including related activities
and services) of the Company or any Restricted Subsidiary, provided (x) such
transactions are in the ordinary course of business and (y) such vendor does not
beneficially own more than 50% of the voting power of the Voting Stock of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Capital Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
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"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms or otherwise is (i) required to be redeemed prior to the
mandatory redemption date of the Preferred Stock or Stated Maturity of the
Exchange Debentures, (ii) redeemable at the option of the holder thereof at any
time prior to the mandatory redemption date of the Preferred Stock or Stated
Maturity of the Exchange Debentures or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or Debt having a
scheduled maturity prior to the mandatory redemption date of the Preferred Stock
or Stated Maturity of the Exchange Debentures; provided that any Capital Stock
that would not constitute Redeemable Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of a "change of control" occurring prior to
the mandatory redemption date of the Preferred Stock or Stated Maturity of the
Exchange Debentures shall not constitute Redeemable Stock if the "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in the "Change
of Control" covenant described herein and such Capital Stock specifically
provides that such Person will not repurchase or redeem any such stock pursuant
to such provision prior to the Company's repurchase of such shares of Preferred
Stock or Exchange Debentures as are required to be repurchased pursuant to the
"Change of Control" covenant described below.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on the Closing Date or created subsequent thereto, designated from time
to time by the Board of Directors as (or otherwise deemed to be) a "Restricted
Subsidiary" in accordance with the "Restricted Subsidiaries" covenant described
below.
"S&P" means Standard & Poor's Ratings Services or, if Standard & Poor's
Ratings Services shall cease rating debt securities having a maturity at
original issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Standard & Poor's Ratings Services ceases rating debt securities having
a maturity at original issuance of at least one year and its ratings business
with respect thereto shall not have been transferred to any successor Person,
then "S&P" shall mean any other nationally recognized rating agency (other than
Moody's) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Transfer Agent, with respect to the Preferred Stock, or the
Trustee, with respect to the Exchange Debentures.
"Specialized Mobile Radio" or "SMR" means a mobile radio communications
system that is operated as described or incorporated by reference in this
Prospectus.
"Stated Maturity", when used with respect to any Debt security or any
installment of interest thereon, means the date specified in such Debt security
as the fixed date on which the principal of such Debt security or such
installment of interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Total Common Equity" of any Person means, as of any day of determination
(and as modified for purposes of the definition of "Change of Control"), the
product of (i) the aggregate number of outstanding primary shares of Common
Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (ii) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (ii) of the preceding sentence shall be determined
by the Board of Directors in good faith and evidenced by a Board Resolution.
"Total Market Value of Equity" of the Company means, as of any day of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of Common Stock of the Company
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on such day (which shall not include any options or warrants on, or securities
convertible or exchangeable into, shares of Common Stock of the Company) and
(ii) the average Closing Price of such Common Stock over the 20 consecutive
Trading Days immediately preceding such day, plus (2) the liquidation value of
any outstanding shares of Preferred Capital Stock of the Company on such day. If
no such Closing Price exists with respect to shares of any such class, the value
of such shares for purposes of clause (ii) of the preceding sentence shall be
determined by the Board of Directors in good faith and evidenced by a Board
Resolution.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"Trustee" means the trustee under the Exchange Indenture.
"Unrestricted Subsidiary" means Unrestricted Subsidiary Funding Company and
any other Subsidiary that is not a Restricted Subsidiary and includes any
Restricted Subsidiary that becomes an Unrestricted Subsidiary in accordance with
the "Restricted Subsidiaries" covenant described below.
"Vendor Financing Debt" means any Debt owed to (i) a vendor or supplier of
any property or materials used by the Company or its Restricted Subsidiaries in
their telecommunications business, (ii) any Affiliate of such a vendor or
supplier, (iii) any assignee of such a vendor, supplier or Affiliate of such a
vendor or supplier, or (iv) a bank or other financial institution that has
financed or refinanced the purchase of such property or materials from such a
vendor, supplier, Affiliate of such a vendor or supplier or assignee of such a
vendor or supplier; provided that the aggregate amount of such Debt does not
exceed the sum of (w) the purchase price of such property or materials
(including transportation, installation, warranty and testing charges, as well
as applicable taxes paid, in respect of such property or materials), (x) the
cost of design, development, site acquisition and construction, (y) any interest
or other financing costs accruing or otherwise payable in respect of the
foregoing, and (z) the cost of any services provided by such vendor, supplier or
Affiliate of such vendor or supplier.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of the Company means a Restricted
Subsidiary all of the outstanding Capital Stock of which (other than directors'
qualifying shares) shall at the time be owned by the Company or by one or more
Wholly Owned Restricted Subsidiaries or by the Company and one or more Wholly
Owned Restricted Subsidiaries.
CERTAIN COVENANTS
Limitation on Consolidated Debt
The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless (i)
with respect to Debt Incurred under this clause (i), the Debt so Incurred and
outstanding is in an aggregate principal amount that does not exceed 2.25 times,
with respect to Capital Stock sales after June 1, 1997 and on or prior to March
31, 1998, or 2.00 times, with respect to Capital Stock sales after March 31,
1998, the aggregate amount of net cash proceeds (or 80% of the Fair Market Value
of property other than cash) received by the Company after June 1, 1997 from the
issuance and sale (other than to a Restricted Subsidiary) of shares of its
Capital Stock (other than the Preferred Stock and Redeemable Stock), or any
options, warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), other than (x) proceeds applied for use as a Directed
Investment (unless such designation has been revoked by the Board of Directors
and the Company either abandons its plans to make such Investment or is able to
make such Investment pursuant to the "Limitation on Restricted Payments"
covenant (other than as a Directed Investment)) and (y) proceeds which have been
included in the computation of the amounts available for Restricted Payments
pursuant to clause (c)(2) of the "Limitation on Restricted Payments" covenant,
to the extent the inclusion thereof was necessary to allow a subsequent
Restricted Payment to be made, or (ii) on the date of such Incurrence, after
giving effect to the Incurrence of such Debt (or Acquired Debt) and the receipt
and application of the net proceeds thereof (and, if the net
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proceeds of such new Debt are used to acquire a Person that becomes a Restricted
Subsidiary or an operating business of the Company or a Restricted Subsidiary,
to all terms of such acquisition) on a pro forma basis, the Operating Cash Flow
to Consolidated Interest Expense Ratio would equal or exceed 1.75 to 1.
Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to the
holders of, any Junior Securities (other than dividends or distributions
payable solely in its Junior Securities (other than Redeemable Stock) or in
options, warrants or other rights to purchase Junior Securities (other than
Redeemable Stock));
(ii) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly, purchase,
redeem or otherwise acquire or retire for value (other than value
consisting solely of Junior Securities of the Company that are not
Redeemable Stock or options, warrants or other rights to acquire Junior
Securities that are not Redeemable Stock), any Junior Securities of the
Company (including options, warrants or other rights to acquire Junior
Securities); or
(iii) make, or permit any Restricted Subsidiary, directly or
indirectly, to make, any Investment (other than any Permitted Investment)
in any Person (other than in a Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary as a result of such Investment);
(each of the foregoing actions set forth in clauses (i) through (iii), other
than any such action that is a Permitted Investment or a Permitted Distribution,
being referred to as a "Restricted Payment") unless, at the time of such
Restricted Payment, and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except with respect to Investments, after giving effect, on a pro
forma basis, to such Restricted Payment and the Incurrence of any Debt the
net proceeds of which are used to finance such Restricted Payment, the
Consolidated Debt to Annualized Operating Cash Flow Ratio would not have
exceeded 7.0 to 1; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or after
February 15, 1994 shall not exceed:
(1) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the Company for
the period (taken as one accounting period) from April 1, 1994 to the
last day of the last fiscal quarter preceding the date of the proposed
Restricted Payment, plus
(2) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination shall be conclusive and evidenced by a Board
Resolution), received by the Company from the issuance and sale (other
than to a Restricted Subsidiary) after February 15, 1994 of its Junior
Securities (other than Redeemable Stock), or any options, warrants or
other rights to purchase such Junior Securities (other than Redeemable
Stock), and from the issuance and sale, prior to the Closing Date, of
the Class A Preferred Stock and the Class B Preferred Stock, other than
(x) (except for purposes of determining whether an Investment under
clause (iii) above is permitted) Junior Securities or options, warrants
or other rights to purchase Junior Securities (or shares issuable upon
exercise thereof) issued or sold in the PowerFone Merger, Questar/AMI
Share Exchanges, Motorola Business Acquisition and NTT transactions
described in the Company's prospectus, dated February 9, 1994, relating
to the Company's Senior Redeemable Discount Notes due 2004, and (y)
Capital Stock or options, warrants or other rights to purchase Capital
Stock (or shares issuable upon exercise thereof), the proceeds of the
issuance of which is used (A) to make a Directed Investment (unless such
designation has been revoked by the Board of Directors and the Company
is able to make such Investment pursuant to this "Limitation on
Restricted Payments" covenant (other than as a
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Directed Investment)) or (B) to Incur Debt under clause (i) of the
"Limitation on Consolidated Debt" covenant (unless and until the amount
of any such Debt (I) is treated as newly issued Debt and could be
Incurred in accordance with the "Limitation on Consolidated Debt"
covenant (other than under clause (i) thereof) or (II) has been repaid
or refinanced with the proceeds of Debt Incurred in accordance with the
"Limitation on Consolidated Debt" covenant (other than under clause (i)
thereof) or (III) has otherwise been repaid), plus
(3) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination shall be conclusive and evidenced by a Board
Resolution), received by the Company from the issuance or sale (other
than to a Restricted Subsidiary) after February 15, 1994 of any Junior
Securities of the Company (other than Redeemable Stock), or any options,
warrants or other rights to purchase such Junior Securities (other than
Redeemable Stock), upon the conversion of, or exchange for, Debt of the
Company or a Restricted Subsidiary.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Distribution,
Permitted Investment or Directed Investment, and none of a Permitted
Distribution, Permitted Investment or Directed Investment shall be counted as a
Restricted Payment for purposes of clause (c) above. In addition, the foregoing
limitations do not prevent the Company from (I) paying a dividend on Junior
Securities of the Company within 60 days after the declaration thereof if, on
the date when the dividend was declared, the Company could have paid such
dividend in accordance with the provisions of the Certificate of Designation,
(II) repurchasing Junior Securities of the Company (including options, warrants
or other rights to acquire such Junior Securities) from employees or former
employees of the Company or any Subsidiary thereof for consideration not to
exceed $500,000 in the aggregate in any fiscal year (with repurchases pursuant
to this clause (II) not being counted as Restricted Payments for purposes of
clause (c) above) or (III) the repurchase, redemption or other acquisition for
value of Junior Securities of the Company to the extent necessary to prevent the
loss or secure the renewal or reinstatement of any license or franchise held by
the Company or any of its Subsidiaries from any governmental agency; or (IV)
Investments in Unrestricted Subsidiary Funding Company so long as (x) such
Investments are invested in Nextel International and (y) Nextel International is
a Subsidiary of the Company.
Notwithstanding the foregoing limitations in this "Limitation on Restricted
Payments" covenant, the Company is permitted to make any Investment in a Person
that is not (either before or after giving effect thereto) a Subsidiary of the
Company, provided that, immediately after giving effect thereto the amount equal
to (a) the aggregate amount of all Investments made pursuant to this paragraph
minus (b) all cash received by the Company or any Restricted Subsidiary from the
sale, transfer or other disposition to a Person that is not a Subsidiary of the
Company of any such Investment (or portion thereof) included in such aggregate
amount (with the amount of cash to be counted for this purpose not to exceed the
amount of such Investment (or portion thereof) so included), shall not exceed
the greater of (i) $250,000,000 and (ii) 2% of the Total Market Value of Equity
of the Company as of such time. For purposes of determining the aggregate amount
of Investments referred to in clause (a), the amount of any Investment shall be
deemed to equal the cash portion thereof plus the fair market value of any
non-cash portion thereof (to the extent such portion constitutes an Investment)
at the time such Investment is made, as determined by the Board of Directors
(whose good faith determination shall be conclusive and evidenced by a Board
Resolution).
Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary will be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person shall no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) of the third preceding
paragraph or the aggregate amount of Investments pursuant to clause (a) of the
immediately preceding paragraph, in each case to the extent such Investments
would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by the
Company from the issuance or sale of its Junior Securities either upon the
conversion of, or exchange for, Debt of the Company or any Restricted
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Subsidiary shall be deemed to be an amount equal to (a) the sum of (i) the
principal amount or accreted value (whichever is less) of such Debt on the date
of such conversion or exchange and (ii) the additional cash consideration, if
any, received by the Company upon such conversion or exchange, less any payment
on account of fractional shares, minus (b) all expenses incurred in connection
with such issuance or sale. In addition, for purposes of clause (c)(3) above,
the net proceeds received by the Company from the issuance or sale of its Junior
Securities upon the exercise of any options or warrants of the Company or any
Restricted Subsidiary shall be deemed to be an amount equal to (a) the
additional cash consideration, if any, received by the Company upon such
exercise, minus (b) all expenses incurred in connection with such issuance or
sale.
For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such Restricted
Payment, as determined by the Board of Directors (whose good faith determination
shall be conclusive and evidenced by a Board Resolution).
Restricted Subsidiaries
The Company shall not designate any Restricted Subsidiary as an
Unrestricted Subsidiary, and shall not itself, and shall not permit any
Restricted Subsidiary to, sell, convey, transfer or otherwise dispose of any
assets, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction, unless, after giving effect to any such action, the assets (not
including any assets so sold, conveyed, transferred or otherwise disposed of,
other than in the ordinary course of business, to any Unrestricted Subsidiary or
any Person that becomes an Unrestricted Subsidiary as part of such transaction)
and business of the Company and its remaining Restricted Subsidiaries generated
at least 90% of Digital Mobile-SMR Operating Cash Flow in the fiscal quarter of
the Company most recently completed prior to the date of such action.
The Board of Directors may designate any existing Unrestricted Subsidiary
or any Person that is about to become a Subsidiary of the Company as a
Restricted Subsidiary if, after giving effect to such action (and, if such
designation is made in connection with the acquisition of a Person or an
operating business that is about to become a Subsidiary of the Company, after
giving effect to all terms of such acquisition) on a pro forma basis, on the
date of such action, the Debt of such Unrestricted Subsidiary outstanding
immediately prior to such designation would have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Certificate
of Designation.
Subject to the second preceding paragraph and compliance with the
"Limitation on Restricted Payments" covenant, the Board of Directors may
designate any Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary shall, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of the Company's ownership
interest in such Subsidiary (including, without duplication, such indirect
ownership interest in all Subsidiaries of such Subsidiary), as determined by the
Board of Directors in good faith and evidenced by a Board Resolution.
Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the Board of Directors may not designate a Subsidiary of the Company
to be an Unrestricted Subsidiary if, after such designation, (a) the Company or
any of its other Restricted Subsidiaries (i) provides credit support for, or a
Guarantee of, any Debt of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary, (b) a default with respect to any Debt of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns
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any Capital Stock of, or owns or holds any Lien on any property of, any
Restricted Subsidiary which is not a Subsidiary of the Subsidiary to be so
designated.
The Board of Directors, from time to time, may designate any Person that is
about to become a Subsidiary of the Company as an Unrestricted Subsidiary, and
may designate any newly-created Subsidiary as an Unrestricted Subsidiary, if at
the time such Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of corporations)
and no Debt. Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries shall be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this "Restricted
Subsidiaries" covenant, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries. The Board of Directors shall not change the
designation of a Subsidiary of the Company more than twice in any period of five
years.
Transactions with Affiliates
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Company on terms that
are less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person that is not such an Affiliate; provided, however, that this "Transactions
with Affiliates" covenant shall not limit, or be applicable to, (i) any
transaction between Unrestricted Subsidiaries not involving the Company or any
Restricted Subsidiary, (ii) any transaction between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries or (iii) any Permitted
Transactions. In addition, any transaction or series of related transactions,
other than Permitted Transactions, between the Company or any Restricted
Subsidiary and any Affiliate of the Company (other than a Restricted Subsidiary)
involving an aggregate consideration of $5,000,000 or more must be approved in
good faith by a majority of the Company's Disinterested Directors (of which
there must be at least one) and evidenced by a Board Resolution. For purposes of
this "Transactions with Affiliates" covenant, any transaction or series of
related transactions between the Company or any Restricted Subsidiary and an
Affiliate of the Company that is approved by a majority of the Disinterested
Directors (of which there must be at least one) and evidenced by a Board
Resolution shall be deemed to be on terms as favorable as those that might be
obtained at the time of such transaction (or series of transactions) from a
Person that is not such an Affiliate and thus shall be permitted under this
"Transactions with Affiliates" covenant.
Activities of the Company and Restricted Subsidiaries
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
the Company and the Restricted Subsidiaries were engaged in on the Closing Date.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were subject thereto, such documents to be filed with the Commission on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required to file them. The Company shall also in any event (a) within
15 days of each Required Filing Date (i) transmit by mail to all holders at
their registered addresses, without cost to such holders, and (ii) file with the
Transfer Agent copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor
provisions thereto if the Company were subject thereto and (b) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective holder. The Transfer Agent's receipt of such reports, information
and documents shall not
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constitute constructive notice of any information contained therein or
determinable from information contained therein.
Senior Subordinated Debt
So long as any shares of Exchange Preferred Stock are outstanding, the
Company will not Incur any Debt, other than the Exchange Debentures, that is
expressly made subordinated in right of payment to any Senior Debt (as defined
in the Exchange Indenture) unless such Debt, by its terms and by the terms of
any agreement or instrument pursuant to which such Debt is outstanding, is
expressly made pari passu with, or subordinate in right of payment to, the
Exchange Debentures pursuant to provisions substantially similar to those
contained in the Exchange Indenture; provided that the foregoing limitations
shall not apply to distinctions between categories of Senior Debt that exist by
reason of any Liens or Guarantees arising or created in respect of some but not
all Senior Debt.
Merger, Sale of Assets, Etc.
The Company (x) shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to, any Person, and (y) shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole, substantially as an entirety to any Person, unless, in each case (x) or
(y), at the time and after giving effect thereto (i) either: (A) if the
transaction or series of transactions is a consolidation of the Company with or
a merger of the Company with or into any other Person, the Company shall be the
surviving Person of such merger or consolidation, or (B) the Person formed by
any consolidation with or merger with or into the Company, or to which the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, as the case may be, substantially as an entirety
are sold, assigned, conveyed, leased or otherwise transferred (any such
surviving Person or transferee Person referred to in this clause (B) being the
"Surviving Entity"), shall be a corporation, partnership or trust organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia and the Exchange Preferred Stock shall be converted
into or exchanged for and shall become shares of such Surviving Entity having in
respect of such Surviving Entity substantially the same powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Exchange Preferred Stock had
immediately prior to such transaction, and (ii) immediately before and
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (including any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of transactions), no
Default shall have occurred and be continuing, and (iii) the Consolidated Net
Worth of the Company or the Surviving Entity, as the case may be, shall be equal
to or greater than that of the Company immediately prior to such transaction or
series of transactions; provided, however, that the foregoing requirements shall
not apply to any transaction or series of transactions involving the sale,
assignment, conveyance, transfer, lease or other disposition of the properties
and assets by any Restricted Subsidiary to any other Restricted Subsidiary, or
the merger or consolidation of any Restricted Subsidiary with or into any other
Restricted Subsidiary.
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated by the foregoing provisions,
the Company shall deliver, or cause to be delivered, to the Transfer Agent, an
Officers' Certificate stating that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition complies with the requirements
of the Certificate of Designation and an opinion of counsel stating that the
conditions of the Certificate of Designation have been complied with. Each such
Officers' Certificate shall set forth the manner of determination of the
Consolidated Net Worth in accordance with clause (iii) of the preceding
paragraph.
For all purposes of the Certificate of Designation and the Exchange
Preferred Stock (including the provisions described in the two immediately
preceding paragraphs and the "Limitation on Consolidated Debt" and "Restricted
Subsidiaries" covenants), Subsidiaries of any Surviving Entity will, upon such
transaction or
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series of transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the "Restricted Subsidiaries" covenant and
all Debt of the Surviving Entity and its Subsidiaries that was not Debt of the
Company and its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
EXCHANGE
The Company may, at the sole option of the Board of Directors (subject to
the legal availability of funds therefor), at any time after the Optional
Redemption Date, or at any time prior to the Optional Redemption Date in the
event all Existing Senior Notes are repurchased, redeemed or repaid, exchange
all, but not less than all, of the outstanding shares of Preferred Stock,
including any shares of Preferred Stock issued as payment for dividends, into
Exchange Debentures, subject to the conditions set forth in the next succeeding
paragraph. Presently, the exchange of the Preferred Stock for Exchange
Debentures would be restricted by covenants in the Existing Indentures. There
can be no assurance that the conditions in such covenants for the exchange of
Preferred Stock for Exchange Debentures will be satisfied or that the exchange
will occur or that future Debt of the Company would not also restrict an
exchange. In order to effect such exchange, the Company shall (a) if necessary
to satisfy the condition set forth in clause (B) in the following paragraph
based upon the written advice of counsel to the Company, file a registration
statement with the Commission relating to the exchange, and (b) if a
registration statement is filed with the Commission pursuant to clause (a), use
its best efforts to cause such registration statement to be declared effective
as soon as practicable by the Commission unless the opinion referred to in
clause (B) in the following paragraph shall have been subsequently delivered.
In order to effectuate such exchange, the Company shall send a written
notice of exchange by mail to each holder of record of Preferred Stock, which
notice shall state (i) that the Company is exchanging the Preferred Stock into
Exchange Debentures pursuant to the Certificate of Designation and (ii) the date
fixed for exchange (the "Exchange Date"), which date shall not be less than 15
days nor more than 60 days following the date on which such notice is mailed
(except as provided in the last sentence of this paragraph). On the Exchange
Date, if the conditions set forth in clauses (A) through (E) below are
satisfied, the Company shall issue Exchange Debentures in exchange for the
Preferred Stock as provided in the next paragraph, provided that on the Exchange
Date: (A) there shall be legally available funds sufficient therefor (including,
without limitation, legally available funds sufficient therefor under Delaware
law); (B) a registration statement relating to the Exchange Debentures shall
have been declared effective under the Securities Act prior to such exchange and
shall continue to be effective on the Exchange Date or the Company shall have
obtained a written opinion of counsel that an exemption from the registration
requirements of the Securities Act is available for such exchange and that upon
receipt of such Exchange Debentures pursuant to such exchange made in accordance
with such exemption, each holder of an Exchange Debenture that is not an
Affiliate of the Company will not be subject to any restrictions imposed by the
Securities Act upon the resale of such Exchange Debenture, and such exemption is
relied upon by the Company for such exchange; (C) the Exchange Indenture and the
trustee thereunder shall have been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"); (D) immediately after giving
effect to such exchange, no Default or Event of Default (each as defined in the
Exchange Indenture) would exist under the Exchange Indenture; and (E) the
Company shall have delivered to the Trustee under the Exchange Indenture a
written opinion of counsel, dated the date of exchange, regarding the
satisfaction of the conditions set forth in clauses (A), (B) and (C). In the
event that (i) the issuance of the Exchange Debentures is not permitted on the
Exchange Date or (ii) any of the conditions set forth in clauses (A) through (E)
of the preceding sentence are not satisfied on the Exchange Date, the Company
shall use its best efforts to satisfy such conditions and effect such exchange
as soon as practicable thereafter.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding shares of Exchange Preferred Stock will be entitled to receive a
principal amount of Exchange Debentures for shares of Exchange Preferred Stock,
the liquidation preference of which, plus the amount of accumulated and unpaid
dividends (including a prorated dividend for the period from the immediately
preceding dividend payment due to the date of exchange) with respect to which,
equals such principal amount; provided that the Company at its
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option may pay cash for any or all accrued and unpaid dividends in lieu of
issuing Exchange Debentures in respect of such dividends. The Exchange
Debentures will be issued in registered form, without coupons. Exchange
Debentures issued in exchange for Exchange Preferred Stock will be in principal
amounts of $1,000 and integral multiples thereof to the extent practicable, and
will also be issued in principal amounts less than $1,000 so that each holder of
Exchange Preferred Stock will receive certificates representing the entire
principal amount of Exchange Debentures to which its shares of Exchange
Preferred Stock entitle it, provided that the Company may, at the sole option of
the Board of Directors, pay cash in lieu of issuing an Exchange Debenture in a
principal amount less than $1,000. On and after the date of exchange, dividends
will cease to accrue on the outstanding shares of Exchange Preferred Stock, and
all rights of the holders of Exchange Preferred Stock (except the right to
receive the Exchange Debentures, an amount in cash, to the extent applicable,
equal to the accrued and unpaid dividends to the Exchange Date, and, if the
Company so elects, cash in lieu of any Exchange Debenture which is in an amount
that is not an integral multiple of $1,000) will terminate. The person entitled
to receive the Exchange Debentures issuable upon such exchange will be treated
for all purposes as the registered holder of such Exchange Debentures.
The Company will comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
BOOK ENTRY; DELIVERY AND FORM
The Exchange Preferred Stock will initially be issued in the form of one
global certificate (the "Global Exchange Preferred Stock Certificate"). So long
as DTC, or its nominee, is the registered owner or holder of the Global Exchange
Preferred Stock Certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Preferred Stock represented
by such Global Exchange Preferred Stock Certificate for all purposes under the
Certificate of Designation and the Exchange Preferred Stock. No beneficial owner
of an interest in the Global Exchange Preferred Stock Certificate will be able
to transfer that interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Certificate of Designation.
Payments made with respect to the Global Exchange Preferred Stock
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. The Company will have no responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Exchange Preferred Stock
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Global Exchange Preferred Stock Certificate, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Global Exchange Preferred
Stock Certificate as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
such Global Exchange Preferred Stock Certificate held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company understands that DTC will take any action permitted to be taken
by a holder of Exchange Preferred Stock (including the presentation of Exchange
Preferred Stock for exchange as described below) only at the direction of one or
more participants to whose account the DTC interests in the Global Exchange
Preferred Stock Certificate is credited and only in respect of such portion of
the aggregate liquidation preference of Preferred Stock as to which such
participant or participants has or have given such direction.
The Company understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code
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and a "Clearing Agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Preferred Stock
Certificate among participants of DTC, it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. The Company will have no responsibility for the performance by DTC or
its respective participants or indirect participants of its respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Preferred Stock Certificate and a successor depositary is
not appointed by the Company within 90 days, the Company will issue Certificated
Exchange Preferred Stock in exchange for the Global Exchange Preferred Stock
Certificate.
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DESCRIPTION OF EXCHANGE DEBENTURES
The summary contained herein of certain provisions of the Exchange
Debentures does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Exchange Indenture, the form of which has
been filed with the Commission and is incorporated herein by reference. The
definitions of certain terms used in the Exchange Debentures and the Exchange
Indenture and in the following summary are set forth below under "Description of
Exchange Preferred Stock -- Certain Definitions."
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Indenture. The terms of the Exchange Debentures include those stated in the
Exchange Indenture and those made part of the Exchange Indenture by reference to
the Trust Indenture Act. The Exchange Debentures will be subject to all such
terms, and prospective holders of the Exchange Debentures are referred to the
Exchange Indenture and the Trust Indenture Act for a statement of such terms.
The following summary of certain provisions of the Exchange Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act and to all of the provisions of the
Exchange Indenture, including the definitions of certain terms therein and those
terms made a part of the Exchange Indenture by reference to the Trust Indenture
Act.
GENERAL
The Exchange Debentures will be unsecured obligations of the Company, will
be limited in aggregate principal amount to the aggregate liquidation preference
of the Preferred Stock (including any Preferred Stock issued in payment of
dividends), plus accrued and unpaid dividends, on the date of exchange of the
Preferred Stock into Exchange Debentures (plus any additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof (other than as described in "Description
of Exchange Preferred Stock -- Exchange" or with respect to additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be senior subordinated obligations of the Company, subordinated
to all existing and future Senior Debt of the Company and senior to all
subordinated obligations of the Company other than senior subordinated
obligations.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar. At the
Company's option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. The Company may change any Paying Agent and
Registrar without prior notice to holders of the Exchange Debentures. Holders of
the Exchange Debentures must surrender Exchange Debentures to the Paying Agent
to collect principal payments.
The Exchange Debentures will mature on July 15, 2009. Each Exchange
Debenture will bear interest at the same rate in effect with respect to the
Preferred Stock on the date the Exchange Debentures are issued (the "Exchange
Debenture Issue Date") from the Exchange Debenture Issue Date or from the most
recent interest payment date to which interest has been paid or provided for.
Interest will be payable semi-annually in cash (or, on or prior to July 15,
2002, in additional Exchange Debentures, at the option of the Company) in
arrears on each January 15 and July 15 commencing with the first such date after
the Exchange Debenture Issue Date. Interest on the Exchange Debentures will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed.
Because of the Company's option through July 15, 2002 to pay interest on
the Exchange Debentures by issuing additional Exchange Debentures, any Exchange
Debentures issued prior to that date will be treated as issued with OID, unless
under special rules for interest holidays the amount of OID is treated as de
minimis. See "Certain United States Federal Income Tax Considerations."
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SUBORDINATION
The Exchange Debentures will be senior subordinated Debt of the Company,
subordinated to the prior payment when due of the principal of, and premium, if
any, and accrued and unpaid interest on, all existing and future Senior Debt of
the Company and senior to the prior payment when due of the principal of, and
premium, if any, and accrued and unpaid interest on, all subordinated Debt of
the Company other than senior subordinated Debt.
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property or
(b) an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities, the holders of Senior Debt shall be entitled
to receive payment in full of all obligations ("Obligations") due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before holders
of the Exchange Debentures shall be entitled to receive any payment with respect
to the Exchange Debentures. Until all Obligations with respect to Senior Debt
are paid in full, any distribution to which holders of the Exchange Debentures
would be entitled shall be made to holders of Senior Debt. Notwithstanding the
foregoing, holders of the Exchange Debentures may receive securities that are
subordinated, at least to the same extent as the Exchange Debentures, to Senior
Debt and any securities issued in exchange for Senior Debt.
In addition, the Company may not make any payment upon or in respect of the
Exchange Debentures (except in such subordinated securities) if (a) a default in
the payment of any principal, premium, if any, interest or other Obligations
with respect to any Designated Senior Debt occurs and is continuing beyond any
applicable grace period (whether upon maturity, as a result of acceleration or
otherwise) or (b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of such Designated Senior Debt to
accelerate its maturity, and the Company and the Trustee receive a notice of
such default (a "Payment Blockage Notice") from the holders, or from the
trustee, agent or other representative of the holders, of any such Designated
Senior Debt. Payments on the Exchange Debentures may and shall be resumed upon
the earlier of (i) the date upon which the default is cured or waived or (ii) in
the case of a default referred to in clause (b) above, 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced within 360 days after the receipt by the Trustee of
any prior Payment Blockage Notice. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than 180
days.
The Exchange Indenture will further require that the Company promptly
notify holders of Senior Debt if payment on the Exchange Debentures is
accelerated because of an Event of Default.
"Designated Senior Debt" under the Exchange Indenture is defined to mean
the Debt specified in clause (i) of the definition of Senior Debt and any Debt
constituting Senior Debt that, at the date of determination, has an aggregate
principal amount of at least $25,000,000 and that is specifically designated by
the Company in the instrument creating or evidencing such Senior Debt as
"Designated Senior Debt."
"Senior Debt" means (i) Debt of the Company under the Existing Senior Notes
and the Existing Indentures, the Bank Credit Facility and the Vendor Credit
Facility and all fees, expenses and indemnities payable in connection with any
of the foregoing and (ii) all other Debt of the Company (other than the Exchange
Debentures), including principal and interest on such Debt, unless such Debt, by
its terms or by the terms of any agreement or instrument pursuant to which such
Debt is issued, is pari passu with, or subordinated in right of payment to, the
Exchange Debentures; provided that the term "Senior Debt" shall not include (a)
any Debt of the Company that, when Incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code, was without recourse
to the Company, (b) any Debt of the Company to a Subsidiary of the Company or to
a joint venture in which the Company has an interest, (c) any Debt of the
Company, to the extent not permitted by the "Limitation on Consolidated Debt" or
the "Senior Subordinated Debt" covenants described below, (d) any repurchase,
redemption or other obligation in respect of Redeemable Stock, (e) any Debt to
any employee of the Company or any of its Subsidiaries,
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<PAGE> 80
(f) any liability for federal, state, local or other taxes owed or owing by the
Company or (g) any trade payables. Senior Debt will also include interest
accruing subsequent to events of bankruptcy of the Company at the rate provided
for in the document governing such Senior Debt, whether or not such interest is
an allowed claim enforceable against the debtor in a bankruptcy case under
federal bankruptcy law.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Exchange Debentures may recover
less ratably than other creditors of the Company. The Company is expected to
incur substantial amounts of additional indebtedness in the future.
OPTIONAL REDEMPTION
The Exchange Debentures may be redeemed at any time on or after July 15,
2002, at the Company's option, in whole or in part, upon not less that 30 or
more than 60 days' prior written notice mailed by first class mail to each
holder's last address as it appears in the Security Register, at the redemption
prices (expressed as a percentage of the principal amount thereof) set forth
below, plus an amount in cash equal to all accrued and unpaid interest to the
redemption date, if redeemed during the 12-month period beginning July 15 of
each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................... 106.50%
2003........................................................... 103.25
2004 and thereafter............................................ 100.00
</TABLE>
In addition, on or prior to July 15, 2000, the Company may redeem Exchange
Debentures having an aggregate principal amount of up to 35% of the aggregate
liquidation preference of the Old Preferred Stock originally issued at a
redemption price equal to 113% of the principal amount thereof, plus accrued and
unpaid interest to the redemption date, out of the net proceeds of any sale of
its common stock, provided that such redemption occurs within 180 days after
consummation of such sale.
Selection
In the case of any partial redemption, selection of the Exchange Debentures
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Exchange
Debentures are listed or, if the Exchange Debentures are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Exchange Debenture of $1,000 in principal amount
or less shall be redeemed in part. If any Exchange Debenture is to be redeemed
in part only, the notice of redemption relating to such Exchange Debenture shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
Debenture in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Exchange Debenture.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an Offer to Purchase to each holder of Exchange Debentures to repurchase
all or any part of such holder's Exchange Debentures at a cash purchase price
equal to 101% of their principal amount, plus accrued and unpaid interest to the
date of purchase (the "Change of Control Payment"). The Offer to Purchase must
be made within 30 days following a Change of Control, must remain open for at
least 30 and not more than 40 days and must comply with the requirements of Rule
14e-1 under the Exchange Act and any other applicable securities laws and
regulations.
None of the provisions in the Exchange Indenture relating to a purchase
upon a Change of Control are waivable by the Board of Directors. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. If a
Change of Control were to occur, the Company would be obligated to purchase all
Debt which would prohibit an Offer to Purchase prior to making an offer to
repurchase Exchange Debentures, and there can be no assurance that the Company
would have
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<PAGE> 81
sufficient funds to pay the purchase price for all Exchange Debentures that the
Company would be required to purchase if a Change of Control were to occur. In
the event that the Company were required to purchase outstanding Exchange
Debentures pursuant to an Offer to Purchase, the Company expects that it would
need to seek third-party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance that
the Company would be able to obtain such financing. In addition, the Company's
ability to purchase the Exchange Debentures may be limited by other
then-existing agreements.
CERTAIN COVENANTS
Limitation on Consolidated Debt
The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless (i)
with respect to Debt Incurred under this clause (i), the Debt so Incurred and
outstanding is in an aggregate principal amount that does not exceed 2.25 times,
with respect to Capital Stock sales after June 1, 1997 and on or prior to March
31, 1998, or 2.00 times, with respect to Capital Stock sales after March 31,
1998, the aggregate amount of net cash proceeds (or 80% of the Fair Market Value
of property other than cash) received by the Company after June 1, 1997 from the
issuance and sale (other than to a Restricted Subsidiary) of shares of its
Capital Stock (other than the Preferred Stock and Redeemable Stock), or any
options, warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), other than (x) proceeds applied for use as a Directed
Investment (unless such designation has been revoked by the Board of Directors
and the Company either abandons its plans to make such Investment or is able to
make such Investment pursuant to the "Limitation on Restricted Payments"
covenant (other than as a Directed Investment)) and (y) proceeds which have been
included in the computation of the amounts available for Restricted Payments
pursuant to clause (c)(2) of the "Limitation on Restricted Payments" covenant,
to the extent the inclusion thereof was necessary to allow a subsequent
Restricted Payment to be made, or (ii) on the date of such Incurrence, after
giving effect to the Incurrence of such Debt (or Acquired Debt) and the receipt
and application of the net proceeds thereof (and, if the net proceeds of such
new Debt are used to acquire a Person that becomes a Restricted Subsidiary or an
operating business of the Company or a Restricted Subsidiary, to all terms of
such acquisition) on a pro forma basis, the Operating Cash Flow to Consolidated
Interest Expense Ratio would equal or exceed 1.75 to 1.
Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to the
holders of, any shares of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase any such Capital
Stock (other than Redeemable Stock));
(ii) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly, purchase,
redeem or otherwise acquire or retire for value (other than value
consisting solely of Capital Stock of the Company that is not Redeemable
Stock or options, warrants or other rights to acquire such Capital Stock
that is not Redeemable Stock), any Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock);
(iii) redeem, repurchase, defease or otherwise acquire or retire for
value, or permit any Restricted Subsidiary to, directly or indirectly,
redeem, repurchase, defease or otherwise acquire or retire for value (other
than value consisting solely of Capital Stock of the Company that is not
Redeemable Stock or options, warrants or other rights to acquire such
Capital Stock that is not Redeemable Stock), prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any Debt
that is subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the Exchange Debentures; or
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(iv) make, or permit any Restricted Subsidiary, directly or
indirectly, to make, any Investment (other than any Permitted Investment)
in any Person (other than in a Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary as a result of such Investment);
(each of the foregoing actions set forth in clauses (i) through (iv), other than
any such action that is a Permitted Investment or a Permitted Distribution,
being referred to as a "Restricted Payment") unless, at the time of such
Restricted Payment, and after giving effect thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) except with respect to Investments, after giving effect, on a pro
forma basis, to such Restricted Payment and the Incurrence of any Debt the
net proceeds of which are used to finance such Restricted Payment, the
Consolidated Debt to Annualized Operating Cash Flow Ratio would not have
exceeded 7.0 to 1; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or after
February 15, 1994 shall not exceed:
(1) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the Company for
the period (taken as one accounting period) from the April 1, 1994 to
the last day of the last fiscal quarter preceding the date of the
proposed Restricted Payment, plus
(2) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination shall be conclusive and evidenced by a Board
Resolution), received by the Company from the issuance and sale (other
than to a Restricted Subsidiary) on or after February 15, 1994 of shares
of its Capital Stock (other than Redeemable Stock), or any options,
warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), other than (x) (except for purposes of determining
whether an Investment under clause (iv) above is permitted) shares of
Capital Stock or options, warrants or other rights to purchase Capital
Stock (or shares issuable upon exercise thereof) issued or sold in the
PowerFone Merger, Questar/AMI Share Exchanges, Motorola Transaction and
NTT transactions as defined and described in the Company's prospectus,
dated February 9, 1994, relating to the Company's Senior Redeemable
Discount Notes due 2004 and (y) shares of Capital Stock or options,
warrants or other rights to purchase Capital Stock (or shares issuable
upon exercise thereof), the proceeds of the issuance of which is used
(A) to make a Directed Investment (unless such designation has been
revoked by the Board of Directors and the Company is able to make such
Investment pursuant to this "Limitation on Restricted Payments" covenant
(other than as a Directed Investment)) or (B) to Incur Debt under clause
(i) of the "Limitation on Consolidated Debt" covenant (unless and until
the amount of any such Debt (I) is treated as newly issued Debt and
could be Incurred in accordance with the "Limitation on Consolidated
Debt" covenant (other than under clause (i) thereof) or (II) has been
repaid or refinanced with the proceeds of Debt Incurred in accordance
with the "Limitation on Consolidated Debt" covenant (other than under
clause (i) thereof) or (III) has otherwise been repaid), plus
(3) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination shall be conclusive and evidenced by a Board
Resolution), received by the Company from the issuance or sale (other
than to a Restricted Subsidiary) after February 15, 1994 of any Capital
Stock of the Company (other than Redeemable Stock), or any options,
warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), upon the conversion of, or exchange for, Debt of the
Company or a Restricted Subsidiary.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Distribution,
Permitted Investment or Directed Investment, and none of a Permitted
Distribution, Permitted Investment or Directed Investment shall be counted as a
Restricted Payment for purposes of clause (c) above. In addition, the foregoing
limitations do not prevent the Company
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from (I) paying a dividend on Capital Stock of the Company within 60 days after
the declaration thereof if, on the date when the dividend was declared, the
Company could have paid such dividend in accordance with the provisions of the
Exchange Indenture, (II) repurchasing Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from employees
or former employees of the Company or any Subsidiary thereof for consideration
not to exceed $500,000 in the aggregate in any fiscal year (with repurchases
pursuant to this clause (II) not being counted as Restricted Payments for
purposes of clause (c) above) or (III) the repurchase, redemption or other
acquisition for value of Capital Stock of the Company to the extent necessary to
prevent the loss or secure the renewal or reinstatement of any license or
franchise held by the Company or any of its Subsidiaries from any governmental
agency; or (IV) Investments in Unrestricted Subsidiary Funding Company so long
as (x) such Investments are invested in Nextel International and (y) Nextel
International is a Subsidiary of the Company.
Notwithstanding the foregoing limitations in this "Limitation on Restricted
Payments" covenant, the Company will be permitted to make any Investment in a
Person that is not (either before or after giving effect thereto) a Subsidiary
of the Company, provided that, immediately after giving effect thereto, the
amount equal to (a) the aggregate amount of all Investments made pursuant to
this paragraph minus (b) all cash received by the Company or any Restricted
Subsidiary from the sale, transfer or other disposition to a Person that is not
a Subsidiary of the Company of any such Investment (or portion thereof) included
in such aggregate amount (with the amount of cash to be counted for this purpose
not to exceed the amount of such Investment (or portion thereof) so included),
shall not exceed the greater of (i) $250,000,000 and (ii) 2% of the Total Market
Value of Equity of the Company as of such time. For purposes of determining the
aggregate amount of Investments referred to in clause (a), the amount of any
Investment shall be deemed to equal the cash portion thereof plus the fair
market value of any non-cash portion thereof (to the extent such portion
constitutes an Investment) at the time such Investment is made, as determined by
the Board of Directors (whose good faith determination shall be conclusive and
evidenced by a Board Resolution).
Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary will be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person shall no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) of the third preceding
paragraph or the aggregate amount of Investments pursuant to clause (a) of the
immediately preceding paragraph, in each case to the extent such Investments
would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by the
Company from the issuance or sale of its Capital Stock either upon the
conversion of, or exchange for, Debt of the Company or any Restricted Subsidiary
shall be deemed to be an amount equal to (a) the sum of (i) the principal amount
or accreted value (whichever is less) of such Debt on the date of such
conversion or exchange and (ii) the additional cash consideration, if any,
received by the Company upon such conversion or exchange, less any payment on
account of fractional shares, minus (b) all expenses incurred in connection with
such issuance or sale. In addition, for purposes of clause (c)(3) above, the net
proceeds received by the Company from the issuance or sale of its Capital Stock
upon the exercise of any options or warrants of the Company or any Restricted
Subsidiary shall be deemed to be an amount equal to (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.
For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such Restricted
Payment, as determined by the Board of Directors (whose good faith determination
shall be conclusive and evidenced by a Board Resolution).
Restricted Subsidiaries
The Company shall not designate any Restricted Subsidiary as an
Unrestricted Subsidiary, and shall not itself, and shall not permit any
Restricted Subsidiary to, sell, convey, transfer or otherwise dispose of any
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assets, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction, unless, after giving effect to any such action, the assets (not
including any assets so sold, conveyed, transferred or otherwise disposed of,
other than in the ordinary course of business, to any Unrestricted Subsidiary or
any Person that becomes an Unrestricted Subsidiary as part of such transaction)
and business of the Company and its remaining Restricted Subsidiaries generated
at least 90% of Digital Mobile-SMR Operating Cash Flow in the fiscal quarter of
the Company most recently completed prior to the date of such action.
The Board of Directors may designate any existing Unrestricted Subsidiary
or any Person that is about to become a Subsidiary of the Company as a
Restricted Subsidiary if, after giving effect to such action (and, if such
designation is made in connection with the acquisition of a Person or an
operating business that is about to become a Subsidiary of the Company, after
giving effect to all terms of such acquisition) on a pro forma basis, on the
date of such action, the Debt of such Unrestricted Subsidiary outstanding
immediately prior to such designation would have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Exchange
Indenture.
Subject to the second preceding paragraph and compliance with the
"Limitation on Restricted Payments" covenant, the Board of Directors may
designate any Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary shall, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of the Company's ownership
interest in such Subsidiary (including, without duplication, such indirect
ownership interest in all Subsidiaries of such Subsidiary), as determined by the
Board of Directors in good faith and evidenced by a Board Resolution.
Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the Board of Directors may not designate a Subsidiary of the Company
to be an Unrestricted Subsidiary if, after such designation, (a) the Company or
any of its other Restricted Subsidiaries (i) provides credit support for, or a
Guarantee of, any Debt of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary, (b) a default with respect to any Debt of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, any Restricted Subsidiary which is not a Subsidiary of the Subsidiary to be
so designated.
The Board of Directors, from time to time, may designate any Person that is
about to become a Subsidiary of the Company as an Unrestricted Subsidiary, and
may designate any newly-created Subsidiary as an Unrestricted Subsidiary, if at
the time such Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of corporations)
and no Debt. Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries shall be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this "Restricted
Subsidiaries" covenant, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries. The Board of Directors shall not change the
designation of a Subsidiary of the Company more than twice in any period of five
years.
Transactions with Affiliates
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Company on terms that
are less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person that is not such an Affiliate; provided, however, that this "Transactions
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with Affiliates" covenant shall not limit, or be applicable to, (i) any
transaction between Unrestricted Subsidiaries not involving the Company or any
Restricted Subsidiary, (ii) any transaction between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries or (iii) any Permitted
Transactions. In addition, any transaction or series of related transactions,
other than Permitted Transactions, between the Company or any Restricted
Subsidiary and any Affiliate of the Company (other than a Restricted Subsidiary)
involving an aggregate consideration of $5,000,000 or more must be approved in
good faith by a majority of the Company's Disinterested Directors (of which
there must be at least one) and evidenced by a Board Resolution. For purposes of
this "Transactions with Affiliates" covenant, any transaction or series of
related transactions between the Company or any Restricted Subsidiary and an
Affiliate of the Company that is approved by a majority of the Disinterested
Directors (of which there must be at least one) and evidenced by a Board
Resolution shall be deemed to be on terms as favorable as those that might be
obtained at the time of such transaction (or series of transactions) from a
Person that is not such an Affiliate and thus shall be permitted under this
"Transactions with Affiliates" covenant.
Activities of the Company and Restricted Subsidiaries
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
the Company and the Restricted Subsidiaries are engaged in on the Closing Date.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were subject thereto, such documents to be filed with the Commission on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required to file them. The Company shall also in any event (a) within
15 days of each Required Filing Date (i) transmit by mail to all holders, as
their names and addresses appear in the Security Register, without cost to such
holders, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or
any successor provisions thereto if the Company were subject thereto and (b) if
filing such documents by the Company with the Commission is not permitted under
the Exchange Act, promptly upon written request supply copies of such documents
to any prospective holder. The Trustee's receipt of such reports, information
and documents shall not constitute constructive notice of any information
contained therein or determinable from information contained therein.
Senior Subordinated Debt
So long as any Exchange Debentures are outstanding, the Company will not
Incur any Debt that is expressly made subordinated in right of payment to any
Senior Debt unless such Debt, by its terms and by the terms of any agreement or
instrument pursuant to which such Debt is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the Exchange Debentures
pursuant to provisions substantially similar to those contained in the Exchange
Indenture; provided that the foregoing limitations shall not apply to
distinctions between categories of Senior Debt that exist by reason of any Liens
or Guarantees arising or created in respect of some but not all Senior Debt.
Merger, Sale of Assets, Etc.
The Company (x) shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to, any Person, and (y) shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the
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<PAGE> 86
Company and its Restricted Subsidiaries, taken as a whole, substantially as an
entirety to any Person, unless, in each case (x) or (y), at the time and after
giving effect thereto (i) either: (A) if the transaction or series of
transactions is a consolidation of the Company with or a merger of the Company
with or into any other Person, the Company shall be the surviving Person of such
merger or consolidation, or (B) the Person formed by any consolidation with or
merger with or into the Company, or to which the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, as the
case may be, substantially as an entirety are sold, assigned, conveyed, leased
or otherwise transferred (any such surviving Person or transferee Person
referred to in this clause (B) being the "Surviving Entity"), shall be a
corporation, partnership or trust organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia and
shall expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company
under the Exchange Debentures and the Exchange Indenture and, in each case, the
Exchange Indenture, as so supplemented, shall remain in full force and effect,
and (ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including any Debt
Incurred or anticipated to be Incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing, and (iii) the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, shall be equal to or
greater than that of the Company immediately prior to such transaction or series
of transactions; provided, however, that the foregoing requirements shall not
apply to any transaction or series of transactions involving the sale,
assignment, conveyance, transfer, lease or other disposition of the properties
and assets by any Restricted Subsidiary to any other Restricted Subsidiary, or
the merger or consolidation of any Restricted Subsidiary with or into any other
Restricted Subsidiary.
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated by the foregoing provisions,
the Company shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate
stating that such consolidation, merger, sale, assignment, conveyance, transfer,
lease or other disposition and the supplemental indenture in respect thereof
(required under clause (i)(B) of the preceding paragraph) comply with the
requirements of the Exchange Indenture and an opinion of counsel stating that
the conditions of the Exchange Indenture have been complied with. Each such
Officers' Certificate shall set forth the manner of determination of the
Consolidated Net Worth in accordance with clause (iii) of the preceding
paragraph.
For all purposes of the Exchange Indenture and the Exchange Debentures
(including the provisions described in the two immediately preceding paragraphs
and the "Limitation on Consolidated Debt" and "Restricted Subsidiaries"
covenants), Subsidiaries of any Surviving Entity will, upon such transaction or
series of transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the "Restricted Subsidiaries" covenant and
all Debt of the Surviving Entity and its Subsidiaries that was not Debt of the
Company and its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
EVENTS OF DEFAULT
The following will be Events of Default under the Exchange Indenture: (a)
failure to pay principal of (or premium, if any on) any Exchange Debenture when
due; (b) failure to pay any interest on any Exchange Debenture when due,
continued for 30 days; (c) default in the payment of principal of, and premium
and interest, if any, on Exchange Debentures required to be purchased pursuant
to an Offer to Purchase as described under "Change of Control" when due and
payable, or failure to make an Offer to Purchase as required thereunder; (d)
failure to perform or comply with the provisions described under "Merger, Sale
of Assets, Etc."; (e) failure to perform any other covenant or agreement of the
Company under the Exchange Indenture or the Exchange Debentures continued for 60
days after written notice to the Company by the Trustee or holders of at least
25% in aggregate principal amount of outstanding Exchange Debentures; (f)
failure to pay when due (subject to any applicable grace period) the principal
of, or acceleration of, any Debt of the Company or any Restricted Subsidiary
having an outstanding principal amount of at least $25,000,000, individually or
in the aggregate; (g) the rendering of a final judgment or judgments against the
Company or any Restricted Subsidiary in an amount in excess of $25,000,000 which
remains undischarged or
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unstayed for a period of 60 days after the date on which the right to appeal has
expired; and (h) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any Restricted Subsidiary.
If an Event of Default (other than an Event of Default described in clause
(h) above) shall occur and be continuing, either the Trustee or the holders of
at least 25% in aggregate principal amount of the outstanding Exchange
Debentures may accelerate all Exchange Debentures; provided however that after
such acceleration, but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of outstanding Exchange
Debentures may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of the Exchange Debentures,
have been cured or waived as provided in the Exchange Indenture. If an Event of
Default specified in clause (h) above occurs, the principal of and interest on
the outstanding Exchange Debentures will ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder. For information as to waiver of defaults, see "Modification and Waiver."
Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Trustee reasonable security or
indemnity. Subject to such provisions for the indemnification of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding
Exchange Debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
No holder of any Exchange Debenture will have any right to institute any
proceeding with respect to the Exchange Indenture or for any remedy thereunder,
unless such holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding Exchange Debentures shall have
made written request, and offered reasonable security or indemnity, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the holders of a majority in aggregate principal amount of the
Exchange Debentures a direction inconsistent with such request and shall have
failed to institute such proceeding within 60 days. However, such limitations do
not apply to a suit instituted by a holder of an Exchange Debenture for
enforcement of payment of the principal of, premium and interest, if any, on
such Exchange Debenture on or after the respective due dates expressed in such
Exchange Debenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Exchange
Indenture and as to any default in such performance.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may elect, at its option at any time, to have the provisions of
the Exchange Indenture relating to defeasance and discharge of indebtedness or
the provisions relating to defeasance of certain restrictive covenants in the
Exchange Indenture, applied to the outstanding Exchange Debentures (as a whole
and not in part).
Defeasance and Discharge. The Exchange Indenture provides that, upon the
Company's exercise of its option to have the provisions relating to defeasance
and discharge applied to the outstanding Exchange Debentures, the Company will
be discharged from all its obligations with respect to the Exchange Debentures
(except for certain obligations to exchange or register the transfer of Exchange
Debentures, to replace stolen, lost or mutilated Exchange Debentures, to
maintain paying agencies and to hold moneys for payment in trust) upon the
deposit in trust for the benefit of the holders of such Exchange Debentures of
money or U.S. Government Obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of and any
installment of interest on such Exchange Debentures on the respective Stated
Maturities thereof in accordance with the terms of the Exchange Indenture and
the Exchange Debentures. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an opinion of counsel to
the effect that the Company has received from, or there has been published by,
the Internal Revenue Service (the "IRS") a ruling, or there has been a change in
tax law, in either case to the effect that
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holders of such Exchange Debentures will not recognize gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to Federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge were not to occur.
Defeasance of Certain Covenants. The Exchange Indenture provides that,
upon the Company's exercise of its option to defease certain restrictive
covenants applied to the outstanding Exchange Debentures, the Company may omit
to comply with certain restrictive covenants, including those described under
"Covenants" and clause (iii) under "Merger, Sale of Assets, Etc.," and the
occurrence of certain Events of Default, which are described above in clause (d)
(with respect to such clause (iii)), clause (e) (with respect to such
restrictive covenants), clause (f) and clause (g) under "Events of Default,"
will be deemed not to be or result in an Event of Default, in each case with
respect to such Exchange Debentures. The Company, in order to exercise such
option, will be required to deposit, in trust for the benefit of the holders of
such Exchange Debentures, money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any installment of interest on such Exchange Debentures on the
respective Stated Maturities thereof in accordance with the terms of the
Exchange Indenture and the Exchange Debentures. The Company will also be
required, among other things, to deliver to the Trustee an opinion of counsel to
the effect that holders of such Exchange Debentures will not recognize gain or
loss for Federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur. In the event the Company
exercised this option with respect to the outstanding Exchange Debentures and
such Exchange Debentures were declared due and payable prior to their Stated
Maturity because of the occurrence of any Event of Default or become payable on
any redemption date at the option of the Company, the amount of money and U.S.
Government Obligations so deposited in trust would be sufficient to pay amounts
due on such Exchange Debentures at the time of their respective Stated
Maturities but may not be sufficient to pay amounts due on such Exchange
Debentures upon such acceleration or redemption. In such case, the Company would
remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Exchange Indenture may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding Exchange Debentures;
provided, however, that no such modification or amendment may, without the
consent of each holder affected thereby, (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Exchange Debenture, (ii)
reduce the principal amount of, premium, if any, or interest on, any Exchange
Debenture, (iii) change the place or currency of payment of principal of
premium, if any, or interest on, any Exchange Debenture, (iv) impair the right
to institute suit for the enforcement of any payment on or after the Stated
Maturity (or, in the case of a redemption, on or after the Redemption Date) of
any Exchange Debenture, (v) modify the subordination provisions in a manner
adverse to the holders in any material respect, (vi) reduce the above-stated
percentage of outstanding Exchange Debentures the consent of whose holders is
necessary to modify or amend the Exchange Indenture, (vii) waive a default in
the payment of principal of, premium, if any, or interest on, the Exchange
Debentures or (viii) reduce the percentage of aggregate principal amount of
outstanding Exchange Debentures the consent of whose holders is necessary for
waiver of compliance with certain provisions of the Exchange Indenture or for
waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Exchange Indenture will provide that no recourse for the payment of the
principal of, premium, if any, or interest on, any of the Exchange Debentures,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company contained in
the Exchange Indenture or in any of the Exchange Debentures, or because of the
creation of any Debt represented thereby, shall be had against any incorporator
or past, present or future stockholder, officer,
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director, employee or controlling person of the Company. Each holder, by
accepting such Exchange Debenture, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Exchange Indenture provides that, except during the continuance of an
Event of Default, the Trustee will perform only such duties as are specifically
set forth in the Exchange Indenture. If an Event of Default has occurred and is
continuing, the Trustee will exercise those rights and powers vested in it under
such Exchange Indenture and use the same degree of care and skill in its
exercise of such rights and powers as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The Exchange Indenture and provisions of the Trust Indenture Act,
incorporated by reference in the Exchange Indenture, contain limitations on the
rights of the Trustee thereunder, should it become a creditor of the Company, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions; provided, however, that if
it acquires any conflicting interest, it must eliminate such conflict or resign.
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TERMS OF EXISTING NEXTEL PREFERRED STOCK
GENERAL
The McCaw Investor presently holds approximately 7,900,000 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 23,700,000 shares of
Common Stock in the aggregate), and 82 shares of Class B Preferred Stock,
convertible into an equal number of shares of Common Stock. In addition, Nextel
has issued shares of the Old 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 Board of Directors or, if greater than three, that number of
directors (rounded up to the nearest whole number) equal to 25% of the entire
Board of Directors (the "Class A Directors"), subject to the 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 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 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 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 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 Certificate of Incorporation 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
Board of Directors 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 Board of Directors and
nomination and oversight of certain executive officers. The Board of Directors,
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 $291,000,000) and the immediate
vesting of the options granted pursuant to the McCaw Incentive Option Agreement.
However, the Board of Directors, 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 Board of Directors also may act to terminate the
Operations Committee, although such action by the Board of
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Directors 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 Certificate of Incorporation 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 Mr. 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 Common Stock in amounts equal to the amounts that would be
received had the Class A Preferred Stock been converted into 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 Board of
Directors (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
$25,000,000 liquidated damages payment contemplated by the McCaw Securities
Purchase Agreement in the event that the Board of Directors takes certain
actions with respect to the Operations Committee that give rise to such payment.
Shares of Class B Preferred Stock are automatically converted on a one-for-one
basis to shares of 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.
CLASS D PREFERRED STOCK
The Old Preferred Stock was issued in a private placement completed on July
21, 1997. The Old Preferred Stock and the Exchange Preferred Stock offered
hereby have identical terms, except that the Exchange Preferred Stock will be
registered under the Securities Act and will not bear legends restricting the
transfer thereof. See "Description of Exchange Preferred Stock."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal U.S. federal income
tax consequences of the Exchange Offer and purchase, ownership and disposition
of the Exchange Preferred Stock and the Exchange Debentures and does not purport
to be a complete analysis of all of the potential tax effects of such purchase,
ownership or disposition. This summary deals only with Exchange Preferred Stock
and Exchange Debentures held as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"), by U.S.
Holders (as defined below). It does not address all aspects of the U.S. federal
income tax consequences of purchasing, holding or disposing of the Exchange
Preferred Stock or the Exchange Debentures that may be relevant to a particular
investor in the context of such investor's individual investment circumstances
or to investors in special situations, such as life insurance companies,
financial institutions, tax-exempt organizations, dealers in securities and
currencies, persons holding Exchange Preferred Stock or Exchange Debentures as a
part of a hedging or conversion transaction or a straddle, U.S.
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Holders whose "functional currency" is not the U.S. dollar or Non-U.S. Holders
(as defined below). This summary also does not discuss tax consequences under
state, local or foreign tax laws. Holders of the Exchange Preferred Stock should
consult their own tax advisors concerning the application to their particular
situation of and changes in U.S. federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdiction. Furthermore, the discussion
below is based upon the provisions of the Code and existing and proposed
Treasury regulations, administrative rulings and judicial decisions thereunder
as of the date hereof, and such authorities may be repealed, revoked or
modified, possibly with retroactive effect, so as to result in U.S. federal
income tax consequences different from those discussed below.
As used herein, a "U.S. Holder" means a beneficial owner that is a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate the income of which is subject to U.S. federal
income taxation regardless of its source or a trust over which a court within
the United States is able to exercise primary supervision and as to which one or
more U.S. fiduciaries have the authority to control all substantial decisions.
An individual may, subject to certain exceptions, be deemed to be a resident (as
opposed to a non-resident alien) of the United States for certain purposes by
virtue of being present in the United States on at least 31 days in the calendar
year and for an aggregate of at least 183 days during a three-year period ending
in the current calendar year (counting for such purposes all of the days present
in the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year). A
"Non-U.S. Holder" is a holder that is not a U.S. Holder.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE
OFFER AND OWNERSHIP AND DISPOSITION OF THE EXCHANGE PREFERRED STOCK OR THE
EXCHANGE DEBENTURES.
EXCHANGE OF OLD PREFERRED STOCK FOR EXCHANGE PREFERRED STOCK
A U.S. Holder of Old Preferred Stock should not recognize income, gain or
loss as a result of the exchange of Old Preferred Stock for the Exchange
Preferred Stock. A holder should have the same tax basis and holding period in
the shares of Exchange Preferred Stock as it had in the shares of Old Preferred
Stock exchanged therefor.
DISTRIBUTIONS ON THE EXCHANGE PREFERRED STOCK
Distributions of cash or, under Section 305(b)(4) of the Code, of
additional shares of Exchange Preferred Stock on the Exchange Preferred Stock
will be treated as dividends taxable as ordinary income to U.S. Holders to the
extent of Nextel's current and accumulated earnings and profits as determined
under U.S. federal income tax principles. The amount of a distribution of
additional shares of Exchange Preferred Stock will equal the fair market value
of the shares of Exchange Preferred Stock distributed as of the date of such
distribution. To the extent that the amount of a distribution on the Exchange
Preferred Stock exceeds Nextel's current and accumulated earnings and profits,
such distribution will be treated as a nontaxable return of capital and will be
applied against and reduce the adjusted tax basis of such Exchange Preferred
Stock in the hands of each U.S. Holder (but not below zero), thus increasing the
amount of any gain (or reducing the amount of any loss) which would otherwise be
recognized by such U.S. Holder upon the sale or other taxable disposition of
such Exchange Preferred Stock. The amount of any such distribution which exceeds
the adjusted tax basis of the Exchange Preferred Stock in the hands of the U.S.
Holder will be treated as capital gain and taxed as indicated under the caption
"-- Redemption, Sale or Exchange of Exchange Preferred Stock -- Sale or Exchange
Treatment." The initial tax basis of additional Exchange Preferred Stock in the
hands of a holder who received such additional Exchange Preferred Stock as a
distribution on Exchange Preferred Stock will equal the fair market value of
such additional Exchange Preferred Stock at the time of distribution.
Nextel presently does not have any current or accumulated earnings and
profits as determined under U.S. federal income tax principles and it is
unlikely to have current or accumulated earnings and profits in the
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foreseeable future. As a result, until such time as Nextel does have earnings
and profits, distributions of cash and additional Exchange Preferred Stock on
the Exchange Preferred Stock will be treated as a nontaxable return of capital
and will be applied against and reduce the adjusted tax basis (but not below
zero) in the hands of each Holder of the shares of Exchange Preferred Stock on
which such distribution is made, thus increasing the amount of any gain (or
reducing the amount of any loss) which would otherwise by recognized by such
holder upon the sale or other taxable disposition of such shares of Exchange
Preferred Stock. In the case of distributions of additional Exchange Preferred
Stock, such basis reduction should be offset on an overall standpoint by a
corresponding amount of tax basis for a holder in the additional Exchange
Preferred Stock. Further, until such time, distributions with respect to the
Exchange Preferred Stock will not be treated as dividends for U.S. federal
income tax purposes and, thus, will not qualify for any dividends-received
deduction generally available to U.S. corporate holders as described below. U.S.
Holders would recognize gain to the extent that any distribution were to exceed
current or accumulated earnings and profits and basis in the Exchange Preferred
Stock.
Under Section 243 of the Code, corporate U.S. Holders generally will be
able to deduct 70% of the amount of any distribution qualifying as a dividend.
There are, however, many exceptions and restrictions relating to the
availability of such dividends-received deduction. For example, Section 246A of
the Code reduces the dividends-received deduction allowed to a corporate U.S.
Holder that has indebtedness "directly attributable" to its investment in
portfolio stock, and Section 246(c) of the Code requires that, in order to be
eligible for a deduction for any dividends received, a corporate U.S. Holder
generally must hold the shares of Exchange Preferred Stock for a 46-day minimum
holding period during the 90-day period beginning on the date which is 45 days
before the ex-dividend date (or, in certain circumstances, a 91-day minimum
holding period during the 180-day period beginning on the date which is 90 days
before the ex-dividend date). A taxpayer's holding period for these purposes is
suspended during any period in which a U.S. Holder has certain options or
contractual obligations with respect to substantially identical stock or holds
one or more other positions with respect to substantially identical stock that
diminishes the risk of loss from holding the Exchange Preferred Stock.
Under Section 1059 of the Code, a corporate U.S. Holder is required to
reduce its tax basis (but not below zero) in the Exchange Preferred Stock by the
non-taxed portion of any "extraordinary dividend" if such stock has not been
held for more than two years before the earliest of the date such dividend is
declared, announced or agreed to. Generally, the non-taxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction provisions of Section 243 of the Code. An
extraordinary dividend on the Exchange Preferred Stock generally would be a
dividend that (i) equals or exceeds 5% of the corporate U.S. Holder's adjusted
tax basis in the Exchange Preferred Stock, generally treating all dividends
received by the U.S. Holder and having ex-dividend dates within an 85-day period
as one dividend, or (ii) exceeds 20% of the corporate U.S. Holder's adjusted tax
basis in such Exchange Preferred Stock, generally treating all dividends
received by the U.S. Holder and having ex-dividend dates within a 365-day period
as one dividend. In determining whether a dividend paid on the Exchange
Preferred Stock is an extraordinary dividend, a corporate U.S. Holder may elect
to substitute the fair market value of the Exchange Preferred Stock for such
U.S. Holders's tax basis for purposes of applying these tests, provided such
fair market value is established to the satisfaction of the Secretary of
Treasury (the "Secretary") as of the day before the ex-dividend date. An
extraordinary dividend also includes any amount treated as a dividend in the
case of a redemption that is non-pro rata as to all stockholders, is in partial
liquidation of the redeeming corporation or would not have been treated as a
dividend in the absence of the option attribution rule, regardless of the
stockholder's holding period and regardless of the size of the dividend. If any
part of the non-taxed portion of an extraordinary dividend is not applied to
reduce the corporate U.S. Holder's tax basis as a result of the limitation on
reducing such basis below zero, such part will be treated as gain from the sale
or exchange of the Exchange Preferred Stock for the taxable year in which the
extraordinary dividend is received. CORPORATE U.S. HOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO
THEIR OWNERSHIP AND DISPOSITION OF THE EXCHANGE PREFERRED STOCK.
A corporate U.S. Holder's liability for alternative minimum tax may be
affected by the portion of the dividends received which such corporate U.S.
Holder deducts in computing taxable income. This results from
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the fact that corporate stockholders (other than certain small business
corporations that are not subject to the alternative minimum tax) are required
to increase alternative minimum taxable income by 75% of the excess of the
current earnings and profits (with certain adjustments) over alternative minimum
taxable income (determined without regard to earnings and profit adjustments or
the alternative tax net operating loss deduction).
REDEMPTION PREMIUM
Under Section 305 of the Code and the applicable Treasury regulations
thereunder, if the redemption price of Exchange Preferred Stock exceeds its
issue price, the difference ("redemption premium") may be taxable as a
constructive distribution of additional Exchange Preferred Stock to the U.S.
Holder (treated as a dividend to the extent of Nextel's current and accumulated
earnings and profits and otherwise subject to the treatment described above for
distributions) over a certain period.
Because the Exchange Preferred Stock provides for optional rights of
redemption by Nextel at prices in excess of the issue price, U.S. Holders could
be required to recognize such redemption premium under a constant yield method
similar to that described below for accruing OID (see "-- Interest and OID on
the Exchange Debentures -- Original Issue Discount") if, based on all of the
facts and circumstances, the optional redemption is more likely than not to
occur. If stock may be redeemed at more than one time, the time and price at
which such redemption is most likely to occur must be determined based on all of
the facts and circumstances. Applicable Treasury regulations provide a "safe
harbor" under which a right to redeem will not be treated as more likely than
not to occur if (i) the issuer and the holder are not related within the meaning
of the Treasury regulations; (ii) there are no plans, arrangements or agreements
that effectively require or are intended to compel the issuer to redeem the
stock (disregarding, for this purpose, a separate mandatory redemption); and
(iii) exercise of the right to redeem would not reduce the yield of the stock,
as determined under the Treasury regulations. Further, the Treasury regulations
provide that such redemption premium is not taxable as a constructive
distribution if it is solely in the nature of a penalty for premature
redemption. A redemption premium is solely in the nature of a penalty for
premature redemption if it is paid as a result of changes in economic or market
conditions over which neither the issuer nor the holder has control. Regardless
of whether the optional redemption is more likely than not to occur, or whether
the redemption premium is solely in the nature of a penalty for premature
redemption, constructive dividend treatment will not result if the redemption
premium does not exceed a de minimis amount. Based on the Treasury regulations,
Nextel intends to take the position that the existence of Nextel's optional
redemption rights do not result in a constructive distribution to the U.S.
Holders.
Further, because the Exchange Preferred Stock provides for an optional
right of the U.S. Holders to require Nextel to acquire the Exchange Preferred
Stock at a price equal to 101% of the liquidation value upon a Change in
Control, U.S. Holders could be required to recognize such redemption premium
under the constant yield method discussed above unless, very generally, the
likelihood of redemption is remote. Here, too, regardless of whether the
likelihood of redemption is remote, constructive dividend treatment will not
result if the redemption premium does not exceed a de minimis amount of 1/4 of
1% of the stated redemption price at maturity multiplied by the number of
complete years to maturity. Nextel intends to take the position that the
existence of U.S. Holders' optional redemption right does not result in a
constructive distribution to the Holders.
Moreover, the Exchange Preferred Stock provides for a mandatory redemption
at a redemption price equal to the liquidation value of the Exchange Preferred
Stock, plus accrued and unpaid dividends. If at the time of issuance of
preferred stock, there is no intention for dividends to be paid currently, the
Internal Revenue Service (the "IRS") may treat the payment of such dividends on
redemption as disguised redemption premium subject to the constant yield rules
discussed above. Dividends on the Exchange Preferred Stock are payable in cash
or, on or prior to July 15, 2002, in additional shares of Exchange Preferred
Stock. Nextel intends to pay all such dividends currently. Thus, while the
appropriate treatment of unpaid cumulative dividends has not yet been addressed
in Treasury regulations and no assurance can be given as to the outcome of such
guidance, Nextel intends to take the position that the terms of the mandatory
redemption should not result in a constructive distribution to the U.S. Holders.
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Finally, in the event that additional Exchange Preferred Stock is
distributed on the Exchange Preferred Stock and such additional Exchange
Preferred Stock has a fair market value at the time of distribution that is less
than its redemption price, such additional Exchange Preferred Stock would have a
redemption premium that may be taxable as a constructive distribution of
additional stock to a U.S. Holder (treated as a dividend to the extent of
Nextel's current and accumulated earnings and profits) under the constant yield
method over the term of such additional Exchange Preferred Stock.
REDEMPTION, SALE OR EXCHANGE OF EXCHANGE PREFERRED STOCK
Exchange or Distribution Characterization
The sale of the Exchange Preferred Stock by a U.S. Holder will be a taxable
transaction. Likewise, a redemption of shares of the Exchange Preferred Stock
for cash or an exchange of the Exchange Preferred Stock for Exchange Debentures
will be a taxable transaction. For U.S. federal income tax purposes, the
exchange of the Exchange Preferred Stock for Exchange Debentures will be treated
as if Nextel made a distribution of the Exchange Debentures in redemption of the
Exchange Preferred Stock. Under Section 302(b) of the Code, such a redemption
for cash or the Exchange Debentures will be treated as a sale or exchange
transaction on which a U.S. Holder generally will recognize capital gain or loss
(except to the extent of amounts received on the exchange that are attributable
to declared dividends, which will be treated in the same manner as distributions
described above) provided that the redemption (i) results in complete
termination of the holder's stock interest in Nextel under Section 302(b)(3) of
the Code; (ii) is "substantially disproportionate" with respect to the
stockholder under Section 302(b)(2) of the Code or (iii) is not "essentially
equivalent to a dividend" under Section 302(b)(1) of the Code because it results
in a "meaningful reduction" in a U.S. Holder's stock interest in Nextel. Whether
a redemption will result in a meaningful reduction depends on the particular
holder's facts and circumstances. In determining whether any of these tests have
been met, the holder is deemed, under the constructive ownership rules of
Section 302(c) of the Code, to own any shares of Nextel stock that are owned, or
deemed owned, by certain related persons and entities and any shares that such
holder, or related person or entity, has the right to acquire by exercise of an
option. Corporate U.S. Holders are urged to consult with their tax advisors with
respect to the option attribution rule and Section 1059 of the Code under recent
legislation.
Distribution Treatment
If the redemption of the Exchange Preferred Stock does not result in a
complete termination or meaningful reduction and is not substantially
disproportionate, the transaction will be treated as a distribution of cash or
Exchange Debentures, as the case may be. The amount of such distribution will be
measured by the amount of cash received by the U.S. Holder or the "issue price,"
as defined below, of the Exchange Debentures received by the U.S. Holder, and
such distribution will be treated in the same manner as distributions described
above. Corporate U.S. Holders should be aware that to the extent such
distribution is treated as a dividend it may be treated as an extraordinary
dividend under Section 1059 of the Code. A U.S. Holder's aggregate tax basis in
the Exchange Debentures will be equal to the issue price of the Exchange
Debentures received by the U.S. Holder.
Sale or Exchange Treatment
If a U.S. Holder sells the Exchange Preferred Stock, or the redemption of
the Exchange Preferred Stock results in a complete termination or meaningful
reduction or is substantially disproportionate, the capital gain or loss
recognized on such sale or exchange generally will be equal to the difference
between the amount realized by the U.S. Holder and such U.S. Holder's adjusted
tax basis in the Exchange Preferred Stock surrendered. In the case of a sale or
redemption for cash, the amount realized will be the amount of cash received on
such sale or redemption. In the case of an exchange of Exchange Preferred Stock
for Exchange Debentures, the amount realized on receipt of the Exchange
Debenture will be equal to the "issue price" of the Exchange Debenture. Thus,
the amount realized on the exchange will be equal to the issue price of the
Exchange Debentures plus any cash received on the exchange (other than amounts
received with respect to declared dividends). Generally speaking, if, as of the
exchange date, the Exchange Debentures or the
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Exchange Preferred Stock are traded on an established securities market on or at
any time during the 60-day period ending 30 days after the exchange date, the
issue price of an Exchange Debenture would be equal to the fair market value of
the traded instrument as of the exchange date. If neither the Exchange Preferred
Stock nor the Exchange Debentures are so traded, the issue price of the Exchange
Debentures would be the stated principal amount of the Exchange Debentures
provided that the yield on the Exchange Debentures is equal to or greater than
the "applicable federal rate" in effect at the time the Exchange Debenture is
issued. If the yield on the Exchange Debentures is less than such applicable
federal rate, its issue price under Section 1274 of the Code would be equal to
the present value, as of the issue date, of all payments to be made on the
Exchange Debentures, discounted at the applicable federal rate. It cannot be
determined at the present time whether the Exchange Preferred Stock or the
Exchange Debentures will be, at the relevant time, traded on an established
securities market within the meaning of the OID Regulations or whether the yield
on the Exchange Debentures will equal or exceed the applicable federal rate, as
discussed above. A U.S. Holder's adjusted tax basis in the Exchange Preferred
Stock surrendered in the redemption will equal the amount paid for such stock
plus the fair market value of any distributions of additional Exchange Preferred
Stock and any amount included in gross income as a constructive distribution of
redemption premium, in each case under Section 305 of the Code, as described in
"-- Distributions on the Exchange Preferred Stock" and "-- Redemption Premium,"
and reduced by the amount of any distribution treated as a nontaxable return of
capital that reduced the adjusted tax basis of the Exchange Preferred Stock, as
described in "-- Distributions on the Exchange Preferred Stock." For certain
noncorporate holders (including individuals), the rate of taxation of capital
gains will depend on (i) the holder's holding period for the Exchange Preferred
Stock (with the lowest rate available for Exchange Preferred Stock held more
than 18 months) and (ii) the holder's marginal tax rate for ordinary income.
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding Exchange Preferred Stock because, for example,
payments of interest on the Exchange Debentures will not be eligible for any
dividends-received deduction that may be available to corporate U.S. Holders.
INTEREST AND OID ON THE EXCHANGE DEBENTURES
The tax treatment of the Exchange Debentures will turn on whether or not
they are issued with OID. Exchange Debentures issued on or before July 15, 2002
likely will be treated as having been issued with OID. Exchange Debentures
issued after July 15, 2002 will not be issued with OID unless, generally, their
stated redemption price at maturity, as defined below, exceeds their issue
price, as defined above. Exchange Debentures issued with OID will be referred to
as "OID Notes." PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
Stated Interest
Payments of interest on a debt instrument generally will be includible in a
U.S. Holder's income as ordinary income under the holder's method of accounting
for U.S. federal income tax purposes. However, because Nextel has the option
through July 15, 2002 to pay interest on the Exchange Debentures by issuing
additional Exchange Debentures, Exchange Debentures (including Exchange
Debentures issued in exchange for Exchange Preferred Stock) issued prior to that
date likely will be treated as issued with OID, and stated interest on such
Exchange Debentures would not be treated as interest for U.S. federal income tax
purposes, but instead will be subject to the OID rules described below. If
Exchange Debentures were not issued with OID, then interest on such Exchange
Debentures generally would be includible in a U.S. Holder's income as ordinary
income under the U.S. Holder's method of accounting. Exchange Debentures issued
after July 15, 2002 may also be issued with OID.
Original Issue Discount
U.S. Holders of OID Notes will be subject to special tax accounting rules,
as described in greater detail below. U.S. Holders of OID Notes should be aware
that they generally must include OID in gross income for U.S. federal income tax
purposes on an annual basis under a constant yield accrual method regardless of
their method of accounting. As a result, U.S. Holders will include OID in income
in advance of the receipt of cash attributable to such income. However, U.S.
Holders of OID Notes generally will not be required to include
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separately in income cash payments received on such notes, even if denominated
as interest, to the extent such payments do not constitute qualified stated
interest (as defined below). Nextel will report to U.S. Holders of any OID Notes
on a timely basis the reportable amount of OID and interest income based on its
understanding of applicable law.
The amount of OID, if any, on a debt instrument is the excess of its
"stated redemption price at maturity" over its "issue price," subject to a
statutorily defined de minimis exception. The "stated redemption price at
maturity" of a debt instrument is the sum of its principal amount plus all other
payments required thereunder, other than payments of "qualified stated
interest." For this purpose, "qualified stated interest" generally means stated
interest that is unconditionally payable in cash or in property (other than the
debt instruments of the issuer), at least annually at a single fixed rate during
the entire term of the debt instrument that appropriately takes into account the
length of intervals between payments. The "issue price" of an Exchange Debenture
will be determined as described under "-- Redemption, Sale or Exchange of
Exchange Preferred Stock."
As noted above, because Nextel has the option through July 15, 2002 to pay
interest on Exchange Debentures by issuing additional Exchange Debentures, any
Exchange Debentures issued prior to that date likely will be treated as OID
Notes, and none of the stated interest on such OID Notes will be treated as
qualified stated interest (unless, under special rules for interest holidays,
the amount of OID is treated as de minimis). Any OID Notes so issued would be
treated as having been issued with OID equal to the excess of their stated
redemption price at maturity (which will be equal to the sum of the principal
amount plus all payments of stated interest) over their issue price (which will
be as described under "-- Redemption, Sale or Exchange of Exchange Preferred
Stock" above). Any additional OID Notes issued in lieu of cash would not be
treated as debt instruments separate from the OID Notes upon which they were
issued, but instead would be aggregated with such OID Notes for OID purposes.
The right to issue additional Exchange Debentures in lieu of paying cash
interest through July 15, 2002 is treated for purposes of the OID provisions of
the Code as an option to defer interest payments on the Exchange Debentures.
Treasury regulations provide that in the case of a debt instrument that provides
the issuer with an unconditional option or options exercisable during the term
of the debt instrument that, if exercised, require payments to be made on the
debt instrument under an alternative payment schedule, the yield and maturity of
such debt instrument for purposes of calculating OID are determined by assuming
the issuer exercises or does not exercise the option in a manner that minimizes
the yield on the debt instrument.
If the issue price of the Exchange Debentures is at least equal to their
principal amount, the yield to maturity of the Exchange Debentures, if the
option to pay interest with additional Exchange Debentures is exercised, will be
no less than the yield to maturity would be, if the option is not exercised.
Accordingly, for purposes of calculating OID, it would be assumed that Nextel
will not exercise the option because exercise of the option will not minimize
the yield. If the option was in fact subsequently exercised and additional
Exchange Debentures were issued by Nextel in lieu of cash, such additional
Exchange Debentures would be aggregated with the Exchange Debentures upon which
they were issued, and OID would be calculated for the remainder of the term of
the Exchange Debentures based upon an adjusted issue price which includes the
principal amount of the additional Exchange Debentures. As a result of such
exercise, U.S. Holders of Exchange Debentures would include OID in income in
advance of the receipt of cash, regardless of such U.S. Holders' regular methods
of accounting.
If the issue price of the Exchange Debentures is less than their principal
amount, the yield to maturity of the Exchange Debentures, if the option to pay
interest with additional Exchange Debentures is exercised, will be less than the
yield to maturity, if the option is not exercised. Accordingly, for purposes of
calculating OID, it would be assumed that Nextel will exercise the option
because to do so will minimize the yield. If Nextel does in fact exercise its
option and issues additional Exchange Debentures in lieu of cash, U.S. Holders
of Exchange Debentures will include OID in income in advance of the receipt of
cash, regardless of such U.S. Holders' regular method of accounting. If Nextel
makes a cash payment instead of exercising its option of issuing an additional
Exchange Debenture, the cash payment made will be treated as a prepayment of the
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Exchange Debentures, partially retiring such Exchange Debentures on a pro rata
basis on the date of such payment. Such retirement would be a taxable event to a
U.S. Holder of the Exchange Debenture.
In the case of Exchange Debentures issued after July 15, 2002, Nextel will
not have the option to pay interest with additional Exchange Debentures. In such
event, (i) all interest payments on such an Exchange Debenture would be
qualified stated interest, (ii) the stated redemption price at maturity of any
Exchange Debenture will be equal to its principal amount, and (iii) such an
Exchange Debenture will therefore be issued with OID only to the extent its
principal amount exceeds its issue price (provided that such excess is not de
minimis). As described under "-- Redemption, Sale or Exchange of Exchange
Preferred Stock" above, however, the issue price of the Exchange Debentures
cannot be determined at the present time.
The amount of OID includible in income by an initial U.S. Holder of an OID
Note is the sum of the "daily portions" of OID with respect to the OID Note for
each day during the taxable year or portion of the taxable year in which such
U.S. Holder holds such note ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The "accrual period" for an OID Note may be of
any length and may vary in length over the term of the OID Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occur on the first day or final day of an accrual period.
The amount of OID allocable to any accrual period is an amount equal to the
excess, if any, of (a) the product of the OID Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any qualified stated
interest allocable to the accrual period. OID allocable to a final accrual
period is the difference between the amount payable at maturity (other than a
payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. Special rules will apply for calculating
OID for an initial short accrual period. The "adjusted issue price" of an OID
Note at the beginning of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period (determined without
regard to the amortization of any acquisition bond premium, as described below)
and reduced by any payments made on such note (other than qualified stated
interest) on or before the first day of the accrual period.
Exchange Debentures may be redeemed prior to their stated maturity at the
option of Nextel. For purposes of computing the yield of such instruments,
Nextel will be deemed to exercise or not exercise its option to redeem the OID
Notes in a manner that minimizes the yield on the OID Notes. It is not
anticipated that Nextel's ability to redeem prior to stated maturity would
affect the yield of an OID Note.
U.S. Holders may elect to treat all interest on any Exchange Debenture as
OID and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. The election is to be made for the taxable
year in which the U.S. Holder acquired the Exchange Debenture, and may not be
revoked without the consent of the IRS. U.S. HOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS ABOUT THIS ELECTION.
MARKET DISCOUNT ON EXCHANGE DEBENTURES
If a U.S. Holder acquires an Exchange Debenture (other than an OID Note)
for an amount less than its stated redemption price at maturity or, in the case
of an OID Note, for an amount that is less than its adjusted issue price, the
amount of the difference will be treated as "market discount" for federal income
tax purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
principal payment on an Exchange Debenture, or any gain on the sale, exchange,
retirement or other disposition of, an Exchange Debenture as ordinary income to
the extent of the market discount which has not previously been included in
income and is treated as having accrued on such Exchange Debenture at the time
of such payment or disposition. In addition, the U.S. Holder may be required to
defer, until the maturity of the Exchange Debenture or its earlier disposition
in a taxable transaction, the
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deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Exchange Debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Debenture,
unless the U.S. Holder elects to accrue on a constant interest method. A U.S.
Holder of an Exchange Debenture may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A U.S. Holder that is treated as acquiring an Exchange Debenture with OID
for an amount that is greater than its adjusted issue price but equal to or less
than the sum of all amounts payable on the Exchange Debenture after the purchase
date, other than qualified stated interest, will be considered to have purchased
such Exchange Debenture at an "acquisition premium." Under the acquisition
premium rules, the amount of OID, if any, which such U.S. Holder must include in
its gross income with respect to such Exchange Debenture for any taxable year
will be reduced by the portion of such acquisition premium properly allocable to
such year.
If immediately after the time the Exchange Preferred Stock is exchanged for
Exchange Debentures or immediately after the time a subsequent U.S. Holder
acquires Exchange Debentures, the U.S. Holder's tax basis in any such Exchange
Debenture exceeds the sum of all amounts payable on the Exchange Debenture after
the exchange date or purchase date, other than qualified stated interest, such
excess may constitute "premium" and such U.S. Holder will not be required to
include any OID in income. A U.S. Holder generally may elect to amortize bond
premium over the remaining term of the Exchange Debenture on a constant yield
method. The amount amortized in any year will be treated as a reduction of the
U.S. Holder's interest income, including OID, from the Exchange Debenture.
Bond premium on an Exchange Debenture held by a U.S. Holder that does not
make such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Exchange Debenture. The election to amortize
bond premium on a constant yield method, once made, applies to all debt
obligations held or subsequently acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
REDEMPTION, SALE OR EXCHANGE OF EXCHANGE DEBENTURES
Upon the redemption, sale, exchange or retirement of an Exchange Debenture,
a U.S. Holder will recognize gain or loss equal to the difference between the
amount realized upon the redemption, sale, exchange or retirement (less any
accrued qualified stated interest, not previously taken into account, which will
be taxable as such) and the adjusted tax basis of the Exchange Debenture. The
adjusted tax basis of a U.S. Holder who received Exchange Debentures in exchange
for Exchange Preferred Stock will, in general, be equal to the issue price of
such Exchange Debentures, increased by OID and market discount previously
included in income by the U.S. Holder and reduced by any amortized premium and
any cash payments on the Exchange Debentures other than qualified stated
interest. Any such gain or loss will generally be capital gain or loss, the tax
consequences of which are indicated under the caption "-- Redemption, Sale or
Exchange of Exchange Preferred Stock -- Sale or Exchange Treatment."
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
If (x) the term of the OID Notes is more than five years, (y) the
yield-to-maturity of the OID Notes, computed as of their issue date, equals or
exceeds the sum of (A) the "applicable federal rate" (as determined under
Section 1274(d) of the Code) in effect for the month in which the OID Notes are
issued (the "AFR") and (B) 5%, and (z) the OID on such OID Notes is
"significant," the OID Notes will be considered AHYDOS under Section 163(i) of
the Code. OID is significant if the aggregate amount includible in gross
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income for periods before the close of any accrual period ending more than five
years after the issue date exceeds the sum of the aggregate amount of interest
to be paid before the close of such accrual period plus the product of the issue
price and the yield to maturity. If the OID Notes are AHYDOS, Nextel would not
be allowed to take a deduction for OID accrued on the OID Notes for U.S. federal
income tax purposes until such time as Nextel actually paid such OID in cash or
in other property (other than stock or debt of Nextel or a person deemed to be
related to Nextel under Section 453(f)(l) of the Code).
Moreover, if the yield-to-maturity on the OID Notes were to exceed the sum
of the AFR and 6% (such excess shall be referred to hereinafter as the
"Disqualified Yield"), the deduction for OID accrued on the OID Notes would be
permanently disallowed for U.S. federal income tax purposes (regardless of
whether Nextel actually paid such OID in cash or in other property) to the
extent such OID is attributable to such Disqualified Yield ("Dividend-Equivalent
Interest"). For purposes of the dividends-received deduction, such
Dividend-Equivalent Interest will be treated as a dividend to the extent it is
deemed to have been paid out of Nextel's current or accumulated earnings and
profits.
Because the amount of OID, if any, attributable to the OID Notes will be
determined at the time such OID Notes are issued and the AFR at the time such
OID Notes are issued in exchange for Exchange Preferred Stock is not
predictable, it is impossible to determine at the present time whether an OID
Note will be treated as an AHYDOS.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the proceeds
of sales of Exchange Debentures and Exchange Preferred Stock made to U.S.
Holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the U.S. Holder fails to
provide a correct taxpayer identification number or certification of exempt
status or, with respect to certain payments, the U.S. Holder fails to report in
full dividend and interest income and the IRS notifies the payor of such
underreporting.
Any amounts withheld under the backup withholding rules will be allowed as
a credit against such U.S. Holder's U.S. federal income tax liability and may
entitle such U.S. Holder to a refund, provided the required information is
furnished to the IRS.
PLAN OF DISTRIBUTION
The Exchange Preferred Stock will be offered by Nextel to the holders of
the Old Preferred Stock in exchange for the Old Preferred Stock pursuant to the
Exchange Offer.
Except as described below, a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the Exchange Preferred
Stock. Each broker-dealer that receives Exchange Preferred Stock for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Preferred Stock. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Preferred Stock
received in exchange for Old Preferred Stock where such Old Preferred Stock was
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period of 90 days after the Expiration Date,
it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale subject to the
conditions described under "The Exchange Offer -- Resale of the Exchange
Preferred Stock."
The Company will not receive any proceeds from any sale of Exchange
Preferred Stock by broker-dealers. Exchange Preferred Stock received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Preferred Stock or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or
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the purchasers of any such Exchange Preferred Stock. Any broker or dealer that
participates in a distribution of such Exchange Preferred Stock may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Preferred Stock and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
other than commissions or concessions of any brokers or dealers and expenses of
counsel for the holders of the Exchange Preferred Stock and will indemnify the
holders of the Exchange Preferred Stock (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the Exchange Preferred Stock offered hereby will be passed
upon for Nextel by Jones, Day, Reavis & Pogue, Atlanta, Georgia.
EXPERTS
The consolidated financial statements and related financial statement
schedules of Nextel incorporated in this 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.
95
<PAGE> 102
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 its directors and officers.
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 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
II-1
<PAGE> 103
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)(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>
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).
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).
</TABLE>
II-2
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
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,
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).
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).
</TABLE>
II-3
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
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).
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, Nextel Finance
Company, 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).
</TABLE>
II-4
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
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 -- 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).
4.38 -- 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).
4.39 -- 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).
4.40 -- 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).
4.41 -- Amendment No. 2 dated as of June 3, 1997 to the Bank Credit Agreement (filed on
August 5, 1997 as Exhibit 4.41 to Nextel's Registration Statement No. 333-28461 on
Form S-3 (the "August S-3 Registration Statement") and incorporated herein by
reference).
4.42 -- Amendment No. 2 dated as of June 3, 1997 to the Vendor Credit Agreement (filed on
August 5, 1997 as Exhibit 4.42 to the August S-3 Registration Statement and
incorporated herein by reference).
4.43 -- Amendment No. 3 dated as of August 20, 1997, to the Bank Credit Agreement (filed on
September 5, 1997 as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated
September 5, 1997 (the "September 5 Form 8-K) and incorporated herein by
reference).
4.44 -- Amendment No. 3 to the Vendor Credit Agreement, dated as of August 29, 1997,
amending the Vendor Credit Agreement (filed on September 5, 1997 as Exhibit 99.2 to
the September 5 Form 8-K and incorporated herein by reference).
4.45 -- Second Secured Vendor Financing Agreement dated as of August 29, 1997 among Nextel,
Nextel Finance Company and the other Restricted Companies thereto and the Vendor
Lenders thereto (the "Second Vendor Financing Agreement") (filed as Exhibit 99.3 to
the September 5 Form 8-K and incorporated herein by reference).
4.46 -- Amendment No. 4 dated as of September 10, 1997 to the Bank Credit Agreement (filed
on September 22, 1997 as Exhibit 4.2 to Nextel's Current Report on Form 8-K dated
September 22, 1997 (the "September 22 Form 8-K") and incorporated herein by
reference).
4.47 -- Amendment No. 4 dated as of September 10, 1997 to the Vendor Credit Agreement
(filed on September 22, 1997 as Exhibit 4.3 to the September 22 Form 8-K and
incorporated herein by reference).
4.48 -- Amendment No. 1 to the Second Vendor Financing Agreement dated as of September 10,
1997 (filed on September 22, 1997 as Exhibit 4.4 to the September 22 Form 8-K and
incorporated herein by reference).
</TABLE>
II-5
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
4.49 -- Indenture between Nextel and Harris Trust and Savings Bank, as Trustee, dated
September 17, 1997 (filed on September 22, 1997 as Exhibit 4.1 to the September 22
Form 8-K and incorporated herein by reference).
*4.50 -- Form of Nextel's 13% Series D Exchangeable Preferred Stock Certificate.
*4.51 -- Registration Rights Agreement by and among Nextel, Morgan Stanley & Co.
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation dated July 21,
1997.
*4.52 -- Form of Indenture related to the Exchange Debentures (the "Exchange Debenture
Indenture").
4.53 -- Form of Note to be issued pursuant to the Exchange Debenture Indenture (included in
Exhibit 4.52).
4.54 -- Indenture between Nextel and Harris Trust and Savings Bank, as Trustee, dated as of
October 22, 1997 (filed on October 23, 1997 as Exhibit 4.1 to Nextel's Current
Report on Form 8-K dated October 23, 1997 (the "October 23 Form 8-K") and
incorporated herein by reference).
4.55 -- Amendment No. 5 dated as of October 9, 1997 to the Bank Credit Agreement (filed on
October 23, 1997 as Exhibit 4.2 to the October 23 Form 8-K and incorporated herein
by reference).
4.56 -- Amendment No. 5 dated as of October 9, 1997 to the Vendor Credit Agreement (filed
on October 23, 1997 as Exhibit 4.3 to the October 23 Form 8-K and incorporated
herein by reference).
4.57 -- Amendment No. 2 dated as of October 9, 1997 to the Second Vendor Financing
Agreement (filed on October 23, 1997 as Exhibit 4.4 to the October 23 Form 8-K and
incorporated herein by reference).
+5 -- Opinion of Jones, Day, Reavis & Pogue re validity.
+8 -- Opinion of Jones, Day, Reavis & Pogue re tax matters.
*12 -- Statement re computation of earnings to fixed charges.
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibits 5 and 8).
+23.2 -- Consent of Deloitte & Touche LLP.
*24 -- Powers of Attorney.
+99 -- Letter of Transmittal and Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* 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
II-6
<PAGE> 108
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) 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.
(c) 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.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
(e) 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.
(f) 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> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its 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 11th day of November, 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>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
* Chairman of the Board, Chief
- --------------------------------------------- Executive Officer and
Daniel F. Akerson Director (Principal
Executive Officer)
* Vice President and Chief
- --------------------------------------------- Financial Officer
Steven M. Shindler (Principal Financial
Officer)
* 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
- ---------------------------------------------
Craig O. McCaw
* Director
- ---------------------------------------------
Keisuke Nakasaki
* Director
- ---------------------------------------------
Masaaki Torimoto
* Director
- ---------------------------------------------
Dennis M. Weibling
</TABLE>
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<PAGE> 110
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
* Director
- ---------------------------------------------
William E. Conway, Jr.
Director
- ---------------------------------------------
Frank M. Drendel
* /s/ THOMAS J. SIDMAN Attorney-in-fact November 11, 1997
- ---------------------------------------------
Thomas J. Sidman
</TABLE>
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<PAGE> 111
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------------------------------------------------------- ----------
<C> <S> <C> <C>
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, 1995 Not
Exhibits No. 4.1.1 and 4.1.2 to Nextel's Post-Effective Amendment No. 1 applicable
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 Not
Exhibit 4.2 to the Nextel S-8 Registration Statement and incorporated applicable
herein by reference)
4.3 -- Indenture between Old Nextel and The Bank of New York, as Trustee, Not
dated August 15, 1993 (the "August Indenture") (filed on December 23, applicable
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)
4.4 -- Form of Note issued pursuant to the August Indenture (included in Not
Exhibit No. 4.3) applicable
4.5 -- Indenture between Old Nextel and The Bank of New York, as Trustee, Not
dated as of February 15, 1994 (the "February Indenture") (filed on applicable
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)
4.6 -- Form of Note issued pursuant to the February Indenture (included in Not
Exhibit No. 4.5) applicable
4.7 -- Supplemental Indenture, dated as of June 30, 1995 to the August Not
Indenture between Old Nextel and The Bank of New York (filed on applicable
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 Not
Indenture between Old Nextel and The Bank of New York (filed on applicable
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 Not
(now known as Nextel), as Successor by Merger to Old Nextel and The applicable
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 Not
(now known as Nextel), as Successor by Merger to Old Nextel and The applicable
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 Not
and The Bank of New York (relating to the August Indenture) filed on applicable
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 Not
and The Bank of New York (relating to the February Indenture) filed on applicable
June 17, 1997 as Exhibit 4.2 to the June 17, Form 8-K and incorporated
herein by reference).
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------------------------------------------------------- ----------
<C> <S> <C> <C>
4.13 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of Not
January 13, 1994, between OneComm (formerly called CenCall applicable
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 Not
Exhibit 4.11) applicable
4.15 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Not
Indenture between OneComm (formerly called CenCall Communications applicable
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 Not
(formerly known as ESMR, Inc.), as successor to OneComm, and The Bank applicable
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 Not
and The Bank of New York (relating to the February Indenture) filed on applicable
June 17, 1997 as Exhibit 4.2 to the June 17, Form 8-K and incorporated
herein by reference)
4.18 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of Not
April 25, 1994, between Dial Call and The Bank of New York (the "2004 applicable
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 Not
Indenture between Dial Call and The Bank of New York (filed on December applicable
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 Not
2004 Indenture between Dial Page (as successor to Dial Call) and The applicable
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 Not
Indenture between Nextel (as successor to Dial Page) and The Bank of applicable
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 Not
and The Bank of New York (relating to the 2004 Indenture) (filed on applicable
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, Not
1993, between Dial Call and The Bank of New York (the "2005 Indenture") applicable
(filed as Exhibit 99.3 to the OneComm S-4 Registration Statement and
incorporated herein by reference)
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------------------------------------------------------- ----------
<C> <S> <C> <C>
4.24 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Not
Indenture between Dial Call and The Bank of New York (filed on April 1, applicable
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 Not
Indenture between Dial Call and The Bank of New York (filed on December applicable
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 Not
Indenture between Dial Page (as successor to Dial Call) and The Bank of applicable
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 Not
2005 Indenture between Nextel (as successor to Dial Page) and The Bank applicable
of New York (filed on April1, 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 Not
and The Bank of New York (relating to the 2005 Indenture) filed on June applicable
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, Not
1997, between McCaw International and The Bank of New York, as Trustee applicable
(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 Not
Exhibit 4.24) applicable
4.31 -- Warrant Agreement, dated as of March 6, 1997, between McCaw Not
International and The Bank of New York (filed on March 31, 1997 as applicable
Exhibit 4.26 to the 1996 Form 10-K and incorporated herein by
reference)
4.32 -- Credit Agreement dated as of September 27, 1996 among Nextel, NFC, the Not
Restricted Companies party thereto, the Lenders party thereto, applicable
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 Not
(filed on July 9, 1997 as Exhibit 99.1 to Nextel's Current Report on applicable
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 Not
September 27, 1996 among Nextel, Nextel Finance Company, the Restricted applicable
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 Not
Agreement (filed on July 9, 1997 as Exhibit 99.2 to the July 9 Form 8-K applicable
and incorporated herein by reference)
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------------------------------------------------------- ----------
<C> <S> <C> <C>
4.36 -- Option Exercise and Lending Commitment Agreement by and between Nextel Not
and Digital Radio, L.L.C., dated as of June 16, 1997 (filed on July 9, applicable
1997 as Exhibit 10.1 to the July 9 Form 8-K and incorporated herein by
reference).
4.37 -- Option Purchase Agreement by and among Nextel and Unrestricted Not
Subsidiary Funding Company and Option Acquisition, L.L.C., dated as of applicable
June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the July 9 Form
8-K and incorporated herein by reference).
4.38 -- Option Agreement (First New Option) by and between Option Acquisition, Not
L.L.C. and Nextel, dated as of June 18, 1997 (filed on July 9, 1997 as applicable
Exhibit 10.4 to the July 9 Form 8-K and incorporated herein by
reference).
4.39 -- Option Agreement (Second New Option) by and between Option Acquisition, Not
L.L.C. and Nextel, dated as of June 18, 1997 (filed on July 9, 1997 as applicable
Exhibit 10.4 to the July 9 Form 8-K and incorporated herein by
reference).
4.40 -- Certificate of Designation for 13% Series D Exchangeable Preferred Not
Stock (filed on July 22, 1997 as Exhibit 4.1 to Nextel's Current Report applicable
on Form 8-K dated July 21, 1997 and incorporated herein by reference).
4.41 -- Amendment No. 2 dated as of June 3, 1997 to the Bank Credit Agreement Not
(filed on August 5, 1997 as Exhibit 4.41 to Nextel's Registration applicable
Statement No. 333-28461 on Form S-3 (the "August S-3 Registration
Statement") and incorporated herein by reference).
4.42 -- Amendment No. 2 dated as of June 3, 1997 to the Vendor Credit Agreement Not
(filed on August 5, 1997 as Exhibit 4.42 to the August S-3 Registration applicable
Statement and incorporated herein by reference).
4.43 -- Amendment No. 3 dated as of August 20, 1997, to the Bank Credit Not
Agreement (filed on September 5, 1997 as Exhibit 99.1 to Nextel's applicable
Current Report on Form 8-K dated September 5, 1997 (the "September 5
Form 8-K") and incorporated herein by reference).
4.44 -- Amendment No. 3 dated as of August 29, 1997, to the Vendor Credit Not
Agreement (filed on September 5, 1997 as Exhibit 99.2 to the September applicable
5 Form 8-K and incorporated herein by reference).
4.45 -- Second Secured Vendor Financing Agreement dated as of August 29, 1997 Not
among Nextel, Nextel Finance Company and the other Restricted Companies applicable
thereto and the Vendor Lenders thereto (the "Second Secured Vendor
Financing Agreement") (filed as Exhibit 99.3 to the September 5 Form
8-K and incorporated herein by reference).
4.46 -- Amendment No. 4 dated as of September 10, 1997 to the Bank Credit Not
Agreement (filed on September 22, 1997, as Exhibit 4.2 to Nextel's applicable
Current Report on Form 8-K dated September 22, 1997 (the "September 22
Form 8-K") and incorporated herein by reference).
4.47 -- Amendment No. 4 dated as of September 10, 1997 to the Vendor Credit Not
Agreement (filed on September 22, 1997, as Exhibit 4.3 to the September applicable
22 Form 8-K and incorporated herein by reference).
4.48 -- Amendment No. 1 dated as of September 10, 1997 to the Second Vendor Not
Financing Agreement (filed on September 22, 1997 as Exhibit 4.4 to the applicable
September 22 Form 8-K and incorporated herein by reference).
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------ ----------------------------------------------------------------------- ----------
<C> <S> <C> <C>
4.49 -- Indenture between Nextel and Harris Trust and Savings Bank, as Trustee, Not
dated September 17, 1997 (filed on September 22, 1997 as Exhibit 4.1 to applicable
the September 22 Form 8-K and incorporated herein by reference).
*4.50 -- Form of Nextel's 13% Series D Exchangeable Preferred Stock Certificate. Not
applicable
*4.51 -- Registration Rights Agreement by and among Nextel, Morgan Stanley & Co. Not
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation applicable
dated July 21, 1997.
*4.52 -- Form of Indenture related to the Exchange Debentures (the "Exchange Not
Debenture Indenture"). applicable
4.53 -- Form of Note to be issued pursuant to the Exchange Debenture Indenture Not
(included in Exhibit 4.52). applicable
4.54 -- Indenture between Nexel and Harris Trust and Savings Bank, as Trustee, Not
daed as of October 22, 1997 (filed on October 23, 1997 as Exhibit 4.1 applicable
to Nextel's Current Report on Form 8-K dated October 23, 1997 (the
"October 23 Form 8- K") and incorporated herein by reference).
4.55 -- Amendment No. 5 dated as of October 9, 1997 to the Bank Credit Not
Agreement (filed on October 23, 1997 as Exhibit 4.2 to the October 23 applicable
Form 8-K and incorporated herein by reference).
4.56 -- Amendment No. 5 dated as of October 9, 1997 to the Vendor Credit Not
Agreement (filed on October 23, 1997 as Exhibit 4.3 to the October 23 applicable
Form 8-K and incorporated herein by reference).
4.57 -- Amendment No. 2 dated as of October 9, 1997 to the Second Vendor Not
Financing Agreement (filed on October 23, 1997 as Exhibit 4.4 to the applicable
October 23 Form 8-K and incorporated herein by reference).
+5 -- Opinion of Jones, Day, Reavis & Pogue re validity.
+8 -- Opinion of Jones, Day, Reavis & Pogue re tax matters.
*12 -- Statement re computation of earnings to fixed charges. Not
applicable
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibits 5 and 8).
+23.2 -- Consent of Deloitte & Touche LLP.
*24 -- Powers of Attorney.
+99 -- Letter of Transmittal and Notice of Guaranteed Delivery. Not
applicable
</TABLE>
- ---------------
* Previously filed.
+ Filed herewith.
<PAGE> 1
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
(404) 521-3939
November 11, 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 515,167
shares of Series D Exchangeable Preferred Stock, $.01 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. 333-39411) (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 Registration Statement, 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 "Legal
Matters" in the Prospectus constituting part of the Registration Statement.
Sincerely,
/s/ JONES, DAY, REAVIS & POGUE
Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 8
JONES, DAY, REAVIS & POGUE
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, Georgia 30308-3242
November 11, 1997
Nextel Communications, Inc.
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Re: EXCHANGE OFFER FOR SERIES D EXCHANGEABLE PREFERRED STOCK
Dear Sirs:
We have acted as counsel to Nextel Communications, Inc. in connection with
the Registration Statement on Form S-4, to which this opinion appears as Exhibit
8, which includes the Prospectus of the Company relating to the Exchange Offer
(as such term is defined in the Prospectus). Unless otherwise indicated, any
capitalized terms used herein shall have the same meanings that such terms have
in the Prospectus.
On the basis of the foregoing and upon consideration of applicable law, we
are of the opinion that, subject to the qualifications stated therein, the
discussion as to the United States federal income tax matters set forth under
the caption "Certain United States Federal Income Tax Considerations" in the
Prospectus contained in the Registration Statement summarizes the principal
United States federal income tax consequences relevant to the Exchange Offer and
to purchase, ownership and disposition of the Exchange Preferred Stock and the
Exchange Debentures.
We hereby consent to the filing with the Securities and Exchange Commission
of this opinion as an exhibit to the Registration Statement and to the reference
to this firm in the Prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
Jones, Day, Reavis & Pogue
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-39411 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
November 11, 1997
<PAGE> 1
EXHIBIT 99
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE SHARES OF ITS
13% SERIES D EXCHANGEABLE PREFERRED STOCK,
MANDATORILY REDEEMABLE 2009
(EXCHANGEABLE AT THE OPTION OF THE COMPANY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING SHARES OF ITS
13% SERIES D EXCHANGEABLE PREFERRED STOCK,
MANDATORILY REDEEMABLE 2009
(EXCHANGEABLE AT THE OPTION OF THE COMPANY)
OF
NEXTEL COMMUNICATIONS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON DECEMBER 18, 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
Deliver to:
First Chicago Trust Company of New York, Transfer Agent
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Suite 4660 Suite 4680 Tenders & Exchanges
P.O. Box 2569 14 Wall Street c/o The Depository Trust Company
Jersey City, NJ 07303-2569 8th Floor 55 Water Street
New York, NY 10005 DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that the undersigned has received and reviewed
the Prospectus dated November 12, 1997 (the "Prospectus") of Nextel
Communications, Inc. (the "Company") and this Letter of Transmittal (the "Letter
of Transmittal"), which together constitute (i) the Company's offer (the
"Exchange Offer") to exchange its newly issued 13% Series D Exchangeable
Preferred Stock, par value $.01 per share (the "Exchange Preferred Stock"),
which has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for its outstanding 13% Series D Exchangeable Preferred Stock, par
value $.01 per share (the "Old Preferred Stock"), of which 515,167 shares are
issued and outstanding, on a share for share basis. Other capitalized terms used
but not defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by a Holder (as defined
herein below) of Old Preferred Stock either (i) if certificates are to be
forwarded herewith or (ii) if a tender of certificates for Old Preferred Stock,
if available, is to be made by book-entry transfer to the account maintained by
the Transfer Agent at the Depository Trust Company (the "DTC") pursuant to the
procedures set forth in "The Exchange Offer --
<PAGE> 2
Book-Entry Transfer" section of the Prospectus. Holders of Old Preferred Stock
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their Old
Preferred Stock into the Transfer Agent's account at DTC (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal to
the Transfer Agent on or prior to the Expiration Date, must tender their Old
Preferred Stock according to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1. Delivery of Documents to DTC does not constitute
delivery to the Transfer Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Preferred Stock is registered on the books of the Company or any
other person who has obtained a properly completed stock power from the
registered Holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Old
Preferred Stock must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE PROVIDING ANY
INFORMATION BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL
MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND LETTER OF TRANSMITTAL SHOULD BE DIRECTED TO THE TRANSFER
AGENT AT (201) 938-7899 OR AT ITS ADDRESS SET FORTH ABOVE.
2
<PAGE> 3
List below the shares of Exchange Preferred Stock to which this Letter of
Transmittal relates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
DESCRIPTION OF OLD PREFERRED STOCK
- ----------------------------------------------------------------------------------------------
AGGREGATE
NUMBER OF
NAME(S) AND ADDRESS(ES) SHARES NUMBER OF
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY SHARES
(PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S) TENDERED*
- ----------------------------------------------------------------------------------------------
<S> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------
* Unless indicated in the column labeled "Number of Shares Tendered," any tendering Holder
of Old Preferred Stock will be deemed to have tendered the entire aggregate number of
shares represented by the column labeled "Aggregate Number of Shares Represented by
Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and number of shares
on a separate signed schedule and affix the list to this Letter of Transmittal.
- ----------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE TRANSFER AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
-------------------------------------------
Account Number:
----------------------------------------------------------
Transaction Code Number:
-------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Preferred Stock:
-----------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------
Window Ticket Number (if available):
------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
-------------------
3
<PAGE> 4
-------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY (i) if certificates for Old Preferred Stock not
tendered, or Exchange Preferred Stock issued in exchange for Old Preferred
Stock accepted for exchange, is to be issued in the name of someone other
than the undersigned, or (ii) if Old Preferred Stock tendered by
book-entry transfer which is not exchanged is to be returned by credit to
an account maintained at DTC.
Issue certificate(s) to:
Name:
--------------------------------------------------------------------
(PLEASE PRINT)
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
(INCLUDE ZIP CODE)
-----------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
(Complete Substitute Form W-9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old Preferred Stock not
tendered, or Exchange Preferred Stock issued in exchange for Old Preferred
Stock accepted for exchange, is to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown
above.
Mail and deliver certificate(s) to:
Name:
--------------------------------------------------------------------
(PLEASE PRINT)
Address:
-----------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
-------------------------------------------------------------------------
4
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the number of shares of Old Preferred Stock
indicated above. Subject to and effective upon the acceptance for exchange of
the number of shares of Old Preferred Stock tendered in accordance with this
Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to the Old
Preferred Stock tendered hereby. The undersigned hereby irrevocably constitutes
and appoints the Transfer Agent as its agent and attorney-in-fact (with full
knowledge that the Transfer Agent also acts as the agent of the Company) with
respect to the tendered Old Preferred Stock with full power of substitution to
(i) deliver certificates for such Old Preferred Stock, or transfer ownership of
such Old Preferred Stock on the account books maintained by DTC, to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (ii) present such Old Preferred Stock for transfer
on the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Preferred Stock, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Preferred Stock
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that (i) any Exchange Preferred Stock
acquired in exchange for Old Preferred Stock tendered hereby will have been
acquired in the ordinary course of business of the person receiving such
Exchange Preferred Stock, whether or not such person is the undersigned, (ii)
neither the undersigned nor any such other person is engaging in or intends to
engage in a distribution of the Exchange Preferred Stock, (iii) neither the
Holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Preferred Stock and
(iv) neither the Holder nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the
Exchange Preferred Stock issued in exchange for the Old Preferred Stock pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Preferred Stock is
acquired in the ordinary course of such Holder's business and such Holder is not
engaging in and do not intend to engage in a distribution of the Exchange
Preferred Stock and has no arrangement or understanding with any person to
participate in a distribution of such Exchange Preferred Stock. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange
Preferred Stock. If the undersigned is a broker-dealer that will receive
Exchange Preferred Stock for its own account in exchange for Old Preferred Stock
that was acquired as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), it acknowledges that it will
deliver a prospectus in connection with any resale of such Exchange Preferred
Stock; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. If the undersigned is a Participating
Broker-Dealer, that during the 90-day period following the Expiration Date (or
such longer applicable period if use of the Prospectus has been suspended by the
Company) it agrees that it will contact counsel to the Placement Agents at (212)
848-7961 on a weekly basis to confirm the availability of the Prospectus for
delivery in connection with such resales.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Transfer Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Preferred
Stock tendered hereby.
5
<PAGE> 6
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Preferred Stock when, as and if the Company has
given oral or written notice thereof to the Transfer Agent.
If any tendered Old Preferred Stock is not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such unaccepted Old
Preferred Stock will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Preferred Stock pursuant to
the procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the Exchange Preferred Stock issued in
exchange for the Old Preferred Stock accepted for exchange and return any Old
Preferred Stock not tendered or not exchanged in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the Exchange Preferred Stock issued in
exchange for the Old Preferred Stock accepted for exchange and any certificates
for Old Preferred Stock not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s)). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the Exchange Preferred Stock issued in exchange
for the Old Preferred Stock accepted for exchange in the name(s) of, and return
any Old Preferred Stock not tendered or not exchanged and send said certificates
to, the person(s) so indicated. The undersigned recognizes that the Company has
no obligation pursuant to the "Special Payment Instructions" and "Special
Delivery Instructions" to transfer any Old Preferred Stock from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the Old Preferred Stock so tendered.
Holders of Old Preferred Stock who wish to tender their Old Preferred Stock
and (i) whose Old Preferred Stock is not immediately available, or (ii) who
cannot deliver their Old Preferred Stock, this Letter of Transmittal or any
other documents required hereby to the Transfer Agent prior to the Expiration
Date (or who cannot comply with the book-entry transfer procedures on a timely
basis), may tender their Old Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of this Letter of Transmittal.
6
<PAGE> 7
- --------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
OLD PREFERRED STOCK IS BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
---------------------------------------------------------- ---------------------
(Date)
---------------------------------------------------------- ---------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
</TABLE>
Area Code and Telephone Number(s):
-----------------------------------------
Tax Identification or Social Security Number(s):
---------------------------
The above lines must be signed by the registered Holder(s) of Old
Preferred Stock as their name(s) appear(s) on the certificate for the Old
Preferred Stock or by person(s) authorized to become registered Holder(s)
by a properly completed stock power from the registered Holder(s), a copy
of which must be transmitted with this Letter of Transmittal. If Old
Preferred Stock to which this Letter of Transmittal relates is held of
record by two or more joint Holders, then all such Holders must sign this
Letter of Transmittal. If signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, then such
person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 4 regarding the completion
of this Letter of Transmittal.
Name(s):
---------------------------------------------
---------------------------------------------
(Please Print)
Capacity:
--------------------------------------------
Address:
--------------------------------------------
--------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by
an Eligible Institution
(as hereinafter defined):
-------------------------------------------------
(If required by Instruction 4) (Authorized Signature)
---------------------------------------------------------------------------
(Title)
---------------------------------------------------------------------------
(Name of Firm)
Dated: 199
----------------------------------------. --
- --------------------------------------------------------------------------------
7
<PAGE> 8
Please complete Substitute Form W-9 below.
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY SIGNING ---------------------------------
AND DATING BELOW Social Security Number or
Employer Identification Number
---------------------------------------------------------------------------
Department of the Treasury PART 2 -- Check the box if you are exempt from backup withholding. [ ]
Internal Revenue Service
---------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the
IDENTIFICATION NUMBER (TIN) number shown on this form is my correct taxpayer identification number (or
CERTIFICATION I am waiting for a number to be issued to me) and (2) I am not subject to
backup withholding either because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends or the IRS has
notified me that I am no longer subject to backup withholding. (You must
cross out Item (2) above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting interest or
dividends on your return.)
SIGNATURE DATE
--------------------------------------- ----------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Center or Social Security Administration Office or (b) I intend to mail or
deliver an application in the near future. I understand that if I do not provide
a taxpayer identification number within sixty (60) days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
<TABLE>
<S> <C>
- ---------------------------------------------------- ------------------------------------
Signature Date
</TABLE>
8
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD PREFERRED STOCK. The
tendered Old Preferred Stock or any confirmation of a book-entry transfer (a
"Book-Entry Confirmation"), as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof and any other documents
required by this Letter of Transmittal must be received by the Transfer Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. THE METHOD OF DELIVERY OF THE TENDERED OLD PREFERRED STOCK,
THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE TRANSFER
AGENT IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE
PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR
CONFIRMED BY THE TRANSFER AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE TRANSFER AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD PREFERRED STOCK
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock is not immediately available, or (ii) who cannot deliver their
Old Preferred Stock, this Letter of Transmittal or any other documents required
hereby to the Transfer Agent prior to the Expiration Date or (iii) who are
unable to complete the procedure for book-entry transfer on a timely basis, must
tender their Old Preferred Stock according to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution; (ii) prior to the Expiration Date,
the Transfer Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Preferred Stock, the certificate number or numbers of such Old
Preferred Stock and the number of shares of Old Preferred Stock tendered,
stating that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal (or facsimile hereof) together with the certificate(s) representing
the Old Preferred Stock or a Book-Entry Confirmation and any other required
documents will be deposited by the Eligible Institution (as hereinafter defined)
with the Transfer Agent; and (iii) such properly completed and executed Letter
of Transmittal (or facsimile thereof), as well as all other documents required
by this Letter of Transmittal and the certificate(s) representing all tendered
Old Preferred Stock (or a Book-Entry Confirmation) in proper form for transfer,
must be received by the Transfer Agent within five New York Stock Exchange
trading days after the Expiration Date, all as provided in the Prospectus under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures." Any Holder
of Old Preferred Stock who wishes to tender his Old Preferred Stock pursuant to
the guaranteed delivery procedures described above must ensure that the Transfer
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Transfer Agent, a Notice
of Guaranteed Delivery will be sent to Holders who wish to tender their Old
Preferred Stock according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Preferred Stock and withdrawal of tendered
Old Preferred Stock will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Preferred Stock not properly tendered or any Old
Preferred Stock the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Old Preferred
Stock. The Company's interpretation of the terms and conditions of the Exchange
Offer, including the instructions in this Letter of Transmittal and those set
forth in the Prospectus under the caption "The Exchange Offer -- Conditions,"
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection
9
<PAGE> 10
with tenders of Old Preferred Stock must be cured within such time as the
Company shall determine. Neither the Company, the Transfer Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Preferred Stock, nor shall any of them incur any
liability for failure to give such notification. Tenders of Old Preferred Stock
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Old Preferred Stock received by the Transfer Agent
that is not properly tendered and as to which the defects or irregularities have
not been cured or waived will be returned by the Transfer Agent to the tendering
Holders of Old Preferred Stock, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Preferred Stock may tender such
Old Preferred Stock in the Exchange Offer. Any beneficial holder of Old
Preferred Stock who is not the registered Holder and who wishes to tender should
arrange with the registered Holder to execute and deliver this Letter of
Transmittal on his behalf or must, prior to completing and executing this Letter
of Transmittal and delivering his Old Preferred Stock, either make appropriate
arrangements to register ownership of the Old Preferred Stock in such holder's
name or obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership of Old Preferred Stock may take considerable
time.
3. PARTIAL TENDERS. If less than the entire number of shares of Old
Preferred Stock represented by a stock certificate is tendered, the tendering
Holder should fill in the number of shares tendered in the third column of the
box entitled "Description of Old Preferred Stock" above. The entire number of
shares of Old Preferred Stock set forth on the certificate delivered to the
Transfer Agent will be deemed to have been tendered unless otherwise indicated.
If the entire number of shares of all Old Preferred Stock is not tendered, then
an Old Preferred Stock certificate for the number of shares of Old Preferred
Stock not tendered and a certificate or certificates representing Exchange
Preferred Stock issued in exchange for any Old Preferred Stock accepted will be
sent to the Holder at his or her registered address, unless a different address
is provided in the appropriate box on this Letter of Transmittal, promptly after
the Old Preferred Stock is accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Old Preferred Stock tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Preferred Stock without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Preferred Stock tendered and the certificate
or certificates for Exchange Preferred Stock issued in exchange therefor are to
be issued (or any untendered shares of Old Preferred Stock are to be reissued)
to the registered Holder, the said Holder need not and should not endorse any
tendered Old Preferred Stock, nor provide a separate stock power. In any other
case, such Holder must either properly endorse the Old Preferred Stock tendered
or transmit a properly completed separate stock power with this Letter of
Transmittal, with the signatures on the endorsement or stock power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Preferred Stock listed,
such Old Preferred Stock must be endorsed or accompanied by appropriate stock
powers, in each case signed as the name of the registered Holder or Holders
appears on the Old Preferred Stock.
If this Letter of Transmittal (or facsimile hereof) or any Old Preferred
Stock or stock powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Preferred Stock or signatures on stock powers required
by this Instruction 4 must be guaranteed by an Eligible Institution.
10
<PAGE> 11
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Preferred Stock tendered
herewith and such Holder(s) have not completed the box set forth herein entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions," or (b) if such Old Preferred Stock is tendered for the account of
an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Preferred Stock or substitute Old Preferred Stock for shares not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Preferred Stock pursuant to the Exchange
Offer. If, however, certificates representing Exchange Preferred Stock or Old
Preferred Stock (for shares not tendered or accepted for exchange) are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered Holder of the Old Preferred Stock tendered hereby, or if
tendered Old Preferred Stock is registered in the name of any person other than
the person signing this Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Old Preferred Stock pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or on any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Preferred Stock listed in this
Letter of Transmittal.
7. FORM W-9. Any Holder who tenders his Old Preferred Stock is required to
provide the Transfer Agent with a correct Taxpayer Identification Number ("TIN")
on the Form W-9 which is enclosed herewith. If such Holder is an individual, the
TIN is his social security number. Failure to provide the information on the
Form W-9 may subject the surrendering Holder to 31% federal income tax
withholding on certain payments made to Holders of the Exchange Preferred Stock.
Exempt Holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. For additional information in this regard, please refer to the
enclosed Guidelines for Certification of TIN on Substitute Form W-9. In order to
satisfy the Transfer Agent that a foreign individual qualifies as an exempt
recipient, the Holder must submit a Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Transfer Agent.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer, set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions," in the case of
any Old Preferred Stock tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD PREFERRED STOCK. Any tendering
Holder whose Old Preferred Stock has been mutilated, lost, stolen or destroyed
should contact the Transfer Agent at the address indicated herein for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Transfer Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
11
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<S> <C> <C>
- ------------------------------------------------- --------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF--
- ------------------------------------------------- --------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if
combined funds, any one of the
individuals(1)
3. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
4. (a) The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
(b) So-called trust account that is not a The actual owner(1)
legal or valid trust under State law
5. Sole proprietorship account The owner(3)
- ------------------------------------------------- --------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF--
- ------------------------------------------------- --------------------------------------------
6. A valid trust, estate, or pension trust The legal entity (Do not furnish the
identifying number of the personal
representative or trustee unless the legal
entity itself is not designated in the
account title.)(4)
7. Corporate account The corporation
8. Religious, charitable, or educational The organization
organization account
9. Partnership The partnership
10. Association, club or other tax-exempt The organization
organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture The public entity
in the name of a public entity (such as a
State or local government, school district,
or prison) that receives agricultural
program payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
12
<PAGE> 13
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- A person registered under the Investment Advisors Act of 1940 who
regularly acts as a broker.
Payments of dividends not generally subject to backup withholding include
the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments described in Section 404(k) made by an employee stock ownership
plan.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
13
<PAGE> 14
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE OLD PREFERRED OLD PREFERRED
SURRENDERED STOCK TENDERED STOCK ACCEPTED
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Delivery Prepared by:
-----------------------------------------------------------
Checked by:
---------------------------------------------------------------------
Date:
---------------------------------------------------------------------------
14
<PAGE> 15
NOTICE OF GUARANTEED DELIVERY FOR
NEXTLY COMMUNICATIONS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Nextel Communications, Inc. (the "Company") made pursuant to
the Prospectus, dated November 12, 1997 (the "Prospectus"), if certificates for
Old Preferred Stock of the Company are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Transfer Agent prior to 5:00
p.m, New York City time, on the Expiration Date of the Exchange Offer. Such form
may be delivered or transmitted by facsimile transmission, mail, overnight
courier or hand delivery to First Chicago Trust Company of New York (the
"Transfer Agent") as set forth below. In addition, in order to utilize the
guaranteed delivery procedure to tender Old Preferred Stock pursuant to the
Exchange Offer, a completed, signed and dated Letter of Transmittal (or
facsimile thereof) must also be received by the Transfer Agent prior to 5:00
p.m., New York City time, on the Expiration Date. Capitalized terms not defined
herein are defined in the Prospectus.
Deliver to:
First Chicago Trust Company of New York, Transfer Agent
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Suite 4660 Suite 4680 Tenders & Exchange
P.O. Box 2569 14 Wall Street c/o The Depository Trust Company
Jersey City, NJ 07303-2569 8th Floor 55 Water Street
New York, NY 10005 DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Facsimile
(For Eligible Institutions
Only)
201-222-4720 or
201-222-4721
Confirm by Telephone:
202-222-4707
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery.
1
<PAGE> 16
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the number of shares of Old Preferred Stock set forth below, pursuant to
the guaranteed delivery procedures described in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. By so
tendering, the undersigned hereby does make, at and as of the date hereof, the
representations and warranties of a tendering Holder of Old Preferred Stock set
forth in the Letter of Transmittal.
<TABLE>
<S> <C>
Number of Shares of Old Preferred If Old Preferred Stock will be delivered by
Stock Tendered: book- entry transfer to Depository Trust
Company, provide account number:
- --------------------------------------------- ---------------------------------------------
Certificate Nos. (if available): DTC Account Number:
- --------------------------------------------- ---------------------------------------------
Total Number of Shares Represented by Old
Preferred Stock Certificate(s):
- ---------------------------------------------
</TABLE>
2
<PAGE> 17
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
- ---------------------------------------------------------------- ----------------
(Date)
- ---------------------------------------------------------------- ----------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number:
--------------------------------
</TABLE>
Must be signed by the Holder(s) of Old Preferred Stock as their name(s)
appear(s) on certificates for Old Preferred Stock or by person(s) authorized to
become registered Holder(s) by endorsement and documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below:
(Please print name(s) and addresses)
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
3
<PAGE> 18
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the number
of shares of Old Preferred Stock tendered hereby in proper form for transfer, or
timely confirmation of the book-entry transfer of such Old Preferred Stock into
the Transfer Agent's account at DTC pursuant to the procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus,
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantee and any
other documents required by the Letter of Transmittal, will be received by the
Transfer Agent at the address set forth above, within five New York Stock
Exchange trading days after the Expiration Date.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- --------------------------------------------
Address Title
- -------------------------------------------- Name:
Zip Code ---------------------------------------
(Please Type or Print)
Area Code and Telephone No.: Dated:
---------------- --------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD PREFERRED STOCK WITH THIS FORM.
CERTIFICATES FOR OLD PREFERRED STOCK SHOULD ONLY BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
4
