<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
<TABLE>
<C> <S>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-19656
</TABLE>
NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3939651
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1505 FARM CREDIT DRIVE, MCLEAN, VA 22102
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (703) 394-3000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON
STOCK, $0.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated herein by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [ ]
Based on the closing sales price on March 1, 1997, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$2,218,713,158.
On March 1, 1997 the number of shares outstanding of the registrant's Class
A Common Stock and Class B non-voting Common Stock, $0.001 par value was
225,230,943 (including 1,610,868 shares held in treasury) and 17,830,000,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the Annual Meeting of
Stockholders scheduled to be held on or about May 15, 1997 are incorporated in
Part III, Items 10, 11, 12 and 13.
================================================================================
<PAGE> 2
NEXTEL COMMUNICATIONS, INC.
PART I
ITEM 1. BUSINESS
INTRODUCTION
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. ("Nextel" or the "Company"), effective
upon the consummation of the Motorola Transaction. References herein to Nextel
or the Company 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 the Company or 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 the Company's Class A Common Stock, par value
$.001 per share (the "Class A Common Stock"), by Digital Radio L.L.C. (the
"McCaw Investor") on April 5, 1995, an additional acquisition of 8,163,265
shares of the Company's Class A Convertible Redeemable Preferred Stock, par
value $.01 per share (the "Class A Preferred Stock") and 82 shares of the
Company'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").
GENERAL
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, the Company'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
virtually 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 remaining 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 currently is able to access mobile telephone services, two-way
dispatch, paging and alphanumeric short-messaging service, and in the future is
expected to be able to access data transmission. The Company 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 December 31, 1996,
2
<PAGE> 3
Nextel's Digital Mobile networks were operating in major metropolitan market
areas throughout the United States that collectively accounted for approximately
50% of the total United States population.
Prior to the second quarter of 1996, the Company implemented its Digital
Mobile networks in its market areas using Motorola's first generation iDEN
technology. During that time frame, the Company encountered certain technology
and system performance issues relating primarily to the voice transmission
quality of the mobile telephone service. In response to these issues, the
Company and Motorola took action on several fronts to address system performance
issues in general, and voice transmission quality concerns in particular. See
"Nextel's Digital Mobile Networks -- Experience with First Generation iDEN
Systems Implementation." Additionally, the Company, 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. The Company 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 area late in the third quarter of 1996.
Subsequently, Nextel commenced full-scale commercial launches of the
Reconfigured iDEN Digital Mobile networks in the Atlanta, Boston, Denver,
Detroit and Las Vegas metropolitan market areas and in the Northern California
market area, in each case accompanied by an aggressive, regionally focused
marketing campaign.
Recently, Nextel announced the introduction of its national digital network
and indicated that it will not charge roaming fees for its customers traveling
anywhere on the national digital network. Nextel's national digital network,
which covers major metropolitan areas representing approximately 50% of the
United States population, will enable Nextel's mobile telephone customers to
"roam" throughout the markets covered by the network at the same airtime rate
charged in their home markets. The Nextel national digital network provides the
same mobile telephone functionality and related features offered to customers in
their home markets and eliminates the complex dialing procedures, access fees
and higher per-minute airtime rates often encountered by "roaming" customers of
cellular providers. Additionally, the Company recently announced a new billing
policy, pursuant to which Nextel will bill its mobile telephone service
customers based on the actual number of seconds of airtime used after the first
minute, in contrast to the cellular industry practice of rounding all calls up
to the next minute.
Over the three years ended December 31, 1996, the number of subscriber
units in service on Nextel's Digital Mobile network has increased substantially,
reflecting acquisitions, the commencement of Digital Mobile network service in
certain markets and increased sales in markets in which Digital Mobile network
services are provided. As a result, the number of subscriber units in service on
Nextel's Digital Mobile network increased from 13,500 at December 31, 1994, to
85,000 at December 31, 1995 and to 300,300 at December 31, 1996. See also
"Nextel's Existing Analog SMR Operations." Nextel's business and marketing
strategy for its Digital Mobile networks continues to be based on, and reflect,
a principal focus on multi-service business users in its markets with Digital
Mobile networks.
During 1996 and into early 1997, Nextel also significantly expanded its
operations and investments involving wireless communications service providers
outside the United States, which are conducted under or are coordinated by or
through McCaw International, Ltd. ("McCaw International"), an indirect, wholly
owned subsidiary of Nextel. With the exception of the equity interests held by
Nextel and by McCaw International in Clearnet Communications, Inc. ("Clearnet"),
a major provider of analog and digital SMR wireless communications services
throughout Canada, and the holder of one of the two nationwide personal
communications services ("PCS") licenses awarded in Canada, McCaw
International's subsidiaries or other entities in which McCaw International
holds equity or equivalent interests own and operate wireless communications
systems in Latin America and Asia. McCaw International's operating companies
currently provide a variety of analog or digital wireless communications
services (including analog SMR dispatch and interconnect, paging and
alphanumeric short-messaging and digital mobile telephone services) in certain
major metropolitan areas in Argentina, Brazil, Mexico, the Philippines and
Shanghai, China.
Nextel's principal executive and administrative facility is located at 1505
Farm Credit Drive, McLean, Virginia 22102, and its telephone number at that
location is (703) 394-3000.
3
<PAGE> 4
BUSINESS STRATEGY
Nextel's principal business objective is to become a leading provider of
wireless communications services in major markets throughout the United States
and to become a major participant in the global wireless communications business
by making selective international investments in wireless communications
services companies in emerging markets with strong long-term economic growth
prospects. To accomplish its objective in the United States, the Company intends
to capitalize upon the opportunity made possible by the February 13, 1991
unanimous FCC decision approving the Company's proposal to create Digital Mobile
networks within its six then-existing markets. The Company's initial strategy
was to consolidate the fragmented SMR industry in the largest markets in the
United States through the acquisition of SMR systems that had achieved minimum
FCC loading requirements so as to permit aggregation of frequencies in a single
market. See "-- Regulation." The Company has also acquired spectrum through
mergers and acquisitions as well as by obtaining licenses from the FCC. More
recently, the Company's efforts have focused on the development and deployment
of Digital Mobile networks to replace its traditional analog SMR networks.
Customers of the Company's Digital Mobile networks currently are able to access
mobile telephone, two-way dispatch, paging and alphanumeric short-messaging
services using a single, multi-function subscriber unit. In the future, the
Digital Mobile network service offerings also are expected to include data
transmission capabilities.
The Company currently is considering adopting and implementing a newly
developed revised business plan (the "Revised Business Plan"), which would
involve a more accelerated and extensive deployment during 1997 and 1998 of the
Reconfigured iDEN technology platform throughout the Company's existing and
contemplated Digital Mobile networks (including primary connecting routes
between affected markets) in the United States. The Company anticipates that
deployment of Digital Mobile networks utilizing the Reconfigured iDEN technology
platform will enable it to provide potential customers in its markets with an
integrated package of wireless communications services competitive with the
service packages being offered currently or expected to be offered by other
providers of wireless communications services in those markets. The Revised
Business Plan does not contemplate a significant increase in the population
coverage to be achieved by the Digital Mobile networks in operation at the end
of 1998, as compared to the population coverage targets reflected in its current
business plan (the "Existing Business Plan"). However, there are significant
areas of difference between the Existing Business Plan and the Revised Business
Plan in terms of the geographical coverage objectives, the perceived customer
demands for and utilization of the relevant wireless services and the
positioning of the Company's products and services relative to those of
competing wireless communications service providers. The Company believes that
the implementation of its Revised Business Plan will better position Nextel both
to achieve its strategic objectives and to prepare for emerging competition in
the wireless communications industry, especially from certain current operators
that, on their existing cellular frequencies or on other frequencies acquired by
such operators or their affiliates in the recently concluded PCS spectrum
auctions, 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. The Company 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 the
Company's industry position once the Company successfully concludes its
nationwide Digital Mobile network build-out plan and develops a sufficient
customer base in its markets. See "-- Revised Business Plan."
Although the Company already has taken a number of significant steps in
anticipation of implementing the Revised Business Plan, and further actions
currently are underway to reach that objective, several of the actions that must
be taken to enable the Company to implement the Revised Business Plan are
dependent on certain actions by or responses from third parties, which as yet
have not been secured. See "-- Revised Business Plan" and "Risk
Factors -- Nextel to Require Additional Financing" and "-- Forward-Looking
Statements."
4
<PAGE> 5
CURRENT WIRELESS COMMUNICATIONS INDUSTRY
Today's wireless communications industry was created by the FCC in 1970 to
provide high-quality, high-capacity communications services to vehicle-mounted
and hand-held portable telephones and other two-way radio units. Toward this
end, the FCC reallocated 115 MHz of radio spectrum in the 800/900 MHz bands from
the federal government and UHF television to land mobile service use. The FCC
allocated initially 40 MHz for cellular service (which were allocated in equal
blocks to two cellular operators in each Metropolitan Statistical Area ("MSA")
or Rural Statistical Area ("RSA")) and 30 MHz for private radio services,
including SMR. The FCC later increased the allocations to 50 MHz for cellular
service and 46 MHz for private radio services due to capacity constraints. The
remaining 19 MHz were divided among six different services. Because of
regulatory delays, the first commercial cellular systems were not operational
until 1983. Since then, however, growth in the industry has been rapid, with
approximately 44,000,000 mobile telephone units (consisting of analog cellular,
digital cellular and PCS units) in service at December 31, 1996. The first SMR
systems became operational in 1974, and SMR units in service had grown to
approximately 2,300,000 by December 31, 1996. The number of other private radio
users is estimated to be approximately 16,500,000 as of December 31, 1996.
SMR AND CELLULAR/PCS TELEPHONY
The cellular telephone industry has been a regulated duopoly. The FCC
awarded only two licenses to provide cellular service in the service area of any
given cellular MSA or RSA. Additionally, the FCC has allocated 120 MHz spectrum
in the 1.8-2.2 GHz band for the provision of PCS, which include mobile wireless
communications services similar to those provided over Nextel's Digital Mobile
networks. The FCC has awarded three 30 MHz and three 10 MHz licenses for this
spectrum on either a Major Trading Area ("MTA") or a Basic Trading Area ("BTA")
(each as defined in the Rand McNally Commercial Atlas) market definition through
a competitive bidding process. Since August 10, 1996, SMR operators have been
subject to the same common carrier obligations as cellular and PCS operators,
although the amount of spectrum assigned to a single SMR licensee is less than
that assigned to cellular and PCS licensees. See "-- Regulation." Within the
limitations of available spectrum and technology, SMR operators are authorized
to provide mobile communications services to business and individual users,
including mobile telephone, two-way dispatch, paging and mobile data services.
In the past, however, SMR operators have generally not been able to provide
mobile telephone service competitive with that provided by cellular operators
because of various factors affecting SMR system capacity and quality. The
primary factors affecting capacity include: the smaller portion of the radio
spectrum allocated to SMR; regulations and procedures that initially served to
spread ownership of SMR licenses among a large number of operators in each
market, thereby further limiting the amount of SMR spectrum available to any
particular operator, and traditional SMR technology, which employs analog
transmission and a single site, high-power transmitter configuration, thus
precluding the use of any given SMR frequency by more than one caller at a time
within a given licensed service area. Partially as a result of these capacity
constraints, SMR operators traditionally have emphasized two-way dispatch
service, which involves shorter duration communications than mobile telephone
service and places less demand on system capacity.
The traditional analog SMR market, therefore, has been oriented largely to
customers such as contractors, service companies and delivery services that have
significant field operations and need to provide their personnel with the
ability to communicate directly with one another, either on a one-to-one or
one-to-many basis. As a result of the foregoing, the broader market of wireless
communications users that are primarily interested in mobile telephone service
has to date been served only on a limited basis by the traditional analog SMR
operators.
NEXTEL'S DIGITAL MOBILE NETWORKS
The Company's business objective in constructing its Digital Mobile
networks is to enable the Company to offer high-capacity, high-quality, advanced
wireless communications services to customers in its markets. A customer using
Nextel's Digital Mobile network is able to access mobile telephone services,
two-way dispatch,
5
<PAGE> 6
paging and alphanumeric short-messaging services using a single, multi-function
subscriber unit. In the future, the Digital Mobile network service offerings
also are expected to include data transmission capabilities. As of December 31,
1996, Nextel's Digital Mobile networks were activated in major metropolitan
market areas throughout the United States that collectively accounted for
approximately 50% of the total United States population. As of December 31,
1996, approximately 300,300 subscriber units were operating on Nextel's Digital
Mobile networks. Nextel's Existing Business Plan and its Revised Business Plan,
both of which are discussed herein, are premised on several key assumptions,
including the availability of sufficient funding, continued achievement of
satisfactory system performance standards and maintenance of targeted service
and subscriber equipment pricing level. Each of the Existing Business Plan and
the Revised Business Plan contemplate the deployment of the Reconfigured iDEN
technology platform in the Digital Mobile networks constructed or to be
constructed in Nextel's major metropolitan market areas. Under both plans, by
the end of 1998, the Company expects its Digital Mobile networks will be
available in areas covering approximately 85% of the United States population.
The Existing Business Plan and the Revised Business Plan, however, differ in
certain significant areas, including the speed and scope of such deployment. See
"Risk Factors -- Nextel to Require Additional Financing" and "-- Forward-Looking
Statements."
Other SMR system operators, including Clearnet and Corporacion Mobilcom
S.A. de C.V. ("Mobilcom"), which operate in Canada and Mexico, respectively,
have indicated that they plan to employ technology compatible with the iDEN
technology used by Nextel. Nextel owns minority equity interests in each of
Clearnet and Mobilcom (and has certain rights to control or to influence, in
particular circumstances and contexts, Mobilcom's policies and operations) and
has entered into interoperability agreements with Clearnet and Mobilcom to
provide, among other things, for coordination of customer identification and
validation necessary to facilitate universal service in North America.
CONVERSION TO DIGITAL MOBILE NETWORKS. In order to activate Digital Mobile
network service in a market, the Company must have available a certain number of
800 MHz frequencies that have been cleared of analog SMR traffic in that market
("channel recovery"). Channel recovery may involve transferring 800 MHz
customers to 900 MHz channels or other 800 MHz analog SMR channels. Upon
commencement of commercial service, the Company intends to sell the Digital
Mobile network services to potential customers in the relevant markets,
including certain of its existing SMR analog system customers, and to convert
800 MHz frequencies to the Digital Mobile networks as such customers migrate
("migration"). The Company has commenced its channel recovery and migration
efforts for existing customers in each of the markets in which its Digital
Mobile networks have been activated. The Company expects that only a portion of
its SMR channels in each market will be needed for the initial phase of the
Digital Mobile network build-out. Accordingly, the Company expects to have the
opportunity to move the affected customers of its analog SMR networks to the
Digital Mobile networks gradually to avoid any significant disruption of service
to customers. See "Risk Factors -- Risks of Implementation of Digital Mobile
Networks" and "-- Forward-Looking Statements."
DIGITAL MOBILE NETWORK SERVICES. The Company is designing and constructing
its Digital Mobile networks to support a variety of service offerings, including
mobile telephone, two-way dispatch, paging and short-messaging services and, in
the future, data transmission. The Company's Digital Mobile networks will
provide customers desiring mobile telephone service with access to features
competitive with those offered by current wireless communications services, such
as the "hand-off" of calls from one site to another and "in-building" signal
penetration for improved portable performance in selected high usage areas. In
addition to the mobile telephone and two-way dispatch functions, the Digital
Mobile networks have been designed to include a signaling or paging capability,
which also has been built into each subscriber unit, to enable a customer to
receive alphanumeric short-text messages. In addition, Digital Mobile networks
have been designed to offer customers additional features, such as voicemail,
call hold, call waiting, no-answer or busy-signal transfer, and call forwarding.
The Digital Mobile network subscriber units, including both mobile models and
portable models providing two-way dispatch service only, mobile telephone
service only and both two-way dispatch and mobile telephone services, will also
support modems for use in data transmission. See "-- Marketing."
DIGITAL MOBILE NETWORK TECHNOLOGY. The Digital Mobile networks, as
deployed by the Company, combine an advanced digital technology developed and
designed by Motorola, referred to as "iDEN," with a
6
<PAGE> 7
low-power, multi-site transmitter/receiver configuration that permits frequency
reuse. The iDEN technology being deployed by Nextel shares many common
components with the Global System for Mobile Communications ("GSM") technology
that has been established as the digital cellular communications standard in
Europe and is being deployed by certain PCS operators in the United States. The
design of the Company's existing and proposed Digital Mobile networks currently
is premised on dividing a service area into multiple sites having a typical
coverage area of less than one mile to thirty miles in radius (depending on the
terrain and the power setting). Each site contains a low-power transmitter,
receiver and control equipment (the "base station"). The base station in each
site is connected by microwave, fiber optic or telephone line to a computer
controlled switching center (the "switching center"). The switching center
controls the automatic hand-off of calls from site to site as a subscriber
travels, coordinates calls to and from a subscriber unit and connects calls to
the public switched telephone network, in the case of mobile telephone calls. In
the case of two-way dispatch, the switching center connects the subscriber
initiating the call to the other subscriber (in the case of a private call) or
to a number of other subscribers (in the case of a group call) to whom the call
is directed in the requested service areas. Northern Telecom, Inc. ("Northern
Telecom") has supplied the mobile telephone switches for the Digital Mobile
networks.
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 PCS providers or licensees in the
United States. One such format is known as Time Division Multiple Access
("TDMA") digital transmission technology, a version of which, known as
"three-time slot TDMA," has been deployed by AT&T Wireless Services, Inc. ("AT&T
Wireless," formerly McCaw Cellular Communications, Inc. ("McCaw Cellular")), a
subsidiary of AT&T, and by Southwestern Bell Mobile Systems in certain of their
cellular system markets, and is expected to be deployed by certain other
cellular operators. The second principal format is known as Code Division
Multiple Access ("CDMA") digital transmission technology, which has been
deployed by PrimeCo Personal Communications, Bell Atlantic/Nynex Mobile Services
and Sprint PCS in certain of their PCS markets and is expected to be deployed by
certain other cellular and other PCS operators. The third principal format,
known as GSM-PCS, is an updated, up-banded, PCS-adapted version of the
TDMA-based digital technology format that has become the standard for digital
cellular technology in Europe. GSM-PCS has been deployed by American Personal
Communications, a subsidiary of Sprint Spectrum, L.P. in its Washington,
D.C./Baltimore metropolitan market and Bell South in certain of its PCS markets,
and is expected to be deployed by certain other PCS operators.
Although TDMA, CDMA and GSM-PCS are digital transmission technologies, and
thus share certain basic characteristics and areas of contrast to analog
transmission technology, TDMA, CDMA and GSM/PCS are not compatible or
interchangeable with each other. The Motorola proprietary first generation iDEN
technology originally incorporated in Nextel's Digital Mobile networks is known
as "six-time slot TDMA." Although based on the TDMA technology format, this
first generation iDEN technology differs in a number of significant respects
from the TDMA technology versions being assessed or deployed by cellular
operators and PCS licensees in the United States, which differences may have
important consequences. Additionally, unlike the three-time slot TDMA technology
format being utilized for the mobile telephone function in the Reconfigured iDEN
technology platform or the three-time slot TDMA technology format being utilized
by certain cellular providers, the first generation iDEN technology, as well as
the "six-time slot TDMA" technology utilized for the two-way dispatch function
in the Reconfigured iDEN technology platform, can carry up to six voice and/or
control paths per channel.
The implementation of Digital Mobile network design and technology
increases significantly the capacity of the Company's existing SMR channels.
This increase in capacity is accomplished in two ways. First, each channel is
capable of carrying up to six voice and/or control paths by employing the
six-time slot TDMA digital technology or up to three voice and/or control paths
by employing the three-time slot TDMA digital technology. Each voice is
converted into a stream of data bits that are compressed before being
transmitted, allowing each of the time-slotted voice and/or control paths to be
transmitted on the same channel without causing interference. Upon receipt of
the coded voice data bits, the subscriber unit decodes the voice signal. By
using the Reconfigured iDEN technology employing six time slots per channel for
two-way dispatch service rather than analog transmission, the Company should
achieve an approximate six times improvement
7
<PAGE> 8
in channel utilization capacity. The Reconfigured iDEN technology, however, uses
three-time slots per channel for the mobile telephone service, resulting in a
reduction in capacity for mobile telephone service compared to the first
generation iDEN technology.
The second means of increasing capacity is based on employing a system
design in use in the cellular industry that reuses each channel many times
throughout the market area. The ability to reuse channels results from placing
transmitters at low elevation sites and restricting the power output to not more
than 100 watts effective radiated power (which creates a service area of less
than one mile to thirty miles, depending on the terrain and the power setting).
The transmitters are controlled by the switching center. The use of six-time
slot TDMA technology for two-way dispatch service and three-time slot TDMA
technology for mobile telephone service, in combination with Nextel's reuse 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 may be licensed to each cellular and
certain PCS operators in each market.
CUSTOMER ACCEPTANCE CONSIDERATIONS. 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, and the
six-time slot TDMA version of first generation iDEN in particular, as each is
currently deployed, involves certain performance trade-offs, for example, in
various characteristics affecting voice quality and fidelity. In general, as the
relevant technologies are currently deployed, digital voice transmission
produces a distinguishably different set of sound characteristics than analog
voice transmission (whether SMR or cellular). The difference results, in part,
from the fact that digital voice transmission requires the digital encoding and
decoding of the voice communication. Hence, the six-time slot TDMA version of
first generation iDEN, the three time-slot version of Reconfigured iDEN and
other digital cellular voice transmissions, as currently deployed, each sound
different from traditional analog cellular and SMR voice transmissions. These
trade-offs may have an effect on customer acceptance of iDEN technology and the
services offered by Nextel. See "Risk Factors -- Implementation of Digital
Mobile Networks Subject to Risks of Developing Technology."
EXPERIENCE WITH FIRST GENERATION iDEN SYSTEMS IMPLEMENTATION. In late
August of 1993, the Company initiated limited commercial service on the first of
its Digital Mobile networks to be constructed employing first generation iDEN
technology, which was located in greater Los Angeles. The Company continued
implementing 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, the Company 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 the Company'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 the Company's operation of its Digital
Mobile networks. Moreover, the Company 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 the Company's Digital Mobile
networks during periods of very low system traffic, typically at night or on
weekend days. See "Risk Factors -- Forward-Looking Statements."
8
<PAGE> 9
Nextel's objectives in carrying out the initial phase of system development
and technology enhancement were to achieve satisfactory performance levels in
the areas of systems reliability and systems access. Nextel believes that its
existing Digital Mobile networks (including both those utilizing the
Reconfigured iDEN technology and those continuing to use the first generation
iDEN technology), as operated at December 31, 1996, were demonstrating
acceptable performance levels in these areas. Nextel also believes that the
successful development and national deployment throughout Nextel's Digital
Mobile networks of the Reconfigured iDEN technology, with its accompanying
improvements in the voice quality of the mobile telephone service provided on
Nextel's Digital Mobile networks, should enable Nextel to aggressively market
such services as part of a competitive wireless communications services
alternative to existing cellular telephone service in its markets. See "Risk
Factors -- Implementation of Digital Mobile Networks Subject to Risks of
Developing Technology" and "-- Forward-Looking Statements."
RECONFIGURED iDEN DEVELOPMENT AND DEPLOYMENT. The principal objective of
the Reconfigured iDEN development and deployment efforts has been to achieve
significant improvements in voice transmission quality for the mobile telephone
service provided on Nextel's Digital Mobile networks. These improvements result
principally from two significant differences between the first generation iDEN
and the Reconfigured iDEN technology platforms. First, the Reconfigured iDEN
technology (for the mobile telephone function) employs a higher "bit rate"
vocoder than is utilized (for both the two-way dispatch and the mobile telephone
functions) in Nextel's first generation iDEN subscriber units. Second, fewer
time slots per channel are used for the mobile telephone function in the
Reconfigured iDEN technology than the six time slots that are used for all voice
transmission functions in Nextel's first generation iDEN Digital Mobile
networks.
Generally, a vocoder (the component in the subscriber unit that digitally
encodes and decodes voice transmissions) operating at a higher "bit rate" will
be capable of producing a better audio voice quality than a vocoder operating at
a lower "bit rate." Additionally, the use of fewer time slots per channel means
that greater frequency bandwidth is devoted to mobile telephone voice
transmissions in the Reconfigured iDEN technology format than is the case in
Nextel's first generation iDEN Digital Mobile networks. Again, generally, the
greater the bandwidth devoted to a digital voice transmission the better the
resulting audio quality of that transmission. This reduction in time slots per
channel, however, results in a less efficient use of Nextel's SMR spectrum
(compared to six-time slot TDMA) for mobile telephone services. Moreover, such
reduction in time slots per channel may cause an increase in the amount of
system infrastructure equipment required to avoid a reduction in system capacity
resulting in increased capital expenditures. See Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Future Capital Needs and Resources."
Other enhancements to the iDEN technology also have been developed in
connection or contemporaneously with the development process of the Reconfigured
iDEN technology, such as the development of more sophisticated and effective
forward error correction algorithms, better voice sampling techniques and
related software improvements. Such other enhancements also are expected to
contribute positively to the perceived audio quality of voice transmissions on
the Digital Mobile networks. Further, other factors that also may raise the
level of customer satisfaction with overall system performance, such as
adjustments to Digital Mobile network design and layout, are a continuing part
of the ongoing process of system development and technology optimization. The
pursuit of activities relating to the Reconfigured iDEN technology, however, is
distinct from, and largely independent of, such ongoing system development and
technology optimization activities on the part of representatives of each of
Nextel and Motorola that also are designed, in part, to produce improvements in
the quality of voice transmissions on the Digital Mobile networks. See "Risk
Factors -- Implementation of Digital Mobile Networks Subject to Risks of
Developing Technology."
TECHNOLOGY COMMITMENTS. Pursuant to 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") and by the Second
Equipment Agreement Amendment entered into in connection with the McCaw
Transaction (the "Second Equipment Agreement Amendment"), Motorola provides the
iDEN infrastructure and subscriber handset equipment to Nextel throughout its
markets (such equipment purchase agreements, as amended, being referred to
herein as the "Equipment Purchase Agreements").
9
<PAGE> 10
The Company 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 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
system infrastructure 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. Such commitments are in addition to
amounts purchased from Motorola or for which Nextel, OneComm or Dial Page had
placed orders with Motorola prior to August 4, 1994, which orders, in the case
of OneComm and Dial Page, have become obligations of Nextel. To implement the
Existing Business Plan, which is based on Nextel's Digital Mobile networks
system build-out plan that contemplates deployment of the Reconfigured iDEN
technology in most of the major United States metropolitan market areas where
the Company's Digital Mobile networks are scheduled to be operational by the end
of 1998, Nextel estimates that an aggregate of approximately $1.0 billion in
infrastructure and other system capital costs would be incurred during 1997 and
1998. Nextel estimates that adoption and implementation of the more accelerated
and extensive Digital Mobile networks system build-out plan and Reconfigured
iDEN deployment contemplated in the Revised Business Plan would be likely to
increase total infrastructure and other system capital costs by at least
$450,000,000 during the same two-year period. In either case, the actual costs
incurred could be higher or lower than such cost estimates, due to (among other
factors) the uncertain impact of potential future developments, such as changes
in system design, changes in the producer price index, the timing of equipment
purchases and the success of Nextel's related marketing plans. See "Revised
Business Plan" and "-- Forward-Looking Statements."
As indicated herein, under "-- Agreements with Significant
Stockholders -- The McCaw Investor," the Second Equipment Agreement Amendment
limits Nextel's ability, prior to October 1, 1997 without Motorola's consent, to
deploy a "Switch in Technology" which, under the Second Equipment Agreement
Amendment, is defined to mean a decision by Nextel before August 4, 1999 to
install and use digital radio frequency technology as an alternative to iDEN on
more than 25% of its SMR channels in the 806-824 MHz band in one or more of its
top 20 domestic markets, or the utilization by Nextel of any of its SMR channels
for voice interconnect on certain United States cellular and/or PCS radio
telephony standards. After October 1, 1997, Nextel may not implement such a
Switch in Technology unless (1) Nextel determines that the iDEN or Reconfigured
iDEN equipment fails to meet certain performance specifications established in
the Second Equipment Agreement Amendment, which failure materially adversely
affects the commercial viability of the technology to provide reliable services
as intended by Motorola and Nextel, and Motorola does not cure such failure
within six months after receiving notice thereof, or (2) Nextel or the McCaw
Investor offers to acquire the remainder of Motorola's shares of Class A Common
Stock at a per share price of at least 110% of the average of the closing prices
of the Class A 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.
Nextel continuously reviews alternate technologies as they are developed.
To date, however, it has not been regarded as necessary or as a commercially
feasible strategy to adapt currently available alternative technologies to
operate on Nextel's present spectrum position.
Nextel continues to pursue certain regulatory initiatives that would
provide SMR operators, including Nextel, with the right to use contiguous blocks
of spectrum. The FCC issued an order in December 1995 that would provide SMR
operators, including Nextel, with the opportunity to obtain contiguous spectrum.
See "-- Regulation." Were Nextel to obtain a sufficient contiguous spectrum
position in its market areas, pursuant to the FCC's 1995 order, or otherwise, it
would become feasible to consider deployment of currently existing
10
<PAGE> 11
cellular digital technology transmission formats, including CDMA and TDMA, on
such contiguous spectrum blocks. Independent of such technological feasibility,
however, additional factors, including Nextel's contractual obligations to
Motorola regarding the domestic deployment and utilization of iDEN technology,
and additional capital requirements associated with any Switch in Technology,
would likely materially affect Nextel's consideration of such alternative
technologies.
Should Nextel choose to deploy a technology other than iDEN for any of its
wireless communications services, Nextel believes that its systems planning and
its contractual relationships with Motorola would permit it to utilize a
different technology. In light of the development period for Reconfigured iDEN,
however, Nextel has agreed, as described above, not to effect a Switch in
Technology on its SMR channels prior to October 1, 1997 without Motorola's
consent. Due to the considerable present uncertainty surrounding the factors
that might affect such a decision, including the performance characteristics and
customer perceptions of first generation iDEN, Reconfigured iDEN, or of
competing digital technologies and possible future improvements in first
generation iDEN or Reconfigured iDEN technology platforms, it is impossible to
predict if or when such a decision could be made.
SYSTEM CONSTRUCTION AND SUPPLIERS. The first step required to achieve the
build-out of a Digital Mobile network in a market is the completion of the radio
design plan, which typically takes about four months. This stage involves the
selection of specific areas in the market for the placement of base station
sites and the identification of specific frequencies that will be employed at
each site in the initial configuration. Sites are selected on the basis of their
proximity to targeted customers, the ability to acquire and build the site and
frequency propagation characteristics. Site procurement efforts include
obtaining leases and permits, and in many cases, zoning approvals. This site
acquisition process for the initial system to be constructed in a market,
depending on the number of sites, typically takes from two to 18 months.
Preparation of each site for equipment installation, including construction of
equipment shelters, towers and power systems, grounding, ventilation and air
conditioning, typically takes six weeks, while equipment installation, testing
and pre-operational systems optimization generally takes an additional six weeks
prior to commencing system operation. Following commencement of system
operations in a selected market, the Company expects to add new sites to such
system continually in order to improve coverage and capacity. See
"-- Forward-Looking Statements."
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 Prior Equipment Agreement
Amendment provides 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 an alternative source for either iDEN system
infrastructure or subscriber equipment.
As described herein, see "-- Technology Commitments," system infrastructure
purchases under agreements with Motorola and other vendors of equipment related
to the Digital Mobile networks, and inventory purchases made in anticipation of
the commencement of commercial service in Nextel's markets, have caused and will
continue to cause a significant increase in liabilities during the start-up
phase of the Digital Mobile networks. Nextel anticipates that its net losses
will increase significantly during the ongoing start-up phase of Digital Mobile
networks and that it will continue to generate significant operating losses 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. See "Risk
Factors -- Nextel to Require Additional Financing" and "-- Forward-Looking
Statements."
MARKETING. 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. The
11
<PAGE> 12
Company's marketing focuses on the differentiated package of integrated services
offered by the Company (mobile telephone, two-way dispatch, which the Company
markets as its "instant conferencing" feature under the "Nextel Direct
Connect"(SM) service name, alphanumeric short-messaging and paging) and
available to its customers using a single, multi-function subscriber unit.
Nextel's strategy is to focus principally on multi-service business users in its
markets with Digital Mobile networks.
The Company commenced the full-scale commercial launch of its first Digital
Mobile network using the Reconfigured iDEN technology in the Chicago
metropolitan market area late in the third quarter of 1996, accompanied by the
commencement of a more broadly focused, regionally based marketing campaign in
that market area. Subsequently, Nextel initiated additional full-scale
commercial launches, accompanied by more broadly focused marketing campaigns, in
the Atlanta, Boston, Denver, Detroit and Las Vegas metropolitan market areas and
in the Northern California market area. Nextel's commercial launch activities in
these markets represent the first phase of a planned nationwide deployment of
the Reconfigured iDEN technology in Nextel's significant Digital Mobile markets.
Nextel currently expects that implementation of its Existing Business Plan will
involve budgeted infrastructure and other system capital expenditures totaling
approximately $1.0 billion during 1997 and 1998 and that implementation of the
Revised Business Plan would raise such total infrastructure and other system
capital expenditures by at least $450,000,000 during the same two-year period.
In this connection, Nextel anticipates that purchases of Motorola-manufactured
infrastructure equipment will represent the largest category of capital
spending. In the final six months of 1996, Nextel placed orders with Motorola
totaling more than $300 million for products incorporating the Reconfigured iDEN
technology, including system infrastructure equipment and related software and
the new, compact Reconfigured iDEN handsets that Nextel plans to market
nationally, principally under the "PowerFone"(TM) brand name. Assuming the
successful and timely completion of its nationwide Digital Mobile network build-
out plan, Nextel expects that its Digital Mobile networks would provide coverage
to areas representing approximately 85% of the United States population by the
end of 1998. Implementation of the Revised Business Plan would significantly
accelerate Nextel's use of and needs for capital resources and would therefore
be dependent on, among other things, availability of necessary capital. See
"Risk Factors -- Nextel to Require Additional Financing" and "-- Forward-Looking
Statements."
The Company believes that its ability to provide a full line of mobile
communications services in an integrated package using a single, multi-function
subscriber unit on its Digital Mobile networks will distinguish it from other
providers of wireless communications services. The focus and the progress of
Nextel's Digital Mobile network services marketing efforts is and will continue
to be dependent on a number of factors, including system performance, subscriber
equipment performance and the ability to provide services that satisfy customer
needs and expectations. Nextel reviews its business and marketing plans in light
of a variety of factors, including perceived opportunities, actual experiences
in the marketplace, availability of financial and other resources and overall
economic and/or competitive considerations, and may from time to time determine
to change, refine or redirect such plans. See "Risk Factors -- Forward-Looking
Statements."
In January 1997, the Company announced the introduction of its national
digital network and indicated that it will not charge roaming fees for its
customers traveling anywhere on its national digital network. Conventional
cellular customers often are subject to expensive system access fees and higher
per-minute airtime rates when "roaming" outside of their home market.
Additionally, in March 1997, the Company announced a new billing policy,
pursuant to which Nextel will bill its mobile telephone service customers based
on the actual number of seconds of airtime used after the first minute, in
contrast to the cellular industry practice of rounding up all calls to the next
minute.
COMPETITION. Each of the markets in which the Company's Digital Mobile
networks operate or will operate is served by multiple other wireless
communications service providers. In each of the markets where the Company's
Digital Mobile networks operate, the Company 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
12
<PAGE> 13
which have financial resources greater than those of Nextel. PCS operators will
likely compete with Nextel in providing some or all of the services available
through the Company's Digital Mobile networks. Additionally, the Company 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 than those available to the Company, will continue to upgrade their
systems to provide digital wireless communications services competitive with the
Company's Digital Mobile networks. Nextel also expects to face competition from
other technologies and services developed and introduced in the future. See
"Risk Factors -- Success of Nextel Dependent on its Ability to Compete."
Pursuant to the Omnibus Appropriations Act of 1997, the FCC has reallocated
30 MHz of 2.3 GHz spectrum to wireless services and will assign that spectrum
via an auction that must commence no later than April 15, 1997. The FCC will
allow these licensees to offer a broad range of fixed and mobile services, but
has imposed certain technical restrictions that will prohibit the provision of
mobile services using current technology. Additionally, the FCC has reallocated
220 MHz of radio spectrum for use by "emerging telecommunications technologies,"
such as PCS, low-earth orbit satellites and mobile satellite systems. The FCC
has authorized a consortium of communications companies to provide nationwide
mobile satellite services. 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.
REVISED BUSINESS PLAN
The Company currently is considering adopting and implementing its Revised
Business Plan, which would involve a more accelerated and extensive deployment
during 1997 and 1998 of the Reconfigured iDEN technology platform throughout its
existing and contemplated Digital Mobile networks (including primary connecting
routes between affected markets). The Company's Existing Business Plan was
adopted, to endorse and outline the proposed incorporation of the Reconfigured
iDEN technology in the Company's plans to build out its nationwide Digital
Mobile networks following the favorable development and deployment experience
associated with the Reconfigured iDEN technology platform. The Revised Business
Plan does not contemplate a significant increase in the population coverage to
be achieved by the Digital Mobile networks in operation at the end of 1998 as
compared to the population coverage level expected to be reached by that time
under the Existing Business Plan. However, there are significant areas of
difference between the Existing Business Plan and the Revised Business Plan in
terms of the geographical coverage objectives, the perceived customer demands
for and utilization of the relevant wireless services and the positioning of the
Company's products and services relative to those of competing wireless
communications service providers. Implementation of the Revised Business Plan
would have important implications for the nature, speed and scope of the
Company's plans to deploy the Reconfigured iDEN technology platform, the extent
and focus of the Company's related marketing efforts and the consequent impacts
on the Company's capital expenditures and operating expenses over the next
several years.
The Company anticipates that deployment of Digital Mobile networks
utilizing the Reconfigured iDEN technology platform will enable it to provide
potential customers in its markets with an integrated package of wireless
communications services that is competitive with the service packages being
offered currently or expected to be offered by other providers of wireless
communications services in those markets. The Company believes that the
implementation of the Revised Business Plan will better position Nextel both to
achieve its strategic objectives and to prepare for emerging competition in the
wireless communications industry, especially from certain current or future
operators that, on their existing cellular frequencies or on other frequencies
acquired by such operators or their affiliates in the recently concluded PCS
spectrum auctions, are in the process of converting their wireless
communications services systems to digital technology formats and are moving to
provide "nationwide coverage" on the resulting systems. The Company 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 the Company's industry position once the Company successfully
concludes its nationwide Digital Mobile network build-out plan and develops a
sufficient customer base in its markets.
13
<PAGE> 14
Pursuant to its Revised Business Plan, the Company proposes to expand and
intensify its Digital Mobile network construction and related marketing programs
over the remainder of 1997 and 1998 to capitalize on the potential advantages
provided by the Company's ability to deploy a single, proven competitive digital
technology throughout its national network, the potential to economize on
network build-out expenses by concentrating more of its purchases of Motorola
manufactured system infrastructure equipment into 1997 and 1998, and the
opportunity to capture a significant share of the potential customers included
within the groups of mobile workers located in the Company's markets. The
principal objectives targeted by the Revised Business Plan are: (i) expanding
the coverage area of the Nextel national Digital Mobile networks by (A)
including "roaming capable" cities that were not contemplated to be built under
the Existing Business Plan during 1997 and 1998; and (B) instituting a
significantly more robust coverage plan to provide wireless communications
services along major highway corridors joining Nextel's existing and planned
market areas; (ii) increasing the capacity of Nextel's national Digital Mobile
networks by adding incremental base radios, cell sites and switching
infrastructure to the existing and newly constructed Reconfigured iDEN markets
more rapidly than such capacity-enhancing steps were scheduled in the Existing
Business Plan for the affected markets; and (iii) achieving additional growth in
the Nextel national Digital Mobile networks' subscriber base by (A) launching
more aggressive advertising campaigns and marketing efforts emphasizing the
benefits of Nextel's differentiated package of integrated wireless services,
Nextel's expanded roaming network and simplified approach to roaming service and
pricing and Nextel's new "to the second" billing policy, (B) accelerating and
focusing marketing activities on potential customers in markets to be converted
from "roaming only" to "full build" status and (C) offering more competitive
subscriber handset pricing to potential customers made possible by structuring
new volume purchase and production commitments with Motorola.
Implementing such revised construction and marketing plans will involve
substantial increases in the level of capital expenditures and also is likely to
increase operating losses over the next several years. To a large extent, the
increased capital expenditures will involve shifting forward capital
expenditures that Nextel had planned to incur in years subsequent to 1998, based
either on the acceleration of incremental system coverage or incremental system
capacity during 1997 and 1998. Any increased operating losses Nextel might
generate during 1997 and 1998 would to a certain degree likely be attributable
to increased marketing expenses, associated growth in sales and service
organizations and related back-office functions to produce or meet the potential
incremental subscriber growth. Any such increase in operating losses also would
be expected to be magnified by the fact that customer procurement costs tend to
be front-end loaded, whereas the offsetting contributions to revenue would be
expected to be realized over time, including periods subsequent to 1998. Based
on Nextel's currently available and reasonably anticipated sources of equity and
debt financing, including assumed exercise in full of the first McCaw option
later in 1997 (see "-- Agreements with Significant Stockholders -- The McCaw
Investor"), Nextel will require significant additional funds to implement these
revised construction and operating plans. Depending on a variety of factors and
assumptions that Nextel deems within a range of reasonably expected outcomes
(recognizing that such matters remain subject to the impact of future
developments and costs that cannot be predicted accurately), Nextel believes
that it would require significant additional funding during 1997 and 1998 to
meet the capital expenditure and operating loss financing needs of its Digital
Mobile networks (under the Revised Business Plan outlined above) and its analog
SMR networks businesses. See "Risk Factors -- Nextel to Require Additional
Financing" and "-- Forward-Looking Statements."
NEXTEL'S EXISTING ANALOG SMR OPERATIONS
The Company's existing analog SMR operations focus primarily on two-way
radio service provided to customers who need the ability to communicate with one
another in the field, either on a one-to-one or one-to-many basis. Due to
capacity constraints on its existing analog SMR systems in major metropolitan
areas, Nextel has been able to offer mobile telephone service on such systems to
only a limited number of its customers. Nextel acquired significant additional
analog business operations from Motorola in late July 1995, and spent much of
late 1995 and most of 1996 in a lengthy and complicated process to transition
billing and reporting functions for these acquired operations to Nextel's
existing analog SMR business unit. Certain of the reporting practices that were
in place with respect to these acquired operations involved subscriber tracking
14
<PAGE> 15
based on equipment serial number identification, and customer counts for these
business operations were routinely compiled on the same basis. In Nextel's
recently concluded audits of these business operations, it was determined that
including all persons currently assigned an equipment serial number as a
customer of the analog SMR business results in an overstatement in the number of
revenue generating subscribers on the affected analog SMR systems for the
relevant period. This outcome could result for a number of reasons, such as
including in the customer counts persons who were intermittent or seasonal users
of analog SMR services, but were not active customers during the periods being
reported, or including persons who had canceled or otherwise terminated their
active use of the system without turning in their subscriber units and having
their equipment identifications removed from the system.
Nextel is currently in the process of identifying and making appropriate
adjustments to the previously released analog subscriber unit counts for the
affected periods, presently believed to extend from mid-1995 through year end
1996. In connection with these efforts, which have focused first on the most
recently reported analog customer counts, Nextel has determined that the
previously reported number of total analog system subscribers at December 31,
1996, which was estimated to be 814,200, may be overstated by approximately
10-12%. Nextel does not believe that any adjustments to customer counts should
be required other than with respect to these acquired analog SMR operations,
since Nextel's other analog SMR business operations typically have generated
their subscriber counts based on a different approach using current billing
records information.
None of the overstatements of the number of analog units in service with
respect to these acquired analog SMR business operations has had any impact on
the accuracy of any of the revenue, expense or other financial information
(other than in the context of information expressed as per subscriber unit
amounts) released by Nextel concerning its analog SMR business operations over
the affected periods, nor do such matters have any impact on the reported
subscriber counts outside these specific acquired analog SMR operations.
MANAGEMENT AGREEMENTS. In addition to SMR systems for which it is the
licensed owner, the Company manages analog SMR systems licensed to third parties
in certain of its markets. As of December 31, 1996, of the 800 MHz licenses
operated by the Company, approximately 24.3% were managed for third parties; of
the 900 MHz licenses operated by the Company, approximately 4.1% were managed
for third parties. The management agreements generally have terms of 15 or 30
years. In many cases, the Company holds an option to acquire managed SMR
systems. Pursuant to a consent decree addressing all outstanding antitrust
issues in connection with Nextel's recent acquisitions, the Company has agreed
to alter the terms of certain management agreements with third parties with
respect to 900 MHz channels in certain markets.
MARKETING. The Company markets its existing analog SMR services primarily
to businesses that employ fleets of vehicles requiring two-way radio capability
and, to a limited extent, to customers who require both two-way radio and mobile
telephone service, such as sales or service managers. The Company's sales
efforts are directed to both the 900 MHz and 800 MHz systems. The Company
utilizes a direct sales and marketing force as well as independent equipment
dealers. Subscriber units sold by the Company's sales force for use on existing
analog SMR networks are typically installed and maintained by the Company's
service departments. In addition, the service departments are responsible for
system maintenance for most of the Company's existing analog SMR networks. The
Company's marketing of its analog SMR service may be affected in certain markets
by the activation of its Digital Mobile networks in such markets. See
"-- Nextel's Digital Mobile Networks."
COMPETITION. The Company's existing analog SMR operations compete in each
market with a number of other operators of traditional analog SMR networks
providing service on the 220 MHz, 800 MHz and 900 MHz bands. The Company also
competes with SMR and other private radio operators utilizing other frequencies
for the provision of two-way dispatch services.
The Company also competes in each of its major markets with cellular
operators and, in a limited number of such markets, with PCS systems operators,
that offer services similar to the mobile telephone service now offered on
traditional analog SMR networks. At the present time, analog cellular systems
are generally believed to offer better quality wireless telephone transmission
(at a higher price) than traditional analog SMR operators. On March 7, 1995, the
FCC authorized cellular operators to offer two-way dispatch services,
15
<PAGE> 16
which allows cellular operators to offer, upon installation of the necessary
infrastructure equipment, a service that may be competitive with analog SMR or
digital two-way dispatch service. Additionally, Nextel may face competition in
the future from other SMR operators utilizing digital technology.
Although a less direct substitute for SMR service, one-way and two-way
paging services may also be competitive with the Company's services. The
principal factors relevant to competition in providing communications services
in the traditional analog SMR service field are the size of coverage area, the
pricing of such services, the quality of the communications (e.g., clarity, lack
of interference), and the reliability and availability of the service (e.g.,
waiting time for a "clear channel," absence of busy signals, absence of
transmission disconnects or failures). The Company has numerous competitors in
the sales and maintenance of communications equipment used by the customers of
its analog SMR networks. Competition in the sale of such subscriber equipment is
intense. The principal factors relevant to competition in selling subscriber
equipment for use by customers of analog SMR networks are the pricing of such
equipment, the warranty and repair service coverage offered, the features
available and the quality of the equipment.
FISCAL YEAR 1996 TRANSACTIONS AND DEVELOPMENTS
DIAL PAGE MERGER. On January 30, 1996, Nextel consummated the Dial Page
Transaction pursuant to an Agreement of Merger and Plan of Reorganization dated
February 17, 1995. As a result of such transaction, Dial Page was merged with
Nextel and the former stockholders of Dial Page received an aggregate of
approximately 26,800,000 shares of Class A Common Stock. Prior to the merger,
Dial Page was a leading provider of analog SMR and integrated digital wireless
communications services in the southeastern United States.
COMCAST STOCK PURCHASE AGREEMENT. Nextel, Comcast Corporation ("Comcast")
and Comcast FCI, Inc., a wholly owned subsidiary of Comcast ("Comcast FCI"),
entered into an Amendment to the Stock Purchase Agreement, dated as of February
9, 1996, which amended the original Stock Purchase Agreement dated as of
September 14, 1992, as previously amended (the "Comcast Agreement"). Such
amendment set forth certain terms and conditions applicable to the exercise by
Comcast of its anti-dilutive rights with respect to the issuance of shares of
Class A Common Stock in the Dial Page Transaction and also to potential
exercises of Comcast's anti-dilutive rights with respect to issuances of Nextel
equity securities occurring in connection with any subsequent acquisition
transaction. Also on February 9, 1996, Comcast completed the purchase of
8,155,506 shares of Class A Common Stock for an aggregate purchase price of
$99,904,948, pursuant to Comcast's exercise of its anti-dilutive right with
respect to the Dial Page Transaction. In March 1997, Nextel entered into
arrangements with Comcast and Comcast FCI that eliminated a number of previously
existing relationships between the parties, including certain rights under the
Comcast Agreement and related documents. See "Post Fiscal Year-End Transactions
and Developments -- Comcast Option Repurchase."
MANAGEMENT. In early 1996, Nextel announced changes in its senior
management team. In February 1996, the Company announced that Timothy M. Donahue
had been named President and Chief Operating Officer of the Company. Mr. Donahue
had previously been regional president of AT&T Wireless operations in the
Northeast. In March 1996, the Company announced that Daniel F. Akerson had
agreed to join the Company as Chairman and Chief Executive Officer. Mr. Akerson
was previously the chairman and chief executive officer of General Instrument
Corporation and the president of MCI Communications Corporation. Additionally,
in April 1996, Nextel named Steven M. Shindler as its Senior Vice President and
Chief Financial Officer. Mr. Shindler previously served as managing director of
communications finance at The Toronto-Dominion Bank in New York.
MOTOROLA AMENDMENT. Nextel and Motorola entered into an amendment, dated
as of April 28, 1996, to the Equipment Purchase Agreements, which amendment
established payment terms for all purchases made by Nextel under the Equipment
Purchase Agreements and confirmed certain warranty coverages and commencement
dates for system infrastructure equipment and software.
CREDIT FACILITIES. Nextel, Nextel Finance Company, a wholly owned
subsidiary of Nextel ("NFC"), and certain subsidiaries of Nextel entered into
definitive agreements, which became effective on Septem-
16
<PAGE> 17
ber 30, 1996, with respect to a secured credit facility arranged by Chase
Securities, Inc., J.P. Morgan Securities Inc. and Toronto-Dominion Securities
(USA), Inc. (the "Bank Credit Facility"). Concurrently therewith, Nextel, NFC
and certain subsidiaries of Nextel entered into definitive agreements, which
also became effective on September 30, 1996, with respect to the amendment,
restatement and consolidation of the previously existing financing arrangements
with Motorola and NTFC Capital Corporation ("NTFC") (the "Vendor Credit
Facility"; and collectively with the Bank Credit Facility, the "Bank and Vendor
Credit Facilities"). The Credit Agreement relating to the Bank Credit Facility
(the "Bank Credit Agreement") provides for up to $1,655,000,000 of secured
financing, consisting of a $1,085,000,000 revolving loan and $570,000,000 in
term loans. The Amended, Restated and Consolidated Credit Agreement relating to
the Vendor Credit Facility (the "Vendor Credit Agreement") provides for up to
$345,000,000 of secured financing, consisting of a $195,000,000 revolving loan
and $150,000,000 in term loans. Borrowings under the Bank Credit Facility and
the Vendor Credit Facility are ratably secured by liens on assets of Nextel's
subsidiaries that are "restricted" subsidiaries under the terms of the Nextel's
public indentures (the "Nextel Indentures") relating to the Company's five
outstanding issues of Senior Redeemable Discount Notes (the "Nextel Notes").
Additionally, the Nextel Indentures contain provisions that operate to limit the
amount of borrowings available under the Bank Credit Facility and the Vendor
Credit Facility in certain circumstances. See "Risk Factors -- Nextel to Require
Additional Financing." Subsequent to 1996, Nextel and Motorola reached agreement
on certain of the terms and conditions pursuant to which Nextel could access up
to an additional $450,000,000 of equipment financing through Motorola
("Additional Motorola Financing"). See "Post-Fiscal Year End Transactions and
Developments -- Nextel/Motorola Agreements." In order to access such Additional
Motorola Financing, Nextel would be required to procure certain consents,
waivers and/or participation commitments from a number of third parties, to
obtain modifications to the terms of the Bank and Vendor Credit Facilities, the
related security documents and the Nextel Indentures and to satisfy certain
other conditions. Nextel is in the process of seeking certain of such consents,
waivers, commitments and other actions to obtain access to a portion of the
Additional Motorola Financing, but there can be no assurance that Nextel will be
successful in this regard, or that other conditions to access such Additional
Motorola Financing, including those that Nextel is not currently seeking to
fulfill, will be satisfied or otherwise will be dealt with in a timely fashion.
Access to a significant portion of the Additional Motorola Financing, among
other things, would be required for Nextel to successfully implement the Revised
Business Plan. See "Post Fiscal Year-End Transactions and Developments" and
"Risk Factors -- Nextel to Require Additional Financing" and "-- Forward-Looking
Statements."
MERGER AGREEMENT WITH PCI. Nextel entered into an Agreement of Merger and
Plan of Reorganization dated as of October 2, 1996, as amended, with
Pittencrieff Communications, Inc. ("PCI") providing for the merger of PCI with a
wholly owned indirect subsidiary of Nextel. PCI has approximately 6,000 800 MHz
SMR channels covering a total population of over 27 million people predominantly
in the states of Texas, Oklahoma, New Mexico and Arizona. The stockholders of
PCI will receive a maximum of 8,782,403 shares of Class A Common Stock, subject
to certain adjustments, as a result of the merger. The merger is subject to
regulatory and PCI stockholder approval and customary closing conditions, and is
expected to occur during 1997.
POST FISCAL YEAR-END TRANSACTIONS AND DEVELOPMENTS
WVB MERGER. On January 30, 1997, Nextel acquired 81% of the outstanding
shares of Wireless Ventures of Brazil, Inc., an operator of analog SMR systems
in Brazil ("WVB"), for a purchase price of $186,300,000, which was paid with the
issuance of approximately 11,964,000 shares of Class A Common Stock, through a
merger of WVB with a wholly owned subsidiary of Nextel. Nextel simultaneously
contributed its interest in WVB, which was renamed McCaw International
("Brazil"), Ltd., to McCaw International.
MCCAW INTERNATIONAL BOND OFFERING. On March 6, 1997, McCaw International
completed a private placement of 951,463 units for gross proceeds of
approximately $500,000,000. Each unit is comprised of a 10-year senior discount
note and a warrant to purchase 0.10616 shares of McCaw International common
stock. The notes have a 13% yield to maturity, are noncallable for five years,
and require no interest payments for the
17
<PAGE> 18
first five years. The warrants are exercisable at a price of $36.45 and entitle
the holders thereof to purchase in the aggregate 1%, on a fully diluted basis,
of the common stock of McCaw International.
CONSENT SOLICITATION. Under the Nextel Indentures, the Company and its
restricted subsidiaries may only incur debt (other than certain categories of
"Permitted Debt" (as defined in the Nextel Indentures)) if the aggregate amount
of its debt does not exceed 30% of its "Total Market Capitalization" (as defined
in the Nextel Indentures) or if its ratio of "Consolidated Debt" to "Annualized
Operating Cash Flow" (as defined in the Nextel Indentures) does not exceed
certain levels. Because it is anticipated (under both the Existing Business Plan
and the Revised Business Plan) that Nextel will continue to incur significant
operating expenses during the construction and deployment of its Digital Mobile
networks, Nextel is not expected to generate sufficient Annualized Operating
Cash Flow to support the incurrence of debt based on the ratio of its
Consolidated Debt to Annualized Operating Cash Flow.
Nextel's ability to incur debt (other than Permitted Debt) in the
foreseeable future will, therefore, be based on the value of Nextel's Total
Market Capitalization which is primarily affected by the market price of
Nextel's Class A Common Stock. Based on the number of outstanding shares of, and
the recent prices of, Nextel's Class A Common Stock, Nextel is not able to incur
debt based on the value of its Total Market Capitalization under the terms of
the Nextel Indentures, effectively limiting Nextel's ability to raise debt
capital to borrowings that qualify as Permitted Debt. Further, under the Nextel
Indentures, the maximum aggregate amount of Permitted Debt that Nextel may incur
(excluding debt represented by the Nextel Notes) is approximately $1.56 billion.
Because the Nextel Indentures may have the effect of limiting Nextel's
ability (under both the Existing Business Plan and the Revised Business Plan) to
borrow the funds necessary to complete its planned deployment of the
Reconfigured iDEN technology in its Digital Mobile networks, Nextel intends to
seek the consent of the holders of the Nextel Notes to certain amendments to the
Nextel Indentures in April 1997. These amendments would, among other things,
modify the debt incurrence limitations of the Nextel Indentures by expanding the
categories of Permitted Debt to allow the Company to incur additional
indebtedness to fund such accelerated deployment. See "Risk Factors -- Nextel to
Require Additional Financing." See also "-- Nextel/Motorola Agreements," below.
The Company cannot currently estimate the aggregate consideration that will
be paid to all holders of the Nextel Notes in connection with such consents. As
of the date hereof, no such consents have been sought or received by the
Company. No assurances can be given that any such consents will be obtained or
that the aggregate consideration to be paid for such consents will not exceed
amounts that the Company would consider reasonable under the circumstances. See
"Risk Factors -- Forward-Looking Statements."
The foregoing statements relating to the Nextel Indentures are summaries of
the relevant provisions and do not purport to be complete. Where reference is
made to particular provisions of the Nextel Indentures, such provisions,
including the definitions of certain terms, are incorporated by reference as
part of such summaries, and are qualified in their entirety by such reference.
Each of the Nextel Indentures has previously been filed with the Securities and
Exchange Commission (the "Commission"), and each of the Nextel Indentures is
incorporated by reference herein.
COMCAST OPTION REPURCHASE. On March 18, 1997, Nextel and Comcast reached
agreement regarding the terms on which a wholly owned subsidiary of Nextel
agreed to purchase Comcast FCI's rights pursuant to the Amended and Restated
Option Agreement dated as of September 11, 1995 between Nextel and Comcast FCI
(the "Option Agreement") for an aggregate cash purchase price of $25,000,000.
The Option Agreement, which was entered into in connection with the transactions
pursuant to the Comcast Agreement, granted Comcast FCI an option to purchase up
to 25,000,000 shares of Class A Common Stock at an exercise price of $16.00 per
share. In connection with the purchase of Comcast FCI's rights under the Option
Agreement, certain rights of Comcast and Comcast FCI pursuant to the Comcast
Agreement, including anti-dilutive rights and the rights relating to the
appointment of directors of Nextel, were terminated. The transaction was
completed on March 20, 1997.
18
<PAGE> 19
NEXTEL/MOTOROLA AGREEMENTS. On March 27, 1997, Nextel and Motorola entered
into a new agreement which, among other things, establishes certain pricing and
other terms on which Nextel will purchase infrastructure and subscriber
equipment for deployment in the United States pursuant to the existing Equipment
Purchase Agreements between Nextel and Motorola ("1997-1998 Agreement"). The
1997-1998 Agreement also establishes certain infrastructure and subscriber
equipment pricing terms for Nextel's international affiliates and provides for
an infrastructure rebate program pursuant to which Nextel will receive purchase
price rebates from Motorola that will be applied to subscriber equipment
purchased and deployed in the U.S. by Nextel in 1997 and 1998 based on the
levels of Nextel's purchases of infrastructure equipment. The 1997-1998
Agreement also contains commitments by Nextel and Motorola with respect to
Nextel's domestic infrastructure and subscriber equipment purchases in 1997 and
the deployment of equipment utilizing Motorola's iDEN technology in
international markets.
In addition to the 1997-1998 Agreement, Nextel and Motorola also reached a
related understanding regarding the terms and conditions on which Motorola will
provide financing for Nextel's purchases of equipment and services provided by
Motorola, in addition to the amounts contemplated by Motorola's existing
financing commitments. Pursuant to the Additional Motorola Financing commitment,
Motorola has agreed to make up to an additional $450,000,000 in secured
financing available to Nextel consisting of (i) $50,000,000 in additional senior
secured borrowings pursuant to the Vendor Credit Agreement, (ii) up to
$200,000,000 in secured borrowings that are to be second in ranking to the
borrowings made pursuant to both the Vendor Credit Agreement and Nextel's
existing Bank Credit Agreement (the "Second Secured Borrowings"), and (iii) up
to an additional $200,000,000 in borrowings that would be required to be ratably
secured on an equal ranking with borrowings pursuant to the Vendor Credit
Agreement and such existing Bank Credit Agreement (the "Senior Secured
Borrowings").
Availability of the additional financing is subject to a number of
conditions including, among others, with respect to the Second Secured
Borrowings and the Senior Secured Borrowings, the prior borrowing of all amounts
available under the Vendor Credit Agreement (including the additional
$50,000,000 borrowings pursuant thereto described above) and pursuant to
Nextel's existing Bank Credit Agreement (including, with respect to the second
$100 million of the Second Secured Borrowings and all of the Senior Secured
Borrowings, the additional $250,000,000 in borrowings contemplated by such Bank
Credit Agreement), Nextel's receipt of $232.5 million in equity contributions
from the exercise of options held by the McCaw Investor, and the receipt of the
approval of a majority of the lenders and secured parties under the Vendor
Credit Agreement and Nextel's existing Bank Credit Agreement (in the case of the
Second Secured Borrowings) and all of such lenders and secured parties (in the
case of the Senior Secured Borrowings). The availability of the Senior Secured
Borrowings is also conditioned upon Nextel raising $250 million in additional
unsubordinated debt financing and Nextel's receipt of $50,000,000 of debt
financing from an affiliate of Craig O. McCaw on terms equivalent to such Senior
Secured Borrowings. The availability of all of such additional financing is also
subject to Nextel's satisfying certain requirements under the Nextel Indentures
or obtaining waivers of such requirements. The parties contemplate negotiating
and entering into a definitive agreement implementing the terms of the financing
agreements described above. Except for the Additional Financing Commitment with
Motorola, Nextel does not yet have any legally binding agreement or commitment
from third parties relating to, or that may be required to satisfy conditions to
implement all or any portion of, the proposed financing pursuant to such
Additional Motorola Financing. See "Risk Factors -- Nextel to Require Additional
Financing" and "-- Forward-Looking Statements."
AGREEMENTS WITH SIGNIFICANT STOCKHOLDERS
THE MCCAW INVESTOR. Pursuant to the terms of the Securities Purchase
Agreement dated as of April 4, 1995, as amended, among Nextel, the McCaw
Investor and Mr. Craig O. McCaw (the "McCaw Securities Purchase Agreement") and
certain other related agreements and documents, which contemplate certain
completed and potential equity investments by the McCaw Investor in several
types of Nextel securities and certain related agreements and transactions, (i)
the McCaw Investor purchased on April 5, 1995 from Nextel, 1,220,000 shares of
Class A Common Stock for an aggregate purchase price of $14,945,000; and (ii)
the McCaw Investor purchased on July 28, 1995 from Nextel, for an aggregate
purchase price of $300,000,000, an aggregate of 8,163,265 units consisting of a
total of (a) 8,163,265 shares of Class A Preferred Stock;
19
<PAGE> 20
(b) 82 shares of Class B Preferred Stock; and (c) three separate options (the
"McCaw Options"), exercisable for periods of two, four and six years,
respectively, from July 28, 1995, to acquire an aggregate of up to 35,000,000
shares of Class A Common Stock at exercise prices ranging from $15.50 to $21.50
per share. Such shares of Class A Preferred Stock and Class B Preferred Stock
are convertible into an aggregate of approximately 24,490,000 shares of Class A
Common Stock.
Additionally, in connection with such equity investments, Nextel, the McCaw
Investor and Mr. McCaw reached agreement on a number of matters relating to the
ownership, acquisition and disposition of the Class A Preferred Stock and the
Class B Preferred Stock, including without limitation, the granting of
registration and anti-dilutive rights to the McCaw Investor and certain
affiliates, limitations on investments by the McCaw Investor and its affiliates
in excess of approximately 45% of the voting securities of Nextel and certain
transfer restrictions applicable to the shares of Nextel capital stock held by
the McCaw Investor and certain affiliates. Finally, on July 28, 1995 pursuant to
agreements between the McCaw Investor and Motorola entered into in connection
with the McCaw Securities Purchase Agreement, the McCaw Investor purchased
4,000,000 shares of Class A Common Stock from Motorola and Motorola granted to
the McCaw Investor options to purchase up to an additional 9,000,000 shares of
Class A Common Stock held by Motorola.
Pursuant to the McCaw Securities Purchase Agreement, Nextel's Restated
Certificate of Incorporation (the "Nextel Charter") and Nextel's Amended and
Restated By-Laws (the "Nextel By-Laws"), Nextel, the McCaw Investor and Mr.
McCaw have established certain arrangements relating to the governance of Nextel
associated with such investments, including, without limitation, the rights
relating to designation by the McCaw Investor and election of three
representatives of the McCaw Investor to the Nextel Board of Directors (the
"Nextel Board") representing not less than 25% of the Nextel Board. Currently,
the McCaw Investor has designated only two directors for election to the Nextel
Board.
Pursuant to the McCaw Securities Purchase Agreement, the Nextel Charter and
the Nextel By-Laws, a five-member Operations Committee of the Nextel Board was
created, and the McCaw Investor is entitled to have a majority of the members
selected from among the McCaw Investor's representatives on the Nextel Board.
The Operations Committee has the authority to formulate key aspects of Nextel's
business strategy, including decisions relating to the technology used by
Nextel, acquisitions, operating and capital budgets, marketing and strategic
plans, approval of financing plans and endorsement of nominees to the Nextel
Board and committees thereof, as well as nomination and oversight of certain
executive officers. Currently, both of the McCaw Investor's designees on the
Nextel Board also serve as members of the Operations Committee, of which Mr.
McCaw is the chairman. The Nextel Board, by a majority vote, may override
actions taken or proposed by the Operations Committee, although doing so would
give rise to a $25,000,000 liquidated damages payment to the McCaw Investor, the
commencement of accrual of a 12% dividend payable on the stated value of all
outstanding shares of Class A Preferred Stock (an aggregate stated value of
approximately $300,000,000) and the immediate vesting of the options granted
pursuant to the McCaw Incentive Option Agreement (as defined below). However,
the Nextel Board, by a defined super-majority vote, retains the power to
override actions taken or proposed by the Operations Committee without
triggering the obligation to make a liquidated damages payment, or to commence
dividend accruals with respect to the Class A Preferred Stock or to accelerate
the vesting of the options granted pursuant to the McCaw Incentive Option
Agreement. In addition, the Nextel Board also may act to terminate the
Operations Committee, although such action by the Nextel Board would, in certain
circumstances, result in the obligation to make such a liquidated damages
payment and result in the commencement of such dividend accrual and the
accelerated vesting of the related options.
The McCaw Securities Purchase Agreement, the Nextel Charter and the Nextel
By-Laws also delineate a number of circumstances, chiefly involving or resulting
from certain events with respect to the McCaw Investor or 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.
The shares of Class A Preferred Stock are redeemable at Nextel's option,
and the shares of Class B Preferred Stock are mandatorily convertible, in the
event of a change of control of Nextel (as defined in the terms of such
preferred stock). Further, the McCaw Investor has agreed that, subject to
certain limited
20
<PAGE> 21
exceptions (including certain existing securities holdings and relationships),
until the later of (i) five years after the closing of the McCaw Transaction or
(ii) one year after the termination of the Operations Committee, neither it nor
its controlled affiliates will 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 first have been
presented to and rejected by Nextel in accordance with the provisions of the
McCaw Securities Purchase Agreement.
Pursuant to an Amendment, dated as of April 4, 1995, to the Agreement and
Plan of Contribution and Merger by and among Nextel, Motorola, ESMR, and certain
other subsidiaries of Motorola (the "Motorola Merger Amendment") entered into by
Nextel and Motorola in connection with the McCaw Securities Purchase Agreement,
Motorola has agreed to support the decisions and recommendations of the
Operations Committee and to vote the shares of Class A Common Stock held by
Motorola accordingly, subject to (i) the right of any Motorola-designated
members of the Nextel Board to vote in a manner consistent with their fiduciary
duties and (ii) 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 Class A Common Stock held by Motorola.
Concurrently with the execution of the McCaw Securities Purchase Agreement,
Nextel entered into a Management Support Agreement (the "Support Agreement")
with Eagle River, Inc. ("Eagle River"), an affiliate of the McCaw Investor which
also is controlled by Mr. McCaw, pursuant to which Eagle River will provide
management and consulting services to Nextel, the Nextel Board and the
Operations Committee from time to time as requested. In consideration of the
services to be provided to Nextel under the Support Agreement, Nextel entered
into an Incentive Option Agreement (the "McCaw Incentive Option Agreement")
concurrent with the execution of the McCaw Securities Purchase Agreement
granting to Eagle River the Incentive Option to purchase an aggregate of
1,000,000 shares of Class A Common Stock at an exercise price of $12.25 per
share, with such option vesting over a five-year period beginning April 4, 1997,
with full vesting on April 4, 2000.
In connection with the McCaw Transaction, Nextel submitted certain purchase
orders for Motorola-manufactured Digital Mobile network system infrastructure
equipment and confirmed its anticipated infrastructure equipment purchase
commitments for calendar year 1995. Nextel and Motorola also entered into the
Second Equipment Agreement Amendment pursuant to which, among other things, (1)
Motorola agreed to use its best efforts to develop Reconfigured iDEN, (2)
Motorola agreed to more favorable infrastructure and subscriber unit pricing for
Nextel, (3) Motorola agreed to certain performance benchmarks both for iDEN and
Reconfigured iDEN in the areas of voice quality, delay and system access and
reliability which, if not met, will result in credits by Motorola against
Nextel's invoiced costs with respect to equipment shipments, (4) Nextel agreed,
subject to certain conditions, to purchase and implement Reconfigured iDEN when
and as it is made available by Motorola, (5) Motorola agreed to negotiate to
enter into licenses with at least one alternative manufacturer of infrastructure
equipment to permit the manufacture and sale of iDEN compatible infrastructure
equipment, (6) Nextel agreed, 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 and (7) Nextel agreed to certain limitations on
changing the technology deployed on its SMR channels, including an agreement not
to effect such a change prior to October 1, 1997 without Motorola's consent.
MOTOROLA. On July 28, 1995, Nextel consummated the Motorola Transaction
pursuant to the Agreement and Plan of Contribution and Merger, dated August 4,
1994, as amended, by and among Nextel, Motorola, ESMR and ESMR Sub, Inc. (the
"Motorola Agreement"). Pursuant to the Motorola Transaction, Nextel effectively
acquired all of Motorola's 800 MHz SMR licenses in the continental United States
(the "Motorola SMR Business"), in exchange for 59,500,000 shares of Nextel
common stock (comprised of 41,670,000 shares of Class A Common Stock and
17,830,000 shares of Nextel's Class B Non-Voting Common Stock, par value $.001
per share ("Class B Common Stock")). Pursuant to the Motorola Agreement,
Motorola currently has the right to nominate two persons for election as members
of the Nextel Board; although, to date, Motorola has exercised such right only
with respect to one director. Also, in connection with the Motorola Transaction,
Nextel entered into an agreement for the purchase of Motorola infrastructure
equipment for certain of Nextel's Digital Mobile networks, and Motorola agreed
to provide additional new
21
<PAGE> 22
vendor financing (which agreements have been subsequently replaced by the Vendor
Credit Facility). The agreements relating to the Motorola Transaction also
include certain provisions concerning Nextel's choice of technology deployment,
the licensing of additional equipment manufacturers and the selection of
strategic equity investors, as well as transactions involving Motorola Canada
Limited ("Motorola Canada") and Clearnet, including the purchase by Nextel of a
portion of Motorola Canada's equity interest in Clearnet in exchange for
2,500,000 shares of Class A Common Stock, which was consummated effective as of
October 19, 1994.
In connection with the McCaw Transaction, Nextel submitted certain purchase
orders for Motorola-manufactured Digital Mobile network system infrastructure
equipment and confirmed its anticipated infrastructure equipment purchase
commitments for calendar year 1995 and Nextel and Motorola entered into the
Second Equipment Agreement Amendment, as described in "-- The McCaw Investor."
On July 28, 1995, Motorola sold to the McCaw Investor 4,000,000 shares of
Class A Common Stock at $12.25 per share and granted to the McCaw Investor
options to purchase up to an additional 9,000,000 shares of Class A Common Stock
over a six-year period ("McCaw Investor/Motorola Options"). The McCaw
Investor/Motorola Options are exercisable for up to 2,000,000 shares of Class A
Common Stock at $15.50 per share during the 30-day period following the second
anniversary of the closing of the Motorola Transaction (the "Motorola First
Tranche"), up to an additional 2,000,000 shares at $18.50 per share during the
30-day period following the fourth anniversary of the closing of the Motorola
Transaction (the "Motorola Second Tranche") and up to 5,000,000 shares at $21.50
per share during the 30-day period following the sixth anniversary of the
closing of the Motorola Transaction (the "Motorola Third Tranche"). In the event
the Motorola First Tranche is not fully exercised, the number of shares
purchasable in the Motorola Second Tranche will be reduced on a share-for-share
basis. In the event the Motorola Second Tranche is exercised for only a portion
of the shares covered thereby, the number of shares purchasable in the Motorola
Third Tranche will be reduced to the percentage of the Motorola Second Tranche
actually purchased. In addition, Motorola has granted to the McCaw Investor a
right of first offer or a right of first refusal to purchase shares of Class A
Common Stock that are owned by Motorola.
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 ("OBRA '93") and the Telecommunications Act of 1996 ("TCA '96").
With regard to the licensing of Nextel's Digital Mobile networks, Nextel
subsidiaries currently hold FCC licenses to use SMR radio channels in each of
their markets. Unlike other Commercial Mobile Radio Services ("CMRS") licenses,
i.e., cellular and PCS, which are granted on a geographic-area basis (e.g.,
Major Trading Area, Metropolitan Statistical Area), SMR licenses are granted on
a site-by-site basis, requiring that Nextel obtain hundreds of licenses to
construct and operate its SMR systems. In addition, each of these SMR station
licenses generally must be a minimum of 70 miles away from all non-affiliated
SMR base stations operating on the same SMR frequencies and must be constructed
and operational within one year of grant or the licenses will cancel
automatically.
As is true for cellular service and PCS system operators, the
interconnection of subscriber units with the public switched telephone network
requires Nextel to obtain certain exchange and inter-exchange services from
telephone companies and certain common carriers. Also, like cellular service and
PCS system operators, Nextel is permitted to profit from the resale of certain
services or facilities purchased from common carriers, such as local and long
distance service.
On December 15, 1995, the FCC released new 800 MHz SMR licensing rules
intended to address this licensing disparity among SMRs and other CMRS
providers. The new rules provide for the auction of geographic-area based SMR
licenses in the top 200 SMR channels on an Economic Area ("EA") basis. The 200
channels are proposed to be auctioned in blocks of 120 channels, 60 channels and
20 channels in an auction that the FCC has announced will occur in 1997. Once an
upper 200-channel EA license is obtained,
22
<PAGE> 23
the licensee will have the authority to construct, operate and modify its
systems within the licensed geographic area without first obtaining FCC
approval. To ensure proper construction and use of the spectrum, EA licensees
will be required to provide services to one-third of the population within two
years, and two-thirds of the population within five years using approximately
50% of the EA licensee's channels. Failure to meet these build out requirements
will result in loss of the EA license.
Because the upper 200 channels in the 800 MHz SMR service are currently
licensed to existing SMR providers, an EA licensee will have the authority to
relocate incumbents within the EA to the lower 230 SMR channels. Consequently,
Nextel may be subject to relocation in an EA for which it currently holds
licenses but fails to obtain the EA geographic-area license. Any incumbent not
relocated out of the EA licensed area must be provided co-channel protection by
the EA licensee, and will be permitted to make only those system modifications
that do not expand their current interference contour. The incumbent licensees
will also be provided an opportunity to convert their current site-by-site
licenses to a single license encompassing their existing authorized service area
contours.
In addition to promulgating new rules for the upper 200 800 MHz SMR
channels, the FCC proposed on December 15, 1995 to license the lower 230 SMR
channels on an EA basis. The FCC has proposed to auction the lower channels as
an "entrepreneur block," thus limiting auction participation to small businesses
which would likely exclude Nextel from eligibility to bid on the lower channels.
The FCC proposal would not permit lower EA licensees to relocate incumbents.
Nextel has filed comments and reply comments on the lower channel auction
proposal, and has proffered a consensus proposal with SMR WON (a trade
association of small business SMR operators), the American Mobile
Telecommunications Association, and the Personal Communications Industry
Association which, among other things, opposes an "entrepreneur" auction for the
lower channels, and would allow lower channel incumbents, including those that
have been relocated from the upper 200 channels, to enter into partnerships,
consortia, buyouts or other arrangements to determine who would be licensed on
each of the lower 230 channels in each EA. Any channel that incumbents cannot
settle, i.e., those channels that continue to have more than one licensee in an
EA, would be auctioned by the FCC. The FCC is considering this consensus
proposal and has indicated that it will issue final rules on the lower channels
in early 1997. As soon as these rules are finalized, the FCC can proceed with
both of the 800 MHz SMR auctions.
In August 1994, when the FCC first began its consideration of
geographic-area licensing for 800 MHz SMRs, all 800 MHz SMR licensing was frozen
(1) due to a large backlog of SMR applications and (2) in an effort to stabilize
the 800 MHz SMR landscape to prepare for new geographic-area licensing. In the
spring of 1996, the FCC was able to process all of the backlogged applications,
resulting in a number of license grants to Nextel. Many of these grants were the
subject of petitions for reconsideration, but Nextel has retained a large number
of these granted licenses, which will enable further implementation of Nextel's
Digital Mobile network.
At the same time it suspended all 800 MHz SMR licensing, the FCC
established a waiver process whereby parties could obtain new licenses if they
could show that their application (i) affects only channels on which the
applicant is already permanently licensed and (ii) affects coverage only within
the applicant's geographic area. Nextel and other SMR licensees subsequently
filed numerous applications pursuant to this waiver process, and have continued
to pursue FCC grant of these applications. On October 23, 1996, the Chief of the
Wireless Telecommunications Bureau released an order directing the FCC's
Licensing Division to process the waiver applications. On February 6 and 7,
1997, Nextel was granted nearly all of its waiver applications.
Among other regulatory changes being imposed by the FCC on Nextel are a 45
MHz CMRS spectrum cap, thus limiting the amount of CMRS, e.g., cellular, PCS,
and SMR, spectrum any single provider can hold. No more than 10 MHz of SMR
spectrum can be attributed to one entity, however. Cellular licensees and
wireline companies have been granted the authority to participate in dispatch
and SMR services, respectively. The FCC also has required Nextel to permit its
services to be resold, to permit manual roaming by users with technically
compatible equipment, to provide enhanced 911 services by April 1998, and to
offer local
23
<PAGE> 24
telephone number portability by the end of 1998. Nextel also is subject to
limitations on foreign investment as set forth in the Communications Act of
1934, as amended.
Future changes in regulation or legislation affecting Digital Mobile
network service and the recent allocation of additional CMRS spectrum by
Congress and the FCC could materially adversely affect Nextel's business.
EMPLOYEES
At December 31, 1996, the Company had approximately 3,600 full-time
employees. None of the Company's employees are covered by a collective
bargaining agreement and the Company believes that its relationship with its
employees is good.
RISK FACTORS
The Company's business, financial condition and future prospects are
subject to a number of risks and contingencies. Those that the Company regards
currently as among the most significant are summarized below. See also
"-- 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 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 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. 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. 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, and the six-time slot TDMA version of first generation
iDEN in particular, as each is currently deployed, involves certain performance
trade-offs, for example, in various characteristics affecting voice quality and
fidelity. See "Nextel's Digital Mobile Networks -- Digital Mobile Network
Technology," "-- Customer Acceptance Considerations" and "-- Experience with
First Generation iDEN System Implementation."
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. 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. 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 or
other transmission technology formats that may be developed in the future, may
affect customer acceptance of the services offered by Nextel. 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. As
is frequently the case both in the development and implementation of new
technologies and the offering of related services, Nextel has experienced
difficulties and delays in the implementation of the first generation iDEN TDMA
technology in its Digital Mobile networks. See "Nextel's Digital Mobile
Networks -- Experience with First Generation iDEN System Implementation."
24
<PAGE> 25
Motorola has advised Nextel that it contemplates continuing to install
software upgrades and Nextel anticipates it will continue to advise and consult
with Motorola concerning potential measures that could be taken to address any
issues concerning system performance issues and/or expressed customer
satisfaction levels as revealed by Nextel's continuing system testing and
customer surveys. To date, Nextel's experience has been derived mainly based on
customers in its markets employing the first generation iDEN technology, who are
primarily oriented to the two-way dispatch service, and 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 networks,
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 that such technology
optimization activities will be a continuing component of normal Digital Mobile
network operation, and 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 Nextel and Motorola 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 Equipment Agreement Amendment, Motorola agreed to
use its best efforts to develop, and Nextel agreed to implement when developed,
the Reconfigured iDEN technology. Although the Reconfigured iDEN development and
deployment activities to date have proceeded in a timely and satisfactory
manner, no assurance can be given that any further modifications or to the
Reconfigured iDEN technology will be developed successfully, or on the currently
anticipated time schedule, or that any such modifications or enhancements, if
developed, would be deployed in Nextel's Digital Mobile networks or, if
deployed, would perform successfully or would satisfy customer requirements, or
that Nextel's mobile telephone services utilizing the Reconfigured iDEN
technology would continue to be regarded as competitive in the wireless
communications services markets as such markets currently exist and as they are
expected to develop in the future. See "-- Forward-Looking Statements."
NEXTEL TO REQUIRE ADDITIONAL FINANCING. Nextel anticipates that, for the
foreseeable future, it will be utilizing significant amounts of its available
cash for capital expenditures for the construction of Digital Mobile networks
(including the anticipated conversion of its existing Digital Mobile networks to
utilize the Reconfigured iDEN technology platform), operating expenses relating
both to the Digital Mobile networks and to Nextel's analog SMR networks,
potential acquisitions (including the acquisition of rights to spectrum through
the contemplated 800 MHz spectrum auction process) and 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
25
<PAGE> 26
operating losses (exclusive of non-cash items) were approximately $20,400,000.
Such average monthly amounts are not necessarily representative of Nextel's
anticipated experience in such areas and would be expected to increase during
1997 and 1998 in connection with the deployment of the Reconfigured iDEN
technology platform, particularly if the Company is able and decides to
implement the Revised Business Plan. 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 December 31, 1996 totaled approximately $144,693,000.
At December 31, 1996, Nextel had drawn approximately $590,000,000 of its
available financing under the Bank Credit Facility, leaving an aggregate of
approximately $1,065,000,000 available for borrowing under such facility, and
had drawn $150,000,000 of its available financing under the Vendor Credit
Facility, leaving an aggregate of approximately $195,000,000 available for
borrowing under such facility, subject in each case to the satisfaction or
waiver of applicable borrowing conditions. The Bank Credit Agreement
contemplates that the Company, with the consent of the lenders under the Bank
Credit Agreement and the Vendor Credit Agreement, may borrow up to an additional
$250,000,000 (subject to certain limitations) under the Bank Credit Facility
(the "Additional Bank Borrowings"). The Bank Credit Agreement also contemplates
that borrowings under the Vendor Credit Facility may be increased by up to
$50,000,000 (subject to certain limitations) (the "Additional Vendor
Borrowings"). See "Post Fiscal Year-End Transactions and Developments -- Consent
Solicitation."
Nextel is currently taking steps to obtain additional sources of funding in
addition to the amounts currently available under the Bank and Vendor Credit
Facilities, including the Additional Bank Borrowings and Additional Vendor
Borrowings. Availability of the Additional Bank Borrowings is subject, among
other things, to the approval of a majority of the lenders under the Bank Credit
Agreement and the Vendor Credit Agreement. There are currently no legally
binding agreements or understandings with any lenders with respect to the terms
(other than the provisions contained in the Bank Credit Agreement and the Vendor
Credit Agreement that would permit such additional borrowing with majority
approval of the lenders thereunder) on which such Additional Bank Borrowings may
be made available. Nextel has also reached an understanding with Motorola
concerning the terms on which Motorola would make the $50,000,000 in Additional
Vendor Borrowings available and the terms on which Motorola would make
additional secured equipment financing available. See "Post Fiscal Year-End
Transactions and Developments -- Nextel/Motorola Agreements."
Nextel believes that is has sufficient funds currently available pursuant
to the Bank and Vendor Credit Facilities currently in place (but excluding any
amounts that would be available to it through the Additional Bank Borrowings,
the Additional Vendor Borrowings, the Second Secured Borrowings and the Senior
Secured Borrowings the availability of each of which is subject to certain
conditions, including those described herein) and pursuant to the assumed
exercise of the currently outstanding warrants and options to acquire shares of
Class A Common Stock described below, to meet its cash needs for the remainder
of 1997 and into early 1998, based on continuation of its first stage nationwide
Digital Mobile networks build out approach consistent with its Existing Business
Plan, in light of its current (and currently committed) business and investment
activities and assuming a conservative ramp up in Digital Mobile systems
subscriber growth. To fully complete its first stage nationwide Digital Mobile
networks build out in 1998 as envisioned in the Existing Business Plan, and to
adopt and implement the Revised Business Plan, Nextel would need to obtain
additional amounts of debt or equity financing beyond that available under the
Bank and Vendor Facilities currently in place (excluding amounts constituting
Additional Bank Borrowings, Additional Vendor Borrowings, Second Secured
Borrowings and Senior Secured Borrowings) and equity proceeds of $232,500,000
associated with an assumed exercise in full of certain options held by the McCaw
Investor (discussed below). The additional financing that would be required to
carry out the Existing Business Plan activities through 1998 would primarily
consist of equity or debt funding to substitute for the proceeds that would have
been received upon an exercise in full of the warrants for 25,000,000 shares of
Class A Common Stock previously held by Comcast FCI. To the extent such
additional financing were in the form of debt rather than equity, it is likely
that changes to the terms of the Nextel Indentures would be required to permit
the Company the needed flexibility to incur such debt. See "Post Fiscal Year-End
Transactions and Developments -- Consent Solicitation" and
26
<PAGE> 27
"-- Nextel/Motorola Agreements." See also "-- Forward-Looking Statements."
Significant additional financing would be required to adopt and implement the
Revised Business Plan. As indicated above under "Post Fiscal Year-End
Transactions and Developments," the Company is currently investigating and
taking a variety of actions directed to obtain access to significant additional
amounts of debt financing. However, assuming (i) that the Company obtains the
relief it is seeking from the holders of the Nextel Notes, especially the
changes in the provisions of the Nextel Indentures that relate to "Permitted
Debt," and (ii) that the Company secures access to all of the available funds
under the existing Bank and Vendor Credit Facility, and is able to structure
satisfactory arrangements to make the additional $200,000,000 in Second Secured
Borrowings from Motorola available (including obtaining access to the
$250,000,000 in Additional Bank Borrowings and to the $50,000,000 in Additional
Vendor Borrowings), the Company estimates that it would have sufficient
financing available to meet its cash needs through 1998 and completion of the
Existing Business Plan. The Company estimates that approximately an additional
$500,000,000 in financing would be required to meet the Company's anticipated
cash needs through 1998, assuming implementation and completion of the Revised
Business Plan. See "Revised Business Plan." In all of such financing scenarios,
Nextel has assumed that all of the funds currently available pursuant to the
Bank and Vendor Credit Facilities may be borrowed thereunder and that certain
currently outstanding warrants and options to acquire shares of Class A Common
Stock described below will be exercised in full before their respective
currently scheduled expiration dates. See "-- Forward-Looking Statements."
Other than the arrangements summarized under "Post Fiscal Year-End
Transactions and Developments -- Nextel/Motorola Agreements," which are subject
to a number of conditions, there are currently no commitments or understandings
with third parties to obtain funding required to meet such funding shortfall.
Moreover, there can be no assurance that the Additional Bank Borrowings,
Additional Vendor Borrowings or Second Secured Borrowings will be available or
that the outstanding warrants and options will be exercised. Both the Bank and
Vendor Credit Facilities and the Nextel Indentures contain provisions that
operate to limit the amount of borrowings that may be incurred by the Company.
The Company intends to seek the consent of the holders of the Nextel Notes to
certain amendments to the Nextel Indentures that would, among other things,
permit the Company to incur additional indebtedness to meet the funding
requirements associated with completion of its Existing Business Plan and
implementation of its Revised Business Plan. See "Post Fiscal Year-End
Transactions and Developments -- Consent Solicitation." 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 Class A Common Stock. See "-- Forward-Looking
Statements."
Nextel currently is aware of numerous factors and considerations, any one
or more of which could have a material effect on the timing and/or amount of the
future funding to be required by Nextel, but Nextel cannot currently quantify
with precision either the magnitude or the certainty of the effects associated
with any such factors. These factors include: (i) the timing of the anticipated
800 MHz spectrum auction process, and the amounts required to be bid to acquire
any or all of the available spectrum blocks in the major metropolitan market
areas where Nextel currently operates, or currently plans to operate, its
Digital Mobile network and the amounts that may be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks that
may be acquired by Nextel in the 800 MHz spectrum auction process; (ii) the
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 successful commercial introduction
and customer acceptance of Nextel's Digital Mobile services in new market areas
using such technology; (iii) the potential commercial opportunities and risks
associated with implementation of Nextel's Revised 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 by Nextel in the future and in connection with the conversion of
existing Digital
27
<PAGE> 28
Mobile networks to the Reconfigured iDEN technology format, 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 the 1997-1998
Agreement, 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 partly beyond Nextel's control or
influence. See "-- Forward-Looking Statements."
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). Finally, Nextel could obtain significant additional funds in
connection with the exercise of outstanding warrants and options, and the amount
and timing of receipt of such funds also would play a role in Nextel's
determinations concerning the need for or attractiveness of other potentially
available sources of financing. As Nextel has disclosed previously, full
exercise of the options granted to the McCaw Investor at the July 1995 closing
of the McCaw Transaction would result in the receipt by Nextel of approximately
$232,500,000, $277,500,000 and $107,500,000 of additional funds prior to July 29
in the years 1997, 1999 and 2001, respectively, and full exercise of the
warrants initially issued to Motorola for 3,000,000 shares of Class A Common
Stock would result in the receipt by Nextel of approximately $45,000,000 in
additional funds ($32,100,000 of which would be received in 1999 and
substantially all of the remainder of which would be received prior to 2001).
Finally, proceeds from the exercise by the McCaw Investor of its anti-dilutive
rights to acquire additional Nextel equity in connection with certain issuances
by Nextel of its capital stock and proceeds from the exercise of other warrants
and options currently outstanding and held by third parties, including options
granted pursuant to the Nextel Amended and Restated Incentive Equity Plan
(including its predecessor plans) and the Nextel Associates Stock Purchase Plan,
may provide other available sources of funding.
The foregoing discussion concerning potential exercise of various third
party rights to acquire shares of Class A Common Stock is subject to the
qualification that no assurance can be given that any of such rights will be
exercised or, if exercised, that the contemplated investment will in fact be
consummated. In the case of the Bank Credit Facility and the Vendor Credit
Facility (or the Additional Bank Borrowing and/or any of the additional
borrowings contemplated by the Additional Motorola Financing, if structured
successfully), there can be no assurance that the conditions to access such
facilities will be met. To the extent any of the aforementioned proceeds from
option and warrant exercises or financing arrangements are not available when
required, it will be necessary for Nextel to obtain alternate sources of
financing to meet its anticipated funding needs.
Nextel has had and may in the future have discussions with other 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. Motorola
consented with respect to the grant of superior governance rights by Nextel in
connection with the McCaw Transaction. The ability of Nextel to incur additional
indebtedness (including, in certain circumstances, indebtedness incurred under
the Bank Credit Agreement and/or under the Vendor Credit Facility) is and will
be limited by the terms of the Nextel Indentures, the Bank Credit Agreement and
the Vendor Credit Agreement. The Bank Credit Agreement and the Vendor Credit
Agreement also require Nextel and its relevant subsidiaries at specified times
to satisfy 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
28
<PAGE> 29
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 net losses 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 impact of
Reconfigured iDEN technology and other matters discussed above, there can be no
assurance that Nextel will be able to obtain adequate capital to implement the
nationwide build-out of its Digital Mobile networks in accordance with either
the Existing Business Plan or the Revised Business Plan. 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 communication 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. See
"Nextel's Digital Mobile Networks -- Competition" and "-- Marketing."
Following implementation of its Digital Mobile networks and completion of
related system optimization activities, the Company'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 services
in each of the markets in which it operates a Digital Mobile network. The
Company 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 the Company 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 the Company has made significant progress in these areas
to date, no assurance can be given that such objectives will be achieved. See
"Risk Factors -- 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, alphanumeric
short-messaging and paging services, 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
December 31, 1996 represented coverage of approximately 50% of the United States
population. Accordingly, Nextel will not be able to provide roaming service
comparable to that currently available from cellular operators, which have
roaming agreements covering each
29
<PAGE> 30
other's markets throughout the United States, unless and until a nationwide
Digital Mobile networks build-out is substantially completed. 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 will not be compatible with
cellular or PCS systems, and vice versa. This lack of interoperability may
impede the Company's ability to attract cellular 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 cellular handsets, and is (and is likely to remain) somewhat more
expensive than digital cellular 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. The
Company's multi-function subscriber units, however, are competitively priced
compared to multi-function (mobile telephone service and alphanumeric short-text
messaging) digital cellular and PCS handsets. During the transition to digital
technology, certain participants in the United States cellular industry are
offering subscriber units with dual mode (analog and digital) compatibility.
There can be no assurances that existing analog SMR customers will be willing to
invest in new subscriber equipment necessary to migrate to the Digital Mobile
networks. 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. Thus, Nextel's ability to compete based on the price
of subscriber units 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 the Company. The Company
believes that it generally has adequate spectrum to provide the capacity needed
on its Digital Mobile networks for the foreseeable future. See
"-- Forward-Looking Statements."
RELIANCE ON ONE PRINCIPAL SUPPLIER IN IMPLEMENTATION OF DIGITAL MOBILE
NETWORKS. Pursuant to the Equipment Purchase Agreements between Nextel and
Motorola, Motorola provides the iDEN infrastructure and subscriber handset
equipment to Nextel throughout its markets. The Company 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 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 "Nextel's Digital Mobile Networks --
Technology Commitments" 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. Nextel estimates that
system infrastructure and other system capital costs to be incurred through 1998
to implement the Existing
30
<PAGE> 31
Business Plan will be approximately $1.0 billion and that implementation of the
Revised Business Plan would increase such costs by at least $450,000,000. See
"-- Nextel to Require Additional Financing."
The Second Equipment Agreement Amendment places certain limits on Nextel's
ability to use other technologies as an alternative to iDEN. See "Nextel's
Digital Mobile Networks -- Technology Commitments."
It is expected that for the first 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 Prior Equipment Agreement
Amendment provides 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 system 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 OBRA '93 and TCA '96. The Company's ability to conduct its
business is dependent, in part, on its compliance with FCC rules and
regulations. See "-- Regulation." Future changes in regulation or legislation
affecting Digital Mobile network service and Congress' and the FCC's recent
allocation of additional CMRS spectrum by Congress and the FCC could materially
adversely affect Nextel's business.
NEXTEL'S ASSETS PRIMARILY CONSIST OF INTANGIBLE FCC LICENSES. Nextel's
assets consist primarily of intangible assets, principally FCC licenses, the
value of which will depend significantly upon the success of Nextel's business
and the growth of the SMR and wireless communications industries in general. In
the event of default on indebtedness or liquidation of Nextel, there can be no
assurance that the value of these assets will be sufficient to satisfy its
obligations. Nextel had a negative net tangible book value of $1,268,000 as of
December 31, 1996.
NEXTEL SUSCEPTIBLE TO CONTROL BY SIGNIFICANT STOCKHOLDERS. Based on
securities ownership information relating to Nextel as of March 21, 1997, and
giving effect to the repurchase of the Option Agreement from Comcast FCI, the
conversion of the outstanding shares of Nextel's preferred stock and Class B
Common Stock and the exercise in full of (i) three separate options held by the
McCaw Investor exercisable for periods of two, four and six years, respectively,
from July 28, 1995, to acquire an aggregate of up to 35,000,000 shares of Class
A Common Stock at exercise prices ranging from $15.50 to $21.50 per share (the
"McCaw Options"), (ii) the option held by Eagle River, Inc., an affiliate of the
McCaw Investor ("Eagle River"), to purchase an aggregate of 1,000,000 shares of
Class A 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 options
granted on July 28, 1995 to the McCaw Investor by Motorola to purchase up to
9,000,000 shares of Class A Common Stock over a six-year period (the "McCaw
Investor/Motorola Options"), and (iv) a warrant held by Motorola to purchase
2,700,000 shares of Class A Common Stock, the McCaw Investor would hold
approximately 24.5% and Motorola would hold approximately 16.9% of the Class A
Common Stock 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. Craig O. McCaw (the "McCaw Securities
Purchase Agreement"), the McCaw Investor has the right to designate not less
than 25% of the Board of Directors of Nextel (the "Nextel Board"). Additionally,
the McCaw Investor is entitled to have a majority of the members of the
Operations Committee of the Nextel Board selected from the McCaw Investor's
representatives on the Nextel Board. The Operations Committee has the authority
to formulate key aspects of Nextel's business strategy, including decisions
relating to the technology used by Nextel (subject to existing equipment
purchase agreements), acquisitions, the creation and approval of operating and
capital budgets and marketing and strategic plans, approval of financing plans,
31
<PAGE> 32
endorsement of nominees to the Nextel Board and committees thereof and
nomination and oversight of certain executive officers. As a result, based upon
the McCaw Investor's stock ownership position, as well as its ability to
designate at least 25% of the members of the Nextel Board and control the
Operations Committee, the McCaw Investor is in a position to exert significant
influence over Nextel's affairs. The Nextel Board retains the authority to
override actions taken or proposed to be taken by the Operations Committee,
subject, in certain circumstances, to certain financial consequences. The
creation and existence of the Operations Committee does not change the normal
fiduciary duties of the Nextel Board, including fiduciary duties in connection
with any proposal to override any action of or to terminate the Operations
Committee, whether or not such action would give rise to such financial
consequences. Although Motorola is entitled to nominate two directors to the
Nextel Board, presently only one person designated by Motorola is a Nextel
director. Pursuant to an amendment to the Motorola Agreement, 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 Class A
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 Class A Common Stock held by it.
Based upon their respective ownership positions, if the McCaw Investor and
Motorola chose to act together, such parties could have a sufficient voting
interest in Nextel, among other things, to (1) exert effective control over the
approval of amendments to Nextel's Restated Certificate of Incorporation, as
amended (the "Nextel Charter"), mergers, sales of assets or other major
corporate transactions as well as other matters submitted for stockholder vote,
(2) defeat a takeover attempt, and (3) otherwise control whether particular
matters are submitted for a vote of the stockholders of Nextel. Although
Motorola has made certain commitments as described in the last sentence of the
preceding paragraph, Nextel is not aware of any current agreements among the
McCaw Investor and Motorola with respect to the ownership or voting of Class A
Common Stock and neither of Motorola nor the McCaw Investor has indicated to
Nextel that it has any present intention to seek to exercise such control.
Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor has
agreed that it will not vote for any nominee to the Nextel Board other than
persons it is entitled to designate under the terms of the securities it owns or
of the McCaw Securities Purchase Agreement. Upon request of Nextel, the McCaw
Investor has also agreed to cause shares of Class A 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 Class A Common Stock in the
election of directors so designated by the Nextel Board.
Each of the McCaw Investor and Motorola has and (subject to the terms of
applicable agreements between such parties and Nextel) may have an investment or
interest in entities that provide wireless telecommunications services that
could potentially compete with Nextel. Under the McCaw Securities Purchase
Agreement, the McCaw Investor, 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.
POTENTIAL DILUTION FROM PENDING AND FUTURE TRANSACTIONS. As indicated
elsewhere herein, Nextel has commitments, and from time to time, may enter into
additional commitments, to issue a substantial number of new shares of Class A
Common Stock.
32
<PAGE> 33
As of March 1, 1997, there were approximately 267,550,000 shares of Class A
Common Stock outstanding (assuming the conversion of the outstanding shares of
Class B Common Stock and Nextel's preferred stock), on a primary, rather than a
fully diluted, basis, and approximately 355,706,000 shares of Common Stock
outstanding assuming the exercise of all options (including employee options,
Motorola's warrant to purchase 2,700,000 shares, and the options to purchase an
aggregate of 36,000,000 shares pursuant to the McCaw Options and the Incentive
Option), warrants and other existing rights to acquire Class A Common Stock,
outstanding on such date.
On April 29, 1996, the Commission declared effective the Company's
Registration Statement on Form S-4, covering 10,000,000 shares of Class A Common
Stock, or warrants to acquire such shares, which contemplates issuances from
time to time on a "shelf" basis in accordance with Rule 415(a)(1)(viii)
promulgated under the Securities Act in connection with acquisitions of other
businesses, properties or securities in business combination transactions. As of
the date hereof, the Company has not issued any of such Class A Common Stock or
warrants. Additionally, on April 29, 1996, the Commission declared effective the
Company's Registration Statement on Form S-3, covering 8,848,469 shares of Class
A Common Stock, which was filed by Nextel on behalf of Comcast and Comcast FCI
in satisfaction of the Company's obligations pursuant to the registration rights
of Comcast and Comcast FCI. According to the most recent amendment to the
Schedule 13D of Comcast filed on October 1, 1996, Comcast and Comcast FCI have
sold an aggregate of 5,570,000 of such shares of Class A Common Stock pursuant
to brokerage transactions.
Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor was
granted anti-dilutive rights with respect to certain Nextel share issuances. In
connection with the issuance of Class A Common Stock by Nextel in connection
with an acquisition, the McCaw Investor exercised its anti-dilutive rights,
which resulted in the sale of 373,846 treasury shares of Class A Common Stock to
the McCaw Investor on November 26, 1996. The McCaw Investor has the right to
acquire additional shares of Class A Common Stock as a result of future
issuances of shares of Class A Common Stock. An increase in the number of shares
of Class A Common Stock that will become available for sale in the public market
may adversely affect the market price of Class A Common Stock and 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 from the date thereof until eighteen months after
certain development targets for Reconfigured iDEN technology have been achieved,
Motorola LMPS will not solicit other iDEN customers and neither Motorola LMPS
nor Motorola's credit corporation subsidiary will make any equity investment in,
or provide equipment/vendor financing to, certain iDEN customers with respect to
purchases of iDEN equipment.
In light of the competitive posture of Motorola, Nextel and Motorola have
agreed that any information relating to Nextel's business plans and projections
will be used by Motorola only for purposes of ensuring compliance with Nextel's
obligations under the various equipment purchase agreements and financing
agreements between Nextel and Motorola. Motorola has designated one director to
the Nextel Board and, hence, such director has access to Nextel's business plans
subject to certain confidentiality restrictions.
Although Nextel believes that its equipment purchase and financing
relationship with Motorola has been structured to reflect the realities of
purchasing and borrowing from a competitor, there can be no assurance that the
potential conflict of interest will not adversely affect Nextel in the future.
Moreover, Motorola's role as a significant stockholder of Nextel, in addition to
its role as a major creditor and supplier, also creates potential conflicts of
interest, particularly with regard to significant transactions.
33
<PAGE> 34
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 rebutted these allegations, and a major industry trade
association and certain governmental agencies have stated publicly that the use
of such phones poses no undue health risk. The actual or perceived risk of
mobile communications devices could adversely affect Nextel through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber or through reduced financing available to the mobile communications
industry.
FORWARD-LOOKING STATEMENTS. A number of the matters and subject areas
discussed in the foregoing "Risk Factors" section and elsewhere in this Annual
Report that are not historical or current facts deal with potential future
circumstances and developments. The discussion of such matters and subject areas
is qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may materially differ from Nextel's actual
future experience involving any one or more of such matters and subject areas.
Nextel has attempted to identify, in context, certain of the factors that it
currently believes may cause actual future experience and results to differ from
Nextel's current expectations regarding the relevant matter or subject area. The
operation and results of Nextel's wireless communications business also may be
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 (such as, for example,
construction, delivery, and real estate management services) 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 systems 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, 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.
ITEM 2. PROPERTIES
The Company leases its principal executive and administrative office, which
is located at 1505 Farm Credit Drive, in McLean, Virginia, comprising
approximately 80,400 square feet, for an initial term of 10 years, expiring
August 14, 2006, with two five-year renewal options. The Company also leases for
certain administrative operations approximately 110,000 square feet of office
space in Denver, Colorado under a lease expiring in 2004, approximately 95,600
square feet of office space in Norcross, Georgia under a lease expiring in 2005
and approximately 58,170 square feet in Rutherford, New Jersey under a lease
expiring in April 2001. The Company also leases office facilities for sales,
maintenance and administrative operations in its markets. There are
approximately 100 office leases in effect at December 31, 1996 with terms
ranging from 1 to 10 years (not including extensions related to the exercise of
renewal options).
The Company leases antenna sites for the transmission of its radio service
which are located, in the case of its analog SMR operations, primarily on either
building tops or mountain tops and in the case of its Digital Mobile networks
operations, on towers, generally at heights ranging from 150 to 300 feet above
the ground. The terms on approximately 97% of the leases range from
month-to-month to 20 years. As of December 31, 1996, the Company had
approximately 2,500 site leases for its analog SMR business and approximately
2,800 constructed sites at leased locations for its Digital Mobile networks. The
Company also owns properties and transmission towers where management considers
it is in the best interest of the Company to do so. See "Business -- Nextel's
Digital Mobile Networks -- System Construction and Suppliers" for a discussion
of factors relevant to additional equipment, transmission and antenna sites that
will need to be procured and constructed in connection with the implementation
of the Company's Digital Mobile networks in the designated markets.
34
<PAGE> 35
ITEM 3. LEGAL PROCEEDINGS
On July 10, 1995, a lawsuit titled In Re Nextel Communications Securities
Litigation was filed in the United States District Court in the District of New
Jersey. This litigation, which is being pursued as a class action, amends and
consolidates three previously filed class action complaints and seeks damages
allegedly incurred by certain stockholders and claimed to result from
defendants' alleged violations of Section 10(b) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder. The litigation also makes claims
of fraud and deceit. Specifically, plaintiffs claim that such damages resulted
from defendants' certain alleged false and misleading statements made by
defendants regarding the digital communications technology developed by Motorola
and deployed by Nextel in its Digital Mobile networks. While Nextel cannot
predict the outcome of this litigation, Nextel believes that the claims against
it are without merit and intends to vigorously defend against them.
On September 19, 1994, a lawsuit titled Charles Dascal v. Morgan O'Brien,
Becker, Gurman, Lukas, Meyers, O'Brien and McGowan, P.C. and Nextel
Communications, Inc., was filed in the Circuit Court of Dade County, Florida.
The lawsuit, which has been transferred to the United States District Court for
the Southern District of Florida, seeks compensatory damages, lost profits and
special damages based on the defendants' alleged breach of fiduciary duty,
misappropriation of trade secrets, negligent misrepresentation, fraud,
conversion, civil theft, breach of good faith and fair dealing and unjust
enrichment. The claims, which primarily concern alleged conduct by Nextel's
current Vice Chairman and former Chairman of the Board, Morgan O'Brien, in the
late 1970's and early 1980's prior to the formation of Nextel, assert that
business plans allegedly formulated by the plaintiff relating to the development
of a wireless communications system were disclosed to, and have been improperly
used by, the defendants. Nextel has filed counterclaims against Mr. Dascal and
has also filed third-party claims against Tel Air Network, Inc. and
Knight-Ridder, Inc. While Nextel cannot predict the outcome of this litigation,
Nextel believes that the claims against it are without merit and intends to
vigorously defend against them. On September 13, 1994, the Board of Directors
determined that Morgan O'Brien in his capacities as an officer, director and
authorized representative of Nextel, was entitled to indemnification in respect
of this matter.
Nextel was also named as a defendant in the case titled Angelo Mesiero,
William Schiemann and Dennis Donnegan v. American Mobile Systems, Inc., Richard
Somers, William Wedum, Gary Howard and Nextel Communications, Inc. filed in the
Court of Chancery, New Castle County, Delaware on September 9, 1994. This
lawsuit, which is being pursued as a class action, seeks declaratory and
injunctive relief and damages based upon the defendants' alleged breach of their
respective alleged fiduciary duties. Specifically, plaintiffs allege that
Nextel, based on the relationships created by the stock purchase agreement
entered into in connection with the AMS Transaction, owed a fiduciary duty to
the stockholders of AMS that was alleged to have been breached in connection
with the negotiation of a proposed merger with AMS. Nextel expects that all
relevant parties will enter into a stipulation agreeing to a dismissal of this
lawsuit without prejudice.
Unless otherwise indicated, the relevant plaintiffs have not specified
amounts of damages being sought. Given Nextel's assessment of the claims
asserted against it in each such lawsuit, and in other non-material pending or
threatened litigation (including litigation incidental to the conduct of its
business), Nextel does not believe that such lawsuits, individually or in the
aggregate, will have a material adverse effect on Nextel's financial position,
results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the period commencing October 1, 1996 and concluding December 31, 1996,
which is the final quarter covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following section provides certain information regarding those persons
serving as executive officers of the Company as of March 15, 1997. All of such
executive officers were most recently elected to their present officer positions
by action of the Board of Directors of Nextel. There is no family relationship
between any of
35
<PAGE> 36
the executive officers of the Company, or between any of such officers and any
of the Directors of the Company. Officers of the Company are elected to serve
until their successors have been elected.
DANIEL F. AKERSON. (48) Mr. Akerson has served as Chairman of the Board and
Chief Executive Officer since joining the Company on March 6, 1996. From 1993
until March 5, 1996, Mr. Akerson served as a general partner of Forstmann Little
& Co., a private investment firm ("Forstmann Little"). While serving as a
general partner of Forstmann Little, Mr. Akerson also held the positions of
chairman of the board and chief executive officer of General Instrument
Corporation, a technology company acquired by Forstmann Little. From 1983 to
1993, Mr. Akerson held various senior management positions with MCI
Communications Corporation, including president and chief operating officer. Mr.
Akerson serves as a director of American Express Company and as Chairman of the
Board of McCaw International.
MORGAN E. O'BRIEN. (52) Mr. O'Brien has served as a director of the Company
since co-founding the Company in 1987. Since March 1996, Mr. O'Brien has served
as a Vice Chairman of the Nextel Board. From 1987 to March 5, 1996, Mr. O'Brien
served as Chairman of the Nextel Board, and from 1987 to October 16, 1994, Mr.
O'Brien also served as General Counsel of the Company. Mr. O'Brien was with the
firm of Jones, Day, Reavis & Pogue, an international law firm, from January 1986
to January 1990, during which time he served as partner-in-charge of the firm's
telecommunications section from January 1986 until co-founding the Company in
1987. Mr. O'Brien also served as a consultant to Jones, Day, Reavis & Pogue from
January 1990 to October 1991. From June 1979 until April 1987, Mr. O'Brien was
in private legal practice and represented major SMR operators in proceedings
before the FCC. From October 1970 to June 1979, Mr. O'Brien served in a variety
of legal and managerial positions with the FCC in the areas of private radio and
radio common carrier administration. Mr. O'Brien serves on the Board of
Directors of CTIA, a leading wireless communications trade association.
TIMOTHY M. DONAHUE. (48) Mr. Donahue has served as President of the Company
since joining the Company on February 1, 1996 and as a director of the Company
since May 1996. On February 29, 1996, Mr. Donahue was elected to the additional
position of Chief Operating Officer of the Company. From 1986 to January 1996,
Mr. Donahue held various senior management positions with AT&T Wireless, most
recently regional president for the northeast.
STEVEN M. SHINDLER. (34) Mr. Shindler has served as Senior Vice President
and Chief Financial Officer since joining the Company in May 1996. Between 1987
and 1996, Mr. Shindler was an officer with The Toronto Dominion Bank, where most
recently he was a Managing Director in its Communications Finance Group.
BARRY WEST. (51) Mr. West has served as Senior Vice President and Chief
Technology Officer since joining the Company in March 1996. Mr. West served in
various senior positions with British Telecom, most recently as Director of
Value-Added Services and Corporate Marketing at Cellnet, a cellular
communications subsidiary of British Telecom.
THOMAS KELLY. (49) Mr. Kelly joined the Company in April 1996 and serves as
Senior Vice President of Marketing. Between 1993 and 1996, Mr. Kelly was
Regional Vice President of Marketing for AT&T Wireless Services. Prior to
joining AT&T, Mr. Kelly worked for 12 years with the marketing consulting firm
of Howard Bedford Nolan, where he was most recently an Executive Vice President.
ROBERT S. FOOSANER. (54) Mr. Foosaner joined the Company in April 1992 and
serves as Senior Vice President of Government Affairs. Prior to joining the
Company, Mr. Foosaner was a partner at the law firm of Jones, Day, Reavis &
Pogue where he most recently served as head of the communications group. Before
joining the law firm in November 1986, Mr. Foosaner held various positions at
the FCC where he most recently served as Chief, Private Radio Bureau.
KEITH D. GRINSTEIN. (36) Mr. Grinstein has served as President, Chief
Executive Officer and as a director of McCaw International since January 1996.
From January 1991 to December 1995, Mr. Grinstein was President and Chief
Executive Officer of the aviation communications division of AT&T Wireless. Mr.
Grinstein held a number of positions at McCaw Cellular and its subsidiaries,
including Vice President,
36
<PAGE> 37
General Counsel and Secretary of LIN Broadcasting Company, a subsidiary of McCaw
Cellular, and Vice President and Assistant General Counsel of McCaw Cellular.
THOMAS J. SIDMAN. (42) Mr. Sidman has served as Vice President and General
Counsel of the Company since joining the Company on October 17, 1994. From
January 1988 to October 1994, Mr. Sidman was a partner of Jones, Day, Reavis &
Pogue specializing in corporate and securities law and mergers and acquisitions.
A.J. LONG. (35) Mr. Long has served as Vice President and Treasurer since
joining the Company in June 1996. From June 1994 to June 1996, Mr. Long served
as Assistant Treasurer at Sprint Communications, L.P. ("Sprint"). From January
1993 to June 1994, Mr. Long served as Manager of Mergers and Acquisitions at
Sprint. From August 1991 to January 1993, Mr. Long served as Manager of
Corporate Audit Staff at Sprint.
STEPHEN M. BAILOR. (53) Mr. Bailor has served as Vice President and
Corporate Controller since joining the Company in May 1996. From 1993 to 1995,
Mr. Bailor was the Vice President of Financial and Local Billing Services at
Sprint. From 1986 to 1993, Mr. Bailor was the Vice President and Controller of
Telephone Operations at Centel.
37
<PAGE> 38
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
MARKET FOR CLASS A COMMON STOCK
Nextel's Class A Common Stock is traded on the Nasdaq Stock Market ("NSM")
under the symbol "NXTL." Prior to February 3, 1997, the Class A Common Stock
traded under the symbol "CALL." The table below presents high and low sale price
information for the Class A Common Stock as reported by the NSM for the periods
indicated.
<TABLE>
<CAPTION>
QUARTERLY CLASS A
COMMON STOCK PRICE RANGES
----------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------ ------------------
QUARTER HIGH LOW HIGH LOW
------------------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
March 31........................................ $15.625 $ 9.375 $18.875 $13.500
June 30......................................... 18.000 13.000 23.375 16.750
September 30.................................... 21.750 14.000 20.250 14.375
December 31..................................... 18.125 13.875 18.500 12.750
</TABLE>
NUMBER OF STOCKHOLDERS OF RECORD
As of December 31, 1996, the number of stockholders of record of the
Company's Class A Common Stock was 2,886. Nextel has authority to issue shares
of Class B Non-Voting Common Stock, which are convertible on a share-for-share
basis into shares of Class A Common Stock. As of December 31, 1996 there was a
single stockholder of record holding all of the 17,830,000 outstanding shares of
Class B Non-Voting Common Stock.
DIVIDENDS
The Company has not paid any dividends on the Class A Common Stock, and
does not plan to pay dividends on the Class A Common Stock for the foreseeable
future. The Nextel Indentures, the Bank Credit Agreement and the Vendor Credit
Agreement presently prohibit, and are expected to operate so as to continue to
prohibit, Nextel from paying dividends. In addition, the collateral security
mechanisms and related provisions associated with the Bank and Vendor Credit
Facilities limit the amount of cash available to make dividends, loans and cash
distributions to Nextel from Nextel's subsidiaries that operate Digital Mobile
networks in Nextel's markets. Accordingly, while such restrictions are in place,
any profits generated by such subsidiaries will not be available to Nextel for,
among other things, payment of dividends.
The Company anticipates that for the foreseeable future any cash flow
generated from its operations will be used to develop and expand the Company's
business. Any future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's operating results, financial condition and capital requirements,
contractual restrictions, general business conditions and such other factors as
the Company's Board of Directors deems relevant. There can be no assurance that
the Company will pay dividends at any time in the future. Under certain limited
circumstances, the Company may be obligated to pay dividends on the Class A
Preferred Stock. See Part I, Item 1, "Business -- Agreements with Significant
Stockholders -- The McCaw Investor."
RECENT SALES OF UNREGISTERED SECURITIES
Nextel sold securities that were not registered under the Securities Act of
1933, as amended (the "Securities Act") in the following transactions during the
fourth quarter of 1996. On October 24, 1996, Nextel issued 1,319,902 shares of
Class A Common Stock to certain stockholders of Mobilcom valued at $20,128,505,
in exchange for shares of Mobilcom stock in a transaction exempted by Section
4(2) of the Securities Act and Rule 506 of Regulation D thereunder in reliance
upon such stockholders' representations that they were accredited investors and
their agreement to resell such securities only pursuant to a registration
statement or in a transaction exempt from the registration requirements of the
Securities Act.
In connection with the issuance of the shares in connection with the
Mobilcom transaction described above, the McCaw Investor exercised its
anti-dilutive rights, which resulted in the sale of 373,846 treasury shares of
Class A Common Stock to the McCaw Investor on November 26, 1996 for an aggregate
cash consideration of $6,549,034 in a transaction exempted by Section 4(2) of
the Securities Act.
38
<PAGE> 39
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain consolidated financial data for the
periods indicated and should be read in conjunction with the Consolidated
Financial Statements, related notes and other financial information appearing
elsewhere in Part II of this Form 10-K Annual Report (dollar amounts in
thousands, except per share amounts).
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED ENDED
MARCH 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ------------ ----------------------------
1993 1994 1994(8) 1995 1996
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues........................ $ 53,002 $ 67,928 $ 74,857 $ 171,703 $ 332,938
Cost of Operations.............. 20,979 28,666 51,406 151,718 247,717
Selling, general and
administrative expenses....... 18,971 41,107 85,077 193,321 330,256
Expenses related to corporate
reorganization(2)............. -- -- -- 17,372 --
Depreciation and amortization... 25,942 58,398 94,147 236,178 400,831
---------- ---------- ------------ ------------ ------------
Operating loss............. (12,890) (60,243) (155,773) (426,886) (645,866)
Interest income (expense),
net........................... 1,324 (18,101) (41,454) (89,509) (206,480)
Other income (expense),
net(3)(4)..................... 924 3 33 (15,372) (10,866)
Income tax benefit.............. 1,027 21,437 71,345 200,602 307,192
---------- ---------- ------------ ------------ ------------
Net loss........................ $ (9,615) $ (56,904) $ (125,849) $ (331,165) $ (556,020)
========= ========= ========== ========== ==========
Net loss per share.............. $ (0.16) $ (0.73) $ (1.25) $ (2.31) $ (2.50)
========= ========= ========== ========== ==========
Number of shares used in
computations(5)............... 58,736,000 78,439,000 100,639,000 143,283,000 222,779,000
========= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
---------------------- --------------------------------------
1993 1994 1994 1995 1996
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 17,083 $ 483,483 $ 301,679 $ 340,826 $ 139,681
Marketable securities............... 14,768 426,113 172,313 68,443 5,012
Current assets...................... 39,932 921,983 504,248 504,661 309,097
Intangible assets, net.............. 144,666 889,912 1,451,780 3,549,622 4,076,300
Total assets........................ 333,557 2,229,832 2,918,985 5,547,256 6,472,439
Long-term debt(6)................... 55,024 1,113,268 1,193,096 1,687,829 2,783,041
Stockholders' equity(7)............. 255,224 846,304 1,268,575 2,945,141 2,808,138
</TABLE>
- ---------------
(1) See Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 2 to the Notes to Nextel's
consolidated financial statements for a description of acquisitions.
(2) See Note 2 to the Notes to Nextel's consolidated financial statements.
(3) Other expenses in 1995 include a $15.0 million write-down of the investment
in Mobilcom as a result of the devaluation of the Mexican peso.
(4) Other expenses in 1996 primarily reflect equity in the losses of certain
foreign investments accounted for under the equity method. (See Note 2 to
the Notes to Nextel's consolidated financial statements.)
(5) Includes the weighted average number of shares of Nextel common stock
outstanding during the respective periods.
(6) Excludes the current portions of long-term debt. See Note 6 to the Notes to
Nextel's consolidated financial statements.
(7) See Notes 10 and 11 to the Notes to Nextel's consolidated financial
statements.
(8) 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.
39
<PAGE> 40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of Nextel for the fiscal year ended December 31, 1996, the
fiscal year ended December 31, 1995 and the nine month period ended December 31,
1994, and certain factors that are expected to affect the Company's prospective
financial condition. See Part I, Item 1, "Business -- Risk
Factors -- Forward-Looking Statements."
To further its objective of achieving nationwide Digital Mobile network
coverage, Nextel consummated the Motorola, OneComm and AMS Transactions in July
1995 and consummated the Dial Page Transaction on January 30, 1996 (hereinafter
referred to collectively as the "Acquisitions"). Also in July 1995, the Company
consummated the McCaw Transaction, pursuant to which Nextel received net equity
investment proceeds totaling approximately $312,645,000 and has issued shares of
common and preferred stock and stock options expiring at various dates through
July 28, 2001. (See Part I, Item 1, "Business -- Agreements with Significant
Stockholders -- The McCaw Investor" and note 10 to the consolidated financial
statements.) Funds received in the McCaw Transaction are being used for the
implementation and operation of the Digital Mobile networks and to satisfy other
cash requirements of the Company.
In April 1996, the Federal Communications Commission (the "FCC") concluded
its auction of 900 MHz SMR frequencies. Nextel successfully bid a total of
approximately $29,079,000 for 177 ten-channel licenses in markets throughout the
United States, including Alaska and Hawaii. The Company made its final payment
to the FCC for these licenses in July 1996. The Company intends to use the newly
acquired 900 MHz licenses in its ongoing wireless communications operations,
including as part of its ongoing process of transferring its analog SMR
customers from certain 800 MHz frequencies to 900 MHz or other 800 MHz
frequencies.
Nextel entered into an Agreement of Merger and Plan of Reorganization dated
as of October 2, 1996, as amended, with PCI providing for the merger of PCI with
a wholly owned indirect subsidiary of Nextel. PCI has approximately 6,000 800
MHz SMR channels covering a total population of over 27 million people
predominantly in the states of Texas, Oklahoma, New Mexico and Arizona. The
stockholders of PCI will receive a maximum of 8,782,403 shares of Common Stock,
subject to certain adjustments, as a result of the merger. The merger is subject
to regulatory and PCI stockholder approval and customary closing conditions and
is expected to occur during 1997.
Prior to the second quarter of 1996, the Company implemented its Digital
Mobile networks in its market areas using Motorola's first generation iDEN
technology. During that time frame, the Company encountered certain technology
and system performance issues relating primarily to the voice transmission
quality of the mobile telephone service. In response to these issues, the
Company and Motorola took action on several fronts to address system performance
issues in general, and voice transmission quality concerns in particular. See
Part I, Item 1, "Business -- Nextel's Digital Mobile Networks -- Experience with
First Generation iDEN Systems Implementation." In 1995, the Company, together
with Motorola, began pursuing a program directed toward the development and
deployment of modifications to the first generation iDEN technology platform,
which modifications (referred to herein as "Reconfigured iDEN") were targeted
specifically at improving the voice transmission quality of the mobile telephone
service. The Company commenced the full-scale commercial launch of its first
Digital Mobile networks incorporating the Reconfigured iDEN technology in its
Chicago market late in the third quarter of 1996. Subsequently, Nextel commenced
full-scale commercial launches of the Reconfigured iDEN Digital Mobile networks
in the Atlanta, Boston, Denver, Detroit and Las Vegas metropolitan market areas
and the Northern California market area, in each case accompanied by an
aggressive, regionally focused marketing campaign.
The Company is currently considering adopting and implementing the Revised
Business Plan (See Part I, Item 1, "Business -- Revised Business Plan") that
contemplates, among other things, a more aggressive deployment of its Digital
Mobile networks incorporating the Reconfigured iDEN technology based on an
anticipated implementation schedule during 1997 to 1998, which it currently
expects may involve infrastructure and other system capital costs totaling at
least $1.45 billion. In this connection, the Company anticipates that purchases
of Motorola-manufactured infrastructure equipment will represent the largest
category of capital spending. During the last six months of 1996, Nextel placed
orders with Motorola totaling more than
40
<PAGE> 41
$300 million of products incorporating the Reconfigured iDEN technology,
including system infrastructure equipment and related software and the new,
compact Reconfigured iDEN handsets that the Company plans to market nationally,
principally under the "PowerFone"(TM) brand name.
Assuming the successful and timely completion of the Company's build-out
plan, under either Nextel's Existing Business Plan or Revised Business Plan, the
Company expects that its Digital Mobile networks would provide coverage to areas
representing approximately 85% of the United States population by the end of
1998. Implementation of the more rapid and extensive nationwide deployment
strategy contemplated pursuant to the Revised Business Plan would significantly
accelerate the Company's use of and needs for capital resources beyond the
levels associated with the Existing Business Plan and would therefore be
dependent on, among other things, the availability of necessary capital. In the
event Nextel determines to implement the more accelerated and extensive
deployment strategy contemplated by the Revised Business Plan, the Company's
capital expenditures and operating losses would substantially increase over the
next several years. See also "-- Future Capital Needs and Resources" and
"-- Forward-Looking Statements."
The Company also has pursued various international investment and operating
relationships in wireless communications ventures. In 1994, the Company invested
an aggregate of approximately $18,100,000 in cash and exchanged 2,500,000 shares
of Class A Common Stock for an equity interest in Clearnet that as of December
31, 1996 represented an approximate 19.5% equity interest (representing an
approximate 1.7% voting interest) in Clearnet. Clearnet operates wireless
communications systems in Canada and in 1995 was one of two entities awarded a
nationwide PCS license in Canada.
In 1994 and 1995, the Company invested an aggregate of approximately
$57,200,000 for an approximate 18.5% equity interest in Mobilcom, a Mexican SMR
operator, and obtained options to increase its equity interest in Mobilcom. In
August 1996, a wholly owned subsidiary of the Company entered into an agreement
to purchase up to an additional 19.8% equity interest in Mobilcom from certain
shareholders of Mobilcom in two tranches. In October 1996, such subsidiary
completed the acquisition of the first tranche by acquiring an additional 11.6%
equity interest in Mobilcom in exchange for 1,319,902 shares of Class A Common
Stock. As of December 31, 1996, the Company's equity interest in Mobilcom was
approximately 30.1%, not including any of the Mobilcom shares that would be
acquired upon consummation of the second tranche purchase nor any of the
Mobilcom shares currently subject to options or other arrangements providing for
potential acquisition thereof by a wholly owned subsidiary of the Company. (See
note 2 to the consolidated financial statements.)
In 1995, the Company, through McCaw International, invested approximately
$10,000,000 for an approximate 25.2% equity-equivalent interest and committed an
additional $13,200,000 in loan funding in the initial phase of a newly created
GSM digital cellular telephone system operating in Shanghai, China. McCaw
International advanced a total of $10,300,000 of such loan funding to the
Shanghai operations during the year ended December 31, 1996.
In June 1996, McCaw International invested $16,000,000 for a 30% equity
interest in Infocom Communications Network, Inc. ("Infocom"), a wireless
communications company in the Philippines. Infocom currently operates a
nationwide paging business and has 100 pairs of 800 MHz SMR channels in the
Philippines. Infocom was recently awarded a 25-year license by the Philippine
government to provide wireless communications services throughout the
Philippines. The license allows Infocom to provide paging and SMR services, and
gives Infocom the right to seek authority to operate a personal communications
network throughout the Philippines. Infocom plans to use its SMR channels to
implement a national digital network using the same Motorola-developed iDEN
technology deployed by Nextel in its United States Digital Mobile networks.
In August 1996, McCaw International obtained 100% ownership of Com Control
Comunicacion Controlada S.A. (renamed McCaw Argentina S.A., "McCaw Argentina"),
an Argentine SMR company with 800 MHz SMR licenses in areas covering more that
17 million people. Through McCaw International, the Company invested
approximately $15,000,000 in the form of cash and equipment to acquire McCaw
Argentina. McCaw Argentina intends to provide wireless communications services
in Buenos Aires and the
41
<PAGE> 42
next three largest cities in Argentina. McCaw Argentina will focus initially on
providing high-quality analog SMR service and ultimately on providing digital
service.
On January 30, 1997, Nextel acquired 81% of the outstanding shares of WVB,
an operator of analog SMR systems in Brazil, for a purchase price of
$186,300,000, which was paid with approximately 11,964,000 shares of Class A
Common Stock, through a merger of WVB with a wholly owned subsidiary of Nextel.
Nextel simultaneously contributed its interest in WVB, which was renamed McCaw
International ("Brazil"), Ltd., to McCaw International.
The Company intends to continue to investigate and pursue investment,
operating and other relationships in, with or concerning wireless communications
ventures outside the United States, to the extent the Company believes that such
opportunities present the potential to achieve attractive rates of return on
investment or to provide important strategic or other benefits to the Company.
For the most part, such activities have been, and are expected to continue to
be, pursued through subsidiaries of the Company that are classified as
"unrestricted" for purposes of the Company's Nextel Indentures, including McCaw
International. While such classification gives those subsidiaries the
flexibility to participate in and structure transactions in ways that comply
with the covenants in the Nextel Indentures that are applicable to the Company
and its "restricted" subsidiaries, the Nextel Indentures do contain certain
limitations with respect to such "unrestricted" subsidiaries, including limits
on the amount and type of financial support that they may receive from the
Company and its "restricted" subsidiaries. Currently, the Company believes that
these "unrestricted" subsidiaries have or can obtain (in a manner consistent
with the terms of the Indentures) adequate funding to satisfy their existing and
reasonably expected commitments. In March 1997, McCaw International completed a
private placement of units pursuant to which it received gross proceeds of
approximately $500,000,000. The pursuit of international wireless communications
opportunities in the future by such "unrestricted" subsidiaries, however, may be
dependent on, among other factors, their ability to secure necessary equity
and/or debt financing from third parties. There can be no assurance that such
financing could be obtained or, if obtainable, would be made available on
acceptable terms. See also "-- Future Capital Needs and Resources" and
"-- Forward-Looking Statements."
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
Total revenues for the year ended December 31, 1996 increased 94% to
$332,938,000, compared to $171,703,000 for the year ended December 31, 1995.
Radio service revenue increased 119% to $297,512,000. The increase in radio
service revenue was principally a result of a modest increase in subscriber
units in service attributable to the completion of the Dial Page Transaction,
the commencement of Digital Mobile network service in certain markets during
1996 and the increased units in service in markets that commenced Digital Mobile
network service in 1994 and 1995.
The increase in the total number of digital subscriber units in service as
of December 31, 1996 was approximately 215,300 units, to approximately 300,300
units as compared to the approximately 85,000 digital subscriber units in
service as of December 31, 1995, primarily reflecting continued expansion of the
Company's Digital Mobile networks.
The average churn rate for the Digital Mobile networks operation was less
than 1% per month for the year ended December 31, 1996. There was insufficient
history of customer activity on the Digital Mobile networks to derive a
meaningful churn rate for the year ended December 31, 1995.
Cost of radio service revenue for the year ended December 31, 1996
increased 79% to $221,382,000, compared to $123,496,000 for the year ended
December 31, 1995, primarily as a result of a modest increase in subscriber
units in service attributable to the completion of the Dial Page Transaction,
the commencement of Digital Mobile network service in certain markets during
1996 and the increased units in service in markets that commenced Digital Mobile
network service in 1994 and 1995. The direct costs associated with the Digital
Mobile networks, such as site rental and telephone expenses, will continue to
increase as networks are placed into service.
42
<PAGE> 43
Selling, general and administrative expenses for the year ended December
31, 1996 increased 71% to $330,256,000, compared to $193,321,000 for the year
ended December 31, 1995. The increase is primarily related to the increased
staffing and other activities to support the implementation and operation of the
Digital Mobile networks. Selling expenses increased also due to the rollout of
aggressive marketing campaigns associated with the full-scale commercial launch
of the Digital Mobile networks incorporating the Reconfigured iDEN technology in
certain markets in late 1996. Selling, general and administrative expenses
include a loss on Digital Mobile equipment sales of $25,426,000 in 1996,
compared to a loss of $13,759,000 in 1995, reflecting the continued effect of
customer subsidies or discounts on increased sales of Digital Mobile subscriber
units during 1996 as compared to 1995 and the effect of migrating customers from
traditional analog SMR systems to Digital Mobile Network systems. The Company
anticipates that it will continue to offer customers subsidies or discounts in
connection with the sale and installation of Digital Mobile units as a part of
its overall Digital Mobile network service offering.
Expenses related to the corporate reorganization for the year ended
December 31, 1995 reflect estimates of employee and facility related costs
resulting from the consolidation, resizing and relocation of the Company's
headquarters and customer care operations in connection with certain business
combinations consummated in 1995 (see note 2 to the consolidated financial
statements). No such costs were recorded during the year ended December 31,
1996.
Depreciation and amortization for the year ended December 31, 1996
increased 70% to $400,831,000, compared to $236,178,000 for the year ended
December 31, 1995, reflecting the effect of the Acquisitions and the activation
of additional Digital Mobile networks. System assets relating to the development
of Digital Mobile networks represent the largest portion of capital expenditures
during the period. Depreciation and amortization of such assets begins upon
commencement of commercial service in each market. The Company anticipates that
depreciation and amortization expense will continue to increase as a result of
the activation of additional Digital Mobile networks during 1996 and 1997 and
the deployment of additional depreciable assets in markets where commercial
service has commenced and as first generation iDEN Digital Mobile networks are
converted to the Reconfigured iDEN technology platform.
Interest income for the year ended December 31, 1996 decreased 18% to
$21,015,000, compared to $25,525,000 for the year ended December 31, 1995. The
decrease relates to the utilization of cash for the development and
implementation of the Company's Digital Mobile networks and to fund operating
activities.
Interest expense for the year ended December 31, 1996 increased 98% to
$227,495,000, compared to $115,034,000 from the year ended December 31, 1995,
reflecting principally increased interest expense attributable to the assumption
of OneComm's Senior Redeemable Discount Notes due 2004 and the Dial Call Senior
Redeemable Discount Notes due 2004 and 2005 in the Acquisitions and interest
expense attributable to increased borrowings under the Company's Bank and Vendor
Credit Facilities, to fund capital expenditures, acquisitions and operations.
Other expenses for the year ended December 31, 1996 were $10,866,000,
primarily reflecting equity in the losses of certain foreign investments
accounted for under the equity method.
The income tax benefit for the year ended December 31, 1996 was
$307,192,000 as compared to $200,602,000 for the year ended December 31, 1995.
These benefits resulted from the utilization of net operating losses against
deferred tax liabilities. The effective tax rate for 1996 of 35.6% decreased
from 37.7% in 1995 as a result of a decrease in the utilization of state net
operating losses for financial reporting purposes. The Company expects that the
effective tax rate for 1997 will decrease to approximately 14% as a result of a
decrease in the utilization of federal and state net operating losses for
financial reporting purposes. The decrease will have no impact on the Company's
ability to utilize its net operating losses for income tax purposes.
YEAR ENDED DECEMBER 31, 1995 VS. NINE MONTHS ENDED DECEMBER 31, 1994
Total revenues for the year ended December 31, 1995 were $171,703,000, an
increase of 129% from the nine months ended December 31, 1994. Radio service
revenue increased 171% to $135,753,000 and analog
43
<PAGE> 44
equipment sales and maintenance revenue increased 46% to $35,950,000 for the
year ended December 31, 1995 as compared to the nine months ended December 31,
1994.
The increase in radio service revenue was principally a result of (other
than the financial impact of the additional quarter in the 1995 fiscal year) an
increase in analog units in service attributable to the Acquisitions, the
commencement of Digital Mobile network service in certain markets during 1995
and the increased units in service in markets that commenced Digital Mobile
network services in 1994.
The total number of subscriber units in service as of December 31, 1995
increased significantly from the 323,500 subscriber units in service as of
December 31, 1994 reflecting growth from the Acquisitions, the commencement of
Digital Mobile network service in certain markets and increased sales in markets
that commenced Digital Mobile service in 1994. The increase in the total number
of digital subscriber units in service as of December 31, 1995 was approximately
71,500 units, to approximately 85,000 units as compared to the approximately
13,500 digital subscriber units in service as of December 31, 1994 primarily
reflecting expansion of the Company's Digital Mobile networks.
The monthly churn rate for analog SMR operations (not including the
OneComm, AMS and Motorola operations, for which comparable churn data for the
period prior to the completion of the respective transactions is not available)
for the year ended December 31, 1995 was 1.3%, up from the monthly rate of 1.2%
for the nine months ended December 31, 1994. This increase was due principally
to reductions in analog capacity resulting from the migration of frequencies
from the analog SMR systems to Digital Mobile networks and higher churn rates
experienced in the analog SMR operations related to certain of the Acquisitions.
There was insufficient history of customer activity on the Digital Mobile
networks to derive a meaningful churn rate for the Digital Mobile networks for
the respective periods.
Analog equipment sales and maintenance revenue for the year ended December
31, 1995 was $35,950,000 as compared to $24,702,000 for the nine months ended
December 31, 1994. Cost of analog equipment sales and maintenance increased by
$10,011,000 to $28,222,000 for the year ended December 31, 1995 as compared to
the nine months ended December 31, 1994. The increase in analog equipment sales
and maintenance and the related costs reflect primarily the full year impact of
companies acquired in 1994. Nextel's analog SMR unit sales decreased as a result
of the Company's continuing focus away from the sale of SMR analog radios and
migration of analog SMR customers to the Digital Mobile networks in the markets
in which Digital Mobile networks have begun operating.
Cost of radio service revenue for the year ended December 31, 1995
increased by $90,301,000 to $123,496,000 for the nine months ended December 31,
1994 as compared to the nine months ended December 31, 1994, reflecting
primarily increased infrastructure costs associated with the Digital Mobile
networks. Direct costs associated with the Digital Mobile networks, such as site
rental and telephone expenses, will continue to increase as Digital Mobile
networks are placed into service.
Selling, general and administrative expenses increased by $108,244,000 to
$193,321,000 for the year ended December 31, 1995 as compared to the nine months
ended December 31, 1994. The increase (other than the financial impact of the
additional quarter in the current fiscal year) principally related to additional
selling, general and administrative expenses associated with the operations
acquired in acquisitions and increased staffing and other activities to support
the implementation and operation of the Digital Mobile networks. Selling,
general and administrative expenses include a loss on Digital Mobile equipment
sales of $13,759,000, compared to a loss of $6,032,000 for the nine months ended
December 31, 1994, reflecting, in part, the effect of customer subsidies or
discounts on increased sales of Digital Mobile units during the year ended
December 31, 1995.
Expenses related to the corporate reorganization for the year ended
December 31, 1995 result from accrual of estimated employee and facility related
costs pursuant to the announced consolidation, resizing and relocation of the
Company's headquarters and customer care operations in connection with certain
business
44
<PAGE> 45
combinations consummated during 1995 (see note 2 to the consolidated financial
statements). No such costs were incurred in 1994.
Depreciation and amortization increased $142,031,000 to $236,178,000 for
the year ended December 31, 1995 compared to the nine months ended December 31,
1994, reflecting principally (other than the financial impact of the additional
quarter in the current fiscal year) the effect of the additional depreciation
and amortization charges associated with the operations acquired and the
activation of Digital Mobile networks in additional market areas during 1995.
System assets relating to the development of Digital Mobile networks represent
the largest portion of capital expenditures incurred by the Company.
Depreciation and amortization of such assets begins upon commencement of
commercial service in each market. As the Company anticipates that additional
Digital Mobile networks may be activated during fiscal years 1996 and 1997
through growth and acquisitions, depreciation and amortization expense is
expected to continue to increase significantly during these years.
Interest income decreased by $2,512,000 to $25,525,000 for the year ended
December 31, 1995 as compared to the nine months ended December 31, 1994,
principally reflecting the Company's utilization of cash for the development and
implementation of its Digital Mobile networks and for acquisitions. This
utilization was partially offset by the cash investment from the McCaw
Transaction. See Part I, Item 1, "Business -- Agreements with Significant
Stockholders -- The McCaw Investor" and note 10 to the consolidated financial
statements.
Interest expense totaled $115,034,000 for the year ended December 31, 1995,
up $45,543,000 from the nine months ended December 31, 1994, reflecting
principally (other than the financial impact of the additional quarter in the
1995 fiscal year) increased interest expense attributable to the assumption of
OneComm's Senior Redeemable Discount Notes due 2004. The increase in interest
expense from such notes was partially offset by an increase in capitalized
interest relating to construction in progress of Digital Mobile networks. During
the year ended December 31, 1995, the Company capitalized interest of
approximately $31,000,000 as compared to $21,300,000 for the nine months ended
December 31, 1994.
Other expenses of $15,372,000 primarily reflect the Company's $15,000,000
write-down of its investment in Mobilcom as a result of the devaluation of the
Mexican peso during 1995.
The income tax benefit for the year ended December 31, 1995 was
$200,602,000 as compared to $71,345,000 for the nine months ended December 31,
1994. These benefits resulted from the utilization of net operating losses
against deferred tax liabilities.
The effect of the Acquisitions, the increase in Digital Mobile network
related costs and increased depreciation and amortization (other than the
financial impact of the additional quarter in the 1995 fiscal year) were the
primary factors in the $205,316,000 increase in net loss to $331,165,000 for the
twelve months ended December 31, 1995 as compared to the nine months ended
December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net losses of $556,020,000 and $331,165,000 for the years
ended December 31, 1996 and December 31, 1995, respectively. The operating
expenses associated with developing and operating the Digital Mobile networks
have more than offset digital service revenues and the operating earnings of the
analog SMR operations, including those acquired in the Acquisitions, and are
expected to continue to offset such operating earnings for the next several
years. The Company has consistently used external sources of funds, primarily
from equity issuances and the incurrence of debt, to fund operations,
acquisitions, capital expenditures and other non-operating needs. For the next
several years, the Company anticipates using its existing cash and investments,
cash flow from analog operations and externally generated funds from debt and
equity sources as discussed below to cover future needs including the design,
implementation and operation of the Digital Mobile networks.
Working capital was $(66,647,000) and $139,652,000 at December 31, 1996 and
December 31, 1995, respectively. The decrease is primarily attributable to the
use of cash of $201,145,000 resulting from increased capital expenditures
related to the Digital Mobile networks and increased operating expenses.
45
<PAGE> 46
BANK AND VENDOR CREDIT FACILITY. Effective September 30, 1996, Nextel, NFC
and certain subsidiaries of Nextel entered into the Bank Credit Facility.
Concurrently therewith, Nextel, NFC and certain subsidiaries of Nextel entered
into the Vendor Credit Facility, which superseded the previous financing
agreement among Nextel, certain of its subsidiaries, Motorola and NTFC. The Bank
Credit Facility provides for up to $1,655,000,000 of secured financing,
consisting of a $1,085,000,000 revolving loan and $570,000,000 in term loans.
The Vendor Credit Facility provides for up to $345,000,000 of secured financing,
consisting of a $195,000,000 revolving loan and $150,000,000 in term loans.
Borrowings under the Bank Credit Facility and the Vendor Credit Facility are
ratably secured by liens on assets of Nextel's subsidiaries that are
"restricted" subsidiaries under the terms of the Nextel Indentures. As of
December 31, 1996, Nextel had drawn approximately $590,000,000 of its available
financing under the Bank Credit Facility, leaving an aggregate of approximately
$1,065,000,000 available for borrowing under such facility, and had drawn
$150,000,000 of its available financing under the Vendor Credit Facility,
leaving an aggregate of approximately $195,000,000 available for borrowing under
such facility, subject in each case to the satisfaction or waiver of applicable
borrowing conditions. The proceeds from these borrowings were used primarily to
repay the outstanding principal and accrued interest on the prior financing
agreements with Motorola and to fund operations.
Subsequent to 1996, Nextel and Motorola reached agreement on the Additional
Motorola Financing, pursuant to which Nextel could access up to an additional
$450,000,000 of equipment financing through Motorola. See Part I, Item 1,
"Business -- Post Fiscal Year-End Transactions and Developments --
Nextel/Motorola Agreements." In order to access such Additional Motorola
Financing, Nextel would be required to procure certain consents, waivers and/or
participation commitments from a number of third parties, and to obtain
modifications to the terms of the Bank and Vendor Credit Facilities, the related
security documents and the Nextel Indentures and to satisfy certain other
conditions. Nextel is in the process of seeking certain of such consents,
waivers, commitments and other actions to obtain access to a portion of the
Additional Motorola Financing, but there can be no assurance that Nextel will be
successful in this regard, or that other conditions to access such Additional
Motorola Financing, including those that Nextel is not currently seeking to
fulfill, will be satisfied or otherwise will be dealt with in a timely fashion.
On March 3, 1997, McCaw International completed a private placement of
951,463 units yielding approximately $500,000,000 of gross proceeds. Each unit
is comprised of a 10-year senior discount note and a warrant to purchase 0.10616
shares of McCaw International common stock. The notes have a 13% yield to
maturity, are noncallable for five years, and require no interest payments for
the first five years. The warrants are exercisable at a price of $36.45 and
entitle the holders to purchase in the aggregate 1%, on a fully diluted basis,
of the common stock of McCaw International.
CASH FLOWS. Net cash used in operating activities for the year ended
December 31, 1996 was $227,576,000 as compared to net cash used in operating
activities of $137,761,000 for the year ended December 31, 1995. The primary
reason for the increase was the increase in costs incurred during the year ended
December 31, 1996 related to the operation of the Digital Mobile networks. Net
cash used in investing activities was $336,242,000 for the year ended December
31, 1996, net of the $64,438,000 decrease in marketable securities and
$75,827,000 received from the acquisition of Dial Page. Cash used in investing
activities related principally to capital expenditures for the build-out of the
Digital Mobile networks and acquisitions and certain foreign investments made
during the period. Financing activities during the year ended December 31, 1996
consisted primarily of the $248,037,000 net borrowings and proceeds from stock
issuances of $114,636,000. The resulting decrease in cash and cash equivalents
from December 31, 1995 was $201,145,000, to a balance of $139,681,000 at
December 31, 1996.
FUTURE CAPITAL NEEDS AND RESOURCES
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 (including the anticipated conversion of
its existing Digital Mobile networks to utilize the Reconfigured iDEN technology
platform), operating expenses relating both to the Digital Mobile networks and
to Nextel's analog SMR networks, potential acquisitions (including the
acquisition of rights to spectrum through the contemplated 800 MHz spectrum
auction process) and corporate expenditures. Nextel anticipates that its cash
utilization for capital
46
<PAGE> 47
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) were
approximately $20,400,000. Such average monthly amounts are not necessarily
representative of Nextel's anticipated experience in such areas and would be
expected to increase during 1997 and 1998 in connection with the deployment of
the Reconfigured iDEN technology platform, particularly if the Company is able
and decides to implement the Revised Business Plan. 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 December 31, 1996 totaled approximately
$144,693,000.
At December 31, 1996, Nextel had drawn approximately $590,000,000 of its
available financing under the Bank Credit Facility, leaving an aggregate of
approximately $1,065,000,000 available for borrowing under such facility, and
had drawn $150,000,000 of its available financing under the Vendor Credit
Facility, leaving an aggregate of approximately $195,000,000 available for
borrowing under such facility, subject in each case to the satisfaction or
waiver of applicable borrowing conditions. The Bank Credit Agreement
contemplates that the Company, with the consent of the lenders under the Bank
Credit Agreement and the Vendor Credit Agreement, may borrow up to an additional
$250,000,000 (subject to certain limitations) under the Bank Credit Facility
(the "Additional Bank Borrowings"). The Bank Credit Agreement also contemplates
that borrowings under the Vendor Credit Facility may be increased by up to
$50,000,000 (subject to certain limitations) (the "Additional Vendor
Borrowings"). See "Post Fiscal Year-End Transactions and Developments -- Consent
Solicitation."
Nextel is currently taking steps to obtain additional sources of funding in
addition to the amounts currently available under the Bank and Vendor Credit
Facilities, including the Additional Bank Borrowings and Additional Vendor
Borrowings. Availability of the Additional Bank Borrowings is subject, among
other things, to the approval of a majority of the lenders under the Bank Credit
Agreement and the Vendor Credit Agreement. There are currently no legally
binding agreements or understandings with any lenders with respect to the terms
(other than the provisions contained in the Bank Credit Agreement and the Vendor
Credit Agreement that would permit such additional borrowing with majority
approval of the lenders thereunder) on which such Additional Bank Borrowings may
be made available. Nextel has also reached an understanding with Motorola
concerning the terms on which Motorola would make the $50,000,000 in Additional
Vendor Borrowings available and the terms on which Motorola would make
additional secured equipment financing available. See "Post Fiscal Year-End
Transactions and Developments -- Nextel/Motorola Agreements."
Nextel believes that is has sufficient funds currently available pursuant
to the Bank and Vendor Credit Facilities currently in place (but excluding any
amounts that would be available to it through the Additional Bank Borrowings,
the Additional Vendor Borrowings, the Second Secured Borrowings and the Senior
Secured Borrowings the availability of each of which is subject to certain
conditions, including those described herein) and pursuant to the assumed
exercise of the currently outstanding warrants and options to acquire shares of
Class A Common Stock described below, to meet its cash needs for the remainder
of 1997 and into early 1998, based on continuation of its first stage nationwide
Digital Mobile networks build out approach consistent with its Existing Business
Plan, in light of its current (and currently committed) business and investment
activities and assuming a conservative ramp up in Digital Mobile systems
subscriber growth. To fully complete its first stage nationwide Digital Mobile
networks build out in 1998 as envisioned in the Existing Business Plan, and to
adopt and implement the Revised Business Plan, Nextel would need to obtain
additional amounts of debt or equity financing beyond that available under the
Bank and Vendor Facilities currently in place (excluding amounts constituting
Additional Bank Borrowings, Additional Vendor Borrowings, Second Secured
Borrowings and Senior Secured Borrowings) and equity proceeds of $232,500,000
associated with an assumed exercise in full of certain options held by the McCaw
Investor (discussed below). The additional financing that would be required to
carry out the Existing Business Plan activities through 1998 would primarily
consist of equity or debt funding to substitute for the proceeds that would have
been received upon an exercise in full of the warrants for 25,000,000 shares of
Class A Common Stock previously held by
47
<PAGE> 48
Comcast FCI. To the extent such additional financing were in the form of debt
rather than equity, it is likely that changes to the terms of the Nextel
Indentures would be required to permit the Company the needed flexibility to
incur such debt. See "Post Fiscal Year-End Transactions and
Developments -- Consent Solicitation" and "-- Nextel/Motorola Agreements." See
also "-- Forward-Looking Statements." Significant additional financing would be
required to adopt and implement the Revised Business Plan. As indicated above
under "Post Fiscal Year-End Transactions and Developments," the Company is
currently investigating and taking a variety of actions directed to obtain
access to significant additional amounts of debt financing. However, assuming
(i) that the Company obtains the relief it is seeking from the holders of the
Nextel Notes, especially the changes in the provisions of the Nextel Indentures
that relate to "Permitted Debt," and (ii) that the Company secures access to all
of the available funds under the existing Bank and Vendor Credit Facility, and
is able to structure satisfactory arrangements to make the additional
$200,000,000 in Second Secured Borrowings from Motorola available (including
obtaining access to the $250,000,000 in Additional Bank Borrowings and to the
$50,000,000 in Additional Vendor Borrowings), the Company estimates that it
would have sufficient financing available to meet its cash needs through 1998
and completion of the Existing Business Plan. The Company estimates that
approximately an additional $500,000,000 in financing would be required to meet
the Company's anticipated cash needs through 1998, assuming implementation and
completion of the Revised Business Plan. See "Revised Business Plan." In all of
such financing scenarios, Nextel has assumed that all of the funds currently
available pursuant to the Bank and Vendor Credit Facilities may be borrowed
thereunder and that certain currently outstanding warrants and options to
acquire shares of Class A Common Stock described below will be exercised in full
before their respective currently scheduled expiration dates. See
"-- Forward-Looking Statements."
Other than the arrangements summarized under "Post Fiscal Year-End
Transactions and Developments -- Nextel/Motorola Agreements," which are subject
to a number of conditions, there are currently no commitments or understandings
with third parties to obtain funding required to meet such funding shortfall.
Moreover, there can be no assurance that the Additional Bank Borrowings or any
portion of the Additional Motorola Financing will be available or that the
outstanding warrants and options will be exercised. Both the Bank and Vendor
Credit Facilities and the Nextel Indentures contain provisions that operate to
limit the amount of borrowings that may be incurred by the Company. The Company
intends to seek the consent of the holders of the Nextel Notes to certain
amendments to the Nextel Indentures that would, among other things, permit the
Company to incur additional indebtedness to meet the funding requirements
associated with completion of its Existing Business Plan and implementation of
its Revised Business Plan. See "Post Fiscal Year-End Transactions and
Developments -- Consent Solicitation." 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 Class A Common Stock. See "-- Forward-Looking Statements."
Nextel currently is aware of numerous factors and considerations, any one
or more of which could have a material effect on the timing and/or amount of the
future funding to be required by Nextel, but Nextel cannot currently quantify
with precision either the magnitude or the certainty of the effects associated
with any such factors. These factors include: (i) the timing of the anticipated
800 MHz spectrum auction process, and the amounts required to be bid to acquire
any or all of the available spectrum blocks in the major metropolitan market
areas where Nextel currently operates, or currently plans to operate, its
Digital Mobile network and the amounts that may be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks that
may be acquired by Nextel in the 800 MHz spectrum auction process; (ii) the
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 successful commercial introduction
and customer acceptance of Nextel's Digital Mobile services in new market areas
using such technology; (iii) the potential commercial opportunities and risks
associated with implementation of Nextel's Revised 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
48
<PAGE> 49
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 by Nextel in the future and in connection with the conversion of
existing Digital Mobile networks to the Reconfigured iDEN technology format, 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 the 1997-1998
Agreement, 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 partly beyond Nextel's control or
influence. See "-- Forward-Looking Statements."
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). Finally, Nextel could obtain significant additional funds in
connection with the exercise of outstanding warrants and options, and the amount
and timing of receipt of such funds also would play a role in Nextel's
determinations concerning the need for or attractiveness of other potentially
available sources of financing. As Nextel has disclosed previously, full
exercise of the options granted to the McCaw Investor at the July 1995 closing
of the McCaw Transaction would result in the receipt by Nextel of approximately
$232,500,000, $277,500,000 and $107,500,000 of additional funds prior to July 29
in the years 1997, 1999 and 2001, respectively, and full exercise of the
warrants initially issued to Motorola for 3,000,000 shares of Class A Common
Stock would result in the receipt by Nextel of approximately $45,000,000 in
additional funds ($32,100,000 of which would be received in 1999 and
substantially all of the remainder of which would be received prior to 2001).
Finally, proceeds from the exercise by the McCaw Investor of its anti-dilutive
rights to acquire additional Nextel equity in connection with certain issuances
by Nextel of its capital stock and proceeds from the exercise of other warrants
and options currently outstanding and held by third parties, including options
granted pursuant to the Nextel Amended and Restated Incentive Equity Plan
(including its predecessor plans) and the Nextel Associates Stock Purchase Plan,
may provide other available sources of funding.
The foregoing discussion concerning potential exercise of various third
party rights to acquire shares of Class A Common Stock is subject to the
qualification that no assurance can be given that any of such rights will be
exercised or, if exercised, that the contemplated investment will in fact be
consummated. In the case of the Bank Credit Facility and the Vendor Credit
Facility (or the Additional Bank Borrowing and/or any of the additional
borrowings contemplated by the Additional Motorola Financing, if structured
successfully), there can be no assurance that the conditions to access such
facilities will be met. To the extent any of the aforementioned proceeds from
option and warrant exercises or financing arrangements are not available when
required, it will be necessary for Nextel to obtain alternate sources of
financing to meet its anticipated funding needs.
Nextel has had and may in the future have discussions with other 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. Motorola
consented with respect to the grant of superior governance rights by Nextel in
connection with the McCaw Transaction. The ability of Nextel to incur additional
indebtedness (including, in certain circumstances, indebtedness incurred under
the Bank Credit Agreement and/or under the Vendor Credit Facility) is and will
be limited by the terms of the Nextel Indentures, the Bank Credit Agreement and
the Vendor Credit Agreement. The Bank Credit Agreement and the Vendor Credit
Agreement also require
49
<PAGE> 50
Nextel and its relevant subsidiaries at specified times to satisfy 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 net losses 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 impact of
Reconfigured iDEN technology and other matters discussed above, there can be no
assurance that Nextel will be able to obtain adequate capital to implement the
nationwide build-out of its Digital Mobile networks in accordance with either
the Existing Business Plan or the Revised Business Plan. See "-- Forward-Looking
Statements."
EFFECT OF INFLATION
Inflation is not a material factor affecting the Company's business.
General operating expenses such as salaries, employee benefits and lease costs
are, however, subject to normal inflationary pressures.
EFFECT OF NEW ACCOUNTING STANDARDS
NEW ACCOUNTING PRONOUNCEMENTS -- In March 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
128, "Earnings per share" ("SFAS 128"), which supersedes Accounting Principles
Board Opinion No. 15. SFAS 128 is effective for 1997 and simplifies the
computation of earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. The
Statement requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures. Basic earnings per share includes no
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
Management of the Company does not believe that there will be any material
effect of adopting SFAS 128 in 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are filed under this
Item, beginning on page F-1 of this Report. The financial statement schedules
required under Regulation S-X are filed pursuant to Item 14 of this Report,
beginning on page F-28 of this Report.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
None.
50
<PAGE> 51
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITORS' REPORT......................................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1995 and 1996....................... F-3
Consolidated Statements of Operations for the Nine Months Ended December 31, 1994
and the Years Ended December 31, 1995 and 1996.................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the Nine Months
Ended December 31, 1994 and the Years Ended December 31, 1995 and 1996.......... F-5
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 1994
and the Years Ended December 31, 1995 and 1996.................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
FINANCIAL STATEMENT SCHEDULES
Schedule I -- Condensed Financial Information of Registrant........................ F-28
Schedule II -- Valuation and Qualifying Accounts................................... F-32
</TABLE>
F-1
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Nextel Communications, Inc.
We have audited the accompanying consolidated balance sheets of Nextel
Communications, Inc. and subsidiaries (the "Company") as of December 31, 1995
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the nine months ended December 31,
1994, and the years ended December 31, 1995 and 1996. Our audits also included
the financial statement schedules listed in the Index at Item 14(a)(2). These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Nextel Communications, Inc. and
subsidiaries at December 31, 1995 and 1996, and the results of their operations
and their cash flows for the nine months ended December 31, 1994 and the years
ended December 31, 1995 and 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set forth
therein.
DELOITTE & TOUCHE LLP
McLean, Virginia
March 20, 1997, except for Note 13, as to
which the date is March 27, 1997
F-2
<PAGE> 53
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents......................................... $ 340,826 $ 139,681
Marketable securities............................................. 68,443 5,012
Accounts and notes receivable, net................................ 41,451 90,392
Radios and accessories............................................ 21,220 45,168
Other............................................................. 32,721 28,844
---------- -----------
Total current assets........................................... 504,661 309,097
PROPERTY, PLANT AND EQUIPMENT, net.................................. 1,192,204 1,803,739
INTANGIBLE ASSETS, net.............................................. 3,549,622 4,076,300
OTHER ASSETS........................................................ 300,769 283,303
---------- -----------
$5,547,256 $ 6,472,439
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................................. $ 233,269 $ 225,309
Accrued expenses and other........................................ 130,463 148,911
Current portion of long-term debt................................. 1,277 1,524
---------- -----------
Total current liabilities...................................... 365,009 375,744
DEFERRED INCOME TAXES............................................... 549,277 505,516
LONG-TERM DEBT...................................................... 1,687,829 2,783,041
---------- -----------
Total liabilities.............................................. 2,602,115 3,664,301
---------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 9 and 12)
STOCKHOLDERS' EQUITY
Preferred stock, Class A convertible redeemable, 8,163,265 shares
issued and outstanding......................................... 300,000 300,000
Preferred stock, Class B convertible, 82 shares issued and
outstanding.................................................... -- --
Common stock, Class A, 175,749,359 and 211,374,665 shares
issued......................................................... 176 211
Common stock, Class B, non-voting convertible, 17,830,000 shares
issued and outstanding......................................... 18 18
Paid-in capital................................................... 3,197,528 3,672,908
Accumulated deficit............................................... (579,231) (1,135,251)
Treasury shares, at cost, 24,860 and 1,621,568 shares............. (768) (31,400)
Unrealized gain on investments.................................... 32,054 14,993
Notes receivable from stockholders................................ (1,018) (1,100)
Deferred compensation, net........................................ (3,618) (12,241)
---------- -----------
Total stockholders' equity..................................... 2,945,141 2,808,138
---------- -----------
$5,547,256 $ 6,472,439
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 54
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994, AND THE
YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Radio service revenue............................... $ 50,155 $ 135,753 $ 297,512
Analog equipment sales and maintenance.............. 24,702 35,950 35,426
----------- ----------- -----------
74,857 171,703 332,938
----------- ----------- -----------
OPERATING EXPENSES
Cost of radio service revenue....................... 33,195 123,496 221,382
Cost of analog equipment sales and maintenance...... 18,211 28,222 26,335
Selling, general and administrative................. 85,077 193,321 330,256
Expenses related to corporate reorganization........ -- 17,372 --
Depreciation and amortization....................... 94,147 236,178 400,831
----------- ----------- -----------
230,630 598,589 978,804
----------- ----------- -----------
OPERATING LOSS........................................ (155,773) (426,886) (645,866)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense.................................... (69,491) (115,034) (227,495)
Interest income..................................... 28,037 25,525 21,015
Other............................................... 33 (15,372) (10,866)
----------- ----------- -----------
(41,421) (104,881) (217,346)
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT........................ (197,194) (531,767) (863,212)
INCOME TAX BENEFIT.................................... 71,345 200,602 307,192
----------- ----------- -----------
NET LOSS.............................................. $ (125,849) $ (331,165) $ (556,020)
========== ========== ==========
NET LOSS PER COMMON SHARE............................. $ (1.25) $ (2.31) $ (2.50)
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING......................................... 100,639,000 143,283,000 222,779,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 55
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994 AND THE
YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A CLASS B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK COMMON STOCK
--------------------- ---------------- --------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- -------- ------ ------ ----------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE March 31, 1994............ -- $ -- -- $-- 87,336,756 $ 87 504,010 $ 1
Issuance of common stock:
Exercise of options and
warrants....................... 331,314
NTT purchase..................... 1,532,959 2
Acquisitions..................... 15,890,589 16
Conversion of Class B common
stock............................ 504,010 1 (504,010) (1)
Deferred compensation.............
Collection of notes receivable,
net of accrued interest..........
Unrealized loss on investments....
Net loss..........................
--------- -------- --- --- ----------- ---- ---------- ----
BALANCE December 31, 1994......... -- -- -- -- 105,595,628 106 -- --
Issuance of common stock:
Exercise of options and
warrants....................... 1,622,778 2
Digital Radio purchase........... 8,163,265 300,000 82 1,220,000 1
Acquisitions..................... 67,310,953 67 17,830,000 18
Deferred compensation.............
Collection of notes receivable,
net of accrued interest..........
Unrealized gain on investments....
Net loss..........................
--------- -------- --- --- ----------- ---- ---------- ----
BALANCE December 31, 1995......... 8,163,265 300,000 82 -- 175,749,359 176 17,830,000 18
Issuance of common stock:
Exercise of options and
warrants....................... 1,580,981 1
Employee stock purchase plan.....
Acquisitions..................... 25,888,819 26
Comcast purchase................. 8,155,506 8
Exercise of anti-dilutive
rights...........................
Deferred compensation.............
Interest on notes receivable......
Unrealized loss on investments....
Net loss..........................
--------- -------- --- --- ----------- ---- ---------- ----
BALANCE December 31, 1996......... 8,163,265 $300,000 82 $-- 211,374,665 $211 17,830,000 $ 18
========= ======== === === =========== ==== ========== ====
<CAPTION>
UNREALIZED NOTES
(LOSS) RECEIVABLE
PAID-IN ACCUMULATED TREASURY GAIN ON FROM DEFERRED
CAPITAL DEFICIT SHARES INVESTMENTS STOCKHOLDERS COMPENSATION
---------- ----------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE March 31, 1994............ $ 972,499 $ (122,217) $ (1,613) $ -- $ (1,259) $ (1,194)
Issuance of common stock:
Exercise of options and
warrants....................... 8,366 827
NTT purchase..................... 73,498
Acquisitions..................... 468,796
Conversion of Class B common
stock............................
Deferred compensation............. (2,837) 652
Collection of notes receivable,
net of accrued interest.......... 14
Unrealized loss on investments.... (1,214)
Net loss.......................... (125,849)
---------- ----------- -------- ------- -------- --------
BALANCE December 31, 1994......... 1,520,322 (248,066) (786) (1,214) (1,245) (542)
Issuance of common stock:
Exercise of options and
warrants....................... 5,722 18
Digital Radio purchase........... 12,644
Acquisitions..................... 1,654,440
Deferred compensation............. 4,400 (3,076)
Collection of notes receivable,
net of accrued interest.......... 227
Unrealized gain on investments.... 33,268
Net loss.......................... (331,165)
---------- ----------- -------- ------- -------- --------
BALANCE December 31, 1995......... 3,197,528 (579,231) (768) 32,054 (1,018) (3,618)
Issuance of common stock:
Exercise of options and
warrants....................... 16,836 (1,242)
Employee stock purchase plan..... (112) 227
Acquisitions..................... 341,984 (37,009)
Comcast purchase................. 99,897
Exercise of anti-dilutive
rights........................... (842) 7,392
Deferred compensation............. 17,617 (8,623)
Interest on notes receivable...... (82)
Unrealized loss on investments.... (17,061)
Net loss.......................... (556,020)
---------- ----------- -------- ------- -------- --------
BALANCE December 31, 1996......... $3,672,908 $(1,135,251) $(31,400) $14,993 $ (1,100) $(12,241)
========== =========== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 56
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994 AND THE
YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(125,849) $(331,165) $(556,020)
Adjustments to reconcile net loss to net cash used in
operating activities--
Amortization of debt issuance costs................... 2,490 3,739 5,752
Depreciation and amortization......................... 94,147 236,178 400,831
Deferred income taxes................................. (71,730) (201,427) (308,262)
Accretion of senior redeemable notes, net of
capitalization...................................... 60,175 90,691 182,935
Other................................................. (407) 18,339 5,393
Change in current assets and liabilities, net of
effects from acquisitions:
Accounts and notes receivable....................... (2,971) (20,484) (37,403)
Radios and accessories.............................. (6,448) (1,179) (19,939)
Other current assets................................ 109 (18,936) 4,535
Accounts payable, accrued expenses and other........ 42,429 86,483 94,602
--------- --------- ---------
Net cash used in operating activities............ (8,055) (137,761) (227,576)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired.......... (81,457) (75,917) 56,736
Other investments and advances to affiliates............. (63,576) (51,605) (38,380)
Payments for acquisitions of FCC licenses................ (1,780) (10,000) (19,031)
Capital expenditures (Note 1)............................ (340,715) (270,943) (434,641)
Maturities of marketable securities...................... 252,586 112,095 64,438
Other.................................................... (10,883) 9,162 34,636
--------- --------- ---------
Net cash used in investing activities............ (245,825) (287,208) (336,242)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements....................... -- -- 581,408
Borrowings (repayments) on revolving line of credit,
net................................................... -- 154,134 (296,704)
Other (repayments) borrowings, net....................... (2,623) (6,357) 1,009
Debt issuance costs...................................... -- -- (37,676)
Common stock issued...................................... 74,685 16,112 108,087
Preferred stock issued................................... -- 300,000 --
Treasury stock issued.................................... -- -- 6,549
Notes receivable from stockholders....................... 14 227 --
--------- --------- ---------
Net cash provided by financing activities........ 72,076 464,116 362,673
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... (181,804) 39,147 (201,145)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............. 483,483 301,679 340,826
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 301,679 $ 340,826 $ 139,681
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 57
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS -- Nextel Communications, Inc., and its subsidiaries ("Nextel"
or the "Company") provide wireless communications services to their customers
utilizing specialized mobile radio ("SMR") frequencies licensed to them by the
Federal Communications Commission ("FCC"). The Company is principally engaged in
the acquisition and operation of SMR communications systems in the United States
and the sale and servicing of related equipment. Through its subsidiaries McCaw
International, Ltd. ("MIL") and Nextel Investment Company ("NIC"), and other
subsidiaries that are involved in the international wireless investments and
business activities managed and/or coordinated through MIL, Nextel has interests
in wireless operations in Canada, Mexico, Brazil, Argentina, the Philippines,
and Shanghai, China. The Company's initial strategy was to consolidate the
fragmented SMR industry in the largest markets in the United States through the
acquisition of SMR systems that had achieved minimum FCC loading requirements so
as to permit the aggregation of frequencies in a single market. Subsequently,
the Company's business plan has been focused on the development and deployment
of Digital Mobile networks to replace its traditional analog SMR networks.
The Company's principal business objective is to become a leading provider
of wireless telecommunications services in major markets throughout the United
States. The Company's efforts to accomplish its principal objective have
consisted largely of acquiring spectrum and implementing wireless communications
services in its markets by constructing and operating advanced mobile
communications systems employing digital technology with a multi-site
configuration permitting frequency reuse ("Digital Mobile networks"). The
Company has acquired spectrum domestically and internationally through mergers
and acquisitions.
CONCENTRATIONS OF RISK -- The Company believes that the geographic and
industry diversity of its customer base minimizes the risk of incurring material
losses due to concentrations of credit risk.
The Company is party to certain equipment purchase agreements with Motorola
(see Notes 6 and 12). For the foreseeable future the Company 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.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION AND CHANGE IN FISCAL YEAR -- The consolidated
financial statements include the accounts of the Company and its majority-owned
subsidiaries. Investments in companies in which ownership interests range from
twenty to fifty percent and in which the Company exercises significant influence
over operating and financial policies are accounted for using the equity method.
Other investments are accounted for using the cost method. All significant
intercompany transactions and balances have been eliminated in consolidation.
Effective December 31, 1994, the Company changed its fiscal year end from
March 31 to December 31.
CASH AND CASH EQUIVALENTS -- Cash equivalents consist of time deposits and
highly liquid investments with original maturities of three months or less.
F-7
<PAGE> 58
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Supplemental disclosures of cash flow information and non-cash investing
and financing activities are as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, -----------------
1994 1995 1996
------------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH PAID:
Interest paid................................ $6,628 $8,454 $32,660
====== ====== =======
Income taxes paid............................ $ 519 $ 389 $ 1,290
====== ====== =======
</TABLE>
Under its previous vendor financing agreements (see Note 6), the Company
directly financed certain of its equipment purchases. During the nine months
ended December 31, 1994 and the years ended December 31, 1995 and 1996 the total
equipment acquired under these vendor financing agreements was $104.6 million,
$117.8 million and $102.5 million, respectively, resulting in total cash and
non-cash capital expenditures of $466.6 million, $419.7 million and $570.0
million, respectively. Total capital expenditures include interest capitalized
in connection with the construction and development of the Digital Mobile
networks of approximately, $21.3 million, $31.0 million and $32.9 million during
the nine months ended December 31, 1994 and the years ended December 31, 1995
and 1996, respectively.
INVESTMENTS -- Marketable debt securities and certificates of deposits with
maturities greater than three months are classified as marketable securities.
Marketable equity securities intended to be held more than one year are
classified as other long-term assets.
The Company accounts for investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." All of the Company's marketable investments are
classified as available-for-sale as of the balance sheet date and are reported
at fair value, with unrealized gains and losses, net of tax, recorded as a
component of stockholders' equity. Realized gains or losses and declines in
value, if any, judged to be other than temporary on available-for-sale
securities are reported in other income or expense. Investments that are not
considered marketable instruments are recorded at the lower of cost or market
and included in other assets. Management of the Company believes its investment
policy limits exposure to concentrations of credit risk.
RADIOS AND ACCESSORIES -- Radios and accessories are valued at the lower of
cost or market. Cost is determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment, including
improvements that extend useful lives, are recorded at cost, while maintenance
and repairs are charged to operations as incurred. Depreciation and amortization
are computed using the straight-line method based on estimated useful lives of
31 years for buildings, 3 to 10 years for equipment, and 3 years for furniture
and fixtures. Leasehold improvements are amortized over the shorter of the
respective lives of the leases or the useful lives of the improvements.
Construction in Progress includes labor, material, transmission and related
equipment, engineering, site development, interest and other costs relating to
the construction and development of the Digital Mobile networks.
INTANGIBLE ASSETS -- Intangible assets are recorded at cost and are
amortized using the straight-line method based on estimated useful lives of 20
years for FCC licenses and the excess of purchase price over fair value of net
assets acquired, 10 years for customer lists, and up to 20 years for other
intangibles. Noncompetition covenants are amortized over the lives of the
covenants.
F-8
<PAGE> 59
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-LIVED ASSETS -- Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed of "
("SFAS 121"). Long-lived assets and identifiable intangibles to be held and used
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairment is measured by
comparing the carrying value of the long-lived asset to the estimated
undiscounted future cash flows expected to result from use of the assets and
their eventual disposition. The Company determined that as of December 31, 1996,
there had been no impairment in the carrying value of long-lived assets.
INTEREST RATE SWAP AGREEMENTS -- The Company entered into interest rate
swap agreements as a means of managing its interest rate exposure. These
agreements have the effect of converting certain of the Company's variable rate
obligations to fixed rate obligations. Net amounts paid or received are
reflected as adjustments to interest expense.
REVENUE RECOGNITION -- Revenue is recognized for air-time and other
services over the period earned and for sales of equipment when delivered.
DIGITAL MOBILE NETWORK EQUIPMENT SALES AND RELATED COSTS -- Effective
January 1, 1996, the Company classified equipment sales revenue and related
costs of its Digital Mobile network operations within selling, general and
administrative expenses. The loss on the sale of subscriber units used in the
Digital Mobile networks results from the Company's subsidy of Digital Mobile
unit sales and represents marketing costs for the Digital Mobile networks. The
statements of operations for the nine months ended December 31, 1994 and the
year ended December 31, 1995 have been reclassified to conform with this
presentation. Equipment sales and related costs of the Company's Digital Mobile
network operations are as follows:
<TABLE>
<CAPTION>
NINE YEAR ENDED
MONTHS ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment Sales............................ $ 8,820 $ 53,515 $ 129,252
Cost of Equipment Sales.................... 14,852 67,274 154,678
-------- ---------- ----------
$ (6,032) $ (13,759) $ (25,426)
======== ========== ==========
</TABLE>
INCOME TAXES -- Deferred tax assets and liabilities are determined based on
the temporary difference between the financial reporting and tax bases of assets
and liabilities applying enacted statutory tax rates in effect for the year in
which the differences are expected to reverse. Future tax benefits, such as net
operating loss carryforwards, are recognized to the extent that realization of
such benefits is considered to be more likely than not.
FOREIGN CURRENCY TRANSLATION -- Results of operations for foreign
investments are translated using average exchange rates during the period, while
assets and liabilities are translated at the exchange rate in effect at the
reporting date. Gains or losses from translating foreign currency financial
statements are accumulated in a separate component of stockholders' equity.
There were no material foreign currency translation gains or losses for the
periods presented.
NET LOSS PER SHARE -- Net loss per share is based on the weighted average
number of common shares outstanding during the period and does not include
common equivalent shares since their effect would be anti-dilutive.
RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to
conform to the current year presentation.
F-9
<PAGE> 60
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS -- In March 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
128, "Earnings per share" ("SFAS 128"), which supersedes Accounting Principles
Board Opinion No. 15. SFAS 128 is effective for 1997 and simplifies the
computation of earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. The
Statement requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures. Basic earnings per share includes no
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
Management of the Company does not believe that there will be any material
effect from adopting SFAS 128 in 1997.
2. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS
BUSINESS COMBINATIONS
NINE MONTHS ENDED DECEMBER 31, 1994 -- During the nine months ended
December 31, 1994, the Company consummated various acquisitions of SMR
operations in Florida with an aggregate purchase price of approximately $52.3
million.
In April 1994, the Company acquired PowerFone Holdings, Inc. ("PowerFone"),
an operator of SMR systems in Detroit, Cleveland, Cincinnati, Indianapolis, St.
Louis, Pittsburgh and upstate New York, for approximately 7.6 million shares of
Class A Common Stock, having an aggregate market value of approximately $266.0
million at closing.
In August 1994, the Company completed the acquisition of Questar Telecom,
Inc. ("QTI"), a wholly-owned subsidiary of Questar Corporation, and certain
subsidiaries of Advanced Mobilcomm, Inc. (collectively "AMI-West"). QTI and
AMI-West operated SMR systems in the Western regions of the United States. The
Company issued approximately 3.9 million and 1.9 million shares of Class A
Common Stock to the stockholders of QTI and AMI-West, respectively, having an
aggregate market value of approximately $153.0 million at closing.
In a series of transactions, the Company completed the acquisition of Saber
Communications, Inc., an operator of SMR systems in Alabama, Louisiana and
Mississippi, for approximately $48.0 million in cash.
YEAR ENDED DECEMBER 31, 1995 -- On July 28, 1995, the Company acquired from
Motorola, Inc. ("Motorola") substantially all of its owned or managed 800 MHz
SMR licenses and related assets located throughout the continental United States
(the "Motorola SMR Business") in exchange for approximately 41.7 million shares
of Class A Common Stock and 17.8 million shares of Class B Non-voting Common
Stock (the "Motorola Transaction"), having an aggregate market value of
approximately $1,160.0 million at closing.
On July 28, 1995, the merger with OneComm Corporation ("OneComm") was
consummated (the "OneComm Merger") whereby the stockholders of OneComm received
approximately 22.5 million shares of Class A Common Stock (or rights to receive
such stock) , having an aggregate market value of approximately $402.0 million
at closing. OneComm is an operator of SMR systems in the Rocky Mountain, Pacific
Northwest, Midwest, North Central and Ohio Valley areas.
On July 31, 1995, the merger with American Mobile Systems Incorporated
("AMS"), an operator of SMR systems in Florida, was consummated (the "AMS
Transaction"), whereby the stockholders of AMS received approximately 4.2
million shares of Class A Common Stock (or rights to receive such stock), having
an aggregate market value of approximately $81.3 million at closing.
F-10
<PAGE> 61
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In October 1995, the Company acquired certain SMR Properties from Comcast
Corporation (see Note 10) in exchange for approximately 463,000 shares of Class
A Common Stock, having an aggregate market value of approximately $7.2 million
at closing.
As a result of the business combinations consummated in 1995, the Company
began to implement a plan to consolidate, resize and relocate the corporate
headquarters and certain other functions of the various combining entities (the
"Corporate Reorganization"). Accordingly, the Company accrued certain estimated
expenses directly related to such Corporate Reorganization activities, including
employee severance and closure of duplicate facilities. The charge to operations
relating to the Corporate Reorganization ($17.4 million) represents costs with
respect to employees, facilities and related items of the Company prior to the
consummation of such business combinations. Corporate Reorganization costs
related to the acquired entities ($9.9 million) have been included in the cost
of the respective business combinations. As of December 31, 1995 and 1996,
approximately $361,000 and $13.9 million, respectively, of such costs have been
paid relating to the Company and $1.5 million and $9.9 million, respectively, of
such costs have been paid relating to acquired entities.
YEAR ENDED DECEMBER 31, 1996 -- On January 30, 1996, the merger with Dial
Page, Inc. ("Dial Page"), was consummated (the "Dial Page Merger"), whereby the
stockholders of Dial Page received approximately 26.8 million shares of Class A
Common Stock (or rights to receive such stock), having an aggregate value of
approximately $277.9 million on the contract date. Dial Page is an operator of
analog SMR systems in the Southeastern United States.
The following presents the unaudited pro forma consolidated results of
operations for the nine months ended December 31, 1994 and the year ended
December 31, 1995, as if the acquisitions described above, had occurred at the
beginning of each period presented. The 1995 pro forma results include
acquisitions consummated during the years ended December 31, 1995 and 1996 and
the 1994 pro forma results include acquisitions consummated during the nine
months ended December 31, 1994 and the year ended December 31, 1995. The pro
forma effects of acquisitions consummated in 1996 were not material. The pro
forma results are not necessarily indicative of the actual results of operations
that would have occurred had the transactions been consummated as indicated nor
are they intended to indicate results that may occur in the future.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues............................................ $ 172,631 $ 261,393
========== ==========
Net loss............................................ $ (289,252) $ (526,699)
========== ==========
Net loss per share.................................. $ (1.37) $ (2.34)
========== ==========
</TABLE>
In 1996, the Company also acquired several other businesses at a net cost
of $20.0 million. The results of operations of these businesses were not
material in relation to the Company's consolidated results of operations.
All of the acquisitions described above were accounted for by the purchase
method. Accordingly, assets and liabilities have been reflected at fair value at
the date of acquisition. The operating results of the acquired companies are
included in the consolidated statements of operations from their respective
acquisition dates.
F-11
<PAGE> 62
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total purchase price and net assets acquired for acquisitions completed
are as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, --------------------------
1994 1995 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Direct cost of acquisitions:
Cash and accrued transaction costs.............. $ 91,780 $ 89,626 $ 30,487
Note payable.................................... 132 -- --
Common stock, warrants and options.............. 418,195 1,654,525 296,881
Expenses related to corporate reorganization.... -- 9,915 --
--------- ----------- ----------
$ 510,107 $ 1,754,066 $ 327,368
========= =========== ==========
Net assets acquired:
Working capital -- net.......................... $ 1,923 $ (44,992) $ 53,641
Property, plant and equipment................... 26,948 207,070 202,420
Intangible assets............................... 629,024 2,278,310 556,250
Other assets.................................... 14,020 37,790 4,290
Long-term debt.................................. (837) (215,835) (379,017)
Deferred income taxes........................... (160,971) (508,277) (110,216)
--------- ----------- ----------
$ 510,107 $ 1,754,066 $ 327,368
========= =========== ==========
</TABLE>
OTHER TRANSACTIONS
In 1994, the Company invested an aggregate of approximately $18.1 million
in cash and exchanged 2.5 million shares of Class A Common Stock for an equity
interest in Clearnet Communications Inc. ("Clearnet") that as of December 31,
1996 represented an approximately 19.5% equity interest (representing
approximately 1.7% of voting interest) in Clearnet. Such equity interest in
Clearnet had an aggregate market value of approximately $69.0 million at
closing. The Company's investment in Clearnet (classified as other long-term
assets in the accompanying consolidated balance sheets) is accounted for at fair
market value.
In 1995, the Company, through MIL, invested approximately $10.0 million for
an approximate equity-equivalent interest of 25.2% and committed an additional
$13.2 million in loan funding in the initial phase of a newly created Group
Special Mobile ("GSM") digital cellular telephone system operating in Shanghai,
China. During 1996, MIL advanced a total of $10.4 million of such loan funding
to the Shanghai operations.
On March 2, 1995, the Company, through NIC, acquired approximately a 16.5%
interest in Corporacion Mobilcom S.A. de C.V. ("Mobilcom"), a Mexican SMR
operator, for $10.0 million and the conversion of $42.5 million in principal
amount of notes, representing funds advanced to Mobilcom in 1994. In August
1995, the Company acquired an additional 1.5% equity interest in Mobilcom for
approximately $4.7 million. During the year ended December 31, 1995, the Company
recorded a $15.0 million charge to operations representing an other than
temporary decline in this investment as a result of the decline in the Mexican
peso during 1995. The investment was accounted for using the cost method as of
December 31, 1995.
On August 23, 1996, the Company, through NIC, entered into certain
agreements to purchase up to 19.8% of additional equity interest in Mobilcom
from the selling stockholders and Grupo Comunicaciones San Luis, S.A. De C.V.
("Grupo"), the associated company of Mobilcom, in two tranches. An additional
11.6% equity interest in Mobilcom was acquired on October 24, 1996 in exchange
for 1.3 million shares of Class A Common Stock valued at $23.1 million. On
January 24, 1997, the Company acquired an additional 8.2% equity interest in
Mobilcom from the selling stockholders in exchange for 1.3 million shares of
Class A Common Stock valued at $16.5 million bringing the Company's aggregate
interest in Mobilcom to
F-12
<PAGE> 63
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately 38%. Upon the closing of the first tranche, the ownership interest
increased from 18.5% to 30.1% requiring a change in the accounting method used
to account for the investment from the cost method to the equity method,
resulting in a $10.8 million charge to other expenses.
The Company, through NIC, has the right to appoint a majority of Mobilcom
board members. In order to retain the contractual right to designate a majority
of the board of directors of Mobilcom, the Company must invest approximately
$76.8 million in Mobilcom through certain qualified capital transactions by
March 1998. As of January 31, 1997, the Company had invested $43.6 million in
such qualified capital transactions. The Company has the option to purchase
before March 1998, up to an additional 29.5% of Mobilcom's common stock. Certain
shareholders of Mobilcom retain the right to approve certain significant
transactions such as acquisitions and dispositions, and the approval of business
plans of Mobilcom. In addition, beginning on October 24, 1997, holders of
approximately 33% of the outstanding capital stock of Mobilcom have the right
for two years to put (the "Mobilcom Put") the entire amount of their holdings to
the company at its appraised fair market value of cash upon occurrence of
certain events. The Mobilcom Put is automatically exercisable on October 24,
1999.
NIC has agreed under certain circumstances to attempt to provide Grupo with
liquidity with respect to its 21% equity interest in Mobilcom. At any time after
January 1, 1999, NIC, if requested by Grupo, will cause Mobilcom to undertake a
U.S. registered public offering or sale for cash to a third party of Grupo's
shares at their appraised fair market value within one year of such request. If
Mobilcom fails to provide Grupo with liquidity through either of these methods,
Grupo has the right to cause Mobilcom to file a registration statement in the
United States covering Grupo's Mobilcom shares.
On June 14, 1996, the Company, through MIL, invested $16.0 million in cash
to obtain a 30% interest in Infocom Communications Network, Inc. ("Infocom"), a
wireless communications company located in the Philippines. This investment is
accounted for by the equity method.
On August 6, 1996, the Company, through MIL, acquired all of the
outstanding shares of Com Control Comunicacion Controlada S.A. (renamed McCaw
Argentina S.A.), an Argentine company with 800 MHz SMR licenses, for $15.0
million in the form of cash and equipment.
SUBSEQUENT TRANSACTIONS -- On January 30, 1997, Nextel acquired 81% of the
outstanding shares of Wireless Ventures of Brazil, Inc., an operator of SMR
systems in Brazil ("WVB"), for a purchase price of $186.3 million, which was
paid with Class A Common Stock, through a merger of WVB with a wholly-owned
subsidiary of Nextel. Nextel simultaneously contributed its interest in WVB,
which was renamed McCaw International ("Brazil"), Ltd., to MIL.
PENDING TRANSACTIONS -- In October 1996, the Company entered into a
definitive agreement with Pittencrieff Communications, Inc. ("Pittencrieff"), an
SMR operator with licenses in Texas, Oklahoma, New Mexico and Arizona, providing
for the merger of Pittencrieff with a wholly-owned indirect subsidiary of the
Company (the "Pittencrieff Transaction"). Pursuant to the Pittencrieff
Transaction, the Company will issue a maximum of 8,782,403 shares of Class A
Common Stock, subject to certain adjustments, in exchange for all of the
outstanding shares (or rights to acquire shares) of Pittencrieff common stock.
The maximum dollar value of the shares of Class A Common Stock to be issued to
the Pittencrieff stockholders is set at $170.0 million (subject to certain
adjustments). Accordingly, if the price of the Class A Common Stock exceeds
$19.36 at the closing of the Pittencrieff Transaction, the number of shares to
be issued to the Pittencrieff stockholders would be decreased so that the total
maximum dollar value threshold would not be exceeded. The closing of the
Pittencrieff Transaction, which is subject to certain conditions, including
regulatory approval and the approval of the Pittencrieff stockholders, is
expected to occur in 1997.
F-13
<PAGE> 64
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Trade:
Billed................................................. $34,855 $ 68,166
Unbilled............................................... 6,267 12,478
Reserve for doubtful accounts.......................... (5,232) (10,774)
------- --------
35,890 69,870
Notes receivable......................................... -- 12,295
Other.................................................... 5,561 8,227
------- --------
$41,451 $ 90,392
======= ========
</TABLE>
Notes receivable, all due within one year, primarily consist of advances to
foreign investees bearing interest at rates from 6% - 14.5%.
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land................................................. $ 980 $ 1,948
Buildings and improvements........................... 15,267 78,036
Equipment............................................ 972,063 1,287,489
Furniture and fixtures............................... 71,603 98,555
Construction in progress............................. 271,592 652,519
---------- ----------
1,331,505 2,118,547
Less accumulated depreciation and amortization....... 139,301 314,808
---------- ----------
$1,192,204 $1,803,739
========= =========
</TABLE>
5. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
FCC licenses......................................... $2,762,502 $3,300,176
Excess of purchase price over fair value of net
assets acquired.................................... 867,639 1,083,963
Customer lists....................................... 137,519 134,320
Noncompetition covenants............................. 93,248 85,385
Other................................................ 32,204 38,783
---------- ----------
3,893,112 4,642,627
Less accumulated amortization........................ 343,490 566,327
---------- ----------
$3,549,622 $4,076,300
========= =========
</TABLE>
F-14
<PAGE> 65
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
11.5% Senior redeemable discount notes due 2003,
interest payable semi-annually beginning March 1,
1999, net of unamortized discount of $143,835 and
$89,024............................................ $ 390,569 $ 436,831
9.75% Senior redeemable discount notes due 2004,
interest payable semi-annually beginning August 15,
1999, net of unamortized discount of $307,329 and
$205,773........................................... 837,102 920,662
10.125% Senior redeemable OneComm discount notes due
2004, interest payable semi-annually beginning July
15, 1999, net of unamortized discount of $193,638
and $151,810....................................... 224,122 258,066
12.25% Senior redeemable Dial Page discount notes due
2004, interest payable semi-annually beginning
October 15, 1999, net of unamortized discount of
$186,584........................................... -- 355,246
10.25% Senior redeemable Dial Page discount notes due
2005, interest payable semi-annually beginning June
15, 1999, net of unamortized discount of $45,192... -- 69,973
Bank credit facility, interest payable quarterly at
an adjusted rate calculated either on the prime
rate or LIBOR (8% to 9.75%)........................ -- 590,000
Vendor credit facility, interest payable quarterly at
2% over the prime rate (10.25%).................... -- 150,000
Equipment notes payable, interest at 2% over
corporate base rate as defined (10.5%)............. 235,075 --
Other................................................ 2,238 3,787
---------- ----------
1,689,106 2,784,565
Less current portion................................. 1,277 1,524
---------- ----------
$1,687,829 $2,783,041
========== ==========
</TABLE>
SENIOR REDEEMABLE DISCOUNT NOTES -- In August 1993, the Company completed
the issuance of $525.9 million principal amount of senior redeemable discount
notes due 2003 (the "2003 Notes"). The 2003 Notes, which are unsecured
obligations and noncallable until September 1, 1998, generated $300.0 million of
gross proceeds.
In February 1994, the Company completed the issuance of $1,126.4 million
principal amount of senior redeemable discount notes due 2004 (the "2004
Notes"). The 2004 Notes, which are unsecured obligations and noncallable until
February 15, 1999, generated $700.0 million of gross proceeds.
The $409.9 million principal amount of OneComm's senior redeemable discount
notes due 2004 (the "OneComm 2004 Notes") are unsecured obligations and
noncallable until January 15, 1999. The OneComm 2004 Notes were assumed in
connection with the OneComm Merger and were adjusted to fair value at the date
of acquisition at an annual yield to stated maturity of approximately 14.2%.
The $541.8 million principal amount of Dial Page's senior redeemable
discount notes due 2004 (the "Dial Page 2004 Notes") are unsecured obligations
and noncallable until April 15, 1999. The Dial Page 2004 Notes were assumed in
connection with the Dial Page Merger and were adjusted to fair value at the date
of acquisition at an annual yield to stated maturity of approximately 14.3%.
F-15
<PAGE> 66
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The $115.2 million principal amount of Dial Page's senior redeemable
discount notes due 2005 (the "Dial Page 2005 Notes") are unsecured obligations
and noncallable until December 15, 1998. The Dial Page 2005 Notes were assumed
in connection with the Dial Page Merger and were adjusted to fair value at the
date of acquisition at the annual yield to stated maturity of approximately
14.3%.
The indentures governing the 2003 Notes, 2004 Notes, OneComm 2004 Notes,
Dial Page 2004 Notes, and Dial Page 2005 Notes (collectively the "Notes")
contain substantially similar covenants which, among other things, restrict the
ability of the Company and certain of its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of its capital
stock or make certain other restricted payments; create liens; enter into
transactions with affiliates or related persons; sell certain assets; engage in
any business other than the telecommunications business; or consolidate, merge
or sell all or substantially all of its assets. Additionally, the indentures
governing the 2003 Notes restrict the Company from encumbering the ability of
certain of its restricted subsidiaries, as defined in the Notes, to pay
dividends or make certain payments to the Company. Assets of the restricted
subsidiaries may not be transferred to Nextel except for payments of overhead
services, taxes or principal and interest on Notes. Also under these indentures,
the Company and its restricted subsidiaries may only incur debt other than
certain categories of permitted debt (as defined in the indentures), if the
aggregate amount of its debt does not exceed 30% of its total market
capitalization or if its ratio of consolidated debt to annualized operating cash
flow does not exceed certain levels.
Prior to the consummation of the Motorola Transaction and the OneComm and
Dial Page Mergers, the Company received consents of holders of the 2003 Notes,
2004 Notes, the OneComm 2004 Notes and the Dial Page 2004 and 2005 Notes that
were required under terms of the respective indentures. In exchange for the
consents, the Company agreed to pay each consenting holder of the respective
notes an amount equal to $10.00 per $1,000 of principal amount at maturity of
the respective notes. The Company, OneComm and Dial Page paid approximately
$26.9 million for these consents, which is included in transaction costs related
to the Motorola Transaction and the OneComm and Dial Page Mergers, as
appropriate (see Note 2).
BANK AND VENDOR CREDIT FACILITIES -- On September 30, 1996, Nextel, Nextel
Finance Company ("NFC"), a wholly-owned subsidiary of Nextel, and certain other
subsidiaries of Nextel entered into definitive agreements with respect to a
secured credit facility arranged by a group of banks (the "Bank Credit
Facility"). The Bank Credit Facility provides for up to $1,655.0 million of
secured financing, consisting of $1,085.0 million in revolving loans and $570.0
million in term loans. The commitments to make revolving loans are reduced
beginning March 31, 2001 with final maturities of the revolving loans occurring
on March 31, 2003. Quarterly principal payments on the term loans commence March
31, 2001 with final maturities on June 30, 2003. Concurrently therewith, Nextel,
NFC and certain other subsidiaries of Nextel entered into definitive agreements,
which also became effective on September 30, 1996, with respect to the
amendment, restatement and consolidation of the previously existing financing
arrangements with Motorola and NTFC Capital Corporation ("NTFC") (the "Vendor
Credit Facility"). The Vendor Credit Facility supersedes the previous financing
agreements and provides for up to $345.0 million of secured financing,
consisting of a $195.0 million revolving loan and $150.0 million in term loans,
with revolving credit commitment reductions and term loan payments parallel to
those of the Bank Credit Facility.
Borrowings under the Bank Credit Facility and the Vendor Credit Facility
(collectively, the "Facilities") are ratably secured by liens on assets of
Nextel's subsidiaries that are "restricted" subsidiaries under the terms of
Nextel's public indentures. As of December 31, 1996, Nextel had drawn $590.0
million of its available financing under the Bank Credit Facility, leaving an
aggregate of $1,065.0 million available for borrowing under such facility.
Additionally, Nextel had drawn $150.0 million of its available financing under
the Vendor Credit Facility, leaving an aggregate of $195.0 million available for
borrowing under such facility. The proceeds from these borrowings were used
primarily to repay the outstanding principal and accrued interest under the
previous financing agreements with Motorola and NTFC and to fund operations.
Commitment fees of 0.5% are payable quarterly based on the average unused
balance of the Bank Credit Facility. However, the
F-16
<PAGE> 67
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maximum permitted indebtedness (excluding indebtedness represented by the Notes)
pursuant to the indentures relating to the Notes is limited to $1,560.0 million
as of December 31, 1996.
The Facilities agreements contain similar covenants which limit the ability
of the Company and certain of its subsidiaries to incur additional indebtedness;
create liens; pay dividends or make distributions in respect of its capital
stock or make certain other restricted payments; consolidate, merge or sell all
or substantially all of its assets or engage in certain acquisitions; guarantee
obligations of other entities; enter into hedging agreements; enter into
transactions with affiliates or related persons; or engage in any business other
than the telecommunications business. Additionally, the agreements require
compliance with various financial ratios and the attainment of certain operating
results during the terms of the credit facilities. The Facilities are secured by
certain assets and capital stock of Nextel's restricted subsidiaries. At
December 31, 1996, substantially all of the Company's assets were pledged in
connection with these facilities.
PREVIOUS VENDOR FINANCING -- In 1991, the Company entered into agreements,
as amended, with Motorola for the purchase, installation and maintenance of the
Company's Digital Mobile networks infrastructure and related subscriber
equipment. In addition, the Company and certain of its subsidiaries entered into
financing and security agreements with Motorola which provided and secured
equipment financing totaling $685.0 million (the "Motorola Financing").
Borrowings under these facilities were limited to the cost of equipment and
services provided by Motorola (excluding subscriber equipment) and evidenced by
individual promissory notes. At December 31, 1995, approximately $225.1 million
was outstanding under these facilities. On September 30, 1996, the agreements
relating to this facility were amended and restated to become the Vendor Credit
Facility and the balances outstanding under the Motorola Financing were
refinanced with the Vendor Credit Facility discussed above.
The Company entered into a warrant agreement with Motorola providing for
the issuance of warrants for the purchase of 3.0 million shares of Class A
Common Stock as an inducement to enter into certain of the aforementioned
agreements. The exercise price of the warrants is $15.00 per share, the market
value of the stock at the date of grant. The warrants are issuable in varying
installments corresponding with the commencement date of commercial service of
Digital Mobile networks in certain regional market areas. At December 31, 1995
and 1996, warrants for approximately 2.1 million shares and 2.7 million shares,
respectively, were issued and exercisable, and such warrants expire at various
dates ranging from October 1999 to December 2000.
In 1991, the Company entered into a financing agreement, as amended, with
the NTFC providing for a $40.0 million line of credit for the purchase of six
Northern Telecom Corporation switching systems and related services. The terms
and conditions of the agreement were substantially identical to the Motorola
Financing agreements. At December 31, 1995, $10.0 million was outstanding under
this facility. On September 30, 1996, the agreements relating to this facility
were amended and restated to become the Vendor Credit Facility and the balances
outstanding under the NTFC financing were refinanced with the Vendor Credit
Facility discussed above.
For the years subsequent to December 31, 1996, annual maturities of
long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................ $ 1,524
1998............................................................ 1,109
1999............................................................ 53,852
2000............................................................ 98,960
2001............................................................ 207,193
Thereafter...................................................... 3,100,310
----------
3,462,948
Less unamortized discount....................................... 678,383
----------
$2,784,565
=========
</TABLE>
F-17
<PAGE> 68
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTEREST RATE SWAPS -- In October 1996, NFC entered into an interest rate
swap agreement with a notional amount of $320.0 million which will convert
floating rate debt into fixed rate obligations with an effective interest rate
of 5.9%. This swap commenced on October 2, 1996 for a one-year period expiring
on October 2, 1997. As of December 31, 1996 based on estimates obtained from
dealers, the Company would be obligated to pay $872,000 to settle this contract.
In December 1996, NFC entered into an interest rate swap agreement with a
notional amount of $100.0 million which will convert floating rate debt into
fixed rate obligations with an effective interest rate of 5.36%. This swap
commenced on December 13, 1996 and will terminate either on December 13, 1999 or
on the first day of the quarterly interest payment period when the floating rate
is equal to or exceeds 6.25%, whichever comes first. As of December 31, 1996
based on estimates obtained from dealers, the Company would receive $142,000 to
settle this contract.
SUBSEQUENT TRANSACTION -- On March 3, 1997, MIL completed a private
placement of 951,463 units yielding $500.0 million of gross proceeds. Each unit
is comprised of a 10-year senior discount note and a warrant to purchase 0.10616
shares of MIL common stock. The notes have a 13% yield to maturity, are
noncallable for five years, and require no coupon payments for the first five
years. The warrants are exercisable at a price of $36.45 and entitle the holders
to purchase in the aggregate 1%, on a fully diluted basis, of the common stock
of MIL.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been determined by
the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1996
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Marketable securities (including equity
securities classified within other long-term
assets)..................................... $ 183,544 $ 183,544 $ 97,356 $ 97,344
Other assets.................................. $ 56,117 $ 65,007 $ 10,082 $ 10,082
Long-term debt................................ $1,687,829 $1,386,808 $2,783,041 $2,354,400
</TABLE>
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS PAYABLE
AND ACCRUED EXPENSES -- The carrying amounts of these items are a reasonable
estimate of their fair value.
MARKETABLE SECURITIES -- The fair value of these securities are estimated
based on quoted market prices.
F-18
<PAGE> 69
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995 and 1996, marketable securities (including equity
securities classified within other long-term assets) consist of the following:
<TABLE>
<CAPTION>
UNREALIZED
COST FAIR VALUE (LOSS) GAIN
------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
1995
Available for sale:
Debt securities............................. $69,679 $ 68,443 $(1,236)
Equity securities........................... $59,618 $115,101 $55,483
1996
Available for sale:
Debt securities............................. $ 4,991 $ 5,000 $ 9
Equity securities........................... $69,159 $ 92,344 $23,185
</TABLE>
At December 31, 1996, the net unrealized gain on investments of
approximately $15.0 million included in stockholders' equity is net of a related
deferred income tax liability of approximately $8.2 million.
OTHER ASSETS -- The fair value of other assets, consisting primarily of
investments in promissory notes and escrow deposits, are estimated by
discounting future cash flows using current rates at which similar notes would
be issued to similar borrowers and quoted market prices, as applicable. At
December 31, 1995 and 1996, it was not practicable to value investments in
nonmarketable equity securities of foreign entities with a carrying value of
approximately $55.5 million and $19.7 million, respectively. Accordingly, these
investments are excluded from the above table.
LONG-TERM DEBT -- The fair value of these securities are estimated based on
quoted market prices of the 2003 Notes, 2004 Notes, OneComm 2004 Notes, Dial
Page 2004 Notes, and Dial Page 2005 Notes. Interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt issues for which no market
quotes are available.
8. INCOME TAXES
The components of the income tax (benefit) provision were as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
State................................... $ 385 $ 825 $ 1,070
--------- ----------- -----------
Deferred:
Federal................................. (59,612) (161,700) (272,279)
State................................... (12,118) (39,727) (35,983)
--------- ----------- -----------
(71,730) (201,427) (308,262)
--------- ----------- -----------
Income tax benefit........................ $(71,345) $ (200,602) $ (307,192)
========= =========== ===========
</TABLE>
F-19
<PAGE> 70
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of taxes computed at the statutory rate to the income
tax benefit is as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, ----------------------
1994 1995 1996
------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at statutory rate...... $(69,018) $(186,118) $(302,124)
State tax benefit -- net.................. (7,626) (25,286) (22,701)
Amortization of goodwill.................. 4,766 8,400 14,104
Other..................................... 533 2,402 3,529
------------ --------- ---------
$(71,345) $(200,602) $(307,192)
========== ========= =========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards........................ $405,784 $ 725,452
Deferred interest................................... 20,098 61,773
Other............................................... 24,196 28,459
-------- ----------
450,078 815,684
Valuation allowance -- net operating losses........... -- (41,065)
-------- ----------
450,078 774,619
-------- ----------
Deferred tax liabilities:
Property, plant and equipment....................... 66,348 112,012
Intangibles......................................... 910,814 1,103,047
Unrealized gain..................................... 22,193 22,724
Other............................................... -- 42,352
-------- ----------
999,355 1,280,135
-------- ----------
Net deferred tax liability............................ $549,277 $ 505,516
======== =========
</TABLE>
At December 31, 1996, the Company had approximately $1,511.0 million of
consolidated net operating loss carryforwards for Federal income tax purposes
which expire through 2011, and approximately $326.0 million of separate return
net operating loss carryforwards which expire through 2011. The utilization of
tax net operating losses may be subject to certain limitations.
During the years ended December 31, 1995 and 1996, tax benefits of
approximately $1.1 million and $7.4 million, respectively, related to the
exercise of employee stock options, were credited to stockholders' equity.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS -- The Company leases various equipment and
office facilities under operating leases. Leases for analog antenna sites are
generally a one year term or month-to-month; digital antenna sites are generally
five year terms but are cancelable after a short notice period under certain
circumstances. Future rental payments for such antenna site leases will
approximate $30.5 million for the year ending December 31, 1997, including
amounts due to Motorola of approximately $25.9 million (see Note 12).
F-20
<PAGE> 71
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Office facilities and equipment other than antenna sites are leased under
agreements with terms ranging from 1 to 10 years. The leases normally provide
for the payment of minimum annual rentals and certain leases include provisions
for renewal options of up to ten years.
For years subsequent to December 31, 1996, future minimum payments for all
lease obligations that have initial noncancellable lease terms exceeding one
year are as follows (in thousands):
<TABLE>
<S> <C>
1997...................................................... $ 74,957
1998...................................................... 58,826
1999...................................................... 40,694
2000...................................................... 28,849
2001...................................................... 18,982
Thereafter................................................ 41,649
--------
$263,957
========
</TABLE>
Total rental expense was approximately $37.0 million, $58.9 million and
$84.5 million for the nine months ended December 31, 1994, and the years ended
December 31, 1995 and 1996, respectively.
LEGAL CONTINGENCIES -- On July 10, 1995, a lawsuit titled In Re Nextel
Communications Securities Litigation was filed in the United States District
Court in the District of New Jersey. This litigation, which is being pursued as
a class action suit, amends and consolidates three previously filed class action
complaints and seeks damages allegedly incurred by certain stockholders and
claimed to result from defendants' alleged violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The
litigation also makes claims of fraud and deceit. Specifically, plaintiffs claim
that such damages resulted from defendants' certain alleged false and misleading
statements regarding the digital communications technology developed by Motorola
and deployed by Nextel in its Digital Mobile networks. While Nextel cannot
predict the outcome of this litigation, Nextel believes that the claims against
it are without merit and intends to vigorously defend against them.
On September 19, 1994, a lawsuit titled Charles Dascal v. Morgan O'Brien,
Becker, Gurman, Lukas, Meyers, O'Brien and McGowan, P.C. and Nextel
Communications, Inc., was filed in the Circuit Court of Dade County, Florida.
The lawsuit, which has been transferred to the United States District Court for
the Southern District of Florida, seeks compensatory damages, lost profits and
special damages based on the defendants' alleged breach of fiduciary duty,
misappropriation of trade secrets, negligent misrepresentation, fraud,
conversion, civil theft, breach of good faith and fair dealing and unjust
enrichment. The claims, which primarily concern alleged conduct by Nextel's
current Vice-Chairman and former Chairman of the Board, Morgan O'Brien, in the
1970s and early 1980s prior to the formation of Nextel, assert that business
plans allegedly formulated by the plaintiff relating to the development of a
wireless communications system were disclosed to, and have been improperly used
by, the defendants. While Nextel cannot predict the outcome of this litigation,
Nextel believes that the claims against it are without merit, and intends to
vigorously defend against them. On September 13, 1994, the Board of Directors
determined that Morgan O'Brien, in his capacities as an officer, director and
authorized representative of Nextel, was entitled to indemnification in respect
of this matter.
Unless otherwise indicated, the relevant plaintiffs have not specified
amounts of damages being sought. Given the Company's assessment of the claims
asserted against it in each such lawsuit, the Company does not believe that such
lawsuits, individually or in the aggregate, will have a material adverse effect
on the Company's financial condition, results of operations or liquidity.
The Company and its subsidiaries are involved in certain other
administrative proceedings and matters concerning legal issues rising in the
ordinary course of business. Management can not predict the final
F-21
<PAGE> 72
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
disposition of such issues, but believes that adequate provision has been made
for probable losses and that the ultimate resolution of these proceedings will
not have a material adverse effect on the accompanying financial statements.
REGULATORY CONTINGENCIES -- On December 15, 1995, the FCC released new 800
MHz SMR licensing rules intended to provide for the auction of geographic-area
based SMR licenses in the top 200 SMR channels on an Economic Area ("EA") basis.
The 200 channels will be auctioned in blocks of 120 channels, 60 channels and 20
channels in an auction that the FCC has announced will occur in 1997. Once an
upper 200-channel EA license is obtained, the licensee will have the authority
to construct, operate and modify its systems within the licensed geographic area
without first obtaining FCC approval. To ensure proper construction and use of
the spectrum, EA licensees will be required to provide services to one-third of
the population within two years, and two-thirds of the population within five
years using more than 50% of the EA licensee's channels. Failure to meet these
build out requirements will result in loss of the EA license.
Because the upper 200 channels in the 800 MHz SMR service are licensed to
existing SMR providers, the EA licensee will have the authority to relocate
incumbents within the EA to the lower 230 SMR channels. Consequently, Nextel may
be subject to relocation in an EA for which it currently holds licenses but
fails to obtain the EA geographic-area license. Any incumbent not relocated out
of the EA licensed area must be provided co-channel protection by the EA
licensee, and will be permitted to make only those system modifications that do
not expand their current interference contour. The incumbent licenses will also
be provided an opportunity to convert their current site-by-site licenses to a
single license encompassing their existing authorized service area contours.
In addition to promulgating new rules for the upper 200 800 MHz channels,
the FCC proposed on December 15, 1995 to license the lower 230 SMR channels on
an EA basis. The FCC has proposed to auction the lower channels as an
"entrepreneur block" thus limiting auction participation to small businesses
which would likely exclude Nextel from eligibility to bid on the lower channels.
The FCC proposal would not permit lower EA licensees to relocate incumbents.
10. STOCKHOLDERS' EQUITY
During 1995, the Company increased its authorized shares to 613.9 million
of which 515.0 million shares are authorized as Class A Common Stock (par value
$.001 per share), 35.0 million shares as Class B nonvoting convertible common
stock (par value $.001 per share), and 63.9 million shares as Preferred Stock
(par value $.01 per share). The Class B Common Stock is convertible on a
one-to-one basis into Class A Common Stock at the option of the holder subject
to certain restrictions on the holder.
STOCK ISSUANCES -- In 1992, the Company entered into a Stock Purchase
Agreement (the "Comcast Agreement") and related Option Agreement (the "Comcast
Option"), as amended, with Comcast Corporation and/or its wholly-owned
subsidiary, Comcast FCI, Inc. (collectively, "Comcast") whereby Comcast agreed
to purchase $100.0 million of Class A Common Stock. The first $50.0 million was
purchased for cash in 1992 at $14.00 per share. The second $50.0 million, was
comprised of $35.0 million which was subject to a contingent purchase
opportunity for a cash price set on June 30, 1995 at 90% of the then prevailing
market price (such contingent purchase opportunity was not exercised) and $15.0
million which was deemed to be satisfied upon the Company's purchase of Comcast
SMR properties located in Philadelphia (see Note 2). Under the terms of the
Comcast Option, Comcast purchased for $20.0 million a five-year option to
acquire an additional 25.0 million shares of Class A Common Stock at an exercise
price of $16.00 per share. The option price was paid in the form of a $20.0
million five-year promissory note which accrued interest at 5% per annum. On
June 30, 1995, the rights and obligations of the Company and Comcast with
respect to the potential $35.0 million equity investment expired, and on July
18, 1995, Comcast repaid the $20.0 million note, plus accrued interest. On March
20, 1997, Nextel entered into arrangements with Comcast that provided for the
purchase by Unrestricted Subsidiary Funding Company, a wholly-owned subsidiary
of Nextel
F-22
<PAGE> 73
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
("USFC"), of the Comcast rights pursuant to the options described above for a
purchase price of $25.0 million (the "Comcast Repurchase Option"). The terms of
the agreement relating to such option purchases provided for the termination of
a number of previously existing relationships between Nextel and Comcast,
including the Comcast Agreement and related documents.
Pursuant to the Comcast Agreement, Comcast was granted certain rights to
purchase additional shares of Class A Common Stock upon any public or private
issuances of such shares by the Company as specified in the Comcast Agreement
(the "Comcast Purchase Right"). On May 1, 1995, Comcast exercised its right to
purchase shares in connection with the Dial Page Merger (see Note 2). Under the
terms of the Company's agreement with Comcast, the rights with respect to the
issuance of shares in the transactions with Motorola, OneComm and Digital Radio,
L.L.C. ("Digital Radio") (as described below) lapsed on April 30, 1995. On
February 9, 1996, Comcast purchased approximately 8.2 million shares of Class A
Common Stock for approximately $99.9 million, pursuant to Comcast's exercise of
its anti-dilutive rights with respect to the Dial Page Merger. The Comcast
Purchase Right was terminated in connection with the Comcast Option Repurchase.
On July 28, 1995, the Company consummated a securities purchase agreement
with Digital Radio and Craig O. McCaw ("McCaw") (the "McCaw Securities Purchase
Agreement" or the "McCaw Transaction") pursuant to which Digital Radio purchased
for an aggregate price of $300.0 million, Nextel units (the "Units") consisting
of approximately 8.2 million shares of a newly created Class A Convertible
Redeemable Preferred Stock and 82 shares of a newly created Class B Convertible
Preferred Stock. The Units are convertible into approximately 24.5 million
shares of the Class A Common Stock and are redeemable under certain
circumstances solely at the Company's option. The Preferred Stock only pays
dividends under certain limited circumstances. In addition, pursuant to three
separate option agreements, Digital Radio may purchase for cash up to 35.0
million shares of Class A Common Stock at exercise prices ranging from $15.50 to
$21.50 per share for periods of two to six years from July 28, 1995. On April 5,
1995, Digital Radio purchased approximately 1.2 million shares of Class A Common
Stock for an aggregate purchase price of approximately $14.9 million ($12.6
million net of applicable expenses attributable to both such initial investment
and the additional investments described above).
Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor was
granted anti-dilutive rights with respect to certain Nextel share issuances,
which rights and related terms are largely comparable to the Comcast Purchase
Right ("McCaw Purchase Right"). In November 1996, upon the issuance of shares in
connection with an acquisition, the McCaw Investor exercised its anti-dilutive
rights, which resulted in the sale of 373,846 treasury shares of Nextel Class A
Common Stock to the McCaw Investor for $6.5 million.
In connection with the McCaw Transaction, the Company also entered into a
management support agreement with Eagle River, Inc. ("Eagle River"), an
affiliate of Digital Radio, to provide management and consulting services from
time to time as requested. In consideration for these services, the Company
entered into an incentive option agreement granting Eagle River an option to
purchase an aggregate of up to 1.0 million shares of Class A Common Stock at an
exercise price of $12.25 per share, exercisable over two, four and six years.
For the years ended December 31, 1995 and 1996 approximately $905,000 and $1.8
million of compensation expense was charged to operations in connection with
these agreements. During the years ended December 31, 1995 and 1996, the Company
paid Eagle River approximately $247,000 and $348,000 under the terms of this
agreement for reimbursement of expenses.
F-23
<PAGE> 74
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WARRANT ISSUANCES -- The following is a summary of issued and outstanding
warrants for the purchase of the Company's Class A Common Stock:
<TABLE>
<CAPTION>
SHARES
COVERED BY
WARRANTS PRICE
---------- -------------------
<S> <C> <C> <C> <C>
Issued and outstanding, April 1, 1994 and December 31,
1994................................................... 32,614,485 $0.001 - $16.00
Acquired................................................. 497,139 17.64
Exercised................................................ (580,000) 0.001 - 2.00
---------- ------ ------
Issued and outstanding, December 31, 1995................ 32,531,624 2.00 - 17.64
Acquired................................................. 2,160,067 12.14 - 43.16
---------- ------ ------
Issued and outstanding, December 31, 1996................ 34,691,691 $ 2.00 - $43.16
========= ====== ======
Exercisable, December 31, 1996........................... 34,391,691 $ 2.00 - $43.16
========= ====== ======
</TABLE>
On March 20, 1997, an option to acquire 25.0 million shares, covered by
warrants outstanding as of December 31, 1996, was repurchased pursuant to the
Comcast Option Repurchase described above.
11. STOCK AND EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OPTION PLANS -- The Company's Incentive Equity Plan (the
"Plan") provides for the issuance of up to 24.0 million shares of Class A Common
Stock to officers and key employees. Generally, options outstanding under the
Company's stock option plan: (1) are granted at prices equal to or exceeding the
market value of the stock on the grant date; (2) vest ratably over either a four
or five year service period; and (3) expire ten years subsequent to award.
A summary of the Plan activity is as follows:
<TABLE>
<CAPTION>
WEIGHTED
OPTION AVERAGE
SHARES PRICE RANGE EXERCISE PRICE
---------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding, March 31, 1994............... 5,497,777 $ 1.25 - $40.75 $16.65
Granted................................... 288,600 13.50 - 40.25 19.12
Acquired.................................. 38,026 14.20 - 14.20 14.20
Canceled.................................. (118,088) 3.50 - 40.25 33.81
Exercised................................. (248,694) 1.25 - 15.87 5.56
---------- ------ ------ -------
Outstanding, December 31, 1994............ 5,457,621 1.25 - 40.75 17.47
Granted................................... 3,246,050 12.25 - 19.38 21.92
Acquired.................................. 1,382,835 2.82 - 19.09 11.34
Canceled.................................. (141,417) 3.50 - 40.25 21.59
Exercised................................. (728,766) 1.25 - 15.00 2.79
---------- ------ ------ -------
Outstanding, December 31, 1995............ 9,216,323 1.25 - 40.75 18.60
Granted................................... 5,332,995 13.50 - 19.75 15.64
Acquired.................................. 2,198,192 10.28 - 42.97 12.77
Canceled.................................. (2,969,568) 1.75 - 40.25 17.11
Exercised................................. (1,522,873) 1.25 - 15.00 7.39
---------- ------ ------ -------
Outstanding, December 31, 1996............ 12,255,069 $ 1.75 - $42.97 $16.50
========= ====== ====== =============
Exercisable, December 31, 1996............ 4,912,535 $ 1.75 - $42.97 $13.45
========= ====== ====== =============
</TABLE>
F-24
<PAGE> 75
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is a summary of the status of stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- ------------------------------
WEIGHTED-AVERAGE AVERAGE WEIGHTED-AVERAGE
EXERCISE NUMBER OF LIFE EXERCISE NUMBER OF EXERCISE
PRICE RANGE SHARES REMAINING PRICE SHARES PRICE
- ---------------- ---------- ---------------- -------- --------- ----------------
(YEARS)
<S> <C> <C> <C> <C> <C>
$1.75 - $5.00 1,422,227 3.7 $ 4.50 1,361,981 $ 4.56
7.00 - 10.28 1,358,120 5.3 9.30 1,358,120 9.30
13.08 - 18.38 7,729,357 8.7 15.19 1,562,915 14.44
19.09 - 25.63 242,776 8.6 21.99 42,060 25.07
30.75 - 42.97 1,502,589 6.9 40.17 587,459 40.20
---------- ---------
12,255,069 7.5 16.50 4,912,535 13.45
========= ========
</TABLE>
The Plan also provides for the grant of deferred shares at no cost to the
participants in consideration of services performed. Generally, these deferred
shares vest over a three-year period. An accelerated vesting schedule may be
triggered in the event of a change in control of the Company. During the nine
months ended December 31, 1994, and the years ended December 31, 1995 and 1996,
the Company granted deferred shares of 29,000, 77,000, and 1,100,000,
respectively. Compensation expense of $160,000, $1.7 million and $4.2 million
has been recognized in relation to the deferred share grants for the nine months
ended December 31, 1994 and the years ended December 31, 1995 and 1996,
respectively.
In connection with the nationwide construction of the Digital Mobile
network, the Company entered into a stock performance compensation arrangement
covering certain senior managers and granted options covering 578,500 shares of
Class A Common Stock with an exercise price of $16.125. Vesting is based upon
completion of the buildout by certain dates; one-third of the options vest
immediately upon completion, one-third vest 12 months after completion, and the
remainder vest 24 months after completion.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). This Statement encourages but does not require
companies to account for employee stock compensation awards based on their
estimated fair value at the grant date with the resulting cost charged to
operations. The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. If the Company had elected to recognize compensation
expense based on the fair value of the awards granted in 1995 and 1996,
consistent with the provisions of SFAS 123, the Company's net loss and net loss
per common share would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net loss
As reported......................................... $(331,165) $(556,020)
========= =========
Pro forma........................................... $(337,271) $(570,467)
========= =========
Loss per common share:
As reported......................................... $ (2.31) $ (2.50)
========= =========
Pro forma........................................... $ (2.35) $ (2.56)
========= =========
Weighted average fair value of options granted........ $ 14.79 $ 10.56
========= =========
</TABLE>
F-25
<PAGE> 76
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of the effect on future amounts. SFAS 123 does not apply
to awards granted prior to 1995.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Expected stock price volatility................... 55% 55%
Risk-free interest rate........................... 5.9% - 7.9% 5.7% - 7.1%
Expected life of options.......................... 8 years 8 years
Expected dividend yield........................... 0.00% 0.00%
</TABLE>
The Company's stock options are not transferable, and the actual value of
the stock options that an employee may realize, if any, will depend on the
excess of the market price on the date of exercise over the exercise price. The
Company has based its assumption for stock price volatility on the variance of
weekly closing prices of the Company's stock from its initial offering date to
the present. The risk-free rate of return used equals the yield on ten-year
zero-coupon U.S. Treasury issues on the grant date. No discount was applied to
the value of the grants for non-transferability or risk of forfeiture.
NOTES RECEIVABLE FROM STOCKHOLDERS -- As of December 31, 1995 and 1996,
notes receivable from stockholders of approximately $1.0 million and $1.1
million were outstanding. These notes, included in stockholders' equity,
represent advances to certain former officers for the exercise of options, are
non-interest bearing and are payable on the expiration dates of the option
grants.
STOCK APPRECIATION RIGHTS -- On November 1, 1996, MIL adopted a Stock
Appreciation Rights Plan, which was effective as of November 1, 1995, whereby
selected employees and agents of MIL may be granted rights to share in the
future appreciation in the value of MIL. Such rights do not represent an equity
interest in MIL, only a right to compensation under the terms of the plan.
MIL retroactively granted 1,160,000 rights under the plan, at an exercise
price of $10.00 per right, on dates ranging from October 1, 1995 to October 28,
1996, with vesting periods of 4 years. Rights under the plan may not be
exercised until the employee has vested in 50% of the grants. As of December 31,
1995 and 1996, there were 755,000 and 1,240,000 rights outstanding,
respectively. None of those rights were exercisable under the terms of the plan.
MIL had no commitment to make payments under the plan at December 31, 1995 and
1996 and no compensation expense had been recognized because there had been no
appreciation in the value of the rights from the time of issuance to December
31, 1995 and 1996.
EMPLOYEE STOCK PURCHASE PLAN -- Under the 1996 Employee Stock Purchase Plan
("ESPP"), eligible employees may subscribe to purchase shares of the Company's
Class A Common Stock through payroll deductions up to 10% of eligible
compensation. The purchase price is the lower of 85% of market value at the
beginning or the end of each quarter. The aggregate number of shares purchased
by an employee may not exceed $25,000 of fair market value annually (subject to
limitations imposed by Section 423 of the Internal Revenue Code). A total of 5.0
million shares are available for purchase under the plan. The plan will
terminate on the tenth anniversary of its adoption. During 1996, 7,360 treasury
shares were issued pursuant to the plan at a price per share of $15.725.
EMPLOYEE BENEFIT PLAN -- The Company has defined contribution plans
pursuant to Section 401(k) of the Internal Revenue Code covering all eligible
officers and employees. The Company provides a matching contribution of $.50 for
every $1.00 contributed by the employee up to 4% of each employee's salary. Such
contributions were approximately $287,000, $997,000 and $2.0 million for the
nine months ended December 31, 1994 and the years ended December 31, 1995 and
1996, respectively. At December 31, 1996, the Company had no other pension or
postemployment benefit plans.
F-26
<PAGE> 77
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. RELATED PARTY TRANSACTIONS
At December 31, 1996, Motorola owned approximately 19% and 100% of the
Company's outstanding Class A and Class B Common Stock, respectively.
During the years ended December 31, 1995 and 1996, the Company acquired
approximately $217.2 million and $490.8 million of infrastructure and other
equipment, handsets, warranties, rent and services from Motorola. At December
31, 1995 and 1996, amounts payable to Motorola, classified within accounts
payable, accrued expense and other, approximated $179.4 million and $61.0
million. Under certain agreements, as amended, the Company is committed to
purchase from Motorola a significant amount of system infrastructure equipment
through 1999. Motorola is the principal supplier of the Company's Digital Mobile
infrastructure equipment and handsets.
On June 28, 1996 the Company completed the acquisition of certain 800 MHz
trunked SMR systems, located in Hawaii, from Motorola for approximately $5.4
million in cash.
On August 23, 1996, the Company through NIC loaned Grupo $12.0 million. The
principal and accrued interest outstanding as of December 31, 1996 was
approximately $3.4 million.
13. SUBSEQUENT EVENTS
On March 27, 1997, Nextel and Motorola reached agreement on terms and
conditions pursuant to which Nextel could access up to an additional $450.0
million of equipment financing through Motorola. In order to access such
additional financing, Nextel would be required to procure certain consents,
waivers and/or participation commitments from a number of third parties, and to
obtain modifications to the terms of the Bank and Vendor Credit Facilities, the
related security documents and the Nextel Indentures and to satisfy certain
other conditions.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996
----------------------------------------
Revenues................................ $ 68,318 $ 77,619 $ 91,040 $ 95,961
Operating loss.......................... (146,944) (160,420) (159,638) (178,864)
Net loss................................ (118,718) (130,028) (148,883) (158,391)
Net loss per common share............... (0.56) (0.58) (0.66) (0.70)
1995
----------------------------------------
Revenues................................ $ 29,501 $ 30,177 $ 51,074 $ 60,951
Operating loss.......................... (70,139) (73,223) (133,440) (150,084)
Net loss................................ (53,199) (56,982) (102,134) (118,850)
Net loss per common share............... (0.50) (0.53) (0.61) (0.62)
</TABLE>
F-27
<PAGE> 78
NEXTEL COMMUNICATIONS, INC.
(PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 204,048 $ 8,837
Marketable securities.............................................. 64,685 --
Accounts receivable................................................ 311 15
Other.............................................................. 151 4,446
---------- ----------
Total current assets....................................... 269,195 13,298
PROPERTY, PLANT AND EQUIPMENT, net................................... 1,602 6,028
INTANGIBLE ASSETS, net............................................... 587 4,541
DEFERRED INCOME TAXES................................................ 32,263 71,110
INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES.......................... 4,063,337 4,711,946
OTHER ASSETS......................................................... 65,676 125,796
---------- ----------
$4,432,660 $4,932,719
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other....................... $ 35,039 $ 81,090
Current portion of long-term debt.................................. 517 951
---------- ----------
Total current liabilities.................................. 35,556 82,041
LONG-TERM DEBT....................................................... 1,451,963 2,042,540
COMMITMENTS AND CONTINGENCIES (NOTE 1)
STOCKHOLDERS' EQUITY................................................. 2,945,141 2,808,138
---------- ----------
$4,432,660 $4,932,719
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-28
<PAGE> 79
NEXTEL COMMUNICATIONS, INC.
(PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994
AND THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING EXPENSES
Selling, general and administrative...................... $ 11,846 $ 28,293 $ 80,559
Expenses related to corporate reorganization............. -- 6,379 --
Depreciation and amortization............................ 2,053 1,770 2,122
--------- --------- ---------
13,899 36,442 82,681
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense......................................... (80,465) (116,034) (202,035)
Interest income ($43,219, $96,485 and $131,997
intercompany)......................................... 60,626 113,501 144,057
Intercompany management fee.............................. 14,811 23,413 80,559
Other.................................................... 20 (30) 49
--------- --------- ---------
(5,008) 20,850 22,630
--------- --------- ---------
LOSS BEFORE INCOME TAX BENEFIT AND EQUITY IN NET LOSSES OF
SUBSIDIARIES............................................. (18,907) (15,592) (60,051)
INCOME TAX BENEFIT......................................... 7,000 46,232 36,514
--------- --------- ---------
INCOME (LOSS) BEFORE EQUITY IN NET LOSSES OF
SUBSIDIARIES............................................. (11,907) 30,640 (23,537)
EQUITY IN NET LOSSES OF SUBSIDIARIES....................... (113,942) (361,805) (532,483)
--------- --------- ---------
NET LOSS................................................... $(125,849) $(331,165) $(556,020)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-29
<PAGE> 80
NEXTEL COMMUNICATIONS, INC.
(PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994
AND THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(125,849) $(331,165) $(556,020)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities........................ 150,885 334,021 236,417
--------- --------- ---------
Net cash provided by (used in) operating
activities..................................... 25,036 2,856 (319,603)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in and advances to subsidiaries.............. (622,928) (335,399) (123,244)
(Increase) decrease in other assets...................... (6,246) (4,495) 9,873
Payments for acquisitions, net of cash acquired.......... (13,011) (48,577) 61,417
Capital expenditures..................................... (4,968) (925) (5,951)
Decrease in marketable securities........................ 257,576 102,616 65,692
--------- --------- ---------
Net cash (used in) provided by investing
activities..................................... (389,577) (286,780) 7,787
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing activities -- other....................... (768) (611) 1,969
Common stock issued...................................... 74,685 16,112 108,087
Preferred stock issued................................... -- 300,000 --
Treasury stock issued.................................... -- -- 6,549
Notes receivable -- incentive equity plan................ 14 227 --
--------- --------- ---------
Net cash provided by financing activities........ 73,931 315,728 116,605
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... (290,610) 31,804 (195,211)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............. 462,854 172,244 204,048
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 172,244 $ 204,048 $ 8,837
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-30
<PAGE> 81
NEXTEL COMMUNICATIONS, INC.
(PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. For accounting policies and other information, see the Notes to the
Consolidated Financial Statements of Nextel Communications, Inc. and
Subsidiaries, included elsewhere herein.
2. The parent company accounts for its investments in subsidiaries by the equity
method of accounting.
3. The parent company income tax benefit represents the difference between taxes
computed on a consolidated basis and taxes calculated by the subsidiaries on
a separate return basis.
4. Certain net assets and related operations of the parent company were
contributed to a wholly-owned subsidiary. The accompanying condensed
financial statements for 1994 and 1995 have been reclassified as a result of
these contributions.
5. The parent company has an agreement with each of its wholly-owned
subsidiaries whereby the parent company provides administrative services for
each of its subsidiaries and charges the subsidiaries a fee equal to the
actual costs incurred in performing these administrative services. The fees
charged to the subsidiaries for the performance of administrative services
totaled approximately $14.8 million, $23.4 million and $80.6 million for the
nine months ended December 31, 1994 and the years ended December 31, 1995 and
1996, respectively.
F-31
<PAGE> 82
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS END OF PERIOD
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Nine Months Ended December 31, 1994
Allowance for Doubtful Accounts...... $ 642 $1,139 $ 377 $ (335) $ 1,823
====== ====== ====== ======= =======
Year Ended December 31, 1995
Allowance for Doubtful Accounts...... $1,823 $1,936 $2,538 $(1,065) $ 5,232
====== ====== ====== ======= =======
Year Ended December 31, 1996
Allowance for Doubtful Accounts...... $5,232 $6,968 $2,477 $(3,903) $10,774
====== ====== ====== ======= =======
</TABLE>
- ---------------
(1) Allowances of acquired companies.
F-32
<PAGE> 83
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required herein regarding directors is incorporated herein
by reference from the definitive Proxy Statement for Nextel's 1997 Annual
Meeting, which is scheduled to be filed on or before April 29, 1997, under the
caption "Election of Directors." The information required herein regarding
executive officers required is set forth in Part I hereof under the heading
"Executive Officers of the Registrant," which information is incorporated herein
by reference. The information required herein regarding compliance with Section
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") by the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities is incorporated
herein by reference from the definitive Proxy Statement for Nextel's 1997 Annual
Meeting, which is scheduled to be filed on or before April 29, 1997, under the
caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934 by
Company Officers, Directors and 10% Stockholders."
ITEM 11. EXECUTIVE COMPENSATION
The information required herein regarding compensation of executive
officers and directors is incorporated herein by reference from the definitive
Proxy Statement for Nextel's 1997 Annual Meeting, which is scheduled to be filed
on or before April 29, 1997, under the captions "Executive Compensation" And
"Election of Directors -- Compensation of Directors."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required herein is incorporated herein by reference from
the definitive Proxy Statement for Nextel's 1997 Annual Meeting, which is
scheduled to be filed on or before April 29, 1997, under the caption "Securities
Ownership of Management and Certain Beneficial Owners."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required herein is incorporated herein by reference from
the definitive Proxy Statement for Nextel's 1997 Annual Meeting, which is
scheduled to be filed on or before April 29, 1997, under the caption "Certain
Relationships and Related Transactions."
51
<PAGE> 84
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) (1) The following Financial Statements are included in Part II Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................. F-2
Consolidated Balance Sheets, December 31, 1995 and 1996...................... F-3
Consolidated Statements of Operations, Nine Months Ended December 31, 1994
and Years Ended December 31, 1995 and 1996................................. F-4
Consolidated Statements of Changes in Stockholders' Equity, Nine Months Ended
December 31, 1994 and Years Ended December 31, 1995 and 1996............... F-5
Consolidated Statements of Cash Flows, Nine Months Ended December 31, 1994
and Years Ended December 31, 1995 and 1996................................. F-6
Notes to Consolidated Financial Statements................................... F-7
</TABLE>
(2) Financial Statement Schedules are submitted herewith and are
included herein in 14(d):
<TABLE>
<S> <C>
Schedule I................................................................... F-28
Schedule II.................................................................. F-32
</TABLE>
------------------------
(3) List of Exhibits -- Refer to Exhibit Index on pages 54-59, which is
incorporated herein by reference.
(b) Reports on Form 8-K:
(1) The Registrant filed a Current Report on Form 8-K dated September
30, 1996 and filed with the Commission on October 1, 1996 reporting under
Item 5 the execution of the Bank and Vendor Credit Facility.
(2) The Registrant filed a Current Report on Form 8-K dated and filed
with the Commission on October 3, 1996 reporting under Item 5 thereof the
execution of an agreement of merger and plan of reorganization dated
October 2, 1996 between the Company and PCI providing for the merger of PCI
with a wholly owned subsidiary of the Company.
(3) The Registrant filed a Current Report on Form 8-K dated and filed
with the Commission on November 4, 1996 reporting under Item 5 thereof the
execution of an agreement and plan of merger between the Company and WVB
providing for the merger of WVB with a wholly owned subsidiary of the
Company.
(4) The Registrant filed a Current Report on Form 8-K dated November
22, 1996 and filed with the Commission on November 26, 1996 reporting under
Item 5 thereof the execution of an amendment to the Registration Agreement
dated as of August 23, 1996 and filed as an Exhibit to the Company's
Registration on Form S-3 (File No. 333-11733).
(c) Exhibits listed above in Item 14(a)(3) are included herein.
(d) Financial Statement Schedules listed above in Item 14(a)(2) are
incorporated herein by reference herein.
52
<PAGE> 85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of McLean,
Commonwealth of Virginia.
NEXTEL COMMUNICATIONS, INC.
By: /s/ STEVEN M. SHINDLER
------------------------------------
March 31, 1997 Steven M. Shindler
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ------------------------------------------------------------
<C> <S>
/s/ DANIEL F. AKERSON Chairman of the Board, Chief Executive Officer and Director
- ----------------------------------- (Principal Executive Officer)
Daniel F. Akerson
/s/ TIMOTHY M. DONAHUE President and Chief Operating Officer
- -----------------------------------
Timothy M. Donahue
/s/ STEVEN M. SHINDLER Senior Vice President and Chief Financial Officer
- ----------------------------------- (Principal Financial Officer)
Steven M. Shindler
/s/ STEPHEN M. BAILOR Vice President and Corporate Controller
- ----------------------------------- (Principal Accounting Officer)
Stephen M. Bailor
/s/ MORGAN E. O'BRIEN Vice Chairman of the Board and Director
- -----------------------------------
Morgan E. O'Brien
/s/ KEITH BANE Director
- -----------------------------------
Keith Bane
Director
- -----------------------------------
Robert Cooper
/s/ CRAIG O. MCCAW Director
- -----------------------------------
Craig O. McCaw
/s/ KEISUKE NAKASAKI Director
- -----------------------------------
Keisuke Nakasaki
/s/ MASAAKI TORIMOTO Director
- -----------------------------------
Masaaki Torimoto
/s/ DENNIS M. WEIBLING Director
- -----------------------------------
Dennis M. Weibling
/s/ WILLIAM E. CONWAY Director
- -----------------------------------
William E. Conway
</TABLE>
53
<PAGE> 86
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Agreement of Merger and Plan Reorganization by and between
Nextel Finance Company, DCCI Merger Inc. and Pittencrieff Communications, Inc.,
dated as of December 3, 1996.
3.1 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).
3.2 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).
4.1 Restated Certificate of Incorporation of Nextel (see Exhibit No. 3.1 above).
4.2 Amended and Restated By-Laws of Nextel (see Exhibit No. 3.2 above).
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 Old Nextel's Registration Statement No. 33-73388 on Form S-4 (the "PowerFone
S-4") 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 Old Nextel's Current Report on Form 8-K 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
Nextel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
4.8 Supplemental Indenture dated as of June 30, 1995 to the February Indenture between
Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit 4.2 to
Nextel's Quarterly Report on Form 10-Q 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, Inc. (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
Nextel's Quarterly Report on Form 10-Q 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, Inc. (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
Nextel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference).
4.11 Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13,
1994, between OneComm (formerly called CenCall Communications Corp.) and The Bank
of New York (the "OneComm Indenture") (filed on June 7, 1995 as Exhibit No. 99.2
to Old Nextel's Registration Statement No. 33-93182 on Form S-4 (the "OneComm S-4
Registration Statement") and incorporated herein by reference).
4.12 Form of Note issued pursuant to the OneComm Indenture (included in Exhibit 4.11).
</TABLE>
54
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
4.13 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 Nextel's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
4.14 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 Nextel's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference).
4.15 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).
4.16 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
the Nextel's Registration Statement No. 33-80021 on Form S-4 (the "Dial Page S-4
Registration Statement") and incorporated herein by reference).
4.17 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 No. 4.26 to Nextel's Annual Report on Form 10-K for the
year ended December 31, 1995 (the "1995 Form 10-K") and incorporated herein by
reference).
4.18 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 No. 4.27 to the 1995 Form 10-K and incorporated herein by
reference).
4.19 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).
4.20 Supplemental Indenture, dated as of April 25, 1994, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on April 1, 1996 as Exhibit No. 4.29 to
the 1995 Form 10-K and incorporated herein by reference).
4.21 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).
4.22 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 No. 4.31 to the 1995 Form 10-K and incorporated herein by
reference).
4.23 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 No. 4.32 to the 1995 Form 10-K and incorporated herein by
reference).
4.24 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").
4.25 Form of Note issued pursuant to the McCaw Indenture (included in Exhibit 4.24).
4.26 Warrant Agreement, dated as of March 6, 1997, between McCaw International and The
Bank of New York.
4.27 Credit Agreement dated as of September 27, 1996 among Nextel, NFC, the Restricted
Companies party thereto, the Lenders party thereto, Toronto-Dominion (Texas) Inc.,
as Administrative Agent, and The Chase Manhattan Bank, as Collateral Agent (filed
on October 1, 1996 as Exhibit 99.1 to the Company's Current Report on Form 8-K
dated September 27, 1996 (the "September 27 Form 8-K") and incorporated herein by
reference).
</TABLE>
55
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
4.28 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 (filed on October 1, 1996 as Exhibit 99.2 to the September 27 Form 8-K and
incorporated herein by reference).
10.1 Amended and Restated Current Stock Unit Purchase Warrant No. CM-1 dated June 15,
1990 issued by Old Nextel to Chase Manhattan Investment Holdings, Inc. (filed on
October 17, 1991 as Exhibit No. 10.8 to the S-1 Registration Statement and
incorporated herein by reference).
10.2 Current Stock Unit Purchase Warrant No. CM-3 dated June 15, 1990 issued by Old
Nextel to Chase Manhattan Investment Holdings, Inc. (filed on October 17, 1991 as
Exhibit No. 10.10 to the S-1 Registration Statement and incorporated herein by
reference).
10.3 Current Stock Unit Purchase Warrant No. 2 dated January 29, 1988 issued by Old
Nextel to Kansallis-Osake-Pankki (filed on October 17, 1991 as Exhibit No. 10.12
to the S-1 Registration Statement and incorporated herein by reference).
10.4 Registration Rights Agreement dated as of June 15, 1990 between Old Nextel and
Chase Manhattan Investment Holdings, Inc. (filed on October 17, 1991 as Exhibit
No. 10.21 to the S-1 Registration Statement and incorporated herein by reference.)
10.5 Registration Rights Agreement dated as of December 20, 1990 between Old Nextel and
the persons appearing on the signature pages thereof under the caption "ORIGINAL
INVESTORS" (filed on October 17, 1991 as Exhibit No. 10.22 to the S-1 Registration
Statement and incorporated herein by reference).
10.6 Stock Purchase Agreement dated as of September 26, 1988 by and among Old Nextel,
First Capital Corporation of Chicago and Madison Dearborn Partners IV, as amended
by the letter dated February 7, 1989 (filed on October 17, 1991 as Exhibit No.
10.27 to the S-1 Registration Statement and incorporated herein by reference).
10.7 Stock Purchase Agreement dated as of December 4, 1989 by and among Old Nextel,
First Chicago Investment Corporation and Madison Dearborn Partners IV (filed on
November 15, 1991 as Exhibit No. 10.28 to the S-1 Registration Statement and
incorporated herein by reference).
10.8 Subscription Agreement dated as of July 24, 1989 by and between First Chicago
Investment Corporation and Old Nextel, as amended pursuant to, and in accordance
with, the Stock Purchase Agreement, dated as of December 4, 1989 (filed on
November 15, 1991 as Exhibit No. 10.29 to the S-1 Registration Statement and
incorporated herein by reference).
10.9 Subscription Agreement dated as of July 24, 1989 by and between Old Nextel and
Madison Dearborn Partners V, as amended pursuant to, and in accordance with, the
Stock Purchase Agreement, dated as of December 4, 1989 (filed on November 15, 1991
as Exhibit No. 10.30 to the S-1 Registration Statement and incorporated herein by
reference).
10.10*** Employment Agreement, dated as of June 15, 1987, between Old Nextel and Morgan E.
O'Brien, and Amendment dated January 29, 1990 (filed on October 17, 1991 as
Exhibit No. 10.34 to the S-1 Registration Statement and incorporated herein by
reference).
10.11*** Employment Agreement, dated as of June 15, 1987, between Old Nextel and Brian D.
McAuley, and Amendment dated January 29, 1990 (filed on October 17, 1991 as
Exhibit No. 10.35 to the S-1 Registration Statement and incorporated herein by
reference).
10.12* Letter Agreement between Motorola, Inc. and Old Nextel, dated as of November 4,
1991 (filed on November 15, 1991 as Exhibit No. 10.47 to the S-1 Registration
Statement and incorporated herein by reference).
</TABLE>
56
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.13* Enhanced Specialized Mobile Radio System Purchase Agreement between Motorola, Inc.
and Old Nextel, dated as of November 4, 1991 (filed on November 15, 1991 as
Exhibit No. 10.48 to the S-1 Registration and incorporated herein by reference).
10.14 Warrant Agreement between Motorola, Inc. and Old Nextel, dated November 1, 1991
(filed on November 15, 1991 as Exhibit No. 10.53 to the S-1 Registration Statement
and incorporated herein by reference).
10.15 Form of Indemnification Agreement, and Exhibits thereto between Old Nextel and
each of its directors (filed on June 24, 1992 as Exhibit No. 10.56 to Old Nextel's
Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated
herein by reference).
10.16*** Employment Agreement, dated as of March 26, 1992, between Old Nextel and Robert
Foosaner (filed on May 27, 1993 as Exhibit No. 10.41 to Old Nextel's Annual Report
on Form 10-K for the year ended March 31, 1993 and incorporated herein by
reference).
10.17 Stock Purchase Agreement by and between Nippon Telegraph and Telephone Corporation
and Old Nextel, dated as of January 20, 1994 (filed on January 27, 1994 as Exhibit
No. 4.17 to Amendment No. 1 to the PowerFone S-4 and incorporated herein by
reference).
10.18 Technical Services Agreement dated as of January 20, 1994 between Old Nextel and
NTT America, Inc. (filed as Exhibit No. 10.49 on June 8, 1994 to Old Nextel's
Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated
herein by reference).
10.19 Registration Rights Agreement dated as of June 30, 1993 among Old Nextel, First
Capital Corporation of Chicago, Madison Dearborn Partners V, Madison Dearborn
Partners VI and Madison Dearborn Partners VIII (filed on June 8, 1994 as Exhibit
No. 10.50 to Old Nextel's Annual Report on Form 10-K for the year ended March 31,
1994 and incorporated herein by reference).
10.20 The Nextel Stock Option Plan (filed on December 21, 1992 as Exhibit No. 4(c) to
the Registration Statement No. 33-56080 on Form S-8 and incorporated herein by
reference).
10.21 Agreement of Merger and Plan of Reorganization, dated as of February 17, 1995, by
and between Old Nextel and Dial Page, as amended by Amendment No. 1 to the
Agreement of Merger and Plan of Reorganization, dated as of July 31, 1995,
Amendment No. 2 to the Agreement of Merger and Plan of Reorganization, dated as of
July 31, 1995 and Amendment No. 3 to the Agreement of Merger and Plan of
Reorganization, dated as of December 4, 1995 (filed on December 13, 1995 as
Exhibit 2.1 to Nextel's Registration Statement No. 33-80021 on Form S-4 and
incorporated herein by reference).
10.22 Warrant Acquisition Agreement, dated as of July 14, 1993, by and between OneComm
and The Chase Manhattan Bank (National Association), and Form of Stock Purchase
Warrant (filed as Exhibit 10.42 to the OneComm S-1 Registration Statement and
incorporated herein by reference).
10.23* Amendment, dated August 4, 1994, to the Enhanced Specialized Mobile Radio System
Equipment Purchase Agreement, between Old Nextel and Motorola, dated November 1,
1991, as amended and to the Letter Agreement, between Old Nextel and Motorola,
dated November 4, 1991, as amended (collectively the "Equipment Purchase
Agreements") (filed as Exhibit 10.02 to the ESMR Form S-4 Registration Statement
and incorporated herein by reference).
10.24* Second Amendment to Equipment Purchase Agreements dated April 4, 1995 (filed as
Exhibit 10.03 to the ESMR Form S-4 Registration Statement and incorporated herein
by reference).
10.25 Incentive Option Agreement, dated April 4, 1995, between Old Nextel and Eagle
River, Inc. (filed as Exhibit 99.3 to Old Nextel's Current Report on Form 8-K
dated April 10, 1995 and filed on April 11, 1995 and incorporated herein by
reference).
</TABLE>
57
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
10.26 Forms of Option Agreements dated April 6, 1995 between Old Nextel, Digital Radio,
L.L.C. and Craig O. McCaw.
10.27 Registration Rights Agreement, dated July 28, 1995, by and among Nextel, The Chase
Manhattan Bank (National Association), Canadian Imperial Bank of Commerce and
Fleet National Bank (filed on April 1, 1996 as Exhibit No. 10.57 to the 1995 Form
10-K and incorporated herein by reference).
10.28 Registration Rights Agreement, dated July 28, 1995, by and between Nextel and
Motorola (filed on November 14, 1995 as Exhibit 10.8 to Nextel's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
10.29 Settlement Agreement dated as of October 2, 1995 between Nextel and Wayland R.
Hicks (filed on November 14, 1995 as Exhibit 10.15 to Nextel's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
10.30 Securities Purchase Agreement between Old Nextel, Digital Radio, L.L.C. and Craig
O. McCaw, dated April 4, 1995 (filed on April 11, 1995 as Exhibit 2.1 to Old
Nextel's Current Report on Form 8-K dated April 10, 1995 and incorporated herein
by reference).
10.31* Amendment 004 to Enhanced Specialized Mobile Radio System Purchase Agreement,
dated as of April 28, 1996, between Nextel and Motorola, Inc. (filed on July 5,
1996 as Exhibit 99.1 to Nextel's Current Report on Form 8-K dated July 5, 1996 and
incorporated herein by reference).
10.32 Amendment dated as of April 26, 1996 to Warrant Agreement between Motorola, Inc.
and Nextel (f/k/a Fleet Call, Inc.) (filed on August 14, 1996 as Exhibit 10.2 to
Nextel's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and
incorporated herein by reference).
10.33*** Nextel Amended and Restated Incentive Equity Plan ("Nextel Plan") (filed on June
21, 1996 as Exhibit 4.3 to Nextel's Registration Statement No. 333-06521 on Form
S-8 and incorporated herein by reference).
10.34 Nextel Associate Stock Purchase Plan (filed on June 21, 1996 as Exhibit 4.3 to
Nextel's Registration Statement No. 333-06523 on Form S-8 and incorporated herein
by reference).
10.35*** Employment Agreement dated as of March 5, 1996 between Daniel Akerson and Nextel.
10.36*** Employment Agreement dated February 1, 1996 between Tim Donahue and Nextel.
10.37*** Addendum to Employment Agreement between Tim Donahue and Nextel dated March 24,
1997.
10.38 Form of Registration Rights Agreement, dated July 28, 1995, by and among the
Company and Digital Radio, L.L.C.
10.39 Term Sheet For Debt Financing, dated as of March 26, 1997, between the Company and
Motorola.
10.40*** Amendment No. 1, adopted March 28, 1997, to Nextel Plan.
10.41 Agreement and Plan of Contribution and Merger, dated August 4, 1994, as amended,
by and among Old Nextel, Motorola, Inc., ESMR, Inc. (now known as Nextel), ESMR
Sub, Inc. and Others (filed on April 28, 1995 as Exhibit No. 2.01 to ESMR's
Registration Statement No. 33-91716 on Form S-4 (the "ESMR S-4 Registration
Statement") and incorporated herein by reference).
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche LLP.
27** Financial Data Schedule.
</TABLE>
58
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
99.1 Memorandum Opinion and Order of the Federal Communications Commission, dated as of
February 13, 1991 (filed on December 5, 1992 as Exhibit No. 28.1 to the S-1
Registration Statement and incorporated herein by reference).
99.2 Letter from Motorola, Inc. to Old Nextel dated as of January 13, 1992 (filed on
January 16, 1992 as Exhibit No. 28.2 to the S-1 Registration Statement and
incorporated by reference).
99.3 Order entered by the United States District Court for the District of Columbia on
July 25, 1995 approving the proposed consent decree between the Antitrust Division
of the United States Justice Department, Motorola, Inc. and Nextel (filed on April
1, 1996 as Exhibit 99.3 to the 1995 Form 10-K and incorporated herein by
reference).
</TABLE>
- ---------------
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.
*** Management contract or compensatory plan or arrangement.
59
<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT OF MERGER AND PLAN
OF REORGANIZATION
dated as of
December 3, 1996
by and between
NEXTEL COMMUNICATIONS, INC.,
NEXTEL FINANCE COMPANY,
DCI MERGER INC.
and
PITTENCRIEFF COMMUNICATIONS, INC.
<PAGE> 2
AMENDED AND RESTATED
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK; TREATMENT OF OPTIONS AND WARRANTS . . . . . . . . . . 3
1.1 Exchange Ratio and Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Value Cap Adjusted for Channels Not Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Value Cap Adjusted for Negative Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4 Value Cap Adjusted for Negative Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Value Cap Adjusted for Option/Warrant Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.6 Value Cap Adjusted for Severance Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6A Settlement with Castle Tower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.7 Value Cap Adjusted if Closing Occurs After 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.8 Asset Value and Dilution Adjustments to Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . 12
1.9 Value Cap Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.10 Additional Consideration in Lieu of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.11 Nextel Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.13 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.14 Effective Time; Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.15 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.16 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.17 Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.18 Surrender of Certificates and Delivery of Merger Consideration . . . . . . . . . . . . . . . . . . . . 18
1.19 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.20 Rights of Holders of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.21 Assumption of Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.22 Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2 Subsidiaries and Other Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.7 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.11 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
2.12 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.13 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.14 Transactions Not in the Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.15 Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.17 Bank Accounts; Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.18 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.19 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.20 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.21 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.23 Special Liabilities; Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.24 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.25 Materially Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.26 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.27 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2.28 Schedule Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
2.29 Information in Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
2.30 Castle Tower Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEXTEL AND MERGER SUB . . . . . . . . . . . . . . . . . . . . . . . . 63
3.1 Corporate Organization; Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
3.3 Common Stock; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.5 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
3.6 Information in Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IV. COVENANTS OF PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.2 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.4 SEC Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.5 Antitrust Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.6 Restraint on Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.8 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.9 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.10 Update Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE V. COVENANTS OF NEXTEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.1 Antitrust Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.2 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
5.3 Current Public Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.4 Offer to Warrant Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5.5 Directors and Officers Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5.6 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE VI. JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.2 Standstill Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.3 Trading Prohibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.4 Substitute of Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.6 Cooperation Concerning Extended Implementation Channels . . . . . . . . . . . . . . . . . . . . . . . . 82
6.7 Auction Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE VII. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE VIII. CONDITIONS TO OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.1 Conditions to Obligations of Nextel and PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.2 Conditions to Obligations of Nextel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.3 Conditions to the Obligations of PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE IX. TERMINATION/EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
9.2 Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.1 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.4 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.5 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.8 Captions; Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.10 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>
- iii -
<PAGE> 5
DEFINITIONS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Actual PCI Common Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Adjusted EBITDA Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Adjusted Value Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Asset List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Awarded License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Basic Value Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Castle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Castle License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Castle Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 16
Channel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Contaminants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Converted Nextel Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Converted Per Share Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Current Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
DCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Defined benefit plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Defined contribution plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Dilutive PCI Common Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EA Auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ESMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Excess parachute payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Extended Implementation Channel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
FCC License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
First Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
GCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C>
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Immaterial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
July 1 Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
July 1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
June 30 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Market Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 15
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Morgan Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
MSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Multiemployer plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Multiple employer plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Nasdaq NM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Nextel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nextel Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Nextel Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Nextel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Nextel Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Nextel Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Non-core Market Channel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Off the shelf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Overlap EAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PCI Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
PCI Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
PCI Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
PCI Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PCI Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PCI Share Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PCI Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PCI/PCI Subs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Permitted Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Pollutants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Potentially responsible party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Qualifying Extended Implementation Channel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Qualifying Extended Implementation Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Shortfall Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SMR License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SMR System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SMR Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
- v -
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C>
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Terminating Nextel Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Terminating PCI Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Third-Party Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
To the knowledge of PCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
To the knowledge of the Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unfavorable FCC Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Value Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Voting stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Welfare Benefit Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
- vi -
<PAGE> 8
ANNEXES
<TABLE>
<S> <C>
Annex A - Form of Letter Concerning Compliance with Rule 145
Annex B - Blue Sky
Annex C-1 - Form of Opinion of Gardere & Wynne, L.L.P.
Annex C-2 - Form of Opinion of Gardner, Carton & Douglas
Annex D - Form of Nextel Warrant
Annex E - Form of Opinion of Jones, Day, Reavis & Pogue
Annex F - Letter Agreement between Nextel Communications, Inc. and Castle
Tower Corporation
</TABLE>
- vii -
<PAGE> 9
AMENDED AND RESTATED
AGREEMENT OF MERGER AND PLAN
OF REORGANIZATION
Amended and Restated Agreement of Merger and Plan of Reorganization dated
as of December 3, 1996 ("Agreement") by and among NEXTEL COMMUNICATIONS, INC.,
a Delaware corporation ("Nextel"), NEXTEL FINANCE COMPANY, a Delaware
corporation and a wholly owned subsidiary of Nextel formerly known as Dispatch
Communications, Inc. ("NFC"), DCI MERGER INC., a Delaware corporation and a
wholly owned subsidiary of NFC ("Merger Sub") and PITTENCRIEFF COMMUNICATIONS,
INC., a Delaware corporation ("PCI").
PLAN OF REORGANIZATION
Nextel, through NFC and Merger Sub, and PCI intend to enter into a
tax-free plan of reorganization under the Internal Revenue Code of 1986, as
amended (the "Code").
The plan of reorganization will consist of the merger of Merger Sub with
and into PCI, with PCI being the surviving corporation. This merger ("Merger")
will be consummated in accordance with the terms and conditions hereof and will
be consummated at the "Effective Time of the Merger" as defined herein.
Nextel has caused NFC to form Merger Sub solely for the purpose of
consummating the Merger.
<PAGE> 10
2
Nextel, NFC, Merger Sub and PCI entered into an Agreement of Merger and
Plan of Reorganization dated as of October 2, 1996 (the "First Agreement").
Simultaneously with the execution of the First Agreement, PCI has
delivered to Nextel (i) an executed letter agreement from Castle Tower
Corporation, (ii) a waiver of preemptive rights from Advanced MobileComm, Inc.
("AMI") pursuant to that certain Contribution Agreement, dated as of September
5, 1995, as subsequently amended, among PCI, Pittencrieff Communications, Inc.,
a Texas corporation, AMI and each of the other sellers named therein, which
waiver shall be effective at the Effective Time of the Merger, and (iii) a
confirmation from AMI that the Voting Agreement and Proxy dated January 16,
1996 shall terminate in accordance with its terms pursuant to Section 4(ii)
thereof effective at the Effective Time of the Merger.
Simultaneously with the execution of the First Agreement, FMR Corp., a
Massachusetts corporation ("FMR"), has agreed that, among other things, at the
Effective Time of the Merger, FMR will exchange its warrants to purchase
capital stock of PCI for a warrant to purchase Class A (Voting) Common Stock of
Nextel, par value $.001 per share ("Nextel Common Stock"), in the form of Annex
D.
The parties to the First Agreement desire to amend certain provisions and
restate the First Agreement and, accordingly, the parties have entered into
this Agreement. All schedules to this Agreement set forth information as of
October 2, 1996.
<PAGE> 11
3
AGREEMENT
In order to consummate the plan of reorganization, and in consideration of
the mutual agreements hereinafter contained, Nextel, NFC, Merger Sub and PCI
agree as follows:
ARTICLE I. CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK; TREATMENT
OF OPTIONS AND WARRANTS
1.1 Exchange Ratio and Conversion of Shares. At the Effective Time of
the Merger (as defined herein), all the outstanding shares of common stock of
PCI, par value $.01 per share ("PCI Common Stock") shall be converted into
shares of Nextel Common Stock using an exchange ratio of 3.17:1.0, so that
three and seventeen one hundredths shares of PCI Common Stock are converted
into one share of Nextel Common Stock (the "Basic Exchange Ratio"), subject to
the adjustments described in this Article I. As of July 1, 1996, (i) the total
number of shares of PCI Common Stock outstanding ("July 1 Shares"), plus (ii)
the total number of shares of PCI Common Stock issuable upon exercise of
warrants or options, or upon exchange or conversion of convertible instruments
(regardless of whether they were on July 1 or are at the Effective Time of the
Merger "in the money") as set forth on Schedule 2.5(a) ("July 1 Derivatives"),
and excluding (y) all treasury shares, and (z) all other shares, rights to
acquire shares or other issuance commitments for shares of PCI Common Stock
that are not July 1 Shares or July 1 Derivatives, was 27,840,219 (the "PCI
Share Base"). The maximum value of Nextel Common Stock to be issued hereunder
at the Effective Time of the Merger with respect to (a) the PCI Share
<PAGE> 12
4
Base (without adjustment for any instrument that may have expired without
exercise, exchange or conversion into PCI Common Stock), and (b) any PCI Common
Stock, or options, warrants, convertible or exchangeable instruments or other
commitments to issue PCI Common Stock outstanding at the Effective Time of the
Merger that are not July 1 Shares or July 1 Derivatives (such additional PCI
Common Stock or issuance commitments, the "Dilutive PCI Common Equivalents";
and together with the PCI Share Base (without adjustment for any instrument
that may have expired without exercise, exchange or conversion into PCI Common
Stock), the "Actual PCI Common Equivalents") shall be $170,000,000 (the "Basic
Value Cap"). The maximum number of shares of Nextel Common Stock to be issued
hereunder at the Effective Time of the Merger shall be 8,782,403, subject to
adjustment only in the event Nextel elects to deliver additional shares to
avert a termination of this Agreement pursuant to Section 1.10, or for changes
to the capitalization of Nextel pursuant to Section 1.12.
1.2 Value Cap Adjusted for Channels Not Delivered. (a) If at the time of
the Closing (as defined herein) the number of Channels Delivered by PCI is (i)
less than 95% of the number of Channels set forth on Schedule 1.2 in any
metropolitan statistical area ("MSA") identified on Schedule 1.2 (each such
MSA, a "Shortfall Market"), or (ii) fewer than 3,000 Channels with regard to
the market areas not listed on Schedule 1.2 (each such Channel, a "Non-core
Market Channel"), then (A) for each Shortfall Market the Channel value set
forth on Schedule 1.2 for that Shortfall Market shall be multiplied by the
difference
<PAGE> 13
5
between the number of Channels set forth on Schedule 1.2 for that Shortfall
Market minus the number of Channels Delivered in that Shortfall Market and (B)
except as provided in Section 1.2(b)(iii), for the Non-core Market Channels,
the shortfall, if any, between 3,000 and the number of Non-core Market Channels
Delivered shall be multiplied by $3,000 (the product of each calculation, a
"Market Adjustment"). The sum of all such Market Adjustments shall be
subtracted from the Basic Value Cap.
(b) If the FCC (as defined herein) responds to PCI's filings for
rejustification of its extended implementation authority by granting PCI less
than twenty four (24) months from the date of such FCC response to construct
any Channel that had extended implementation authority (an "Unfavorable FCC
Response") then (i) each extended implementation channel identified on Schedule
2.27 ("Extended Implementation Channel") that received an Unfavorable FCC
Response and is located within 25 miles of an MSA will be deemed constructed as
required by clause 1.2(d)(iii) for purposes of determining whether such
Extended Implementation Channels are Delivered, and if all other criteria set
forth in Section 1.2(d) for that Channel to be Delivered have been met, such
Extended Implementation Channel (the "Qualifying Extended Implementation
Channel") will be counted toward the Channel targets set forth on Schedule
1.2(a), provided, however, that the total number of Qualifying Extended
Implementation Channels in any MSA shall not exceed the number of Extended
Implementation Channels for such MSA identified on Schedule 1.2, (ii) an amount
<PAGE> 14
6
equal to the lesser of (A) $3,000,000, or (B) the product of $3,658 multiplied
by the number of Extended Implementation Channels receiving an Unfavorable FCC
Response, will be subtracted from the Basic Value Cap, and (iii) the target for
Non-core Market Channels shall be reduced from 3,000 to 1,800 and the
shortfall, if any, between 1,800 and the number of Non-core Market Channels
Delivered shall be multiplied by $5,000 to determine the Market Adjustment, if
any, for the Non-core Market Channels.
(c) If the FCC responds to PCI's filings for rejustification of its
extended implementation authority by granting PCI twenty-four (24) months or
more from the date of such response to construct any Extended Implementation
Channel, that Extended Implementation Channel will be deemed constructed as
required by clause 1.2(d)(iii) for purposes of determining whether such
Extended Implementation Channel is Delivered regardless of when the date of the
Closing occurs, so long as any postponements of the date of the Closing are not
caused by the action or inaction of PCI.
(d) A "Channel" shall be "Delivered" by PCI if at the Effective Time
of the Merger: (i) the FCC license for such channel has been granted to PCI or
a PCI Subsidiary by a Final Order (as defined herein); (ii) there is a Final
Order approving a transfer of control of that license to Nextel; (iii) if
unconstructed or deconstructed, there are at least 180 days remaining before
the construction or reconstruction deadline applicable to that channel; (iv) in
the case of a channel counted
<PAGE> 15
7
towards or applicable to an MSA market target, such channel is located within
25 miles of the core of the applicable MSA, except as otherwise provided on
Schedule 1.2; (v) in the case of a channel counted towards or applicable to an
MSA market target, there is no co-channel license located within 55 miles of
the channel, except for co-channel licenses that are PCI, PCI Subsidiaries, or
licenses controlled by Nextel, except as otherwise provided on Schedule 1.2;
(vi) the channel is either (x) a land mobile 800 MHz frequency, being one of
the 430 frequencies allocated for specialized mobile radio ("SMR"), or (y) a
frequency in an MSA identified on Schedule 1.2 and allocated for public safety,
industrial land transportation or business where the radio service
classification has been converted to commercial service classification (i.e.,
YX or GX radio service type) or (z) a frequency in a Non-core Market allocated
for public safety, industrial land transportation or business; (vii) the
channel is granted pursuant to a primary license; (viii) in the case of a
channel counted towards or applicable to an MSA market target, such channel is
a discrete frequency within the applicable market and not subject to any cross
border frequency sharing or channel coordination or similar arrangement, taking
into account all frequencies deemed Delivered pursuant to this Agreement in
that market; (ix) the license for or including the channel is not subject to
(A) any agreement to be sold to a third party, or (B) any option or right of
first refusal in favor of any third party; (x) there is no contract right of
any third party or FCC order otherwise encumbering or
<PAGE> 16
8
limiting the use of the license; (xi) no consideration is due to any person in
connection with the channel; and (xii) the channel is not subject to any
finders' preference action (other than the pending appeal of a favorable FCC
ruling) or otherwise included within any proceeding commenced or assessed by a
third party (other than Nextel) or any regulatory agency, including, without
limitation, the FCC, that could result in a take-back, termination,
cancellation or nonrenewal of the relevant licenses.
1.3 Value Cap Adjusted for Negative Cash Flow. If Adjusted EBITDA
Earnings for the period from April 1, 1996 to the last day of the calendar
quarter most recently ended before the Effective Time of the Merger is
negative, that amount shall be annualized (i.e. adjusted) to equal the loss
that PCI would have experienced in a 12-month period at that rate of loss, and
that annualized amount shall be subtracted from the Basic Value Cap. In the
event the Effective Time of the Merger is more than one year from the date of
the First Agreement, so long as any postponements of the date of the Closing
are not caused by the action or inaction of PCI, there shall be no value cap
adjustment pursuant to this Section 1.3. "Adjusted EBITDA Earnings" means
PCI's earnings from continuing operations as shown on the unaudited
consolidated financial statements that are prepared by PCI in the ordinary
course of business consistent with past practice, (a) before interest expense,
taxes, depreciation, amortization, other income and expense, all determined in
accordance with past practices, to the extent consistent with GAAP (as herein
defined), and (b) without reduction for reasonable accounting, legal, printing
<PAGE> 17
9
and financial advisory fees, special employee incentive bonuses (as agreed to
by Nextel from time to time) and expenses associated with the Agreement and the
transactions contemplated hereby (the "Transaction Costs") so long as the
Transaction Costs in the aggregate for the period through and including the
Closing (regardless whether GAAP would reflect them in that period) do not
exceed $1,500,000, all determined in accordance with past practices, to the
extent consistent with GAAP.
1.4 Value Cap Adjusted for Negative Working Capital. (a) Based on the
unaudited consolidated balance sheet of PCI as of the month-end preceding the
Effective Time of the Merger prepared by PCI in the ordinary course of
business, consistent with past practices, if the working capital (herein
defined) of PCI is negative, the negative amount of such working capital shall
be subtracted from the Basic Value Cap. The terms used in this Section shall
have the meaning given to those terms in current use in the accounting
profession in the United States under Generally Accepted Accounting Principles
("GAAP"). For the purposes of this Section, with the exceptions herein listed,
working capital shall mean the result obtained by subtracting current
liabilities from current assets.
(b) For purposes of calculating working capital pursuant to this
Section, (i) the long term portion of the long term debt of PCI shall be
included in the current liabilities; (ii) all accounts and/or notes receivable
from the five executive officers of PCI shall be excluded from the current
assets; (iii) discounts on notes payable shall be excluded from the current
<PAGE> 18
10
liabilities (thus increasing current liabilities); (iv) both (A) the
Transaction Costs that were paid on or before the period reflected on the
balance sheet, and (B) the Transaction Costs that have not been paid on or
before the period reflected on the balance sheet (regardless whether GAAP would
reflect them as current liabilities as of that date) shall, up to an aggregate
maximum for all amounts under this clause (iv) of $1,500,000, be excluded from
the current liabilities; (v) all severance costs that have been incurred or are
estimated to be incurred as a result of the Merger and change of control
effected thereby shall be included in the current liabilities of PCI under the
provisions of this Section (regardless whether GAAP would reflect them as
current liabilities as of that date); (vi) any cash advanced by Nextel pursuant
to Section 6.6 and any expenditures of those funds shall be excluded from
either current assets or current liabilities, as applicable; and (vii) any cash
that was received upon the exercise of any July 1 Derivatives (as those
instruments were in effect on July 1, 1996) prior to the Effective Time of the
Merger will be excluded from current assets.
1.5 Value Cap Adjusted for Option/Warrant Exercise. If at the Effective
Time of the Merger, PCI (on a consolidated basis) does not have cash in an
amount equal to the aggregate exercise price or other consideration due upon
exercise, exchange or conversion under the terms of the July 1 Derivatives (as
those instruments were in effect on July 1, 1996) exercised prior to the
Effective Time of the Merger, or has issued any shares of PCI
<PAGE> 19
11
Common Stock in respect of any July 1 Derivatives in any cashless exercise
transaction, the Basic Value Cap shall be reduced by the difference between the
amount of cash that should have been received upon such exercise and the actual
amount of cash received upon such exercise and held at the Effective Time of
the Merger.
1.6 Value Cap Adjusted for Severance Amounts. If the aggregate amount
paid or to be paid or other value given to the five executives identified in
Section 5.6(b) as described therein whether pursuant to existing commitments or
otherwise, excluding (i) bonuses earned in 1996 or debt forgiven in 1996 up to
an aggregate of $222,871, and (ii) bonuses earned in 1997 up to 35% of the
salary of each such executive as in effect on the date of the First Agreement,
prorated through the date of the Closing, exceeds $1,260,000, then the amount
of such excess shall be subtracted from the Basic Value Cap.
1.6A Settlement with Castle Tower. Prior to Closing, PCI shall enter
into a settlement and release agreement with Castle (as defined below) pursuant
to which Castle shall settle and release all claims arising under the Castle
Purchase Agreement (as defined below).
1.7 Value Cap Adjusted if Closing Occurs After 1997. For purposes of the
exchange ratio adjustments, if any, to be made pursuant to Sections 1.8 and
1.9, if the date of the Closing occurs after December 31, 1997, then, so long
as any
<PAGE> 20
12
postponements of the date of the Closing are not caused by the action or
inaction of PCI, any adjustments made to the Basic Value Cap pursuant to
Sections 1.2, 1.4, 1.5 and 1.6 shall be reduced to equal one half of the
adjustments otherwise calculated pursuant to those Sections.
1.8 Asset Value and Dilution Adjustments to Exchange Ratio. If there are
any reductions to the Basic Value Cap under Section 1.2, 1.3, 1.4, 1.5, 1.6 or
1.7 or if there are any Dilutive PCI Common Equivalents at the Effective Time
of the Merger then, in lieu of the Basic Exchange Ratio set forth in Section
1.1, the exchange ratio shall equal:
(i) 3.17; multiplied by
(ii) the quotient of (A) the Basic Value Cap of $170,000,000,
divided by (B) the Basic Value Cap minus the sum of any
reductions pursuant to Sections 1.2, 1.3, 1.4, 1.5 and 1.6,
or, if Section 1.7 is applicable, one-half of such sum (the
"Adjusted Value Cap"); multiplied by
(iii) the quotient of (Y) the Actual PCI Common Equivalents,
divided by (Z) the PCI Share Base.
1.9 Value Cap Adjustment. If, at the Effective Time of the Merger:
(a) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI
Common Equivalents; divided by
<PAGE> 21
13
(b) (i) the Basic Exchange Ratio of 3.17 or, if Section 1.8 applies,
(ii) the exchange ratio calculated under Section 1.8; multiplied
by
(c) the Nextel Closing Price,
is greater than the lower of (y) the Basic Value Cap, or (z) the Adjusted Value
Cap, then the exchange ratio shall be further adjusted to equal:
(A) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI
Common Equivalents; multiplied by
(B) the Nextel Closing Price; divided by
(C) (i) the Basic Value Cap, or, if lower, (ii) the Adjusted Value
Cap.
1.10 Additional Consideration in Lieu of Termination. (a) If the Board of
Directors of PCI has elected (as contemplated by Section 9.1(d)(iv)) to
terminate this Agreement because the Nextel Closing Price on the day before the
scheduled date of the Closing is less than $14.00, Nextel may elect to deliver
shares of Nextel Common Stock with an aggregate value, based on the Nextel
Closing Price on the day of the Closing equal to the product of (i) $14,
multiplied by (ii) the total number of shares of Nextel Common Stock that would
be issued or issuable with respect to Actual PCI Common Equivalents as
otherwise determined under this Article I (the "Value Floor").
(b) If Nextel makes the election contemplated by Section 1.10(a),
then: (i) the termination election made by the PCI Board of Directors under
Section 9.1(d)(iv) shall be automatically rescinded and cancelled; (ii) the
Merger shall
<PAGE> 22
14
proceed pursuant to this Agreement; and (iii) in lieu of the exchange ratio set
forth in Section 1.1 or calculated and adjusted under Section 1.8 or 1.9, the
Actual PCI Common Equivalents shall be converted into shares of Nextel Common
Stock in the ratio that (i) Actual PCI Common Equivalents, bears to (ii) the
quotient of the Value Floor divided by the Nextel Closing Price on the date of
the Closing.
1.11 Nextel Closing Price. As used in this Agreement, the "Nextel Closing
Price" shall be the arithmetic average of the closing sales price for Nextel
Common Stock on the Nasdaq National Market (the "Nasdaq NM") for the 20 trading
days immediately preceding the date on which the Nextel Closing Price is to be
determined.
1.12 Other Adjustments. Nextel and PCI agree that in the event of any
change in the terms of the authorized capital stock of Nextel (other than a
change solely in the number of shares), or the declaration or payment of any
share dividend or share distribution by Nextel to its stockholders, or any
distribution of cash, property or securities by Nextel to its stockholders
(other than regular quarterly cash dividends payable out of earnings), or any
split, reclassification, recapitalization, subdivision or exchange in respect
of the outstanding stock of Nextel, then appropriate adjustments shall be made
to the number of shares of Nextel Common Stock issuable in the Merger, as set
forth in Section 1.1, to place each of Nextel, NFC, and Merger Sub, PCI and the
holders of PCI Common Stock in the same posture as if the Effective Time of the
Merger had occurred immediately
<PAGE> 23
15
prior to the occurrence of the event giving rise to such adjustment. Further,
Nextel and PCI agree that in the event of any change in the terms of the
authorized capital stock of PCI, or any distribution of securities by PCI to
its stockholders, or any split, reclassification, recapitalization, subdivision
or exchange in respect of the outstanding stock of PCI, appropriate adjustments
shall be made to place each of Nextel, Merger Sub, PCI and the holders of PCI
Common Stock in the same posture as if the Effective Time of the Merger had
occurred immediately prior to the occurrence of the event giving rise to such
adjustment. No adjustment shall be made pursuant to the preceding sentence for
redemptions, repurchases or other cancellation or retirement of outstanding
shares of PCI Common Stock or rights to acquire shares of PCI Common Stock.
1.13 Terms of the Merger. Upon the terms and subject to the conditions
set forth herein, and in accordance with the General Corporation Law of the
State of Delaware ("GCL"), as soon as practicable following the satisfaction
(or, to the extent permitted, the waiver) of the conditions set forth in
Article VIII, Merger Sub and PCI shall cause a Certificate of Merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State
of Delaware as provided in Section 251 of the GCL. The Certificate of Merger
shall provide that Merger Sub shall be merged with and into PCI (the "Merger").
Following the Merger, PCI shall continue as the surviving corporation (the
"Surviving Corporation").
<PAGE> 24
16
1.14 Effective Time; Effects of the Merger. The Merger shall become
effective when both (a) this Agreement shall be adopted and approved by the
stockholders of PCI in accordance with the applicable provisions of the GCL and
(b) the Certificate of Merger, executed in accordance with the relevant
provisions of the GCL, is filed with the Secretary of State of Delaware (the
time the Merger becomes effective being referred to as the "Effective Time of
the Merger"). Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time of the Merger: the separate existence of Merger
Sub shall cease; the Surviving Corporation shall possess all assets and
property of every description, and all interests therein, wherever located, and
the rights, privileges, immunities, powers, franchises and authority, of a
public as well as of a private nature, of each of Merger Sub and PCI (the
"Constituent Corporations"); all obligations belonging to or due each of the
Constituent Corporations shall be vested in, and become the obligations of, the
Surviving Corporation without further act or deed; title to any real estate or
any interest therein vested in either of the Constituent Corporations shall not
revert or in any way be impaired by reason of the Merger; all rights of
creditors and all liens upon any property of any of the Constituent
Corporations shall be preserved unimpaired, and the Surviving Corporation shall
be liable for all of the obligations of each of the Constituent Corporations;
and any claim existing, or action or proceeding pending, by or against either
of the Constituent
<PAGE> 25
17
Corporations may be prosecuted to judgment with right of appeal, as if the
Merger had not taken place.
1.15 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Merger Sub as in effect immediately preceding the Effective
Time of the Merger shall constitute the Certificate of Incorporation of the
Surviving Corporation (the "Certificate of Incorporation") within the meaning
of the GCL Section 104. The By-Laws of Merger Sub as in effect immediately
preceding the Effective Time of the Merger shall constitute the By-Laws of the
Surviving Corporation (the "By-Laws") until amended in accordance with
applicable law and the Certificate of Incorporation.
1.16 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time of the Merger shall be the directors
and officers of the Surviving Corporation at the Effective Time of the Merger
and shall hold office from the Effective Time of the Merger until their
respective successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and By-Laws of the
Surviving Corporation, or as otherwise provided by law.
1.17 Exchange Agent. Prior to the Effective Time of the Merger, Nextel
shall designate a bank or trust company to act as exchange agent in the Merger
(the "Exchange Agent"). Prior to the Effective Time of the Merger, Nextel
shall contribute to NFC the shares of Nextel Common Stock necessary to make
payment for each share of the capital stock of PCI being converted by reason of
the Merger. Immediately thereafter, NFC shall contribute such
<PAGE> 26
18
shares of Nextel Common Stock to Merger Sub and Merger Sub will immediately
prior to or at the Effective Time of the Merger deliver to the Exchange Agent
such shares of Nextel Common Stock.
1.18 Surrender of Certificates and Delivery of Merger Consideration.
(a) Promptly after the Effective Time of the Merger, Nextel shall
cause the Exchange Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time of the Merger
represented outstanding shares of PCI Common Stock (the "Certificates") (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall be in form
approved by Nextel and the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Nextel Common Stock and cash for fractional shares.
Upon surrender to the Exchange Agent of a Certificate or Certificates, together
with a letter of transmittal duly executed (in the approved form), and such
other documents as the Surviving Corporation or the Exchange Agent may
reasonably request, a holder of a Certificate shall be entitled to receive in
exchange therefor a portion of Nextel Common Stock as set forth in Section 1.1,
as adjusted pursuant to this Article I (the "Merger Consideration").
(b) The stock transfer books of PCI shall be closed at the Effective
Time of the Merger and no transfer of capital stock
<PAGE> 27
19
of PCI outstanding prior to the Effective Time of the Merger shall be
registered on the stock transfer books of the Surviving Corporation. If Nextel
Common Stock is to be issued to a person other than the person in whose name
the Certificates are registered, it shall be a condition of issuance that the
Certificates surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such issuance shall pay all
transfer and other taxes required by reason of the receipt by a person other
than the registered holder of the Certificates surrendered, or establish to the
reasonable satisfaction of the Surviving Corporation or the Exchange Agent that
such tax has been paid or is not applicable.
(c) At any time following ninety days after the Effective Time of
the Merger, Nextel shall be entitled to require the Exchange Agent to deliver
to Nextel any Nextel Common Stock which had been made available to the Exchange
Agent by or on behalf of Nextel or the Surviving Corporation and which has not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to Nextel (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Nextel
Common Stock payable upon due surrender of their Certificates. Notwithstanding
the foregoing, Nextel shall not be liable to a holder of Certificates for
amounts delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws. Nextel shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of
shares.
<PAGE> 28
20
(d) If any Certificates shall not have been surrendered prior to one
year after the Effective Time of the Merger (or immediately prior to such
earlier date on which any payment in respect thereof would otherwise escheat to
or become the property of any governmental unit or agency), the payment in
respect of such Certificates shall, to the extent permitted by applicable law,
become the property of Nextel, free and clear of all claims of interest of any
person previously entitled thereto.
(e) Certificates, if and when presented to the Exchange Agent or the
Surviving Corporation after the Effective Time of the Merger, shall be
cancelled and exchanged for the consideration provided for, and in accordance
with, the procedures set forth in this Section.
1.19 No Fractional Shares. Notwithstanding any other provision of this
Agreement (but subject to the final sentence of this Section 1.19), no
fractional share of Nextel Common Stock or certificates or scrip therefor shall
be issued as a result of the conversion of issued and outstanding capital stock
of PCI into Nextel Common Stock, but in lieu of each fractional interest there
shall be made a payment in cash therefor, without interest, at a pro rata price
based on the Nextel Closing Price. The Surviving Corporation shall provide (or
shall cause one or more of its Affiliates to provide) the Exchange Agent with
sufficient cash to make such payments, and, thereafter, the Surviving
Corporation shall cause the Exchange Agent to make such payments to the holders
of Certificates in cash, without interest, on the surrender of their
Certificates. Wherever in this Agreement it
<PAGE> 29
21
is contemplated that, in connection with the Merger, cash payment shall be made
in lieu of fractional share interests to persons otherwise entitled to receive
such fractional share interests, Nextel may (in its sole and absolute
discretion) deliver to such persons a number of whole shares, determined by
rounding up to the nearest whole share, and thereupon shall be relieved of any
obligation hereunder to make cash payments to such persons in lieu of any
fractional share interests.
1.20 Rights of Holders of Certificates.
(a) At the Effective Time of the Merger, the holders of Certificates
for shares of capital stock of PCI (other than certificates representing shares
held in PCI's treasury, which shall be automatically cancelled pursuant to the
Merger) shall cease to have any rights as stockholders of PCI, and their sole
rights shall pertain to the shares of Nextel Common Stock into which their
shares of PCI capital stock shall have been converted by the Merger. After the
Effective Time of the Merger, each holder of outstanding Certificates for
shares of capital stock of PCI shall be entitled upon surrender of the same
duly transmitted to the Exchange Agent to receive in exchange therefor
certificates representing the number of whole shares of Nextel Common Stock
into which such holder's shares of capital stock of PCI shall have been
converted by the Merger, plus (if applicable) cash in lieu of fractional
shares.
(b) Pending surrender and exchange under this Agreement, a holder's
Certificates for capital stock of PCI shall be deemed for all corporate
purposes, other than the payment of
<PAGE> 30
22
dividends, to evidence the number of whole shares of Nextel Common Stock into
which such shares have been converted by the Merger and, subject to the last
sentence of Section 1.19, the right to receive cash for any fractional
interests resulting therefrom. Subject to Section 1.18(d), unless and until
any outstanding Certificates for shares of PCI capital stock are surrendered,
no dividend (stock or cash) payable to holders of record of Nextel Common Stock
as of any date subsequent to the Effective Time of the Merger shall be paid to
the holder of any such Certificate, but upon such surrender of such
Certificates there shall be paid to the record holder of the certificate for
Nextel Common Stock issued in exchange therefor the amount of dividends, if
any, but without interest, that have theretofore become payable subsequent to
the Effective Time of the Merger with respect to the number of whole shares of
Nextel Common Stock represented by the certificate issued upon such surrender
and exchange.
1.21 Assumption of Stock Options.
(a) Schedules 2.5(a) and 2.5(b) set forth a list of each director
and employee stock option outstanding on the date of the First Agreement,
whether or not fully exercisable (collectively, the "PCI Stock Options"), to
purchase PCI Common Stock heretofore granted or assumed by PCI pursuant to any
stock option, stock purchase or similar plan adopted, assumed or maintained at
any time by PCI, any of its controlled Affiliates or any of their respective
predecessors in interest, including but not limited to the PCI 1993 Stock
Option Plan, the PCI 1994
<PAGE> 31
23
Non-Employee Director Stock Option Plan, the PCI 1996 Stock Option Plan, and
the PCI 1996 Non-Employee Director Stock Option Plan, each as amended and in
effect on the date of the First Agreement (collectively the "PCI Option
Plans"). Schedules 2.5(a) and 2.5(b) also set forth with respect to each PCI
Stock Option the option exercise price, the number of shares subject to the
option, any related stock appreciation rights, the dates of grant, vesting,
exercisability and expiration of the option and whether the option is an
incentive stock option or a non-qualified stock option. All rights under the
PCI Stock Options shall be treated as provided in this Section 1.21, and to the
extent the terms of the PCI Option Plans and/or of any related agreements are
inconsistent with the treatment to be accorded to the PCI Stock Options
pursuant to this Section 1.21, then PCI shall cause the PCI Option Plans and/or
any related agreements with affected participants to be amended, and all
required third party, governmental and regulatory body consents or approvals to
such amendments to be procured, such that all such inconsistencies shall be
eliminated by the Effective Time of the Merger.
(b) Each PCI Stock Option outstanding immediately prior to the
Effective Time of the Merger shall be converted at the Effective Time of the
Merger into an issued and outstanding option of Nextel in accordance with the
terms of the PCI Option Plans, so that (i) from and after the Effective Time of
the Merger, each such PCI Stock Option may be exercised only for shares of
Nextel Common Stock notwithstanding any contrary
<PAGE> 32
24
provision of the PCI Option Plans or stock option agreements executed in
connection therewith, (ii) each such PCI Stock Option shall at the Effective
Time of the Merger become an option to purchase a number of shares of Nextel
Common Stock equal to the quotient arrived at by dividing the number of shares
of PCI Common Stock subject to such option immediately prior to the Effective
Time, by the Basic Exchange Ratio, as adjusted pursuant to Article I
("Converted Nextel Shares"), and (iii) the exercise price per share of Nextel
Common Stock at which each such PCI Stock Option is exercisable shall be the
amount (rounded up to the next whole cent) arrived at by multiplying the
exercise price per share of PCI Common Stock at which such PCI Stock Option is
exercisable immediately prior to the Effective Time by the Basic Exchange
Ratio, as adjusted pursuant to Article I (the "Converted Per Share Price");
provided, however, that, notwithstanding the foregoing, Nextel shall not issue
or pay for any fractional share otherwise issuable upon any exercise by any
holder of PCI Stock Options that are so converted, and provided further,
however, that in the case of each PCI Stock Option which is an incentive stock
option, the Basic Exchange Ratio shall be adjusted for such option, if
necessary, so as not to constitute a modification, extension or renewal of the
option, within the meaning of Section 424(h) of the Code. All PCI Stock
Options converted into issued and outstanding options of Nextel pursuant to the
preceding sentence, except those PCI Stock Options held by directors who are
not also employees or consultants of PCI or any of its subsidiaries, shall be
so converted into issued and outstanding
<PAGE> 33
25
options under Nextel's Amended and Restated Incentive Equity Plan, as amended
May 13, 1996 (the "Nextel Plan").
(c) The Board of Directors of PCI and/or of the Surviving Corporation,
as appropriate, shall take such action as may be required under the PCI Option
Plans and the Compensation Committee of the Board of Directors of Nextel shall
take such action as may be required under the Nextel Plan to effectuate the
foregoing. Prior to the Effective Time of the Merger, Nextel shall reserve for
issuance the number of shares of Nextel Common Stock necessary to satisfy the
obligations of Nextel under this Section 1.21, and within five (5) business
days after the Effective Time of the Merger, Nextel shall register such shares
pursuant to the Securities Act of 1933, as amended (the "Securities Act").
Prior to the Effective Time of the Merger, PCI, and thereafter the Surviving
Corporation, as may be appropriate, shall take such actions as are necessary to
effect the provisions of this Section 1.21 and to preserve for the holders of
PCI Stock Options the benefits to be provided pursuant to this Section 1.21.
Notwithstanding anything in this Section 1.21(c), neither PCI nor Nextel shall
have any liability for failing to take (or to cause to be taken) actions in
respect of any stock option plan or related agreement that would violate (in
any material respect) the terms thereof or would be prohibited by applicable
law.
1.22 Warrants. At the Effective Time of the Merger, PCI's outstanding
warrants (the "Warrants") to purchase shares of PCI Common Stock shall be
assumed by Nextel. Each Warrant shall
<PAGE> 34
26
thereafter evidence a warrant to purchase the number of shares of Nextel Common
Stock into which the number of shares of PCI Common Stock issuable pursuant to
such Warrant would have been converted in the Merger at an exercise price per
share equal to the amount (rounded up to the next whole cent) arrived at by
dividing the aggregate exercise price under such Warrant by the number of
shares of Nextel Common Stock purchasable thereunder, unless exchanged at the
Closing for warrants of Nextel pursuant to agreements with the warrant holders
as described in the Recitals or as contemplated by Section 5.4.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PCI
PCI represents and warrants to Nextel that:
2.1 Corporate Organization.
(a) PCI has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
the corporate power and authority to own or lease its properties and to conduct
its business as it has been and is now being conducted. The copies of the
Certificate of Incorporation of PCI, certified by the Secretary of the State of
Delaware, and its By-Laws, certified by the Secretary of PCI, previously
delivered by PCI to Nextel, are true, correct and complete.
(b) The subsidiaries of PCI are listed on the Schedules with
reference to this Section (collectively, the "Subsidiaries"). Each of the
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation,
as set
<PAGE> 35
27
forth on the Schedules with reference to this Section and has the corporate
power and authority to own or lease its properties and to conduct its business
as it has been and is now being conducted. The copies of the Certificate of
Incorporation of each Subsidiary, certified by the Secretary of State of the
state of its incorporation, and its By-Laws, certified by such Subsidiary's
Secretary, previously delivered by PCI to Nextel, are true, correct and
complete.
(c) PCI and each Subsidiary are duly licensed or qualified and in
good standing as a foreign corporation in all jurisdictions identified on the
Schedules with reference to this Section and such jurisdictions are the only
ones in which their ownership of property or the character of their activities
is such as to require them to be so licensed or qualified.
2.2 Subsidiaries and Other Entities.
(a) All the outstanding capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable. PCI owns all the
issued and outstanding capital stock of each Subsidiary. Except as set forth
on the Schedules with reference to this Section, PCI holds all the issued and
outstanding capital stock of each Subsidiary free and clear of any mortgage,
pledge, security interest, encumbrance, lien, claim or charge of any kind. As
of the Closing, PCI shall hold all the issued and outstanding capital stock of
each Subsidiary free and clear of any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind.
<PAGE> 36
28
(b) There are no warrants, options, subscriptions, other convertible
instruments, and no commitments, obligations, or agreement (whether firm or
conditional) pursuant to which PCI or any Subsidiary is or may be obligated to
issue, transfer, deliver or sell shares of capital stock of any Subsidiary or
other securities of any Subsidiary.
(c) Except for the Subsidiaries, and except as set forth in the
Schedules with reference to this Section, none of PCI or the Subsidiaries has
any direct or indirect subsidiaries, nor do any of them own, directly or
indirectly, any partnership, equity, profit, participation or similar ownership
interest in any corporations, partnerships, joint ventures, trusts,
unincorporated organizations, associations or similar entities.
2.3 Corporate Authorization.
(a) The Board of Directors of PCI, by unanimous vote of all
directors at a meeting duly called and held, has (i) determined that the Merger
is fair to and in the best interests of the stockholders of PCI and (ii)
resolved to submit this Agreement to and recommend approval of this Agreement
by the stockholders of PCI.
(b) PCI has all necessary corporate power and authority to enter
into this Agreement and to perform all of the obligations to be performed by it
hereunder. The execution, delivery and performance of this Agreement by PCI
has been duly authorized by PCI, and, upon the execution and delivery hereof
by, respectively, Nextel, NFC and Merger Sub, this Agreement will constitute
the valid and legally binding obligations of PCI,
<PAGE> 37
29
enforceable against PCI in accordance with its terms, except as enforceability
thereof may be limited by applicable bankruptcy, reorganization, insolvency or
other similar laws affecting creditors' rights generally, by equitable
principles of general applicability with respect to the availability of
equitable remedies, or by public policies applicable to securities laws.
(c) The Board of Directors of PCI received an opinion of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), its financial advisor, at or
before the Board meeting (prior to the approval vote) described in Section
2.3(a) above, to the effect that the consideration to be received by PCI's
stockholders in the Merger is fair to the stockholders from a financial point
of view. PCI has provided Nextel with a correct and complete copy of the
engagement letter between Morgan Stanley and PCI.
2.4 Capital Stock. The entire authorized capital stock of PCI consists
solely of 50,000,000 shares of PCI Common Stock, of which 26,162,225 shares are
issued and outstanding as of the date of the First Agreement, and 1,000,000
shares of preferred stock, par value $.01 per share, none of which are issued
or outstanding. All of the outstanding shares of PCI Common Stock (and any
shares issuable pursuant to presently outstanding options, if exercised and
purchased at the applicable exercise price) were duly authorized and will be,
when issued and the option price paid (if applicable), validly issued, fully
paid and nonassessable. Except as set forth in the Schedules with reference to
this Section, none of the capital stock or other securities of PCI is entitled
or subject to preemptive rights or
<PAGE> 38
30
registration rights. Other than the requisite vote of PCI stockholders to
consummate the Merger, the authorization or consent of no person is required in
order to consummate the transactions contemplated herein by virtue of any such
person having an equitable or beneficial interest in the PCI Common Stock.
Except as set forth on the Schedules with reference to this Section, there are
not now, and at the Effective Time of the Merger there will not be, any voting
trusts or other agreements or understandings to which PCI is a party or is
bound with respect to the voting of PCI Common Stock. To the knowledge of PCI,
all outstanding shares of PCI Common Stock were offered, sold and issued in
compliance with all applicable laws and regulations.
2.5 Options. (a) PCI has set forth on the Schedules with reference to
this Section all warrants, options, subscriptions and other convertible
instruments or agreements pursuant to which PCI was obligated as of July 1,
1996 to issue, transfer, deliver or sell shares of PCI Common Stock and the
exercise or purchase price of each such warrant, option, subscription,
convertible instrument or agreement. Except as set forth in the Schedules with
reference to this Section, as of July 1, 1996, no options or warrants to
purchase shares of PCI Common Stock have ever been granted, except for employee
options that have been exercised or have terminated without exercise prior to
July 1, 1996, pursuant to the terms of the respective PCI Option Plans. Except
as set forth in the Schedules with reference to this Section, as of July 1,
1996, there were no commitments or obligations of PCI, either
<PAGE> 39
31
firm or conditional, to issue, deliver or sell, whether under offers, stock
option agreements, stock bonus agreements, stock purchase plans, incentive
compensation plans, warrants, conversion rights or otherwise, any authorized
but unissued shares, or treasury shares, of PCI Common Stock or other
securities of PCI.
(b) PCI has set forth on the Schedules with reference to this
Section all warrants, options, subscriptions and other convertible instruments
or agreements pursuant to which PCI was or is obligated as of July 1, 1996, as
of the date hereof, and as of the Closing to issue, transfer, deliver or sell
shares of PCI Common Stock, which are not set forth on Schedule 2.5(a).
Additionally, set forth on such Schedule with reference to this Section are the
exercise or purchase price of each warrant, option, subscription, convertible
instrument or agreement set forth thereon.
2.6 Compliance with Laws. Except for matters that individually and in
the aggregate will not have a material adverse effect on the business,
financial condition, results of operations, liabilities or assets of PCI and
its Subsidiaries, taken as a whole, and that will not impair PCI's ability to
perform, in any material respect, its obligations under this Agreement or any
other document or instrument to which PCI is a party in connection with the
transactions contemplated herein, or as set forth in the Schedules with
reference to this Section, to the knowledge of PCI, (i) neither PCI nor any
Subsidiary is currently in violation (nor is any of them currently liable or
<PAGE> 40
32
otherwise currently responsible with respect to prior violations) of any
statute, law or regulation applicable to any of their presently or formerly
owned properties or to the conduct of their current or past businesses; (ii)
none of the processes followed, results obtained, services provided or products
made, modified or installed by any of them (in the ordinary course of their
businesses or otherwise), or by any managers with respect to SMR Licenses (as
defined herein) held by any of PCI or its Subsidiaries (pursuant to Third Party
Management Agreements (as defined herein) or otherwise) or by PCI or its
Subsidiaries in the management or operation of SMR Licenses managed by any of
them (pursuant to PCI Management Agreements or otherwise), violate any statute,
law or regulation applicable thereto; (iii) none of (a) the businesses of PCI
or any Subsidiary, (b) the processes, results, services or products performed,
sold or otherwise made available by PCI or any Subsidiary, (c) the processes,
results, services or products performed, sold or otherwise made available by
any manager with respect to SMR Licenses held by PCI or any Subsidiary
(pursuant to Third Party Management Agreements or otherwise) or (d) the
processes, results, services or products performed, sold or otherwise made
available by PCI or any Subsidiary in the management or operation of SMR
Licenses managed by any of them (pursuant to PCI Management Agreements or
otherwise) violates any applicable law or regulation relating to air, water or
noise pollution or employee health and safety or the production, storage,
labeling, transportation or disposition of solid waste or hazardous or
<PAGE> 41
33
toxic substances; (iv) PCI, its Subsidiaries, each of the managers with respect
to SMR Licenses held by PCI or a Subsidiary, and PCI and its Subsidiaries in
their capacities as managers under PCI Management Agreements, has each timely
obtained all licenses and permits and timely filed all reports required to be
filed under any such applicable laws or regulations; (v) neither PCI, its
Subsidiaries nor any other person has stored, dumped or otherwise disposed of
any chemical substances, including any "Hazardous Substances," "Pollutants" or
"Contaminants" (as such terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA")) on,
beneath or about any of the properties of PCI or its Subsidiaries; (vi) none of
PCI, its Subsidiaries or any of their respective managers (with respect to SMR
Licenses held by PCI or a Subsidiary) has received written notice that it is a
"potentially responsible party" under any environmental law or of any violation
of any environmental, zoning or other land use ordinance, law or regulation
relating to the operation of its or their businesses, or to any of the
processes followed, results obtained, services provided or products made,
modified or installed (in the ordinary course of its or their businesses or
otherwise), including, but not limited to, the Toxic Substances Control Act of
1976, as amended, the Resource Conservation Recovery Act of 1976, as amended,
the Clean Air Act, as amended, the Federal Water Pollution Control Act, as
amended, CERCLA or the Occupational Safety and Health Act of 1970, as amended,
nor are PCI and any Subsidiary aware of any such violation. PCI has
<PAGE> 42
34
listed in the Schedules with reference to this Section all environmental
reports known to PCI or its Subsidiaries relating to any owned or leased real
property of PCI or its Subsidiaries and has previously delivered to Nextel a
true, correct and complete copy of each report so listed.
2.7 No Conflict. Except as set forth in the Schedules with reference to
this Section and subject to the adoption and approval of this Agreement by the
stockholders of PCI, the execution and delivery of this Agreement by PCI and
the consummation of the transactions contemplated hereby do not, and will not
constitute an event which, after notice or lapse of time or both would (a)
violate any provision of, or result in the breach of, or accelerate or permit
the acceleration of the performance required by: (i) the terms of, any
applicable law, rule or regulation of any governmental body, except where any
such violation, breach, acceleration, termination or creation, individually or
in the aggregate, would not have a material adverse effect upon the business,
financial condition, results of operation, liabilities or assets of PCI and the
Subsidiaries, taken as a whole, and would not impair PCI's ability to perform,
in any material respect, its obligations under this Agreement or any other
document or instrument to which PCI is a party in connection with the
transactions contemplated herein, (ii) the Certificate of Incorporation or
By-Laws of PCI or any Subsidiary; (iii) any indenture, material agreement, or
other material instrument to which PCI or any Subsidiary is a party or by which
PCI or any Subsidiary may be bound; or (iv) any order, judgment
<PAGE> 43
35
or decree applicable to any of them, except where any such violation, breach,
acceleration, termination, creation or order, individually or in the aggregate,
would not have a material adverse effect upon the business, financial
condition, results of operation, liabilities or assets of PCI and the
Subsidiaries, taken as a whole, and would not impair PCI's ability to perform,
in any material respect, its obligations under this Agreement or any other
document or instrument to which PCI is a party in connection with the
transactions contemplated herein, or (b) terminate or result in the termination
of any indenture, material agreement or other material instrument, or result in
the creation of any lien, charge or encumbrance upon any of the properties or
assets of PCI or any Subsidiary under any agreement to which any of them is a
party, except where any such violation, breach, acceleration, termination or
creation, individually or in the aggregate, would not have a material adverse
effect upon the business, financial condition, results of operation,
liabilities or assets of PCI and the Subsidiaries, taken as a whole, and would
not impair PCI's ability to perform, in any material respect, its obligations
under this Agreement or any other document or instrument to which PCI is a
party in connection with the transactions contemplated herein.
2.8 Litigation. Except as set forth in the Schedules with reference to
this Section, there are no actions, suits, proceedings, claims or
investigations formally instituted and pending or, to the knowledge of PCI and
its Subsidiaries, threatened against or specifically affecting PCI or any
<PAGE> 44
36
Subsidiary or involving any of their properties or assets, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitration panel or alternative dispute resolution body, except where the
outcome of any such actions, suits, proceedings, claims or investigations,
individually or in the aggregate, would not have a material adverse effect upon
the business, financial condition, results of operation, liabilities or assets
of PCI and the Subsidiaries, taken as a whole, and would not impair PCI's
ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which PCI is a party in
connection with the transactions contemplated herein. Except as set forth in
such Schedule, neither PCI nor any Subsidiary is subject to or is in default
under, any order, writ, injunction or decree of any court or Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, or any arbitration panel or alternative dispute resolution
body.
2.9 Insurance. Set forth in the Schedules with reference to this Section
is a list of (a) all insurance policies held by PCI or any Subsidiary
(indicating the insurer, type, amount and term of coverage, deductible,
description of vehicles, latest property insurable values by location (100%
replacement value), workers' compensation payroll (separately for clerical,
sales and technical employees), and additional named insureds with respect to
each such policy); and (b) to the knowledge of PCI, all
<PAGE> 45
37
claims pending under any of such insurance policies. Except as set forth in
such Schedule, all of these policies are in full force and effect and all
premiums due thereon have been paid or accrued and there are no retroactive
experience-based premium adjustment features in any policy.
2.10 Intellectual Property. Except for the name of PCI and except as set
forth in the Schedules with reference to this Section, to the knowledge of PCI,
there are no patents or patent applications; trademarks, service marks, trade
dress, trade names, corporate names or any applications to register any of the
foregoing marks or names; copyrights or copyright registrations; or any
licenses, other than software licenses acquired solely through the purchase of
the underlying software, to or from third parties with respect to any of the
foregoing (including, without limiting the generality of the foregoing, all
computer software, data and documentation) relating to PCI's or the
Subsidiaries' business as now conducted or as presently proposed to be
conducted. To the knowledge of PCI, except as set forth in the Schedules with
reference to this Section, (i) neither of PCI nor any Subsidiary has infringed,
misappropriated or otherwise conflicted with any proprietary rights of any
third parties; (ii) PCI is not aware of any infringement, misappropriation or
conflict which will occur as a result of the continued operation of PCI's or
the Subsidiaries' business as now conducted or as presently proposed to be
conducted; and (iii) neither PCI nor any Subsidiary has received any notices of
any infringement or misappropriation from any third party.
<PAGE> 46
38
2.11 Assets. PCI has delivered to Nextel a Schedule (which makes
reference to this Section) that lists all fixed capital assets owned by PCI
(including, without limitation, all repeater and ancillary equipment necessary
for the operation of the business of PCI, all assets located at each site, all
office equipment and furniture owned by PCI and all other material tangible
assets owned by PCI) (the "Asset List"). The assets on the Asset List include
substantially all of the tangible assets presently used by PCI in the conduct
of its business in Arizona, California, Colorado, New Mexico, North Dakota,
Oklahoma, South Dakota and Texas (collectively, the "States").
2.12 Financial Statements. PCI has previously delivered to Nextel the
following financial statements (including any notes thereto), all of which have
been prepared in accordance with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the consolidated
financial position of PCI and its Subsidiaries, at the dates stated in such
financial statements and the results of their operations for the periods stated
therein (subject in the case of the financial statements referenced in
paragraph (b) to the absence of notes and to normal year-end adjustments):
(a) a Consolidated Balance Sheet at December 31, 1995, and a
Consolidated Statement of Operations, Statement of Stockholders' Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 1995 which
have been audited by and that are accompanied by the report of KPMG Peat
Marwick LLP; and
<PAGE> 47
39
(b) a Consolidated Balance Sheet at June 30, 1996 and a Consolidated
Statement of Operations, and a Consolidated Statement of Cash Flows for the six
months ended June 30, 1996.
2.13 Liabilities. PCI and its Subsidiaries do not have any liability or
obligation, secured or unsecured (whether accrued, absolute, contingent or
otherwise), except:
(i) trade payables and accrued expenses incurred in the
ordinary course of business and consistent with past practices for which
the stated due date has not passed ("Current Payables");
(ii) those liabilities or obligations (for which the stated due
date has not passed) relating to operating contracts or leases entered
into in the ordinary course of business consistent with past practice;
(iii) liabilities and obligations of the type shown on PCI's
balance sheet at June 30, 1996 that was previously delivered to Nextel
(the "June 30 Balance Sheet") and any increase in the amount of such
liabilities after June 30, 1996 was either (1) consented to in writing by
Nextel, or (2) incurred by PCI or any Subsidiary in the ordinary course of
business after such date;
(iv) the Transaction Costs which shall not exceed $1,500,000; and
(v) other liabilities or obligations that do not exceed $10,000
individually and do not exceed $100,000 in the aggregate or that are set
forth in the Schedules with reference to this Section specifically
identified and agreed
<PAGE> 48
40
to by Nextel as Permitted Liabilities for purposes of this Agreement (and,
to the extent reasonably ascertainable, have been identified by type,
source and dollar amount) (the liabilities and obligations described in
this clause and clauses (i) through (iv) above, collectively, the
"Permitted Liabilities").
2.14 Transactions Not in the Ordinary Course. Except as set forth on the
Schedules with reference to this Section, since July 1, 1996 until the date of
the First Agreement neither PCI nor any Subsidiary has (a) incurred any
liability or obligation not in the ordinary course of business or entered into
any transaction other than in the ordinary course of business the value of
which did not exceed $10,000 individually and did not exceed $100,000 in the
aggregate; (b) declared or made any payment or distribution to stockholders or
other holders of equity or other similar ownership or participation interests,
including stock splits, stock dividends and profit distributions, or purchased
or redeemed any shares or other equity or other similar ownership or
participation interests except as provided for in this Agreement; (c)
mortgaged, pledged or subjected to lien, charge or any other encumbrance, any
of its assets, tangible or intangible; (d) sold or transferred, or agreed to
sell or transfer, or acquired or agreed to acquire any SMR Licenses; (e) sold
or transferred any of its other assets, tangible or intangible, the value of
which did not exceed $10,000 individually and did not exceed $100,000 in the
aggregate except, in each case, in the ordinary course of business; (f)
cancelled any debts or claims except in each case
<PAGE> 49
41
in the ordinary course of business; (g) increased the rate of compensation of
any officer or of any employee receiving (giving effect to such increase) more
than $50,000 per annum or paid or declared any bonus (excluding fixed-formula
compensation incentive payments such as may be paid to certain sales employees
from time to time), except as set forth in the Schedules with reference to this
Section; (h) agreed to or amended or instituted any employment contract, bonus
plan, stock option plan, profit sharing plan, pension plan, retirement plan or
other similar arrangement or plan, except as set forth in the Schedules with
reference to this Section.
2.15 Capital Projects. Set forth in the Schedules with reference to this
Section is a description of all capital projects currently committed for or
authorized by PCI for (i) SMR Systems (as defined herein) and (ii) all other
capital projects involving the expenditure of more than $50,000 in any single
case or more than $200,000 in the aggregate.
2.16 Taxes. Except as set forth in the Schedules with reference to this
Section, the Subsidiaries have been included in a consolidated Federal income
tax return filed by PCI. Except as set forth in the Schedules with reference
to this Section, (i) PCI, on behalf of itself and its Subsidiaries
(collectively, "PCI/PCI Subs"), has accurately prepared and has duly and timely
filed with all appropriate Federal, foreign, state and local governmental
agencies, all tax returns and reports required to be filed by it; (ii) all
taxes owed or withheld, or which may be claimed to be owed or required to be
withheld, to or for the
<PAGE> 50
42
benefit of any governmental agency for or with respect to the periods covered
by such returns and reports or with respect to any period (or portions thereof)
ending at or before the Closing, and all interest, penalties, assessments and
deficiencies connected therewith, have been or will be timely paid in full or
provided for in full; (iii) PCI/PCI Subs has not executed or filed with any
taxing authority any agreement extending the period for assessment or
collection of any taxes; (iv) PCI/PCI Subs is not a party to any pending audit,
inquiry, action or proceeding, nor has PCI/PCI Subs been notified of the
inception of any such audit, inquiry, action or proceeding by any Federal,
foreign, state or local governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency, court
or instrumentality for the assessment or collection of taxes; (v) no deficiency
or assessment notices or reports or statements of tax due have been received by
PCI/PCI Subs in respect of any of its tax returns; and (vi) to the best of
PCI's knowledge, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will have no material
effect upon the tax treatment of any previously consummated transaction in
which PCI acquired all or any part of the assets or capital stock of another
entity.
2.17 Bank Accounts; Employees. Set forth in the Schedules with reference
to this Section is a complete list of (a) all banks in which PCI or any
Subsidiary has an account or safe deposit box and the names of all persons
authorized to draw
<PAGE> 51
43
thereon or have access thereto; (b) the current fixed annual rate of
compensation (plus total cash compensation broken down between fixed and bonus
components for fiscal year 1995) as of the date of such list for each of the
five (5) then highest paid employees of PCI and each Subsidiary for the current
fiscal year and a summary of the basis on which each such person is compensated
if such basis is other than exclusively a fixed salary rate; (c) the names of
all persons holding powers of attorney from PCI and each Subsidiary and a
summary statement of the terms thereof; and (d) the name of each person who is
an "affiliate" of PCI for purposes of Rule 145 under the Securities Act.
2.18 Real Estate. The Schedules with reference to this Section list all
real estate, real estate options and leaseholds owned or held by PCI or any
Subsidiary. Except for matters that individually and in the aggregate will not
have a material adverse effect on the business, financial condition, results of
operations, liabilities or assets of PCI and its Subsidiaries, taken as a
whole, and that will not impair PCI's or the Subsidiaries' ability to perform,
in any material respect, its or their obligations under this Agreement or any
other document or instrument to which PCI or a Subsidiary is a party in
connection with the transactions contemplated herein, or as set forth on the
Schedules with reference to this Section, there are no title defects, issues of
validity or enforceability, deficiencies in rights of possession or use or
similar matters relating to or affecting any real estate owned or leased, or
which is subject to an option to buy, sell or lease, of or by PCI or any
Subsidiary.
<PAGE> 52
44
Except for Permitted Liens (as defined herein), for matters that individually
and in the aggregate will not have a material adverse effect on the business,
financial condition, results of operations, liabilities or assets of PCI and
its Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth in the Schedules with reference to this Section, PCI or
a Subsidiary, as the case may be, has good and marketable title in fee simple
to all real estate owned by it and good leasehold interests in all of its
leaseholds, none of which interests will be materially and adversely affected
by the transactions contemplated hereby, and each lease with an initial term of
more than one year is, to the knowledge of PCI and its Subsidiaries,
enforceable against the lessor thereunder and PCI or its Subsidiary, as the
case may be, enjoys quiet possession of all leaseholds.
2.19 Title to Properties. Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth on the
<PAGE> 53
45
Schedules with reference to this Section, each of PCI and its Subsidiaries has
good title to all of its personal properties and assets, tangible and
intangible (including, without limitation, those on the Asset List). Except
for liens or encumbrances set forth in the Schedules with reference to this
Section (which identifies those that will be removed prior to the Closing),
none of such properties or assets is subject to any lien or encumbrance other
than (a) any liens securing Current Payables, (b) any liens or encumbrances
connected with operating leases entered into in the ordinary course of business
consistent with past practice, (c) such other encumbrances that do not secure
indebtedness and do not materially detract from the value of, or interfere with
the present or future use of, the property subject thereto and affected thereby
or otherwise materially impair the business, financial condition, results of
operations or operations of PCI and its Subsidiaries, taken as a whole, or (d)
as otherwise disclosed to and approved by Nextel in writing (collectively,
"Permitted Liens").
2.20 Contracts. Except as set forth in the Schedules with reference to
this Section, neither PCI nor any Subsidiary (nor any of their properties) is a
party to or bound by any (a) agreement or other arrangement not made in the
ordinary course of business, involving payments or receipts in excess of
$25,000 individually or more than $100,000 in the aggregate; (b) employment or
consulting contract; (c) contract with any labor union; (d) employee bonus,
pension, profit-sharing, retirement, stock purchase or other benefit or welfare
plan or
<PAGE> 54
46
agreement; (e) lease or management agreement relating to the use or operation
of an SMR Channel; (f) other lease with respect to real or personal property,
whether as lessor or lessee, involving lease payments in excess of $50,000 per
annum or $200,000 in the aggregate; (g) contract or commitment for the purchase
of raw materials or supplies or the sale of products involving more than
$50,000 per annum or $200,000 in the aggregate; (h) indenture, agreement, note,
mortgage, guaranty or other writing which evidences or relates to any loan of
money to, or indebtedness for money borrowed by, PCI or any Subsidiary; (i)
license agreement or other contract or agreement relating to patents,
trademarks, trade names, techniques or copyrights or applications for any
thereof, inventions, trade secrets or other proprietary know-how or technical
assistance; (j) any loan to officers, directors or employees of PCI or any
Subsidiary (all of which loans will be repaid in full by the Closing); or (k)
any agreement relating to any direct or indirect acquisition of SMR Licenses in
the case of any of the foregoing, whether written or oral (and, in the case of
oral commitments, with PCI providing an accurate written summary of all
material terms to Nextel). Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection
<PAGE> 55
47
with the transactions contemplated herein, or as set forth in such Schedule, to
the knowledge of PCI, neither PCI nor any Subsidiary, nor any other party
thereto, is in default under the terms of any commitments described in
Subsections (a) through (k) of this Section.
2.21 Compliance with Securities Laws. PCI has complied with all
applicable Federal and state securities laws and regulations with regard to the
registration, offer and sale of the PCI Common Stock registered under the shelf
registration statement on Form S-4 (Registration No. 33-83810).
2.22 Brokers. Except for fees paid to Morgan Stanley, neither PCI nor any
Subsidiary has directly or indirectly dealt with anyone acting in the capacity
of a finder or broker and none of them has incurred nor will they incur any
obligation for any finder's or broker's fee or commission in connection with
this Agreement or the Merger.
2.23 Special Liabilities; Warranties. Except for matters that
individually and in the aggregate will not have a material adverse effect on
the business, financial condition, results of operations, liabilities, or
assets of PCI and its Subsidiaries, taken as a whole, and that will not impair
PCI's or its Subsidiaries' ability to perform, in any material respect, its or
their obligations under this Agreement or any other document or instrument to
which PCI or a Subsidiary is a party in connection with the transactions
contemplated herein, or as set forth on the Schedules with reference to this
Section, (i) neither PCI nor any Subsidiary has any liability under any
contracts under which the
<PAGE> 56
48
consideration to be paid or received by PCI or a Subsidiary is determined in
whole or in part based on profits or operating results, nor are there any
contingent payments owing to any person in connection with the acquisition of
any business, entity, frequency or channel by PCI or a Subsidiary; (ii) neither
PCI nor any Subsidiary has extended any warranties to their respective
customers, except those that each of them is authorized to extend on behalf of
product manufacturers; (iii) neither PCI nor any Subsidiary is now subject to
any outstanding, pending or, to the knowledge of PCI, threatened claims based
on warranty coverage; and (iv) there are no pending or threatened claims by any
manufacturer or vendor of equipment to disallow or invalidate manufacturers'
warranty coverage.
2.24 Employee Benefit Matters. Except as set forth on the Schedules with
reference to any particular subsection of this Section, to the knowledge of
PCI:
(a) PCI does not have and never has had any obligation to contribute
to any "multiemployer plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or any "multiple
employer plan" described in Section 210(a) of ERISA or Section 413(c) of the
Code. PCI does not maintain, contribute to, or have any liability under or
with respect to any plan or arrangement, whether or not terminated, which
provides or provided medical, health, life insurance of other welfare-type
benefits for current or future retired or terminated employees (except for
limited continued medical benefit coverage required to be provided under
<PAGE> 57
49
Section 4980B of the Code or as required under applicable state law). PCI does
not maintain, contribute to or have any liability under or with respect to any
employee plan which is a "defined benefit plan" (as defined in Section 3(35) of
ERISA), whether or not terminated. PCI does not maintain, contribute to or
have any liability under or with respect to any employee plan which is a
"defined contribution plan" (as defined in Section 3(34) of ERISA), whether or
not terminated.
(b) PCI does not maintain, contribute to or have any liability under
or with respect to any plan or arrangement providing benefits to current or
former employees or directors, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated (any such plan or arrangement, an
"Employee Plan"). For purposes of this Section 2.24, "PCI" includes all
organizations that now are or that have been, within the past six years, under
common control with PCI pursuant to Section 414(b) or (c) of the Code. PCI
previously has delivered to Nextel true, complete and correct copies of each of
the Employee Plans, including all amendments thereto, and any other documents
or other instruments relating thereto reasonably requested by Nextel.
(c) All Employee Plans are being, and have been, maintained,
operated and administered in all material respects in accordance with their
respective terms and in compliance with all applicable laws.
<PAGE> 58
50
(d) No Employee Plan is funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code.
(e) There have been no prohibited transactions or breaches of any of
the duties imposed on "fiduciaries" (within the meaning of Section 3(21) of
ERISA) by ERISA with respect to any Employee Plan that could reasonably be
expected to result in PCI or any Subsidiary becoming liable directly or
indirectly (by indemnification or otherwise) for any material excise tax,
penalty or other liability under ERISA or the Code.
(f) There are no actions or claims pending or, to the knowledge of
PCI or any Subsidiary, threatened, with respect to any Employee Plan (other
than routine claims for benefits), and there are no investigations or audits of
any Employee Plan by any governmental authority currently pending and there
have been no such investigations or audits that have been concluded that
resulted in any liability of PCI and its Subsidiaries that has not been fully
discharged.
(g) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
have been paid. With respect to any insurance policy providing funding for
benefits under any Employee Plan, (x) there is no liability of PCI and its
Subsidiaries, in the nature of a retroactive or retrospective rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the date
<PAGE> 59
51
hereof, and (y) no insurance company issuing any such policy is in
receivership, conservatorship, liquidation or similar proceeding and, to the
knowledge of PCI and its Subsidiaries, no such proceedings with respect to any
insurer are imminent.
(h) Each Employee Plan that is a group health plan subject to
Section 4980B of the Code (or which was subject to Section 162(k) of the Code)
has been operated in material compliance with the continuation coverage
requirements of Section 4980B of the Code and Section 162(k) of the Code, as
applicable, and Part 6 of Subtitle B of Title I of ERISA.
(i) Each Employee Plan that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance with the secondary payer
requirements of Section 1862(b)(1) of such Act.
(j) The execution, delivery and performance of this Agreement will
not, solely in and of itself, (i) constitute a stated triggering event under
any Employee Plan that will result in any payment (whether of severance pay or
otherwise) becoming due from PCI or any Subsidiary to any present or former
officer, employee, director, shareholder or consultant, or former employee (or
dependents of any thereof), or (ii) accelerate the time of payment or vesting,
or increase the amount, of compensation due to any employee, officer, director,
shareholder or consultant of PCI or any Subsidiary.
(k) Neither PCI nor any Subsidiary has agreed or committed to make
any amendments to any of the Employee Plans not
<PAGE> 60
52
already embodied in the documents comprising any such Employee Plan, other than
any amendments required by law.
(l) All contributions, transfers, and payments by PCI or any
Subsidiary in respect of any Employee Plan have been or are fully deductible
under the Code.
(m) PCI's financial statements at and for the six months ended June
30, 1996 contain and, at and for the period ending on the Closing, will contain
adequate accruals for (i) bonuses, sales commissions and vacation pay earned
but not received as of such dates and (ii) incurred or continuing but unpaid
claims under Employee Plans not funded by insurance.
(n) No Employee Plan provides benefits to any individual who is not
a current or former employee of PCI or a Subsidiary, or the dependents or other
beneficiaries of any such individual.
(o) Except as set forth on Schedule 2.24(o), no "excess parachute
payments" within the meaning of Section 280G of the Code will be made in
connection with or as a result of the Merger (without regard to whether any
such payment might be reasonable compensation for personal services performed
or to be performed in the future).
2.25 Materially Correct. Article II of this Agreement together with the
Schedules referenced herein does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
disclosures contained therein in the light of the circumstances under which
they are made, not misleading.
<PAGE> 61
53
2.26 Information. PCI has made available to Nextel each registration
statement, schedule, report, proxy statement or information statement it has
filed with the Securities and Exchange Commission (the "SEC") since January 1,
1994, including, without limitation, (a) PCI's Annual Report on Form 10-K for
the years ended December 31, 1994 and December 31, 1995, including all
documents incorporated by reference therein, and (b) PCI's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996 and any Report on Form 8-K filed
since December 31, 1995 (collectively, the "PCI Reports"). The PCI Reports,
taken as a whole and taken together with information previously furnished by
PCI to Nextel, did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. As used in this Section 2.26, "material" means material to the
business, financial condition, results of operations, liabilities or assets of
PCI and its Subsidiaries taken as a whole. PCI has delivered to Nextel on or
prior to the date of the First Agreement all private placement, confidential
offering or similar memoranda and other offering or solicitation materials used
at any time by PCI or anyone acting on its behalf in connection with any offer
or sale of securities of PCI.
2.27 Regulatory Matters.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the indicated meanings:
<PAGE> 62
54
"FCC" shall mean the Federal Communications Commission or any
successor thereto.
"FCC License" shall mean any paging, mobile telephone, SMR or
other license, permit, consent, certificate of compliance, franchise, approval
or authorization of any type granted or issued by the FCC, including, without
limitation, any of the foregoing authorizing the acquisition, construction or
operation of an SMR System (as defined herein), radio paging system or other
radio communications system.
"PCI Management Agreement" shall mean any management or other
agreement (other than a loading agreement) pursuant to which PCI or a
Subsidiary agrees to manage or to perform other services (other than loading)
with respect to SMR Licenses held by another person in exchange for either the
right to receive a portion of the revenues derived from such SMR Licenses or
the right to purchase such SMR Licenses or any loading agreement pursuant to
which such Subsidiary is loading SMR Licenses held by another person in
exchange for either the right to receive a portion of the revenues derived from
such SMR Licenses in excess of 25% of the aggregate revenues derived from such
SMR Licenses or the right to purchase such SMR Licenses.
A fact or circumstance shall be "Immaterial" for purposes of
this Section if such fact or circumstance would not result in the cancellation,
revocation, termination, adverse modification or any other material adverse
effect on any 800 MHz FCC license; the cancellation, revocation, termination,
adverse modification or any other material adverse effect on 5% or more
<PAGE> 63
55
of the frequencies in any category of service set forth on Schedule 2.27; or
any other material adverse effect on any other right granted or enjoyed by PCI,
with respect to the FCC frequencies.
"SMR License" shall mean an FCC License authorizing the
construction, ownership and operation of an SMR system in the 800 or 900 MHz
band issued pursuant to 47 CFR Part 90 of the Rules and Regulations of the FCC.
"SMR System" shall mean an SMR system licensed under 47 CFR Part
90 of the Rules and Regulations of the FCC.
"SMR Units" shall mean the number of mobile and control stations
(within the meaning of 47 CFR Part 90 of the Rules and Regulations of the FCC)
subscribing to SMR Systems licensed to or managed by PCI or a Subsidiary
excluding, however, any such units which are subject to a Third-Party
Management Agreement if the respective third party has a right to purchase the
SMR Licenses which are subject to such Third-Party Management Agreement.
"Third-Party Management Agreement" shall mean any management or
other agreement (other than a loading agreement) pursuant to which a person
(other than PCI or a Subsidiary) is managing SMR Licenses held by PCI or a
Subsidiary or any loading agreement pursuant to which a person (other than PCI
or a Subsidiary) is loading SMR Licenses held by PCI or a Subsidiary in
exchange for the right to receive a portion of the revenues derived from such
SMR Licenses in excess of 25% of the aggregate revenues derived from such SMR
Licenses.
<PAGE> 64
56
(b) License Information. Schedule 2.27 sets forth a true and
complete list of the following information, which need not with respect to the
information called for by clause (ii) below include Immaterial information, for
each FCC License issued to or operated by PCI or its Subsidiaries (including
all FCC Licenses subject to a PCI Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses), the name
of the licensee, the name of the seller(s), the call sign, the transmitter
location (by site coordinates and city), the category or type of service
(e.g., paging, SMR, etc.), the frequency or frequencies authorized, and
operating entity;
(ii) in the case of SMR Licenses, the number of channels
authorized, the number of channels constructed, whether the license is for
a conventional or trunked SMR System, the applicable loading date, whether
the SMR License is subject to a Finders Preference, whether the SMR
License is operating under Special Temporary Operating Authority ("STA")
and the applicable STA expiration date, and whether the SMR License is
managed by PCI pursuant to a PCI Management Agreement or by any other
persons pursuant to a Third-Party Management Agreement;
(iii) each holder of any such FCC License that is neither
wholly owned by PCI nor owned entirely by unaffiliated persons and managed
by PCI; and
(iv) for all FCC Licenses (including SMR Licenses), whether such
FCC Licenses are subject to rights
<PAGE> 65
57
of first refusal, options and other such rights or obligations in
existence on the date of the First Agreement, including, without
limitation, entitlements to acquire additional ownership interests, which
may affect the ownership interests of PCI.
(c) Condition of Systems. All of the properties, equipment and
systems owned and/or operated by PCI and related to the FCC licenses set forth
on Schedule 2.27 are, and, to the knowledge of PCI, any such properties,
equipment and systems added in connection with any contemplated system
expansion or construction prior to the Closing will be, in compliance with all
standards or rules imposed by any governmental agency or authority (including,
without limitation, the FCC, the Federal Aviation Administration and (if
applicable), any public utilities commission or other state or local
governments or instrumentalities) applicable to PCI or its operation of the
properties, equipment and systems or as imposed under any agreements with
customers, except for any non-compliance that is, individually or in the
aggregate Immaterial. To the knowledge of PCI, all of the equipment and
systems owned and/or operated by PCI are in good repair and working order,
ordinary wear and tear excepted. In addition to the other representations and
warranties set forth herein which are expressly based upon PCI's knowledge,
with regard to the 450 MHz FCC Licenses set forth on Schedule 2.27, the
representations in this Section 2.27(c) are made to the best of PCI's
knowledge.
<PAGE> 66
58
(d) Fees; License Compliance. PCI has paid all franchise, license
or other fees and charges which have become due in respect of its business and
has made appropriate provision as is required by generally accepted accounting
principles, consistently applied, for any such fees and charges which have
accrued. Except for Immaterial matters or as set forth in Schedule 2.27, PCI
has duly secured all necessary permits, licenses, consents and authorizations
from, and has filed all required registrations, applications, reports and other
documents with, the FCC and, if applicable, any public utilities commission and
other entity exercising jurisdiction over the SMR businesses, radio paging
businesses and other radio communications businesses of PCI or the construction
of delivery systems therefor, as such businesses are currently conducted. PCI
or a Subsidiary holds or has the contractual right to obtain the FCC Licenses
specified on Schedule 2.27 and, except for matters that are, individually or in
the aggregate Immaterial, or as indicated in such Schedule, all such FCC
Licenses are valid and in full force and effect without conditions except for
such conditions as are stated on the FCC License or as are generally applicable
to holders of similarly situated FCC Licenses. PCI has filed with the FCC
prior to any applicable deadline a complete and accurate application for
rejustification of any unconstructed or deconstructed FCC License related to
previously granted or requested wide area Enhanced Specialized Mobile Radio
("ESMR") licenses. Except as set forth on Schedule 2.27, with regard to FCC
Licenses related to wide area ESMR frequencies, neither PCI
<PAGE> 67
59
nor any of its Subsidiaries is subject to a short space agreement or any other
agreement, FCC waiver or otherwise applicable regulations encumbering or
limiting the use of such FCC License. Except for Immaterial matters or as set
forth on Schedule 2.27, all applicable loading requirements with respect to any
SMR Licenses listed on such Schedule have been met and PCI has taken every
reasonable action to cause the same to be loaded in compliance with FCC
regulations. Except matters that are, individually or in the aggregate
Immaterial, or as set forth on Schedule 2.27, to the knowledge of PCI no event
has occurred and is continuing which could (i) result in the revocation,
termination or adverse modification of any FCC License listed on such Schedule
or (ii) adversely affect any rights of PCI thereunder. Except as indicated on
Schedule 2.27, PCI has no reason to believe and no knowledge that all of the
FCC Licenses specified on Schedule 2.27 will not be renewed in the ordinary
course. Except with regard to any planned enhanced SMR Systems of PCI and
except as shown on Schedule 2.27, PCI has sufficient time, materials,
equipment, contract rights and other required resources to complete, in a
timely fashion and in full, construction of all the SMR Systems, radio paging
and other radio communications systems associated with the FCC Licenses listed
on Schedule 2.27 in compliance with all applicable technical standards and
construction requirements and deadlines. Except for matters that are,
individually or in the aggregate Immaterial, or as set forth on Schedule 2.27,
the current ownership and operation by PCI of such SMR Systems, radio paging
<PAGE> 68
60
and other radio communications systems comply with the Communications Act of
1934, as amended (the "Communications Act"), and all applicable rules,
regulations and policies of the FCC. In addition to the other representations
and warranties set forth herein which are expressly based upon PCI's knowledge,
with regard to the 450 MHz FCC Licenses set forth on Schedule 2.27, the
representations in this Section 2.27(d) are made to the best of PCI's
knowledge.
(e) Management Agreements. Set forth on Schedule 2.27(e) is a
complete and correct list of all PCI Management Agreements (and associated
option agreements, if any) and Third-Party Management Agreements to which PCI
or any Subsidiary is a party that correctly identifies the manager under each
such agreement and the holder of the SMR Licenses which are the subject of such
agreements, the transmitter locations (by address), and number of channels
covered by such SMR Licenses, the term of such agreements, any options or calls
(and the respective option or call prices as well as the time period in which
any option or call must be exercised or made) in favor of any party to such
agreements to purchase or sell any interest in such SMR Licenses and the
respective fees or revenues payable or receivable under any such agreements.
Except for matters that are, individually or in the aggregate, Immaterial or as
set forth on Schedule 2.27(e) to the knowledge of PCI and its Subsidiaries, the
terms of all such PCI Management Agreements and Third-Party Management
Agreements and the operation of each SMR System pursuant thereto comply with
the Communications Act and all
<PAGE> 69
61
applicable rules, regulations and policies of the FCC. Except for matters that
are, individually or in the aggregate Immaterial, or as set forth on Schedule
2.27(e), none of the channels licensed to PCI or its Subsidiaries are subject
to a Third Party Management Agreement. Each PCI Management Agreement includes
an option allowing PCI or a Subsidiary to purchase the channels that are
subject to that agreement and no such option will be adversely affected by the
Merger.
(f) Discrete Frequency Application. PCI has provided Nextel access
to, and prior to December 16, 1996 will have delivered to Nextel a true and
correct copy of, each Request for Rule Waiver and related digital mobile system
application and each general cover letter related to an ESMR application, as
filed with the FCC, and any correspondence relating to any frequency sent to
the FCC and all supplemental or related materials filed or sent in connection
therewith by or on behalf of PCI, all materials submitted to the FCC and/or to
PCI in connection therewith by any third party, and any written communication
issued by the FCC or any FCC staff member in response to, or otherwise in
connection with, any of the foregoing.
2.28 Schedule Disclosure. Regardless of any qualifications or limitations
on the representations and warranties set forth in this Article II regarding
materiality, PCI has used all reasonable best efforts to list and/or describe
on the Schedules all matters required to be listed and/or described by the
representations and warranties set forth herein.
<PAGE> 70
62
2.29 Information in Registration Statement. The information, regarding
PCI, its subsidiaries and affiliates, included in the Registration Statement
referred to in Sections 4.4 and 5.2 of this Agreement will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
2.30 Castle Tower Agreements. PCI, a certain PCI Subsidiary and Castle
Tower Corporation, formerly known as Castle Communications Corporation
("Castle"), entered into that certain License Agreement dated as of January 10,
1995, as amended, (the "Castle License Agreement") and that certain Purchase
and Sale Agreement dated as of December 23, 1994, as amended, (the "Castle
Purchase Agreement"). Except as set forth in the Schedules with reference to
this Section, (i) there are no actions, suits or proceedings, formally
instituted, pending or threatened, against PCI or any of its affiliates related
to the Castle Purchase Agreement or the Castle License Agreement, and (ii) all
radio communications equipment, including base stations, antennae, poles,
dishes or masts, cabling or wiring and accessories used therewith, leased to or
owned by PCI and located on property owned by Castle is currently in compliance
with the technical standards relating to frequency compatibility, radio
interference protection, antenna type and location and physical installation
set forth on Exhibit B to the License Agreement.
<PAGE> 71
63
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEXTEL AND MERGER SUB
Nextel and Merger Sub, jointly and severally, represent and warrant to PCI
that:
3.1 Corporate Organization; Authorization. (a) Each of Nextel and Merger
Sub has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own or lease its properties and to conduct its business as it
is now being conducted.
(b) Each of Nextel and Merger Sub has all necessary corporate power and
authority to enter into this Agreement and to perform all of the obligations to
be performed by it hereunder. The execution, delivery and performance of this
Agreement by Nextel and Merger Sub have been duly authorized by Nextel and
Merger Sub, respectively, and upon the execution and delivery hereof by Nextel
and Merger Sub, this Agreement will constitute the valid and legally binding
obligations of Nextel and Merger Sub, enforceable against each of them in
accordance with its terms.
3.2 Capital Stock. The entire authorized capital stock of Nextel
consists solely of (a) 515,000,000 shares of Nextel Common Stock, of which
337,899,220 shares were issued and outstanding as of August 30, 1996, (b)
35,000,000 shares of Class B Non-Voting Common Stock, par value $.001 per
share, of which 17,830,000 shares were issued and outstanding as of August 30,
1996, (c) 10,000,000 shares of preferred stock, par value $.01 per share,
<PAGE> 72
64
of which (i) 8,163,265 Class A shares, (ii) 82 Class B shares and (iii) no
other Preferred shares of any other Class were issued and outstanding as of
August 30, 1996. At the Effective Time of the Merger, the shares of Nextel
Common Stock issued by reason of the Merger will be duly authorized, validly
issued, fully paid and nonassessable, and their issuance in connection with the
Merger will be registered under the Securities Act and registered or exempt
from registration under applicable state securities laws and such shares of
Nextel Common Stock will be listed on the Nasdaq NM. At the Effective Time of
the Merger, Nextel will have a sufficient number of authorized but unissued
shares of Nextel Common Stock reserved under the Nextel Plan for issuance upon
conversion and exercise of the PCI Stock Options.
3.3 Common Stock; Registration. At the Closing, the shares of Nextel
Common Stock issued by reason of the Merger will be duly authorized, validly
issued, fully paid and nonassessable, will be registered under the Securities
Act, and will be "voting stock" within the meaning of Section 368(a)(1)(B) of
the Code.
3.4 No Conflict. The execution and delivery of this Agreement by Nextel
and Merger Sub and the consummation of the transactions contemplated hereby do
not and will not violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by the terms
of, any applicable law, rule or regulation of any governmental body, the
Amended and Restated Certificate of Incorporation or the Amended and Restated
By-Laws of Nextel, or the Certificate of Incorporation or the By-Laws of Merger
Sub or any agreement,
<PAGE> 73
65
indenture or other instrument to which Nextel or Merger Sub is a party or by
which Nextel or Merger Sub may be bound, or of any order, judgment or decree
applicable to it, or terminate or result in the termination of any such
agreement, indenture or instrument, or result in the creation of any lien,
charge or encumbrance upon any of the properties or assets of Nextel or Merger
Sub under any agreement to which either of them is a party, or constitute an
event which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a lien, charge or
encumbrance, except where any such violation, breach, acceleration, termination
or creation would not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of Nextel and its
subsidiaries, taken as a whole, or would not impair Nextel's or Merger Sub's
ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which Nextel or Merger Sub is
a party in connection with the transactions contemplated herein.
3.5 Information. Nextel has delivered to PCI each registration
statement, schedule, report, proxy statement or information statement it has
filed with the SEC from January 1, 1996 to the date of the First Agreement,
including, without limitation, (a) Nextel's Annual Report on Form 10-K for the
year ended December 31, 1995 and (b) Nextel's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, (collectively, the "Nextel Reports"). As of
the date of the First Agreement, the
<PAGE> 74
66
Nextel Reports, taken as a whole and taken together with any other information
previously furnished by Nextel to PCI (except for any forecasts or projections
or forward-looking estimates or similar predictive information contained
therein), did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. As used in this Section, "material" means material to the
business, financial condition, results of operations, liabilities or assets of
Nextel and its subsidiaries, taken as a whole. The representation made in this
Section shall also be deemed to be made by Nextel to PCI immediately prior to
the Closing, but with reference to all information furnished by Nextel to PCI
prior to the Closing.
3.6 Information in Registration Statement. The information, except
information regarding PCI, its Subsidiaries and affiliates, included in the
Registration Statement referred to in Sections 4.4 and 5.2 of this Agreement
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE IV. COVENANTS OF PCI
4.1 Conduct of Business. (a) From the date of the First Agreement until
the Effective Time of the Merger, PCI shall conduct its business, and shall
cause each Subsidiary to conduct
<PAGE> 75
67
such Subsidiary's business, only in the ordinary course and, without limiting
the generality of the foregoing, neither PCI nor any Subsidiary shall, without
the written consent of Nextel: (i) except as permitted by Section 4.1(b),
dispose or contract to dispose of any SMR Channels or FCC Licenses except as
may occur as a result of an FCC enforcement action or otherwise required under
law; (ii) except as set forth on a Schedule that refers to this Section,
dispose of or contract to dispose of any other assets, tangible or intangible,
except in the ordinary course of business, consistent with past practice and,
with respect to capital assets, in connection with the replacement of the asset
being disposed of; (iii) except as set forth in Section 4.7 or as permitted by
Section 4.1(b), acquire or contract to acquire any SMR Channels or FCC Licenses
or any rights to acquire any SMR Channels or FCC Licenses or acquire or
contract to acquire, directly or indirectly, any interest in an entity that has
any interest in SMR Channels or FCC Licenses; (iv) voluntarily incur any
absolute or contingent debt obligation except in the ordinary course of
business under currently existing lines of credit; (v) enter into any lease or
contract for the purchase or sale of real estate or of any interest therein;
(vi) encumber any property or other assets except for encumbrances constituting
Permitted Liens or encumbrances of which Nextel is promptly notified in writing
and which will be removed prior to the Closing; (vii) declare or pay any
dividend or purchase or redeem any of its shares, notes or other securities or
make any other distribution to shareholders; (viii) other than in accordance
<PAGE> 76
68
with normal compensation adjustment policies (all of which, including year-end
bonuses, are included in the Schedules), increase the rate of remuneration to
any of its directors, officers, employees or other representatives, or agree to
do so or fail to pay any year-end bonuses then owed included on such Schedule
prior to the Effective Time of the Merger; (ix) except for obtaining
stockholder approval of the 1996 Stock Option Plan and the 1996 Non-Employee
Director Stock Option Plan, amending the 1994 Non-Employee Director Stock
Option Plan to eliminate automatic granting of PCI Options or as permitted by
Section 5.6(a), adopt any new or amend any existing employee benefit plan or
any employment agreement or amend any PCI Stock Option once implemented except
as set forth in Section 1.21(a); (x) form or cause to be formed any subsidiary;
(xi) issue, sell, distribute or dispose of any shares, notes or other
securities of PCI or offer to sell or sell any PCI Common Stock registered
pursuant to PCI's shelf registration statement on Form S-4 (Registration No.
33-83810) or commit itself to do so; (xii) make any commitments for capital
improvements; or (xiii) fail to keep its properties insured substantially to
the same extent as they are currently insured.
(b) PCI may dispose of or contract to dispose of any non-SMR Channel or
FCC License that is within 25 miles of an MSA market identified on Schedule 1.2
but does not meet the criteria set forth in Section 1.2(d)(vi)(y) in exchange
for SMR Channels or FCC Licenses that enable PCI to Deliver additional
Channels. PCI may acquire third-party FCC Licenses that are located within
<PAGE> 77
69
55 miles of a PCI controlled license, but PCI may not pay more than $10,000 per
frequency so acquired.
4.2 Reasonable Efforts. PCI shall, and shall cause each Subsidiary to,
use all reasonable efforts to preserve intact its business organization and to
preserve its goodwill as to customers, suppliers and others having business
relations with it.
4.3 Inspection. PCI shall, and shall cause each Subsidiary to, permit
representatives of Nextel, during normal business hours, to examine PCI's and
each Subsidiary's properties, books, contracts, tax returns and other records,
and shall furnish such representatives with all such information concerning
such affairs as they may reasonably request.
4.4 SEC Registration. (a) PCI shall use its reasonable best efforts to,
and shall use its reasonable best efforts to cause each Subsidiary to, furnish
to Nextel such information about PCI and each Subsidiary (including their
respective affiliates) as may be necessary to enable Nextel to prepare and file
with the SEC a Registration Statement on Form S-4 under the Securities Act and
the rules and regulations promulgated thereunder, in respect of the shares of
Nextel Common Stock to be issued by reason of the Merger (such registration
statement, the prospectus included therein and the proxy statement to be
furnished to the holders of PCI Common Stock, in each case together with any
amendments or supplements thereto, the "Registration Statement"). PCI shall
use its reasonable best efforts so that the PCI Information (as defined below)
included
<PAGE> 78
70
in the Registration Statement shall not, at the time the Registration Statement
is declared effective, at the time the proxy statement/prospectus contained
therein is first mailed to PCI's stockholders, or at the time of the meeting of
the stockholders of PCI to approve the Merger, contain any untrue statement of
a material fact, omit to state any material fact required to be stated therein,
or omit any material fact necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or
circumstance should come to the attention of PCI with respect to the PCI
Information which is required to be set forth in an amendment or supplement to
the Registration Statement, PCI will immediately notify Nextel and shall assist
Nextel in appropriately amending or supplementing the Registration Statement in
the manner contemplated in Section 5.2(b). An amendment or supplement may be
accomplished, to the extent permitted by law, rule or regulation, by including
such information in a filing under the Exchange Act that is incorporated by
reference into the Registration Statement. The Registration Statement insofar
as it relates to information concerning PCI, its Subsidiaries, or any of their
respective businesses, assets, directors, affiliates, officers or shareholders
that is supplied by PCI for inclusion in the Registration Statement, including
incorporation by reference to SEC filings (the "PCI Information"), will comply
as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations
<PAGE> 79
71
thereunder and the Exchange Act and the rules and regulations thereunder;
except that PCI shall have no liability or obligation for any information other
than the PCI Information.
(b) PCI shall instruct its accountants to deliver and shall use its
reasonable best efforts to cause its accountants, KPMG Peat Marwick LLP, to
deliver to Nextel letters dated at the time the Registration Statement becomes
effective and as of the Closing, addressed to Nextel, each containing such
matters as are customarily contained in auditors' letters regarding information
about PCI and its Subsidiaries expressly for inclusion in the Registration
Statement, and in a form and substance reasonably satisfactory to Nextel.
4.5 Antitrust Filing. In connection with the transactions contemplated
by this Agreement, PCI (and, to the extent required, its affiliates) shall
promptly file or cause to be filed any reports, documents, filings or other
data required to be filed by PCI pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the rules and regulations
promulgated thereunder, and shall use its best efforts to respond as promptly
as practicable to all inquiries received for additional information or
documentation.
4.6 Restraint on Solicitations. From the date of the First Agreement
until the Effective Time of the Merger, neither PCI nor any of its respective
directors, officers, employees, affiliates, representatives or agents, shall
directly or indirectly, encourage (including by way of furnishing information),
solicit, initiate, participate in or otherwise be a party to any
<PAGE> 80
72
discussions or negotiations with any corporation, partnership, person or other
entity or group concerning any transaction that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal (as defined herein). Neither the
Board of Directors of PCI nor any committee thereof shall (a) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Nextel, the
approval or recommendation by the Board of Directors of PCI of the Merger or
this Agreement or (b) approve or recommend, or propose to approve or recommend,
any Takeover Proposal or any other acquisition of outstanding shares of PCI
Common Stock other than pursuant to the Merger or this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement shall
prevent the Board of Directors of PCI from furnishing information to, or
entering into discussions or negotiations with, any unsolicited corporation,
partnership, person or other entity or group, or taking any action described in
clauses (a) and (b) of the preceding sentence, if and only to the extent that
the Board of Directors of PCI shall have determined in good faith, after
receiving written advice of its outside counsel, that such action would be
required under applicable law in the exercise of its fiduciary duties. PCI
will immediately notify Nextel if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, PCI. As used in this
Agreement, "Takeover Proposal" shall mean any tender or exchange offer,
proposal, other than a proposal by Nextel or any of its affiliates, for a
<PAGE> 81
73
merger, share exchange or other business combination involving PCI or any
proposal or offer to acquire in any manner a substantial equity interest in PCI
or a substantial portion of the assets of PCI.
4.7 Best Efforts. PCI shall, and shall cause each Subsidiary to, use its
reasonable best efforts (i) to obtain prior to Closing all of the SMR licenses
or applications being sought by PCI and/or a Subsidiary that are on file with
and pending approval from the FCC prior to Closing, including all frequencies
or applications pending as of the date of the First Agreement for wide area
ESMR filings and all finder's preference applications, and (ii) to obtain as
promptly as practicable and in any event prior to Closing all FCC approvals or
consents necessary to permit the consummation of the transactions contemplated
by this Agreement. PCI shall obtain the amendments, consents and approvals
regarding the PCI Stock Options and/or any related agreements contemplated by
Section 1.21(a).
4.8 Stockholder Approval. After the Registration Statement has become
effective, PCI shall use its reasonable best efforts to promptly furnish a copy
of the proxy statement/ prospectus included therein to each stockholder of PCI
and to call and convene a special meeting to obtain promptly any approvals of
the PCI stockholders required in connection with the transactions contemplated
by this Agreement.
4.9 Affiliates.
(a) PCI shall use all reasonable efforts to cause each person who is
an "affiliate" of PCI for purposes of Rule 145
<PAGE> 82
74
under the Securities Act to deliver to Nextel prior to the date of PCI's
stockholders' meeting a written agreement substantially in the form attached
hereto as Annex A.
4.10 Update Information. Not earlier than ten (10) and not less than five
(5) days before the date scheduled for Closing, PCI shall correct and
supplement in writing any information furnished on Schedules that, to the
knowledge of PCI, is incorrect or incomplete (or otherwise expressly
contemplated by Article II of this Agreement), and shall promptly furnish such
corrected and supplemented information to Nextel, so that such information
shall be correct and complete at the time such updated information is so
provided. Thereafter, to the Closing, PCI shall notify Nextel in writing of
any changes or supplements to the updated information needed, to the knowledge
of PCI, to make such information correct and complete at all times to the
Closing. It is agreed that the furnishing of such corrected and supplemental
information, in and of itself, shall not create any presumption that such
information constitutes or evidences the existence of a material change or any
breach or violation by PCI of any provision of this Agreement.
ARTICLE V. COVENANTS OF NEXTEL
5.1 Antitrust Filing. In connection with the transactions contemplated
by this Agreement, Nextel shall promptly file or cause to be filed any reports,
documents, filings or other data required to be filed by Nextel pursuant to the
HSR Act and the rules and regulations promulgated thereunder, and shall use its
<PAGE> 83
75
best efforts to respond as promptly as practicable to all inquiries received
for additional information or documentation.
5.2 Registration Statement.
(a) Nextel shall file the Registration Statement and use its
reasonable best efforts to cause such Registration Statement to become
effective as promptly as practicable, and shall use its reasonable best efforts
to take any action required to be taken to comply in all material respects with
any applicable federal or state securities laws in connection with the issuance
of Nextel Common Stock in the Merger; except that such covenant of Nextel is
made, as to those portions of the Registration Statement containing or required
to contain PCI Information, assuming and relying on timely and full compliance
with Section 4.4.
(b) Nextel shall use its reasonable best efforts so that the
information included in the Registration Statement, shall not, at the time the
Registration Statement is declared effective, at the time the proxy
statement/prospectus contained therein is first mailed to PCI's stockholders,
or at the time of the meeting of the stockholders of PCI to approve the Merger,
contain any untrue statement of a material fact, omit to state any material
fact required to be stated therein, or omit to state any material fact
necessary in order to make the statements therein not misleading; except that
such covenant of Nextel is made, as to those portions of the Registration
Statement containing or required to contain PCI Information, assuming and
relying on timely and full compliance with Section 4.4. If at
<PAGE> 84
76
any time prior to the Effective Time any event or circumstance should come to
the attention of Nextel which is required to be set forth in an amendment or
supplement to the Registration Statement, Nextel will use its reasonable best
efforts to appropriately amend or supplement the Registration Statement. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the
Exchange Act that is incorporated by reference into the Registration Statement.
The Registration Statement and all other documents required to be filed by
Nextel with the SEC in connection with the transactions contemplated herein
will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder;
except that Nextel shall have no liability or obligation for any PCI
Information.
5.3 Current Public Information. Nextel shall use all reasonable efforts
to file all reports required to be filed by it under the Securities Act or the
Securities Exchange Act of 1934 and the rules and regulations adopted by the
SEC thereunder and shall use all reasonable efforts to take such further action
as may be necessary to ensure that the requirements of Rule 144(c) under the
Securities Act are satisfied such as to enable any "affiliates" of PCI (for
purposes of Rule 145 under the Securities Act) to offer or sell the shares of
Nextel Common Stock received by them in the Merger pursuant to paragraph (d) of
<PAGE> 85
77
Rule 145 (subject to compliance with the provisions of paragraphs (e), (f) and
(g) of Rule 144).
5.4 Offer to Warrant Holders. Nextel shall offer to each holder of a
warrant listed on Schedule 2.5(a) (other than FMR, Corp.) the opportunity to
exchange its warrant at the Closing for a warrant to purchase shares of Nextel
Common Stock in the form attached as Annex D. Any terms and conditions
negotiated by Nextel with any warrant holder shall not give any other warrant
holder the right to comparable terms and conditions. Nextel's offer pursuant
to this Section 5.4 shall expire at the time the Registration Statement is
filed with the SEC.
5.5 Directors and Officers Indemnification. (a) For a period of three
years from and after the Effective Time of the Merger, Nextel shall cause the
Surviving Corporation to indemnify and hold harmless each present and former
director and officer of PCI against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, proceeding, investigation or action,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time
of the Merger, whether asserted or claimed prior to, at or after the Effective
Time of the Merger, to the fullest extent that PCI would have been permitted
under the Certificate of Incorporation or By-Laws of PCI in effect immediately
prior to the Effective Time of the Merger to indemnify such person (including
the advancing of expenses as incurred to the fullest extent permitted
<PAGE> 86
78
under applicable law; provided that the person to whom such expenses are
advanced provides an undertaking to the Surviving Corporation to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification).
(b) For a period of three years from and after the Effective Time of
the Merger, Nextel shall cause the Surviving Corporation to use all reasonable
efforts to maintain director and officer insurance comparable to that
maintained by PCI at the Effective Time of the Merger. After the third
anniversary of the Closing, the Surviving Corporation may terminate such
insurance provided that the Board of Directors of the Surviving Corporation
reasonably determines that the Surviving Corporation has the financial ability
to satisfy its indemnification obligations under this Section 5.5.
5.6 Employee Matters. (a) If any individual who is employed by PCI at
the Effective Time of the Merger whose employment with the Surviving
Corporation (and all affiliates of the Surviving Corporation) is involuntarily
terminated by the Surviving Corporation or an affiliate without cause (as
defined below) during the six-month period immediately after the Effective Time
of the Merger then (y) such individual shall receive a severance payment,
subject to applicable withholding and other taxes, in an amount equal to (i)
three (3) times such employee's monthly salary, plus (ii) an additional week's
salary for each year that such employee had been employed by PCI, plus (iii) an
amount equal to the unvested employer's contributions made or accrued on or
before the date of the Closing to the PCI
<PAGE> 87
79
401(k) Plan for the account of that employee and (z) all issued and outstanding
options of Nextel held by such employee shall automatically vest. For purposes
of this Section, termination without cause shall mean the termination of any
employee's employment with the Surviving Corporation and all affiliates of the
Surviving Corporation other than a termination for one or more of the following
reasons: (i) willful, knowing and intentional violation of an express
direction or rule or regulation of general application; (ii) theft,
misappropriation or embezzlement of the employer's funds; (iii) conviction of a
felony; or (iv) repeated and consistent failure to be present at work during
regular hours without a valid reason therefor.
(b) In accordance with the terms and provisions of the executive
employment agreements dated as of February 22, 1996 and presently in existence
between PCI and each of Dale E. Harkins, Warren D. Harkins, Thomas R. Modisett,
C.G. Whitten and Bradley B. Waldrip (each, an "Executive"), the employment of
each Executive shall be terminated upon the occurrence of a "change of control"
as defined therein, and, upon such termination, the Surviving Corporation will
pay and make available to each Executive, all of the severance payments and
rights provided for in Section 2.2(e) of each such agreement.
(c) At the Effective Time of the Merger, all issued and outstanding
options of PCI held by non-employee directors of PCI shall automatically vest.
ARTICLE VI. JOINT COVENANTS
6.1 Confidentiality.
<PAGE> 88
80
(a) Except (i) for the use of information as required in connection
with Nextel's Registration Statement, (ii) for any other governmental filing
required in order to complete the transactions contemplated herein, and (iii)
as Nextel and PCI may agree or consent in writing, all information received by
PCI and Nextel and their respective representatives pursuant to the terms of
this Agreement shall be kept in strictest confidence by the receiving party and
its representatives. If the transactions contemplated hereby shall fail to be
consummated, all copies of documents or extracts thereof containing information
and data as to one of the other parties, including all information prepared by
the receiving party or such receiving party's representatives, shall be turned
over to the party furnishing same, except that such information prepared by the
receiving party or such receiving party's representatives may be destroyed at
the option of the receiving party, with notice of such destruction (or return)
to be confirmed in writing to the disclosing party. Any information not so
destroyed (or returned) will remain subject to these confidentiality provisions
(notwithstanding any termination of this Agreement) until the second
anniversary of the date of the First Agreement.
(b) The foregoing confidentiality provisions shall not apply to such
portions of the information received which (i) are or become generally
available to the public through no action by the receiving party or by such
party's representatives or (ii) are or become available to the receiving party
on a nonconfidential basis from a source, other than the disclosing
<PAGE> 89
81
party or its representatives, which the receiving party believes, after
reasonable inquiry, is not prohibited from disclosing such portions to it by a
contractual, legal or fiduciary obligation, and shall not apply to any
disclosure by Nextel of any information disclosed by PCI, so long as such
disclosure occurs after the Closing.
6.2 Standstill Agreement. From the date of the First Agreement until
the Effective Time of the Merger, neither PCI, nor any representatives of PCI,
acting on its behalf or in concert with it, will directly or indirectly (i)
acquire, or offer, propose or agree to acquire, by purchase or otherwise, any
Nextel Common Stock, or (ii) participate in or encourage the formation of any
partnership, syndicate or other group which owns or seeks or offers to acquire
beneficial ownership of, any Nextel Common Stock.
6.3 Trading Prohibitions. PCI hereby acknowledges that as a result of
disclosures by Nextel contemplated under this Agreement, PCI and its affiliates
may, from time to time, have material, non-public information concerning Nextel
and other companies. PCI confirms that it and its affiliates are aware and PCI
has advised its representatives that (i) the United States securities laws may
prohibit a person who has material, non-public information from purchasing or
selling securities of any company to which such information relates, and (ii)
material non-public information shall not be communicated to any other person
except as permitted herein.
<PAGE> 90
82
6.4 Substitute of Subsidiary. Nextel has the option to substitute any
wholly-owned direct or indirect subsidiary of Nextel either for NFC or Merger
Sub in connection with the Merger, provided that such substitution does not
adversely affect the interests of PCI or its stockholders. If Nextel makes
such an election, each reference to NFC or Merger Sub, as applicable, herein
shall be deemed to refer to the new subsidiary.
6.5 Support of Transactions. Nextel, PCI and their respective affiliates
shall each (i) use his or its reasonable best efforts to assemble, prepare and
file any information (and, as needed, to supplement such information) as may be
reasonably necessary to obtain as promptly as practicable all governmental and
regulatory consents required under Article VIII, (ii) exert his or its
reasonable best efforts to obtain all material consents and approvals of third
parties that either of Nextel, PCI or their respective affiliates are
responsible to obtain in order to consummate the Merger, (iii) take such other
action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Article VIII or otherwise to comply with
this Agreement, and (iv) provide the other parties, and such other party's
employees, officers, accountants, lawyers, financial advisors and other
representatives with access to its personnel, properties, business and records
under all reasonable circumstances.
6.6 Cooperation Concerning Extended Implementation Channels. Nextel, PCI
and their respective controlled affiliates agree to cooperate and to use their
respective best efforts to
<PAGE> 91
83
achieve the maximum amount of time from the FCC for construction of the
Extended Implementation Channels. Accordingly, PCI agrees to present
reasonably in advance of any proposed filing with the FCC a draft for review by
Nextel and either (i) to make such changes as are proposed by Nextel or (ii) to
discuss any changes proposed by Nextel that will not be made in the filing.
Further, Nextel, PCI and their respective controlled affiliates shall cooperate
with regard to any design, engineering, zoning, equipment selection or
construction efforts to achieve construction of such Extended Implementation
Channels as economically as possible and in full compliance with all applicable
rules and regulations of the FCC. Nextel may, in its sole discretion, advance
cash to PCI to enable PCI to construct channels on which there is at any time
prior to Closing less than six months remaining to construct Extended
Implementation Channels after the FCC has responded to PCI's filings for
rejustification of its extended implementation grants.
6.7 Auction Participation.
(a) Definitions. For purposes of this Section, the following terms
shall have the following indicated meanings:
(i) "EA" means Bureau of Economic Analysis Economic Area, the
defined market-based service areas in which blocks of SMR spectrum are
proposed to be assigned pursuant to the EA Auction.
(ii) "EA Auction" means the 800 MHz SMR block license auction
established by the FCC in the First Report and Order, PR Docket No.
93-144, released December 15, 1995.
<PAGE> 92
84
(iii) "Overlap EAs" means the following EAs:
127 (Dallas/Ft. Worth); 128 (Abilene); 129 (San Angelo); 130 (Austin); 131
(Houston); 132 (Corpus Christi); 133 (McAllen); 134 (San Antonio); 135
(Odessa-Midland); 136 (Hobbs); 137 (Lubbock); 138 (Amarillo); 157 (El Paso);
and 87 (Beaumont).
(b) Formation of Consortium. In the event that, pursuant to FCC
rules, the filing deadline for eligibility to participate in the EA Auction
occurs prior to the earlier of the Effective Time of the Merger or the
expiration or termination of this Agreement, PCI and Nextel or a designated
subsidiary (hereinafter referred to as "Nextel") shall form a consortium to
participate in bidding in the EA Auction for block licenses in the Overlap EAs.
Nextel shall determine and control all aspects of the consortium's bidding
strategy and participation (including, without limitation, determining the
amount of the joint bids to be submitted by the consortium, the EAs in which to
bid, and whether to top competing bids) and shall be responsible for funding
100% of the consortium's bids. Neither party shall bid for block licenses in
the Overlap EAs except via the consortium and PCI shall not bid for block
licenses in EAs outside of the Overlap EAs. Nextel shall be free to bid for
block licenses outside of the Overlap EAs individually or in consortia formed
with other parties, and without reference to the consortium procedures set
forth herein.
(c) Awarded Channels. Nextel shall be entitled to retain the right
to all channels included in block licenses the consortium is awarded pursuant
to the EA Auction, if any (each,
<PAGE> 93
85
an "Awarded License") subject to the PCI purchase option hereinafter described.
In the event of the termination or expiration of this Agreement prior to the
Effective Time of the Merger but after the formation of the consortium, PCI
shall have the right to purchase an aggregate of twenty (20) channels in each
Overlap EA in which an Awarded License is granted (but no more than twenty (20)
channels in any Overlap EA), exercisable by written notice to Nextel within
thirty (30) days after the later of (i) such expiration or termination, and
(ii) the grant of the Awarded License to the consortium; provided that (A) the
consortium is granted Awarded License(s) including more than twenty (20)
channels in the Overlap EA with respect to which PCI wishes to exercise its
purchase option; and (B) if the disaggregation of channels from an Awarded
License would be necessary to permit the assignment and sale of such channels
to PCI, such disaggregation of channels included in licenses granted pursuant
to the EA Auction is permitted under FCC rules. The purchase price payable to
Nextel upon the exercise of such option shall be an amount in cash equal to the
auction bid price paid by the consortium for such channels. The channels sold
to PCI upon an exercise of the purchase option shall be chosen by Nextel and
shall be contiguous channels included in an Awarded License. The parties shall
use all reasonable efforts to effect the assignment to PCI of any channels with
respect to which the purchase option is exercised (including, without
limitation, cooperation in the submission of applications for the assignment or
transfer of control of subject channels required under applicable FCC rules)
<PAGE> 94
86
promptly following such exercise. Such purchase option is applicable only to
the rights to use of spectrum in the Overlap EAs which may be obtained by the
consortium in the EA Auction (if any), and shall not apply to existing channel
holdings of Nextel or its subsidiaries or channel holdings that Nextel or its
subsidiaries may acquire other than as an Awarded License in the EA Auction.
(d) Further Assurances; Regulatory Compliance. The provisions of
this Agreement reflect the intention of the parties with respect to their
participation in the EA Auction, but such provisions are based on certain
assumptions regarding the procedures and rules adopted by the FCC pursuant to
which the EA Auction will be conducted (including, without limitation, the
permissibility of parties bidding jointly via a consortium for block licenses
in specified EAs, but individually and without reference to the consortium in
other EAs). If, however, such procedures and rules vary from those assumed by
the parties hereto, such that the provisions of this Agreement are inapposite
or otherwise unworkable, the parties agree to negotiate in good faith to amend
this Agreement in order to provide an alternate manner of cooperating in their
participation in the EA Auction in the Overlap EAs to carry out the intent of
the parties set forth herein. Notwithstanding the foregoing, if any provision
herein does not comport with regulations adopted by the FCC, such provision
will be null and void. The parties will extend all reasonable good faith
efforts to act in conformance with the intent of this Agreement but under no
circumstances will this
<PAGE> 95
87
Agreement be interpreted as requiring either party to take any action
prohibited, or fail to take any action required, by FCC regulations.
ARTICLE VII. CLOSING
7.1 Filing. As soon as all of the conditions set forth in Article VIII
of this Agreement have either been fulfilled or waived, the Boards of Directors
of Nextel, NFC, Merger Sub and PCI hereby direct their officers forthwith to
file and record all relevant documents with the appropriate government
officials to effectuate the Merger.
7.2 Closing. The Closing shall, unless another date or place is agreed
to in writing by the parties hereto, take place at a location and time mutually
agreed upon by Nextel and PCI at the earliest practicable date, and such date,
time and location shall be confirmed in writing by such parties not less than
ten (10) days prior to the scheduled date of the Closing. The term "Closing,"
when used in this Agreement, means the Effective Time of the Merger.
ARTICLE VIII. CONDITIONS TO OBLIGATIONS
8.1 Conditions to Obligations of Nextel and PCI. The obligations of
Nextel and PCI to consummate, or cause to be consummated, the Merger are
subject to the satisfaction of the following conditions, any one or more of
which may be waived in writing by such parties:
<PAGE> 96
88
(a) The stockholders of PCI shall have taken all necessary action to
authorize, approve and adopt this Agreement and the transactions referred to
herein.
(b) All waiting periods under the HSR Act and the regulations
promulgated thereunder applicable to the Merger shall have expired or been
terminated.
(c) All necessary approvals, clearances and consents of governmental
and regulatory authorities required to be procured by Nextel and PCI in
connection with the Merger (including all required FCC approvals and consents,
which shall be deemed to be obtained for purposes of this Agreement only when
they have become Final Orders), and all material approvals and consents of
third parties that are required to be obtained in connection with the
transactions contemplated by this Agreement or the Merger Agreement, shall have
been procured. Any consent or approval granted or an order entered by the FCC
shall be a "Final Order" when a sufficient number of days shall have elapsed
from the date of entry or grant thereof without the filing of any adverse
request, petition or appeal by any party or third party or by the FCC (on its
own motion) with respect to such consent, approval or order, or any aspect or
portion thereof, or any resubmissions of any applications or requests for any
of such consents, approvals or orders, or, if challenged, that such consent,
approval or order (or affected aspects or portions thereof) shall have been
reaffirmed or upheld and the applicable period for seeking further
administrative or judicial review
<PAGE> 97
89
shall have expired without the filing of any action, petition or request for
further review.
(d) There shall not be in force any order or decree, statute, rule
or regulation nor shall there be on file any complaint by a governmental agency
seeking an order or decree, restraining, enjoining or prohibiting the
consummation of the Merger, and neither Nextel nor NFC nor Merger Sub nor PCI
nor any of its Subsidiaries shall have received notice from any governmental
agency that it has determined to institute any suit or proceeding to restrain
or enjoin the consummation of the Merger or to nullify or render ineffective
this Agreement if consummated, or to take any other action which would result
in the prohibition or material change in the Merger.
(e) Nextel's Registration Statement shall have become effective
under the Securities Act and no stop order suspending such effectiveness shall
have been issued or threatened with respect thereto.
(f) The registration statements or other filings as may be required
under applicable blue sky laws pursuant to Annex B shall have become effective,
and no stop order shall be threatened or in effect with respect thereto.
(g) The shares of Nextel Common Stock issuable in the Merger shall
have been listed or approved for listing upon notice of issuance by the Nasdaq
NM.
8.2 Conditions to Obligations of Nextel. The obligation of Nextel to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the
<PAGE> 98
90
satisfaction of the following additional conditions, any one or more of which
may be waived in writing by Nextel:
(a) Each of the representations and warranties of PCI contained in
this Agreement shall be true and correct both on the date of the First
Agreement and as of the Closing, as if made anew at and as of that time, and
each of the covenants and agreements of PCI and its Subsidiaries to be
performed as of or prior to the Closing shall have been duly performed, except
in each case for changes after the date of the First Agreement which are
contemplated or expressly permitted by this Agreement.
(b) PCI shall have delivered to Nextel a certificate signed by its
President, dated the Closing, certifying, in form reasonably satisfactory to
Nextel and to its counsel that, to the best of the knowledge and belief of such
officer, the conditions specified in Section 8.1 as they relate to PCI and in
subsection 8.2(a), (d), (e), (i) and (j) have been fulfilled.
(c) Nextel shall have received opinions, dated the Closing, from
Gardere & Wynne, L.L.P. in the form of Annex C-1 and from Gardner, Carton &
Douglas, in the form of Annex C-2.
(d) The FCC shall have acted on PCI's filing(s) for rejustification
of its extended implementation authority.
(e) PCI shall have no liabilities or obligations except Permitted
Liabilities.
(f) Nextel shall have received letters from KPMG Peat Marwick LLP,
dated as of the date the Registration Statement becomes effective and as of the
Closing, addressed to Nextel, containing such matters as are customarily
contained in auditors'
<PAGE> 99
91
letters regarding information about PCI and its Subsidiaries expressly for
inclusion in the Registration Statement, and in form and substance reasonably
satisfactory to Nextel.
(g) At the time the Registration Statement becomes effective, and
also at the Closing, PCI and its Subsidiaries shall have furnished to Nextel
certificates, dated as of said times and signed by its President and Secretary,
to the effect that to the best of the knowledge and belief of the signing
persons the material contained in the Registration Statement which relates to
PCI and its Subsidiaries, contains, as of the date of each of such
certificates, no material misstatement of fact and does not omit to state any
material fact necessary to make the statements made not misleading.
(h) Nextel shall have received from each "affiliate" of PCI (as
defined in Rule 145 under the Securities Act) a Rule 145 Letter in the form of
Annex A.
(i) No stockholder of PCI shall be entitled to exercise dissenter's
or appraisal rights under the GCL.
(j) PCI shall be the sole owner of each entity listed on Schedule
2.2(b).
(k) Nextel and Castle shall have entered into definitive agreements
that are consistent with the terms set forth in Annex F.
8.3 Conditions to the Obligations of PCI. The obligation of PCI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following
<PAGE> 100
92
additional conditions, any one or more of which may be waived in writing by
PCI:
(a) Each of the representations and warranties of Nextel contained
in this Agreement shall be true and correct in all material respects both on
the date of the First Agreement and as of the Closing, as if made anew at and
as of that time, and each of the covenants and agreements of Nextel to be
performed as of or prior to the Closing shall have been duly performed, except
in each case for changes after the date of the First Agreement which are
contemplated or expressly permitted by this Agreement.
(b) Nextel shall have delivered to PCI a certificate signed by an
officer of Nextel, dated the Closing, certifying, in form reasonably
satisfactory to PCI and its counsel, to the effect that to the best of the
knowledge and belief of such officer, the conditions specified in Section 8.1
as they relate to Nextel and in subsection 8.3(a) have been fulfilled.
(c) PCI shall have received an opinion, dated the Closing, from
Jones, Day, Reavis & Pogue in the form of Annex E.
ARTICLE IX. TERMINATION/EFFECTIVENESS
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of the parties authorized by their
respective Boards of Directors, at any time prior to the Closing.
(b) By PCI by written notice to Nextel on December 31, 1997 if the
Closing has not occurred on or before such date so
<PAGE> 101
93
long as any postponements of the date of the Closing are not caused principally
by the action or inaction of PCI.
(c) Prior to the Closing, by written notice to PCI from Nextel
authorized by the Board of Directors of Nextel, if (i) there is a material
breach of any representation, warranty, covenant or agreement on the part of
PCI or any Subsidiary set forth in this Agreement, or if a representation or
warranty of PCI shall be untrue in any material respect, in either case such
that the condition specified in Sections 8.2(a) or 8.2(b) would not be
satisfied at Closing (a "Terminating PCI Breach"), except that, if such
Terminating PCI Breach is curable by PCI through the exercise of its reasonable
best efforts, then, for up to thirty (30) days, but only as long as PCI
continues to exercise such reasonable best efforts, Nextel may not terminate
this Agreement under this Section 9.1(c)(i) (the number of days elapsed prior
to any such cure, the "PCI Cure Period"), (ii) any governmental or regulatory
consent or approval required for consummation of the transactions contemplated
hereby is denied by or in a final order or other final action issued or taken
by the appropriate governmental or regulatory authority, agency or similar body
or (iii) consummation of any of the transactions contemplated hereby is
enjoined, prohibited or otherwise restrained by the terms of a final,
non-appealable order or judgment of a court of competent jurisdiction. If any
amendments, consents and approvals with respect to stock option agreements for
the PCI Stock Options have not been obtained by
<PAGE> 102
94
October 30, 1996, such failure shall be a material breach of a covenant for
purposes of this Section 9.1(c).
(d) Prior to the Closing, by written notice to Nextel from PCI
authorized by its Board of Directors, if (i) there is a material breach of any
representation, warranty, covenant or agreement on the part of Nextel set forth
in this Agreement, or if a representation or warranty of Nextel shall be untrue
in any material respect, in either case such that the condition specified in
Sections 8.3(a) or 8.3(b) would not be satisfied at Closing (a "Terminating
Nextel Breach"), except that, if such Terminating Nextel Breach is curable by
Nextel through the exercise of its reasonable best efforts then for up to 30
days, but only as long as Nextel continues to exercise such reasonable best
efforts, PCI may not terminate this Agreement under this Section 9.1(d)(i) (the
number of days elapsed prior to any such cure, the "Nextel Cure Period"), (ii)
any governmental or regulatory consent or approval required for consummation of
the transactions contemplated hereby is denied by or in a final order or other
final action issued or taken by the appropriate governmental or regulatory
authority, agency or similar body, (iii) consummation of any of the
transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a court
of competent jurisdiction or (iv) the Nextel Closing Price is below $14.00 and
Nextel does not adjust the Exchange Ratio, as provided in Section 1.10.
<PAGE> 103
95
(e) By Nextel by written notice to PCI during the thirty (30) day
period commencing on March 1, 1997, if Nextel and Castle have not entered into
the agreements contemplated by Section 8.2(k) so long as any failure to enter
into such agreements has not been caused by the action or inaction of Nextel.
9.2 Effect. Any termination of this Agreement, however effected, shall
not release either Nextel or PCI from any liability or other consequences
arising from any breach or violation by any such party of the terms of this
Agreement prior to the effective time of such termination, nor shall any such
termination release any party from its obligations or duties under this
Agreement which, by their terms and/or expressed intent, may require
performance subsequent to any such termination, and all provisions of this
Agreement which set forth such obligations or duties (including, without
limitation, Section 6.1 and, to the extent provided therein, in Section 10.6)
and such other general or procedural provisions which may be relevant to any
attempt to enforce such obligations or duties, shall survive any such
termination of this Agreement until such obligations or duties shall have been
performed or discharged in full.
ARTICLE X. MISCELLANEOUS
10.1 Waiver. Any party to this Agreement may, at any time prior to the
Closing, by action taken by its Board of Directors, or officers thereunto duly
authorized, waive any of the terms or
<PAGE> 104
96
conditions of this Agreement or agree to an amendment or modification to this
Agreement by an agreement in writing executed in the same manner (but not
necessarily by the same persons) as this Agreement.
10.2 Notices. All notices and other communications among the parties
shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) five days after posting in the United States mail
having been sent registered or certified mail return receipt requested, or
(iii) delivered by telecopy, which must be received in its entirety during
normal business hours, meaning between the hours of 10:00 a.m. and 6:00 p.m.,
McLean, Virginia time, and promptly confirmed by delivery in person or post as
aforesaid in each case, with postage prepaid, addressed as follows:
(a) If to Nextel, to:
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Attention: General Counsel
Telephone No.: (703) 394-3000
Telecopier No.: (703) 394-3001
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Jeanne M. Rickert, Esq.
Telephone No.: (216) 586-3939
Telecopier No.: (216) 579-0212
<PAGE> 105
97
(b) If to PCI, to:
1 Village Drive, Suite 500
Abilene, Texas 79606
Attention: General Counsel
Telephone No.: (915) 690-5800
Telecopier No.: (915) 690-5831
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 3000
Dallas, Texas 75201
Attention: Randall G. Ray, Esq.
Telephone No.: (214) 999-4544
Telecopier No.: (214) 999-4667
or to such other address or addresses as the parties may from time to time
designate in writing.
10.3 Assignment. Except as provided in Section 6.4, no party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other parties. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
10.4 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto, or any subsidiary of Nextel
joining this Agreement under the circumstances described in Section 6.4, any
right or remedies under or by reason of this Agreement.
10.5 Reliance. Each of the parties to this Agreement shall be deemed to
have relied upon the accuracy of the written representations and warranties
made to it in or pursuant to this
<PAGE> 106
98
Agreement, notwithstanding any investigations conducted by or on its behalf or
notice, knowledge or belief to the contrary.
10.6 Expenses. Nextel shall bear its own expenses incurred in connection
with this Agreement and the transactions herein contemplated whether or not
such transactions shall be consummated, including, without limitation, all fees
of its legal counsel and accountants. PCI and its Subsidiaries shall bear
their own legal, financial advisory and accounting fees and expenses incurred
in connection with this Agreement and the transactions herein contemplated if
such transactions shall be consummated. In no event will the expenses borne by
PCI and the Subsidiaries include expenses incurred by PCI's stockholders or the
officers and directors of PCI and its Subsidiaries in connection with the
transactions herein contemplated.
10.7 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or Annexes refer to the Sections, Articles and
Annexes to this Agreement. As used in this Agreement, the phrase "to the
knowledge of PCI" or "to the knowledge of the Subsidiaries" shall comprehend
those matters that are, known to any of the executive officers of PCI.
10.8 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more
<PAGE> 107
99
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Entire Agreement. This Agreement (together with the Schedules to
this Agreement), constitutes the entire agreement among the parties and
supersedes any other agreements, whether written or oral, that may have been
made or entered into by or among Nextel or its subsidiaries and PCI or its
Subsidiaries or by any Director or Directors or officer or officers of such
parties relating to the transactions contemplated hereby, or incident hereto.
No representations, warranties, covenants, understandings, agreements, oral or
otherwise, relating to the transactions contemplated by this Agreement exist
between the parties except as expressly set forth in this Agreement.
10.10 Amendments. This Agreement may be amended or modified in whole
or in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
10.11 Publicity. All press releases or other public communications of
any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Nextel and PCI which approval shall not
be unreasonably withheld by any party; provided, however, that, subject to
compliance with Section 6.1, nothing herein shall prevent any party from
publishing such press releases or other public communications as such party may
consider necessary in order to satisfy such party's legal or contractual
obligations.
<PAGE> 108
100
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be duly executed as of the date first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ John H. Willmoth
-------------------------
Title:
------------------------
NEXTEL FINANCE COMPANY
By: /s/ John H. Willmoth
-------------------------
Title:
------------------------
DCI MERGER INC.
By: /s/ John H. Willmoth
-------------------------
Title:
------------------------
PITTENCRIEFF COMMUNICATIONS, INC.
By: /s/ C. G. Whitten
-------------------------
Title:
------------------------
<PAGE> 109
ANNEX A
<PAGE> 110
ANNEX A
__________________, 1997
Nextel Communications, Inc.
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Pittencrieff Communications, Inc.
1 Village Drive
Suite 500
Abilene, Texas 79606
Dear Sirs:
The undersigned has been advised that as of the date hereof he, she
or it may be deemed to be an "affiliate" of Pittencrieff Communications, Inc.,
a Delaware corporation ("PCI"), as that term is defined for purposes of Rule
145 under the Securities Act of 1933, as amended (the "Securities Act"),
although nothing contained herein shall be construed as an admission that the
undersigned is an affiliate of PCI. PCI, Nextel Communications, Inc., a
Delaware corporation ("Nextel"), Nextel Finance Company, a Delaware corporation
and a wholly owned subsidiary of Nextel ("NFC") and DCI Merger Inc., a Delaware
corporation and a wholly owned subsidiary of NFC ("Merger Sub"), have entered
into an Agreement of Merger and Plan of Reorganization dated as of October 2,
1996 (the "Merger Agreement"). The Merger Agreement provides, among other
things, for the merger of Merger Sub with and into PCI (the "Merger") and, in
accordance therewith, the shares of common stock, par value $.01 per share, of
PCI and rights to acquire shares owned by the undersigned at the Effective Time
of the Merger (as defined in the Merger Agreement) shall be converted into the
right to receive shares or rights to acquire shares of Class A Common Stock,
par value $.001 per share, of Nextel (the "Nextel Common Stock") on the terms
and subject to the conditions set forth in the Merger Agreement.
With respect to Nextel Common Stock to be received by the undersigned
in the Merger, the undersigned represents, warrants, understands and agrees as
follows:
1. The undersigned has been advised that the issuance of the Nextel
Common Stock to it pursuant to the Merger Agreement has been registered with
the Securities and Exchange Commission
<PAGE> 111
Nextel Communications, Inc.
Pittencrieff Communications, Inc.
_________________, 1997
Page 2
(the "Commission") under the Securities Act on a Registration Statement on Form
S-4. However, the undersigned also has been advised that any offer, sale,
transfer or disposition by it of any of the Nextel Common Stock received by it
in the Merger may, under current law, be made only in accordance with the
provisions of Rule 145 under the Securities Act, pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
provided thereunder.
2. The undersigned understands that, as an affiliate of PCI, the
provisions of Rule 145 permit sales, in general, while Nextel is a Reporting
Company (as defined below), only in "brokers' transactions" within the meaning
of Section 4(4) of the Securities Act and paragraph (g) of Rule 144 thereunder
or transactions directly with a "market maker," as defined in Section 3(a)(38)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), where
the aggregate number of shares of Nextel Common Stock sold at any time,
together with all sales of restricted Nextel Common Stock sold for the
undersigned's account during the preceding three-month period, does not exceed
the greater of (i) one percent of the Nextel Common Stock outstanding or (ii)
the average weekly volume of trading in Nextel Common Stock on all national
securities exchanges and/or reported through the automated quotation system of
a registered securities association during the four-week period preceding any
such sale. For purposes of determining the amount of securities specified in
clauses (i) and (ii) above, the provisions of paragraph (e)(3) of Rule 144
shall apply. A "Reporting Company" means a company that is subject to the
requirements to file, and is filing, periodic reports under Section 13 or 15(d)
of the Exchange Act.
3. The undersigned further understands that Rule 145 permits sales
of Nextel Common Stock without the restrictions set forth in paragraph 2 above
if (i) at the time of sale, the undersigned is not an affiliate of Nextel, the
shares of Nextel Common Stock have been held for a minimum period of two years
after the Effective Time of the Merger and Nextel is a Reporting Company or
(ii) such shares have been held for a minimum period of three years after the
Effective Time of the Merger and the undersigned has not been an affiliate of
Nextel for at least three months prior to the sale.
4. The undersigned hereby represents and warrants to Nextel that
the undersigned will not offer, sell, transfer or otherwise dispose of any
Nextel Common Stock received by the undersigned in the Merger, except pursuant
to (i) the provisions of Rule 145 under the Securities Act, (ii) an effective
registration statement under the Securities Act or (iii) in a transaction that,
in the opinion of legal counsel reasonably satisfactory to Nextel,
<PAGE> 112
Nextel Communications, Inc.
Pittencrieff Communications, Inc.
_________________, 1997
Page 3
is exempt from registration under the Securities Act. In the event of a sale
or other disposition pursuant to Rule 145, the undersigned will, upon request
of Nextel, supply evidence reasonably satisfactory to Nextel of compliance with
such Rule.
5. The undersigned has carefully read this letter and the Merger
Agreement and has discussed their requirements and other applicable limitations
upon the offer, sale, transfer or other disposition of the Nextel Common Stock
to be acquired by the undersigned in the Merger, to the extent it believed
necessary, with the undersigned's counsel or counsel for PCI.
6. The undersigned understands that, except as provided in Section
5.2 of the Merger Agreement, Nextel is under no obligation to register the
offer, sale, transfer or other disposition of the Nextel Common Stock by the
undersigned or on behalf of the undersigned or to take any other action
necessary in order to make compliance with an exemption from registration
available.
7. The undersigned understands and agrees that stop transfer
instructions may be given to Nextel's transfer agents with respect to Nextel
Common Stock to be acquired by the undersigned in the Merger and that there may
be placed on the certificates for such shares, and any certificates issued in
exchange or substitution therefor, a legend stating:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The shares represented by this certificate may only be
transferred in accordance with the terms of an Agreement dated
____________, 1996 among the registered holder hereof, Nextel
Communications, Inc. and PCI, a copy of which Agreement is on file at
the principal offices of Nextel Communications, Inc."
The undersigned understands and agrees that, upon the undersigned's
request or the request of a transferee, the legend set forth in this paragraph
7 shall be removed by delivery of substitute certificates without such legend
(a) if the transfer to the transferee was effected in accordance with clause
(i) or (ii) of paragraph 4 and the conditions of paragraph 4 were complied with
or (b) upon delivery to Nextel of an opinion of counsel reasonably satisfactory
to Nextel or other evidence reasonably satisfactory to Nextel to the effect
that such legend is not required for purposes of the Securities Act.
<PAGE> 113
Nextel Communications, Inc.
Pittencrieff Communications, Inc.
_________________, 1997
Page 4
8. The undersigned also understands that unless the transfer by the
undersigned of the Nextel Common Stock to be acquired in the Merger has been
registered under the Securities Act or is a sale made in conformity with the
provisions of Rule 145, Nextel reserves the right to put the following legend
on the certificates issued to its transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution of such shares, and such shares may
not be sold or otherwise transferred except in accordance with an
exemption from the registration requirements of the Securities Act of
1933."
In addition, the undersigned understands and agrees that, upon its
request or the request of its transferee, the legend set forth in this
paragraph 8 shall be removed by delivery of substitute certificates without
such legend upon delivery to Nextel of an opinion of counsel reasonably
satisfactory to Nextel or other evidence reasonably satisfactory to Nextel to
the effect that such legend is not required for purposes of the Securities Act.
Very truly yours,
-----------------------------------------
Accepted this ___ day
of _____________, 1997.
Nextel Communications, Inc.
By:
------------------------
<PAGE> 114
Nextel Communications, Inc.
Pittencrieff Communications, Inc.
_________________, 1997
Page 5
Accepted this ___ day
of _____________, 1997.
Pittencrieff Communications, Inc.
By:
------------------------
<PAGE> 115
ANNEX B
<PAGE> 116
ANNEX B
None.
<PAGE> 117
ANNEX C-1
<PAGE> 118
ANNEX C-1
_______________, 1997
Nextel Communications, Inc.
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Re: Pittencrieff Communications, Inc.
Ladies and Gentlemen:
We have acted as counsel for Pittencrieff Communications, Inc., a
Delaware corporation ("PCI"), in connection with the Agreement of Merger and
Plan of Reorganization, by and between PCI, Nextel Communications, Inc., a
Delaware corporation ("Nextel"), Nextel Finance Company, a Delaware corporation
and a wholly owned subsidiary of Nextel formerly known as Dispatch
Communications, Inc. and DCI Merger Inc., a Delaware corporation and a wholly
owned subsidiary of Nextel Finance Company, dated as of October 2, 1996
("Merger Agreement").
The opinions herein are rendered to you pursuant to Section 8.2(c) of
the Merger Agreement. Capitalized terms used herein that are defined in the
Merger Agreement, and not otherwise defined herein, shall have the meanings
given to such terms in the Merger Agreement.
As such counsel, we have examined such documents, records and matters
of fact and questions of law as we have considered appropriate for purposes of
rendering the opinions expressed below, except where a statement is qualified
as to knowledge, in which case we have made only the limited inquiry as
specified below. We have examined, among other things, the following:
(a) The Merger Agreement;
(b) The Registration Statement;
(c) The material written agreements and instruments to which
PCI is a party, or by which it may be bound, or to which PCI's properties
or assets are subject identified to us in an officer's certificate signed
by an officer of PCI ("Material Agreements");
<PAGE> 119
Nextel Communications, Inc.
____________, 1997
Page 2
(e) Any court or administrative orders, writs, judgments, and
decrees specifically directed to and currently binding on PCI and
identified to us in an officer's certificate signed by an officer of PCI
("Court Orders"); and
(f) The current Certificate of Incorporation and the current
Bylaws of PCI ("Governing Documents").
In rendering the opinions expressed herein, we have assumed without
any independent verification (a) the legal capacity of natural persons, (b) the
genuineness of all signatures (other than those of officers of PCI on the
Merger Agreement), (c) the authenticity of all documents submitted to us as
originals, the conformity to authentic original documents of all documents
submitted to us as certified, notarial, conformed, or photostatic copies, and
the accuracy of all public files, records and certificates of, or furnished by,
governmental or regulatory agencies or authorities and examined by us.
We have been furnished with, and with your consent have relied upon,
certificates of officers of PCI with respect to certain factual matters. In
addition, we have obtained and relied upon such certificates and assurances
from public officials as we have deemed necessary.
Based on the foregoing, and subject to the exceptions,
qualifications, and limitations contained herein, it is our opinion that, as of
the date hereof:
1. PCI is a corporation duly incorporated, validly existing, and in
good standing under the General Corporation Law of Delaware ("DGCL"), and has
the corporate power and authority to own its properties and to conduct its
business as currently conducted, and as proposed to be conducted, as described
in the Proxy Statement/Prospectus which is part of the Registration Statement.
PCI has the corporate power and authority to enter into and perform its
obligations under the Merger Agreement.
2. The Merger Agreement has been duly authorized by all necessary
corporate action on the part of PCI and has been duly executed and delivered by
PCI.
3. Neither the execution and delivery of the Merger Agreement, nor
the consummation of the Merger, by PCI will (i) constitute a violation of the
DGCL, any statute or regulation of the United States of America applicable to
PCI, or any Court Orders or (ii) constitute a breach or violation of any
provision of the Governing Documents.
<PAGE> 120
Nextel Communications, Inc.
____________, 1997
Page 3
4. Neither the execution and delivery of the Merger Agreement, nor
the consummation of the Merger, by PCI will (i) constitute a violation of or
result in a breach of or a default (or an event that, with notice or lapse of
time or both, would constitute a default) under, (ii) cause the creation of any
security interest, lien, charge or encumbrance upon any of the properties or
assets of PCI under, or (iii) cause or permit the acceleration of the maturity
of any debt or obligation of PCI pursuant to any Material Agreement.
5. No registration with or authorization or approval by any court
or federal governmental authority of the United States of America or under the
DGCL that has not been made or obtained is required of PCI in connection with
its execution and delivery of the Merger Agreement or its consummation of the
Merger, except the filing to effect the Merger under the DGCL.
6. To the best of our knowledge, there are no actions, proceedings
or investigations pending or overtly threatened against PCI or any of its
properties by or before any court, governmental authority, or arbitrator,
domestic or foreign, seeking to restrain or prohibit the consummation of the
transactions described in the Merger Agreement.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We are opining herein as to the effect on the Merger Agreement only
of the federal laws of the United States of America, the laws of the State of
Texas, and the DGCL, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws or as to any matters
of municipal law or the laws of any local agencies within any state. We
express no opinion as to, and have assumed for purposes of the opinions set
forth herein, compliance by the parties with (i) the statutes administered by,
the rules and regulations of, or matters exclusively within the purview of the
Federal Communications Commission, including, without limitation, the
Communications Act of 1934, as amended, (ii) the application of any antitrust,
antifraud or trade regulation laws, other than the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or (iii) the securities laws and
regulations of the United States of America and the State of Texas.
B. We have assumed that the Merger Agreement has been duly authorized,
executed, and delivered by or on behalf of each of the parties thereto (other
than PCI) and is the valid, legally binding, and enforceable obligation of each
of the parties thereto (other than PCI).
<PAGE> 121
Nextel Communications, Inc.
____________, 1997
Page 4
C. As used in the opinions expressed herein, "to the best of our
knowledge" and similar phrases refer only to the actual current consciousness,
without independent verification, of attorneys of our Firm who are or have been
involved in the representation of PCI in connection with the Merger Agreement.
D. To the extent any of the opinions expressed herein relate to or
involve materiality in any form, we have relied upon PCI to determine what is
or would be "material" under the circumstances.
E. The opinion expressed in Paragraph 1 regarding the good standing of
PCI is rendered solely on the basis of, and has only the meaning ascribed to, a
certificate issued by the Secretary of State of the State of Delaware.
F. We have not conducted any search of any indices, dockets, or other
records of any federal, state, or local court, administrative agency or body,
or of any arbitrator.
G. This opinion letter is limited to the matters expressly stated, and
no other opinion upon the matters so expressly stated is implied or may be
inferred.
H. This opinion letter is as of the date hereof, and we undertake no
obligation, and expressly disclaim any obligation, to advise you of any change
in the matters set forth herein or of any circumstances or developments after
the date hereof that would or might conflict with any of the assumptions herein
stated.
I. The opinions expressed herein are rendered only to you and are solely
for your benefit in connection with the transactions described in the Merger
Agreement. This opinion letter may not be relied upon by you for any other
purpose, or furnished to, quoted to, or relied upon by any other person, firm,
or entity for any purpose, without our prior written consent.
Respectfully submitted,
GARDERE & WYNNE, L.L.P.
By:
------------------------
Randall G. Ray, Partner
<PAGE> 122
ANNEX C-2
<PAGE> 123
DRAFT GC&D LEGAL OPINION
[DATE]
Nextel Communications, Inc.
1505 Farm Credit Dr.
Suite 100
McLean, VA 22102
Ladies and Gentlemen:
We have acted as special communications counsel to Pittencrieff
Communications, Inc., a Delaware corporation (the "Company"), in connection
with the transactions contemplated by the Agreement of Merger and Plan of
Reorganization dated as of October 2, 1996 (the "Agreement") between the
Company; Nextel Communications, Inc., a Delaware corporation ("Nextel"); Nextel
Finance Company, a Delaware corporation and wholly-owned subsidiary of Nextel
("NFC"); and DCI Merger, Inc., a Delaware corporation and wholly-owned
subsidiary of NFC. This opinion is being delivered to you at the Company's
request pursuant to Section 8.2(c) of the Agreement. All capitalized terms used
but not defined herein shall have the meanings assigned thereto in the
Agreement.
In connection with the delivery of this opinion, we have examined
originals, or copies certified or otherwise identified to our satisfaction of
the following documents:
(i) the Agreement;
(ii) the licenses, permits and authorizations issued to the Company by
the Federal Communications Commission ("FCC" or the "Commission") and set forth
in Exhibit A hereto (the "Licenses");
(iii) the publicly-available files of the FCC, and the FCC's database
as maintained for the FCC by its contractor, Inneractive Systems, Inc. (the
"FCC Database"), relating the Company or its assets, as such were publicly
available for public inspection on __________, 1996 (the "Record Date"). It is
the Commission's currently policy to eliminate licensing records from existing
station files which are more than six years old upon review by the Commission
of a particular station file. Therefore, the publicly available Commission
station files may not contain a complete record of the licensing history of a
particular system or station. In addition, documents submitted to the FCC are
generally not immediately included in station files. This too may prevent a
complete review of the licensing records to be undertaken in some
circumstances; and
(iv) a Finder's Preference case list dated __________ which was made
available through the Commission's copying contractor, International
Transcription Services, and which is intended to include Finder's Preference
cases received at the FCC.
<PAGE> 124
Nextel Communications, Inc.
___________, 1997
Page 2
We have been retained by the Company strictly as special
communications counsel and not as general counsel or in any other role. Our
opinions set forth herein are strictly as to law under the Federal
Communications Act of 1934, as amended and the Rules of the FCC adopted
thereunder (collectively, the "Act"). Without limitation, we express no opinion
herein as to the enforceability of the Documents under the laws of any State or
as to the enforceability of the choice of law provision set forth in the
Agreement.
To the extent we deemed necessary for purposes of this opinion, we
have relied upon the accuracy and completeness of (i) statements and
representations of officers of the Company as to factual matters, (ii) the
corporate records provided to us by such officers, and (iii) certificates and
other documents obtained from public officials (the "Documents"). We have
further relied as to factual matters on the representations and warranties
contained in the Documents and we have assumed the completeness and accuracy of
all such representations and warranties as to factual matters. We further have
assumed the genuineness of all signatures, the legal capacity of all
individuals who have executed the Documents and all other documents we have
reviewed; the authenticity of all documents submitted to us as originals; and
the conformity to original documents of all documents submitted to us as
certified photostatic, reproduced or conformed copies. We have also assumed
that the Documents have been duly authorized, executed and delivered by each of
the parties thereto; are enforceable in accordance with their terms against
such parties; ands that the execution, delivery and performance of the
Documents by each of the parties thereto does not and will not result in a
breach of, or constitute a default under any agreement, instrument or other
document to which such party is a party or any order, judgment, writ or decree
applicable to such party or to which such party's property is subject.
Whenever our opinion with respect to factual matters is indicated to
be based on our "Knowledge," we are referring to the actual, current knowledge
of Russell Fox, the attorney having supervisory responsibility for the
Company's relationship with this firm, and those other attorneys of Gardner,
Carton & Douglas who have been given substantive legal attention to the affairs
of the Company during the preceding 12 months. When, in this opinion, we refer
to our knowledge after "Due Inquiry," we are referring solely to the review of
documents referenced above. This letter does not express an opinion on those
matters which would require a physical inspection of specific actual
transmitter sites or systems in connection with this Opinion. Moreover, we have
not, except as set forth herein, undertaken any independent investigation to
determine the existence or absence of facts upon which our opinion relies; we
have not undertaken any physical inspection of the Company, its stations or its
other assets; and no inference as to our knowledge of the existence or absence
of such facts should be drawn from such representation.
Based upon and subject to our examination as aforesaid and
subject to the qualifications set forth herein, we are of the opinion that:
<PAGE> 125
Nextel Communications, Inc.
___________, 1997
Page 3
1. The FCC has granted its consent and authorization for the transfer
of control or the Licenses from the Company to [DCI] and such consent and
authorization has become a Final Order. To the best of our Knowledge after Due
Inquiry, except as otherwise noted in Exhibit A hereto, the Licenses are in
full force and effect and have the expiration dates set forth in Exhibit A. The
Licenses are the only licenses, permits or authorizations of the FCC required
under an Act for the operation of the facilities authorized by the Licenses,
and, except as otherwise indicated in Exhibit A hereto, no other party has
received an authorization from the FCC to operate a transmitting station in the
same radio service, on the same frequencies, and in the same geographic areas
as is authorized to each respective System. To the best of our Knowledge after
Due Inquiry, any application for the renewal of a License required to be filed
under the Act prior to the date hereof has been filed.
2. To the best of our Knowledge after Due Inquiry, except as set forth
in Exhibit A hereto, and except for facts which affect the industry generally
there is no fact that permits, or after notice or lapse of time or both would
permit revocation or termination of the Licenses, the issuance by the FCC of a
notice of violation or notice of apparent liability; or that would materially
and adversely affect the Licenses or the Systems.
3. To the best of our Knowledge after Due Inquiry, except as set forth
in Exhibit A hereto, and except for decrees, orders or rulings which affect the
industry generally, there is no outstanding decree, order or other ruling of
the FCC relating to the Licenses or the transmitting facilities authorized
thereunder (the "Systems") which would have a material, adverse affect on the
Licenses or the Systems; the FCC has not issued any notice of a default,
revocation, or demand for return with respect to any License; and there are no
claims (including "finder's preference" claims), complaints, investigations,
proceedings, petitions, notices of violation or notices of apparent liability
which, if accurate and adopted finally, would result in the revocation or
termination of, or have a material adverse on, the Licenses under the Act.
4. All FCC authorizations and consents required to be obtained under
the Agreement prior to Closing have been obtained and are Final Orders. The
execution, delivery and performance of the Parties' obligations under the
Agreement does not violate the Act.
The opinions set forth herein are provided only with respect to the
laws and the regulations under the Act which are in effect as of the date
hereof and we assume no responsibility for updating this opinion to take into
account any event, action, interpretation or change of law occurring subsequent
to the date hereof that may affect the validity of any of the opinions
expressed herein.
This opinion is furnished by us solely for your benefit for use in
connection with the Documents and the transactions contemplated thereby and it
may not be furnished or quoted to, or relied upon by, any other person, without
our prior written consent.
<PAGE> 126
Nextel Communications, Inc.
___________, 1997
Page 4
Very truly yours,
<PAGE> 127
ANNEX D
<PAGE> 128
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO THE
DISTRIBUTION HEREOF OR OF THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON
EXERCISE HEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES
AND REGULATIONS THEREUNDER NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF MAY BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR
UPON RECEIPT BY THE COMPANY OF AN OPINION SATISFACTORY AS TO FORM, SCOPE AND
SUBSTANCE OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO AN EXEMPTION THEREFROM.
WARRANT
To Purchase _______ Shares
of Class A Common Stock, $.001 par value, of
NEXTEL COMMUNICATIONS, INC.
No. __ ______________, 199_
THIS IS TO CERTIFY that, for value received, _____________, or registered
assigns, is entitled upon the due exercise hereof at any time during the
Exercise Period (as hereinafter defined) to purchase _________________________
shares of Common Stock of Nextel Communications, Inc., a Delaware corporation
(the "Company"), at an Exercise Price of $_______ per share (subject to
adjustment as provided herein), and to exercise the other rights, powers and
privileges hereinafter provided, all on the terms and subject to the conditions
hereinafter set forth.
Pursuant to the terms of the Agreement of Merger and Plan of
Reorganization, dated as of September ____, 1996, (the "Merger Agreement") by
and between the Company, [Sub] and _________ ("Frontier"), [Sub] was merged
with and into [Frontier] (the "Merger"). As contemplated by the Merger
Agreement, the Company offered to exchange for each outstanding warrant to
purchase common stock of Frontier (the "Frontier Warrant") a new warrant of the
Company with the terms and conditions set forth herein. This warrant (the
"Warrant") has been issued in exchange for a Frontier Warrant upon the
consummation of the Merger.
1. Definitions. The terms defined in this Section 1 shall have the following
respective meanings:
"Assignment" shall mean the form of Assignment appearing at the end of
this Warrant.
"Common Stock" shall mean the Class A Common Stock, $0.001 par value per
share, of the Company, or, after consummation of the Merger, such other
generally held class of common stock of the Company as may be outstanding from
time to time. In addition, for the purpose of determining whether an
adjustment under Section 4 may be required as a result of the issuance of
Common Stock or Convertible Securities, Common Stock shall be deemed to include
any other class or series of stock which participates in a corporation's
profits with the Common Stock.
"Company" shall mean Nextel Communications, Inc., a Delaware corporation,
and any successor corporation.
<PAGE> 129
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are directly or indirectly convertible into or
exchangeable for, with or without payment of additional consideration, shares
of Common Stock, either immediately or upon a specified date or the happening
of a specified event.
"corporation" shall include an association, partnership, joint stock
company, business trust or other similar organization.
"Current Market Price" of any security as of any date herein specified
shall be (a) if such security is listed or admitted for trading on any national
securities exchange, the last sale price of such security, regular way, or the
average of the closing bid and asked prices thereof if no such sale occurred,
in each case as officially reported on the principal securities exchange on
which such security is listed, or (b) if not reported as described in clause
(a), the average of the closing bid and asked prices of such security in the
over-the-counter market as shown by the National Association of Securities
Dealers, Inc. Automated Quotation System, or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, as reported by any member firm of the New York Stock Exchange selected
by the Company, or (c) if not quoted as described in clause (b), the average of
the closing bid and asked prices for such security as reported by the National
Quotation Bureau Incorporated or any similar successor organization, as
reported by any member firm of the New York Stock Exchange selected by the
Company. If such security is quoted on a national securities or central market
system in lieu of a market or quotation system described above, the closing
price shall be determined in the manner set forth in clause (a) of the
preceding sentence if actual transactions are reported and in the manner set
forth in clause (b) of the preceding sentence if bid and asked prices are
reported but actual transactions are not.
"Exercise Period" shall mean the period commencing upon consummation of
the Merger and terminating at the close of business on ______________________ .
"Exercise Price" shall mean the price per share of Common Stock set forth
in the preamble to this Warrant, as such price may be adjusted pursuant to
Section 4.
"Fair Value" shall mean the fair value of the appropriate security,
property, assets, business or entity as determined in good faith by the Board
of Directors of the Company (the "Board"), provided that the fair value of the
security, property, assets, business or entity, as the case may be, in question
shall be determined without, in the case of any such securities, applying a
discount for any lack of liquidity thereof, but otherwise in each case in
accordance with generally accepted financial practice.
-2-
<PAGE> 130
"Merger" shall have the meaning specified in the preamble to this Warrant.
"Merger Agreement" shall have the meaning specified in the preamble to
this Warrant.
"Notice of Exercise" shall mean the form of Notice of Exercise appearing
at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise privilege of
the holder of the Warrant, any shares (other than Common Stock) and any other
securities of the Company or of any other Person which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, upon
the exercise or partial exercise of the Warrants, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock (or Other Securities)
pursuant to the terms of the Warrant or otherwise.
"Frontier" shall mean __________________, a Delaware corporation.
"Frontier Warrant" shall have the meaning specified in the preamble to
this Warrant.
"shares" of any Person shall include any and all shares of capital stock
of such Person of any class or other shares, interests, participations or other
equivalents (however designated) in the capital of such Person.
"Warrant Register" shall have the meaning specified in Section 3.1.
"Warrant Shares" shall mean the shares of Common Stock (and/or Other
Securities) issued or issuable, as the case may be, from time to time upon
exercise of the Warrant, including, without limitation, any shares of Common
Stock (and/or Other Securities) issuable with respect thereto by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or otherwise.
"Warrant" shall have the meaning specified in the preamble to this
Warrant.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this Section 2, the holder hereof shall have the right, at its
option, to exercise this Warrant in whole or in part at any time or from time
to time during the Exercise Period.
-3-
<PAGE> 131
2.2. Manner of Exercise; Issuance of Common Stock. To exercise this
Warrant, the holder hereof shall deliver to the Company (a) a Notice of
Exercise duly executed by the holder hereof specifying the number of Warrant
Shares to be purchased, (b) payment of an amount equal to the aggregate
Exercise Price for all such Warrant Shares, which shall be made (i) in cash or
by certified or bank cashier's check payable to the order of the Company, or
(ii) by delivery to the Company of that number of shares of Common Stock having
a value computed based upon the Current Market Price equal to the then
applicable Exercise Price multiplied by the number of Warrant Shares then being
purchased, and (c) this Warrant. In the alternative, this Warrant may be
exercised on a net basis, such that, without the exchange of any funds, the
holder of this Warrant receives that number of Warrant Shares subscribed to
less that number of shares of Common Stock having an aggregate value computed
based upon the Current Market Price at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by such holder for
the number of Warrant Shares subscribed to. The Company shall, as promptly as
practicable, and in any event within five days thereafter, cause to be issued
and delivered to the holder hereof (or its nominee) or the transferee
designated in the Notice of Exercise, (y) a certificate or certificates
representing the number of Warrant Shares specified in the Notice of Exercise
and (z) if this Warrant is exercised in part, a new Warrant evidencing the
right of the holder to purchase the aggregate number of Warrant Shares for
which this Warrant shall not have been exercised. The holder or transferee so
designated in the Notice of Exercise shall be deemed to have become the holder
of record of such Warrant Shares for all purposes as of the close of business
on the date on which the Notice of Exercise, an amount equal to the aggregate
Exercise Price, and this Warrant shall have been received by the Company.
2.3. Fractional Shares. Notwithstanding any other provision of this
Warrant, the Company shall not issue fractional Warrant Shares or scrip
representing fractional Warrant Shares upon any exercises of this Warrant.
3. Registration, Transfer and Exchange; Legends.
3.1. Maintenance of Registration Books. The Company shall keep at its
principal executive office, or such other address (including that of the
Company's transfer agent) as the Company shall notify the holder in writing, a
register (the "Warrant Register") in which the Company shall provide for the
registration, transfer and exchange of the Warrant. The Company shall not at
any time close the Warrant Register so as to result in preventing or delaying
the exercise or transfer of this Warrant, provided that the Company may make
reasonable provisions with respect to closing the Warrant Register.
3.2. Transfer and Exchange. Upon surrender for registration of transfer
of this Warrant at such office, the Company shall
-4-
<PAGE> 132
execute and deliver in the name of the designated transferee or transferees one
or more new Warrants representing the right to purchase at the Exercise Price
then in effect a like aggregate number of Warrant Shares, and shall execute
and deliver to the holder of this Warrant a new Warrant conveying the right to
purchase any Warrant Shares not transferred.
If such a transfer is not made pursuant to an effective Registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
the Warrant holder will, if requested by the Company, deliver to the Company an
opinion of counsel, which counsel and opinion shall be satisfactory in form,
scope and substance to the Company, that the Warrant may be sold without
registration under the Securities Act, as well as:
(a) an investment covenant satisfactory to the Company signed by the
proposed transferee;
(b) an agreement by such transferee to the impression of the
restrictive investment legend set forth at the beginning of this Warrant;
and
(c) an agreement by such transferee to be bound by the provisions of
this Warrant.
3.3. Replacement. In the case of any loss, theft or destruction of this
Warrant, upon delivery of a written agreement to indemnify the Company (which
agreement may be unsecured, if from the original holder of this Warrant), or in
the case of any mutilation of this Warrant, upon surrender of this Warrant to
the Company, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant representing the right to purchase at the Exercise Price
then in effect a like aggregate number of Warrant Shares.
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any adjustment of
the Exercise Price as provided in Section 4.2, the holder hereof shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Common Stock (calculated to the nearest
1/100th of a share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
4.2. Adjustment of Exercise Price. The Exercise Price shall be subject to
adjustment from time to time as set forth in this Section 4.2.
(a) Stock Dividends, Subdivisions and Combinations. If the Company
at any time and from time to time subsequent to
-5-
<PAGE> 133
the date hereof: (i) declares a dividend upon, or makes any distribution in
respect of, any of its stock, payable in shares of Common Stock or Convertible
Securities or (ii) subdivides its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or (iii) combines its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, then
the Exercise Price shall be adjusted to the price determined by multiplying the
Exercise Price per share of Common Stock immediately prior to such event by a
fraction (A) the numerator of which shall be the total number of outstanding
shares of Common Stock immediately prior to such event, and (B) the denominator
of which shall be the total number of outstanding shares of Common Stock
immediately after such event, treating as outstanding all shares of Common
Stock issuable upon conversions or exchanges of such Convertible Securities.
(b) Issuance of Additional Shares of Common Stock. If the Company
at any time and from time to time subsequent to the date hereof shall issue or
sell any shares of Common Stock, for a consideration (before underwriters
discount, in the case of a sale involving an unaffiliated underwriter) less
than the Current Market Price per share, the Exercise Price upon each such
issuance or sale shall be adjusted to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next succeeding
paragraph by a fraction the numerator of which is (i) the sum of (A) the number
of shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the Current Market Price per share of Common Stock immediately
prior to such issue or sale plus (B) the aggregate consideration, if any,
received by the Company upon such issue or sale, divided by (ii) the total
number of shares of Common Stock outstanding immediately after such issue or
sale, and the denominator of which is the Current Market Price per share of
Common Stock immediately prior to such issue or sale. No adjustment will be
made under this Section 4.2(b) that would result in an increase in the Exercise
Price.
For purposes of this Section 4.2(b), the date as of which the Current
Market Price shall be determined shall be the earlier of (x) the date on which
the Company shall enter into a firm contract for the issuance of such shares of
Common Stock and (y) the date of actual issuance of such shares of Common
Stock.
No adjustment of the Exercise Price shall be made under this Section
4.2(b) upon the issuance of any shares of Common Stock which are (aa)
distributed to holders of Common Stock pursuant to a stock dividend or
subdivision for which an adjustment is provided under Section 4.2(a) or (bb)
issued pursuant to the conversion or exchange of any Convertible Securities to
the extent that an adjustment shall previously have been made upon the issuance
of such Convertible Securities pursuant to Sections 4.2(a) or (c).
-6-
<PAGE> 134
(c) Issuance of Convertible Securities. If the Company at any time
and from time to time subsequent to the date hereof shall issue or sell any
Convertible Securities and the consideration per share for which shares of
Common Stock may at any time thereafter be issuable pursuant to the terms of
such Convertible Securities shall be less than the Current Market Price per
share (determined as of the date specified in the next succeeding paragraph),
the Exercise Price upon each such issuance or sale shall be adjusted as
provided in Section 4.2(b) on the basis that (i) the maximum number of shares
of Common Stock necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the date of
the determination of the Current Market Price, specified in the next succeeding
paragraph, and (ii) the aggregate consideration, if any, received for such
shares of Common Stock shall be deemed to be the minimum consideration received
and receivable by the Company in connection with the issuance and exercise of
such Convertible Securities.
For the purposes of this Section 4.2(c), the date as of which the
Current Market Price per share shall be determined shall be the earlier of (x)
the date on which the Company shall enter into a firm contract for the issuance
of such Convertible Securities and (y) the date of actual issuance of such
Convertible Securities.
(d) Readjustment of Exercise Price. In the event of any change in
(i) the purchase price payable for any Convertible Securities referred to in
Section 4.2(c), (ii) the consideration, if any, payable upon the conversion or
exchange of such Convertible Securities or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for shares of
Common Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been in effect
at such time had such Convertible Securities provided for such changed
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any right to convert or exchange
under any Convertible Securities not exercised, the Exercise Price then in
effect shall forthwith be increased to the Exercise Price which would have been
in effect at the time of such expiration had such Convertible Securities never
been issued. No readjustment of the Exercise Price pursuant to this Section
4.2(e) shall (x) increase the Exercise Price by an amount in excess of the
adjustment previously made to the Exercise Price in respect of the issue, sale
or grant of the applicable Convertible Securities or (y) require any adjustment
to the amount paid or number of shares of Common Stock received by any Person
upon any exercise of this Warrant prior to the date upon which such
readjustment to the Exercise Price shall occur.
(e) Reorganization, Reclassification or Recapitalization of Company.
If the Company at any time and from time to time subsequent to the date hereof
shall effect (i) any
-7-
<PAGE> 135
reorganization or reclassification or recapitalization of the capital stock of
the Company (other than in the cases referred to in Section 4.2(a)), (ii) any
consolidation or merger of the Company with or into another Person, (iii) the
sale, transfer or other disposition of the property, assets or business of the
Company as an entirety or substantially as an entirety or (iv) any other
transaction or any other event shall occur as a result of which holders of
Common Stock become entitled to receive any shares of stock or other securities
and/or property of another Person, there shall thereafter be deliverable upon
the exercise of this Warrant or any portion thereof (in lieu of or in addition
to the Warrant Shares theretofore deliverable, as appropriate) the highest
number of shares of stock or other securities and/or the greatest amount of
property to which the holder of the number of Warrant Shares which would
otherwise have been deliverable upon the exercise of this Warrant or any
portion thereof at the time would have been entitled upon such reorganization
or reclassification or recapitalization of capital stock, consolidation,
merger, sale, transfer, disposition or other transaction or upon the occurrence
of such other event, and at the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall make equitable, written
adjustments in the application of the provisions herein set forth so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares of stock or other securities or other
property thereafter deliverable upon exercise of the Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement of the
Company and/or the successor entity, as applicable, for the benefit of the
holder or holders of the Warrants at the time outstanding, which agreement
shall bind each such entity and shall be accompanied by a favorable opinion of
counsel to the Company reasonably acceptable to the holder or holders of the
Warrant as to the enforceability of such agreement and as to such other matters
as such holder or holders may reasonably request.
(f) Distribution of Assets. If the Company at any time and from
time to time subsequent to the date hereof declares a dividend upon, or makes
any distribution in respect of, any of its stock payable in any asset or
property of the Company, other than any cash dividend that is paid out of the
retained earnings of the Company, in any transaction as to which the other
provisions of this Section 4 are not strictly applicable, then and in each such
case, the Exercise Price shall be adjusted by subtracting from the Exercise
Price then in effect the Fair Value of the assets or property so distributed to
the holder of one share of Common Stock; provided that no such adjustment will
result in an Exercise Price of less than the par value of the Common Stock.
-8-
<PAGE> 136
(g) Determination of Consideration. For purposes of this Section 4,
the consideration received or receivable by the Company for the issuance, sale,
grant or assumption of shares of Common Stock or Convertible Securities,
irrespective of the accounting treatment of such consideration, shall be valued
as follows:
(i) Cash Payment. In the case of cash, the net
amount received by the Company after deduction of any accrued interest
or dividends, any expenses paid or incurred and any underwriting
commissions or concessions paid or allowed by the Company in
connection with such issue or sale.
(ii) Non-Cash Payment. In the case of
consideration other than cash, the Fair Value thereof or, if less, in
the case of any security, the Current Market Price of such security,
if applicable (in each case, as of the date immediately preceding the
issuance, sale or grant in question).
(iii) Allocation Related to Common Stock. If
shares of Common Stock are issued or sold together with other
securities or other assets of the Company for a consideration which
covers both, the consideration received or receivable (computed as
provided in clauses (i) and (ii) above) shall be allocable to such
shares of Common Stock as determined by the Board in good faith.
(iv) Allocation Related to Convertible
Securities. If any Convertible Securities are issued or sold together
with other securities or other assets of the Company in a transaction
in which no specific consideration is allocated to the Convertible
Securities, the consideration received shall be allocated among such
Convertible Securities and securities or other assets as determined in
good faith by the Board.
(v) Dividends in Securities. If the Company
shall declare a dividend or make any other distribution upon any stock
of the Company (other than Common Stock) payable in shares of Common
Stock or Convertible Securities, such shares of Common Stock or
Convertible Securities, as the case may be, issuable in payment of
such dividend and distribution shall be deemed to have been issued or
sold without consideration.
(vi) Convertible Securities. The consideration
for which shares of Common Stock shall be deemed to be issued upon the
issuance or sale of any Convertible Securities shall be determined by
dividing (A) the total consideration, if any, received by the Company
as consideration for the Convertible Securities, as the case may be,
plus the minimum aggregate amount of additional
-9-
<PAGE> 137
consideration, if any, payable to the Company upon the conversion or
exchange of such Convertible Securities, as the case may be, in each
case after deducting any accrued interest or dividends; by (B) the
maximum number of shares of Common Stock issuable or upon the
conversion or exchange of such Convertible Securities.
(vii) Merger, Consolidation or Sale of Assets.
If any shares of Common Stock or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration therefor shall
be deemed to be the Fair Value of such portion of the assets and
business of the non-surviving corporation as shall be attributable to
such Common Stock or Convertible Securities, as the case may be. In
the event of (A) any merger or consolidation of which the Company is
not the surviving corporation or (B) the sale, transfer or other
disposition of the property, assets or business of the Company as an
entirety or substantially as an entirety for stock or other securities
of any other Person, the Company shall be deemed to have issued the
number of shares of its Common Stock for stock or securities of the
surviving corporation or such other Person computed on the basis of
the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the Fair Value on the date of such
transaction of such stock or securities of the surviving corporation
or such other Person, and if any such calculation results in
adjustment of the Exercise Price, the determination of the number of
Warrant Shares issuable upon exercise of this Warrant immediately
prior to such merger, consolidation or sale, for the purposes of
Section 4.2(e), shall be made after giving effect to such adjustment
of the Exercise Price.
(h) Record Date. If the Company shall take a record of
the holders of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or Convertible
Securities or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then all references in this Section 4 to the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be, shall be deemed to be references to such record date.
(i) Shares Outstanding. The number of shares of Common
Stock deemed to be outstanding at any given time shall not include shares of
Common Stock held by the Company or any Subsidiary.
(j) Maximum Exercise Price. At no time shall the
Exercise Price exceed the amount set forth in the first paragraph
-10-
<PAGE> 138
of the Preamble of this Warrant except as a result of an adjustment thereto
pursuant to Section 4.2(a)(iii).
(k) No Adjustments under Certain Circumstances. Anything
herein to the contrary notwithstanding, no adjustment to the Exercise Price
shall be made in the case of any issuance of (i) shares of Common Stock upon
the exercise in whole or part of any Warrant or, any warrant included in the
Other Securities, including any Frontier Warrant exchanged by the holder for
this Warrant in connection with the Merger or (ii) shares of Common Stock to an
employee, director or consultant of the Company or any Subsidiary for such
person's own investment and as part of a bona fide compensation plan approved
by the Board.
4.3. Certificates and Notices.
(a) Adjustments to Exercise Price. Upon any adjustment
under this Section 4 of the number of shares of Common Stock purchasable upon
exercise of this Warrant or of the Exercise Price, the Company shall
immediately notify the holder of this Warrant in writing setting forth in
reasonable detail the events requiring the adjustment and the method by which
such adjustment was calculated and specifying the adjusted Exercise Price and
the number of shares of Common Stock purchasable upon exercise of this Warrant
after giving effect to such adjustment.
(b) Extraordinary Corporate Events. If the Company at
any time and from time to time after the date hereof shall propose to (i) pay
any dividend payable in stock to the holders of shares of Common Stock or to
make any other distribution to the holders of shares of Common Stock, (ii)
offer to the holders of shares of Common Stock rights to subscribe for or
purchase any additional shares of any class of stock or any other rights or
options or (iii) effect any reclassification of the Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock), or any reorganization or recapitalization or any
consolidation or merger (other than a merger in which no distribution of
securities or other property is to be made to holders of shares of Common
Stock), or any sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, or the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall mail to the holder of this Warrant a certificate giving notice of such
proposed action, specifying (A) the date on which the stock transfer books of
the Company shall close, or a record shall be taken, for determining the
holders of Common Stock entitled to receive such stock dividends or other
distribution or such rights or options, or the date on which such
reclassification, reorganization, recapitalization, consolidation, merger,
sale, transfer, other disposition, liquidation, dissolution or winding up shall
take place or commence, as the case may be, and (B) the date as of which it is
expected that holders of Common Stock of record shall be entitled to receive
securities or other property
-11-
<PAGE> 139
deliverable upon such action, if any such date is to be fixed. Such
certificate shall be mailed in the case of any action covered by clause (i) or
(ii) above at least 20 days prior to the record date for determining holders of
Common Stock for purposes of receiving such payment or offer, or in the case of
any action covered by clause (iii) above at least 20 days prior to the date
upon which such action takes place and 20 days prior to any record date to
determine holders of Common Stock entitled to receive such securities or other
property.
5. Covenants of the Company.
5.1. No Impairment or Amendment. The Company shall not by any
action including, without limitation, amending its charter, any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate to protect the
rights of the holder hereof against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any Warrant Shares above the amount payable therefor upon such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly issue fully paid and nonassessable Warrant Shares, (c) will
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction as may be necessary to enable the Company
to perform its obligations under this Warrant, and (d) will not issue any
capital stock or enter into any agreement, the terms of which would have the
effect, directly or indirectly, of preventing the Company from honoring its
obligations hereunder.
So long as any Warrants are outstanding, the Company will acknowledge
in writing, in form satisfactory to any holder of any such security the
continued validity of the Company's obligations hereunder to the holders of
Warrants.
5.2. Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance, sale and delivery upon the
exercise of this Warrant, such number of shares of Common Stock equal to the
number of shares of Common Stock (and/or Other Securities) issuable upon the
exercise of this Warrant. All such shares of Common Stock (and/or Other
Securities) shall be duly authorized and, when issued upon exercise of this
Warrant, will be validly issued and fully paid and nonassessable with no
liability on the part of the holders thereof.
6. Miscellaneous.
-12-
<PAGE> 140
6.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of this
Warrant or any Warrant Shares shall operate as a waiver of or otherwise
prejudice such holder's rights, powers or remedies.
6.2. Amendment. Any term, covenant, agreement or condition of this
Warrant may, with the consent of the Company, be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), only by one or more substantially
concurrent written instruments signed by the holder or holders of the Warrant.
6.3. Communications. All notices to the Company or the holder
shall be in writing and shall be deemed to have been adequately given if
delivered in person, by facsimile transmission with receipt acknowledged or by
delivery by a recognized courier for overnight delivery, or mailed, certified
mail, return receipt requested, to such party at its address set forth below
(or such other address as it may from time to time designate in writing to the
other parties hereto).
<TABLE>
<S> <C>
The Company: Nextel Communications, Inc.
201 Route 17 North
Rutherford, New Jersey 07070
Attention: General Counsel
Fax: (201) 438-5540
With a copy to: Jeanne M. Rickert, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Ave.
Cleveland, Ohio 44114
Fax: (216) 579-0212
The Holder:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
With a copy to:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
</TABLE>
6.4. Remedies. The Company stipulates that the remedies at law of
the holder or holders of the Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of the
terms of the Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
-13-
<PAGE> 141
6.5. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company and the holder or holders of this Warrant, to the extent
provided herein, and shall be enforceable by such holder or holders.
6.6. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the parties hereto and all amendments and
supplements hereof and all waivers and consents hereunder, shall be construed
in accordance with and governed by the laws of Delaware.
IN WITNESS WHEREOF, NEXTEL COMMUNICATIONS, INC. has caused this
Warrant to be executed as an instrument under seal as of the date first above
written.
NEXTEL COMMUNICATIONS, INC.
By
------------------------------
(Title)
-14-
<PAGE> 142
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ___________ shares of Common
Stock (or Other Securities) [Specify] of NEXTEL COMMUNICATIONS, INC. and
herewith makes payment therefor in the amount of $_____________, all at the
price and on the terms and conditions specified in the within Warrant, and
requests that a certificate (or ____ certificates in denominations of ______
shares) for such shares hereby purchased be issued in the name of and delivered
to (choose one) (a) the undersigned or (b) _____________, whose address is
___________________________ and, if such shares shall not include all the
Warrant Shares issuable as provided in the within Warrant, that a new Warrant
of like tenor for the number of Warrant Shares not being purchased hereunder be
issued in the name of and delivered to (choose one) (a) the undersigned or (b)
_____________, whose address is __________________________.
Dated: _______________ __, ________.
[ ]
By
----------------------------------
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
-15-
<PAGE> 143
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto __________, whose address is
___________________________, all of the rights of the undersigned under the
within Warrant, with respect to _______ shares of Common Stock (or Other
Securities) [Specify] of NEXTEL COMMUNICATIONS, INC. and, if such shares shall
not include all the Warrant Shares issuable as provided in the within Warrant,
that a new Warrant of like tenor for the number of Warrant Shares not being
transferred hereunder be issued in the name of and delivered to the
undersigned, and does hereby irrevocably constitute and appoint _____________
Attorney to register such transfer on the books of NEXTEL COMMUNICATIONS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: _______________ __, ________.
[ ]
By
----------------------------------
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
-16-
<PAGE> 144
ANNEX E
<PAGE> 145
ANNEX E
JDR&P LETTERHEAD
______________, 1997
Pittencrieff Communications, Inc.
1 Village Drive
Suite 500
Abilene, Texas 79606
Re: Agreement of Merger and Plan of Reorganization, dated as of
October 2, 1996, by and among Pittencrieff Communications, Inc.,
Nextel Communications, Inc., Nextel Finance Company and DCI
Merger Inc.
Gentlemen:
We have acted as counsel to Nextel Communications, Inc., a Delaware
corporation ("Nextel"), Nextel Finance Company, a Delaware corporation and a
wholly owned subsidiary of Nextel, formerly known as Dispatch Communications,
Inc. ("NFC"), and DCI Merger Inc., a Delaware corporation and a wholly owned
subsidiary of NFC ("Merger Sub"), in connection with the Agreement of Merger
and Plan of Reorganization by and among Pittencrieff Communications, Inc.
("PCI"), Nextel, NFC and Merger Sub, dated as of October 2, 1996 (the "Merger
Agreement"). This opinion is being furnished to you pursuant to Section 8.3(c)
of the Merger Agreement. Capitalized terms that are used but not defined in
this opinion shall have the meanings given to them in the Merger Agreement.
In rendering the opinions expressed herein, we have assumed without
any independent investigation: (a) that the signatures on all documents that
we have examined are genuine and that where any such signature purports to have
been made in a corporate, governmental, fiduciary or other capacity, the person
who affixed such signature to such documents had authority to do so (other than
if such person is or was a director or an officer of Nextel, NFC or Merger Sub)
(b) the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
certified, conformed or photostatic copies, and (c) the correctness of public
files, records and certificates of, or furnished by, governmental or regulatory
agencies or authorities that we have examined.
We have examined such documents, records and matters of fact and
questions of law as we have deemed necessary for
<PAGE> 146
Pittencrieff Communications, Inc.
____________, 1997
Page 2
purposes of this opinion. In addition, we have relied as to matters of fact
upon certificates of officers of Nextel and its subsidiaries, and have not
independently verified the accuracy of the statements contained in such
certificates. In rendering our opinions below regarding good standing and
qualification as a foreign corporation, we have relied exclusively upon
certificates of public officials of the relevant jurisdictions (and with
respect to the payment of taxes and the filing of tax returns in the States of
_______________, a certificate of an officer of Nextel), copies of which have
been delivered to you. In rendering the opinion in paragraph 3 below, we have
reviewed only those judgments, orders or decrees that have been specifically
identified to us by Nextel as binding upon Nextel, NFC or Merger Sub or its or
their property. In rendering the opinions in paragraph 4 below, we have
reviewed only those contracts and agreements binding on Nextel, NFC or Merger
Sub or its or their property and which have been specifically identified to us
by Nextel as those that are material to the business or financial condition of
Nextel, NFC and Merger Sub taken as a whole, and which are identified and
listed in Exhibit A hereto. With your approval, we have assumed that the
Merger Agreement has been duly authorized, executed and delivered by PCI.
In rendering the opinions herein, we are expressing no opinion as to
(i) the laws of any jurisdiction other than the State of Delaware and the
Federal laws of the United States, all as in effect on the date hereof, (ii)
the statutes administered by, the rules and regulations of, or matters
exclusively within the purview of the Federal Communications Commission, or any
comparable state governmental authority or agency, (iii) any state securities
laws or (iv) any Federal or state antitrust laws, other than the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Based upon the foregoing and subject to the further qualifications,
assumptions and limitations set forth herein, we are of the opinion that:
1. Each of Nextel, NFC and Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the General
Corporation Law of Delaware ("DGCL"), and has the corporate power and authority
to own its properties and to conduct its business as currently conducted, and
as proposed to be conducted, as described in the Annual Report on Form 10-K of
Nextel for the year ended December 31, 1995, which is incorporated by reference
into the Registration Statement on Form S-4 of Nextel, as amended (the
"Registration Statement"), and in the related Proxy Statement/Prospectus
(together with any supplements or amendments thereto, the "Proxy Statement").
Each of Nextel, NFC and Merger Sub has the corporate power and
2
<PAGE> 147
Pittencrieff Communications, Inc.
____________, 1997
Page 3
authority to enter into and perform its respective obligations under the Merger
Agreement.
2. The Merger Agreement has been duly authorized, executed and
delivered by Nextel, NFC and Merger Sub, respectively.
3. To our Actual Knowledge, neither the execution and delivery of
the Merger Agreement by Nextel, NFC and Merger Sub nor the consummation by
Merger Sub of the Merger, will constitute a violation of the DGCL or any
Federal statute or regulation, or any judgment, order or decree of any court or
governmental authority binding upon Nextel, NFC or Merger Sub or its or their
property, or conflict with or constitute a breach or violation of any provision
of the certificate of incorporation or by-laws of Nextel, NFC or Merger Sub.
4. Neither the execution and delivery of the Merger Agreement by
Nextel, NFC and Merger Sub nor the consummation of the Merger, will conflict
with, constitute a violation of or result in a breach in or a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under, or cause the creation of any security interest, lien, charge or
encumbrance upon any of the properties or assets of Nextel, NFC or Merger Sub
under, or cause or permit the acceleration of the maturity of any debt or
obligation of Nextel, NFC or Merger Sub pursuant to any agreement listed on
Exhibit A hereto to which Nextel, NFC or Merger Sub is a party.
5. No registration with or authorization or approval by any Federal
or Delaware court or governmental authority that has not been made or obtained
is required of Nextel, NFC or Merger Sub in connection with the execution and
delivery of the Merger Agreement, or the consummation of the Merger, except the
filing to effect the Merger under the DGCL.
6. The shares of Nextel Common Stock to be issued in the Merger
have been duly authorized, and when issued at or after the Effective Time of
the Merger as contemplated in and in accordance with the Merger Agreement, will
be validly issued and fully paid and nonassessable.
7. The shares of Nextel Common Stock to be issued in the Merger
have been duly authorized for quotation on The Nasdaq Stock Market, Inc. upon
official notice of issuance.
8. The Registration Statement has become effective under the
Securities Act of 1933, as amended, and to our Actual Knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for
3
<PAGE> 148
Pittencrieff Communications, Inc.
____________, 1997
Page 4
that purpose are pending or threatened by the Securities and Exchange
Commission.
9. To our Actual Knowledge, there are no actions, proceedings or
investigations pending or overtly threatened against Nextel, NFC or Merger Sub
or any of their properties by or before any court, governmental authority or
arbitrator, domestic or foreign, seeking to restrain or prohibit the
consummation of the transactions described in the Merger Agreement.
As used herein, the phrase "our Actual Knowledge" means the Actual
Knowledge of the Primary Lawyer Group. The Primary Lawyer Group includes
Jeanne M. Rickert, Lisa A. Stater, Kelly R. Caffarelli and William N. Smith.
This opinion is furnished by us solely for your benefit upon the
understanding that we are not hereby assuming any professional responsibility
to any other person, firm, or entity whatsoever and have no responsibility to
advise you of changes in the facts, or of any circumstances or developments
after the date hereof that would or might conflict with any of the assumptions
herein stated.
Very truly yours,
4
<PAGE> 149
ANNEX F
<PAGE> 150
NEXTEL COMMUNICATIONS, INC.
1505 Farm Credit Drive
McLean, VA 22102
703-394-3000 FAX 703-394-3001
[NEXTEL LOGO]
October 2, 1996
Warren D. Harkins, President Ted B. Miller, Jr.
and Chief Executive Officer President
Pittencrieff Communications, Inc. Castle Tower Corporation
One Village Drive, Suite 500 510 Bering Drive, Suite 310
Abilene, Texas 79606 Houston, Texas 77057
Re: Certain Understandings
Dear Sirs:
As you are aware, Nextel Communications, Inc., either
directly or through one or more of its subsidiaries (collectively, "Nextel"),
currently is exploring a potential transaction with Pittencrieff
Communications, Inc. ("Frontier'). Certain contractual arrangements currently
in place between Castle Tower corporation ("Castle") and Frontier present
issues or concerns for Nextel, which Nextel would require to be satisfactorily
resolved before proceeding with any potential transaction with Frontier. Such
issues and concerns chiefly are presented by the terms and conditions contained
in a certain Purchase and Sale Agreement ("Purchase Agreement") and related
License Agreement ("License Agreement"), each by and between Castle and
Frontier. Representatives of Castle, Frontier and Nextel have discussed and
tentatively and conditionally agreed on certain changes to the terms and
conditions of such Purchase Agreement and License Agreement, certain related
actions and the establishment of certain additional arrangements, all as
summarized on Exhibit 1 attached hereto.
In the interest of time, Nextel has indicated its willingness
to proceed to prepare and finalize suitable definitive documentation regarding
the potential transaction with Frontier prior to the preparation and execution
of all definitive documents required to implement the tentative agreements and
understandings reflected in the attached Exhibit 1, subject, however to (1)
Castle and Frontier entering into this letter confirming their conditional
acceptance of such agreements and understandings as is reflected on Exhibit 1
hereto and their commitment to work in good faith with Nextel to prepare and
enter into appropriate definitive documents to evidence all of the terms and
conditions required to implement such agreements and understandings and (2)
Castle and Frontier acknowledging that Nextel shall have no liability or
responsibility to either of them, except pursuant to and in accordance with the
terms of any definitive agreements between either or both of them and Nextel,
whether or not appropriate definitive documents of the type referred to in the
foregoing clause (1) are in fact entered into or whether or not any potential
transaction between Nextel and Frontier is ultimately consummated.
<PAGE> 151
Nextel and Frontier acknowledge that the agreement of Castle
contained in this letter and the attached Exhibit 1 are conditional in that
they are subject to the approval of both Castle's Board of Directors and
Castle's bank lending group; Nextel and Frontier further acknowledge that
Castle shall have no liability or responsibility in either one of them, except
pursuant to and in accordance with the terms of any definitive agreements
between either or both of them and Castle, and then only in the event the
potential merger transaction between Nextel and Frontier closes.
Nextel has asked that in the event its potential merger
transaction with Frontier closes, Castle should release all or a substantial
part of its collateral under the License Agreement, and modify certain rights
to which it is currently entitled under the Purchase Agreement and the License
Agreement (the "Concession"). Nextel acknowledges that Castle would not agree
to the Concessions, were it not for Castle's reliance on Nextel's agreement to
perform its commitments and agreements reflected in the attached Exhibit 1.
Please signify your acceptance, approval and acknowledgment
of the foregoing by signing the enclosed copy of this letter in the space
indicated below and returning a fully executed copy to the undersigned.
Very truly yours,
NEXTEL COMMUNICATIONS, INC.
By: /s/ John H. Willmoth
------------------------
Accepted, approved and acknowledged:
CASTLE TOWER CORPORATION
By: /s/ Ted B. Miller, Jr.
-------------------------
PITTENCRIEFF COMMUNICATIONS, INC.
By: /s/ Warren D. Harkins
--------------------------
Attachment
<PAGE> 1
EXHIBIT 4.24
================================================================================
MCCAW INTERNATIONAL, LTD.,
as Issuer
and
THE BANK OF NEW YORK
_________________________
Indenture
Dated as of March 6, 1997
_________________________
13% Senior Discount Notes due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ -----------------
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.08
Section 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 10.02
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.17; 10.02
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . 4.16; 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 10.03
(e) . . . . . . . . . . . . . . . . . . . . . . . . 10.04
Section 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 10.02
Section 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.07
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.03. Execution, Authentication and Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.05. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.07. Book-Entry Provisions for Global Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.08. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.09. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.10. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.11. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.14. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.15. Issuance of Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.02. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.03. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.06. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.07. Payment of Notes Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
__________________________________
Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
<PAGE> 4
ii
<TABLE>
<S> <C> <C>
SECTION 3.08. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of Restricted . . . . . . . . . . . . . . . . . . 52
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Group Members . . . . . . . . . . . . . . . . . . . 52
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.09. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.10. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.11. Repurchase of Notes upon a Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.12. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.13. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.14. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.15. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.16. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.17. Commission Reports and Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.18. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.19. Limitation on Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.20. Calculation of Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.02. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
<PAGE> 5
iii
<TABLE>
<S> <C>
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.13. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.14. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.10. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.11. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.12. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.02. Defeasance and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 8.03. Defeasance of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.05. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9.03. Revocation and Effect of Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
<PAGE> 6
iv
<TABLE>
<S> <C>
SECTION 9.04. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.05. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.03. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 10.04. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.06. Payment Date Other Than a Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.08. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.09. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.11. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.12. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.13. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.14. Right of First Opportunity Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
EXHIBIT A Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
</TABLE>
<PAGE> 7
INDENTURE, dated as of March 6, 1997, between MCCAW
INTERNATIONAL, LTD., a Washington corporation, (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation, (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance initially of up to $951,463,000
aggregate principal amount at maturity of the Company's 13% Senior Discount
Notes due 2007 (the "Notes") issuable as provided in this Indenture. Pursuant
to the terms of a Placement Agreement dated March 3, 1997 between the Company
and Morgan Stanley & Co. Incorporated, as manager, for itself and the other
placement agents named therein (the "Placement Agreement"), the Company has
agreed to issue and sell 951,463 units (the "Units"), each Unit consisting of
one Note and one warrant ("Warrant") to purchase 0.10616 shares of common
stock, without par value, of the Company (the "McCaw Common Stock"). The Notes
and the Warrants included in each Unit will become separately transferable at
the close of business upon the earlier to occur of (i) the date that is six
months after the Closing Date, (ii) the commencement of an exchange offer with
respect to the Notes undertaken pursuant to the Registration Rights Agreement,
(iii) the effectiveness of a shelf registration statement with respect to
resales of the Notes and (iv) the commencement of an Offer to Purchase (the
"Separation Date"). All things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been done, and the
Company has done all things necessary to make the Notes, when executed by the
Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act
of 1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.
<PAGE> 8
2
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accreted Value" is defined to mean, for any Specified Date, the
amount calculated pursuant to (i), (ii), (iii) or (iv) for each $1,000
principal amount at maturity of Notes:
(i) if the Specified Date occurs on one or more of the
following dates (each a "Semi-Annual Accrual Date"), the Accreted
Value will equal the amount set forth below for such Semi-Annual
Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
<S> <C>
October 15, 1997 $ 567.35
April 15, 1998 $ 604.23
October 15, 1998 $ 643.51
April 15, 1999 $ 685.33
October 15, 1999 $ 729.88
April 15, 2000 $ 777.32
October 15, 2000 $ 827.85
April 15, 2001 $ 881.66
October 15, 2001 $ 938.97
April 15, 2002 $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first
Semi-Annual Accrual Date, the Accreted Value will equal the sum of (a)
$525.51 and (b) an amount equal to the product of (1) the Accreted
Value for the first Semi-Annual Accrual Date less $525.51 multiplied
by (2) a fraction, the numerator of which is the number of days from
the issue date of the Notes to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is the
number of days elapsed from the issue date of the Notes to the first
Semi-Annual Accrual Date, using a 360-day year of twelve 30-day
months;
(iii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the
Accreted Value for the Semi-Annual Accrual Date immediately preceding
such Specified Date and (b) an amount equal to the product of (1) the
Accreted Value for the immediately following Semi-Annual Accrual Date
less the Accreted Value for the immediately preceding Semi-Annual
Accrual Date multiplied by (2) a fraction, the numerator of which is
the number of days from the immediately preceding Semi-Annual Accrual
Date to the Specified Date,
<PAGE> 9
3
using a 360-day year of twelve 30-day months, and the denominator of
which is 180; or
(iv) if the Specified Date occurs after the last
Semi-Annual Accrual Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Group Member or assumed in connection
with an Asset Acquisition by a Restricted Group Member and not Incurred in
connection with, or in anticipation of, such Person becoming a Restricted Group
Member or such Asset Acquisition; provided that Indebtedness of such Person
which is redeemed, defeased, retired or otherwise repaid at the time of or
immediately upon consummation of the transactions by which such Person becomes
a Restricted Group Member or such Asset Acquisition shall not be Acquired
Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Group Members
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Unrestricted Subsidiary or
Unrestricted Affiliate, except (x) with respect to net income, to the extent of
the amount of dividends or other distributions actually paid to the Company or
any Restricted Group Member by such Unrestricted Subsidiary or Unrestricted
Affiliate during such period, and (y) with respect to net losses, to the extent
of the amount of cash contributed by the Company or any Restricted Group Member
to such Unrestricted Subsidiary or Unrestricted Affiliate during such period;
(ii) solely for the purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of Section 4.04
(and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Group Member or is merged into or consolidated with the
Company or any Restricted Group Member or all or substantially all of the
property and assets of such Person are acquired by the Company or any
Restricted Group Member; (iii) the net income of any Restricted Group Member to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Group Member of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Group Member; provided, in the case of
restrictions imposed in connection with outstanding Indebtedness, that the
amount of net income excluded during any period shall not exceed the aggregate
amount of such Indebtedness that would need to be repaid to enable such
Restricted Group Member to declare and pay dividends or similar distributions
of such net income; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock of the Company
<PAGE> 10
4
or any Restricted Group Member owned by Persons other than the Company and any
Restricted Group Member; (vi) all extraordinary gains and extraordinary losses;
and (vii) to the extent not otherwise excluded in accordance with GAAP, the net
income (or loss) of any Restricted Group Member in an amount that corresponds
to the percentage ownership interest in the income of such Restricted Group
Member not owned on the last day of such period, directly or indirectly, by the
Company.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Group Members (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted Group
Members (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles other than radio frequency licenses, all as set forth on the most
recent quarterly or annual consolidated balance sheet of the Company and its
Restricted Group Members, prepared in conformity with GAAP and filed with the
Commission pursuant to Section 4.17; provided that Adjusted Consolidated Net
Tangible Assets shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount that corresponds to the percentage ownership
interest in the assets of each Restricted Group Member not owned on the date of
determination, directly or indirectly, by the Company.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or any
Restricted Group Member in any other Person pursuant to which such Person shall
become a Restricted Group Member or shall be merged into or consolidated with
the Company or any Restricted Group Member; provided that such Person's primary
business is related, ancillary or complementary to the businesses of the
Company and its Restricted Group Members on the date of such investment or (ii)
an acquisition by the Company or any Restricted Group Member of the property
and assets of any Person other than the Company or any Restricted Group Member
that constitute substantially all of a division or line of business of such
Person; provided that
<PAGE> 11
5
the property and assets acquired are related, ancillary or complementary to the
businesses of the Company and its Restricted Group Members on the date of such
acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any Restricted Group Member (other than to the Company or another Restricted
Group Member) of (i) all or substantially all of the Capital Stock of any
Restricted Group Member or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any Restricted
Group Member.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any
Restricted Group Member to any Person other than the Company or any Restricted
Group Member of (i) all or any of the Capital Stock of any Restricted Group
Member, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any Restricted Group Member or
(iii) any other property and assets of the Company or any Restricted Group
Member outside the ordinary course of business of the Company or such
Restricted Group Member and, in the case of any of the foregoing clauses (i)
through (iii), that is not governed by the provisions of Article Five; provided
that "Asset Sale" shall not include (a) sales or other dispositions of
inventory, receivables and other current assets, (b) sales or other
dispositions of assets for consideration at least equal to the fair market
value of the assets sold or disposed of, provided that the consideration
received would satisfy clause (B) of Section 4.10, (c) sales or other
dispositions of obsolete equipment, (d) sales or other dispositions of the
Capital Stock of an Unrestricted Subsidiary or an Unrestricted Affiliate or (e)
sales or other distributions of assets with a fair market value (as certified
in an officers' certificate) not in excess of $1 million.
"Average Life" means, at any date of determination with respect to any
debt security, 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 security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the
Secretary of the Company to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
<PAGE> 12
6
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person; and
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under such lease.
"Change of Control" means such time as (i) (a) prior to the occurrence
of a Public Market, a "person" or "group" (within the meaning of Section 13(d)
or 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the
Company, on a fully diluted basis, than is held by the Existing Stockholders
and their Affiliates on such date and (b) after the occurrence of a Public
Market, a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power of the Voting Stock of the Company on a fully diluted basis and
such ownership is greater than the amount of voting power of the Voting Stock,
on a fully diluted basis, held by the Existing Stockholders and their
Affiliates on such date; or (ii) individuals who on the Closing Date constitute
the Board of Directors (together with any new directors whose election by the
Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
series and classes of such common stock.
<PAGE> 13
7
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the name of
the Company (i) by its Chairman, a Vice Chairman, its President or a Vice
President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary and delivered to the Trustee; provided, however, that
such written request or order may be signed by any two of the officers or
directors listed in clause (i) above in lieu of being signed by one of such
officers or directors listed in such clause (i) and one of the officers listed
in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (iii) income taxes, to the extent such amount
was deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation expense as
determined in conformity with GAAP, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (v) amortization expense as
determined in conformity with GAAP, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, and (vi) all other non-cash items
to the extent reducing Adjusted Consolidated Net Income (other than items that
will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items to the extent increasing
Adjusted Consolidated Net Income, as determined in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
in respect of any Indebtedness that is Guaranteed or secured by the Company or
any Restricted Group Member) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Group Members during such
period; excluding, however, (i) any amount of such interest of any Restricted
Group Member if the net income of such Restricted Group Member is excluded in
the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) or
(vii) of the definition thereof (but only in the same proportion as the net
income of such Restricted Group Member is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) or (vii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the
<PAGE> 14
8
Notes, all as determined (without taking into account Unrestricted Subsidiaries
or Unrestricted Affiliates) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the
ratio of (i) the aggregate amount (determined as set forth in the definition of
"Indebtedness") of Indebtedness of the Company and its Restricted Group Members
as at such Transaction Date to (ii) the aggregate amount of Consolidated EBITDA
for the latest fiscal quarter for which financial statements of the Company
have been filed with the Commission pursuant to Section 4.17 (such fiscal
quarter being the "One Quarter Period"), multiplied by four; provided that (A)
pro forma effect shall be given to (x) any Indebtedness Incurred from the
beginning of the One Quarter Period through the Transaction Date (the
"Reference Period"), to the extent such Indebtedness is outstanding on the
Transaction Date and (y) any Indebtedness that was outstanding during such
Reference Period but that is not outstanding or is to be repaid on the
Transaction Date; (B) pro forma effect shall be given to Asset Dispositions and
Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such Reference Period, as
if they had occurred and such proceeds had been applied on the first day of
such Reference Period; and (C) pro forma effect shall be given to asset
dispositions and asset acquisitions (including giving pro forma effect to the
application of proceeds of any asset disposition) that have been made by any
Person that has become a Restricted Group Member or has been merged with or
into the Company or any Restricted Group Member during such Reference Period
and that would have constituted Asset Dispositions or Asset Acquisitions had
such transactions occurred when such Person was a Restricted Group Member as if
such asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the full fiscal quarter immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed of for which financial information
is available, multiplied by four.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Group
Members (which shall be as of a date not more than 90 days prior to the date of
such computation, and which shall not take into account Unrestricted
Subsidiaries or Unrestricted Affiliates), less any amounts attributable to
Redeemable Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company
or any Restricted Group Member, each item to be determined in conformity with
GAAP.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office
<PAGE> 15
9
is, at the date of this Indenture, located at 101 Barclay Street, 21 West, New
York, New York 10286, Attention: Corporate Trust Administration.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its nominees, and
their respective successors.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"Existing Stockholders" means Craig O. McCaw and Nextel.
"fair market value" means 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 for
purposes of clause (viii) of the second paragraph of Section 4.03, (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 capital contribution or sale
of Capital Stock and (y) in the event the aggregate fair market value of any
other property received by the Company exceeds $10 million, 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 Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a
<PAGE> 16
10
significant segment of the accounting profession. Except as specifically
provided, all ratios and computations contained or referred to in this
Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance
with the terms of the covenants and with other provisions of this Indenture
shall be made without giving effect to the amortization of any expenses
incurred in connection with the offering of the Notes.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of such Person's business), to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"Holder" or "Noteholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Indebtedness by reason of a Person
becoming a Restricted Group Member; provided that neither the accrual of
interest nor the accretion of original issue discount shall be considered an
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations
(including reimbursement obligations) with respect to (x) letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered
into in the ordinary course of business of such Person to the extent such
<PAGE> 17
11
letters of credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed no later than the third Business Day following receipt by
such Person of a demand for reimbursement and (y) letters of credit secured by
cash collateral, to the extent secured thereby), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness
of other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (A)
that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
unamortized portion of the original issue discount of such Indebtedness at the
time of its issuance as determined in conformity with GAAP, (B) that the amount
of Indebtedness at any time of any Restricted Group Member shall be reduced by
an amount that corresponds to the percentage ownership interest in the assets
of such Restricted Group Member not owned on the date of determination,
directly or indirectly, by the Company, (C) money borrowed at the time of the
Incurrence of any Indebtedness in order to pre-fund the payment of interest on
such Indebtedness shall be deemed not to be "Indebtedness" and (D) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indenture" means this Indenture as originally executed or as it may
be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date on
April 15 and October 15, of each year, commencing October 15, 2002.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement.
<PAGE> 18
12
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted Group
Members) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary of the Company as an
Unrestricted Subsidiary, (ii) the designation of a Restricted Affiliate as an
Unrestricted Affiliate and (iii) the fair market value of the Capital Stock (or
any other Investment), held by the Company or any Restricted Group Member, of
(or in) any Person that has ceased to be a Restricted Group Member, including
without limitation, by reason of any transaction permitted by clause (iii) of
Section 4.06 or an Investment ceasing to be a Permitted Investment pursuant to
clause (ii)(y) of the definition of "Permitted Investment"; provided that the
fair market value of the Investment remaining in any Person that has ceased to
be a Restricted Group Member shall not exceed (x) the value of the aggregate
amount of Investments previously made in such Person valued at the time such
Investments were made less (y) the net reduction of such Investments. For
purposes of the definition of "Unrestricted Affiliate" and "Unrestricted
Subsidiary" and Section 4.04, (i) "Investment" shall include the fair market
value of the assets (net of liabilities (other than liabilities to the Company
or any of its Subsidiaries)) of any Restricted Group Member at the time that
such Restricted Group Member is designated an Unrestricted Subsidiary or
Unrestricted Affiliate, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Subsidiaries))
of any Unrestricted Subsidiary or Unrestricted Affiliate at the time that such
Unrestricted Subsidiary or Unrestricted Affiliate is designated a Restricted
Subsidiary or Restricted Affiliate shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary or Unrestricted Affiliate shall be valued at its fair
market value at the time of such transfer; provided that the amount of any
Investment made by a Restricted Group Member shall be reduced by an amount that
corresponds to the percentage ownership interest in the assets of such
Restricted Group Member not owned on the date of determination, directly or
indirectly, by the Company.
"Involuntary Event" has the meaning specified in the definition of
"Permitted Investments."
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof or any
agreement to give any security interest); provided that the amount of assets of
a Restricted Group Member subject to a Lien shall be reduced by an amount that
corresponds to the percentage ownership interest in the assets of such
Restricted
<PAGE> 19
13
Group Member not owned on the date of determination, directly or indirectly, by
the Company.
"McCaw Common Stock" has the meaning specified in the recitals to this
Indenture.
"Minority Owned Affiliate," of any specified Person, means any other
Person in which an Investment in the Capital Stock of such Person has been made
by such specified Person other than a direct or indirect Subsidiary of such
specified Person.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Motorola Credit Agreement" means any credit agreement, loan or other
similar agreement entered into pursuant to the Motorola Vendor Financing
Template Memorandum of Understanding, together with all other agreements,
instruments and documents executed or delivered pursuant thereto or in
connection therewith, as such agreements, instruments or documents may be
amended, supplemented, extended, renewed, replaced or otherwise modified from
time to time.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Group Member) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company
and its Restricted Group Members, taken as a whole, (iii) payments made to
repay Indebtedness or any other obligation outstanding at the time of such
Asset Sale that either (A) is secured by a Lien on the property or assets sold
or (B) is required to be paid as a result of such sale and (iv) appropriate
amounts to be provided by the Company or any Restricted Group Member as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP; provided that with respect to any Asset Sale by a
Restricted Group Member, Net Cash Proceeds shall be reduced by an amount that
corresponds to the percentage ownership interest in the assets of such
Restricted Group Member not owned on the date of such Asset Sale, directly or
indirectly, by the Company; and (b) with respect to any capital contribution or
issuance or sale of Capital Stock, the proceeds of such capital contribution or
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent
<PAGE> 20
14
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Group Member) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such capital
contribution or issuance or sale and net of taxes paid or payable as a result
thereof.
"Nextel" means Nextel Communications, Inc.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Note Register" has the meaning provided in Section 2.04.
"Notes" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Notes" shall include
the Notes initially issued on the Closing Date, any Exchange Notes to be issued
and exchanged for any Notes pursuant to the Registration Rights Agreement and
this Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as
one series of Notes under this Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to
accrue interest (or amortize original issue discount, as the case may be)
pursuant to its terms; (iv) that, unless the Company defaults in the payment of
the purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest (or amortize original issue discount,
as the case may be) on and after the Payment Date; (v) that Holders electing to
have a Note purchased pursuant to the Offer to Purchase will be required to
surrender the Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of the Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the third Business Day immediately preceding the
Payment Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and (vii)
<PAGE> 21
15
that Holders whose Notes are being purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall
be in a principal amount at maturity of $1,000 or integral multiples thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal
in principal amount to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or integral multiples thereof. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, and (ii)
the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof. Each Officers' Certificate (other than
certificates provided pursuant to TIA Section 314(a)(4)) shall include the
statements provided for in TIA Section 314(e).
"Offshore Global Note" has the meaning provided in Section 2.01.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Offshore Notes Exchange Date" has the meaning provided in Section
2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e).
"Overhead Services Agreement" means the Overhead Services Agreement,
to be dated as of the Closing Date, between the Company and Nextel.
<PAGE> 22
16
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permanent Offshore Global Note" has the meaning provided in Section
2.01.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary of the Company or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary of the Company or be merged or
consolidated with or into or transfer or convey all or substantially all its
assets to, the Company or a Restricted Subsidiary of the Company; provided that
such Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
Investment; (ii) an Investment by the Company or a Restricted Group Member in a
Restricted Affiliate or a Person which will, upon the making of such
Investment, become a Restricted Affiliate or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, a Restricted
Affiliate; provided that (x) such Person's primary business is related,
ancillary or complementary to the businesses of the Company and its Restricted
Group Members on the date of such Investment and (y) any such Investment shall
cease to be a Permitted Investment in the event such Restricted Affiliate shall
cease to be a Restricted Affiliate or shall cease to observe any of the
provisions of the covenants that are applicable to such Restricted Affiliate,
provided that in the event such Restricted Affiliate ceases to be a Restricted
Affiliate or such Restricted Affiliate ceases to observe any of the provisions
of the covenants applicable to it solely as a result of circumstances,
developments or conditions beyond the control of the Company (such failure to
be a Restricted Affiliate or failure to observe a covenant as a result of any
such circumstance, development or condition, being an "Involuntary Event") any
such Investment previously made in such Restricted Affiliate will not cease to
be a Permitted Investment unless such Involuntary Event continues for 90 days;
(iii) an Investment by a Restricted Affiliate in a Restricted Subsidiary of
such Restricted Affiliate or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary of such Restricted Affiliate or be
merged or consolidated with or into or transfer or convey all or substantially
all its assets to, such Restricted Affiliate or a Restricted Subsidiary of such
Restricted Affiliate; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Company and its Restricted
Group Members on the date of such Investment; (iv) Temporary Cash Investments;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in accordance
with GAAP; and (vi) stock, obligations or securities received in satisfaction
of judgments or as part of or in connection with the bankruptcy, winding up or
liquidation of a Person, except if such stock, obligations or securities are
received in consideration for an Investment made in such Person in connection
with or anticipation of such bankruptcy, winding up or liquidation.
<PAGE> 23
17
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory and common law Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any Restricted
Group Member; (vi) Liens (including extensions and renewals thereof) upon real
or personal property acquired after the Closing Date; provided that (a) such
Lien is created solely for the purpose of securing Indebtedness Incurred, in
accordance with Section 4.03, (1) to finance the cost (including the cost of
design, development, construction, improvement, installation or integration) of
the item of property or assets subject thereto and such Lien is created prior
to, at the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost and (c) any such Lien shall not extend to or cover any property or
assets other than such item of property or assets and any improvements on such
item; (vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Group Members, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Group Members relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements (or substantially
equivalent filings outside the United States) regarding leases; (xi) Liens on
property of, or on shares of Capital Stock or Indebtedness of, any Person
existing at the time such Person becomes, or becomes a part of, any Restricted
Group Member; provided that such Liens do not extend to or cover any property
or assets of the Company or any Restricted Group Member other than the property
or assets acquired; (xii) Liens in favor of the Company or any Restricted Group
Member; (xiii) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Group Member that does not give rise to
an Event of Default; (xiv) Liens securing reimbursement obligations
<PAGE> 24
18
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xv)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are either within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case,
securing Indebtedness under Interest Rate Agreements and Currency Agreements
and forward contracts, options, future contracts, futures options or similar
agreements or arrangements designed solely to protect the Company or any of its
Restricted Group Members from fluctuations in interest rates, currencies or the
price of commodities; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any Restricted Group Member in the ordinary course of
business in accordance with the past practices of the Company and its
Restricted Group Members prior to the Closing Date; (xviii) Liens on or sales
of receivables; (xix) Liens on the Capital Stock of Unrestricted Subsidiaries
and Unrestricted Affiliates; and (xx) Liens securing Indebtedness in an amount
not to exceed at any one time outstanding 10% of Adjusted Consolidated Net
Tangible Assets.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of this Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity
Offering has been consummated and (ii) at least 15% of the total issued and
outstanding Common Stock of the
<PAGE> 25
19
Company has been distributed by means of an effective registration statement
under the Securities Act or sales pursuant to Rule 144 under the Securities
Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder
of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the Stated Maturity of the Notes; 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 an "asset sale" or "change
of control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "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 Section 4.10 and
Section 4.11 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 Notes as are required to be repurchased pursuant
to Section 4.10 and Section 4.11.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration" has the meaning provided in Section 4.17.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated March 3, 1997, among the Company and Morgan Stanley & Co.
Incorporated, Chase Securities Inc., Lehman Brothers Inc. and NatWest Capital
Markets Limited and certain permitted assigns specified therein.
"Registration Statement" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 1 or October 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
<PAGE> 26
20
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice chairman of the board of directors, the chairman or
any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Affiliate" means any direct or indirect Minority Owned
Affiliate of the Company or a Restricted Subsidiary of the Company that has
been designated by the Board of Directors as a Restricted Affiliate based on a
determination by the Board of Directors that the Company has, directly or
indirectly, the requisite control over such Minority Owned Affiliate to prevent
it from Incurring Indebtedness, or taking any other action at any time, in
contravention of any of the provisions of this Indenture that are applicable to
Restricted Affiliates; provided that immediately after giving effect to such
designation (x) the Liens and Indebtedness of such Minority Owned Affiliate
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred for all purposes of this Indenture and (y)
no Default or Event of Default shall have occurred and be continuing. The
Company will be required to deliver an Officers' Certificate to the Trustee
upon designating any Minority Owned Affiliate as a Restricted Affiliate.
"Restricted Group Members" means collectively, each Restricted
Subsidiary of the Company, each Restricted Affiliate and each Restricted
Subsidiary of a Restricted Affiliate.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" has the meaning specified in the recitals to this
Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
<PAGE> 27
21
"Significant Group Member" means, at any date of determination, any
Restricted Group Member that, together with its Restricted Subsidiaries and
Restricted Affiliates, (i) for the most recent fiscal year of the Company,
accounted for more than 10% of the consolidated revenues of the Company and its
Restricted Group Members or (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Group Members, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Specified Date" means any Redemption Date, any Change of Control
Payment Date, Excess Proceeds Payment Date or any date on which the Notes first
become due and payable after an Event of Default.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such
Person and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50 million (or
the foreign currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor, (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more than
90 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America
<PAGE> 28
22
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P, and (v)
securities with maturities of six months or less from the date of acquisition
issued or fully and unconditionally guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or Moody's.
"Temporary Offshore Global Note" has the meaning provided in Section
2.01.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S. Code Section 77aaa-77bbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the acquisition
of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any Restricted Group Member, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"U.S. Global Note" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof at any time
prior to the Stated Maturity of the Notes, and shall also include a depository
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt; provided that (except as
<PAGE> 29
23
required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Units" has the meaning provided in the recitals to this Indenture.
"Unrestricted Affiliate" means any Minority Owned Affiliate of the
Company other than a Restricted Affiliate. The Board of Directors may designate
any Restricted Affiliate to be an Unrestricted Affiliate unless such Minority
Owned Affiliate owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any Restricted Group Member; provided that (A) any
Guarantee by the Company or any Restricted Group Member of any Indebtedness of
the Minority Owned Affiliate being so designated shall be deemed an
"Incurrence" of such Indebtedness and an "Investment" by the Company or such
Restricted Group Member (or both, if applicable) at the time of such
designation; (B) either (I) the Minority Owned Affiliate to be so designated
has total assets of $1,000 or less or (II) if such Minority Owned Affiliate has
assets greater than $1,000, such designation would be permitted under Section
4.04 and (C) if applicable, the Incurrence of Indebtedness and the Investment
referred to in clause (A) of this proviso would be permitted under Section 4.03
and Section 4.04. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or
any Restricted Subsidiary of any Indebtedness of the Subsidiary being so
designated shall be deemed an "Incurrence" of such Indebtedness and an
"Investment" by the Company or such Restricted Subsidiary (or both, if
applicable) at the time of such designation; (B) either (I) the Subsidiary to
be so designated has total assets of $1,000 or less or (II) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under
Section 4.04 and (C) if applicable, the Incurrence of Indebtedness and the
Investment referred to in clause (A) of this proviso would be permitted under
Section 4.03 and Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that
immediately after giving effect to such designation (x) the Liens and
Indebtedness of such
<PAGE> 30
24
Unrestricted Subsidiary outstanding immediately after such designation would,
if Incurred at such time, have been permitted to be Incurred for all purposes
of this Indenture and (y) no Default or Event of Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Warrant Agreement" means the Warrant Agreement dated as of March 6,
1997 between the Company and The Bank of New York, as warrant agent.
"Warrants" means the warrants issued under the Warrant Agreement, each
of which initially entitles the holder thereof to purchase 0.10616 shares of
McCaw Common Stock at $36.45 per share, subject to adjustment.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture notes" means the Notes;
"indenture note holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule of
the Commission and not otherwise defined herein have the meanings assigned to
them therein.
<PAGE> 31
25
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words
in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained
in this Indenture shall be computed in accordance with the definition
of GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. The Notes and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture. The Notes may
have notations, legends or endorsements required by law, stock exchange
agreements to which the Company is subject or usage. The Company shall approve
the form of the Notes and any notation, legend or endorsement on the Notes.
Each Note shall be dated the date of its authentication.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
<PAGE> 32
26
Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in
registered form, substantially in the form set forth in Exhibit A
(collectively, the "U.S. Global Notes"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
U.S. Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more temporary
global Notes in registered form substantially in the form set forth in Exhibit
A (the "Temporary Offshore Global Notes") deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. At any time following the later of the
Separation Date and April 15, 1997 (the "Offshore Notes Exchange Date"), upon
receipt by the Trustee and the Company of a certificate substantially in the
form of Exhibit B hereto, one or more permanent global Notes in registered form
substantially in the form set forth in Exhibit A (the "Permanent Offshore
Global Notes"; and together with the Temporary Offshore Global Notes, the
"Offshore Global Notes") duly executed by the Company and authenticated by the
Trustee as hereinafter provided shall be deposited with the Trustee, as
custodian for the Depositary, and the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the Temporary
Offshore Global Notes in an amount equal to the principal amount of the
beneficial interest in the Temporary Offshore Global Notes transferred.
Notes offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes". The U.S.
Global Notes and the Offshore Global Notes are sometimes referred to herein as
the "Global Notes".
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
<PAGE> 33
27
SECTION 2.02. Restrictive Legends. Unless and until a Note
is exchanged for an Exchange Note or sold in connection with an effective
Registration pursuant to the Registration Rights Agreement, the U.S. Global
Notes, Temporary Offshore Global Notes and each U.S. Physical Note shall bear
the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO MCCAW INTERNATIONAL, LTD.
(THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES AT THE TIME OF
TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO
<PAGE> 34
28
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION",
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE.
<PAGE> 35
29
Prior to the Separation Date, each Note shall bear the
following legend on the face thereof:
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF
WHICH CONSISTS OF ONE NOTE AND ONE WARRANT INITIALLY ENTITLING THE
HOLDER THEREOF TO PURCHASE 0.10616 COMMON SHARES, WITHOUT PAR VALUE,
OF MCCAW INTERNATIONAL, LTD (A "WARRANT"). PRIOR TO THE CLOSE OF
BUSINESS UPON THE EARLIEST TO OCCUR OF (i) SEPTEMBER 6, 1997, (ii) THE
COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE
EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO
RESALES OF THE NOTES AND (iv) THE COMMENCEMENT OF AN OFFER TO PURCHASE
THE NOTES, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
SECTION 2.03. Execution, Authentication and Denominations.
The Notes shall be executed by two Officers of the Company. The signature of
any of these Officers on the Notes may be by facsimile or manual signature in
the name and on behalf of the Company.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Note, the Note shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes. Such Company Order
shall specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and in case of an issuance of
Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such
<PAGE> 36
30
authenticating agent. An authenticating agent has the same rights as an Agent
to deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount at maturity and
any integral multiple of $1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency where Notes may
be presented for payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served, which shall be in the Borough of Manhattan, The City
of New York. The Company shall cause the Registrar to keep a register of the
Notes and of their transfer and exchange (the "Note Register"). The Company
may have one or more co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
give prompt written notice to the Trustee of the name and address of any such
Agent and any change in the address of such Agent. If the Company fails to
maintain a Registrar, Paying Agent and/or agent for service of notices and
demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for
service of notices and demands. The Company may remove any Agent upon written
notice to such Agent and the Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a successor
Agent to such Agent as evidenced by an appropriate agency agreement entered
into by the Company and such successor Agent and delivered to the Trustee or
(ii) notification to the Trustee that the Trustee shall serve as such Agent
until the appointment of a successor Agent in accordance with clause (i) of
this proviso. The Company, any Subsidiary of the Company, or any Affiliate of
any of them may act as Paying Agent, Registrar or co-Registrar, and/or agent
for service of notice and demands.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Registrar shall make
available to the Trustee on or before each Interest Payment Date and at such
other times as the Trustee may reasonably request, the names and addresses of
the Holders as they appear in the Note Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than each due date of the principal, premium, if any, and interest on any
Notes, the Company shall deposit with the Paying Agent money in immediately
available funds sufficient to pay such principal, premium, if any, and interest
so becoming due. The Company shall require each
<PAGE> 37
31
Paying Agent other than the Trustee to agree in writing that such Paying Agent
shall hold in trust for the benefit of the Holders or the Trustee all money
held by the Paying Agent for the payment of principal of, premium, if any, and
interest on the Notes (whether such money has been paid to it by the Company or
any other obligor on the Notes), and such Paying Agent shall promptly notify
the Trustee of any default by the Company (or any other obligor on the Notes)
in making any such payment. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee and account for any funds disbursed,
and the Trustee may at any time during the continuance of any payment default,
upon written request to a Paying Agent, require such Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed. Upon
doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company or any Subsidiary of the Company or
any Affiliate of any of them acts as Paying Agent, it will, on or before each
due date of any principal of, premium, if any, or interest on the Notes,
segregate and hold in a separate trust fund for the benefit of the Holders a
sum of money sufficient to pay such principal, premium, if any, or interest so
becoming due until such sum of money shall be paid to such Holders or otherwise
disposed of as provided in this Indenture, and will promptly notify the Trustee
of its action or failure to act.
SECTION 2.06. Transfer and Exchange. The Notes are issuable
only in registered form. The Notes shall initially be issued as part of an
issuance of Units, each of which consists of one Note and one Warrant. Prior
to the Separation Date, the Notes may not be transferred or exchanged
separately from, but may be transferred or exchanged only together with the
Warrants issued in connection with such Notes. A Holder may transfer a Note
only by written application to the Registrar stating the name of the proposed
transferee and otherwise complying with the terms of this Indenture. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Registrar in the Note Register. Prior to the registration of any
transfer by a Holder as provided herein, the Company, the Trustee, and any
agent of the Company shall treat the person in whose name the Note is
registered as the owner thereof for all purposes whether or not the Note shall
be overdue, and neither the Company, the Trustee, nor any such agent shall be
affected by notice to the contrary. Furthermore, any Holder of a Global Note
shall, by acceptance of such Global Note, agree that transfers of beneficial
interests in such Global Note may be effected only through a book entry system
maintained by the Holder of such Global Note (or its agent) and that ownership
of a beneficial interest in the Note shall be required to be reflected in a
book entry. When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Notes of other authorized denominations (including an exchange of
Notes for Exchange Notes), the Registrar shall register the transfer or make
the exchange as requested if its requirements for such transactions are met;
provided that no exchanges of Notes for Exchange Notes shall occur until a
Registration Statement shall have been declared effective by the Commission and
that any Notes that are exchanged for Exchange Notes shall be cancelled by the
Trustee. To permit registrations of transfers and
<PAGE> 38
32
exchanges, the Company shall execute and the Trustee shall authenticate Notes
at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange or redemption of the Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Notes. (a)
The U.S. Global Note and Offshore Global Note initially shall (i) be registered
in the name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian,
or under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Note may be transferred in accordance with the rules and procedures of
the Depositary and the provisions of Section 2.08. In addition, U.S. Physical
Notes and Offshore Physical Notes shall be transferred to all beneficial owners
in exchange for their beneficial interests in the U.S. Global Note or the
Offshore Global Note, respectively, if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the U.S. Global
Note or the Offshore Global Note, as the case may be, and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)
an Event of Default has occurred and is continuing and the Registrar has
received a request therefor from the Depositary or (iii) in accordance with the
rules and procedures of the Depositary and the provisions of Section 2.08.
<PAGE> 39
33
(c) Any beneficial interest in one of the Global Notes
that is transferred to a person who takes delivery in the form of an interest
in the other Global Note will, upon transfer, cease to be an interest in such
Global Note and become an interest in the other Global Note and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
(d) In connection with any transfer of a portion of the
beneficial interests in the U.S. Global Note or Permanent Offshore Global Note
to beneficial owners pursuant to paragraph (b) of this Section, the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Note or Permanent Offshore Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note or Permanent Offshore Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes or Offshore Physical Notes, as the case may be, of like tenor
and amount.
(e) In connection with the transfer of the entire U.S.
Global Note or Offshore Global Note to beneficial owners pursuant to paragraph
(b) of this Section, the U.S. Global Note or Offshore Global Note, as the case
may be, shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Note or Offshore Global Note, as the
case may be, an equal aggregate principal amount of U.S. Physical Notes or
Offshore Physical Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (f) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Note set forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for
an interest in the Temporary Offshore Global Note pursuant to paragraph (b),
(d) or (e) of this Section shall, except as otherwise provided by paragraph (f)
of Section 2.08, bear the legend regarding transfer restrictions applicable to
the Offshore Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
<PAGE> 40
34
SECTION 2.08. Special Transfer Provisions. Unless and until
a Note is exchanged for an Exchange Note or sold in connection with an
effective Registration Statement pursuant to the Registration Rights Agreement,
the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note to any Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the time period referred to in
Rule 144(k) under the Securities Act or (y) the proposed transferee
has delivered to the Registrar (A) a certificate substantially in the
form of Exhibit C hereto and (B) if the aggregate Accreted Value of
the Notes at the time of transfer is less than $100,000, an opinion of
counsel acceptable to the Company that such transfer is in compliance
with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Note, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount at maturity of
the U.S. Global Note in an amount equal to the principal amount at
maturity of the beneficial interest in the U.S. Global Note to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Certificates of
like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a U.S.
Physical Note or an interest in the U.S. Global Note to a QIB (excluding
Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) U.S.
Physical Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
<PAGE> 41
35
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A or (y) an
interest in the U.S. Global Note, the transfer of such interest may be
effected only through the book entry system maintained by the
Depositary.
(ii) If the proposed transferee is an Agent Member, and
the Note to be transferred consists of U.S. Physical Notes, upon
receipt by the Registrar of the documents referred to in clause (i)
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity
of the U.S. Global Note in an amount equal to the principal amount at
maturity of the U.S. Physical Notes, to be transferred, and the
Trustee shall cancel the U.S. Physical Note so transferred.
(c) Transfers of Interests in the Temporary Offshore
Global Note. The following provisions shall apply with respect to registration
of any proposed transfer of interests in the Temporary Offshore Global Note:
(i) The Registrar shall register the transfer of any Note
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit D hereto or (y) if the proposed transferee is a
QIB and the proposed transferor has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Registrar of the documents referred to in clause (i)(y)
above and instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount at
maturity of the U.S. Global Note, in an amount equal to the principal
amount at maturity of the Temporary Offshore Global Note to be
transferred, and the Trustee shall decrease the amount of the
Temporary Offshore Global Note in such an amount.
<PAGE> 42
36
(d) Transfers of Interests in the Permanent Offshore
Global Note or Unlegended Offshore Physical Notes. The following provisions
shall apply with respect to any transfer of interests in the Permanent Offshore
Global Note or unlegended Offshore Physical Notes. The Registrar shall
register the transfer of any such Note without requiring any additional
certification.
(e) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any transfer of a Note to a
Non-U.S. Person:
(i) Prior to April 15, 1997, the Registrar shall register
any proposed transfer of a Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit D hereto from the
proposed transferor.
(ii) On and after April 15, 1997, the Registrar shall
register any proposed transfer to any Non-U.S. Person if the Note to
be transferred is a U.S. Physical Note or an interest in the U.S.
Global Note, upon receipt of a certificate substantially in the form
of Exhibit D from the proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon receipt by
the Registrar of (x) the documents, if any, required by paragraph (ii)
and (y) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount at maturity of
the U.S. Global Note in an amount equal to the principal amount at
maturity of the beneficial interest in the U.S. Global Note to be
transferred, and (b) if the proposed transferee is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount at maturity of the Offshore Global Note in an amount
equal to the principal amount at maturity of the U.S. Physical Notes
or the U.S. Global Note, as the case may be, to be transferred, and
the Trustee shall cancel the Physical Note, if any, so transferred or
decrease the amount of the U.S. Global Note.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated by the second
sentence of the fourth paragraph of Section 2.01 or paragraphs (a)(i)(x) or
(e)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the
<PAGE> 43
37
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act.
(g) General. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture. The Registrar shall not register a transfer of any
Note unless such transfer complies with the restrictions on transfer of such
Note set forth in this Indenture. In connection with any transfer of Notes,
each Holder agrees by its acceptance of the Notes to furnish the Registrar or
the Company such certifications, legal opinions or other information as either
of them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the Registrar
shall not be required to determine (but may rely on a determination made by the
Company with respect to) the sufficiency of any such certifications, legal
opinions or other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Notes. If a mutilated Note is
surrendered to the Trustee or if the Holder claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note of like tenor and amount and bearing a number
not contemporaneously outstanding; provided that the requirements of this
Section 2.09 are met. If required by the Trustee or the Company, an indemnity
bond must be furnished that is sufficient in the judgment of both the Trustee
and the Company to protect the Company, the Trustee or any Agent from any loss
that any of them may suffer if a Note is replaced. The Company may charge such
Holder for its expenses and the expenses of the Trustee in replacing a Note.
In case any such mutilated, lost, destroyed or wrongfully taken Note has become
or is about to become due and payable, the Company in its discretion may pay
such Note instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Notes. Notes outstanding at any
time are all Notes that have been authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section 2.10 as not outstanding.
<PAGE> 44
38
If a Note is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on the maturity date money sufficient to pay Notes payable
on that date, then on and after that date such Notes cease to be outstanding
and interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or
one of its Affiliates holds such Note, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes which
the Trustee knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Company or any other
obligor upon the Notes or any Affiliate of the Company or of such other
obligor.
SECTION 2.11. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Company will cause definitive Notes to be prepared
without unreasonable delay. After the preparation of definitive Notes, the
temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Company designated for such
purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall be entitled to the same benefits under
this Indenture as definitive Notes.
SECTION 2.12. Cancellation. The Company at any time may
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
<PAGE> 45
39
surrendered to them for transfer, exchange or payment. The Trustee shall
cancel all Notes surrendered for transfer, exchange, payment or cancellation in
accordance with its normal procedure.
SECTION 2.13. CUSIP Numbers. The Company in issuing the
Notes may use "CUSIP," "CINS" or "ISIN" numbers (if then generally in use), and
the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that
any such notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of redemption or exchange and that reliance may be placed only on
the other identification numbers printed on the Notes.
SECTION 2.14. Defaulted Interest. If the Company defaults in
a payment of interest on the Notes, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect
to the payment of any defaulted interest, shall mean the 15th day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to
the Trustee a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.15. Issuance of Additional Notes. The Company may, subject
to Article Four of this Indenture, issue additional Notes under this Indenture.
The Notes issued on the Closing Date and any additional Notes subsequently
issued shall be treated as a single class for all purposes under this
Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Notes may be
redeemed, at the Company's option, in whole or in part, at any time or from
time to time, on or after April 15, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of principal amount at maturity),
plus accrued and unpaid interest, if any, to the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date that is on
or prior to the Redemption
<PAGE> 46
40
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing April 15, of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2002 106.500%
2003 103.250%
2004 and thereafter 100.000%
</TABLE>
(b) In addition, at any time prior to April 15, 2000, the
Company may redeem up to 35% of the principal amount at maturity of the Notes
with the Net Cash Proceeds of one or more sales by the Company of its Capital
Stock (other than Redeemable Stock), at any time as a whole or from time to
time in part, at a Redemption Price (expressed as a percentage of Accreted
Value on the Redemption Date) of 113%, plus accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is on or prior to the Redemption Date to
receive interest due on an Interest Payment Date); provided that at least
$618.5 million aggregate principal amount at maturity of Notes remains
outstanding after each such redemption.
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Notes pursuant to Section 3.01(a) or 3.01(b), it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Notes to
be redeemed.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least 45 days before the Redemption
Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less
than all of the Notes are to be redeemed at any time, the Trustee shall select
the Notes to be redeemed in compliance with the requirements, as certified to
it by the Company, of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not listed on a national
securities exchange, by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate; provided that no Notes of $1,000 in
principal amount at maturity or less shall be redeemed in part.
The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption. Notes in denominations
of $1,000 in principal amount at maturity may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
at maturity or any integral multiple thereof) of Notes that have denominations
larger than $1,000 in principal amount at maturity. Provisions of this
Indenture that apply to Notes called for
<PAGE> 47
41
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company and the Registrar promptly in writing of the Notes or
portions of Notes to be called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any
redemption of Notes pursuant to Section 3.01(a) or 3.01(b), at least 30 days
but not more than 60 days before a Redemption Date, the Company shall mail a
notice of redemption by first class mail to each Holder whose Notes are to be
redeemed.
The notice shall identify the Notes to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right
of the Holders is to receive payment of the Redemption Price plus
accrued interest to the Redemption Date upon surrender of the Notes to
the Paying Agent;
(vi) that, if any Note is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount
at maturity or any integral multiple thereof) of such Note to be
redeemed and that, on and after the Redemption Date, upon surrender of
such Note, a new Note or Notes in principal amount at maturity equal
to the unredeemed portion thereof will be reissued; and
(vii) that, if any Note contains a CUSIP, CINS or ISIN
number as provided in Section 2.13, no representation is being made as
to the correctness of the CUSIP, CINS or ISIN number either as printed
on the Notes or as contained in the notice of redemption and that
reliance may be placed only on the other identification numbers
printed on the Notes.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given
such notice to the Holders), made in writing to the Trustee at least 30 days
(or such shorter period as shall be satisfactory to the Trustee) before a
Redemption Date, the Trustee shall give the notice of redemption in the name
and at the expense of the Company. If, however, the Company gives such notice
to
<PAGE> 48
42
the Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to
the Paying Agent, such Notes shall be paid at the Redemption Price, plus
accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Notes held by Holders to whom such notice was
properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to
any Redemption Date, the Company shall deposit with the Paying Agent (or, if
the Company is acting as its own Paying Agent, shall segregate and hold in
trust as provided in Section 2.05) money sufficient to pay the Redemption Price
of and accrued interest on all Notes to be redeemed on that date other than
Notes or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation.
SECTION 3.07. Payment of Notes Called for Redemption. If
notice of redemption has been given in the manner provided above, the Notes or
portion of Notes specified in such notice to be redeemed shall become due and
payable on the Redemption Date at the Redemption Price stated therein, together
with accrued interest to such Redemption Date, and on and after such date
(unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Notes), such Notes shall cease to accrue interest. Upon
surrender of any Note for redemption in accordance with a notice of redemption,
such Note shall be paid and redeemed by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date; provided that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders registered as such at the close of
business on the relevant Regular Record Date.
SECTION 3.08. Notes Redeemed in Part. Upon surrender of any
Note that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Note equal in principal amount to
the unredeemed portion of such surrendered Note.
<PAGE> 49
43
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall pay the
principal of, premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the date
due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the
Company, or any Affiliate of any of them) holds on that date money designated
for and sufficient to pay the installment. If the Company or any Subsidiary of
the Company or any Affiliate of any of them, acts as Paying Agent, an
installment of principal, premium, if any, or interest shall be considered paid
on the due date if the entity acting as Paying Agent complies with the last
sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee shall serve as
the Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Company
will maintain in the Borough of Manhattan, The City of New York an office or
agency where Notes may be surrendered for registration of transfer or exchange
or for presentation for payment and where notices and demands to or upon the
Company in respect of the Notes and this Indenture may be served. The Company
will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee set forth in
Section 10.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, The City of New
York, as such office of the Company in accordance with Section 2.04.
<PAGE> 50
44
SECTION 4.03. Limitation on Indebtedness. (a) The Company
will not, and will not permit any Restricted Group Member to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Closing
Date); provided that the Company may Incur Indebtedness, and any Restricted
Group Member may Incur Acquired Indebtedness, if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Leverage Ratio would be less than 9 to 1, for
Indebtedness Incurred on or prior to December 31, 1999, or 7 to 1, for
Indebtedness Incurred thereafter.
Notwithstanding the foregoing, the Company and any Restricted Group
Member (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate
principal amount not to exceed $100 million, less any amount of such
Indebtedness permanently repaid as provided under Section 4.10;
(ii) Indebtedness (A) to the Company evidenced by an
unsubordinated promissory note or (B) to any Restricted Group Member;
provided that any event which results in any such Restricted Group
Member ceasing to be a Restricted Group Member or any subsequent
transfer of such Indebtedness (other than to the Company or another
Restricted Group Member) shall be deemed, in each case, to constitute
an Incurrence of such Indebtedness not permitted by this clause (ii);
(iii) Indebtedness of the Company or any Restricted Group
Member issued in exchange for, or the net proceeds of which are used
to refinance or refund, then outstanding Indebtedness of the same
Person (other than Indebtedness Incurred under clause (i), (ii), (iv)
or (vi) of this paragraph) or any refinancings thereof in an amount
not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the Notes or
Indebtedness that is pari passu with, or subordinated in right of
payment to, the Notes shall only be permitted under this clause (iii)
if (A) in case the Notes are refinanced in part or the Indebtedness to
be refinanced is pari passu with the Notes, such new Indebtedness, by
its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining
Notes, (B) in case the Indebtedness to be refinanced is subordinated
in right of payment to the Notes, such new Indebtedness, by its terms
or by the terms of any agreement or instrument pursuant to which such
new Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Notes at least to the extent
that the Indebtedness to be refinanced is subordinated to the Notes
and (C) such new Indebtedness, determined as of the date of Incurrence
of such new Indebtedness, does not mature prior to the Stated Maturity
of the Indebtedness to be
<PAGE> 51
45
refinanced or refunded, and the Average Life of such new Indebtedness
is at least equal to the remaining Average Life of the Indebtedness to
be refinanced or refunded;
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements (a) are designed solely to protect the Company or its
Restricted Group Members against fluctuations in foreign currency
exchange rates or interest rates and (b) do not increase the
Indebtedness 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 Group
Member pursuant to such agreements, in any case Incurred in connection
with the disposition of any business, assets or Restricted Group
Member (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Group Member 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 Group Member in connection with such
disposition;
(v) Indebtedness of the Company, to the extent the net
proceeds thereof are promptly (A) used to purchase Notes tendered in
an Offer to Purchase made as a result of a Change in Control or (B)
deposited to defease the Notes as set forth in Article VIII;
(vi) Guarantees of the Notes and Guarantees of
Indebtedness of the Company by any Restricted Group Member provided
the Guarantee of such Indebtedness is permitted by and made in
accordance with Section 4.07;
(vii) Indebtedness Incurred to finance the cost (including
the cost of design, development, construction, improvement,
installation or integration and all import duties) of
telecommunications network assets, equipment or inventory acquired by
the Company or a Restricted Group Member after the Closing Date; and
(viii) Indebtedness of the Company not to exceed, at any one
time outstanding, two times, or Indebtedness of a Restricted Group
Member not to exceed at any one time outstanding, one times (x) the
Net Cash Proceeds received by the Company after the Closing Date from
contributions of capital or the issuance and sale of its Capital Stock
(other than Redeemable Stock) to a Person that is not a Subsidiary of
the Company or a Restricted Affiliate, to the extent such Net Cash
Proceeds have not been used pursuant to clause (C)(2) of the first
paragraph of Section 4.04 to make
<PAGE> 52
46
a Restricted Payment and (y) 80% of the fair market value of property
other than cash received by the Company after the Closing Date from
contributions of capital or the issuance and sale of its Capital Stock
(other than Redeemable Stock) to a Person that is not a Subsidiary of
the Company or a Restricted Affiliate.
(b) Notwithstanding any other provision of this Section
4.03, the maximum amount of Indebtedness that the Company or a Restricted Group
Member may Incur pursuant to this Section 4.03 shall not be deemed to be
exceeded, with respect to any outstanding Indebtedness due solely to the result
of fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Indebtedness Incurred under the
Motorola Credit Agreement on or prior to the Closing Date shall be treated as
Incurred pursuant to clause (i) of the second paragraph of this Section 4.03,
(2) Guarantees of, Liens securing or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included and (3) any Liens granted pursuant to
the equal and ratable provisions referred to in Section 4.09 shall not be
treated as Indebtedness. For purposes of determining compliance with this
Section 4.03, in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described in the above clauses
(other than Indebtedness referred to in clause (1) of the preceding sentence),
the Company, in its sole discretion, shall classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in one
of such clauses.
SECTION 4.04. Limitation on Restricted Payments. The Company
will not, and will not permit any Restricted Group Member to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on or with
respect to its Capital Stock (other than (x) dividends or distributions payable
solely in shares of its Capital Stock (other than Redeemable Stock) or in
options, warrants or other rights to acquire shares of such Capital Stock and
(y) pro rata dividends or distributions on Capital Stock of Restricted Group
Members held by Persons other than the Company or other Restricted Group
Members, provided that the Company or any other Restricted Group Members
holding shares of Capital Stock of such dividend or distribution paying
Restricted Group Member shall receive such pro rata dividends or distributions
as may be due to such other Restricted Group Members or the Company at or prior
to the payment of such pro rata dividends or distributions to such other
Persons) held by Persons other than the Company or any Restricted Group Member,
(ii) purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of (A) the Company or an Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Person or (B) a Restricted Group Member (including options, warrants or
other rights to acquire such shares of Capital Stock) held by any Affiliate of
the Company (other than a Restricted Group Member) or any holder (or any
Affiliate of such holder) of 5% or more of the Capital Stock of the Company,
(iii) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or retirement
for value, of Indebtedness
<PAGE> 53
47
of the Company that is subordinated in right of payment to the Notes (other
than the purchase, repurchase or the acquisition of Indebtedness in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in any case due within one year of the date of acquisition) or
(iv) make any Investment, other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i) through (iv) being
collectively "Restricted Payments") if, at the time of, and after giving effect
to, the proposed Restricted Payment: (A) a Default or Event of Default shall
have occurred and be continuing, (B) except with respect to Investments, the
Company could not Incur at least $1.00 of Indebtedness under the first
paragraph of Section 4.03 or (C) the aggregate amount of all Restricted
Payments (the amount, if other than in cash, to be determined in good faith by
the Board of Directors, whose determination shall be conclusive and evidenced
by a Board Resolution) made after the Closing Date shall exceed the sum of (1)
50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the
Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such
loss) (determined by excluding income resulting from transfers of assets by the
Company or a Restricted Group Member to an Unrestricted Subsidiary or
Unrestricted Affiliate) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
pursuant to Section 4.17 plus (2) the aggregate Net Cash Proceeds received by
the Company after the Closing Date from the issuance and sale permitted by this
Indenture of its Capital Stock (other than Redeemable Stock) to a Person who is
not a Subsidiary or Restricted Affiliate of the Company (except to the extent
such Net Cash Proceeds are used to Incur Indebtedness outstanding pursuant to
clause (viii) of the second paragraph of Section 4.03) or from the issuance to
a Person who is not a Subsidiary or Restricted Affiliate of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Redeemable Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes) plus (3) an amount equal
to the net reduction in Investments (other than reductions in Permitted
Investments or reductions in Investments made pursuant to clause (ix) of the
following paragraph) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Group Member or from the
Net Cash Proceeds from the sale of any such Investment (except, in each case,
to the extent any such payment or proceeds are included in Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries of the Company or a Restricted Affiliate or from
redesignations of Unrestricted Affiliates as Restricted Affiliates (valued in
each case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by the Company or any
Restricted Group Member in such Person, Unrestricted Subsidiary or Unrestricted
Affiliate.
The foregoing provision shall not be violated by reason of:
<PAGE> 54
48
(i) the payment of any dividend within 60 days after the
date of declaration thereof if, at said date of declaration, such
payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if
any, and accrued and unpaid interest, with the proceeds of, or in
exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of Section 4.03;
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company (or options, warrants or other rights to
acquire such Capital Stock) in exchange for, or out of the proceeds of
a substantially concurrent offering of, shares of Capital Stock (other
than Redeemable Stock) of the Company;
(iv) the making of any principal payment or the
repurchase, redemption, retirement, defeasance or other acquisition
for value of Indebtedness of the Company which is subordinated in
right of payment to the Notes in exchange for, or out of the proceeds
of, a substantially concurrent offering of, shares of the Capital
Stock of the Company (other than Redeemable Stock);
(v) the declaration or payment of dividends on the Common
Stock of the Company following a Public Equity Offering of such Common
Stock, of up to 6% per annum of the Net Cash Proceeds received by the
Company in such Public Equity Offering;
(vi) payments or distributions, to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of this Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property and assets of
the Company;
(vii) Investments acquired as a capital contribution to the
Company or in exchange for Capital Stock (other than Redeemable Stock)
of the Company or Capital Stock of Nextel or any of its subsidiaries
(other than the Company and its Subsidiaries);
(viii) 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;
<PAGE> 55
49
(ix) Investments in an aggregate amount not to exceed $30
million, plus reductions in such Investments (except to the extent any
such reduction is included in Adjusted Consolidated Net Income) not to
exceed the amount of the Investments previously made;
(x) Investments in a Person which has ceased to be a
Restricted Affiliate or ceases to observe any of the provisions of the
covenants applicable to it as a result of an Involuntary Event;
provided (I) such Investment is made with the proceeds of a
substantially concurrent capital contribution to, or sale of Capital
Stock (other than Redeemable Stock) of, the Company and (II) after
such Investment such Involuntary Event shall no longer continue and
such person shall be a Restricted Affiliate; or
(xi) repurchases of Warrants pursuant to a Repurchase
Offer;
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein, other than with respect to clause
(x), a Default or Event of Default that will cease to exist substantially
contemporaneously with such Investment.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof
and an exchange of Capital Stock for Capital Stock or Indebtedness referred to
in clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance
of Capital Stock referred to in clauses (iii) and (iv), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
Section 4.04 have been met with respect to any subsequent Restricted Payments.
SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Group Members. The Company will not, and
will not permit any Restricted Group Member to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Group Member to (i) pay dividends
or make any other distributions permitted by applicable law on any Capital
Stock of such Restricted Group Member owned by the Company or any other
Restricted Group Member, (ii) pay any Indebtedness owed to the Company or any
other Restricted Group Member, (iii) make loans or advances to the Company or
any other Restricted Group Member or (iv) transfer any of its property or
assets to the Company or any other Restricted Group Member.
The foregoing provisions shall not restrict any encumbrances
or restrictions:
(i) existing on the Closing Date in this Indenture or any
other agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in
<PAGE> 56
50
any such extensions, refinancings, renewals or replacements are no
less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property
or assets of such Person acquired by the Company or any Restricted
Group Member, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or restrictions
are not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person
so acquired;
(iv) in the case of clause (iv) of the first paragraph of
this Section 4.05, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Group Member not otherwise prohibited by
this Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property
or assets of the Company or any Restricted Group Member in any manner
material to the Company or any Restricted Group Member;
(v) with respect to a Restricted Group Member and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Group Member;
(vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if the
encumbrance or restriction applies only in the event of a default with
respect to a financial covenant contained in such Indebtedness or
agreement, is not materially more disadvantageous to the Holders of
the Notes than is customary in comparable financings (as determined by
the Company) and the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes;
(vii) contained in any stockholders or similar agreement,
so long as such encumbrance or restriction is not materially more
disadvantageous to the Holders of the Notes than the encumbrances and
restrictions contained in comparable agreements entered into in the
past by the Company or a Restricted Group Member; or
<PAGE> 57
51
(viii) contained in any agreement entered into after the
Closing Date, so long as such encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than the
encumbrances and restrictions contained in the Motorola Credit
Agreement.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Group Member from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale
or other disposition of property or assets of the Company or any Restricted
Group Member that secure Indebtedness of the Company or any Restricted Group
Member.
SECTION 4.06. Limitation on the Issuance and Sale of Capital
Stock of Restricted Group Members. The Company will not sell, and will not
permit any Restricted Group Member, directly or indirectly, to issue or sell,
any shares of Capital Stock of a Restricted Group Member (including options,
warrants or other rights to purchase shares of such Capital Stock) except (i)
to the Company or a Wholly Owned Restricted Subsidiary of the Company; (ii)
issuances of director's qualifying shares or sales to foreign nationals of
shares of Capital Stock of a foreign Restricted Group Member, to the extent
required by applicable law; (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Group Member would no longer constitute a
Restricted Group Member, provided any Investment in such Person remaining after
giving effect to such issuance or sale would have been permitted to be made
under Section 4.04, if made on the date of such issuance or sale; and (iv)
issuances or sales of Common Stock (including options, warrants or other rights
to purchase Common Stock) of a Restricted Group Member, provided the Net Cash
Proceeds, if any, of such sale are applied in accordance with clause (A) or (B)
of Section 4.10.
SECTION 4.07. Limitation on Issuances of Guarantees by
Restricted Group Members. The Company will not permit any Restricted Group
Member, directly or indirectly, to Guarantee any Indebtedness of the Company
which is pari passu with or subordinate in right of payment to the Notes
("Guaranteed Indebtedness"), unless (i) such Restricted Group Member
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by
such Restricted Group Member and (ii) such Restricted Group Member waives and
will not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Group Member as a result of any
payment by such Restricted Group Member under its Subsidiary Guarantee;
provided that this paragraph shall not be applicable to (x) any Guarantee of
any Restricted Group Member that existed at the time such Person became a
Restricted Group Member and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Group Member or (y) any
Guarantee of any Restricted Group Member of Indebtedness Incurred (I) under a
revolving credit, vendor financing or working capital facility pursuant to
clause (i) of the second paragraph of Section 4.03 or (II)
<PAGE> 58
52
pursuant to clause (vii) of the second paragraph of Section 4.03. If the
Guaranteed Indebtedness is (A) pari passu with the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee
at least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Group Member may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Group Member's Capital Stock in, or all or
substantially all the assets of, such Restricted Group Member (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release
or discharge of the Guarantee which resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by or as a result of payment under
such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders
and Affiliates. The Company will not, and will not permit any Restricted Group
Member to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Person known by the Company to be an Affiliate of such holder) of 5% or more of
any class of Capital Stock of the Company or with any Affiliate of the Company
or any Restricted Group Member, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Group Member than could be
obtained, at the time of such transaction or, if such transaction is pursuant
to a written agreement, at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply
to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors of the Company or (B)
for which the Company or a Restricted Group Member delivers to the
Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or
such Restricted Group Member from a financial point of view;
(ii) any transaction solely between the Company and any of
its Wholly Owned Restricted Subsidiaries or solely between Wholly
Owned Restricted Subsidiaries of the Company;
(iii) the payment of reasonable and customary regular fees
to directors of the Company who are not employees of the Company;
<PAGE> 59
53
(iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Company and any other Person with
which the Company files a consolidated tax return or with which the
Company is part of a consolidated group for tax purposes;
(v) any Restricted Payments not prohibited by Section
4.04;
(vi) any payments or other transactions pursuant to the
Overhead Services Agreement as in effect on the Closing Date; or
(vii) any transaction or series of related transactions
involving consideration or payments of less than $5 million.
Notwithstanding the foregoing, any transaction covered by the first paragraph
of this Section 4.08 and not covered by clauses (ii) through (v) of this
paragraph, the aggregate amount of which exceeds $10 million in value, must be
approved or determined to be fair in the manner provided for in clause (i)(A)
or (B) above.
SECTION 4.09. Limitation on Liens. The Company will not, and
will not permit any Restricted Group Member to, create, incur, assume or suffer
to exist any Lien on any of its assets or properties of any character, or any
shares of Capital Stock or Indebtedness of any Restricted Group Member, without
making effective provision for all of the Notes and all other amounts due under
this Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is subordinated in right of
payment to the Notes, prior to) the obligation or liability secured by such
Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets
or Capital Stock of the Company or its Restricted Group Members
created in favor or for the benefit of the Holders;
(iii) Liens with respect to the assets of a Restricted
Group Member granted by such Restricted Group Member to the Company or
another Restricted Group Member to secure Indebtedness owing to the
Company or such other Restricted Group Member;
(iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under
clause (iii) of the second paragraph of Section 4.03; provided that
such Liens do not extend to or cover any
<PAGE> 60
54
property or assets of the Company or any Restricted Group Member other
than the property or assets securing the Indebtedness being
refinanced;
(v) Liens securing Indebtedness Incurred under clause (i)
or clause (vii) of the second paragraph of Section 4.03; or
(vi) Permitted Liens.
SECTION 4.10. Limitation on Asset Sales. The Company will
not, and will not permit any Restricted Group Member to, consummate any Asset
Sale, unless (i) the consideration received by the Company or such Restricted
Group Member is at least equal to the fair market value of the assets sold or
disposed of and (ii) at least 75% of the consideration received consists of
cash or Temporary Cash Investments or the assumption of Indebtedness of the
Company or any Restricted Group Member relating to such assets, provided that
the Company or such Restricted Group Member is irrevocably released and
discharged from such Indebtedness. In the event and to the extent that the Net
Cash Proceeds received by the Company or any Restricted Group Member from one
or more Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed $5 million, then the Company shall or shall cause the
relevant Restricted Group Member to (i) within twelve months after the date Net
Cash Proceeds so received exceed $5 million (A) apply an amount equal to such
excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of
the Company or any Restricted Group Member providing a Subsidiary Guarantee
pursuant to Section 4.07 or Indebtedness of any other Restricted Group Member,
in each case owing to a Person other than the Company or any Restricted Group
Member, provided that in the event Indebtedness of a Restricted Group Member is
repaid, only the Company's pro rata portion (determined as provided in the
definition of "Indebtedness") of such repaid Indebtedness shall be deemed to
have been repaid in accordance with this clause (A), or (B) invest an equal
amount, or the amount not so applied pursuant to clause (A) (or enter into a
definitive agreement committing to so invest within twelve months after the
date of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Group Members existing on the date of such
investment and (ii) apply (no later than the end of the twelve-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the last paragraph of this
Section 4.10. The amount of such excess Net Cash Proceeds required to be
applied (or to be committed to be applied) during such twelve-month period as
set forth in clause (i) of the preceding sentence and not applied as so
required by the end of such period shall constitute "Excess Proceeds."
Notwithstanding the foregoing, to the extent that any or all
of the Net Cash Proceeds of any Asset Sale of assets based outside the United
States are prohibited or delayed
<PAGE> 61
55
by applicable local law from being repatriated to the United States and such
Net Cash Proceeds are not actually applied in accordance with the foregoing
paragraph, the Company shall not be required to apply the portion of such Net
Cash Proceeds so affected but may permit the applicable Restricted Group
Members to retain such portion of the Net Cash Proceeds so long, but only so
long, as the applicable local law will not permit repatriation to the United
States (the Company hereby agreeing to cause the applicable Restricted Group
Member to promptly take all actions required by the applicable local law to
permit such repatriation) and once such repatriation of any such affected Net
Cash Proceeds is permitted under the applicable local law, such repatriation
will be immediately effected and such repatriated Net Cash Proceeds will be
applied in the manner set forth in this covenant as if the Asset Sale had
occurred on such date; provided that to the extent that the Company has
determined in good faith that repatriation of any or all of the Net Cash
Proceeds of such Asset Sale would have a material adverse tax cost consequence,
the Net Cash Proceeds so affected may be retained by the applicable Restricted
Group Member for so long as such material adverse tax cost event would
continue.
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.10 totals at least $5 million, the Company must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate Accreted Value of Notes on the relevant Payment Date equal to the
Excess Proceeds on such date, at a purchase price equal to 101% of the Accreted
Value of the Notes on the relevant Payment Date, plus, in each case, accrued
interest (if any) to the Payment Date.
SECTION 4.11. Repurchase of Notes upon a Change of Control.
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the Accreted Value thereof on the relevant
Payment Date, plus accrued interest (if any) to the Payment Date.
SECTION 4.12. Existence. Subject to Articles Four and Five
of this Indenture, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and the existence
of each Restricted Group Member in accordance with the respective
organizational documents of the Company and each Restricted Group Member and
the rights (whether pursuant to charter, partnership certificate, agreement,
statute or otherwise), material licenses and franchises of the Company and each
Restricted Group Member; provided that the Company shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Group Member, if the maintenance or preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Restricted Group Members taken as a whole.
<PAGE> 62
56
SECTION 4.13. Payment of Taxes and Other Claims. The Company
will pay or discharge and shall cause each of its Restricted Group Members to
pay or discharge, or cause to be paid or discharged, before the same shall
become delinquent (i) all material taxes, assessments and governmental charges
levied or imposed upon (a) the Company or any such Restricted Group Member, (b)
the income or profits of any such Restricted Group Member which is a
corporation or (c) the property of the Company or any such Restricted Group
Members and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Restricted Group Member; provided that the Company shall not be
required to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established.
SECTION 4.14. Maintenance of Properties and Insurance. The
Company will cause all properties used or useful in the conduct of its business
or the business of any of its Restricted Group Members, to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly conducted at all times; provided that nothing in this
Section 4.14 shall prevent the Company or any such Restricted Group Member from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Company, desirable in the conduct of the business of the
Company or such Restricted Group Member.
The Company will provide or cause to be provided, for itself
and its Restricted Group Members, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, with reputable
insurers or with the government of the United States of America, or an agency
or instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or such Restricted Group Member, as the case may
be, is then conducting business.
SECTION 4.15. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default the Company, promptly
after it becomes aware thereof, will give written notice thereof to the
Trustee.
SECTION 4.16. Compliance Certificates. (a) The Company
shall deliver to the Trustee, within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), an
Officers' Certificate stating whether or not the signers know of any Default or
Event of Default that occurred during such fiscal quarter. In the case of the
Officers' Certificate delivered within 90 days of the end of the Company's
fiscal year,
<PAGE> 63
57
such certificate shall contain a certification from the principal executive
officer, principal financial officer or principal accounting officer that a
review has been conducted of the activities of the Company and its Restricted
Group Members and the Company's and its Restricted Group Members' performance
under this Indenture and that, to the knowledge of such Officers, the Company
has complied with all conditions and covenants under this Indenture. For
purposes of this Section 4.16, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture. If they do know of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
The first certificate to be delivered pursuant to this Section 4.16(a) shall be
for the first fiscal quarter beginning after the execution of this Indenture.
(b) So long as (and to the extent) not prohibited by the
then current recommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee, within 90 days after the
end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, (ii) that they have read the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of
this Section 4.16 and (iii) whether, in connection with their audit
examination, anything came to their attention that caused them to believe that
the Company was not in compliance with any of the terms, covenants, provisions
or conditions of Article Four and Section 5.01 of this Indenture as they
pertain to accounting matters and, if any Default or Event of Default has come
to their attention, specifying the nature and period of existence thereof;
provided that such independent certified public accountants shall not be liable
in respect of such statement by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of an audit examination conducted in accordance with generally accepted
auditing standards in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's
fiscal years, the Company shall deliver to the Trustee a list of all
Significant Group Members. The Trustee shall have no duty with respect to any
such list except to keep it on file and available for inspection by the
Holders.
SECTION 4.17. Commission Reports and Reports to Holders. At
all times from and after the earlier of (i) the date of the commencement of a
registered exchange offer for the Notes by the Company or the effectiveness of
the Shelf Registration Statement pursuant to and in accordance with the terms
of the Registration Rights Agreement (the "Registration") and (ii) September 6,
1997, in either case, whether or not the Company is then required to file
reports with the Commission, the Company shall file with the Commission all
such reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of 1934
if it were subject thereto. The Company shall supply the Trustee and each
Holder or shall supply to the Trustee for
<PAGE> 64
58
forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information. Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates). In
addition, at all times prior to the earlier of the date of the Registration and
September 6, 1997, the Company shall, at its cost, deliver to each Holder of
the Notes quarterly and annual reports substantially equivalent to those which
would be required by the Exchange Act. In addition, at all times prior to the
Registration, upon the request of any Holder or any prospective purchaser of
the Notes designated by a Holder, the Company shall supply to such Holder or
such prospective purchaser the information required under Rule 144A under the
Securities Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
SECTION 4.18. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.19. Limitation on Sale-Leaseback Transactions. The
Company will not, and will not permit any Restricted Group Member to, enter
into any sale-leaseback transaction involving any of its assets or properties
whether now owned or hereafter acquired, whereby the Company or a Restricted
Group Member sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Group Member, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights,
of not in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
<PAGE> 65
59
(iii) the transaction is solely between the Company and any
Wholly Owned Restricted Subsidiary of the Company or solely between
Wholly Owned Restricted Subsidiaries of the Company; or
(iv) the Company or such Restricted Group Member, within
twelve months after the sale or transfer of any assets or properties
is completed, applies an amount not less than the net proceeds
received from such sale in accordance with clause (A) or (B) of the
first paragraph of Section 4.10.
SECTION 4.20. Calculation of Original Issue Discount. The
Company shall file with the Trustee promptly at the end of each calendar year
(i) a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on outstanding Notes as of
the end of such year and (ii) such other specific information relating to such
original issue discount as may then be relevant under the Internal Revenue Code
of 1986, as amended from time to time and requested by the Trustee.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company shall
not consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the
Person (if other than the Company) formed by such consolidation or
into which the Company is merged or that acquired or leased such
property and assets of the Company shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, all of
the obligations of the Company on all of the Notes and under this
Indenture;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction
on a pro forma basis, the Company or any Person becoming the successor
obligor of the Notes shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(iv) immediately after giving effect to such transaction
on a pro forma basis the Company, or any Person becoming the successor
obligor of the Notes, as the case
<PAGE> 66
60
may be, shall have a Consolidated Leverage Ratio not greater than 110%
of the Consolidated Leverage Ratio of the Company immediately prior to
the transaction; and
(v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion of Counsel, in
each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision, that all
conditions precedent provided for herein relating to such transaction
have been complied with and, in the event that the continuing Person
is organized under the laws of any jurisdiction other than the United
States of America or any jurisdiction thereof, that the indenture and
the Notes constitute legal, valid and binding obligations of the
continuing Person, enforceable in accordance with their terms;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation
or merger, or any sale, conveyance, transfer, lease or other disposition of all
or substantially all of the property and assets of the Company in accordance
with Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the Notes;
provided that the Company shall not be released from its obligation to pay the
principal of, premium, if any, or interest on the Notes in the case of a lease
of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Notes if:
(a) the Company defaults in the payment of principal of
(or premium, if any, on) any Note when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise;
<PAGE> 67
61
(b) the Company defaults in the payment of interest on
any Note when the same becomes due and payable, and such default
continues for a period of 30 days;
(c) the Company defaults in the performance or breach of
the provisions of Article Five or the failure to make or consummate an
Offer to Purchase in accordance with Section 4.10 or Section 4.11;
provided that a default or breach of Section 4.10 arising from an
Involuntary Event shall not constitute an Event of Default unless such
Involuntary Event continues for 90 days;
(d) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in this
Indenture or under the Notes (other than a default specified in clause
(a), (b) or (c) above) and such default or breach continues for a
period of 60 consecutive days after written notice by the Trustee or
the Holders of 25% or more in aggregate principal amount at maturity
of the Notes, provided that a default or breach of a covenant or
agreement arising from a Restricted Affiliate ceasing to observe any
covenant applicable to it resulting from an Involuntary Event shall
not constitute an Event of Default unless such Involuntary Event
continues for 90 days;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Group Member having an
outstanding principal amount of $5 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not
been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure
to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived
or extended within 30 days of such payment default; provided that an
acceleration or payment default arising from an Involuntary Event
shall not constitute an Event of Default unless such Involuntary Event
continues for 90 days;
(f) any final judgment or order (not covered by
insurance) for the payment of money in excess of $5 million in the
aggregate for all such final judgments or orders against all such
Persons (treating any deductibles, self-insurance or retention as not
so covered) shall be rendered against the Company or any Significant
Group Member and shall not be paid or discharged, and there shall be
any period of 30 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final
judgments or orders outstanding and not paid or discharged against all
such Persons to exceed $5 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided that a final judgment or
order arising from
<PAGE> 68
62
an Involuntary Event shall not constitute an Event of Default unless
such Involuntary Event continues for 90 days;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Group Member in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any Significant Group Member or for all or substantially all of the
property and assets of the Company or any Significant Group Member or
(C) the winding up or liquidation of the affairs of the Company or any
Significant Group Member and, in each case, such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(h) the Company or any Significant Group Member (A)
commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such
law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Group Member or for
all or substantially all of the property and assets of the Company or
any Significant Group Member or (C) effects any general assignment for
the benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in clause (g) or (h) above that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount at
maturity of the Notes, then outstanding, by written notice to the Company (and
to the Trustee if such notice is given by the Holders), may, and the Trustee at
the request of such Holders shall, declare the Accreted Value of, premium, if
any, and accrued interest on the Notes to be immediately due and payable. Upon
a declaration of acceleration, such Accreted Value of, premium, if any, and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Group Member or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clause (g) or (h)
above occurs with respect to the Company, the Accreted Value of, premium, if
any, and accrued interest on the Notes then outstanding shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
<PAGE> 69
63
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may
waive all past Defaults and rescind and annul such declaration of acceleration
and its consequences if (i) all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and accrued interest on the
Notes that have become due solely by such declaration of acceleration, have
been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of
the outstanding Notes, by notice to the Trustee, may waive an existing Default
or Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in clause
(a) or (b) of Section 6.01 or in respect of a covenant or provision of this
Indenture which cannot be modified or amended without the consent of the holder
of each outstanding Note affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes may
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. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, that may involve the Trustee in personal liability,
or that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders of Notes not joining in the giving of such direction and may
take any other action it deems proper that is not inconsistent with any such
direction received from Holders of Notes.
SECTION 6.06. Limitation on Suits. A Holder may not
institute any proceeding, judicial or otherwise, with respect to this Indenture
or the Notes, or for the appointment of a receiver or trustee, or for any other
remedy hereunder unless:
<PAGE> 70
64
(i) such Holder has previously given the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal
amount at maturity of outstanding Notes shall have made a written
request to the Trustee institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such
request;
(iv) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of indemnity and
has failed to institute any such proceeding; and
(v) during such 60-day period, the Holders of a majority
in aggregate principal amount at maturity of the outstanding Notes do
not give the Trustee a direction that is inconsistent with such
written request.
For purposes of Section 6.05 of this Indenture and this
Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal amount
of outstanding Notes have concurred in any request or direction of the Trustee
to pursue any remedy available to the Trustee or the Holders with respect to
this Indenture or the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of the principal of, premium, if any, or interest
on, such Note or to bring suit for the enforcement of any such payment, on or
after the due date expressed in the Notes, shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a),
(b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor of the Notes for the whole amount of principal, premium,
if any, and accrued interest remaining unpaid, together with interest on
overdue principal, premium, if any, and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate specified in the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection,
<PAGE> 71
65
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Notes in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Notes for principal, premium, if any,
and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as
their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or
<PAGE> 72
66
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of the suit, and the court may assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of
this Indenture, or a suit by Holders of more than 10% in principal amount of
the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Company, Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of
the Trustee shall be as provided by the TIA and as set forth herein.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in
<PAGE> 73
67
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate
any fact or matter stated in the document;
(ii) before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel, which
shall conform to Section 10.04. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(v) the Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized
or within its rights or powers or for any action it takes or omits to
take in accordance with the direction of the Holders of a majority in
principal amount at maturity of the outstanding Notes relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; provided that the Trustee's
conduct does not constitute gross negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a making be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically
<PAGE> 74
68
prescribed) may, in the absence of bad faith on its part, rely upon an
Officer's Certificate; and
(vii) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company
personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to the Trustee, the Trustee shall mail to each Holder in the manner and
to the extent provided in TIA Section 313(c) notice of the Default or Event of
Default within 45 days after it occurs, unless such Default or Event of Default
has been cured; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1997, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report dated as of such May
15, if required by TIA Section 313(a).
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee such compensation as shall be agreed upon in writing for its
services. The
<PAGE> 75
69
compensation of the Trustee shall not be limited by any law on compensation of
a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by the Trustee. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense, including taxes (other than
taxes based upon, measured by or determined by the income of the Trustee)
incurred by it without negligence or bad faith on its part in connection with
the acceptance or administration of this Indenture and its duties under this
Indenture and the Notes, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served upon it
or any of its officers in connection with the exercise or performance of any of
its powers or duties under this Indenture and the Notes.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, premium, if any, and interest on
particular Notes.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
6.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company
in writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may at any time remove
the Trustee, by Company Order given at least 30 days prior to the date of the
proposed removal.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the outstanding Notes may
appoint a successor Trustee to replace the successor Trustee
<PAGE> 76
70
appointed by the Company. If the successor Trustee does not deliver its
written acceptance required by the next succeeding paragraph of this Section
7.08 within 30 days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of a majority in principal amount
of the outstanding Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee shall become effective and (iii) the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10, any
Holder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
The Company shall give notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligation under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be
the successor Trustee with the same effect as if the successor Trustee had been
named as the Trustee herein.
SECTION 7.10. Eligibility. This Indenture shall always have
a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law and except for money held
in trust under Article Eight of this Indenture.
<PAGE> 77
71
SECTION 7.12. Withholding Taxes. The Trustee, as agent for
the Company, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Notes any and all
withholding taxes applicable thereto as required by law. The Trustee agrees to
act as such withholding agent and, in connection therewith, whenever any
present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Notes, to withhold such
amounts and timely pay the same to the appropriate authority in the name of and
on behalf of the holders of the Notes, that it will file any necessary
withholding tax returns or statements when due. The Company or the Trustee
shall, as promptly as possible after the payment of the taxes described above,
deliver to each holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such holders may
reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except
as otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered
(other than destroyed, lost or stolen Notes that have been replaced or
Notes that are paid pursuant to Section 4.01 or Notes for whose
payment money or securities have theretofore been held in trust and
thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder; or
(ii) (A) the Notes mature within one year or all of them
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if any, and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by
it hereunder, (C) no Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement
or instrument to which the Company is a
<PAGE> 78
72
party or by which it is bound and (E) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein
relating to the satisfaction and discharge of this Indenture have been
complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Notes and this Indenture
except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Notes on the 123rd day after the date of the
deposit referred to in clause (A) of this Section 8.02, and the provisions of
this Indenture will no longer be in effect with respect to the Notes, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of apparently mutilated, defaced, destroyed, lost
or stolen Notes, (iii) rights of Holders to receive payments of principal
thereof and interest thereon, (iv) the Company's obligations under Section
4.02, (v) the rights, obligations and immunities of the Trustee hereunder and
(vi) the rights of the Holders as beneficiaries of this Indenture with respect
to the property so deposited with the Trustee payable to all or any of them;
provided that the following conditions shall have been satisfied:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10 of this Indenture) and conveyed all right, title and interest for
the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (A), money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state
<PAGE> 79
73
and local taxes or other charges and assessments in respect thereof
payable by the Trustee, the principal of, premium, if any, and accrued
interest on the outstanding Notes at the Stated Maturity of such
principal or interest; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it
is bound;
(C) immediately after giving effect to such deposit on a
pro forma basis, no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or during the period
ending on the 123rd day after such date of deposit;
(D) the Company shall have delivered to the Trustee (1)
either (x) a ruling directed to the Trustee received from the Internal
Revenue Service to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this Section 8.02 and will
be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such
option had not been exercised or (y) an Opinion of Counsel to the same
effect as the ruling described in clause (x) above accompanied by a
ruling to that effect published by the Internal Revenue Service,
unless there has been a change in the applicable federal income tax
law since the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required and (2) an Opinion of
Counsel to the effect that (x) the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (y) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company under either such statute, and either (I)
the trust funds will no longer remain the property of the Company (and
therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (II) if a court were to rule under any
such law in any case or proceeding that the trust funds remained
property of the Company, (a) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not
paid to the Holders, the Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds
that is not avoidable in bankruptcy or otherwise except for the effect
of Section 552(b) of the United States Bankruptcy Code on interest on
the trust funds accruing after the
<PAGE> 80
74
commencement of a case under such statute and (b) the Holders will be
entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used in such case or proceeding;
(E) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such deposit defeasance and discharge
will not cause the Notes to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none
of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to this
Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and
when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (D)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of
the Company's obligations under Section 4.01, then the Company's obligations
under such Section 4.01 shall cease upon delivery to the Trustee of such ruling
or Opinion of Counsel and compliance with the other conditions precedent
provided for herein relating to the defeasance contemplated by this Section
8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) under Section 5.01 and Sections 4.03 through 4.17 and Section
4.19, clauses (c) and (d) under Section 6.01 with respect to such clauses (iii)
and (iv) under Section 5.01 and Sections 4.03 through 4.17 and Section 4.19,
and clauses (e) and (f) under Section 6.01 shall be deemed not to be Events of
Default, in each case with respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for
the benefit of the Holders, under the terms of an irrevocable trust
<PAGE> 81
75
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (C) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the
Trustee, the principal of, premium, if any, and interest on the
outstanding Notes on the Stated Maturity of such principal or
interest; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal, premium, if any, and
interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it
is bound;
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion
of Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) the Holders
have a valid first-priority security interest in the trust funds, (C)
the Holders will not recognize income, 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 and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred and (D) after
the passage of 123 days following the deposit (except, with respect to
any trust funds for the account of any Holder who may be deemed to be
an "insider" for purposes of the United States Bankruptcy Code, after
one year following the deposit), the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company under either such statute, and either (1)
the trust funds will no longer remain the property of the Company (and
therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (2) if a court were to rule under any
such law in any case or proceeding that the trust funds
<PAGE> 82
76
remained property of the Company, (x) assuming such trust funds
remained in the possession of the Trustee prior to such court ruling
to the extent not paid to the Holders, the Trustee will hold, for the
benefit of the Holders, a valid and perfected security interest in
such trust funds that is not avoidable in bankruptcy or otherwise
(except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute), (y) the Holders will be
entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used in such case or proceeding
and (z) no property, rights in property or other interests granted to
the Trustee or the Holders in exchange for, or with respect to, such
trust funds will be subject to any prior rights of holders of other
Indebtedness of the Company or any of its Subsidiaries;
(v) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such deposit defeasance and discharge
will not cause the Notes to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05. Repayment to Company. Subject to Sections
7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay
to the Company upon request set forth in an Officers' Certificate any excess
money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for two years;
provided that the Trustee or such Paying Agent before being required to make
any payment may cause to be published at the expense of the Company once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money at such Holder's address (as set forth in the Note
Register) notice that such money remains unclaimed and that after a date
specified therein (which shall be at least 30 days from the date of such
publication or mailing) any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to
such money must look to the Company for
<PAGE> 83
77
payment as general creditors unless an applicable law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or
8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Notes without notice to or the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency in
this Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee; or
(5) to make any change that, in the good faith opinion of
the Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
<PAGE> 84
78
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution), and
the Trustee may amend this Indenture and the Notes with the written consent of
the Holders of a majority in aggregate principal amount at maturity of the
Notes then outstanding, and the Holders of a majority in aggregate principal
amount at maturity of the Notes then outstanding by written notice to the
Trustee may waive future compliance by the Company with any provision of this
Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note,
(ii) reduce the Accreted Value of, or premium, if any, or
interest on, any Note,
(iii) change the place or currency of payment of principal
of, or premium, if any, or interest on, any Note or adversely affect
any right of repayment at the option of any Holder of any Note,
(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 Note,
(v) reduce the above-stated percentage of outstanding
Notes the consent of whose Holders is necessary to modify or amend
this Indenture,
(vi) waive a Default in the payment of principal of,
premium, if any, or interest on the Notes,
(vii) modify any of the provisions of this Section 9.02,
except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Note affected
thereby or
(viii) reduce the percentage or aggregate principal amount
at maturity of outstanding Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of this
Indenture or for waiver of certain defaults.
<PAGE> 85
79
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the Note of the consenting
Holder, even if notation of the consent is not made on any Note. However, any
such Holder or subsequent Holder may revoke the consent as to its Note or
portion of its Note. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. An amendment, supplement or waiver shall become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses
(i) through (viii) of Section 9.02. In case of an amendment or waiver of the
type described in clauses (i) through (viii) of Section 9.02, the amendment or
waiver shall bind each Holder who has consented to it and every subsequent
Holder of a Note that evidences the same indebtedness as the Note of the
consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note about the changed terms and return it to the
Holder and the Trustee may place an appropriate
<PAGE> 86
80
notation on any Note thereafter authenticated. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the Note shall issue
and the Trustee shall authenticate a new Note that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the
rights of the Trustee. The Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of
and to govern indentures qualified under the TIA. After the effectiveness of
the Registration Statement, this Indenture shall be subject to the provisions
of the TIA that are required to be a part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
<PAGE> 87
81
if to the Trustee:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to him at his address as it appears on the Note Register by first class mail
and shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or
communication is mailed in the manner provided in this Section 10.02, it is
duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 10.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
<PAGE> 88
82
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
SECTION 10.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion
of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 10.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date
of maturity of any Note shall not be a Business Day, then payment of principal
of, premium, if any, or interest on such Note, as the case may be, need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Payment Date, or
Redemption Date, or at the Stated Maturity or date of maturity of such Note;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Payment Date, Redemption Date, Stated Maturity or date
of maturity, as the case may be.
SECTION 10.07. Governing Law. The laws of the State of New
York shall govern this Indenture and the Notes. The Trustee, the Company and
the Holders agree to submit to the jurisdiction of the courts of the State of
New York in any action or proceeding arising out of or relating to this
Indenture or the Notes.
<PAGE> 89
83
SECTION 10.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.09. No Recourse Against Others. No recourse for
the payment of the principal of, premium, if any, or interest on any of the
Notes, 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 this Indenture, or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any incorporator
or against any past, present or future partner, shareholder, other
equityholder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person, either directly or through the Company
or any successor Person, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Notes.
SECTION 10.10. Successors. All agreements of the Company in
this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 10.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 10.12. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 10.13. Table of Contents, Headings, Etc. The Table
of Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
<PAGE> 90
84
SECTION 10.14. Right of First Opportunity Agreement. The
Company agrees not to amend the Right of First Opportunity Agreement in any
respect material and adverse to the Holders of the Notes. If the Company
proposes to amend the Right of First Opportunity Agreement, it shall notify the
Trustee in writing 30 days prior to the effectiveness of such amendment of such
proposal to amend and such notice shall include a written copy of the contents
of such proposed amendment (the "Right of First Opportunity Notice").
Within five days of receipt of a Right of First Opportunity Notice,
the Trustee shall give written notice to the Holders of the Right of First
Opportunity Notice. Such notice by the Trustee shall include a copy of the
Right of First Opportunity Notice.
<PAGE> 91
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
MCCAW INTERNATIONAL, LTD.
By: /s/ KEITH D. GRINSTEIN
------------------------------
Name: Keith D. Grinstein
Title: President & CEO
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
------------------------------
Name: Mary Jane Morrissey
Title: Vice President
<PAGE> 92
EXHIBIT A
[FACE OF NOTE]
MCCAW INTERNATIONAL, LTD.
13% Senior Discount Note Due 2007
[CUSIP] [CINS] __________
No. $_________
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
<TABLE>
<S> <C>
Issue Date: March 6, 1997 Original issue discount under Section 1273 of the
Internal Revenue Code (for each $1,000 principal
Yield to maturity for period from Issue Date to amount): $1,140.09
April 15, 2007: 13.35524%, compounded semi-
annually on April 15 and October 15, commencing Issue Price (for each $1,000 principal amount):
April 15, 1997 (computed without giving effect to $509.91
the additional payments of interest in the event
the issuer fails to commence the exchange offer or
cause the registration statement to be declared
effective, each as described on the reverse
hereof)
</TABLE>
MCCAW INTERNATIONAL, LTD., a Washington corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ________________, or its
registered assigns, the principal sum of ___________________ ($______) on April
15, 2007.
Interest Payment Dates: April 15 and October 15, commencing
October 15, 2002.
Regular Record Dates: April 1 and October 1.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE> 93
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
MCCAW INTERNATIONAL, LTD.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 13% Senior Discount Notes due 2007 described
in the within-mentioned Indenture.
Date: THE BANK OF NEW YORK, as Trustee
By:______________________________
Authorized Signatory
<PAGE> 94
A-3
[REVERSE SIDE OF NOTE]
MCCAW INTERNATIONAL, LTD.
13% Senior Discount Note due 2007
1. Principal and Interest.
The Company will pay the principal of this Note on April 15,
2007.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the April 1 or October 1
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing October 15, 2002; provided that no interest shall accrue on the
principal amount of this Note prior to April 15, 2002 and no interest shall be
paid on this Note prior to October 15, 2002, except as provided in the next
paragraph.
If an exchange offer registered under the Securities Act is
not consummated and a shelf registration statement under the Securities Act
with respect to resales of the Notes is not declared effective by the
Commission, on or before September 6, 1997 in accordance with the terms of the
Registration Rights Agreement dated March 3, 1997 among the Company and Morgan
Stanley & Co. Incorporated, Chase Securities Inc., Lehman Brothers Inc. and
NatWest Capital Markets Limited, interest (in addition to the accrual of
original issue discount during the period ending April 15, 2002 and in addition
to the interest otherwise due on the Notes after such date) will accrue, at an
annual rate of 0.5% of Accreted Value on the preceding Semiannual Accrual Date
on the Notes from September 6, 1997, payable in cash semiannually, in arrears,
on each April 15 and October 15, commencing October 15, 1997, until the
exchange offer is consummated or the shelf registration statement is declared
effective. The Holder of this Note is entitled to the benefits of such
Registration Rights Agreement.
From and after April 15, 2002, interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from April 15, 2002; provided that, if there is no
existing default in the payment of interest and this Note is authenticated
between a Regular Record Date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
<PAGE> 95
A-4
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the
extent lawful, at a rate per annum that is 2% in excess of the rate otherwise
payable.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on
the principal amount of the Notes as provided above on each April 15 and
October 15 to the persons who are Holders (as reflected in the Note Register at
the close of business on such April 1 and October 1 immediately preceding the
Interest Payment Date), in each case, even if the Note is cancelled on
registration of transfer or registration of exchange after such record date;
provided that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to a Paying Agent on or after
April 15, 2007.
The Company will pay principal, premium, if any, and as
provided above, interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal, premium, if any, and interest by its check payable
in such money. It may mail an interest check to a Holder's registered address
(as reflected in the Note Register). If a payment date is a date other than a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
March 6, 1997 (the "Indenture"), between the Company and The Bank of New York
(the "Trustee"). Capitalized terms herein are used as defined in the Indenture
unless otherwise indicated. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture,
the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
<PAGE> 96
A-5
5. Redemption.
The Notes will be redeemable, at the Company's option, in
whole or in part, at any time on or after April 15, 2002 and prior to maturity,
upon not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's last address as it appears in the Note Register, at the
following Redemption Prices (expressed in percentages of their principal amount
at maturity), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date) if redeemed during the 12-month period commencing on April 15
of the applicable year set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2002 106.500%
2003 103.250%
2004 and thereafter 100.000%
</TABLE>
In addition, at any time prior to April 15, 2000, the Company
may redeem up to 35% of the principal amount at maturity of the Notes with the
Net Cash Proceeds of one or more sales by the Company of its Capital Stock
(other than Redeemable Stock) at any time as a whole or from time to time in
part, at a Redemption Price (expressed as a percentage of Accreted Value on the
Redemption Date) of 113%, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date);
provided that at least $618.5 million aggregate principal amount at maturity of
Notes remains outstanding after each such redemption.
Notice of any optional redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Note Register.
Notes in original denominations larger than $1,000 may be redeemed in part. On
and after the Redemption Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, each Holder
shall have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in the Indenture at a purchase price equal
to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any,
to the date of purchase (the "Change of Control Payment").
<PAGE> 97
A-6
A notice of such Change of Control will be mailed within 30
days after any Change of Control occurs to each Holder at his last address as
it appears in the Note Register. Notes in original denominations larger than
$1,000 may be sold to the Company in part. On and after the Change of Control
Payment Date, interest ceases to accrue and the original issue discount ceases
to accrete on Notes or portions of Notes surrendered for purchase by the
Company, unless the Company defaults in the payment of the Change of Control
Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount at maturity and multiples of $1,000
in excess thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer or exchange of any Notes selected for
redemption. Also, it need not register the transfer or exchange of any Notes
for a period of 15 days before a selection of Notes to be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company will be discharged from certain covenants set
forth in the Indenture.
<PAGE> 98
A-7
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not materially and adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Group Members, among other things, to Incur
additional Indebtedness, make Restricted Payments, use the proceeds from Asset
Sales, engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note
when the same becomes due and payable, and such default continues for a period
of 30 days; (c) default in the performance or breach of the provisions of
Article Five or the failure to make or consummate an Offer to Purchase in
accordance with Section 4.10 or Section 4.11; provided that a default or breach
of Section 4.10 arising from an Involuntary Event shall not constitute an Event
of Default unless such Involuntary Event continues for 90 days; (d) the Company
defaults in the performance of or breaches any other covenant or agreement of
the Company in this Indenture or under the Notes (other than a default
specified in clause (a), (b) or (c) above) and such default or breach continues
for a period of 60 consecutive days after written notice by the Trustee or the
Holders of 25% or more in aggregate principal amount at maturity of the Notes,
provided that a default or breach of a covenant or agreement arising from a
Restricted Affiliate ceasing to observe any
<PAGE> 99
A-8
covenant applicable to it resulting from an Involuntary Event shall not
constitute an Event of Default unless such Involuntary Event continues for 90
days; (e) there occurs with respect to any issue or issues of Indebtedness of
the Company or any Significant Group Member having an outstanding principal
amount of $5 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be created,
(I) an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default; provided that an acceleration
or payment default arising from an Involuntary Event shall not constitute an
Event of Default unless such Involuntary Event continues for 90 days; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $5 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any Significant
Group Member and shall not be paid or discharged, and there shall be any period
of 30 consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such Persons to exceed $5 million during
which a stay of enforcement of such final judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; provided that a final
judgment or order arising from an Involuntary Event shall not constitute an
Event of Default unless such Involuntary Event continues for 90 days; (g) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Group Member in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company
or any Significant Group Member or for all or substantially all of the property
and assets of the Company or any Significant Group Member or (C) the winding up
or liquidation of the affairs of the Company or any Significant Group Member
and, in each case, such decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; or (h) the Company or any Significant Group
Member (A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company
or any Significant Group Member or for all or substantially all of the property
and assets of the Company or any Significant Group Member or (C) effects any
general assignment for the benefit of creditors.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Notes may declare all the Notes to be due and payable. If a
bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Notes automatically become due and payable. Holders
<PAGE> 100
A-9
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services
for the Company or its Affiliates and may otherwise deal with the Company or
its Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to McCaw
International, Ltd., 1191 Second Avenue, Suite 1600, Seattle, Washington 98101,
Attention: President.
<PAGE> 101
A-10
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
________________________________________________________________________________
Please print or typewrite name and address including zip code of assignee
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_________________________________________ attorney to transfer said Note on the
books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
PERMANENT OFFSHORE GLOBAL NOTES AND
OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the shelf registration statement with
respect to resales of the Notes is declared effective or (ii) the end of the
period referred to in Rule 144(k) under the Securities Act, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
<PAGE> 102
A-11
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date: ___________________ ____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ___________________________________ ______________________________
NOTICE: To be executed by an
executive officer
<PAGE> 103
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.10 or Section 4.11 of the Indenture, state the
amount (in principal amount at maturity): $___________________.
Date: _________________
Your Signature:_______________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
<PAGE> 104
EXHIBIT B
Form of Certificate
________________, ____
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
Re: McCaw International, Ltd. (the "Company")
13% Senior Discount Notes
due 2007 (the "Notes")
Dear Sirs:
This letter relates to U.S. $_______________ principal amount at
maturity of Notes represented by a Note (the "Legended Note") which bears a
legend outlining restrictions upon transfer of such Legended Note. Pursuant to
Section 2.01 of the Indenture (the "Indenture") dated as of March 6, 1997
relating to the Notes, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby
requested to exchange the legended certificate for an unlegended certificate
representing an identical principal amount at maturity of Notes, all in the
manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
<PAGE> 105
B-2
By: ____________________________
Authorized Signature
<PAGE> 106
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
____________, ____
The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
Attention: Corporate Trust Administration
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Re: McCaw International, Ltd. (the "Company")
13% Senior Discount Notes due 2007 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of $__________________
aggregate principal amount at maturity of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of March 6, 1997, relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (C)
to an institutional
<PAGE> 107
C-2
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Company a signed letter substantially in the form of this letter, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act, or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser
that resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ______________________________
Authorized Signature
<PAGE> 108
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________, ____
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Re: McCaw International, Ltd. (the "Company")
13% Senior Discount Notes due 2007 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S.$__________________
aggregate principal amount at maturity of the Notes, we confirm that such sale
has been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
<PAGE> 109
D-2
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ______________________________
Authorized Signature
<PAGE> 1
EXHIBIT 4.26
________________________________________________________________________________
WARRANT AGREEMENT
between
MCCAW INTERNATIONAL, LTD.
and
THE BANK OF NEW YORK
Dated as of March 6, 1997
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.3. Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.4. Certificated Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2. Exercise; Restrictions on Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3. Method of Exercise; Payment of Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4. Repurchase Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2. Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.3. Statement on Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4. Notice of Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5. Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.6. When Issuance or Payment May Be Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.7. Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.2. Book-Entry Provisions for the Global Warrants . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.3. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.4. Surrender of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.2. Right of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X
REMEDIES
Section 10.1. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.2. Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.3. Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.2. Right to Consult Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.3. Compensation; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.4. No Restrictions on Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.5. Discharge or Removal; Replacement Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.6. Successor Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C> <C>
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.3. No Merger, Consolidation or Sale of Assets of the Company . . . . . . . . . . . . . . . . . . 39
Section 12.4. Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.5. Notices; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.6. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.8. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.10. Common Shares Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.11. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 12.12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.13. Right of First Opportunity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
</TABLE>
<PAGE> 5
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of March 6, 1997 (this
"Agreement"), between MCCAW INTERNATIONAL, LTD., a Washington corporation (the
"Company"), and THE BANK OF NEW YORK (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated
March 3, 1997 (the "Placement Agreement"), among the Company and Morgan Stanley
& Co. Incorporated ("Morgan Stanley"), as manager (the "Manager"), for itself
and the other placement agents named therein (collectively with the Manager,
the "Placement Agents"), the Company has agreed to issue and sell to the
Placement Agents an aggregate of 951,463 warrants (each, a "Warrant" and
collectively, the "Warrants"), each Warrant initially entitling the holder
thereof to purchase 0.10616 shares of Common Stock (as defined below) of the
Company at an exercise price of $36.45 per Common Share (as defined below) as
part of 951,463 units (the "Units"), each Unit consisting of one 13% Senior
Discount Note due 2007 of the Company (each a "Note" and collectively, the
"Notes") to be issued pursuant to the provisions of an Indenture, dated as of
the date hereof, among the Company and The Bank of New York (the "Indenture"),
and one Warrant;
WHEREAS, the Notes and the Warrants included in each Unit will
become separately transferable at the close of business upon the earliest to
occur of (i) the date that is six months after the Closing Date (as defined
below), (ii) the commencement of an exchange offer with respect to the Notes
undertaken pursuant to the Notes Registration Rights Agreement (as defined
below), (iii) the effectiveness of a shelf registration statement with respect
to resales of the Notes or (iv) the commencement of an offer to purchase the
Notes undertaken pursuant to the Indenture (the "Separation Date"); and
WHEREAS, the Company desires to engage the Warrant Agent to
act on the Company's behalf, and the Warrant Agent desires to act on behalf of
the Company, in connection with the issuance of the Warrant Certificates (as
defined below) and the other matters as provided herein, including, without
limitation, for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company
and the record holders thereof (together with the holders of shares of Common
Stock (or other securities) received upon exercise thereof, the "Holders").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements contained herein and in the Placement Agreement, the Company
and the Warrant Agent hereby agree as follows:
<PAGE> 6
2
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2
hereof.
"Auditors" means, at any time, the independent auditors of the
Company at such time.
"Board" means the board of directors of the Company from time
to time.
"Business Day" means a day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of the
corporate trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Certificate for Surrender" means the form on the reverse side
of the Warrant Certificate substantially in the form of Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the
Company.
"Common Stock" means the common stock, without par value, of
the Company.
"Company" has the meaning specified in the preamble to this
Agreement.
"Current Market Value" has the meaning specified in Section
4.1(f) hereof.
<PAGE> 7
3
"Default" has the meaning specified in Section 10 hereof.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1
hereof.
"Expiration Date" means April 15, 2007.
"Final Surrender Time" has the meaning specified in Section
3.4 hereof.
"Financial Expert" means one of the Persons listed in Appendix
A hereto.
"Global Warrants" has the meaning specified in Section 2.1
hereof.
"Holders" has the meaning specified in the recitals to this
Agreement.
"IAI Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that
does not (or whose directors, executive officers or 5% stockholders do not)
have a direct or indirect financial interest in the Company or any of its
subsidiaries or affiliates, which has not been for at least five years and, at
the time it is called upon to give independent financial advice to the Company
is not (and none of its directors, executive officers or 5% stockholders is) a
promoter, director, or officer of the Company or any of its subsidiaries or
affiliates. The Independent Financial Expert may be compensated and
indemnified by the Company for opinions or services it provides as an
Independent Financial Expert.
"Institutional Accredited Investor" shall mean an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act.
"Legended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
<PAGE> 8
4
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this
Agreement.
"Notes Registration Rights Agreement" means the Registration
Rights Agreement with respect to the Notes dated March 3, 1997 among the
Company and Morgan Stanley, as Manager, and the other Placement Agents named in
the Placement Agreement.
"Notice Date" has the meaning specified in Section 3.4 hereof.
"Officer" means, with respect to the Company, (i) the Chairman
of the Board, the Chief Executive Officer or any other Director of the Company
or (ii) the Treasurer or any Assistant Treasurer, the Company's Secretary or
any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed
in clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of
the definition thereof in lieu of being signed by one Officer listed in clause
(i) of the definition thereof and one Officer listed in clause (ii) of the
definition thereof.
"Offshore Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agreement" has the meaning specified in the recitals
to this Agreement.
"Private Placement Legend" means the legend set forth on the
Warrant Certificates in the form set forth in Section 2.2(a) hereof.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
<PAGE> 9
5
"Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Relevant Value" means the value of the Warrants as set forth
in the Value Report in accordance with Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any
date when the Company consolidates with or merges into or with (but only where
holders of the Common Stock receive consideration in exchange for all or part
of such Common Stock), or sells all or substantially all of its assets to,
another Person which does not have a class of equity securities registered
under the Exchange Act or a wholly owned subsidiary of such Person, if the
consideration for such transaction does not consist solely of cash or such
merger or consolidation is not effected solely for the purpose of changing the
Company's state of incorporation.
"Repurchase Notice" has the meaning specified in Section
3.4(a) hereof.
"Repurchase Obligation" has the meaning specified in Section
10.2 hereof.
"Repurchase Offer" means the Company's offer to repurchase
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" means the amount of cash payable in respect
of Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified
in Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Right of First Opportunity Agreement" means the Right of
First Opportunity Agreement dated March 6, 1997 between the Company and Nextel.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Separation Date" has the meaning specified in the recitals to
this Agreement.
<PAGE> 10
6
"Spread" means, with respect to any Warrant, the Current
Market Value of the Common Shares subject to such Warrant, less the Exercise
Price of such Warrant, in each case as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this
Agreement.
"U.S. Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Unlegended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
"Valuation Date" means the date five Business Days prior to
the Notice Date.
"Value Certificate" has the meaning specified in Section 3.4
hereof.
"Value Report" has the meaning specified in Section 4.1(k)
hereof.
"Warrant" has the meaning specified in the recitals to this
Agreement.
"Warrant Agent" has the meaning specified in the preamble to
this Agreement.
"Warrant Certificates" has the meaning specified in Section
2.1 hereof.
"Warrant Registration Rights Agreement" means the Warrant
Registration Rights Agreement, dated March 3, 1997, between the Company and the
Warrant Agent.
"Warrant Registration Statement" has the meaning specified in
Section 3 of the Warrant Registration Rights Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates
representing the Warrants (the "Warrant Certificates") shall be substantially
in the form attached hereto as
<PAGE> 11
7
Exhibit A, shall be dated the date on which such Warrant Certificates are
countersigned by the Warrant Agent and shall have such insertions as are
appropriate or required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more global Warrant Certificate in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "Restricted Global Warrant"), deposited with the Warrant Agent,
as custodian for, and registered in the name of the nominee for, the
Depositary, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more global
Warrant Certificate in definitive, fully registered form, substantially in the
form set forth in Exhibit A (the "Legended Regulation S Global Warrant"),
deposited with the Warrant Agent, as custodian for, and registered in the name
of, the Depositary or its nominee for the accounts of Euroclear and Cedel Bank,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. Prior to March 6, 1998, beneficial interests in the
Legended Regulation S Global Warrant may be only held through Euroclear and
Cedel Bank. At any time following March 6, 1998, upon receipt by the Warrant
Agent and the Company of a certificate substantially in the form of Exhibit D
hereto, one or more global Warrants in registered form substantially in the
form set forth in Exhibit A (the "Unlegended Regulation S Global Warrant"; and
together with the Legended Regulation S Global Warrant, the "Regulation S
Global Warrants") shall be deposited with the Warrant Agent, as custodian for,
and registered in the name of the nominee for, the Depositary, duly executed by
the Company and countersigned by the Warrant Agent as hereinafter provided, and
the Warrant Agent shall reflect on its books and records the date and a
decrease in the Legended Regulation S Global Warrant in an amount equal to the
beneficial interest in number of Warrants evidenced by the Legended Regulation
S Global Warrant transferred. The aggregate number of Warrants represented by
the Regulation S Global Warrant may from time to time be increased or decreased
by adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
<PAGE> 12
8
Warrants offered and sold to Institutional Accredited
Investors who are not QIBs shall be issued initially in registered form
substantially in the form set forth in Exhibit A ("IAI Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in
exchange for interests in the Restricted Global Warrant shall be issued in the
form of permanent Warrant Certificates in registered form, substantially in the
form set forth in Exhibit A (the "Restricted Certificated Warrants" and,
together with IAI Certificated Warrants, the "U.S. Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange for
interests in the Regulation S Global Warrants shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form
set forth in Exhibit A (the "Offshore Certificated Warrants"). The Offshore
Certificated Warrants and the U.S. Certificated Warrants are sometimes
collectively herein referred to as the "Certificated Warrants". The Restricted
Global Warrant and the Regulation S Global Warrant are sometimes herein
collectively referred to as the "Global Warrants."
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant
Certificates, other than the Unlegended Regulation S Global Warrants, shall
bear the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS WARRANT IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
<PAGE> 13
9
TIME PERIOD REFERRED TO UNDER RULE 144(k) TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d), IF APPLICABLE UNDER THE SECURITIES ACT AS
IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER
THE WARRANTS REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO MCCAW
INTERNATIONAL, LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE WARRANT AGENT), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE WARRANTS
REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE WARRANT AGENT AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE
<PAGE> 14
10
WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Warrant shall also bear the following
legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO MCCAW INTERNATIONAL,
LTD. OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE
WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the
Separation Date shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13% SENIOR
DISCOUNT NOTE DUE 2007 OF MCCAW INTERNATIONAL, LTD. (THE "NOTES") AND
ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.10616
COMMON SHARES, WITHOUT PAR VALUE, OF MCCAW INTERNATIONAL, LTD. PRIOR
TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) SEPTEMBER
6, 1997, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH
<PAGE> 15
11
RESPECT TO THE NOTES, (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES OR (iv) THE COMMENCEMENT OF AN
OFFER TO PURCHASE THE NOTES, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing 951,463 Warrants, each Warrant to purchase
initially 0.10616 Common Shares, may be executed, on or after the date of this
Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the written direction of the
Company signed by its Chief Executive Officer or other duly authorized
executive officer to the purchasers thereof on the date of issuance. The
Warrant Agent is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2.3 or by Section 3.3, Article VI or
Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, any Vice
President or other duly authorized executive officer of the Company either
manually or by facsimile signature printed thereon. The Warrant Certificates
shall be countersigned by manual signature of the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any officer or
director of the Company whose signature shall have been placed upon any of the
Warrant Certificates shall cease to be such officer or director of the Company
before countersignature by the Warrant Agent and the issuance and delivery
thereof, such Warrant Certificates may nevertheless be countersigned by the
Warrant Agent and issued and delivered with the same force and effect as though
such person had not ceased to be such officer or director of the Company.
Section 2.4. Certificated Warrants. Beneficial owners of
interests in a Global Warrant may receive Certificated Warrants (which, except
as set forth in Section 8.3(d), shall bear the Private Placement Legend) in
accordance with the procedures of the Warrant Agent and the Depositary
provided, however, that beneficial owners of interests in the Regulation S
Global Warrant may not receive Offshore Certificated Warrants in exchange for
such interest prior to the date one year from the Closing Date. In connection
with the execution and delivery of such Certificated Warrants, the Warrant
Agent shall reflect on its books and records the date and a decrease in the
number of Warrants represented by the relevant Global Warrant equal to the
number of such Certificated Warrants and the Company shall execute and the
Warrant Agent shall countersign and deliver to said beneficial owners one or
more Certificated Warrants in an equal aggregate number.
<PAGE> 16
12
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall,
when countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "Exercise Price") of $36.45
per Common Share, subject to adjustment as provided in Section 4.1 and Article
V hereof.
Section 3.2. Exercise; Restrictions on Exercise. At any time
after one year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of the Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act. Any Warrants
not exercised by 5:00 p.m., New York City time, on the Expiration Date shall
expire and all rights of the Holders of such Warrants shall terminate.
Additionally, pursuant to Section 4.1(j)(ii) hereof, the Warrants shall expire
and all rights of the Holders of such Warrants shall terminate in the event the
Company merges or consolidates with or sells all or substantially all of its
property and assets to a Person (other than an Affiliate of the Company) if the
consideration payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale consists solely of
cash or in the event of the dissolution, liquidation or winding up of the
Company.
Section 3.3. Method of Exercise; Payment of Exercise Price.
In order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set
forth in Section 12.5 hereof, with the Subscription Form set forth on the
reverse of the Warrant Certificate duly executed, together with payment in full
of the Exercise Price then in effect for each Common Share (or other
securities) issuable upon exercise of the Warrants as to which a Warrant is
exercised; such payment may be made in cash or by certified or official bank or
bank cashier's check payable to the order of the Company and shall be made to
the Warrant Agent at its corporate trust office address set forth in Section
12.5 hereof prior to the close of business on the date the Warrant Certificate
is surrendered to the Warrant Agent for exercise. Notwithstanding the
foregoing, if the Common Shares (or other securities) issuable upon exercise of
the Warrants are registered under the Exchange Act, the Exercise Price may be
paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. All payments received upon exercise of Warrants shall be delivered
to the Company by the Warrant Agent as instructed in writing by the Company.
If less than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant
<PAGE> 17
13
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not exercised shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same. Upon the
exercise of any Warrants following the surrender of a Warrant Certificate in
conformity with the foregoing provisions, the Warrant Agent shall instruct the
Company to transfer promptly to the Holder or, upon the written order of the
Holder of such Warrant Certificate, appropriate evidence of ownership of any
Common Shares or other security or property to which it is entitled, registered
or otherwise placed in such name or names as may be directed in writing by the
Holder, and to deliver such evidence of ownership to the Person or Persons
entitled to receive the same and fractional shares, if any, or an amount in
cash, in lieu of any fractional shares, as provided in Section 4.5 hereof;
provided that the Holder of such Warrant shall be responsible for the payment
of any transfer taxes required as the result of any change in ownership of such
Warrants or the issuance of such Common Shares other than to the Holder of such
Warrants. Upon the exercise of a Warrant or Warrants, the Warrant Agent is
hereby authorized and directed to requisition from any transfer agent of the
Common Shares (and all such transfer agents are hereby irrevocably authorized
to comply with all such requests) certificates (bearing the legend set forth in
Section 12.10 hereof, if applicable, unless a Registration Statement relating
to such Common Shares shall then be in effect or the Company and the Holder
exercising such Warrant or Warrants otherwise agree) for the necessary number
of Common Shares to which said Holder may be entitled. The Company shall
enter, or shall cause any transfer agent of the Common Shares to enter, the
name of the Person entitled to receive the Common Shares upon exercise of the
Warrants into the Company's register of shareholders within 14 days of such
exercise. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of the surrender for exercise, as provided
above, of the Warrant Certificate representing such Warrant and, for all
purposes under this Agreement, the Person entitled to receive any Common Shares
deliverable upon such exercise shall, as between such Person and the Company,
be deemed to be the Holder of such Common Shares of record as of the close of
business on such date and shall be entitled to receive, and the Warrant Agent
shall deliver to such Person, any Common Shares to which such Person would
have been entitled had such Person been the registered holder on such date.
Section 3.4. Repurchase Offers. (a) Notice of Repurchase
Event. Within five Business Days following the occurrence of a Repurchase
Event, the Company shall give notice (a "Repurchase Notice") to the Holders of
the Warrants and the Warrant Agent that such event has occurred.
(b) Repurchase Offers Generally. Following the
occurrence of a Repurchase Event, the Company shall offer to repurchase for
cash all outstanding Warrants pursuant to the provisions of this Section 3.4 (a
"Repurchase Offer"). The Company shall
<PAGE> 18
14
give notice of a Repurchase Offer in accordance with Section 3.4(f) hereof.
Each date on which the Company gives any such notice is referred to as the
"Notice Date." The Repurchase Offer shall commence on the Notice Date for such
Repurchase Offer and shall expire at 5:00 p.m., New York City time, on a date
determined by the Company (the "Final Surrender Time") that is at least 30 but
not more than 60 days after the Notice Date. Once a Repurchase Event has
occurred, there is no limit on the number of Repurchase Offers that the Company
may make.
(c) Repurchase Offers. (i) In any Repurchase Offer, the
Company shall offer to purchase for cash at the Repurchase Price all Warrants
outstanding on the Notice Date for such Repurchase Offer that are properly
tendered to the Warrant Agent on or prior to the Final Surrender Time for such
Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to,
accept such Repurchase Offer by tendering to the Warrant Agent, on or prior to
the Final Surrender Time for such Repurchase Offer, the Warrant Certificates
evidencing the Warrants such Holder desires to have repurchased in such offer,
together with a completed Certificate for Surrender in substantially the form
attached to the Warrant Certificate. A Holder may withdraw all or a portion of
the Warrants tendered to the Warrant Agent at any time prior to the Final
Surrender Time for such Repurchase Offer. If less than all the Warrants
represented by a Warrant Certificate shall be tendered, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not tendered shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same; provided
that the Holder of such Warrants shall be responsible for the payment of any
transfer taxes required as the result of any change in ownership of such
Warrants.
(d) Repurchase Price. (i) The purchase price (the
"Repurchase Price") for each Warrant properly tendered to the Warrant Agent
pursuant to a Repurchase Offer shall be equal to the value (the "Relevant
Value") on the Valuation Date of the Common Shares issuable, and other
securities or property of the Company which would have been delivered, upon
exercise of Warrants had the Warrants been exercised (regardless of whether the
Warrants are then exercisable), less the Exercise Price in effect on the Notice
Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other
securities or property issuable upon exercise of all the Warrants, on any
Valuation Date shall be:
(1) (A) If the Common Shares (or other securities) are
registered under the Exchange Act, deemed to be the average of the
daily market prices (on the stock
<PAGE> 19
15
exchange that is the primary trading market for the Common Shares (or
other securities)) of the Common Shares (or other securities) for the
20 consecutive trading days immediately preceding such Valuation Date
or, (B) if the Common Shares (or other securities) have been
registered under the Exchange Act for less than 20 consecutive trading
days before such date, then the average of the daily market prices for
all of the trading days before such date for which daily market prices
are available, in the case of each of (A) and (B), as certified to the
Warrant Agent by the President, any Vice President or the Chief
Financial Officer of the Company (the "Value Certificate"). The
market price for each such trading day shall be: (A) in the case of a
security listed or admitted to trading on any national securities
exchange, the closing sales price on such day, or if no sale takes
place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to
trading on any national securities exchange, the last reported sale
price on such day, or if no sale takes place on such day, the average
of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case
of a security not then listed or admitted to trading on any national
securities exchange and as to which no such reported sale price or bid
and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation
service, or a newspaper of general circulation in the Borough of
Manhattan, City and State of New York customarily published on each
Business Day, designated by the Company, or, if there shall be no bid
and asked prices on such day, the average of the high bid and low
asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so
reported and (D) if there are no bid and asked prices reported during
the 30 days prior to the date in question, the Relevant Value shall be
determined as if the Common Shares (or other securities) were not
registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not
registered under the Exchange Act or if the value cannot be computed
under clause (1) above, deemed to be equal to the value set forth in
the Value Report (as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board of Directors in
accordance with Section 3.4(e) hereof, and retained on customary terms
and conditions, using one or more valuation methods that the
Independent Financial Expert, in its best professional judgment,
determines to be most appropriate but without giving effect to any
discount for lack of liquidity, the fact that the Company has no class
of equity securities registered under the Exchange Act or the fact
that the Common Shares and other securities or property issuable upon
exercise of the Warrants represent a minority interest in the Company.
The Company shall cause the Independent Financial Expert to deliver to
the Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert in accordance with
Section 3.4(e) hereof, a value report (the "Value Report") stating the
<PAGE> 20
16
Relevant Value of the Common Shares and other securities or property
of the Company, if any, being valued as of the Valuation Date and
containing a brief statement as to the nature and scope of the
methodologies upon which the determination of Relevant Value was made.
The Warrant Agent shall have no duty with respect to the Value Report
of any Independent Financial Expert, except to keep it on file and
available for inspection by the Holders. The determination as to
Relevant Value in accordance with the provisions of this Section
3.4(d) shall be conclusive on all Persons. The Independent Financial
Expert shall consult with management of the Company in order to allow
management to comment on the proposed Relevant Value prior to delivery
to the Company of any Value Report of the Independent Financial
Expert.
(e) Selection of Independent Financial Expert. If clause
(d)(ii)(2) is applicable, the Board of Directors of the Company shall select an
Independent Financial Expert not more than five Business Days following a
Repurchase Event. Within two days after such selection of the Independent
Financial Expert, the Company shall deliver to the Warrant Agent a notice
setting forth the name of such Independent Financial Expert.
(f) Notice of Repurchase Offer. Each notice of a
Repurchase Offer (an "Offer Notice") given by the Company pursuant to Section
3.4(b)(i) shall be given by the Company directly to all Holders of the
Warrants, with a copy to the Warrant Agent, shall be given simultaneously with
the Repurchase Notice (or, in the event that the Relevant Value of the Common
Shares or other securities or property issuable upon exercise of all the
Warrants cannot be determined pursuant to Section 3.4(d)(ii)(1), then such
Offer Notice shall be given within five Business Days after the Company
receives the Value Report with respect to such offer) and shall specify (A) the
Final Surrender Time for such Repurchase Offer, (B) the manner in which
Warrants may be surrendered to the Warrant Agent for repurchase by the Company,
(C) the Repurchase Price at which the Warrants will be repurchased by the
Company, (D) if applicable, the name of the Independent Financial Expert whose
valuation of the Common Shares and other securities or property was utilized in
connection with determining such Repurchase Price and (E) that payment of the
Repurchase Price will be made by the Warrant Agent. Each such notice shall be
accompanied by a Certificate for Surrender for Repurchase Offer in
substantially the form attached to the Warrant Certificate and a copy of the
Value Report, if any.
(g) Payment for Warrants. Upon surrender for repurchase
of any Warrants in conformity with the provisions of this Section 3.4, the
Warrant Agent shall thereupon promptly notify the Company of such surrender.
On or before the Final Surrender Time for any Repurchase Offer, the Company
shall deposit with the Warrant Agent funds sufficient to make payment for the
Warrants tendered to the Warrant Agent and not withdrawn. After receipt of
such deposit from the Company, the Warrant Agent shall make payment, by
delivering a check in such amount as is appropriate, to such Person or
<PAGE> 21
17
Persons as it may be directed in writing by the Holder surrendering such
Warrants, net of any transfer taxes required to be paid in the event that the
check is to be delivered to a Person other than the Holder.
(h) Compliance with Laws. Notwithstanding anything
contained in this Section 3.4, if the Company is required to comply with laws
or regulations in connection with making any Repurchase Offer, such laws or
regulations shall govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number
of Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) Divisions; Consolidations; Reclassifications. In
case the Company shall, on or before the Expiration Date, (i) issue any Common
Shares in payment of a dividend or other distribution with respect to its
Common Shares, (ii) subdivide its issued and outstanding Common Shares, (iii)
consolidate its issued and outstanding Common Shares into a smaller number of
shares, or (iv) reclassify or convert the Common Shares (other than a
reclassification in connection with a merger, consolidation or other business
combination which will be governed by Section 4.1(j)), then the number of
Common Shares purchasable upon exercise of each Warrant immediately prior to
the record date for such issue or distribution or the effective date of such
subdivision, consolidation, reclassification or conversion shall be adjusted so
that the Holder of each Warrant shall thereafter be entitled to receive the
kind and number of Common Shares which such Holder would have been entitled to
receive after the happening of any of the events described above had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this Section
4.1(a) shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) Rights; Options; Warrants. In case the Company shall
issue rights, options, warrants or convertible or exchangeable securities
(other than an issuance of convertible or exchangeable securities subject to
Section 4.1(a)) to all holders of its Common Shares, entitling them to
subscribe for or purchase Common Shares at a price per share which is lower (at
the record date for such issuance) than the then Current Market Value per
Common Share, then the Company shall ensure that at the time of such issuance,
the same or a like offer or invitation is made to the Holders of the Warrants
as if their Warrants had been exercised on the day immediately preceding the
record date of such offer or invitation
<PAGE> 22
18
on the terms (subject to any adjustment pursuant to Section 4.1(a) for a prior
event) on which such Warrants could have been exercised on such date; provided
that if the Board so resolves, the Company shall not be required to ensure that
the same offer or invitation is made to the Holders of the Warrants, but the
number of Common Shares thereafter purchasable upon the exercise of each
Warrant shall instead be adjusted and shall be determined by multiplying the
number of Common Shares theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the sum of (i) the number of
Common Shares outstanding immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable securities plus (ii) the
number of additional Common Shares which may be purchased or subscribed for
upon exercise, exchange or conversion of such rights, options, warrants or
convertible or exchangeable securities and the denominator of which shall be
the sum of (x) the number of Common Shares outstanding immediately prior to the
issuance of such rights, options, warrants or convertible or exchangeable
securities plus (y) the number of shares which the total consideration received
by the Company for such rights, options, warrants or convertible or
exchangeable securities so offered would purchase at the then Current Market
Value per Common Share. Except as otherwise provided above, such adjustment
shall be made whenever such rights, options, warrants or convertible or
exchangeable securities are issued, and shall become effective retroactively
immediately after the record date for the determination of shareholders
entitled to receive such rights, options, warrants or convertible or
exchangeable securities.
(c) Issuance of Common Shares at Lower Values. In case
the Company shall sell and issue any Common Share or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in Section
4.1(a) or (b) above, (ii) Common Shares issued pursuant to (x) any Rights
outstanding on the date of this Agreement or any Right issued in any
transaction described in Section 4.1(a) or (b) above and (y) a Right, if on the
date such Right was issued, the exercise, conversion or exchange price per
Common Share with respect thereto was at least equal to the then Current Market
Value per Common Share and (iii) any Common Shares or Right issued as
consideration when any corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the Company in an arm's-length
transaction between the Company and a Person other than an Affiliate of the
Company) at a price per Common Share (determined in the case of any such Right,
by dividing (x) the total consideration receivable by the Company in
consideration of the sale and issuance of such Right, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Common Shares covered by such Right) that
is lower than the Current Market Value per Common Share in effect immediately
prior to such sale or issuance, then the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Common Shares theretofore purchasable upon exercise
of such Warrant by a fraction, the numerator of which shall be the number of
Common Shares outstanding immediately after such sale or issuance and the
denominator of which shall be the number of Common Shares outstanding
immediately prior to such sale or issuance plus the number of
<PAGE> 23
19
Common Shares which the aggregate consideration received (determined as
provided below) for such sale or issuance would purchase at such Current Market
Value per Common Share. For purposes of this Section 4.1(c), the Common Shares
which the holder of any such Right shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such Right, plus
the consideration or premiums stated in such Right to be paid for the Common
Shares covered thereby. In case the Company shall sell and issue any Right
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per Common Share" and the "consideration
received by the Company" for purposes of the first sentence of this Section
4.1(c), the Board shall determine, in good faith, the fair value of the Right
then being sold as part of such unit. For purposes of this paragraph, a
"Right" shall mean any right, option, warrant or convertible or exchangeable
security containing the Right to subscribe for or acquire one or more Common
Shares, excluding the Warrants. This Section 4.1(c) shall not apply to: (i)
the exercise of Warrants, or the conversion or exchange of other securities
convertible or exchangeable for Common Shares; or (ii) Common Shares issued
upon the exercise of Rights or warrants issued to all holders of Common Shares.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Common Shares referred to in
Section 4.1(a) above and excluding distributions in connection with the
dissolution, liquidation or winding-up of the Company which shall be governed
by Section 4.1(j) and distributions of securities referred to in Section
4.1(a), Section 4.1(b) or Section 4.1(c)), then, in each case, the number of
Common Shares purchasable after such record date upon the exercise of each
Warrant shall be determined by multiplying the number of Common Shares
purchasable upon the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Value
per Common Share immediately prior to the record date for such distribution and
the denominator of which shall be the Current Market Value per Common Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the evidences of its
indebtedness, or assets or other distributions so distributed attributable to
one Common Share. Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(e) Expiration of Rights, Options and Conversion
Privileges. Upon the expiration of any rights, options, warrants or conversion
or exchange privileges (including without limitation any Rights) that have
previously resulted in an adjustment hereunder, if any thereof shall not have
been exercised, exchanged or converted, the Exercise Price and the number of
Common Shares issuable upon the exercise of each Warrant shall, upon such
<PAGE> 24
20
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
Common Shares so issued were the Common Shares, if any, actually issued or sold
upon the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including without limitation any Rights) and
(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion
plus the consideration, if any, actually received by the Company for issuance,
sale or grant of all such rights, options, warrants or conversion or exchange
rights (including without limitation any Rights) whether or not exercised.
(f) Current Market Value. For the purposes of any
computation under this Article IV, the "Current Market Value" per Common Share
or of any other security (herein collectively referred to as a "security") at
any date herein specified shall be:
(i) if the security is not registered under the Exchange
Act, the value of the security (1) most recently determined as of a
date within the six months preceding such date by an Independent
Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or (2) if no
such determination shall have been made within such six-month period
or if the Company so chooses, determined as of such a date by an
Independent Financial Expert selected by the Company in accordance
with the criteria for such valuation set out in Section 4.1(k), or
(ii) if the security is registered under the Exchange Act,
the average of the daily market prices of the security for the 20
consecutive trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the
daily market prices for all of the trading days before such date for
which daily market prices are available. The market price for each
such trading day shall be: (A) in the case of a security listed or
admitted to trading on any national securities exchange, the closing
sales price, regular way, on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day
on the principal national securities exchange on which such security
is listed or admitted, as determined by the Board, in good faith, (B)
in the case of a security not then listed or admitted to trading on
any national securities exchange, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not
then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices
are available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a
newspaper of
<PAGE> 25
21
general circulation in the Borough of Manhattan, City and State of New
York customarily published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are
no bid and asked prices reported during the 30 days prior to the date
in question, the Current Market Value of the security shall be
determined as if the security were not registered under the Exchange
Act.
(g) Consideration Received. For purposes of any
computation respecting consideration received pursuant to this Section 4.1, the
following shall apply:
(i) in the case of the issuance of Common Shares for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board (irrespective of the accounting
treatment thereof), whose determination shall be conclusive and
described in reasonable detail in a board resolution which shall be
provided as soon as practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options,
warrants or securities convertible into or exchangeable for Common
Shares (including any Rights), the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Company for the issuance of such rights, options, warrants or
securities convertible into or exchangeable for Common Shares, plus
the additional minimum consideration, if any, to be received by the
Company upon the exercise, conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this Section 4.1(g)).
(h) De Minimis Adjustments. No adjustment in the number
of Common Shares purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
number of Common Shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this Section 4.1(h)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
<PAGE> 26
22
(i) Adjustment of Exercise Price. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per Common Share payable upon exercise of
such Warrant shall be adjusted (calculated to the nearest $.01) so that it
shall equal the price determined by multiplying such Exercise Price immediately
prior to such adjustment by a fraction the numerator of which shall be the
number of Common Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the denominator of which shall be the
number of Common Shares so purchasable immediately thereafter. Following any
adjustment to the Exercise Price pursuant to this Article IV, the amount
payable, when adjusted, shall never be less than the par value per Common Share
at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes in the capital of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege and the Exercise
Price of each class of shares shall thereafter be subject to adjustment on
terms comparable to those applicable to Common Shares in this Article IV.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(j) Consolidation, Merger, Etc. (i) Subject to the
provisions of Subsection (ii) below of this Section 4.1(j), in case of the
consolidation of the Company with, or merger of the Company with or into, or of
the sale of all or substantially all of the properties and assets of the
Company to, any Person, and in connection therewith consideration is payable to
holders of Common Shares (or other securities or property purchasable upon
exercise of Warrants) in exchange therefor, the Warrants shall remain subject
to the terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive upon
exercise the number of shares in the capital or other securities or property
(including cash) of or from the Person resulting from such consolidation or
surviving such merger or to which such sale shall be made or of the parent of
such Person, as the case may be, that would have been distributable or payable
on account of the Common Shares if such Holder's Warrants had been exercised
immediately prior to such merger, consolidation or sale (or, if applicable, the
record date therefor); and in any such case the provisions of this Agreement
with respect to the rights and interests thereafter of the Holders of Warrants
shall be appropriately adjusted by the Board in good faith so as to be
applicable, as nearly as may reasonably be, to any shares, other securities or
any property thereafter deliverable on the exercise of the Warrants.
<PAGE> 27
23
(ii) Notwithstanding the foregoing, (x) if the Company
merges or consolidates with, or sells all or substantially all of its
property and assets to, another Person (other than an Affiliate of the
Company) and consideration is payable to holders of Common Shares in
exchange for their Common Shares in connection with such merger,
consolidation or sale which consists solely of cash, or (y) in the
event of the dissolution, liquidation or winding up of the Company,
then the Holders of Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders
of Common Shares (or other securities issuable upon exercise of the
Warrants) as if the Warrants had been exercised immediately prior to
such event, less the Exercise Price. Upon receipt of such payment, if
any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the
holders of the Warrants will be entitled to receive the higher of (i)
the amount payable to the holders of the Warrants described above and
(ii) the Repurchase Price payable to the holders of the Warrants
pursuant to such Repurchase Offer. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person
and, in the event of any dissolution, liquidation or winding up of the
Company, the Company shall deposit promptly with the Warrant Agent the
funds, if any, necessary to pay the Holders of the Warrants. After
receipt of such deposit from such Person or the Company and after
receipt of surrendered Warrant Certificates, the Warrant Agent shall
make payment by delivering a check in such amount as is appropriate
(or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may
be directed in writing by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the
Current Market Value shall be deemed to be equal to the value set forth in the
Value Report (as defined below) as determined by an Independent Financial
Expert, which shall be selected by the Board in its sole discretion, and
retained on customary terms and conditions, using one or more valuation methods
that the Independent Financial Expert, in its best professional judgment,
determines to be most appropriate. The Company shall cause the Independent
Financial Expert to deliver to the Company, with a copy to the Warrant Agent,
within 45 days of the appointment of the Independent Financial Expert, a value
report (the "Value Report") stating the value of the Common Shares and other
securities or property of the Company, if any, being valued as of the Valuation
Date and containing a brief statement as to the nature and scope of the
examination or investigation upon which the determination of value was made.
The Warrant Agent shall have no duty with respect to the Value Report of any
Independent Financial Expert, except to keep it on file and available for
inspection by the Holders. The determination as to Current Market Value in
accordance with the provisions of this Section 4.1(k) shall be conclusive on
all Persons. The Independent Financial Expert shall consult with management of
the Company in order to allow management to comment on the proposed value prior
to delivery to the Company of any Value Report.
<PAGE> 28
24
(l) When No Adjustment Required. No adjustment need be
made for:
(i) grants or exercises of Rights granted to employees of
the Company or any of its subsidiaries or Common
Shares issued or granted to such employees, whether
or not upon the exercise, exchange or conversion of
any such Rights (to the extent that all such
securities do not have an aggregate value in excess
of 15% of the equity value of the Company on a fully
diluted basis, as determined in good faith by the
Board);
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company entered into
prior to the date of the issuance of the Warrants;
(iii) rights to purchase Common Shares pursuant to a
Company plan for reinvestment of dividends or
interest; and
(iv) a change in the par value of the Common Shares
(including a change from par value to no par value
or vice versa).
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
Section 4.2. Notice of Adjustment. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall cause, so far as it is
able, the Warrant Agent promptly to mail, at the expense of the Company, to
each Holder notice of such adjustment or adjustments and shall deliver to the
Warrant Agent a certificate of the Auditors setting forth the number of Common
Shares purchasable upon the exercise of each Warrant and the Exercise Price
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the
same, from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Common Shares purchasable on exercise of the Warrants or any
of the other adjustments set forth in Section 4.1, or with respect to the
nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment, or the validity or value (or the
kind or amount) of any Common Shares which may be purchasable on exercise of
the Warrants. The Warrant Agent shall not be responsible for any failure of
the Company to
<PAGE> 29
25
make any cash payment or to issue, transfer or deliver any Common Shares or
share certificates upon the exercise of any Warrant.
Section 4.3. Statement on Warrants. Irrespective of any
adjustment in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger, Etc. In case
at any time after the date hereof and prior to 5:00 p.m. (New York City time)
on the Expiration Date, there shall be any (i) consolidation or merger
involving the Company or sale, transfer or other disposition of all or
substantially all of the Company's property, assets or business (except a
merger or other reorganization in which the Company shall be the surviving
corporation and holders of Common Shares receive no consideration in respect of
their shares) or (ii) any other transaction contemplated by Section 4.1(j)(ii)
above then, in any one or more of such cases, the Company shall cause to be
mailed to the Warrant Agent and shall cause the Warrant Agent to mail, at
Company's expense, to each Holder of a Warrant, at the earliest practicable
time (and, in any event, not less than 20 days before any date set for
definitive action), notice of the date on which such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the kind and amount of the
Common Shares and other securities, money and other property deliverable upon
exercise of the Warrants. Such notice shall also specify the date as of which
the holders of record of the Common Shares or other securities or property
issuable upon exercise of the Warrants shall be entitled to exchange their
shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Common Shares which shall be issuable upon such exercise
thereof shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If
any fraction of a Common Share would, except for the provisions of this Section
4.5, be issuable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
<PAGE> 30
26
Section 4.6. When Issuance or Payment May Be Deferred. In
any case in which this Article IV shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Common Shares
and other shares in the capital of the Company, if any, issuable upon such
exercise over and above the Common Shares and other shares in the capital of
the Company, if any, issuable upon such exercise and (ii) paying such holder
any amount in cash in lieu of a fractional share; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional Common Shares, other
shares and cash upon the occurrence of the event requiring such adjustment.
Section 4.7. Initial Public Offering. Notwithstanding
anything to the contrary herein contained, if the Company conducts an initial
public offering of equity securities (other than nonconvertible preferred
shares), the Company will give the Holders the opportunity to convert such
Warrants into warrants to purchase such equity securities (other than
nonconvertible preferred shares) and such Common Shares or such other
securities that have been received by the Holders upon the exercise of Warrants
into such equity securities (other than nonconvertible preferred shares). Such
conversion opportunity will be on terms and conditions determined to be fair
and reasonable by the Company's Board of Directors.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any
time, or from time to time, to decrease the Exercise Price of the Warrants
and/or increase the number of shares issuable upon the exercise of the
Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to
the registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in
<PAGE> 31
27
exchange for or in lieu thereof, a new Warrant Certificate of the same tenor
and for a like aggregate number of Warrants. Upon the issuance of any new
Warrant Certificate under this Article VI, the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and other expenses (including the fees and expenses
of the Warrant Agent) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Article VI in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable by anyone and shall be entitled
to the benefits of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such
number of its authorized but unissued Common Shares deliverable upon exercise
of Warrants as will be sufficient to permit the exercise in full of all
outstanding Warrants and will cause appropriate evidence of ownership of such
Common Shares to be delivered to the Warrant Agent upon its request for
delivery thereof upon the exercise of Warrants. The Company covenants that all
Common Shares of the Company that may be issued upon the exercise of the
Warrants will, upon issuance, be duly authorized, validly issued, fully paid
and not subject to any calls for funds and free from pre-emptive rights and all
taxes, liens, charges and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only. The Warrant Agent shall keep at its
office a register for the registration of Warrant Certificates and transfers or
exchanges of Warrant Certificates as herein provided and other appropriate data
as determined by the Warrant Agent. The Company shall, upon reasonable notice
to the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon
<PAGE> 32
28
any registration of transfer or exchange of Warrant Certificates shall be the
valid obligations of the Company, evidencing the same obligations, and entitled
to the same benefits under this Agreement, as the Warrant Certificates
surrendered for such registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance
of the Units. Prior to the Separation Date, the Warrants may not be
transferred or exchanged separately from, but may be transferred or exchanged
only together with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application
to the Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book-entry system maintained by the holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with
a request to register the transfer or to exchange them for an equal amount of
Warrants of other authorized denominations, the Warrant Agent shall register
such transfer or make such exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrants.
Section 8.2. Book-Entry Provisions for the Global Warrants.
(a) The Global Warrants initially shall (i) be registered in the name of the
Depositary for such Global Warrant or the nominee of such Depositary, (ii) be
delivered to the Warrant Agent as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Agreement with respect to the Global
Warrants held on their behalf by the Depositary or the Warrant Agent as its
custodian, and the Depositary may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the
<PAGE> 33
29
absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to
transfers of such Global Warrant in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in
the Global Warrants may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 8.3 hereof. U.S.
Certificated Warrants and Offshore Certificated Warrants shall be transferred
to beneficial owners in exchange for their beneficial interests in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, (i) if the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for any such Global Warrant and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)
if there is a Default or (iii) upon the request of the beneficial owner in
accordance with the rules and procedures of the Depositary and the provisions
of Section 8.3 hereof; provided that Offshore Certificated Warrants shall not
be transferred in exchange for the Legended Regulation S Global Note prior to
one year after the Closing Date.
(c) Any beneficial interest in one of the Global Warrants
that is transferred to a person who takes delivery in the form of an interest
in any other Global Warrant will, upon transfer, cease to be an interest in
such Global Warrant and become an interest in such other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire
Restricted Global Warrant or Regulation S Global Warrant to beneficial owners
pursuant to paragraph (b) of this Section 8.2, the Restricted Global Warrant or
the Regulation S Global Warrant, as the case may be, shall be surrendered to
the Warrant Agent for cancellation, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, U.S. Certificated Warrants or Offshore Certificated Warrants, as the case
may be, of authorized denominations representing, in the aggregate, the number
of Warrants theretofore represented by the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be.
(e) In connection with the transfer of a portion of the
beneficial interests in the Restricted Global Warrant or the Unlegended
Regulation S Global Warrant to beneficial owners pursuant to paragraph (b) of
this Section 8.2, the Warrant Agent shall reflect on its
<PAGE> 34
30
books and records the date and a decrease in the amount of Warrants represented
by the Restricted Global Warrant or Unlegended Regulation S Global Warrant in
an amount equal to the amount of Warrants represented by the beneficial
interest in the Restricted Global Warrant or Unlegended Regulation S Global
Warrant to be transferred, and the Company shall execute, and the Warrant Agent
shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Unlegended Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be, of
like tenor and amount.
(f) Any Certificated Warrant delivered in exchange for an
interest in a Global Warrant pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (d) of Section 8.3
hereof, bear the legend regarding transfer restrictions set forth in Section
2.2 hereof.
(g) The registered holder of a Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following
provisions shall apply:
(a) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
a QIB (excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by
Certificated Warrants or by an interest in the Regulation S Global
Warrant, the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Warrant Certificate stating, or has
otherwise advised the Company and the Warrant Agent in writing, that
the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the
form of Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is purchasing the
Warrants for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing
<PAGE> 35
31
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and
the Warrants to be transferred are represented by Certificated
Warrants or an interest in the Regulation S Global Warrant, upon
receipt by the Warrant Agent of the documents referred to in clause
(i) above and instructions given in accordance with the Depositary's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and an increase in the amount of
Warrants represented by the Restricted Global Warrant in an amount
equal to the amount of Warrants represented by the Certificated
Warrants or the interest in the Regulation S Global Warrant, as the
case may be, to be transferred, and the Warrant Agent shall cancel the
Certificated Warrants or decrease the amount of the Regulation S
Global Warrant so transferred.
(b) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to the registration of any
proposed transfer of Warrants to a Non-U.S. Person:
(i) The Warrant Agent shall register any proposed
transfer of Warrants to a Non-U.S. Person only upon receipt of a
certificate substantially in the form of Exhibit B from the proposed
transferor.
(ii) If the proposed transferee is an Agent Member and the
Warrants to be transferred are represented by Certificated Warrants or
an interest in the Restricted Global Warrant, upon receipt by the
Warrant Agent of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented
by the Regulation S Global Warrant in an amount equal to the number of
Warrants represented by the Certificated Warrants or the Restricted
Global Warrant, as the case may be, to be transferred, and the Warrant
Agent shall cancel the Certificated Warrant or decrease the amount of
Warrants represented by the Restricted Global Warrant so transferred.
(c) Transfers to Any Other Person. The following
provisions shall apply with respect to the registration of any proposed
transfer of Warrants to any Person not specified in paragraphs (a) and (b)
above (including any Institutional Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed
transfer of Warrants to any such Person if (x) the transferor has
delivered to the Warrant Agent and the Company a certificate
substantially in the form of Exhibit C-1 hereto and, if required by
paragraph (d) thereof, an Opinion of Counsel to the effect set forth
therein and
<PAGE> 36
32
(y) the proposed transferee has delivered to the Warrant Agent and the
Company a certificate substantially in the form of Exhibit C-2 hereto
if such transferee is an Institutional Accredited Investor that is not
a QIB.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the Restricted Global Warrant or the
Regulation S Global Warrant, upon receipt by the Warrant Agent and the
Company of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Company shall execute and the Warrant Agent
shall countersign Certificated Warrants in an amount equal to the
number of Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant, if any, as the case may be, to be
transferred and the Warrant Agent shall decrease the number of
Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant so transferred.
(d) Private Placement Legend. Upon the transfer,
exchange or replacement of Warrant Certificates not bearing the Private
Placement Legend, the Warrant Agent shall deliver Warrant Certificates that do
not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates bearing the Private Placement Legend, the
Warrant Agent shall deliver only Warrant Certificates that bear the Private
Placement Legend unless either (i) the circumstances contemplated by the third
sentence of the third paragraph of Section 2.1 exist or (ii) there is delivered
to the Warrant Agent an opinion of counsel reasonably satisfactory to the
Company and its Counsel and the Warrant Agent to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) Transfers of Interests in the Legended Regulation S
Global Warrant. The following provisions shall apply with respect to
registration of any proposed transfer of interests in the Legended Regulation S
Global Warrant:
(i) The Registrar shall register the transfer of any
Warrant (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit B hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Warrant stating, or has otherwise advised
the Company and the Warrant Agent in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that it is purchasing the Warrant for its own account or an
account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has
<PAGE> 37
33
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Warrant Agent of the documents referred to in clause
(i)(y) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and an increase in the
number of Warrants represented by the Restricted Global Warrant, in an
amount equal to the number of Warrants represented by the Legended
Regulation S Global Warrant to be transferred, and the Warrant Agent
shall decrease the number of Warrants represented by the Legended
Regulation S Global Warrant.
(f) Transfers of Interests in the Unlegended Regulation S
Global Note or Unlegended Offshore Certificated Warrants. The following
provisions shall apply with respect to any transfer of interests in the
Unlegended Regulation S Global Warrant or unlegended Offshore Certificated
Warrants: The Warrant Agent shall register the transfer of any such Warrant
without requiring any additional certification.
(g) General. (i) By its acceptance of any Warrants
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of such Warrants acknowledges the restrictions on transfer of such
Warrants set forth in this Agreement and in the Private Placement Legend and
agrees that it will transfer such Warrants only as provided in this Agreement.
The Warrant Agent shall not register a transfer of any Warrants unless such
transfer complies with the restrictions on transfer of such Warrants set forth
in this Agreement. In connection with any transfer of Warrants, each Holder
agrees by its acceptance of Warrants to furnish the Warrant Agent or the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the Warrant
Agent shall not be required to determine (but may rely on a determination made
by the Company with respect to) the sufficiency of any such certifications,
legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section
8.2 hereof or this Section 8.3. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable
written notice to the Warrant Agent.
Section 8.4. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented
<PAGE> 38
34
thereby shall, if surrendered to the Company, be delivered to the Warrant
Agent, and all Warrant Certificates surrendered or so delivered to the Warrant
Agent shall be promptly cancelled by the Warrant Agent and shall not be
reissued by the Company and, except as provided in this Article VIII in case of
an exchange, Article III hereof in case of the exercise of less than all the
Warrants represented thereby or Article VI in case of a mutilated Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time or otherwise
dispose of such cancelled Warrant Certificates as the Company may direct in
writing.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder. The
Company and the Warrant Agent may deem and treat the registered Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
Accordingly, the Company and/or the Warrant Agent shall not, except as ordered
by a court of competent jurisdiction as required by law, be bound to recognize
any equitable or other claim to or interest in the Warrants on the part of any
person other than such registered Holder, whether or not it shall have express
or other notice thereof. Prior to the exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote or to consent
to any action of the shareholders, to receive dividends or other distributions,
to exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with
respect to this Agreement are vested in the Holders of the Warrants, and any
Holder of any Warrant, without the consent of the Warrant Agent or the Holders
of any other Warrant, may, on such Holder's own behalf and for such Holder's
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise in respect of,
such Holder's right to exercise such Warrants in the manner provided in the
Warrant Certificate representing such Warrants and in this Agreement.
ARTICLE X
<PAGE> 39
35
REMEDIES
Section 10.1. Defaults. It shall be deemed to be a "Default"
with respect to the Company's (or its successor's) obligations under this
Agreement if:
(a) a Repurchase Event occurs and the Company (or its
successor) shall fail to make a Repurchase Offer pursuant to Section
3.4 hereof; or
(b) the Company (or its successor) shall fail to purchase
the Warrants pursuant to the Repurchase Offer in accordance with the
provisions of Section 3.4 hereof.
Section 10.2. Payment Obligations. Upon the happening of a
Default under this Agreement, the Company shall be obligated to increase the
amount otherwise payable pursuant to Section 3.4(d) hereof in respect of the
Repurchase Offer to which such Default relates by an amount equal to interest
thereon at a rate per annum equal to 13% from the date of the Default to the
date of payment, which interest shall compound quarterly (all such payment
obligations in respect of such Repurchase Offer, together with all such
increased amounts, being the "Repurchase Obligation").
Section 10.3. Remedies; No Waiver. Notwithstanding any other
provision of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the
Repurchase Obligation or to enforce the performance of any provision of this
Warrant Agreement. A delay or omission by any Holder of a Warrant in
exercising, or a failure to exercise, any right or remedy arising out of a
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Default. All remedies are cumulative to the extent
permitted by law.
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The Warrant Agent
hereby accepts the agency established by this Agreement and agrees to perform
the same upon the terms and conditions herein set forth, by all of which the
Company and the Holders of Warrants, by their acceptance thereof, shall be
bound. The Warrant Agent shall not, by countersigning Warrant Certificates or
by any other act hereunder, be deemed to make any representations as to the
validity or authorization of the Warrants or the Warrant Certificates (except
as to its countersignature thereon) or of any Common Shares issued upon
exercise of any Warrant, or as to the accuracy of the computation of the
Exercise Price or the number or kind or amount of Common Shares deliverable
upon exercise of any Warrant or the correctness of
<PAGE> 40
36
the representations of the Company made in the certificates that the Warrant
Agent receives. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant. The
Warrant Agent shall not have any duty to calculate or determine any adjustments
with respect to either the Exercise Price or the kind and amount of Common
Shares receivable by Holders upon the exercise of Warrants required from time
to time and the Warrant Agent shall have no duty or responsibility in
determining the accuracy or correctness of such calculation. The Warrant Agent
shall not be (a) liable for any recital or statement of fact contained herein
or in the Warrant Certificates or for any action taken, suffered or omitted by
it in good faith in the belief that any Warrant Certificate or any other
documents or any signatures are genuine or properly authorized, (b) responsible
for any failure on the part of the Company to comply with any of its covenants
and obligations contained in this Agreement or in the Warrant Certificates or
(c) liable for any act or omission in connection with this Agreement except for
its own gross negligence, bad faith or willful misconduct. The Warrant Agent
is hereby authorized to accept instructions with respect to the performance of
its duties hereunder from the Chairman of the Board, Chief Executive Officer,
any Vice President or other executive officer of the Company and to apply to
any such officer for instructions (which instructions will be promptly given in
writing when requested) and the Warrant Agent shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with the
instructions of any such officer; however, in its discretion, the Warrant Agent
may, in lieu thereof, accept other evidence of such or may require such further
or additional evidence as it may deem reasonable. The Warrant Agent shall not
be liable for any action taken with respect to any matter in the event it
requests instructions from the Company as to that matter and does not receive
such instructions within a reasonable period of time after the request
therefor.
The Warrant Agent may execute and exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect or misconduct of
any such attorneys, agents or employees; provided reasonable care has been
exercised with respect to the retention of any such attorney, agent or
employee. The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in respect
hereof, unless first indemnified to its reasonable satisfaction. The Warrant
Agent shall promptly notify the Company in writing of any claim made or action,
suit or proceeding instituted against it arising out of or in connection with
this Agreement.
The Company will perform, execute, acknowledge and deliver or
cause to be delivered all such further acts, instruments and assurances as are
consistent with this Agreement and as may reasonably be required by the Warrant
Agent in order to enable it to carry out or perform its duties under this
Agreement.
<PAGE> 41
37
The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement against the Warrant
Agent, whose duties and obligations shall be determined solely by the express
provisions hereof.
Section 11.2. Right to Consult Counsel. The Warrant Agent
may at any time consult with legal counsel (who may be legal counsel for the
Company), and the opinion or advice of such counsel shall be full and complete
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
Section 11.3. Compensation; Indemnification. The Company
agrees promptly to pay the Warrant Agent from time to time and in any case
within 30 days of receipt of an invoice, compensation for its services
hereunder as the Company and the Warrant Agent may agree from time to time, and
to reimburse it upon its request for reasonable fees or expenses and reasonable
counsel fees and expenses incurred in connection with the execution and
administration of this Agreement, and further agrees to indemnify the Warrant
Agent and save it harmless against any losses, liabilities or expenses arising
out of or in connection with the acceptance and administration of this
Agreement, including, without limitation, the reasonable costs and expenses of
investigating or defending any claim of such liability, except that the Company
shall have no liability hereunder to the extent that any such loss, liability
or expense results from the Warrant Agent's own gross negligence, bad faith or
willful misconduct. The obligations of the Company under this Section 11.3
shall survive the exercise and the expiration of the Warrants, the termination
of this Agreement and the resignation or removal of the Warrant Agent in
respect of services or expenses incurred in connection with the Warrants or
this Agreement.
Section 11.4. No Restrictions on Actions. Nothing in this
Agreement shall be deemed to prevent the Warrant Agent and any shareholder,
director, officer or employee of the Warrant Agent from buying, selling or
dealing in any of the Warrants or other securities of the Company or becoming
pecuniarily interested in transactions in which the Company may be interested,
or contracting with or lending money to the Company or otherwise acting as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
Section 11.5. Discharge or Removal; Replacement Warrant
Agent. The Warrant Agent may resign from its position as such and be
discharged from all further duties and liabilities hereunder (except liability
arising as a result of the Warrant Agent's own gross negligence, bad faith or
willful misconduct), after giving one month's prior written notice to
<PAGE> 42
38
the Company. The Company may at any time remove the Warrant Agent upon one
month's written notice specifying the date when such discharge shall take
effect, and the Warrant Agent shall thereupon in like manner be discharged from
all further duties and liabilities hereunder, except as aforesaid. The Warrant
Agent shall mail to each Holder of a Warrant, at the Company's expense, a copy
of said notice of resignation or notice of removal, as the case may be. Upon
such resignation or removal the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of
30 days after it has been notified in writing of such resignation by the
resigning Warrant Agent or after such removal, then the resigning or removed
Warrant Agent or the Holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. After 30 days from
receipt of, or giving, notice, as the case may be, and pending appointment of a
successor to the original Warrant Agent, either by the Company or by such a
court, the duties of the Warrant Agent shall be carried out by the Company.
Any new warrant agent, whether appointed by the Company or by such a court,
shall be a bank or trust company doing business under the laws of the United
States or any state thereof, in good standing and having a combined capital and
surplus of not less than $25,000,000. The combined capital and surplus of any
such new warrant agent shall be deemed to be the combined capital and surplus
as set forth in the most recent annual report of its condition published by
such warrant agent prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the requirements of a federal
or state supervising or examining authority. After acceptance in writing of
such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; however, the original Warrant Agent shall in all events deliver and
transfer to the successor Warrant Agent all property (including, without
limitation, documents and recorded information), if any, at the time held
hereunder by the original Warrant Agent and if for any reason it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning or
removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file notice thereof with the resigning or
removed Warrant Agent and shall forthwith cause a copy of such notice to be
mailed by the successor Warrant Agent to each Holder of a Warrant. Failure to
give any notice provided for in this Section 11.5, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be.
No Warrant Agent hereunder shall be liable for any acts or omissions of any
successor Warrant Agent.
Section 11.6. Successor Warrant Agent. Any corporation into
which the Warrant Agent or any new warrant agent may be merged or converted, or
any corporation resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency
<PAGE> 43
39
business of the Warrant Agent, shall be a successor Warrant Agent under this
Agreement without any further act, provided that such corporation would be
eligible for appointment as successor to the Warrant Agent under the provisions
of Section 11.5 hereof. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to each Holder of a
Warrant.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent. The
Warrant Agent shall not be required to pay interest on any monies deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any monies, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the
purpose for which such monies, securities or other property shall have been
deposited; but such monies, securities or other property need not be segregated
from other funds, securities or other property except to the extent required by
law. Any monies, securities or other property deposited with the Warrant Agent
for payment or distribution to the Holders that remains unclaimed for one year
after the date the monies, securities or other property was deposited with the
Warrant Agent shall be delivered to the Company upon its request therefor.
Section 12.2. Payment of Taxes. Subject to Article VI
hereof, all Common Shares issuable upon the exercise of Warrants shall be
validly issued, fully paid and not subject to any calls for funds, and the
Company shall pay any taxes and other governmental charges that may be imposed
under the laws of the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery thereof
upon exercise of Warrants (other than income taxes imposed on the Holders).
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company
shall not be required to issue any share certificate or pay any cash until such
tax or charge has been paid or it has been established to the Warrant Agent's
and the Company's satisfaction that no such tax or charge is due.
Section 12.3. No Merger, Consolidation or Sale of Assets of
the Company. Except as otherwise provided herein, the Company will not merge
into or consolidate with
<PAGE> 44
40
any other Person, or sell or otherwise transfer its property, assets and
business substantially as an entirety to a successor of the Company, unless the
Person resulting from such merger or consolidation, or such successor of the
Company, shall expressly assume, by supplemental agreement satisfactory in form
to the Warrant Agent and executed and delivered to the Warrant Agent, the due
and punctual performance and observance of each and every covenant and
condition of this Agreement or contained in the Warrants to be performed and
observed by the Company.
Section 12.4. Reports to Holders. At all times from and
after the earlier of (i) the Separation Date and (ii) September 6, 1997, in
either case, whether or not the Company is then required to file reports with
the Commission, the Company shall file with the Commission all such reports and
other information it would be required to file with the Commission by Section
13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company
shall supply the Warrant Agent and each Holder or shall supply to the Warrant
Agent for forwarding to each such Holder, without cost to such Holder, copies
of such reports and other information. The Warrant Agent's receipt of such
reports and other information shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Warrant Agent is entitled to rely exclusively on Officers'
Certificates). In addition, at all times prior to the earlier of the
Separation Date and September 6, 1997, the Company shall, at its cost, deliver
to each Holder quarterly and annual reports substantially equivalent to those
which would be required by the Exchange Act. In addition, at all times, upon
the request of any Holder or any prospective purchaser of the Warrants
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
Section 12.5. Notices; Payment. (a) Except as otherwise
provided in Section 12.5(b) hereof, any notice, demand or delivery authorized
by this Agreement shall be sufficiently given or made when mailed, if sent by
first class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Attention: Heng-Pin Kiang
<PAGE> 45
41
To the Warrant Agent:
The Bank of New York
101 Barclay Street,
21 West
New York, NY 10286
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or
making such notice, demand or delivery. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given
when mailed, whether or not the Holder receives the notice.
(b) Payment of the Exercise Price should be made in
accordance with the provisions of this Agreement at the office of the Warrant
Agent set forth above.
(c) Any notice required to be given by the Company to the
Holders shall be made by mailing by registered mail, return receipt requested,
to the Holders at their last known addresses appearing on the register
maintained by the Warrant Agent. The Company hereby irrevocably authorizes the
Warrant Agent, in the name and at the expense of the Company, to mail any such
notice upon receipt thereof from the Company. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given
when mailed, whether or not the Holder receives the notice.
Section 12.6. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the Warrant Agent and
their respective successors and assigns, and the Holders from time to time of
the Warrants. Nothing in this Agreement is intended or shall be construed to
confer upon any Person, other than the Company, the Warrant Agent and the
Holders of the Warrants, any right, remedy or claim under or by reason of this
Agreement or any part hereof.
Section 12.7. Counterparts. This Agreement may be executed
manually or by facsimile in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument.
Section 12.8. Amendments. The Warrant Agent may, without the
consent or concurrence of the Holders of the Warrants, by supplemental
agreement or otherwise, join with the Company in making any changes or
corrections in this Agreement that (a) are required to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained or (b) add to the covenants and agreements
of the Company in this Agreement further covenants and agreements of the
Company thereafter to be observed, or surrender any rights or power reserved to
or
<PAGE> 46
42
conferred upon the Company in this Agreement; provided that in either case such
changes or corrections do not and will not adversely affect, alter or change
the rights, privileges or immunities of the Holders of Warrants. Upon the
Warrant Agent's request, the Company shall promptly provide an Officer's
Certificate and Opinion of Counsel which provide all conditions precedent to
adoption of an amendment that have been satisfied.
Section 12.9. Headings. The descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 12.10. Common Shares Legend. Unless and until the
Common Shares issuable upon the exercise of the Warrants are registered under
the Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(d), IF APPLICABLE, UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO MCCAW
INTERNATIONAL, LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
<PAGE> 47
43
FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRANSFER AGENT AND
REGISTRAR AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS
A PROVISION REQUIRING THE TRANSFER AGENT AND REGISTRAR TO REFUSE TO
REGISTER ANY TRANSFER OF THE SHARES OF COMMON STOCK REPRESENTED BY
THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Section 12.11. Third Party Beneficiaries. The Holders shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and
<PAGE> 48
44
the Warrant Agent, on the other hand, and each Holder shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders
hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations
may be applicable to such Holder.
Section 12.12. Termination. Except as otherwise specified
herein, this Agreement shall terminate at 5:00 p.m. (New York City time) on the
tenth anniversary of the Closing Date. Notwithstanding the foregoing, this
Agreement shall terminate on any earlier date as of which all Warrants have
been exercised.
Section 12.13. Right of First Opportunity Agreement. The
Company agrees not to amend the Right of First Opportunity Agreement in any
respect material and adverse to the Holders of the Warrants. If the Company
proposes to amend the Right of First Opportunity Agreement, it shall notify the
Warrant Agent in writing 30 days prior to the effectiveness of such amendment
of such proposal to amend and such notice shall include a written copy of the
contents of such proposed amendment (the "Right of First Opportunity Notice").
Within five days of receipt of a Right of First Opportunity Notice,
the Warrant Agent shall give written notice to the Holders of the Right of
First Opportunity Notice. Such notice by the Warrant Agent shall include a
copy of the Right of First Opportunity Notice.
Section 12.14. Governing Law. This Agreement shall be
governed by the laws of the State of New York.
<PAGE> 49
45
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed, as of the day and year first above written.
MCCAW INTERNATIONAL, LTD.
By: /s/ KEITH GRINSTEIN
-------------------------------
Name: Keith Grinstein
Title: President
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
-------------------------------
Name: Mary Jane Morrissey
Title: Vice President
<PAGE> 50
EXHIBIT A
FORM OF WARRANT CERTIFICATE
MCCAW INTERNATIONAL, LTD.
[CUSIP] [CINS] [ISIN] No. _____
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns,
is the owner of ___________ Warrants, each of which represents the right to
purchase, after March 6, 1998, from MCCAW INTERNATIONAL, LTD., a Washington
corporation (the "Company"), 0.10616 common shares, without par value, of the
Company (the "Common Shares") at an exercise price (the "Exercise Price") of
$36.45 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office
of The Bank of New York, or to its successor, as the warrant agent under the
Warrant Agreement (any such warrant agent being herein called the "Warrant
Agent"), with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full by
wire transfer or by certified or official bank or bank cashier's check payable
to the order of the Company. Notwithstanding the foregoing, if the Common
Shares (or other securities) issuable upon exercise of the Warrants are
registered under the Exchange Act, the Exercise Price may be paid by
surrendering additional Warrants to the Warrant Agent having an aggregate
Spread equal to the aggregate Exercise Price of the Warrants being exercised.
At any time after one year after the Closing Date and on or before the
Expiration Date, any outstanding Warrants may be exercised on any Business Day;
provided that the Warrant Registration Statement is, at the time of exercise,
effective and available for the exercise of Warrants or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of March 6, 1997 (the "Warrant Agreement"),
between the Company and The Bank of New York and a Registration Rights
Agreement dated as of March 3, 1997 (the "Warrant Registration Rights
Agreement"), between the Company and The Bank of New York, as Warrant Agent,
and is subject to the Articles of Incorporation and Bylaws of the Company and
to the terms and provisions contained therein, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The terms of the Warrant Agreement and the Warrant Registration
Rights Agreement are hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement and the Warrant
Registration Rights Agreement for a full description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Company and the
Holders of the Warrants. The summary of the terms of the Warrant
<PAGE> 51
A-2
Agreement and the Warrant Registration Rights Agreement contained in this
Warrant Certificate is qualified in its entirety by express reference to the
Warrant Agreement and the Warrant Registration Rights Agreement. All terms
used in this Warrant Certificate that are defined in the Warrant Agreement and
the Warrant Registration Rights Agreement shall have the meanings assigned to
them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration
Rights Agreement are on file at the office of the Warrant Agent and may be
obtained by writing to the Warrant Agent at the following address:
The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
Attention: Corporate Trust Administration
A "Repurchase Event", as defined in the Warrant Agreement,
shall be deemed to occur on any date when the Company consolidates with or
merges into or with (but only where holders of the Common Stock receive
consideration in exchange for all or part of such Common Stock), or sells all
or substantially all of its assets to, another Person which does not have a
class of equity securities registered under the Exchange Act or a wholly owned
subsidiary of such Person, if the consideration for such transaction does not
consist solely of cash or such merger or consolidation is not effected solely
for the purpose of changing the Company's state of incorporation.
Following a Repurchase Event, the Company must make an offer to
repurchase for cash all outstanding Warrants (a "Repurchase Offer"). If the
Company makes a Repurchase Offer, Holders may, until the expiration date of
such offer, surrender all or part of their Warrants for repurchase by the
Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement,
be repurchased by the Company at a price in cash (the "Repurchase Price") equal
to the value on the Valuation Date relating thereto of the Common Shares and
other securities or property of the Company which would have been delivered
upon exercise of the Warrants had the Warrants been exercised, less the
Exercise Price (whether or not the Warrants are then exercisable). The value
of such Common Shares and other securities will be (i) if the Common Shares (or
other securities) are registered under the Exchange Act, determined based upon
the average of the daily market prices (as determined pursuant to Section
3.4(d)(ii)(1) of the Warrant Agreement) of the Common Shares (or other
securities) for the 20 consecutive trading days immediately preceding such
Valuation Date or (ii) if the Common Shares (or other securities)
<PAGE> 52
A-3
are not registered under the Exchange Act or if the value cannot be computed
under clause (i) above, determined by the Independent Financial Expert (as
defined in the Warrant Agreement), in each case as set forth in the Warrant
Agreement.
The "Valuation Date" as defined in the Warrant Agreement shall
be deemed to occur on the date five Business Days prior to the date notice of
the Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a
rate per annum of 13% from the date of the Default to the date of payment,
which interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells
all or substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of
each Warrant and the price per share are subject to adjustment as provided in
the Warrant Agreement. Except as stated in the immediately preceding
paragraph, in the event the Company merges or consolidates with, or sells all
or substantially all of its assets to, another Person, each Warrant will, upon
exercise, entitle the Holder thereof to receive the number of shares of capital
stock or other securities or the amount of money and other property which the
holder of an Common Share (or other securities or property issuable upon
exercise of a Warrant) is entitled to receive upon completion of such merger,
consolidation or sale.
As to any final fraction of a share which the same Holder of
one or more Warrant Certificates would otherwise be entitled to purchase upon
exercise thereof in the same transaction, the Company may pay the cash value
thereof determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all Common
Shares issuable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company
shall pay any taxes and other governmental charges that may be imposed under
the laws of the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery thereof
<PAGE> 53
A-4
upon exercise of Warrants (other than income taxes imposed on the Holders).
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company
shall not be required to issue any share certificate or pay any cash until such
tax or charge has been paid or it has been established to the Warrant Agent's
and the Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set
forth in Article VIII of the Warrant Agreement, this Warrant Certificate and
all rights hereunder are transferable by the registered Holder hereof, in whole
or in part, on the register of the Company maintained by the Warrant Agent for
such purpose at the Warrant Agent's office in New York, New York, upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Warrant Agent duly executed, with signatures guaranteed as specified in the
attached Form of Assignment, by the registered Holder hereof or his attorney
duly authorized in writing and by such other documentation required pursuant to
the Warrant Agreement and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will sign and issue and the Warrant Agent will countersign and deliver
to such Holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred. Each taker and Holder of this Warrant Certificate,
by taking and holding the same, consents and agrees that prior to the
registration of transfer as provided in the Warrant Agreement, the Company and
the Warrant Agent may treat the person in whose name the Warrants are
registered as the absolute owner hereof for any purpose and as the Person
entitled to exercise the rights represented hereby, any notice to the contrary
notwithstanding. Accordingly, the Company and/or the Warrant Agent shall not,
except as ordered by a court of competent jurisdiction as required by law, be
bound to recognize any equitable or other claim to or interest in the Warrants
on the part of any person other than such Registered Holder, whether or not it
shall have express or other notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any
rights of a shareholder of the Company, including, without limitation, the
right to vote or to consent to any action of the shareholders, to receive any
distributions, to exercise any pre-emptive right or to receive any
<PAGE> 54
A-5
notice of meetings of shareholders, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided in the Warrant
Agreement.
This Warrant Certificate shall be void and all rights
evidenced hereby shall cease on March 6, 2007, unless sooner terminated by the
liquidation, dissolution or winding-up of the Company or as otherwise provided
in the Warrant Agreement upon the consolidation or merger of the Company with,
or sale of the Company to, another Person or unless such date is extended as
provided in the Warrant Agreement.
<PAGE> 55
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
MCCAW INTERNATIONAL, LTD.
By: _________________________
Name:
Title:
Dated:
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By: ________________________
Authorized Signatory
<PAGE> 56
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Bank of New York,
as Warrant Agent
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being by wire transfer or by certified or official bank or bank
cashier's check payable to the order or at the direction of McCaw
International, Ltd. or, if the Common Shares (or other securities) issuable
upon exercise of the Warrants are registered under the Exchange Act, the
exercise price may be paid by surrendering additional Warrants to the Warrant
Agent having an aggregate Spread equal to the aggregate exercise price of the
Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the Common shares, without par value, of McCaw International, Ltd.
(the "Common Shares") deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
Check One
[ ] (a) (i) it is not a U.S. person (as defined in Rule 902
of Regulation S under the Securities Act) and the
Warrants are not being exercised on behalf of a U.S.
person.
or
[ ] (ii) it is furnishing to the Warrant Agent a written
opinion of counsel to the effect that the Warrants and
the Common Shares issuable upon exercise of the Warrants
have been registered under the Securities Act or are
exempt from registration thereunder.
<PAGE> 57
A-8
and (b) if an opinion is not being furnished, the undersigned is located
outside the United States at the time of the exercise hereof.
Dated: _______________________________
(Signature of Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 58
A-9
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by McCaw International, Ltd.)
To:
The undersigned, having received prior notice of the
consideration for which MCCAW INTERNATIONAL, LTD. will repurchase the Warrants
represented by the within Warrant Certificate, hereby surrenders this Warrant
Certificate for repurchase by MCCAW INTERNATIONAL, LTD. of the number of
Warrants specified below for the consideration set forth in such notice.
Dated: _________________________
(Number of Warrants)
_________________________
(Signature of Owner)
_________________________
(Street Address)
_________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_________________________
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 59
A-10
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration
received from the Assignee(s) named below, the undersigned registered Holder of
this Warrant Certificate hereby sells, assigns, and transfers unto the
Assignee(s) named below (including the undersigned with respect to any Warrants
constituting a part of the Warrants evidenced by this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s): ___________________________________
Address: __________________________________________________
No. of Warrants: ___________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT UNLEGENDED
REGULATION S GLOBAL WARRANTS AND UNLEGENDED OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the
exemption from registration under the U.S. Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and
the Warrant Agreement.
or
<PAGE> 60
A-11
[ ] (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement
shall have been satisfied.
Dated: _________________________
(Signature of Owner)
_________________________
(Street Address)
_________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
the Warrant(s) for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the U.S.
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding McCaw International, Ltd. as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:________________
_____________________________________________
[NOTE: To be executed by an executive officer]
<PAGE> 61
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: McCaw International, Ltd.
(the "Company") Warrants to Purchase
Common Shares (the "Warrants")
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants,
we hereby certify that such sale has been effected pursuant to and in
accordance with Regulation S under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the
United States and not to a U.S. Person (as defined in Regulation S
under the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United
States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulations S under the Securities Act) have been made by
us, any of our affiliates or any persons acting on our behalf in
the United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, as
applicable; and
<PAGE> 62
B-2
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _________________________
Authorized Signature
<PAGE> 63
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of McCaw International, Ltd. (the "Company")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in
compliance with the transfer restrictions applicable to the Warrants or
interests therein transferred pursuant to and in accordance with the Securities
Act, and accordingly we hereby further certifies that (check one):
(a) [ ] such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act; or
(b) [ ] such transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such transfer is being effected pursuant to an
effective registration statement under the Securities Act;
or
<PAGE> 64
C1-2
(d) [ ] such transfer is being effected pursuant to an
exemption from the registration requirements of the Securities Act other than
Rule 144A, Rule 144 or Rule 904, and we hereby further certify that such
transfer complies with the transfer restrictions applicable to the Warrants or
interests therein transferred to Institutional Accredited Investors and in
accordance with the requirements of the exemption claimed, which certification
is supported by an Opinion of Counsel provided by us or the transferee (a copy
of which we have attached to this certification), to the effect that such
transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred Warrants or interests therein will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI
Certificated Warrant and in the Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By: ______________________________
Authorized Signatory
<PAGE> 65
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of
McCaw International, Ltd. (the "Company")
Dear Sirs:
In connection with our proposed purchase of ___________
aggregate number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the
Warrants, any interest therein or the Common Shares issuable upon
exercise of any Warrant (the "Warrant Shares") is subject to certain
restrictions and conditions set forth in the Warrant Agreement dated as
of March 6, 1997 relating to the Warrants (the "Warrant Agreement") and
the Warrant Registration Rights Agreement dated March 3, 1997 relating
to the Warrants (the "Warrant Registration Rights Agreement") and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Warrants or Warrant Shares except in compliance
with, such restrictions and conditions and the U.S. Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the Warrants represented by this
Warrant Certificate and, as of the date this Warrant Certificate was
originally issued, the Warrant Shares have not been registered under the
Securities Act, and accordingly may not be offered, sold, pledged or
otherwise transferred within the United States or to, or for the account
or benefit of, U.S. Persons except as set forth in the following
sentence. We agree
<PAGE> 66
C2-2
that we will not, within the time period referred to under Rule 144(k)
of the Securities Act (taking into account the provisions of Rule 144(d)
under the Securities Act, if applicable) under the Securities Act as in
effect on the date of the transfer of this Warrant, resell or otherwise
transfer the Warrants represented by this Warrant Certificate except (a)
to McCaw International, Ltd. or any subsidiary thereof, (b) to a
qualified institutional buyer in compliance with Rule 144A under the
Securities Act, (c) outside the United States in an offshore transaction
in compliance with Rule 904 under the Securities Act, (d) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act (if available), (e) to an institutional accredited
investor that, prior to such transfer, furnishes to you, to the Company
and, in the case of the Warrant Shares, to the transfer agent and
registrar therefor, a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Warrants
represented by this Warrant Certificate (the form of which letter can be
obtained from the Warrant Agent) and an opinion of counsel acceptable to
McCaw International, Ltd. and its counsel that such transfer is in
compliance with the Securities Act or (f) pursuant to an effective
registration statement under the Securities Act and, in each case, in
accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any
Warrants, any interest therein or Warrant Shares, we will be required to
furnish to you and the Company such certifications, legal opinions and
other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Warrants purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
our investment in the Warrants, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment
for an indefinite period of time.
5. We are acquiring the Warrants purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You, the Company and, if applicable, the transfer agent and
registrar for the Warrant Shares are entitled to rely upon this letter and are
irrevocably authorized to produce
<PAGE> 67
C2-3
this letter or a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters covered
hereby.
Very truly yours,
[Name of Transferee]
By: ______________________________
Authorized Signature
<PAGE> 68
EXHIBIT D
Form of Certificate
_______________, ____
The Bank of New York
101 Barclay Street
New York, NY 10286
Attention: Corporate Trust Administration
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
Re: Warrants to Purchase Common Shares of
McCaw International, Ltd. (the "Company")
Dear Sirs:
This letter relates to _______________ Warrants represented by a Warrant
Certificate (the "Legended Warrants") which bears a legend outlining
restrictions upon transfer of such Legended Warrants. Pursuant to Section 2.1
of the Warrant Agreement dated as of March 6, 1997 (the "Warrant Agreement")
relating to the Warrants, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Warrants could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933. Accordingly, you are
hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical number of Warrants, all in the manner
provided for in the Warrant Agreement.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ______________________________
Authorized Signature
<PAGE> 69
APPENDIX A
LIST OF FINANCIAL EXPERTS
Alex. Brown & Sons
Bear, Stearns & Co., Inc.
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
Lehman Brothers
<PAGE> 1
EXHIBIT 10.26 - FORM 1
EXHIBIT B
================================================================================
- --------------------------------------------------------------------------------
OPTION AGREEMENT
(FIRST TRANCHE)
by and between
Digital Radio, L.L.C.
and
Nextel Communications, Inc.
Dated as of __________ __, 1995
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. GRANT OF OPTION. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Grant. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Shares To Be Issued; Reservation of Shares. . . . . 2
2. ADJUSTMENTS TO OPTION RIGHTS. . . . . . . . . . . . . . . . 2
2.1 Stock Combinations. . . . . . . . . . . . . . . . . 2
2.2 Reorganizations. . . . . . . . . . . . . . . . . . 2
2.3 Adjustment Upon Changes in Capitalization. . . . . 3
2.4 Notice. . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Fractional Interests. . . . . . . . . . . . . . . . 4
3. EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Exercise of Option. . . . . . . . . . . . . . . . . 4
3.2 Issuance of Option Shares. . . . . . . . . . . . . 4
4. NO DILUTION OR IMPAIRMENT. . . . . . . . . . . . . . . . . . 5
5. RIGHTS OF HOLDER . . . . . . . . . . . . . . . . . . . . . . 5
6. TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . 5
7. LEGEND ON OPTION SHARES. . . . . . . . . . . . . . . . . . . 5
8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 5
8.1 Amendments. . . . . . . . . . . . . . . . . . . . . 5
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . 6
8.3 Waiver By Consent . . . . . . . . . . . . . . . . . 6
8.4 No Implied Waiver; Rights Are Cumulative . . . . . 7
8.5 Governing Law . . . . . . . . . . . . . . . . . . . 7
8.6 Severability . . . . . . . . . . . . . . . . . . . 7
8.7 Captions . . . . . . . . . . . . . . . . . . . . . 7
8.8 Entire Agreement . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER, AND FURTHER PROVIDED THAT SUCH TRANSFER
IS EFFECTED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 6 HEREIN.
OPTION AGREEMENT
(First Tranche)
This OPTION AGREEMENT (the "Option") is being entered into
this __th day of _______, 1995, by and between Nextel Communications, Inc., a
Delaware corporation (the "Company") and Digital Radio, L.L.C., a Washington
limited liability company ("Buyer"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement (as defined below).
RECITALS
A. The Company and Buyer have entered into a Securities
Purchase Agreement dated as of April 4, 1995 (the "Securities Purchase
Agreement") pursuant to which, among other things, the Company agreed to sell
and Buyer agreed to purchase certain shares of the Company's Class A
Convertible Redeemable Preferred Stock and Class B Convertible Preferred Stock
on the Closing Date (as defined in the Securities Purchase Agreement).
B. Pursuant to the Securities Purchase Agreement, the Company
has agreed to grant to Buyer on the Closing Date three options to purchase
shares of the Company's Class A Common Stock, par value $.001 per share (the
"Common Stock"), on the terms set forth in the Securities Purchase Agreement,
this Option, the Second Option and the Third Option.
NOW, THEREFORE, for the consideration set forth in the
Securities Purchase Agreement and other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Company agrees
with Buyer as follows:
1. GRANT OF OPTION.
1.1 GRANT. The Company hereby grants to Buyer this Option,
exercisable as provided herein in whole or in part at any time and from time to
time during the period from the date hereof through 6:00 p.m., local time in
New York, New York, on the
<PAGE> 4
second anniversary of the Closing Date (the "Exercise Period") to purchase an
aggregate of up to Fifteen Million (15,000,000) shares of Common Stock (as such
number may be adjusted pursuant to Section 2 hereof, the "Option Shares"), at
an exercise price of $15.50 per share (as such price may be adjusted pursuant
to Section 2 hereof, the "Exercise Price"). Buyer and its permitted successors
and assigns are hereinafter referred to as "Holder."
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company
covenants and agrees that all Option Shares will, upon issuance, be duly
authorized, validly issued and outstanding, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issuance thereof,
except as otherwise provided in the Securities Purchase Agreement. The Company
further covenants and agrees that it will from time to time take all actions
required to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Exercise Price. The Company further
covenants and agrees that, during the Exercise Period, the Company will at all
times have authorized and reserved sufficient shares of Common Stock to provide
for the exercise of this Option in full.
2. ADJUSTMENTS TO OPTION RIGHTS.
2.1 STOCK COMBINATIONS. In case the Company shall combine
all of the outstanding Common Stock proportionately into a smaller number of
shares, the Exercise Price per Option Share hereunder in effect immediately
prior to such combination shall be proportionately increased and the number of
Option Shares issuable to the Holder upon exercise of this Option shall be
proportionately decreased, as of the effective date of such combination.
2.2 REORGANIZATIONS. If any of the following transactions
(each, a "Special Transaction") shall become effective: (i) a capital
reorganization or reclassification of the capital stock of the Company, (ii) a
consolidation or merger of the Company with another entity or (iii) a sale or
conveyance of all or substantially all of the Company's assets, then, as a
condition of any such Special Transaction, lawful and adequate provision shall
be made whereby the Holder shall thereafter have the right to purchase and
receive, at any time after the consummation of such transaction until the
expiration of the Exercise Period, upon the basis and upon the terms and
conditions specified herein, and in lieu of the Option Shares immediately
theretofore issuable upon exercise of this Option for the aggregate Exercise
Price in effect immediately prior to such consummation, such shares of stock,
other securities, cash or other assets as may be issued or payable in and
pursuant to the terms of such Special Transaction with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of Option Shares immediately theretofore issuable upon exercise in full of this
Option had such Special Transaction not taken place (pro rated in the case of
any partial exercises). In
- 2 -
<PAGE> 5
connection with any Special Transaction, appropriate provision shall be made
with respect to the rights and interests of the Holder to the end that the
provisions of this Option (including without limitation provisions for
adjustment of the Exercise Price and the number of Option Shares issuable upon
the exercise of the Option), shall thereafter be applicable, as nearly as may
be, to any shares of stock, other securities, cash or other assets thereafter
deliverable upon the exercise of this Option. The Company shall not effect any
Special Transaction unless prior to or simultaneously with the closing the
successor entity (if other than the Company), if any, resulting from such
consolidation or merger or the entity acquiring such assets shall assume by a
written instrument executed and mailed by certified mail or delivered to the
Holder at the address of the Holder appearing on the books of the Company, the
obligation of the Company or such successor corporation to deliver to such
Holder such shares of stock, securities, cash or other assets as, in accordance
with the foregoing provisions, such Holder has rights to purchase.
2.3 ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event
of any change in the Common Stock by reason of stock dividends, stock splits,
recapitalizations, reclassifications or the like, the type and number of Option
Shares issuable upon exercise of this Option, and the Exercise Price, as the
case may be, shall be adjusted appropriately, immediately upon such change. No
such adjustment shall be made on account of any dividend payable other than in
stock of the Company.
2.4 NOTICE. Whenever this Option, the Option Shares or the
Exercise Price is to be adjusted as provided herein or a dividend or
distribution (in cash, stock or otherwise and including, without limitation,
any liquidating distributions) is to be declared by the Company, or a Special
Transaction is deemed by the Company to be substantially certain to occur
(other than a Special Transaction in which the Company is the surviving entity
and which would not require the execution of a written instrument pursuant to
Section 2.2 above), the Company shall forthwith cause to be sent to the Holder
at the last address of the Holder shown on the books of the Company, by
first-class mail, postage prepaid, at least ten (10) days prior to the record
date specified in (A) below or at least twenty (20) days before the date
specified in (B) below, a notice stating in reasonable detail the facts
requiring such adjustment and the calculation thereof, if applicable, and
stating (if applicable):
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined (provided, that
in the event the Company institutes a policy of declaring cash dividends on a
periodic basis, the Company need only provide the relevant information called
for in this clause (A) with respect to the
- 3 -
<PAGE> 6
first cash dividend payment to be made pursuant to such policy and thereafter
provide only notice of any changes in the amount or the frequency of any
subsequent dividend payments), or
(B) the date on which a Special Transaction is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon consummation of
the Special Transaction.
2.5 FRACTIONAL INTERESTS. This Option may be exercised only
for a whole number of shares of Common Stock, other than any fraction of a
share of Common Stock which would result upon this Option being exercised in
full; provided, however that the Company shall not be required to issue
fractions of shares of Common Stock on the exercise in full of this Option. If
any fraction of a share of Common Stock would, except for the provisions of
this Section 2.5, be issuable upon the exercise in full of this Option, the
Company may (in lieu of issuing such fractional share) either (A) purchase such
fraction for an amount in cash equal to the current value of such fraction,
computed (i) if the Common Stock shall be listed or admitted to unlisted
trading privileges on the NASDAQ National Market System or any securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed
or admitted to unlisted trading privileges on more than one such exchange, on
the basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (ii) if the Common Stock
shall not be so listed or admitted to unlisted trading privileges, on the basis
of the last bid price, or if there is no reported last bid, the average of the
bid prices, for the Common Stock on the last business day prior to the date of
exercise, as reported by the National Association of Securities Dealers
Automated Quotation System or any successor thereto, or, if such computations
cannot be made as aforesaid, as the Board of Directors of the Company may in
good faith determine or (B) issue a number of whole shares determined by
rounding up to the nearest whole share.
3. EXERCISE.
3.1 EXERCISE OF OPTION. The Holder may exercise this Option
by (i) surrendering this Option, with the form of exercise notice attached
hereto as Exhibit "A" duly executed by Holder, and (ii) making payment to the
Company of the aggregate Exercise Price for the applicable Option Shares by
wire transfer to an account designated by the Company. Upon any partial
exercise of this Option, the Company, at its expense, shall forthwith issue to
the Holder for its surrendered option a replacement Option identical in all
respects to this Option, except that the number of Option Shares shall be
reduced accordingly.
- 4 -
<PAGE> 7
3.2 ISSUANCE OF OPTION SHARES. The Option Shares purchased
shall be issued to the Holder exercising this Option as of the close of
business on the date on which all actions and payments required to be taken or
made by Holder, pursuant to Section 3.1, shall have been so taken or made.
Certificates for the Option Shares so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) days after this Option
is surrendered.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its Certificate of Incorporation or Bylaws or through
reorganization, reclassification, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Option, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Option above the
Exercise Price, and at all times will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock upon the exercise of this
Option. In the event of actions, other than those specified herein, affecting
adversely the rights of the Holder, the Board of Directors of the Company shall
make such adjustments as shall be equitable in the circumstances.
5. RIGHTS OF HOLDER. Holder shall not, solely by virtue of
this Option and prior to the issuance of the Option Shares upon due exercise
thereof, be entitled to any rights of a shareholder in the Company.
6. TRANSFERABILITY. Holder hereby represents and warrants
that it is acquiring this Option and, upon the exercise thereof, the Option
Shares, for investment and not with a view to resale or distribution thereof.
Holder may not sell, assign, transfer or otherwise dispose of this Option,
except in accordance with the terms of the Securities Purchase Agreement.
Subject to compliance with federal and state securities laws and with the
Securities Purchase Agreement, if applicable, the Holder may sell, assign,
transfer or otherwise dispose of any Option Shares acquired upon any exercise
hereof at any time and from time to time.
7. LEGEND ON OPTION SHARES. Certificates evidencing the
Option Shares shall bear the following legend: "The securities represented by
this certificate have not been registered under the Securities Act of 1933 of
the United States of America. They may not be sold, offered for sale, pledged
or hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of
- 5 -
<PAGE> 8
counsel reasonably satisfactory to the Company and its counsel that such
registration is not required." Such certificates also shall be legended as
appropriate to reflect any and all restrictions on transfer of such Option
Shares that are contained in any of the Transaction Agreements.
8. MISCELLANEOUS.
8.1 AMENDMENTS. The parties may, from time to time, enter
into written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Option or changing in any manner the rights of
either of the parties hereunder. No amendment, supplement or modification
shall be binding on either party unless made in writing and signed by a duly
authorized representative of each party and effected in compliance with Section
11.4 of the Securities Purchase Agreement, if applicable.
8.2 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand or by courier, or by certified mail, or, when
transmitted by facsimile and a confirmation of transmission printed by sender's
facsimile machine. A copy of any notice given by facsimile also shall be
mailed, postage prepaid, to the addressee. Notices to the respective parties
hereto shall be addressed as follows:
(i) If to the Company:
Nextel Communications, Inc.
201 Route 17 North
Rutherford, NJ 07070
Attention: Thomas D. Hickey,
Assistant General Counsel
Telecopier: (201) 438-5540
with a copy to:
Jeanne M. Rickert, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Telecopier: (216) 579-0212
(ii) If to the Buyer:
Digital Radio, L.L.C.
2320 Carillon Point
Kirtland, WA 94104-2675
Attention: Dennis Weibling, Esq.
Telecopier: (201) 828-8060
- 6 -
<PAGE> 9
with a copy to:
C. James Judson, Esq.
Digital Radio, L.L.C.
2320 Carillon Point
Kirtland, WA 94104-2675
Telecopier: (206) 828-8060
and:
Bruce Alan Mann, Esq.
Morrison & Foerster
345 California Street
San Francisco, CA 94104
Telecopier: (415) 677-7522
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
8.3 WAIVER BY CONSENT. The Holder may execute and deliver to
the Company a written instrument waiving, on such terms and conditions as the
Holder may specify in such instrument, any of the requirements of this Option
otherwise imposed on the Company.
8.4 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to
exercise or the delay in exercising by either party of any right, remedy, power
or privilege under this Option, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, power or privilege under this
Option shall not preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
8.5 GOVERNING LAW. This Option and rights and obligations of
the parties hereunder shall be governed by, construed and interpreted in
accordance with the laws of the State of Delaware applicable to agreements
executed by residents of that state, and fully to be performed, in that state.
8.6 SEVERABILITY. If any provision of this Option is found
to be unenforceable for any reason whatsoever, such provision shall be deemed
null and void to the extent of such unenforceability but shall be deemed
separable from and shall not invalidate any other provision of this Option.
8.7 CAPTIONS. Captions to the various paragraphs of this
Agreement are provided for convenience only and shall not be used to construe
the provisions of this Option.
- 7 -
<PAGE> 10
8.8 ENTIRE AGREEMENT. This Option and such portions of other
Transaction Agreements as are relevant to this Option constitutes the entire
understanding of the parties with respect to the subject matter of the Option
and supersedes all prior discussions, agreements and representations, whether
oral or written, concerning the subject matter hereof and whether or not
executed by Buyer and the Company.
- 8 -
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DIGITAL RADIO, L.L.C.
By:
---------------------------
Name:
Title:
NEXTEL COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
- 9 -
<PAGE> 12
EXHIBIT "A"
[To be signed only upon exercise of Option]
To Nextel Communications, Inc.:
The undersigned, the Holder of the within Option, hereby
irrevocably elects to exercise the purchase right represented by such Option
for, and to purchase thereunder, _____________ shares of the Class A Common
Stock of Nextel Communications, Inc. and herewith makes payment of $___________
thereof or, and requests that the certificates for such shares be issued in the
name of, and be delivered to, ______________ whose address is
___________________________.
Dated:
- ----------------------------
----------------------------------------
(Signature must conform in all respects
to name of Holder as
specified on the face of the
Option)
----------------------------------------
Address
- 10 -
<PAGE> 13
EXHIBIT 10.26 - FORM 2
EXHIBIT C
================================================================================
- --------------------------------------------------------------------------------
OPTION AGREEMENT
(SECOND TRANCHE)
by and between
Digital Radio, L.L.C.
and
Nextel Communications, Inc.
Dated as of __________ __, 1995
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. GRANT OF OPTION. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Grant. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Shares To Be Issued; Reservation of Shares. . . . . 2
2. ADJUSTMENTS TO OPTION RIGHTS. . . . . . . . . . . . . . . . 2
2.1 Stock Combinations. . . . . . . . . . . . . . . . . 2
2.2 Reorganizations. . . . . . . . . . . . . . . . . . 2
2.3 Adjustment Upon Changes in Capitalization. . . . . 3
2.4 Notice. . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Fractional Interests. . . . . . . . . . . . . . . . 4
3. EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Exercise of Option. . . . . . . . . . . . . . . . . 4
3.2 Issuance of Option Shares. . . . . . . . . . . . . 5
4. NO DILUTION OR IMPAIRMENT. . . . . . . . . . . . . . . . . . 5
5. RIGHTS OF HOLDER . . . . . . . . . . . . . . . . . . . . . . 5
6. TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . 5
7. LEGEND ON OPTION SHARES. . . . . . . . . . . . . . . . . . . 5
8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 6
8.1 Amendments. . . . . . . . . . . . . . . . . . . . . 6
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . 6
8.3 Waiver By Consent . . . . . . . . . . . . . . . . . 7
8.4 No Implied Waiver; Rights Are Cumulative . . . . . 7
8.5 Governing Law . . . . . . . . . . . . . . . . . . . 7
8.6 Severability . . . . . . . . . . . . . . . . . . . 7
8.7 Captions . . . . . . . . . . . . . . . . . . . . . 7
8.8 Entire Agreement . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 15
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER, AND FURTHER PROVIDED THAT SUCH TRANSFER
IS EFFECTED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 6 HEREIN.
OPTION AGREEMENT
(Second Tranche)
This OPTION AGREEMENT (the "Option") is being entered into
this __th day of _______, 1995, by and between Nextel Communications, Inc., a
Delaware corporation (the "Company") and Digital Radio, L.L.C., a Washington
limited liability company ("Buyer"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement (as defined below).
RECITALS
A. The Company and Buyer have entered into a Securities
Purchase Agreement dated as of April 4, 1995 (the "Securities Purchase
Agreement") pursuant to which, among other things, the Company agreed to sell
and Buyer agreed to purchase certain shares of the Company's Class A
Convertible Redeemable Preferred Stock and Class B Convertible Redeemable
Preferred Stock on the Closing Date (as defined in the Securities Purchase
Agreement).
B. Pursuant to the Securities Purchase Agreement, the Company
has agreed to grant to Buyer on the Closing Date three options to purchase
shares of the Company's Class A Common Stock, par value $.001 per share (the
"Common Stock"), on the terms set forth in the Securities Purchase Agreement,
the First Option, this Option and the Third Option.
NOW, THEREFORE, for the consideration set forth in the
Securities Purchase Agreement and other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Company agrees
with Buyer as follows:
1. GRANT OF OPTION.
1.1 GRANT. The Company hereby grants to Buyer this Option,
exercisable as provided herein in whole or in part at any time and from time to
time during the period from the date hereof
<PAGE> 16
through 6:00 p.m., local time in New York, New York, on the fourth anniversary
of the Closing Date (the "Exercise Period") to purchase up to an aggregate
number of shares of Common Stock equal to the aggregate number of shares of
Common Stock, not to exceed the lesser of (i) Fifteen Million (15,000,000)
shares of Common Stock (as adjusted pursuant to Section 2 hereof for all events
described therein that occur from and after the Closing Date) and (ii) the
number of shares of Common Stock that have been issued pursuant to the First
Option (as such number may be adjusted pursuant to Section 2 hereof for all
events described therein that occur from and after the date of such issuance),
at an exercise price of $18.50 per share (as adjusted pursuant to Section 2
hereof for all events described therein that occur from and after the Closing
Date, the "Exercise Price"). The aggregate number of shares of Common Stock
issuable hereunder are referred to as the "Option Shares." The Company shall
have the right to designate one or more other entities from which any or all of
the shares of Common Stock purchasable pursuant to this Option may be
purchased. Buyer and its permitted successors and assigns are hereinafter
referred to as "Holder."
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company
covenants and agrees that all Option Shares will, upon issuance, be duly
authorized, validly issued and outstanding, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issuance thereof,
except as otherwise provided in the Securities Purchase Agreement. The Company
further covenants and agrees that it will from time to time take all actions
required to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Exercise Price. The Company further
covenants and agrees that, during the Exercise Period, the Company will at all
times have authorized and reserved sufficient shares of Common Stock to provide
for the exercise of this Option in full.
2. ADJUSTMENTS TO OPTION RIGHTS.
2.1 STOCK COMBINATIONS. In case the Company shall combine
all of the outstanding Common Stock proportionately into a smaller number of
shares, the Exercise Price per Option Share hereunder in effect immediately
prior to such combination shall be proportionately increased and the number of
Option Shares issuable to the Holder upon exercise of this Option shall be
proportionately decreased, as of the effective date of such combination.
2.2 REORGANIZATIONS. If any of the following transactions
(each, a "Special Transaction") shall become effective: (i) a capital
reorganization or reclassification of the capital stock of the Company, (ii) a
consolidation or merger of the Company with another entity or (iii) a sale or
conveyance of all or substantially all of the Company's assets, then, as a
condition of any such Special Transaction, lawful and adequate provision shall
be made whereby the Holder shall thereafter have
- 2 -
<PAGE> 17
the right to purchase and receive, at any time after the consummation of such
transaction until the expiration of the Exercise Period, upon the basis and
upon the terms and conditions specified herein, and in lieu of the Option
Shares immediately theretofore issuable upon exercise of this Option for the
aggregate Exercise Price in effect immediately prior to such consummation, such
shares of stock, other securities, cash or other assets as may be issued or
payable in and pursuant to the terms of such Special Transaction with respect
to or in exchange for a number of outstanding shares of Common Stock equal to
the number of Option Shares immediately theretofore issuable upon exercise in
full of this Option had such Special Transaction not taken place (pro rated in
the case of any partial exercises). In connection with any Special
Transaction, appropriate provision shall be made with respect to the rights and
interests of the Holder to the end that the provisions of this Option
(including without limitation provisions for adjustment of the Exercise Price
and the number of Option Shares issuable upon the exercise of the Option),
shall thereafter be applicable, as nearly as may be, to any shares of stock,
other securities, cash or other assets thereafter deliverable upon the exercise
of this Option. The Company shall not effect any Special Transaction unless
prior to or simultaneously with the closing the successor entity (if other than
the Company), if any, resulting from such consolidation or merger or the entity
acquiring such assets shall assume by a written instrument executed and mailed
by certified mail or delivered to the Holder at the address of the Holder
appearing on the books of the Company, the obligation of the Company or such
successor corporation to deliver to such Holder such shares of stock,
securities, cash or other assets as, in accordance with the foregoing
provisions, such Holder has rights to purchase.
2.3 ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event
of any change in the Common Stock by reason of stock dividends, stock splits,
recapitalizations, reclassifications or the like, the type and number of Option
Shares issuable upon exercise of this Option, and the Exercise Price, as the
case may be, shall be adjusted appropriately, immediately upon such change. No
such adjustment shall be made on account of any dividend payable other than in
stock of the Company.
2.4 NOTICE. Whenever this Option, the Option Shares or the
Exercise Price is to be adjusted as provided herein or a dividend or
distribution (in cash, stock or otherwise and including, without limitation,
any liquidating distributions) is to be declared by the Company, or a Special
Transaction is deemed by the Company to be substantially certain to occur
(other than a Special Transaction in which the Company is the surviving entity
and which would not require the execution of a written instrument pursuant to
Section 2.2 above, the Company shall forthwith cause to be sent to the Holder
at the last address of the Holder shown on the books of the Company, by
first-class mail, postage prepaid, at least ten (10) days prior to the record
date
- 3 -
<PAGE> 18
specified in (A) below or at least twenty (20) days before the date specified
in (B) below, a notice stating in reasonable detail the facts requiring such
adjustment and the calculation thereof, if applicable, and stating (if
applicable):
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined (provided, that
in the event the Company institutes a policy of declaring cash dividends on a
periodic basis, the Company need only provide the relevant information called
for in this clause (A) with respect to the first cash dividend payment to be
made pursuant to such policy and thereafter provide only notice of any changes
in the amount or the frequency of any subsequent dividend payments), or
(B) the date on which a Special Transaction is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon consummation of
the Special Transaction.
2.5 FRACTIONAL INTERESTS. This Option may be exercised only
for a whole number of shares of Common Stock, other than any fraction of a
share of Common Stock which would result upon this option being exercised in
full; provided, however that the Company shall not be required to issue
fractions of shares of Common Stock on the exercise in full of this Option. If
any fraction of a share of Common Stock would, except for the provisions of
this Section 2.5, be issuable upon the exercise in full of this Option, the
Company may (in lieu of issuing such fractional share) either (A) purchase such
fraction for an amount in cash equal to the current value of such fraction,
computed (i) if the Common Stock shall be listed or admitted to unlisted
trading privileges on the NASDAQ National Market System or any securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed
or admitted to unlisted trading privileges on more than one such exchange, on
the basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (ii) if the Common Stock
shall not be so listed or admitted to unlisted trading privileges, on the basis
of the last bid price, or if there is no reported last bid, the average of the
bid prices, for the Common Stock on the last business day prior to the date of
exercise, as reported by the National Association of Securities Dealers
Automated Quotation System or any successor thereto, or, if such computations
cannot be made as aforesaid, as the Board of Directors of the Company may in
good faith determine or (B) issue a number of whole shares determined by
rounding up to the nearest whole share.
- 4 -
<PAGE> 19
3. EXERCISE.
3.1 EXERCISE OF OPTION. The Holder may exercise this Option
by (i) surrendering this Option, with the form of exercise notice attached
hereto as Exhibit "A" duly executed by Holder, and (ii) making payment to the
Company of the aggregate Exercise Price for the applicable Option Shares by
wire transfer to an account designated by the Company. Upon any partial
exercise of this Option, the Company, at its expense, shall forthwith issue to
the Holder for its surrendered option a replacement Option identical in all
respects to this Option, except that the number of Option Shares shall be
reduced accordingly.
3.2 ISSUANCE OF OPTION SHARES. The Option Shares purchased
shall be issued to the Holder exercising this Option as of the close of business
on the date on which all actions and payments required to be taken or made by
Holder, pursuant to Section 3.1, shall have been so taken or made. Certificates
for the Option Shares so purchased shall be delivered to the Holder within a
reasonable time, not exceeding ten (10) days after this Option is surrendered.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its Certificate of Incorporation or Bylaws or through
reorganization, reclassification, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Option, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against dilution or other -impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Option above the
Exercise Price, and at all times will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock upon the exercise of this
Option. In the event of actions, other than those specified herein, affecting
adversely the rights of the Holder, the Board of Directors of the Company shall
make such adjustments as shall be equitable in the circumstances.
5. RIGHTS OF HOLDER. Holder shall not, solely by virtue of
this Option and prior to the issuance of the Option Shares upon due exercise
thereof, be entitled to any rights of a shareholder in the Company.
6. TRANSFERABILITY. Holder hereby represents and warrants
that it is acquiring this Option and, upon the exercise thereof, the Option
Shares, for investment and not with a view to resale or distribution thereof.
Holder may not sell, assign, transfer or otherwise dispose of this Option,
except in accordance with the terms of the Securities Purchase Agreement.
- 5 -
<PAGE> 20
Subject to compliance with federal and state securities laws and with the
Securities Purchase Agreement, if applicable, the Holder may sell, assign,
transfer or otherwise dispose of any Option Shares acquired upon any exercise
hereof at any time and from time to time.
7. LEGEND ON OPTION SHARES. Certificates evidencing the
Option Shares shall bear the following legend: "The securities represented by
this certificate have not been registered under the Securities Act of 1933 of
the United States of America. They may not be sold, offered for sale, pledged
or hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel reasonably satisfactory to
the Company and its counsel that such registration is not required." Such
certificates also shall be legended as appropriate to reflect any and all
restrictions on transfer of such Option Shares that are contained in any of the
Transaction Agreements.
8. MISCELLANEOUS.
8.1 AMENDMENTS. The parties may, from time to time, enter
into written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Option or changing in any manner the rights of
either of the parties hereunder. No amendment, supplement or modification
shall be binding on either party unless made in writing and signed by a duly
authorized representative of each party and effected in compliance with Section
11.4 of the Securities Purchase Agreement, if applicable.
8.2 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand or by courier, or by certified mail, or, when
transmitted by facsimile and a confirmation of transmission printed by sender's
facsimile machine. A copy of any notice given by facsimile also shall be
mailed, postage prepaid, to the addressee. Notices to the respective parties
hereto shall be addressed as follows:
(i) If to the Company:
Nextel Communications, Inc.
201 Route 17 North
Rutherford, New Jersey 07070
Attention: Thomas D. Hickey
Assistant General Counsel
Telecopier: (201) 438-5540
- 6 -
<PAGE> 21
with a copy to:
Jeanne M. Rickert, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Telecopier: (216) 579-0212
(ii) If to the Buyer:
Digital Radio, L.L.C.
2320 Carillon Point
Kirkland, WA 98033
Attention: Dennis Weibling, Esq.
Telecopier: (206) 828-8060
with a copy to:
C. James Judson, Esq.
Digital Radio, L.L.C.
2320 Carillon Point
Kirtland, WA 94104-2675
Telecopier: (206) 828-8060
and:
Bruce Alan Mann, Esq.
Morrison & Foerster
345 California Street
San Francisco, CA 94104
Telecopier: (415) 677-7522
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
8.3 WAIVER BY CONSENT. The Holder may execute and deliver to
the Company a written instrument waiving, on such terms and conditions as the
Holder may specify in such instrument, any of the requirements of this Option
otherwise imposed on the Company.
8.4 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to
exercise or the delay in exercising by either party of any right, remedy, power
or privilege under this Option, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, power or privilege under this
Option shall not preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
- 7 -
<PAGE> 22
8.5 GOVERNING LAW. This Option and rights and obligations of
the parties hereunder shall be governed by, construed and interpreted in
accordance with the laws of the State of Delaware applicable to agreements
executed by residents of that state, and fully to be performed, in that state.
8.6 SEVERABILITY. If any provision of this Option is found
to be unenforceable for any reason whatsoever, such provision shall be deemed
null and void to the extent of such unenforceability but shall be deemed
separable from and shall not invalidate any other provision of this Option.
8.7 CAPTIONS. Captions to the various paragraphs of this
Agreement are provided for convenience only and shall not be used to construe
the provisions of this Option.
8.8 ENTIRE AGREEMENT. This Option and such portions of other
Transaction Agreements as are relevant to this Option constitutes the entire
understanding of the parties with respect to the subject matter of the Option
and supersedes all prior discussions, agreements and representations, whether
oral or written, concerning the subject matter hereof and whether or not
executed by Buyer and the Company.
- 8 -
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DIGITAL RADIO, L.L.C.
By:
---------------------------
Name:
Title:
NEXTEL COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
- 9 -
<PAGE> 24
EXHIBIT "A"
[To be signed only upon exercise of Option]
To Nextel Communications, Inc.:
The undersigned, the Holder of the within Option, hereby
irrevocably elects to exercise the purchase right represented by such Option
for, and to purchase thereunder, _____________ shares of the Class A Common
Stock of Nextel Communications, Inc. and herewith makes payment of $___________
thereof or, and requests that the certificates for such shares be issued in the
name of, and be delivered to, ______________ whose address is
___________________________.
Dated:
- ------------------------
----------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the
face of the Option)
----------------------------------------
Address
- 10 -
<PAGE> 25
EXHIBIT 10.26 - FORM 3
EXHIBIT D
================================================================================
- --------------------------------------------------------------------------------
OPTION AGREEMENT
(THIRD TRANCHE)
by and between
Digital Radio, L.L.C.
and
Nextel Communications, Inc.
Dated as of __________ __, 1995
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. GRANT OF OPTION. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Grant. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Shares To Be Issued; Reservation of Shares. . . . . 2
2. ADJUSTMENTS TO OPTION RIGHTS. . . . . . . . . . . . . . . . 2
2.1 Stock Combinations. . . . . . . . . . . . . . . . . 2
2.2 Reorganizations. . . . . . . . . . . . . . . . . . 2
2.3 Adjustment Upon Changes in Capitalization. . . . . 3
2.4 Notice. . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Fractional Interests. . . . . . . . . . . . . . . . 4
3. EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Exercise of Option. . . . . . . . . . . . . . . . . 4
3.2 Issuance of Option Shares. . . . . . . . . . . . . 5
4. NO DILUTION OR IMPAIRMENT. . . . . . . . . . . . . . . . . . 5
5. RIGHTS OF HOLDER . . . . . . . . . . . . . . . . . . . . . . 5
6. TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . 5
7. LEGEND ON OPTION SHARES. . . . . . . . . . . . . . . . . . . 6
8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 6
8.1 Amendments. . . . . . . . . . . . . . . . . . . . . 6
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . 6
8.3 Waiver By Consent . . . . . . . . . . . . . . . . . 7
8.4 No Implied Waiver; Rights Are Cumulative . . . . . 8
8.5 Governing Law . . . . . . . . . . . . . . . . . . . 8
8.6 Severability . . . . . . . . . . . . . . . . . . . 8
8.7 Captions . . . . . . . . . . . . . . . . . . . . . 8
8.8 Entire Agreement . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 27
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER, AND FURTHER PROVIDED THAT SUCH TRANSFER
IS EFFECTED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 6 HEREIN.
OPTION AGREEMENT
(Third Tranche)
This OPTION AGREEMENT (the "Option") is being entered into
this __th day of _______, 1995, by and between Nextel Communications, Inc., a
Delaware corporation (the "Company") and Digital Radio, L.L.C., a Washington
limited liability company ("Buyer"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement (as defined below).
RECITALS
A. The Company and Buyer have entered into a Securities
Purchase Agreement dated as of April 4, 1995 (the "Securities Purchase
Agreement") pursuant to which, among other things, the Company agreed to sell
and Buyer agreed to purchase certain shares of the Company's Class A
Convertible Redeemable Preferred Stock and Class B Convertible Preferred Stock
on the Closing Date (as defined in the Securities Purchase Agreement).
B. Pursuant to the Securities Purchase Agreement, the Company
has agreed to grant to Buyer on the Closing Date three options to purchase
shares of the Company's Class A Common Stock, par value $.001 per share (the
"Common Stock"), on the terms set forth in the Securities Purchase Agreement,
the First Option, the Second Option and this Option.
NOW, THEREFORE, for the consideration set forth in the
Securities Purchase Agreement and other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Company agrees
with Buyer as follows:
1. GRANT OF OPTION.
1.1 GRANT. The Company hereby grants to Buyer this Option,
exercisable as provided herein in whole or in part at any time and from time to
time during the period from the date hereof through 6:00 p.m., local time in
New York, New York, on the sixth
<PAGE> 28
anniversary of the Closing Date (the "Exercise Period") to purchase up to an
aggregate of the lesser of (i) Five Million (5,000,000) shares of Common Stock
(as such number may be adjusted pursuant to Section 2 hereof for all events
described therein that occur after the Closing Date) and (ii) the number of
shares of Common Stock that were issued pursuant to the Second Option (as such
number may be adjusted pursuant to Section 2 hereof for all events described
therein that occur from and after the date of such issuance), at an exercise
price of $21.50 per share (as adjusted pursuant to Section 2 hereof for all
events described therein that occur after the Closing Date, the "Exercise
Price"). The aggregate number of shares of Common Stock issuable hereunder are
referred to as the "Option Shares". The Company shall have the right to
designate one or more other entities from which any or all of the shares of
Common Stock purchasable pursuant to this Option may be purchased. Buyer and
its permitted successors and assigns are hereinafter referred to as "Holder."
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company
covenants and agrees that all Option Shares will, upon issuance, be duly
authorized, validly issued and outstanding, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issuance thereof,
except as otherwise provided in the Securities Purchase Agreement. The Company
further covenants and agrees that it will from time to time take all actions
required to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Exercise Price. The Company further
covenants and agrees that, during the Exercise Period, the Company will at all
times have authorized and reserved sufficient shares of Common Stock to provide
for the exercise of this Option in full.
2. ADJUSTMENTS TO OPTION RIGHTS.
2.1 STOCK COMBINATIONS. In case the Company shall combine
all of the outstanding Common Stock proportionately into a smaller number of
shares, the Exercise Price per Option Share hereunder in effect immediately
prior to such combination shall be proportionately increased and the number of
Option Shares issuable to the Holder upon exercise of this Option shall be
proportionately decreased, as of the effective date of such combination.
2.2 REORGANIZATIONS. If any of the following transactions
(each, a "Special Transaction") shall become effective: (i) a capital
reorganization or reclassification of the capital stock of the Company, (ii) a
consolidation or merger of the Company with another entity or (iii) a sale or
conveyance of all or substantially all of the Company's assets, then, as a
condition of any such Special Transaction, lawful and adequate provision shall
be made whereby the Holder shall thereafter have the right to purchase and
receive, at any time after the consummation of such transaction until the
expiration of the
- 2 -
<PAGE> 29
Exercise Period, upon the basis and upon the terms and conditions specified
herein, and in lieu of the Option Shares immediately theretofore issuable upon
exercise of this Option for the aggregate Exercise Price in effect immediately
prior to such consummation, such shares of stock, other securities, cash or
other assets as may be issued or payable in and pursuant to the terms of such
Special Transaction with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of Option Shares immediately
theretofore issuable upon exercise in full of this Option had such Special
Transaction not taken place (pro rated in the case of any partial exercises).
In connection with any Special Transaction, appropriate provision shall be made
with respect to the rights and interests of the Holder to the end that the
provisions of this Option (including without limitation provisions for
adjustment of the Exercise Price and the number of Option Shares issuable upon
the exercise of the Option), shall thereafter be applicable, as nearly as may
be, to any shares of stock, other securities, cash or other assets thereafter
deliverable upon the exercise of this Option. The Company shall not effect any
Special Transaction unless prior to or simultaneously with the closing the
successor entity (if other than the Company), if any, resulting from such
consolidation or merger or the entity acquiring such assets shall assume by a
written instrument executed and mailed by certified mail or delivered to the
Holder at the address of the Holder appearing on the books of the Company, the
obligation of the Company or such successor corporation to deliver to such
Holder such shares of stock, securities, cash or other assets as, in accordance
with the foregoing provisions, such Holder has rights to purchase.
2.3 ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event
of any change in the Common Stock by reason of stock dividends, stock splits,
recapitalizations, reclassifications or the like, the type and number of Option
Shares issuable upon exercise of this Option, and the Exercise Price, as the
case may be, shall be adjusted appropriately, immediately upon such change. No
such adjustment shall be made on account of any dividend payable other than in
stock of the Company.
2.4 NOTICE. Whenever this Option, the Option Shares or the
Exercise Price is to be adjusted as provided herein or a dividend or
distribution (in cash, stock or otherwise and including, without limitation,
any liquidating distributions) is to be declared by the Company, or a Special
Transaction is deemed by the Company to be substantially certain to occur
(other than a Special Transaction in which the Company is the surviving entity
and which would not require the execution of a written instrument pursuant to
Section 2.2 above), the Company shall forthwith cause to be sent to the Holder
at the last address of the Holder shown on the books of the Company, by
first-class mail, postage prepaid, at least ten (10) days prior to the record
date specified in (A) below or at least twenty (20) days before the date
specified in (B) below, a notice stating in reasonable
- 3 -
<PAGE> 30
detail the facts requiring such adjustment and the calculation thereof, if
applicable, and stating (if applicable):
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined (provided, that
in the event the Company institutes a policy of declaring cash dividends on a
periodic basis, the Company need only provide the relevant information called
for in this clause (A) with respect to the first cash dividend payment to be
made pursuant to such policy and thereafter provide only notice of any changes
in the amount or the frequency of any subsequent dividend payments), or
(B) the date on which a Special Transaction is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon consummation of
the Special Transaction.
2.5 FRACTIONAL INTERESTS. This Option may be exercised only
for a whole number of shares of Common Stock, other than any fraction of a
share of Common Stock which would result upon this Option being exercised in
full; provided, however that the Company shall not be required to issue
fractions of shares of Common Stock on the exercise in full of this Option. If
any fraction of a share of Common Stock would, except for the provisions of
this Section 2.5, be issuable upon the exercise in full of this Option, the
Company may (in lieu of issuing such fractional share) either (A) purchase such
fraction for an amount in cash equal to the current value of such fraction,
computed (i) if the Common Stock shall be listed or admitted to unlisted
trading privileges on the NASDAQ National Market System or any securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed
or admitted to unlisted trading privileges on more than one such exchange, on
the basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (ii) if the Common Stock
shall not be so listed or admitted to unlisted trading privileges, on the basis
of the last bid price, or if there is no reported last bid, the average of the
bid prices, for the Common Stock on the last business day prior to the date of
exercise, as reported by the National Association of Securities Dealers
Automated Quotation System or any successor thereto, or, if such computations
cannot be made as aforesaid, as the Board of Directors of the Company may in
good faith determine or (B) issue a number of whole shares determined by
rounding up to the nearest whole share.
3. EXERCISE.
- 4 -
<PAGE> 31
3.1 EXERCISE OF OPTION. The Holder may exercise this Option
by (i) surrendering this Option, with the form of exercise notice attached
hereto as Exhibit "A" duly executed by Holder, and (ii) making payment to the
Company of the aggregate Exercise Price for the applicable Option Shares by
wire transfer to an account designated by the Company. Upon any partial
exercise of this Option, the Company, at its expense, shall forthwith issue to
the Holder for its surrendered option a replacement Option identical in all
respects to this Option, except that the number of Option Shares shall be
reduced accordingly.
3.2 ISSUANCE OF OPTION SHARES. The Option Shares purchased
shall be issued to the Holder exercising this Option as of the close of
business on the date on which all actions and payments required to be taken or
made by Holder, pursuant to Section 3.1, shall have been so taken or made.
Certificates for the Option Shares so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) days after this Option
is surrendered.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its Certificate of Incorporation or Bylaws or through
reorganization, reclassification, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Option, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against dilution or other -impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Option above the
Exercise Price, and at all times will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock upon the exercise of this
Option. In the event of actions, other than those specified herein, affecting
adversely the rights of the Holder, the Board of Directors of the Company shall
make such adjustments as shall be equitable in the circumstances.
5. RIGHTS OF HOLDER. Holder shall not, solely by virtue of
this Option and prior to the issuance of the Option Shares upon due exercise
thereof, be entitled to any rights of a shareholder in the Company.
6. TRANSFERABILITY. Holder hereby represents and warrants
that it is acquiring this Option and, upon the exercise thereof, the Option
Shares, for investment and not with a view to resale or distribution thereof.
Holder may not sell, assign, transfer or otherwise dispose of this Option,
except in accordance with the terms of the Securities Purchase Agreement.
Subject to compliance with federal and state securities laws and with the
Securities Purchase Agreement, if applicable, the Holder
- 5 -
<PAGE> 32
may sell, assign, transfer or otherwise dispose of any Option Shares acquired
upon any exercise hereof at any time and from time to time.
7. LEGEND ON OPTION SHARES. Certificates evidencing the
Option Shares shall bear the following legend: "The securities represented by
this certificate have not been registered under the Securities Act of 1933 of
the United States of America. They may not be sold, offered for sale, pledged
or hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel reasonably satisfactory to
the Company and its counsel that such registration is not required." Such
certificates also shall be legended as appropriate to reflect any and all
restrictions on transfer of such Option Shares that are contained in any of the
Transaction Agreements.
8. MISCELLANEOUS.
8.1 AMENDMENTS. The parties may, from time to time, enter
into written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Option or changing in any manner the rights of
either of the parties hereunder. No amendment, supplement or modification
shall be binding on either party unless made in writing and signed by a duly
authorized representative of each party and effected in compliance with Section
11.4 of the Securities Purchase Agreement, if applicable.
8.2 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand or by courier, or by certified mail, or, when
transmitted by facsimile and a confirmation of transmission printed by sender's
facsimile machine. A copy of any notice given by facsimile also shall be
mailed, postage prepaid, to the addressee. Notices to the respective parties
hereto shall be addressed as follows:
(i) If to the Company:
Nextel Communications, Inc.
201 Route 17 North
Rutherford, NJ 07070
Attention: Thomas D. Hickey
Assistant General Counsel
Telecopier: (201) 438-5540
- 6 -
<PAGE> 33
with a copy to:
Jeanne M. Rickert, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Telecopier: (216) 579-0212
(ii) If to the Buyer:
Digital Radio, L.L.C.
2320 Carillon Point
Kirtland, WA 94104-2675
Attention: Dennis Weibling, Esq.
Telecopier: (206) 828-8060
with a copy to:
C. James Judson, Esq.
Digital Radio, L.L.C.
2320 Carillon Point
Kirtland, WA 94104-2675
Telecopier: (206) 828-8060
and:
Bruce Alan Mann, Esq.
Morrison & Foerster
345 California Street
San Francisco, CA 94104
Telecopier: (415) 677-7522
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
8.3 WAIVER BY CONSENT. The Holder may execute and deliver to
the Company a written instrument waiving, on such terms and conditions as the
Holder may specify in such instrument, any of the requirements of this Option
otherwise imposed on the Company.
8.4 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to
exercise or the delay in exercising by either party of any right, remedy, power
or privilege under this Option, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, power or privilege under this
Option shall not preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
- 7 -
<PAGE> 34
8.5 GOVERNING LAW. This Option and rights and obligations of
the parties hereunder shall be governed by, construed and interpreted in
accordance with the laws of the State of Delaware applicable to agreements
executed by residents of that state, and fully to be performed, in that state.
8.6 SEVERABILITY. If any provision of this Option is found
to be unenforceable for any reason whatsoever, such provision shall be deemed
null and void to the extent of such unenforceability but shall be deemed
separable from and shall not invalidate any other provision of this Option.
8.7 CAPTIONS. Captions to the various paragraphs of this
Agreement are provided for convenience only and shall not be used to construe
the provisions of this Option.
8.8 ENTIRE AGREEMENT. This Option and such portions of other
Transaction Agreements as are relevant to this Option constitutes the entire
understanding of the parties with respect to the subject matter of the Option
and supersedes all prior discussions, agreements and representations, whether
oral or written, concerning the subject matter hereof and whether or not
executed by Buyer and the Company.
- 8 -
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DIGITAL RADIO, L.L.C.
By:
---------------------------
Name:
Title:
NEXTEL COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
- 9 -
<PAGE> 36
EXHIBIT "A"
[To be signed only upon exercise of Option]
To Nextel Communications, Inc.:
The undersigned, the Holder of the within Option, hereby
irrevocably elects to exercise the purchase right represented by such Option
for, and to purchase thereunder, _____________ shares of the Class A Common
Stock of Nextel Communications, Inc. and herewith makes payment of $___________
thereof or, and requests that the certificates for such shares be issued in the
name of, and be delivered to, ______________ whose address is
___________________________.
Dated:
- -----------------------
---------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the
face of the Option)
---------------------------------------
Address
- 10 -
<PAGE> 1
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into by and between Daniel
Akerson ("Executive") and Nextel Communications, Inc., a Delaware corporation
("Employer" or the "Company"), to be effective on and as of March 5, 1996.
WITNESSETH:
WHEREAS, Employer is engaged in the business of acquiring and
operating 800-900 MHz wireless telecommunications business, including trunked
and conventional specialized Mobile Radio ("SMR") licenses and facilities,
community repeater facilities, enhanced digital mobile SMR communications
systems, and related assets (the "SMR Business");
WHEREAS, Executive has skills and experience in wireless telephony
generally and the SMR Business specifically, and with the technology associated
with each; and
WHEREAS, Employer desires to obtain Executive's services for the
conduct of its SMR Business, and Executive desires to be employed in such SMR
Business by and for Employer;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties hereto agree as follows:
1. Employment. Employer hereby employs Executive as Chief Executive
Officer and Executive hereby accepts such employment upon the terms and
conditions hereinafter set forth.
2. Duties.
a. Executive shall serve as Chief Executive Officer and Chairman
of the Board of Directors of Employer, and as a member of the Operations
Committee of the Board of Directors, and shall perform his services as such
within the framework of the policies, objectives and Bylaws of Employer. In
such capacity, Executive (i) shall exercise general supervisory responsibility
and management authority over Employer and all of its controlled affiliates,
and (ii) shall perform such other duties commensurate with his position as may
be assigned to him from time to time by the Board of Directors and/or the
Operations Committee. Promptly following the effective date hereof, Employer
shall take or cause to be taken any and all corporate action necessary or
advisable to cause the appointment of Executive to a vacant position on
Employer's Board of Directors, and to the Operations Committee of the Board of
Directors. Executive shall continue to serve as a member of the Board of
Directors and the Operations Committee thereof throughout the Employment Term.
1
<PAGE> 2
b. Executive shall devote substantially all his business time,
attention and energies to the performance of his duties and functions under
this Employment Agreement and shall not during the term of his employment
hereunder be engaged in any other substantial business activity for gain,
profit or other pecuniary advantage. Executive shall faithfully, loyally and
diligently perform his assigned duties and functions and shall not engage in
any activities whatsoever which conflict with his obligations to Employer
during the term of his employment hereunder. Notwithstanding the foregoing,
(i) Executive may continue to serve as a director of General Instrument
Corporation and American Express Company, (ii) Executive may serve as a
director of other corporations with the consent of the Operations Committee and
(iii) nothing in the foregoing shall be construed so as to limit or prohibit
personal investments by Executive; provided that such investments shall not
amount to a controlling interest in any entity.
c. Employer shall furnish Executive with such facilities at
Employer's corporate headquarters location and services as are suitable to his
position and adequate for the performance of his duties and functions
hereunder.
3. Term. The term of this Employment Agreement shall commence on the
date hereof (the "Commencement Date") and, unless terminated earlier pursuant
to paragraph 10 hereof, shall continue through March 5, 1999 (the "Initial
Term"), and thereafter shall continue unless and until such time as (i) either
party hereto notifies the other, upon twelve (12) months prior written notice,
that this Employment Agreement will be terminated at the end of the Initial
Term or the later expiration of such twelve-month notice period, or (ii)
Executive's employment is otherwise terminated pursuant to paragraph 10 hereof
(the "Extended Term") (the Initial Term, together with the Extended Term, if
any, being referred to herein as the "Employment Term").
4. Compensation. Employer shall pay to Executive, in consideration
of and as compensation for the services agreed to be rendered by Executive
hereunder, the following:
a. Base Salary. During the Employment Term, the Company shall
pay to Executive a base salary of $400,000 per annum; provided that the amount
of such base salary shall be reviewed at least annually and may, in Employer's
sole discretion, be increased by Employer from time to time during the
Employment Term (with the first such review to occur during March 1997) in
light of the conditions then existing and the services then being rendered by
Executive, in which case Executive's base salary shall be such higher amount as
may be determined by Employer (such annual base salary, as in effect from time
to time, being referred to herein as the "Base Salary"). The Base Salary shall
be payable in accordance with Employer's normal payroll schedule, less
appropriate deductions for federal, state and local income taxes, FICA
contributions and any other deductions required by law or authorized by
Executive.
b. Annual Performance Bonus. In addition to the Base Salary,
Executive shall be entitled to receive an annual performance bonus (the "Annual
Bonus") for each
2
<PAGE> 3
year of service (or any part thereof in the event of termination of Executive's
employment hereunder, in which case the Annual Bonus shall be prorated for such
partial year) during the Employment Term (each such year or any partial such
year being referred to as an "Annual Bonus Period"), in an amount, if any, as
may be determined by the Operations Committee and/or the Board of Directors in
their complete discretion, up to a maximum of 75% of the Base Salary payable
during such Annual Bonus Period, based on Executive's performance against
objectives for the prior year of service. Such objectives shall be determined
by mutual agreement of Executive and Employer. Notwithstanding the foregoing,
the Annual Bonus for 1996 shall be paid on a full calendar year basis and shall
not be prorated from the effective date of this Agreement. Each Annual Bonus
shall be payable in accordance with Employer's normal annual bonus payment
schedule, less appropriate deductions for federal, state, and local income
taxes, FICA contributions and any other deductions required by law or
authorized by Executive.
c. Deferred Shares, Inducement Options and Special Bonus.
(i) A. Grant of Deferred Shares. At or prior to the
execution of this Agreement, and subject to the terms and conditions set forth
in this paragraph 4(c), Employer grants to Executive the right to receive
1,000,000 shares (the "Deferred Shares") of Employer's Class A voting common
stock ("Common Stock"). Subject to the forfeiture provisions set forth in
subparagraph (ii) below, and the provisions of subparagraph (iii) relating to
Change of Control Events, the Deferred Shares shall be distributed in their
entirety to Executive on the earlier of March 5, 1999 (the "Distribution Date")
or such earlier date as Executive's employment is terminated hereunder;
provided however, that Executive will be entitled to further defer the
distribution of Deferred Shares in accordance with subparagraph (v) below.
Employer shall cause such Deferred Shares to be awarded under its Incentive
Equity Plan and thus to be among the shares covered by the Form S-8
Registration Statement previously filed and currently in effect covering awards
made under such Plan, and in the event any termination or lapse of
effectiveness of such Form S-8 Registration Statement should result in such
Deferred Shares becoming "restricted" securities for purposes of federal or
state securities laws or regulations then Employer shall use its best efforts
to issue the Deferred Shares pursuant to an effective registration statement on
Form S-8 (or such other appropriate form as the Company shall determine) and to
qualify such Deferred Shares under any applicable state securities laws or
regulations, such that, upon issuance and distribution of such shares to
Executive, there are no restrictions under federal or state securities laws or
regulations on the further transfer of such shares, other than any such
restrictions imposed by virtue of Executive's status as an officer or director
of the Company or as may otherwise be imposed by law with respect to
unrestricted shares. In addition, the Company shall exercise its best efforts
to obtain such shareholder and other approvals, and to take such other actions,
toward the objective that the provisions of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended ("Exchange Act") are applicable to the grant
and distribution of the Deferred Shares, and that the distribution of the
Deferred Shares shall not constitute a "purchase" of the Common Stock pursuant
to Section 16(b) of the Exchange Act.
3
<PAGE> 4
(B) Grant of Inducement Options. At or prior to the execution of
this Agreement and subject to the terms and conditions set forth in this
paragraph 4(c), the Compensation Committee of the Board of Directors of
Employer authorized the grant to Executive, pursuant to Employer's Incentive
Equity Plan, of options to acquire 1,000,000 shares of Employer's Common Stock
on the terms set forth in Annex A hereto (the "Inducement Options"). The
shares of Employer's Common Stock that will be issued on exercise of such
Inducement Options are among the shares covered by the Form S-8 Registration
Statement previously filed and currently in effect covering awards made under
Employer's Incentive Equity Plan, and in the event of any termination or lapse
of effectiveness of such Form S-8 Registration Statement should result in the
shares issued upon exercise of such Inducement Options becoming "restricted"
securities for purposes of federal or state securities laws or regulations then
Employer shall use its best efforts to cause such shares to be issued pursuant
to an effective registration statement on Form S-8 (or such other appropriate
form as the Company shall determine) and to qualify such shares under any
applicable state securities laws or regulations such that, upon issuance and
distribution of such shares to Executive, there are no restrictions under
federal or state securities laws or regulations on the further transfer of such
shares, other than any such restrictions imposed by virtue of Executive's
status as an officer or director of the Company or as otherwise may be imposed
by law with respect to unrestricted shares. In addition, the Company shall
exercise its best efforts to obtain such shareholder and other approvals, and
to take such other actions, toward the objective that the provisions of Rule
16b-3 under the Exchange Act are applicable to the grant of the inducement
Options and any subsequent distribution of the shares issued upon exercise
thereof, and that the distribution of such shares to Executive shall not
constitute a "purchase" of Common Stock pursuant to Section 16(b) of the
Exchange Act.
(C) Commitment Regarding Special Bonus. Employer hereby commits
to pay Executive a Special Bonus (in addition to any other bonus or incentive
compensation payment to which Executive may be entitled) in the amount of
[$14,750,000] on or prior to March 5, 2006. Such Special Bonus shall be paid
in cash and otherwise as provided in accordance with Annex B attached hereto.
(ii) Forfeiture. If Executive's employment hereunder is
terminated prior to March 5, 1999, either by (A) Employer for Cause or
Permanent Disability as permitted pursuant to paragraph 10(b) hereof, or (B)
Executive other than as permitted pursuant to paragraph 10(c) hereof, then
Executive's right to receive any of the Deferred Shares and vesting of any of
the Inducement Options shall be forfeited, the Inducement Options thereupon
shall expire unexercised (except as provided in subparagraphs (iii) and (iv)
below); and Executive shall have no further rights, claims or interest in or to
any of the Deferred Shares or any of the Inducement Options, except as provided
in subparagraphs (iii) and (iv) below. If Executive's employment hereunder is
terminated prior to March 5, 1999, (A) upon Executive's death, (B) by Employer
other than as permitted pursuant to paragraph 10(b) or (C) by Executive in
circumstances constituting Constructive Termination as permitted pursuant to
paragraph 10(c), then Executive's rights to the
4
<PAGE> 5
Inducement Options shall be forfeited (it being understood that Executive's
right to receive all 1,000,000 of the Deferred Shares shall be then vested and
nonforfeitable), and thereafter Executive shall have no further rights, claims
or interest in or to any of the forfeited Inducement Options, except as set
forth in subparagraphs (iii) and (iv) below. If Executive's employment
hereunder is terminated on or after March 5, 1999, but prior to March 5, 2006,
then Executive's right to vesting of the Inducement Options shall be forfeited
(it being understood that Executive's right to receive all 1,000,000 Deferred
Shares shall then be vested and nonforfeitable), the Inducement Options
thereupon shall expire unexercised (except as provided in subparagraphs (iii)
and (iv) below); and thereafter Executive shall have no further rights, claims
or interest in or to any of the forfeited Inducement Options, except as
provided in subparagraphs (iii) and (iv) below. So long as, and to the extent
that, Executive's rights to the Deferred Shares have not been forfeited in
accordance with the foregoing provisions of this paragraph 4(c)(ii), Employer
shall distribute to Executive, and deliver to Executive a certificate or
certificates representing, the Deferred Shares in the amounts and on the dates
specified in this paragraph 4(c).
(iii) Effect of Change of Control. Notwithstanding anything to
the contrary in this Agreement, Executive's right to receive the Deferred
Shares and to exercise the Inducement Options shall become fully vested and
nonforfeitable upon the occurrence of a Change of Control Event. A "Change of
Control Event" shall mean (i) a Change of Control (defined below), unless
Executive has been given notice of termination of Executive's Employment prior
to the Company's first contemplation of such Change of Control for reasons
unrelated to such Change of Control, or (ii) the termination of Executive's
employment by the Company in contemplation of a Change of Control. Any
termination of Executive's employment within 60 days of the public announcement
of a Change of Control shall be deemed to have been in contemplation of such
Change of Control. If a Change of Control Event occurs, then on the date of
such Change of Control Event Employer shall distribute to Executive, and
deliver to Executive a certificate or certificates representing, all of the
Deferred Shares and shall deliver to Executive an appropriate written
instrument confirming the vesting in full of the Inducement Options, whether or
not Executive's employment has been terminated, and irrespective of the
forfeiture provisions of subparagraph (ii) above, subject to Executive's right
to defer receipt of such Deferred Shares as provided in subparagraph (v) below.
(iv) Deferred Shares Purchase Option and Partial Vesting and
Exercise Right for Inducement Options. In the event that Executive's right to
receive any of the Deferred Shares and/or to vesting of any of the Inducement
Options is forfeited upon termination of employment pursuant to the provisions
of subparagraph (ii) above, then Executive shall have the options (x) to
exercise a portion of the Inducement Options (the "Inducement Option Exercise
Right") and (y) to purchase a portion of the Deferred Shares ("Deferred Share
Purchase Option"), in each case in accordance with the provisions of this
subparagraph (iv). The total number of shares subject to the Deferred Share
Purchase Option and vesting under the Inducement Option Exercise Right (the
"Purchase/Exercise Options") shall be (A) the Vested Portion (as defined below)
minus
5
<PAGE> 6
(B) the number of Deferred Shares previously distributed to Executive and/or
distributable to Executive in connection with such termination of employment.
The Vested Portion shall mean 2,000,000 multiplied by a fraction, the numerator
of which is the number of days from the Commencement Date to and including the
Vesting Reference Date (as defined below) and the denominator of which is 1825
(i.e., the number of days from the Commencement Date to and including the fifth
anniversary of the Commencement Date). The "Vesting Reference Date" shall be
(A) in the case of a termination of employment by reason of Executive's death,
the date one year after the date of Executive's death, (B) in the case of a
termination of employment by reason of Executive's Permanent Disability, or by
Executive for Constructive Termination, the date one year after the Termination
Date and (C) in the case of termination of Executive's employment for any other
reason, the Termination Date. To the extent the shares subject to the
Purchase/Exercise Options do not exceed 1,000,000 shares, the Purchase/Exercise
Options shall be satisfied solely by providing Executive (or Executive's
Representative, as appropriate) with the opportunity to acquire such number of
shares pursuant to the Inducement Option Exercise Right (and the Inducement
Options shall be vested and available for exercise to the extent of such
shares). If the shares subject to the Purchase/Exercise Options exceed
1,000,000 shares, then the first 1,000,000 shares subject thereto shall be
satisfied through the Inducement Option Exercise Right as provided in the
immediately preceding sentence and as to any excess shares, the
Purchase/Exercise Options shall be satisfied by providing Executive with the
opportunity to acquire such number of excess shares pursuant to the Deferred
Share Purchase Option.
By way of illustrative example, if Executive's employment were
terminated by Employer as of March 5, 2000, upon prior written notice to
Executive pursuant to paragraph 10(b)(ii) below, then the Vesting Reference
Date would be March 5, 2000 (i.e., the Termination Date); the Vested Portion
would be 1,600,000 (i.e., 2,000,000 x (1460 + 1825), with 1460 being the number
of days from the Commencement Date to and including the Termination Date);
Executive would have already received (or would have nonforfeitable rights to
receive) all 1,000,000 of the Deferred Shares pursuant to subparagraphs (i) and
(ii) above; and, accordingly, the number of shares subject to the
Purchase/Exercise Options would be 600,000. Alternatively, if Executive's
termination as of such date were by reason of Executive's death, then the
Vesting Reference Date would be March 5, 2001, and the number of shares subject
to the Purchase/Exercise Options would be 1,000,000.
The Purchase/Exercise Options (and any Inducement Options vested
pursuant to subparagraph (iii) above) will be exercisable (x) in the event of a
termination of Executive's employment by reason of death, Permanent Disability
or Constructive Termination, for a period of one year following the Termination
Date, and (y) in the event of a termination of employment by Employer for any
other reason, for a period of six months following the Termination Date. The
exercise price of the Purchase/Exercise Options shall be $14.75 per share
(subject to adjustment in accordance with subparagraph (vii) below). Executive
may exercise the Purchase/Exercise Options by delivery to the Company of a
written notice of exercise accompanied by payment of the exercise price
6
<PAGE> 7
therefor. At the discretion of the Operations Committee, Executive may pay the
exercise price either (a) in cash or (b) by delivering to the Company
nonforfeitable, non-restricted shares of Common Stock that have been owned by
Executive for at least six (6) months prior to the date of exercise (which
shares shall be valued on the basis of their fair market value at the close of
trading on the date of such exercise (or, if such date is not a trading day, at
the closing price on the nearest preceding trading day). Additionally the
requirement of payment in cash shall be deemed satisfied if the Executive makes
arrangements that are satisfactory to the Company with a broker that is a
member of the National Association of Securities Dealers, Inc. to sell a
sufficient number of the shares of Common Stock, which are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate exercise price and all related tax
withholding amounts and pursuant to which the broker undertakes to deliver to
the Company the amount of the aggregate exercise price and such tax withholding
amounts not later than the date on which the sales transaction will settle in
the ordinary course of business.
(v) Deferral of Receipt. Executive may, in his sole discretion,
elect to defer the receipt of Deferred Shares otherwise distributable to him by
delivering to Employer a written notice of such election no later than December
31 of the calendar year immediately preceding the calendar year in which such
distribution would otherwise occur. Any such election shall be irrevocable and
shall set a specific date for the receipt of such Deferred Shares; provided
that Executive may also specify that the applicable Deferred Shares shall be
distributed on the earlier of such specified date or the termination of
Executive's employment hereunder. In the event of any such election, Executive
shall indemnify and hold harmless Employer from any and all withholding amounts
and penalties and interest associated therewith which may be assessed by the
Internal Revenue Service or any relevant state or local taxing authority in
connection with any such deferral by Executive in the issuance of any of the
Deferred Shares and the recognition of income associated therewith.
(vi) Withholding. Upon the distribution of any Deferred Shares
to Executive, Executive shall pay to Employer an amount equal to such amount as
Employer shall be obligated to remit to the Internal Revenue Service or any
relevant state or local taxing authority as withholding attributable to the
compensation evidenced by the Deferred Shares so distributed to the Executive.
At the discretion of the Operations Committee, Executive may pay such amount
either in cash or by delivery to the Company of a number of shares of Common
Stock (or proceeds from the sale thereof) having a Fair Market Value equal to
such withholding amount (which delivery may be made by an instruction to the
Company to retain a portion of the Deferred Shares otherwise distributable to
Executive or by an instruction to the selling broker to remit such sales
proceeds, otherwise distributable to Executive, to the Company).
(vii) Adjustments. In the event that the Common Stock is changed
into or exchanged for a different number or kind of securities of Employer or
of another entity (by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock
7
<PAGE> 8
dividend, stock combination or otherwise), or if there is a distribution of
cash, securities or other property made to the holders of the Common Stock
(other than cash dividends made out of current earnings of Employer) then an
appropriate and equitable adjustment shall be made in the number and kind of
securities constituting the Deferred Shares and/or issuable upon exercise of
the Inducement Options hereunder, with a view towards preserving the value to
Executive of the rights granted pursuant to this paragraph 4(c). Without
limiting the generality of the foregoing, in the event that an adjustment is
required pursuant to the terms of any options, warrants or convertible
securities of Employer pursuant to any event of the kind specified above, at
least an equivalent adjustment shall be required pursuant to this paragraph
4(c)(vii). In the event any adjustment is required under this paragraph
4(c)(vii), appropriate conforming adjustment shall be made to the exercise
price of the Deferred Share Purchase Option and/or to the Inducement Option
Exercise Right, as appropriate, to all references to numbers of Deferred Shares
and/or to the number of shares covered by the Inducement Options, as
appropriate, contained in this paragraph 4(c), to the definition of Common
Stock, and to any other provisions of this paragraph 4(c) as necessary to
accomplish the intent of this subparagraph (vii).
(viii) Incentive Equity Plan. The Deferred Shares also shall be
subject to the terms and conditions applicable to "Deferred Shares", and the
Inducement Options also shall be subject to the terms and conditions applicable
to "non-qualified stock options", under and pursuant to Employer's Amended and
Restated Incentive Equity Plan, to the extent not inconsistent with the terms
of this Agreement.
(ix) Certain Definitions. For purposes of this Agreement:
"Change of Control" shall mean the occurrence of any of the
following events:
(A) The Company is merged or consolidated or reorganized into
or with another company or other legal entity, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such company or person immediately
after such transaction is held directly or indirectly in the aggregate by the
holders of voting securities of the Company immediately prior to such sale or
transfer, including voting securities issuable upon exercise or conversion of
options, warrants or other securities or rights;
(B) The Company sells or otherwise transfers all or
substantially all of its assets to any other company or other legal entity, and
as a result of such sale or other transfer of assets, less than a majority of
the combined voting power of the then-outstanding securities of such company or
person immediately after such sale or transfer is held directly or indirectly
in the aggregate by the holders of voting securities of the Company immediately
prior to such sale or transfer, including voting securities issuable upon
exercise or conversion of options, warrants or other securities or rights;
8
<PAGE> 9
(C) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 50%
or more of the voting securities of the Company, including voting securities
issuable upon exercise or conversion of options, warrants or other securities
or rights;
(D) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has occurred;
(E) The Operations Committee ceases to exist, representatives
of Digital Radio L.L.C. (or any other entity controlled directly or indirectly
by Craig McCaw, a "Controlled Entity") cease to control the Operations
Committee or Craig McCaw ceases to own or control, directly or indirectly, a
majority of the voting power of Digital Radio L.L.C. or Eagle River, Inc. or
any other Controlled Entity that is the record holder, or the beneficial owner,
of the capital stock of the Company.
Notwithstanding the foregoing provisions of subparagraphs (C)
and (D) hereof, a "Change of Control" shall not be deemed to have occurred
solely because (x) the Company, (y) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the voting securities, or (z) any
Company-sponsored employee stock ownership plan or other employee benefit plan
of the Company, either files or becomes obligated to file a report or proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act, disclosing beneficial ownership by it of voting securities,
whether in excess of 50% or otherwise, or because the Company reports that a
change of control of the Company has or may have occurred or will or may occur
in the future by reason of such beneficial ownership.
"Fair Market Value" of a share of Common Stock shall mean, as
of any given date, (i) the closing price of a share of Common Stock on the
principal exchange on which Common Stock then trades, if any, on the day
previous to such date, or, if shares were not traded on the day previous to
such date, then on the next preceding trading day during which a sale occurred;
or (ii) if such Common Stock is not traded on an exchange but is quoted on
Nasdaq or a successor quotation system, (1) the last sales price (if the Common
Stock is then listed as a National Market Issue under the Nasdaq National
Market System) or (2) the mean between the closing representative bid and asked
prices (in all other cases) for the Common Stock on the day previous to such
date (or, if shares were not traded on the day previous to such date, then on
the next preceding trading day
9
<PAGE> 10
during which a sale occurred), as reported by Nasdaq or such successor
quotation systems.
d. Options. Effective on and as of March 5, 1996 (the date on
which the Operations Committee approved Executive's employment on the terms and
conditions set forth herein), the Compensation Committee of the Board of
Directors of Employer authorized the grant to Executive, pursuant to Employer's
Incentive Equity Plan, of options to acquire 1,000,000 shares of Employer's
Common Stock on the terms set forth in Annex C hereto (the "Original Options").
Promptly following Executive's and Employer's execution hereof, Employer shall
take or cause to be taken such other or further actions as may be necessary in
order to effectuate such grant of the Original Options to Executive. From time
to time during the Employment Term, Employer, in its sole discretion, may grant
additional options (in addition to each of the Original Options and the
Inducement Options) to Executive ("Additional Options"). Except as otherwise
provided herein, the terms and conditions of such Additional Options shall be
as determined by Employer in its sole discretion. Such Additional Options
together with the Inducement Options and the Original Options shall be referred
to collectively herein as the "Options." Executive's rights with respect to
the Options shall be separate from (and in addition to) the rights set forth in
paragraph 4(c) above with respect to the Deferred Shares and the Deferred Share
Purchase Option, and Executive's rights with respect to the Original Options
and any Additional Options shall be separate from (and in addition to) the
rights set forth in paragraph 4(c) above with respect to the Inducement Options
and the Inducement Option Exercise Right.
5. Benefits. During the Employment Term, Executive shall be entitled
to participate in all group health, major medical, pension and profit sharing,
401(k) and other benefit plans maintained by Employer and provided generally to
its executive officers, on the same terms as apply to participation therein by
management generally (except as otherwise provided herein). Further, during
the Employment Term, Executive shall be entitled to participate in all fringe
benefit programs and shall receive all perquisites if and to the extent that
Employer establishes and makes such benefits and perquisites available to
management generally, including, but not limited to, Employer-paid long-term
disability insurance and life insurance coverage.
6. Expenses. During the Employment Term, Employer shall reimburse
Executive for all reasonable travel, entertainment and other business expenses
incurred or paid by Executive in performing his duties and functions hereunder.
In addition, Employer shall reimburse Executive for the reasonable legal and
other expenses incurred by him in connection with the preparation of this
Agreement not to exceed $18,000, and during the Employment Term, Employer shall
reimburse Executive, on an annual basis, for legal, accounting and other
expenses incurred for any investment, financial, estate and/or tax planning in
connection with this Agreement up to a maximum of $10,000.
7. Vacations. Executive shall be entitled to such holidays, sick
leave and personal time off as is allowed under the policies of Employer to
management generally
10
<PAGE> 11
(except as otherwise provided herein). In addition, Executive shall be
entitled to such vacations, taken at such time or times, as Executive shall
determine in his reasonable discretion, consistent with the performance of
Executive's obligations hereunder and the direction of the Operations
Committee.
8. Non-Competition. During the Employment Term and (except as
provided in paragraph 10 herein) for a period of two years thereafter,
Executive shall not enter into or participate in any business competitive to
the SMR Business carried on by Employer; provided that this paragraph 8 shall
not prohibit Executive, following the term of his employment hereunder, from
engaging in any wireless telecommunications business other than the SMR
Business in any manner not involving a breach of Executive's obligations
pursuant to paragraph 9 herein. The provisions of this paragraph 8 shall
survive the expiration and/or termination of this Employment Agreement.
9. Confidential Information. During the Employment Term and for a
period of two years thereafter, Executive will not use for his own advantage or
disclose any proprietary or confidential information relating to the business
operations or properties of Employer, any affiliate of Employer or any of their
respective customers, suppliers, landlords, licensors or licensees. Upon the
expiration or termination of the Employment Term, upon Employer's request,
Executive will surrender and deliver to Employer all documents and information
of every kind relating to or connected with Employer and its affiliates and
their respective businesses, customers, suppliers, landlord, licensors and
licensees. The foregoing confidential information provisions shall not apply
to information which: (i) is or becomes publicly known through no wrongful act
of the Executive; (ii) is rightfully received from any third party without
restriction and without breach by Executive of this Employment Agreement; or
(iii) is independently developed by Executive after the term of his employment
hereunder or is independently developed by a competitor of Employer at any
time. The provisions of this paragraph 9 shall survive the expiration and/or
termination of this Employment Agreement.
11
<PAGE> 12
10. Termination.
a. Automatic Termination Upon Death. In the event of Executive's
death during the Employment Term, Executive's employment hereunder shall be
automatically terminated upon the date of death. As soon as reasonably
practicable following Executive's death, Employer shall pay to Executive's
Representative (defined below in paragraph 20) (i) Executive's accrued but
unpaid Base Salary and Annual Bonus, through the last day of the month of his
death, and (ii) any amount due hereunder for accrued but unused vacation time
as of the date of death. In addition, Executive's Representative shall be
entitled to exercise Executive's rights with respect to the Deferred Shares
and/or the Inducement Options, as appropriate, as set forth in Paragraph 4(c)
above, and Executive's rights with respect to the Options, as provided herein
and in the stock option agreements(s) pertaining thereto.
b. Termination by Employer. During the Initial Term, Employer
shall be entitled to terminate Executive's employment hereunder only upon the
establishment of "Cause" or the "Permanent Disability" of Executive (as those
terms are defined below) by giving written notice to that effect to Executive.
During any Extended Term, Employer shall be entitled to terminate Executive's
employment hereunder (i) upon the establishment of Cause or the Permanent
Disability of Executive, by giving written notice to that effect to Executive
or (ii) for any other reason or for no reason upon twelve months prior written
notice to Executive.
For purposes hereof, the term "Cause" means either (1) Executive's
failure to substantially perform his duties and functions as contemplated
hereunder, if such failure constitutes gross neglect or willful malfeasance;
(2) Executive's committing fraud or embezzlement or otherwise engaging in
conduct that results in Executive being convicted of a felony from which all
appeals have been exhausted; (3) Executive's intentionally acting in a manner
which is materially detrimental or damaging to Employer's reputation, business,
operations or relations with its employees, suppliers or customers, without
taking reasonable steps to remedy such actions promptly after receiving written
notice thereof from Employer; (4) Executive's chronic or habitual abuse of
alcohol or prescription drugs or controlled substances; or (5) Executive's
committing any other material breach of this Employment Agreement without
taking reasonable steps to cease or remedy such breach within thirty (30) days
after Executive's receipt of written notice from Employer specifically
identifying the nature of and circumstances relevant to any such claimed
material breach by Executive.
For purposes hereof the term "Permanent Disability" means: (i)
Executive's failure to devote full normal working time as required herein to
his employment hereunder for a period of at least 90 consecutive normal
business days (or for at least a majority of the normal business days in any
consecutive 180-day period); and (ii) the existence of an illness or incapacity
(either physical or mental) affecting Executive which, in the reasonable
opinion of a Qualified Physician, is likely to be of such character or severity
that Executive would be unable to resume devoting his full normal working time,
12
<PAGE> 13
as required herein, to his employment hereunder for a period of at least nine
consecutive months; the term "Qualified Physician" means an impartial physician
competent to diagnose and treat the illness or condition which Executive is
believed to be suffering, selected by Employer and reasonably acceptable to
Executive (or if Executive is then incapable of acting for himself, Executive's
Representative), who shall have personally examined Executive and shall have
personally reviewed Executive's relevant medical records; provided Employer
shall bear the costs of such Qualified Physician's services and Executive
agrees to submit to an examination by such Qualified Physician and to the
disclosure of Executive's relevant medical records to such Qualified Physician.
The date upon which any termination effected pursuant to this
subparagraph 10(b) shall be effective is set forth in subparagraph 10(d), and
the effect of any such termination shall be as described in subparagraphs 10(e)
and (f).
c. Termination by Executive. During the Initial Term, Executive
shall be entitled to terminate his employment hereunder only upon the
establishment of "Constructive Termination" (as that term is defined below) or
upon a Change of Control, by giving written notice to that effect to Employer.
During any Extended Term, Executive shall be entitled to terminate his
employment hereunder (i) upon the establishment of Constructive Termination or
upon a Change of Control, by giving notice to that effect to Employer or (ii)
for any other reason or for no reason upon twelve months prior written notice
to Employer.
For purposes hereof, "Constructive Termination" shall mean
Executive's termination of his employment hereunder as a direct result of (i) a
reduction in Executive's initial Base Salary or in the maximum permitted Annual
Bonus percentage, (ii) a material change in the nature or extent of Executive's
responsibilities that is inconsistent with Executive's intended position and
status hereunder, or (iii) the material breach by the Employer of any provision
of this Agreement which continues without reasonable steps being taken to cure
such breach for a period of 30 days after written notice thereof by Executive
to Employer.
The date upon which any termination effected pursuant to this
subparagraph 10(c) shall be effective is set forth in subparagraph 10(d), and
the effect of any such termination shall be as described in subparagraphs 10(f)
and (g).
d. Termination Date. In the event Executive's employment
hereunder is terminated for circumstances constituting Cause, Permanent
Disability, Change of Control or Constructive Termination, such termination
shall take effect upon the termination date set forth in the written notice to
that effect given by Executive to Employer or by Employer to Executive, as the
case may be (provided that if either party disputes the propriety of such
termination, the effective date of termination shall be as established by final
resolution of such dispute, whether by agreement of the parties or award of an
arbitrator as contemplated herein, in favor of the propriety of such
termination), and in any other case termination of Executive's employment
hereunder
13
<PAGE> 14
shall take effect on the date specified in the written notice thereof delivered
by Executive to Employer or by Employer to Executive, as the case may be (the
date on which any such termination takes effect being referred to herein as the
"Termination Date"). Employer, at its option, may require Executive to
continue to perform his duties hereunder until the Termination Date or pay to
Executive such amount of compensation and benefits otherwise due hereunder in
accordance with Employer's then existing salary payment schedule or in one lump
sum payment.
e. Effect of Termination by Employer For Cause. In the event
Executive's employment is terminated by Employer for Cause at any time during
the Employment Term, then (i) Employer shall pay to Executive Executive's
accrued but unpaid Base Salary and Annual Bonus through the Termination Date;
(ii) notwithstanding any of the provisions of Employer's Incentive Equity Plan
or of any option agreement with respect thereto to the contrary, any and all of
the Options that theretofore have vested may be exercised at any time on or
before the thirtieth day following such Termination Date and, if not so
exercised, thereupon automatically shall be canceled; and (iii) Executive's
rights with respect to the Deferred Shares and/or the Inducement Options, as
appropriate, shall be as stated in paragraph 4(c) above.
f. Effect of Termination Upon Permanent Disability. In the event
Executive's employment is terminated by Employer upon the Permanent Disability
of Executive at any time during the Employment Term, then:
(A) Employer shall pay to Executive (I) Executive's
accrued but unpaid Base Salary and Annual Bonus through the Termination Date,
(II) Executive's then existing Base Salary for 12 months from the date written
notice of the termination of Executive's employment is given by Employer, and
(III) any amount due hereunder for accrued but unused vacation time as of the
Termination Date.
(B) Employer, at its expense, shall make all benefit
payments, on behalf of Executive and Executive's dependents, for such benefits
Executive otherwise would have been entitled to receive hereunder, for 12
months following the date written notice of the termination of Executive's
employment is given by Employer.
(C) With respect to any of the Options (other than the
Inducement Options) which remain unvested upon such Termination Date,
notwithstanding any provision to the contrary in Employer's Incentive Equity
Plan and/or any stock option agreement with respect thereto, there shall be
immediate vesting of that portion of such unvested Options which would have
vested within 12 months of the date written notice of the termination of
Executive's employment is given by Employer. After giving effect to the
foregoing sentence, any Options (other than the Inducement Options) which
remain unvested shall automatically terminate.
(D) Executive's rights with respect to the Deferred
Shares and/or the Inducement Options, as appropriate, shall be as stated in
paragraph 4(c) above.
14
<PAGE> 15
g. Effect of Wrongful or Constructive Termination or Termination
Upon a Change of Control.
(i) In the event Executive's employment is terminated during
the Employment Term by Executive in circumstances constituting Constructive
Termination or upon a Change of Control, then, from and after such Termination
Date:
(A) Executive shall not be subject to the non-competition
provisions set forth in paragraph 8 hereof.
(B) Executive shall be entitled to receive the Base
Salary, Annual Bonus, benefits, and other treatment (including, without
limitation, vesting and exercise terms for all of the Options, other than the
Inducement Options) which Executive reasonably would have expected to receive
in the period from the Termination Date to the expiration of the Initial Term
(if such Termination Date occurs more than 12 months prior to the expiration of
the Initial Term) or during the 12 months following the date written notice of
the termination of Executive's employment is given by Employer or Executive, as
the case may be, (if such Termination Date occurs after the Initial Term or
within 12 months prior to the expiration of the Initial Term), all of which
shall become effective upon the Termination Date.
(C) Executive's rights with respect to the Deferred
Shares and/or the Inducement Options, as appropriate, shall be as stated in
paragraph 4(c) above.
The foregoing shall be Executive's sole and exclusive remedy for any such
termination of his employment under this subparagraph 10(g).
h. Excess Parachute Payment. In the event that Employer treats
any portion of Executive's payments or benefits hereunder (including, without
limitation, under the foregoing subparagraphs 10(f) and (g)) as an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code ("Code") or any comparable provision of state or local tax law, or it is
otherwise asserted (including on an audit of either Employer or Executive) that
any portion of such payments or benefits is such an "excess parachute payment,"
Employer shall prior to the date on which any amount of excise tax (or penalty
or interest) must be paid in respect thereof, promptly make an additional lump
sum payment in cash to Executive in an amount sufficient, after giving effect
to all federal, state and other taxes and charges (including interest and
penalties, if any) with respect to such payment to make Executive whole for all
taxes (including withholding and social security taxes) imposed under Section
4999 of the Code, or any comparable provision of state or local tax law, with
respect to the "excess parachute payment" and all associated interest and
penalty amounts. Executive shall cooperate in all reasonable respects with
Employer to attempt to minimize any such tax liability.
15
<PAGE> 16
i. Miscellaneous. In the event of any termination or attempted
termination hereof: (i) if multiple events, occurrences or circumstances are
asserted as bases for such termination or attempted termination, the event,
occurrence or circumstance that is earliest in time, and any termination or
attempted termination found to be proper hereunder based thereon, shall take
precedence over the others; (ii) no termination of this Employment Agreement
shall relieve or release either party from liability hereunder based on any
breach of the terms hereof by such party occurring prior to the Termination
Date; (iii) the terms of this Employment Agreement relevant to performance or
satisfaction of any obligation hereunder expressly remaining to be performed or
satisfied in whole or in part at the Termination Date shall continue in force
until such full performance or satisfaction has been accomplished and otherwise
neither party hereto shall have any other or further remaining obligations to
other party hereunder; and (iv) the vesting and exercise provisions set forth
in Employer's Incentive Equity Plan and/or any option agreement with respect to
the Options (other than the Inducement Options) shall continue to apply except
to the extent otherwise expressly provided in this paragraph 10 or in Annex C
hereto.
j. No Set-off; No Duty of Mitigation. There shall be no right of
setoff or counterclaim, in respect of any actual or alleged claim, debt or
obligation, against any payments or benefits required to be made or provided to
Executive hereunder (including, without limitation, pursuant to subparagraphs
10(f) and (g) above). In the event of any termination of Executive's
employment under this paragraph 10, Executive shall be under no obligation to
seek other employment and shall be entitled to all payments or benefits
required to be made or provided to Executive hereunder, without any duty of
mitigation of damages and regardless of any other employment obtained by
Executive.
11. Injunctive Relief. It is agreed that the services of Executive
are unique and that any breach or threatened breach by Executive of any
provision of this Employment Agreement cannot be remedied solely by damages.
Accordingly, in the event of a breach by Executive of his obligations under
this Employment Agreement, Employer shall be entitled to seek and obtain
interim restraints and permanent injunctive relief without proving the
inadequacy of damages as a remedy, restraining Executive and any business,
firm, partnership, individual, corporation or entity participating in such
breach or attempted breach. Nothing herein, however, shall be construed as
prohibiting Employer from pursuing any other remedies available at law or in
equity for such breach or threatened breach, including the recovery of damages
and the termination of the services of Executive.
12. Arbitration. Any dispute or controversy arising out of or
relating to this Employment Agreement or any claimed breach hereof shall be
settled, at the request of either party, by an arbitration proceeding conducted
in accordance with the rules of the American Arbitration Association ("AAA"),
with the award determined to be appropriate by the arbitrator therein to be
final, non-appealable and binding on the parties hereto, and with judgment upon
such award as is rendered in any such arbitration proceeding available for
entry and enforcement in any court having jurisdiction of the parties hereto.
16
<PAGE> 17
The arbitrator shall be an impartial arbitrator qualified to serve in
accordance with the rules of the AAA and shall be reasonably acceptable to each
of the Employer and the Executive. If no such acceptable arbitrator is so
appointed within 15 days after the initial request for arbitration of such
disputed matter, each of the parties promptly shall designate a person
qualified to serve as an arbitrator in accordance with the rules of the AAA,
and the two persons so designated promptly shall select the arbitrator from
among those persons qualified to serve in accordance with the rules of the AAA.
The arbitration shall be held in the greater Washington metropolitan area, or
in such other place as may be agreed upon at the time by the parties. The
expenses of the arbitration proceeding shall be borne by Employer, but the
arbitrator's award may provide that Executive shall reimburse Employer for an
equitable share of such expenses if Executive is not the prevailing party on
any of the issues involved in such arbitration. The Employer shall pay for and
bear the cost of its own and Executive's experts, evidence and counsel in such
arbitration proceeding, but the arbitrator's award may provide that, in
addition to any other amounts or relief due to Employer, Executive shall
reimburse Employer on demand for all of such costs of Executive's experts,
evidence and counsel initially incurred by Employer, to the extent the award
finds such costs properly allocable to any issue(s) in dispute as to which the
award indicates the Employer to be the prevailing party.
13. Indemnification.
a. Employer shall indemnify Executive to the fullest extent
permitted by Delaware law as in effect on the date hereof against all costs,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, penalties and amounts paid in settlement) reasonably incurred
by Executive in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative in which Executive is made, or is
threatened to be made, a party to or a witness in such action, suit or
proceeding by reason of the fact that he is or was an officer, director,
consultant, agent or Executive of the Employer or of any of Employer's
controlled affiliates or is or was serving as an officer, consultant director,
member, Executive, trustee, agent or fiduciary of any other entity at the
request of the Employer (a "Proceeding").
b. Employer shall advance to Executive all reasonable costs and
expenses incurred by him in connection with a proceeding within 20 days after
receipt by Employer of a written request for such advance, accompanied by an
itemized list of the costs and expenses and Executive's written undertaking to
repay to Employer on demand the amount of such advance if it shall ultimately
be determined that Executive is not entitled to be indemnified against such
costs and expenses.
c. The indemnification provided to Executive hereunder is in
addition to, and not in lieu of, any additional indemnification to which he may
be entitled pursuant to Employer's Certificate of Incorporation or Bylaws, any
insurance maintained by Employer from time to time providing coverage to
Executive and other officers and directors of Employer, or any separate written
agreement with Executive. The provisions of this paragraph 13 shall survive
any termination of this Employment Agreement.
17
<PAGE> 18
14. Amendment and Modification. This Employment Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof, and supersedes any and all prior agreements, arrangements or
understandings between the parties hereto with respect to the subject matter
hereof, whether written or oral, including, without limitation, that certain
letter from Employer to Executive dated March 3, 1996, acknowledged and agreed
to by Executive on such date and any other prior agreement, written or oral,
setting forth terms and conditions applicable to Executive's employment by
Employer. Subject to applicable law and upon the consent of the Board of
Directors of Employer, this Employment Agreement may be amended, modified and
supplemented by written agreement of Employer and Executive with respect to any
of the terms contained herein.
15. Waiver of Compliance. Any failure of either party to comply with
any obligation, covenant, agreement or condition on its part contained herein
may be expressly waived in writing by the other party, but such waiver or
failure to insist upon strict compliance shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf of any party,
such consent shall be given in writing.
16. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand, sent by registered or
certified U.S. Mail, postage prepaid, commercial overnight courier service or
transmitted by facsimile and shall be deemed served or delivered to the
addressee at the address for such notice specified below when hand delivered,
upon confirmation of sending when sent by fax, on the day after being sent when
sent by overnight delivery or five (5) days after having been mailed, certified
or registered, with postage prepaid:
<TABLE>
<CAPTION>
If to Employer: If to Executive:
-------------- ---------------
<S> <C>
Nextel Communications, Inc. Daniel Akerson
1505 Farm Credit Drive 1100 Mill Ridge
McLean, VA 22102 McLean, VA 22102
ATTN: General Counsel Facsimile: (703) 442-0217
Facsimile: (703) 394-3001
</TABLE>
or, in the case of either such party, to such substitute address as such party
may designate from time to time for purposes of notices to be given to such
party hereunder, which substitute address shall be designated as such in a
written notice given to the other party addressed as aforesaid.
17. Assignment. This Employment Agreement shall inure to the benefit
of Executive and Employer and be binding upon the successors and general
assigns of
18
<PAGE> 19
Employer. This Employment Agreement shall not be assignable, except to the
extent set forth in paragraph 20.
18. Enforceability. In the event it is determined that this
Employment Agreement is unenforceable in any respect, it is the mutual intent
of the parties that it be construed to apply and be enforceable to the maximum
extent permitted by applicable law.
19. Applicable Law. This Employment Agreement shall be construed and
enforced in accordance with the laws applicable to contracts executed,
delivered and fully to be performed in the Commonwealth of Virginia.
20. Beneficiaries: Executive's Representative. Executive shall be
entitled to select (and to change, from time to time, except to the extent
prohibited under any applicable law) a beneficiary or beneficiaries to receive
any payments, distributions or benefits to be made or distributed hereunder
upon or following Executive's death. Any such designation shall be made by
written notice to Employer. In the event of Executive's death or of a judicial
determination of Executive's incompetence, references in this Agreement to
Executive shall be deemed, as appropriate, to refer to his designated
beneficiary, to his estate or to his executor or personal representative
("Executive's Representative") solely for the purpose of providing a clear
mechanism for the exercise of Executive's rights hereunder in the case of
Executive's death or Permanent Disability.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement to be effective on and as of the day and year first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ Thomas J. Sidman
-------------------------------
Name: Thomas J./Sidman
---------------------
Title: Vice President
---------------------
/s/ Daniel Akerson
-------------------------------
Daniel Akerson
19
<PAGE> 20
ANNEX A
To Employment Agreement between
Nextel Communications, Inc.
and Daniel F. Akerson to be effective as of March 5, 1996
The Inducement Options shall be granted as follows:
Non-qualified options to acquire 1,000,000 shares of Employer Class A
Common Stock awarded on ________, 1997. The Inducement Options shall vest in
full on March 5, 2006, subject to earlier vesting as provided below. The
exercise price of the Inducement Options is $14.75 per share.
All Inducement Options shall, to the extent not theretofore vested in
accordance with their normal terms, vest on an automatic and accelerated basis
(i) in full upon the occurrence of a Change of Control Event, or (ii) to the
extent indicated in connection with the Inducement Option Exercise Right as
described in paragraph 4(c)(ii) of the Employment Agreement.
All Inducement Options (upon vesting) will have an exercise period of ten
(10) years after the relevant grant date subject to earlier termination of the
exercise period in the event of termination of Executive's employment either
(i) by Employer in circumstances constituting Cause or (ii) by Executive other
than in circumstances constituting Constructive Termination or (iii) as
otherwise provided in connection with the Inducement Option Exercise Right as
set forth in subparagraph 4(c)(iv) of the Employment Agreement; in any such
case the Inducement Options shall be canceled if not exercised within the time
prescribed with respect to such termination.
All Inducement Options (and all shares issued on exercise of such
Inducement Options) will be subject to an effective Form S-8 (or other
appropriate form) registration statement and will be qualified for the
treatment afforded under Rule 16b-3.
To the extent not otherwise provided above, or in the Employment Agreement
of which this Annex A forms a part, the terms applicable to all of the
Inducement Options (and of any option agreement entered into in connection
therewith) shall be the standard terms normally applicable to a grant of
"non-qualified" stock options granted pursuant to the Nextel Communications,
Inc. Incentive Equity Plan.
20
<PAGE> 21
ANNEX B
To Employment Agreement between
Nextel Communications, Inc.
and Daniel F. Akerson to be effective as of March 5, 1996
The Special Bonus shall be paid to Executive in full on or prior to April
5, 2006, provided Executive's employment with the Company remains in effect on
March 5, 2006; provided, that following a Change of Control Event, the Special
Bonus shall be paid to Executive in full on the later of (i) thirty days after
the occurrence of such Change of Control Event and (ii) the day on which
Executive exercises all 1,000,000 of the Inducement Options that have vested by
reason of such Change of Control Event. The Special Bonus shall not be paid or
payable, in whole or in part, under any other circumstances except as
specifically provided above, including the termination of Executive's
employment under the Employment Agreement for any other reason. The Special
Bonus, when payable, shall be paid in cash but shall be paid less appropriate
deductions for federal, state and local income taxes, FICA contributions, and
any other deductions required by law or authorized by Executive; provided that,
at the discretion of the Operations Committee, Executive may satisfy such
withholding obligations and authorizations and pay the related amounts so
deducted either in cash or by delivery to the Company of a number of shares of
Common Stock (or proceeds from the sale thereof) having a Fair Market Value
equal to such withholding amount (which delivery may be made by an instruction
to the Company to retain shares of Common Stock that would then otherwise be
distributable to Executive or by an instruction to a broker then selling shares
of Common Stock on behalf of Executive to remit the appropriate amount of sales
proceeds, otherwise distributable to Executive to the Company).
21
<PAGE> 22
ANNEX C.
To Employment Agreement between
Nextel Communications, Inc.
and Daniel Akerson dated March 5, 1996
The Original Options shall be granted as follows:
Non-qualified options to acquire 1,000,000 shares of Employer Class A
Common Stock awarded on March 5, 1996. The Options shall vest annually in five
equal amounts on each of March 5, 1997, March 5, 1998, March 5, 1999, March 5,
2000 and March 5, 2001. The exercise price of the Options is $15.125 per share
(the average trading price on the date of grant).
All Original Options shall, to the extent not theretofore vested in
accordance with their normal terms, vest on an automatic and accelerated basis
(i) in the circumstances set forth in paragraphs 10(f) and (g) of the
Employment Agreement, or (ii) upon the occurrence of a Change of Control Event.
All Original Options (upon vesting) will have an exercise period of
ten (10) years after the relevant grant date subject to earlier termination of
the exercise period in the event of termination of Executive's employment
either (i) by Employer in circumstances constituting Cause or (ii) by Executive
other than in circumstances constituting Constructive Termination; in either of
which case, the Options shall be canceled if not exercised within 30 days
following the Termination Date with respect to such termination.
All Original Options (and all shares issued on exercise of such
Original Options) will be subject to an effective Form S-8 (or other
appropriate form) registration statement and will be qualified for the
treatment afforded under Rule 16b-3.
To the extent not otherwise provided above, or in the Employment
Agreement of which this Annex C forms a part, the terms applicable to all of
the Original Options (and of any option agreement entered into in connection
therewith) shall be the standard terms normally applicable to a grant of
"non-qualified" stock options granted pursuant to the Nextel Communications,
Inc. Incentive Equity Plan.
22
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into by and between Tim Donahue
("Executive") and Nextel Communications, Inc., a Delaware Corporation
("Employer"), to be effective on and as of February 1, 1996.
WITNESSETH:
WHEREAS, Employer is engaged in the business of acquiring and operating
800-900 MHz wireless business including trunked and conventional specialized
Mobile Radio ("SMR") licenses and facilities, community repeater facilities,
enhanced digital mobile SMR communications systems, and related assets (the "SMR
Business");
WHEREAS, Executive has skills and experience in wireless telephony
generally and the SMR Business specifically, and with the technology associated
with each; and
WHEREAS, Employer desires to obtain Executive's services for the conduct
of its SMR Business, and Executive desires to be employed in such SMR Business
by and for Employer;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, the parties hereto agree as follows:
1. Employment. Employer hereby employs Executive as the President and
Chief Operating Officer of Employer and Executive hereby accepts such employment
upon the terms and conditions hereinafter set forth.
2. Duties.
a. Executive shall perform his services as President and Chief
Operating Officer, under the supervision of the Chairman and Chief Executive
Officer and the Operations Committee of the Board of Directors (the "Operations
Committee")) of Employer and within the framework of the policies and objectives
of Employer. In such capacity, Executive (i) shall exercise general day-to-day
supervisory responsibility and operational and management authority over
Employer and its domestic officers and executives and all of its controlled
affiliates in the United States and their respective officers and executives,
(ii) shall provide advice and input to members of Employer's Board of
Directors and the Operations Committee and shall, at their request, attend all
meetings of the Board and the Operations Committee for that purpose, and (iii)
shall
<PAGE> 2
perform such other duties as may be assigned to him from time to time by the
Board of Directors or by the Chairman, or the Operations Committee consistent
with the typical duties of such positions.
b. Executive shall devote his entire business time, attention and
energies to the performance of his duties and functions under this Employment
Agreement and shall not during the term of his employment hereunder be engaged
in any other substantial business activity for gain, profit or other pecuniary
advantage which materially interferes with the performance of his duties
hereunder. Executive shall faithfully, loyally and diligently perform his
assigned duties and functions and shall not engage in any activities whatsoever
which conflict with the objectives of Employer's SMR Business during the term of
his employment hereunder.
c. Employer shall furnish Executive with such facilities at
Employer's corporate headquarters location and services as are suitable to his
position and adequate for the performance of his duties and functions hereunder.
It is understood that Executive's "home base" location shall be at Employer's
principal Executive officers, which currently are located in Rutherford, New
Jersey, but are to be relocated to the Washington, D.C. area during 1996, or any
other location to which Employer shall determine to relocate, subject, however,
to the provisions of paragraph 10(c).
3. Term. The term of this Employment Agreement shall commence on the
effective date hereof and, unless terminated earlier pursuant to paragraph 10
hereof, shall continue until February 1, 1999 (the "Initial Term"), and
thereafter shall automatically continue unless and until such time as (i) either
party hereto notifies the other, upon twelve (12) months prior written notice
served no earlier than February 1, 1999, that this Employment Agreement will be
terminated at the expiration of such twelve-month notice period, or (ii)
Executive's employment is otherwise terminated pursuant to paragraph 10 hereof
(the "Extended Term") (the Initial Term, together with the Extended Term, if
any, being referred to herein as the "Employment Term").
4. Compensation. Employer shall pay to Executive, as compensation for
the services agreed to be rendered by Executive hereunder, the following:
a. Base Salary. During the Employment Term, the Company shall pay to
Executive a salary of $275,000 per annum; provided that the amount of such base
salary may, in Employer's sole discretion, be reviewed and adjusted by Employer
from time to time during the Employment Term in light of the conditions then
existing and the services then being rendered by Executive, in which case
Executive's base salary shall be such higher amount as may be determined by
Employer (such annual base salary, as in effect from time to time, being
referred to herein as the "Base Salary"). The Base Salary shall be payable in
accordance with Employer's normal payroll schedule, less
Page 2
<PAGE> 3
appropriate deductions for federal, state and local income taxes, FICA
contributions and any other deductions required by law or authorized by
Executive.
b. Commencement Bonus. In addition to the Base Salary, Executive
shall receive a commencement bonus (the "Commencement Bonus") of $300,000. The
Commencement Bonus, less appropriate deductions for federal, state, and local
income taxes, FICA contributions and any other deductions required by law or
authorized by Executive, shall be paid within thirty (30) days after the
execution hereof by Employer and Executive.
c. Annual Performance Bonus. In addition to the Base Salary,
Executive shall be entitled to receive an annual performance bonus (the "Annual
Bonus") for each year of service (or any part thereof in the event of
termination of Executive's employment hereunder, in which case the Annual Bonus
shall be prorated for such partial year) during the Employment Term (each such
year or any partial such year being referred to as an "Annual Bonus Period"), in
such amount, if any, as may be determined by the Operations Committee and/or the
Board of Directors in their discretion; provided that, for the first Annual
Bonus Period of the Initial Term, the Annual Bonus shall be in an amount equal
to 75% of the Base Salary payable during such Annual Bonus Period. Each Annual
Bonus shall be payable in accordance with Employer's normal annual bonus payment
schedule, less appropriate deductions for federal, state, and local income
taxes, FICA contributions and any other deductions required by law or authorized
by Executive.
d. Long Term Performance Bonus. Subject to the provisions of
paragraph 10, Executive shall be entitled to receive a performance bonus in the
amount $1,600,000 (the "Long-Term Bonus"), to be paid on such date as may be
designated by Executive pursuant to the following sentence, which day shall be a
normal business day of Employer that is not earlier than January 31, 1999 and
not later than January 3, 2000. Not later than seven days prior to the requested
payment date, Executive shall elect, by irrevocable written notice to Employer
(the "Bonus Election Notice"), either (i) to accept payment of such Long-Term
Bonus in cash, in which case (A) the Long-Term Bonus shall be payable to
Executive on the requested payment date, less appropriate deductions for
federal, state and local income taxes, FICA contributions and any other
deductions required by law or authorized by Executive, and (B) all of the
Tranche II Options (as described in Annex A attached hereto) automatically shall
expire and be canceled upon delivery of such notice; or (ii) to waive his right
to receive payment of the Long-Term Bonus, in which case (C) all of the Tranche
II Options automatically shall vest and thereafter remain in full force and
effect in accordance with their terms and (D) thereupon all of Executive's
rights or claims to receive the Long-Tem Bonus shall terminate. If Executive
fails to deliver the Bonus Election Notice to Employer by
Page 3
<PAGE> 4
December 27, 1999, Executive shall be deemed to have made the election described
in the foregoing clause (ii).
e. Loan. In the event the currently outstanding, interest-free loan
made by AT&T to Executive ("AT&T Loan") is not forgiven or otherwise paid other
than by Executive, a subsidiary of Employer will, upon Executive's prior written
request, make an interest-free loan to Executive in the amount of $400,000 for
the purpose of repaying the AT&T Loan (the "Nextel Loan"). To the extent
federal, state or local income taxes are payable by Executive with respect to
any imputed interest on the Nextel Loan, Employer shall, prior to the date any
such income tax is payable by Executive, promptly make an additional lump sum
payment in cash to Executive in an amount sufficient to make Executive whole
with respect to all such taxes attributable to any such imputed interest on the
Nextel Loan. The entire outstanding principal amount of the Nextel Loan shall be
due and payable on the earlier to occur of (i) the fifth anniversary of the date
of this Agreement; or (ii) if this Employment Agreement shall be terminated by
Employer as permitted pursuant to subparagraph 10(b), or by Executive other than
as permitted pursuant to subparagraph 10(c), in either case prior to such
five-year anniversary date, the Nextel Loan shall be immediately due and payable
in full by Executive to the Nextel subsidiary upon such termination; provided
that, if Executive's employment hereunder is continuing on such five-year
anniversary date, the entire outstanding principal amount of the Nextel Loan
shall be forgiven by the Nextel subsidiary on such date; and provided further
that if Executive's employment is terminated by Employer other than for Cause
(as defined in subparagraph 10(b)) prior to the fifth anniversary of the
effective date of this Agreement, a fraction of the Nextel Loan shall be
forgiven by the Nextel subsidiary, the numerator of which fraction shall be the
number of entire months that have elapsed from the effective date of this
Agreement to the effective date of such termination, and the denominator of
which fraction shall be sixty (60). The Nextel Loan shall be secured by a second
mortgage on the residence of Executive currently located in the Washington, D.C.
area.
f. Options. Effective on and as of January 22, 1996 (the date on
which the Operations Committee approved Executive's employment on the terms and
conditions set forth herein), the Compensation Committee of the Board of
Directors of Employer authorized the grant to Executive, pursuant to Employer's
Incentive Equity Plan, of options to acquire 400,000 shares of Employer's Class
A voting common stock on the terms set forth in Annex A hereto (the "Original
Options"). Promptly following the effective date hereof, Employer shall take or
cause to be taken such other or further actions as may be necessary in order to
effectuate such grant of the Options to Executive. From time to time during the
Employment Term, Employer in its sole discretion, may grant Additional Options
to Executive ("Additional Options"). Except as otherwise provided herein, the
terms and conditions of such Additional Options shall
Page 4
<PAGE> 5
be as determined by Employer in its sole discretion. Such Additional Options
together with the Original Options shall be referred to collectively herein as
the "Options."
5. Benefits. During the Employment Term, Executive shall be entitled
to participate in all group health, major medical, pension and profit sharing,
401(k) and other benefit plans maintained by Employer and provided generally to
its executive officers, on the same terms as apply to participation therein by
management generally. Further, during the Employment Term, Executive shall be
entitled to participate in all fringe benefit programs and shall receive all
perquisites if and to the extent that Employer establishes and makes available
to management generally, including, but not limited to, Employer-paid long-term
disability insurance and life insurance coverage.
6. Expenses. During the Employment Term, Employer shall reimburse
Executive for all reasonable travel, entertainment and other business expenses
incurred or paid by Executive in performing his duties and functions hereunder.
In particular, Employer agrees to provide Executive with $73, 613 in moving
expenses in connection with Executive's required relocation to the Washington
D.C. area for the real estate commission, real estate transfer taxes and
attorneys' fees in connection with the sale of Executive's home in New Jersey
and the loan origination fee and other closing fees in connection with the
purchase of a new residence in the Washington D.C. area. Additionally, Employer
agrees to reimburse Executive for reasonable attorneys fees in connection with
the preparation of this Agreement not to exceed $5,000.
7. Vacations. In addition to such holidays, sick leave and personal
time off as is allowed under the policies of Employer to management generally,
Executive shall be entitled during each twelve-month period during the
Employment Term to twenty (20) days of vacation, with full pay. The duration of
such vacations and the time or times when they shall be taken will be determined
by Executive in consultation with Employer. Such vacation time shall be accrued
at a uniform rate during each such twelve-month period and shall, to the extent
unused during any such twelve-month period, be carried over to succeeding
twelve-month periods; provided, however, that the maximum amount of vacation
that Executive may accrue and carry forward in any twelve-month period is ten
(10) days of vacation time. In addition to such other amounts as may be payable
pursuant to paragraph 10 below, Executive shall receive, within thirty days
after his employment hereunder terminates for any reason a payment (based on
Executive's Base Salary in effect at the time of such termination of employment)
for all of Executive's then accrued but unused vacation time.
8. Non-Competition. During the Employment Term and (except as
provided in paragraph 10 herein) for a period of two years thereafter, Executive
shall not enter into or participate in any business competitive to the SMR
Business carried on by Employer; provided that this paragraph 8 shall not
prohibit Executive, following the
Page 5
<PAGE> 6
term of his employment hereunder, from engaging in any wireless
telecommunications business other than SMR Business in any manner not involving
a breach of Executive's obligations pursuant to paragraph 9 herein. The
provisions of this paragraph 8 shall survive the expiration and/or termination
of this Employment Agreement.
9. Confidential Information. During the Employment Term and for a
period of two years thereafter, Executive will not use for his own advantage or
disclose any propriety or confidential information relating to the business
operations or properties of Employer, any affiliate of Employer or any of their
respective customer, suppliers, landlords, licensors or licensees. Upon the
expiration or termination of the Employment Term, Executive will surrender and
deliver to Employer all proprietary or confidential information of every kind
relating to or connected with Employer and its affiliates and their respective
businesses, customers, suppliers, landlord, licensors and licensees. The
foregoing confidential information provisions shall not apply to information
which: (i) is or becomes publicly known through no wrongful act of the
Executive; (ii) is rightfully received from any third party without restriction
and without breach by Executive of this Employment Agreement; or (iii) is
independently developed by Executive after the term of his employment hereunder
or is independently developed by a competitor of Employer at any time. The
provisions of this paragraph 9 shall survive the expiration and/or termination
of this Employment Agreement.
10. Termination.
a. Automatic Termination Upon Death. In the event of Executive's
death during the Employment Term, Executive's employment hereunder shall be
automatically terminated upon the date of death. As soon as reasonably
practicable following Executive's death, Employer shall pay to Executive's
estate (i) Executive's accrued but unpaid Base Salary, through the last day of
the month of this death, (ii) the unpaid amount of the Long-Term Bonus, if and
to the extent that Executive theretofore has submitted the Bonus Election Notice
to Employer pursuant to subparagraph 4(d) electing to be paid the Long-Term
Bonus, and (iii) any amount due hereunder for accrued but unused vacation time
as of the date of death. If Executive's employment hereunder is terminated as a
result of Executive's death at any time before he has submitted the Bonus
Election Notice pursuant to subparagraph 4(d), all of Executive's rights or
claims to elect to receive the Long-Term Bonus shall terminate immediately, and
Executive's estate shall have the vested right to retain the Tranche II options
and to exercise them in accordance with their terms.
b. Termination by Employer. During the Initial Term, the Employer
shall be entitled to terminate, without liability, Executive's employment
hereunder only upon the establishment of "Cause" or the "Permanent Disability"
of Executive (as those terms are defined below) by giving written notice to that
effect to Executive. During
Page 6
<PAGE> 7
any Extended Term, Employer shall be entitled to terminate, without liability,
Executive's employment hereunder (i) upon the establishment of Cause or the
Permanent Disability of Executive, by giving written notice to that effect to
Executive, or (ii) for any other reason or for no reason upon twelve months
prior written notice to Executive.
For purposes hereof, the term "Cause" means either (1) Executive's
failure to substantially perform his duties and functions as contemplated
hereunder, if such failure constitutes gross neglect or willful malfeasance; (2)
Executive's committing fraud or embezzlement or otherwise engaging in conduct
that results in Executive being convicted of a felony; (3) Executive's acting in
an intentional manner which is reasonably likely to be materially detrimental or
damaging to Employer's reputation, business, operations or relations with its
employees, suppliers or customers, without taking reasonable steps to remedy
such actions within three (3) days after receiving written notice thereof from
Employer; (4) Executive's habitual abuse of alcohol or prescription drugs or
abuse of controlled substances; or (5) Executive's committing any other material
breach of this Employment Agreement without taking reasonable steps to cease or
remedy such breach within thirty (30) days after Executive's receipt of written
notice from Employer specifically identifying the nature of and circumstances
relevant to any such claimed material breach by Executive.
For purposed hereof, the term "Permanent Disability" means: (i)
Executive's failure to devote full normal working time as required herein to his
employment hereunder for a period of at least 30 consecutive normal business
days (or for at least a majority of the normal business days in any consecutive
ninety-day period); and (ii) the existence of an illness or incapacity (either
physical or mental) affective Executive which, in the reasonable opinion of a
Qualified Physician, is likely to be of such character or severity that
Executive would be unable to resume devoting his full normal working time as
required herein to his employment hereunder for a period of at least six
consecutive months. The term "Qualified Physician" means an impartial physician
competent to diagnose and treat the illness or condition which Executive is
believed to be suffering, selected by Employer and reasonably acceptable to
Executive (or if Executive is then incapable of acting for himself, Executive's
personal representative), who shall have personally examined Executive and shall
have personally reviewed Executive's relevant medical records; provided Employer
shall bear the costs of such Qualified Physician's services and Executive agrees
to submit to an examination by such Qualified Physician and to the disclosure of
Executive's relevant medical records to such Qualified Physician.
The date upon which any termination effected pursuant to this
subparagraph 10(b) shall be effective is set forth in subparagraph 10(d), and
the effect of any such termination shall be as described in subparagraphs 10(c)
and (f).
Page 7
<PAGE> 8
c. Termination by Executive. During the Initial term, Executive
shall be entitled to terminate, without liability, his employment hereunder only
upon the establishment of "Good Reason" or "Constructive Termination" (as those
terms are defined below) by giving written notice to that effect to Employer.
During any Extended Term, Executive shall be entitled to terminate, without
liability, his employment hereunder (i) upon the establishment of Good Reason or
Constructive Termination by giving notice to that effect to Employer or (ii) for
any other reason or for no reason upon twelve months prior written notice to
Employer.
For purposes hereof, the term "Good Reason" shall mean Executive's
termination of his employment hereunder as direct result of a material
relocation by Employer of the business site where Executive performs his
principal job responsibilities or duties hereunder, other than the current
headquarters in Rutherford, New Jersey or the planned relocation to the
Washington, D.C. area.
For purposed hereof, "Constructive Termination" shall mean
Executive's termination of his employment hereunder as a direct result of (i) a
reduction in Executive's initial Base Salary or in the maximum permitted Annual
Bonus percentage, (ii) a material change in the nature or extent of Executive's
responsibilities that is inconsistent with Executive's intended position and
status hereunder, or (iii) the material breach by the Employer of any provision
of this Agreement which continues without reasonable steps being taken to cure
such breach for a period of 30 days after written notice thereof by Executive to
Employer.
The date upon which any termination effected pursuant to this
subparagraph 10(c) shall be effective is set forth in subparagraph 10(d), and
the effect of any such termination shall be as described in subparagraphs 10(f)
and (g).
d. Termination Date. In the event Executive's employment
hereunder is terminated for circumstances constituting Cause, Permanent
Disability, Good Reason, or Constructive Termination, such termination shall
take effect upon the termination date set forth in the written notice to that
effect given by Executive to Employer or by Employer to Executive, as the case
may be (provided that if either party disputes the propriety of such
termination, the effective date of termination shall be as established by final
resolution of such dispute, whether by agreement of the parties or award of an
arbitrator as contemplated herein, in favor of the propriety of such
termination), and in any other case termination of Executive's employment
hereunder shall take effect on the date specified in the written notice thereof
delivered by Executive to Employer or by Employer to Executive, as the case may
be, (the date on which any such termination takes effect being referred to
herein as the "Termination Date"). Employer, at its option, may require
Executive to continue to perform his duties hereunder until the Termination Date
or pay to Executive such amount of compensation and benefits
Page 8
<PAGE> 9
otherwise due hereunder in accordance with Employer's then existing salary
payment schedule or in one lump sum payment.
e. Effect of Termination by Employer For Cause. In the event
Executive's employment is terminated by Employer for Cause at any time during
the Employment Term, then (i) Employer shall pay to Executive (A) Executive's
accrued but unpaid Base Salary through the Termination Date, and (B) any amount
due hereunder for accrued but unused vacation time as of the Termination Date;
(ii) all of Executive's rights or claims to elect to receive the Long-Term Bonus
or to retain the Tranche II Options pursuant to subparagraph 4(d) hereof shall
terminate automatically shall expire; and (iii) notwithstanding any of the
provisions of Employer's Incentive Equity Plan or of any option agreement with
respect thereto to the contrary, any and all of the Options that theretofore
have vested may be exercised at any time on or before the thirtieth day
following such Termination Date and, if not so exercised, thereupon
automatically shall be canceled.
f. Effect of Termination for Good Reason or Upon Permanent
Disability In the event Executive's employment is terminated at any time during
the Employment Term by Executive in circumstances constituting Good Reason, or
by Employer upon the Permanent Disability of Executive, in either case, then:
(A) Employer shall pay to Executive (I) Executive's
accrued but unpaid Base Salary through the Termination Date, (II) an amount
equal to 12 months of Executive's then existing Base Salary from the date
written notice of the termination of Executive's employment is given by
Employer, (III) the unpaid amount of the Long-Term Bonus, if and to the extent
that Executive theretofore has submitted the Bonus Election Notice to Employer
pursuant to subparagraph 4(d) electing to be paid the Long-Term Bonus, and (IV)
any amount due hereunder for accrued but unused vacation time as of the
Termination Date.
(B) Employer, at its expense, shall make all benefit
payments, on behalf of Executive and Executive's dependents, for such benefits
Executive otherwise would have been entitled to receive hereunder, for 12 months
following the date written notice of the termination of Executive's employment
is given by Employer.
(C) If the Termination Date occurs prior to such time as
Executive shall have submitted (or have been deemed to have submitted) the Bonus
Election Notice, Executive shall have the right to elect, by written notice
delivered to Employer within ten days following the Termination Date, either to
receive payment of the Long-Term Bonus and to forfeit the Tranche II Options
(all of which shall automatically expire upon such election) or to forgo the
Long-Term Bonus and retain the Tranche II Options (all of which shall vest upon
such election). If Executive fails
Page 9
<PAGE> 10
to deliver the Bonus Election Notice to Employer within such ten-day period,
Executive shall be deemed to have made the election to forego the Long-Term
Bonus and retain the Tranche II Options.
(D) With respect to any of the Options which remain
unvested upon such Termination Date, notwithstanding any provision to the
contrary in Employer's Incentive Equity Plan and/or any stock option agreement
with respect thereto, there shall be immediate vesting of that portion of the
unvested Options which would have vested within 12 months of the date written
notice of the termination of Executive's employment is given by Employer. After
giving effect to the foregoing sentence, any Options which remain unvested shall
automatically terminate.
g. Effect of Wrongful or Constructive Termination
(i) In the event Executive's employment is terminated
during the Initial Term or the Extended Term, if any, by Executive in
circumstances constituting Constructive Termination, or by Employer in any
circumstances other than those permitted pursuant to subparagraph 10(b), and
from and after such Termination Date, (A) Executive shall not be subject to the
non-competition provisions set forth in paragraph 8 hereof, and (B) Executive
shall be entitled to receive the Base Salary, Long-Term Bonus (determined
according to the last sentence of this clause g(i), benefits, and other
treatment (including, without limitation, vesting and exercise terms for all of
the Options, subject to the last sentence of this clause g(i)), which Executive
reasonably would have expected to receive in the period from the Termination
Date to the expiration of the Initial Term (if such Termination Date occurs more
than 12 months prior to the expiration of the Initial Term) or during the 12
months following the date written notice of the termination of Executive's
employment is given by Employer (if such Termination Date occurs after the
Initial Term) all of which shall become effective upon the Termination Date. If
the Termination Date occurs prior to such time as Executive shall have submitted
(or have been deemed to have submitted) the Bonus Election Notice, Executive
shall have the right to elect, by written notice delivered to Employer within
ten days following the Termination Date, either to receive payment of the
Long-Term Bonus and to forfeit the Tranche II Options (all of which shall
automatically expire upon such election) or to forego the Long-Term Bonus and
retain the Tranche II Options (all of which shall vest upon such election). If
Executive fails to deliver the Bonus Election Notice to Employer within such
ten-day period, Executive shall be deemed to have made the election to forego
the Long-Term Bonus and retain the Tranche II Options.
(ii) In the event Executive's employment is terminated
during the Initial Term or the Extended Term, if any, by Executive in any
circumstances other than those permitted pursuant to subparagraph 10(c),
Executive shall forfeit any and all
Page 10
<PAGE> 11
rights and claims hereunder which have not theretofore vested, including any
rights or claims with respect to the Long-Term Bonus and/or the Tranche II
Options.
h. Excess Parachute Payment. In the event that Employer treats any
portion of Executive's payments or benefits hereunder (including, without
limitation, under the foregoing subparagraphs 10(i) and (g) as an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code ("Code") or any comparable provision of state or local tax law, or it is
otherwise asserted (including on an audit of either Employer or Executive) that
any portion of such payments or benefits is such an "excess parachute payment,"
Employer shall prior to the date on which any amount of excise tax (or penalty
or interest) must be paid in respect thereof, promptly make an additional lump
sum payment in cash to Executive in an amount sufficient, after giving effect to
all federal, state and other taxes and charges (including interest and
penalties, if any) with respect to such payment to make Executive whole for all
taxes (including withholding and social security taxes) imposed under Section
4999 of the Code, or any comparable provision of state or local tax law, with
respect to the "excess parachute payment" and all associated interest and
penalty amounts. Executive shall cooperate with Employer to minimize any such
tax liability.
i. Miscellaneous. In the event of any termination or attempted
termination hereof: (i) if multiple events, occurrences or circumstances are
asserted as bases for such termination or attempted termination, the event,
occurrence or circumstance that is earliest in time, and any termination or
attempted termination found to be proper hereunder based thereon, shall take
precedence over the others; (ii) no termination of this Employment Agreement
shall relieve or release either party from liability hereunder based on any
breach of the terms hereof by such party occurring prior to the Termination
Date; (iii) the terms of this Employment Agreement relevant to performance or
satisfaction of any obligation hereunder expressly remaining to be performed or
satisfied in whole or in part at the Termination Date shall continue in force
until such full performance or satisfaction has been accomplished and otherwise
neither party hereto shall have any other or further remaining obligations to
other party hereunder; and (iv) the vesting and exercise provisions set forth in
Employer's Incentive Equity Plan and/or any option agreement with respect to the
Options shall continue to apply except to the extent otherwise expressly
provided in this paragraph 10 or in Annex A hereto.
j. No Set-off. There shall be no right of setoff or counterclaim,
in respect of any actual or alleged claim, debt or obligation, against any
payments or benefits required to be made or provided to Executive hereunder
(including, without limitation, pursuant to subparagraphs 10(f) and (g) above).
Page 11
<PAGE> 12
11. Injunctive Relief. It is agreed that the services of Executive are
unique and that any breach or threatened breach by Executive of any provision of
this Employment Agreement cannot be remedied solely by damages. Accordingly, in
the event of a breach by Executive of his obligations under this Employment
Agreement, Employer shall be entitled to seek and obtain interim restraints and
permanent injunctive relief without proving the inadequacy of damages as a
remedy, restraining Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or attempted breach. Nothing
herein, however, shall be construed as prohibiting Employer from pursuing any
other remedies available at law or in equity for such breach or threatened
breach, including the recovery of damages and the termination of the services of
Executive.
12. Arbitration. Any dispute or controversy arising out of or relating
to this Employment Agreement or any claimed breach hereof shall be settled, at
the request of either party, by an arbitration proceeding conducted in
accordance with the rules of the American Arbitration Association ("AAA"), with
the award determined to be appropriate by the arbitrator therein to be final,
non-appealable and binding on the parties hereto, and with judgment upon such
award as is rendered in any such arbitration proceeding available for entry and
enforcement in any court having jurisdiction of the parties hereto. The
arbitrator shall be an impartial arbitrator qualified to serve in accordance
with the rules of the AAA and shall be reasonably acceptable to each of the
Employer and the Executive. If no such acceptable arbitrator is so appointed
within 15 days after the initial request for arbitration of such disputed
matter, each of the parties promptly shall designate a person qualified to serve
as an arbitrator in accordance with the rules of the AAA, and the two persons so
designated promptly shall select the arbitrator from among those persons
qualified to serv e in accordance with the rules of the AAA. The arbitration
shall be held in the city in which Employer's corporate headquarters are located
at the time of the initiation of any such proceedings, or in such other place as
may be agreed upon at the time by the parties. The expenses of the arbitration
proceeding shall be borne by Employer, but the arbitrator's award may provide
that Executive shall reimburse Employer for an equitable share of such expenses
if Executive is not the prevailing party on any of the issues involved in such
arbitration. The Employer shall pay for and bear the cost of its own and
Executive's experts, evidence and counsel in such arbitration proceeding, but
the arbitrator's award may provide that, in addition to any other amounts or
relief due to Employer, Executive shall reimburse Employer on demand for all of
such costs of Executive's experts, evidence and counsel initially incurred by
Employer, to the extent the award finds such costs properly allocable to any
issue(s) in dispute as to which the award indicates the Employer to be the
prevailing party.
13. Indemnification.
Page 12
<PAGE> 13
a. Employer shall indemnify Executive to the fullest extent
permitted by Delaware law as in effect on the date hereof against all costs,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, penalties and amounts paid in settlement) reasonably incurred
by Executive in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative in which Executive is made, or is
threatened to be made, a party to or a witness in such action, suit or
proceeding by reason of the fact that he is or was an officer, director,
consultant, agent or Executive of the Employer or of any Employer's controlled
affiliates or is or was serving as an officer, consultant director, member,
Executive, trustee, agent or fiduciary of any other entity at the request of the
Employer (a "Proceeding").
b. Employer shall advance to Executive all reasonable costs and
expenses incurred by him in connection with a proceeding within 20 days after
receipt by Employer of a written request for such advance, accompanied by an
itemized list of the costs and expenses and Executive's written undertaking to
repay to Employer on demand the amount of such advance if it shall ultimately be
determined that Executive is not entitled to be indemnified against such costs
and expenses.
c. The indemnification provided to Executive hereunder is in
addition to, and not in lieu of, any additional indemnification to which he may
be entitled pursuant to Employer's Certificate of Incorporation or Bylaws, any
insurance maintained by Employer from time to time providing coverage to
Executive and other officers and directors of Employer, or any separate written
agreement with Executive. The provisions of this paragraph 13 shall survive any
termination of this Employment Agreement.
14. Amendment and Modification. This Employment Agreement contains the
entire agreement between the parties with respect to the subject matter hereof.
Subject to applicable law and upon the consent of the Board of Directors of
Employer, this Employment Agreement may be amended, modified and supplemented by
written agreement of Employer and Executive with respect to any of the terms
contained herein.
15. Waiver of Compliance. Any failure of either party to comply with
any obligation, covenant, agreement or condition on its part contained herein
may be expressly waived in writing by the other party, but such waiver or
failure to insist upon strict compliance shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf of any party,
such consent shall be given in writing.
Page 13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective on and as of the day and year first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/Daniel F. Akerson
---------------------------
Name: Daniel F. Akerson
--------------------------
Title: Chairman/CEO
-------------------------
/s/Tim Donahue
-------------------------------
Tim Donahue
Page 14
<PAGE> 15
ANNEX A
To Employment Agreement between
Nextel Communications, Inc.
and Tim Donahue dated February 1, 1996
The Original Options shall be granted as follows:
Tranche 1 Options: Non-qualified options to acquire 300,000 shares of
Employer Class A Common Stock awarded on January 22, 1996. The Tranche 1 Options
shall vest equally over four (4) years (25% per year) on each of January 22,
1997, January 22, 1998, January 22, 1999 and January 22, 2000. The exercise
price of the Tranche 1 Options is $13.50 per share (the average trading price on
the date of grant).
Tranche II Options: non-qualified options to acquire 100,000 shares of
Employer's Class A Common Stock awarded on January 22, 1996. The Tranche II
Options shall vest 100% upon the election of Executive to waive the Long-Term
Bonus and retain the Tranche II Options pursuant to subparagraphs 4(c), 10(f) or
10(g) of the Employment Agreement. The exercise price of the Tranche II Options
is $13.50 per share (the average trading price on the date of grant).
All Tranche I Options shall, to the extent not theretofore vested in
accordance with their normal terms, vest on an automatic and accelerated basis
(i) in the circumstances set forth in paragraphs 10(f) and (g) of the Employment
Agreement, and (ii) upon a "change of control" as defined in the Employer
Incentive Equity Plan (such definition of change of control to include, without
limitation, the acquisition of 51% or more of the outstanding voting stock of
Employer by a person or related group as defined in Rule 13(d)(3) of the 1934
Act) or (iii) if the Operations Committee ceases to exist, representatives of
Digital Radio L.L.C. cease to control the Operations Committee, or Craig McCaw
ceases to own or control, directly or indirectly, a majority of the voting power
of Digital Radio L.L.C. or Eagle River, Inc.
All Original Options will have an exercise period of ten (10) years after
the relevant vesting date subject to earlier termination of the exercise period
in the event of termination of Executive's employment either (i) by Employer in
circumstances constituting Cause or (ii) by Executive other than in
circumstances constituting Good Reason or Constructive Termination; in either of
which case, the Options shall be canceled if not exercised within 30 days
following the Termination Date with respect to such termination.
Page 15
<PAGE> 16
All Original Options (and all shares issued on exercise of such Options)
will be subject to an effective Form S-8 (or other appropriate form)
registration statement and will be qualified for the treatment afforded under
Rule 16b-3.
To the extent not otherwise provided above, or in the Employment
Agreement of which this Annex A forms a part, the terms applicable to all the
Original Options (and of any option agreement entered into in connection
therewith) shall be the standard terms normally applicable to a grant of
"non-qualified" stock options pursuant to the Nextel Communications, Inc.
Incentive Equity Plan.
Page 16
<PAGE> 1
EXHIBIT 10.37
Page 1
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement ("Addendum") is entered
into by and between Tim Donahue ("Executive") and Nextel Communications,
Inc. ("Employer") this 24 day of March, 1997.
The parties hereto have entered into an Employment Agreement to
be effective on and as of February 1, 1996 ("Agreement"), setting forth
the terms and conditions applicable to Executive's employment by
Employer thereunder, and wish to set forth herein certain alternate
mutually agreeable arrangements which are intended to supplant and/or
modify certain of the provisions contained in the Agreement.
Accordingly, for good and valuable consideration had and received, the
parties hereby agree as follows:
1. Employer (on behalf of itself and its appropriate affiliates)
(" Nextel") hereby agrees, with and for the benefit of Executive, to
attempt in good faith to negotiate and enter into arrangements with AT&T
Wireless Inc. or its appropriate affiliates ("AT&T") providing for the
pre-payment of an aggregate amount of $300,000 of site rental payments
by Nextel to AT&T with respect to AT&T antenna sites as to which Nextel
is or becomes a tenant or as to which the applicable site sharing or
collocation arrangements provide for the making of rental payments by
Nextel to AT&T ("AT&T Sites"), subject to the understandings that (i)
the amount of such site rental payments shall be commercially
reasonable, (ii) Nextel shall be entitled to dollar for dollar credit
against rental payments as they accrue following the prepayment with
respect to such AT&T Sites, and Nextel shall not be obligated to make
any additional rental payments to AT&T with respect to such AT&T Sites
unless and until the full amount so prepaid has been so credited and
(iii) AT&T, simultaneously with such prepayment of site rental by
Nextel, shall fully and finally release and discharge Executive from any
and all liability with respect to an equivalent dollar amount of the
AT&T Loan (as defined in paragraph 4.e. of the Agreement) and shall
execute and deliver to each of Executive and Employer suitable
documentation to evidence such release and discharge. If the matters
described in the foregoing sentence are effected, Executive and Employer
agree that, for purposes of paragraph 4e. of the Agreement, Employer's
obligation to make an interest-free loan to Executive upon Executive's
prior written request shall be reduced in dollar amount from $400,000 to
$100,000 (and such lesser dollar amount so loaned shall be considered to
be the "Nextel Loan" referred to in the Agreement), there shall be no
purpose restrictions imposed on such loan, and the arrangements
contained in paragraph 4.e. of the Agreement with respect to payments in
respect of imputed interest on, repayment obligations concerning, full
or partial forgiveness contingencies affecting and security interests
relating to, the Nextel Loan shall be applicable to such loan
notwithstanding the reduction in its dollar amount. If the matters
described in the first sentence of this paragraph are not effected on or
prior to June 30, 1997 (or such later date as the parties may mutually
agree), this Addendum shall terminate and be of no further force or
effect, and the original provisions of paragraph 4.e. of the Agreement
shall continue in full force and effect unchanged hereby and as if this
Addendum had not existed.
<PAGE> 2
Page 2
2. Except as provided (and subject to the conditions on
effectiveness contained) in the foregoing paragraph 1, the Agreement is
not amended or modified by this Addendum in any respect and is intended
by the parties to continue in full force and effect. The parties intend
that this Addendum and the Agreement shall be construed together as a
single instrument.
3. This addendum shall take effect upon its execution and
delivery, subject, however, to the requirement contained in paragraph 14
of the Agreement that the consent of Employer's Board of Directors be
obtained, and Employer agrees with Executive to seek in good faith to
request and recommend that such consent be granted at the earliest
convenient opportunity.
IN WITNESS WHEREOF, the parties have executed this Addendum as of
the date and year first above written.
NEXTEL COMMUNICATIONS, INC.
/s/Thomas J. Sidman
-------------------------
/s/Timothy Donahue
-------------------------
Tim Donahue
<PAGE> 1
EXHIBIT 10.38
EXHIBIT E
DRAFT OF APRIL 4, 1995
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of July __, 1995 by and among Nextel Communications, Inc., a
Delaware corporation (the "Issuer"), and Digital Radio, L.L.C., a Washington
limited liability company (the "Investor"). Capitalized terms that are used
but not otherwise defined herein are defined in Section 1.1 hereof.
RECITALS
A. The Issuer, the Investor and Craig O. McCaw ("Individual")
are parties to a Securities Purchase Agreement dated as of April 4, 1995 (the
"Securities Purchase Agreement"), and pursuant to such Securities Purchase
Agreement the Issuer has issued or will issue (i) shares of Class A Common
Stock, par value $.001 per share, of the Issuer ("Issuer Common Shares"), to
Investor and (ii) is issuing to Investor units composed of (a) shares of
convertible preferred stock of the Issuer ("Issuer Preferred Shares") and (b)
options to purchase Issuer Common Shares (the "Unit Options").
B. Eagle River, Inc. ("Eagle River"), an Affiliate of
Investor, and Issuer are parties to a Management Support Agreement dated as of
April 4, 1995 (the "Management Agreement"), and pursuant to such Management
Agreement the Issuer has granted to Eagle River options to purchase Issuer
Common Shares as compensation and incentive for services provided by Eagle
River thereunder (the "Incentive Options", and, collectively with the Unit
Options, the "Options")
<PAGE> 2
C. Supplier and the Investor are parties to a Stock Purchase
Agreement dated as of April 4, 1995 (the "Supplier Stock Purchase Agreement"),
and pursuant to such Supplier Stock Purchase Agreement Supplier will sell to
Investor certain Issuer Common Shares (the "Secondary Common Shares") and will
issue to Investor an option (the "Supplier Option") to purchase Issuer Common
Shares held by Supplier (the "Secondary Option Shares").
D. The Issuer has agreed to provide to the Investor certain
registration rights with respect to (i) Issuer Common Shares that the
Investor and/or any of the Qualified Controlled Affiliates may purchase from
the Issuer or receive upon conversion of any of its Issuer Preferred Shares or
upon exercise of any of the Options and (ii) Secondary Common Shares that the
Investor and/or any of the Qualified Controlled Affiliates may purchase from
Supplier and Secondary Option Shares received upon exercise of the Supplier
Option (all Common Shares described above in this paragraph are herein referred
to as "Registrable Securities").
E. The Issuer and the Investor are entering into this
Agreement to set forth the terms and conditions applicable to the grant and
exercise of such registration rights.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
2
<PAGE> 3
ARTICLE 1
DEFINITIONS
1.1 As used in this Agreement, the following terms have
the following meanings:
(i) "Affiliate" means, as to any Person, another
Person that directly or indirectly through
one or more intermediaries, Controls, is
Controlled by or is under common Control
with, such Person. For the purposes of this
definition, "Control" when used with respect
to any Person, means the possession, directly
or indirectly, of the power to direct or
cause the direction of the management and
policies of such Person, whether through the
ownership of voting securities, by contract
or otherwise; the terms "Controlling" and
"Controlled" have meanings correlative to the
foregoing; provided, that the term
"Controlled Affiliate" as used herein
includes Individual and any Affiliate of
Individual that is, at the relevant time,
Controlled by Individual; and further
provided, that the Issuer and Investor shall
not be deemed to be direct or indirect
Affiliates of each other;
(ii) "Convertible Securities" means (i) any
rights, options or warrants to acquire Issuer
Common Shares and (ii) any notes, debentures,
shares of preferred stock or other securities
or rights which are convertible or
exercisable into, or exchangeable for, Issuer
Common Shares;
(ii) "Cutback Registration" means any registration
in which the managing underwriter advises the
Issuer that marketing factors require a
limitation of the number of Issuer Common
Shares to be underwritten in such
registration;
(iii) "Electing Holder" means any holder of Issuer
Common Shares other than holders of
Registrable Securities (in their respective
capacities as such), who has the right to
request inclusion of Issuer Common Shares
held by such holder in a registration;
3
<PAGE> 4
(iv) "holder of Registrable Securities" means any
of the Investor and any Qualified Controlled
Affiliate of the Investor which at the
relevant time is the holder of record of
Registrable Securities;
(v) "Person" means a corporation, association,
joint venture, partnership, limited liability
company, trust, business, individual,
government or political subdivision thereof,
or any governmental agency;
(vi) "Piggyback Registration" means any
registration which is not a Requested
Registration (other than a registration on
Form S-4 or Form S-8);
(vii) "Qualified Controlled Affiliate" means any
Controlled Affiliate, that has agreed, by a
written agreement in form and substance
reasonably satisfactory to the Issuer, to be
bound by all the Transaction Agreements (as
defined in the Securities Purchase Agreement)
with respect to its ownership of securities
of the Issuer as fully as if it were the
Investor;
(viii) "Register", "registered" and "registration"
refer to a registration of Issuer Common
Shares effected by preparing and filing a
registration statement in compliance with the
Securities Act of 1933, as amended ("the
Securities Act") and the declaration or
ordering of the effectiveness of such
registration statement;
(ix) "Registrable Securities" has the meaning
specified in Recital Paragraph D. of this
Agreement, but shall not include any other
Issuer Common Shares or other securities of
the Issuer which may now or hereafter be held
4
<PAGE> 5
or acquired by any holder of Registrable
Securities (provided that, as to any
particular securities, such securities will
cease to be Registrable Securities upon the
first to occur of the following: (i) they
have been sold to the public pursuant to a
registration or pursuant to Rule 144
promulgated by the Securities and Exchange
Commission (or any similar rule then in
force); (ii) with respect to Issuer Common
Shares issued upon exercise of the Incentive
Stock Options, to the extent they have been
previously registered if they may be resold
by the holder thereof without registration or
limitation; and (iii) they have been
exchanged, substituted or replaced by
securities which have been registered under
the Securities Act.) For all purposes of
this Agreement, a holder of Registrable
Securities shall be deemed to hold any
Registrable Securities issuable to such
holder upon conversion or exercise of, or in
exchange for, Convertible Securities of the
types described in Recital Paragraph D. of
this Agreement, disregarding any legal,
regulatory or contractual restrictions on
such conversion, exercise or exchange.
5
<PAGE> 6
(x) "Requested Registration" means a registration
requested by holders of Registrable
Securities pursuant to Section 2.2.
ARTICLE 2
REGISTRATION PROVISIONS
2.1 Piggyback Registration. If at any time, and from
time to time, the Issuer proposes to effect a Piggyback Registration for its
account or for the account of a security holder or holders, the Issuer shall:
(a) promptly give to each holder of Registrable
Securities written notice thereof (which written notice shall include a list of
the jurisdictions in which the Issuer intends to attempt to qualify such
securities under or otherwise comply with the applicable blue sky or other
state securities laws); and
(b) include in such registration (and any related
qualification under or other compliance with blue sky or other state securities
laws), and in any underwriting involved therein, all the Registrable Securities
specified in a written request, made within 15 days after receipt of such
written notice from the Issuer, by any holder of Registrable Securities;
provided that if such registration is a Cutback Registration, then (i) if such
registration is a primary registration on behalf of the Issuer, the Issuer
shall register in such registration (A) first, the Issuer Common Shares the
Issuer proposes to sell in such registration, and (B) second, the Registrable
Securities held by
6
<PAGE> 7
each holder of Registrable Securities and the Issuer Common Shares held by the
Electing Holders,
(1) if such Registrable Securities and/or Issuer Common Shares are
sought to be included in such registration pursuant to contractual
registration rights in existence on the date hereof, in accordance
with the respective contractual rights of the holders of such
Registrable Securities and/or Issuer Common Shares, and
(2) in all other cases, on a pro rata basis, based upon the number of
Issuer Common Shares the holder of Registrable Securities and any
Electing Holders originally sought to include in such registration,
and
(ii) if such registration is a Piggyback Registration which is solely a
secondary registration on behalf of holders of Issuer Common Shares, the Issuer
shall register in such registration (A) first, the Issuer Common Shares
proposed to be sold by the holders of Issuer Common Shares requesting such
registration (the "Demanding Holders"), and (B) second, the Registrable
Securities held by each holder of Registrable Securities and the Issuer Common
Shares held by the Electing Holders, other than the Demanding Holders,
(1) if such Registrable Securities and/or Issuer Common Shares are
sought to be included in such registration pursuant to contractual
registration rights in existence on the date hereof, in accordance
with the respective contractual rights of the holders of such
Registrable Securities and/or Issuer Common Shares, and
7
<PAGE> 8
(2) in all other cases, on a pro rata basis, based upon the number of
Issuer Common Shares each holder of Registrable Securities and such
Electing Holders originally sought to include in such registration.
2.2 Requested Registration.
(a) Request for Registration. If the Issuer shall
receive a written request from any holder of Registrable Securities that the
Issuer effect any registration (including any related qualification under or
compliance with blue sky or other state securities laws) with respect to all or
a part of the Registrable Securities owned by such holder, the Issuer shall
promptly give notice of such request to each other holder of Registrable
Securities. The Issuer shall thereupon promptly use its best efforts
diligently to effect such Requested Registration and related qualifications and
compliances (including, without limitation, the execution of an undertaking to
file post-effective amendments and appropriate qualifications under or other
compliance with the applicable blue sky or other state securities laws) as may
be requested by the holder of Registrable Securities who made the original
request and by the holders of Registrable Securities who make written request
to the Issuer within 20 days after the giving of the aforesaid notice by the
Issuer ("Requesting Holders") and as would permit or facilitate the sale and
distribution of all or such portion of the Registrable Securities as are
specified in any such request; provided that the Issuer shall not be obligated
to take any
8
<PAGE> 9
action to effect a Requested Registration or any related qualification or
compliance pursuant to this Section 2.2:
(i) if, within 60 days after receipt of the
initial request pursuant to this Section 2.2,
the Issuer shall elect to include in such
registration Issuer Common Shares for its own
account, whereupon the Issuer shall notify
each Requesting Holder that it has elected to
effect a Piggyback Registration and shall
thereafter diligently proceed to do so,
including therein the Registrable Securities
as to which notice was given by the
Requesting Holders pursuant to this Section
2.2 but subject to the limitations set forth
in Section 2.1;
(ii) if the Requesting Holders do not request to
include in such registration, in the
aggregate, at least 25% of the Registrable
Securities; or
(iii) if the Issuer has effected two Requested
Registrations on behalf of any holder of
Registrable Securities, which Requested
Registrations have been declared or ordered
effective (including qualification under or
other compliance with the state blue sky or
securities laws requested) and which
effectiveness has not been suspended or
9
<PAGE> 10
stopped by any governmental or judicial
authority.
If the Requested Registration is a Cutback Registration, the
Issuer shall register in such registration (1) first, the Registrable
Securities which any Requesting Holder seeks to include in such registration,
on a pro rata basis based upon the number of such Issuer Common Shares each
Requesting Holder seeks to include in such registration and (2) second, the
Issuer Common Shares held by each Electing Holder, (i) if such Issuer Common
Shares are sought to be included in such registration pursuant to contractual
obligations of the Issuer in existence on the date hereof, in accordance with
the respective contractual rights of the holder of such Issuer Common Shares,
and (ii) in all other cases, on a pro rata basis based upon the number of
shares each Electing Holder seeks to include in such registration.
(b) Underwriting. If Requesting Holders intend to
distribute the Registrable Securities covered by such request by means of an
underwriting, such Requesting Holders shall so advise the Issuer as a part of
the request made pursuant to this Section 2.2 and, in such event, the
Requesting Holders shall select an underwriter of their choice, which choice
shall be subject to the approval of the Board of Directors of the Issuer, and
which approval shall not be unreasonably withheld. The Issuer and such
Requesting Holders shall negotiate in good faith and enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting.
10
<PAGE> 11
If a Requesting Holder disapproves of the terms of the underwriting, such
Requesting Holder may elect to withdraw therefrom by written notice to the
Issuer and the managing underwriter, and each of the remaining Requesting
Holders shall be entitled to increase the number of shares being registered, to
the extent permitted by the managing underwriter, in the proportion which the
number of shares of Registrable Securities being registered by such Requesting
Holder bears to the total number of shares being registered by all such
remaining Requesting Holders.
2.3 Expenses of Registration. Except as otherwise
provided herein, all expenses incurred by the Issuer in connection with any
registration, qualification, or compliance pursuant to this Agreement,
including, without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Issuer and the
holders of Registrable Securities, and the expenses of any audits required by
such registration, shall be borne by the Issuer. However, (a) the Issuer shall
not be required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities and (b) the Issuer shall not be obligated to pay the
fees and disbursements of more than one legal counsel to the Requesting
Holders.
2.4 Registration Procedures. (a) In the case of each
registration, qualification or compliance effected by the Issuer pursuant to
this Article II, the Issuer shall keep each holder of Registrable Securities
included in such registration
11
<PAGE> 12
advised in writing as to the initiation, progress, and effective date of each
registration, qualification and compliance, and, at its expense to the extent
provided in Section 2.3, the Issuer will:
(i) subject to Section 2.4(b) below, keep each
registration, qualification or compliance
effective for a period of 90 days (plus any
number of days that the holders of
Registrable Securities are unable to use a
prospectus pursuant to Section 2.4(b) below)
or until each such holder shall have
completed the distribution described in the
registration statement relating thereto,
whichever first occurs (the "Registration
Period"); and
(ii) furnish such number of prospectuses
(including preliminary prospectuses) and
other documents filed with the Securities and
Exchange Commission as part of the
registration statement as such holders from
time to time may request.
(b) If, within the Registration Period, there occurs any
development or any event which makes any statement in the registration
statement or any post-effective amendment thereto, or any document incorporated
therein by reference, untrue in any material respect or which requires the
making of any changes in the registration statement or post-effective amendment
thereto or
12
<PAGE> 13
prospectus or amendment or supplement thereto, so that they will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of any prospectus, in the light of the circumstances under which they
were made) not misleading, the Issuer shall immediately notify each holder of
Registrable Securities included in such registration of the occurrence thereof
and, as soon as reasonably practicable, prepare and furnish to each such
holder, a reasonable number of copies of a prospectus supplemented or amended
so that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each holder of Registrable Securities agrees that, upon
receipt of any notice from the Issuer pursuant to this Section 2.4(b), such
holder shall forthwith discontinue disposition of Registrable Securities until
it shall have received copies of such amended or supplemented prospectus, and,
if so directed by the Issuer, shall deliver to the Issuer all copies, other
than permanent file copies, then in its possession of the prospectus covering
Registrable Securities at the time of receipt of such notice.
(c) Each holder of Registrable Securities participating
in any Cutback Registration shall, as among all such holders of Registrable
Securities, be entitled to exercise
13
<PAGE> 14
its rights hereunder pro rata according to the number of shares of Registrable
Securities held by such holder.
(d) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Agreement, the Issuer will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Issuer and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Section 2.5 hereof and an opinion of
counsel for the Issuer dated the date of the closing under the underwriting
agreement, and providing that the Issuer shall use its best efforts to furnish
a "cold comfort" letter signed by the independent public accountants who have
audited the Issuer's financial statements included in such registration
statement, in each such case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) as
are customarily covered in opinions of Issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other matters as the underwriters reasonably request and,
in the case of such accountants' letter, with respect to events subsequent to
the date of such financial statements. The holders of Registrable Securities
on whose behalf the Registrable
14
<PAGE> 15
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement.
(e) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act, the Issuer will give the underwriters, if any, and their counsel and
accountants, such reasonable and customary access to its books and records and
such opportunities to discuss the business of the Issuer with its officers and
the independent public accountants who have certified the Issuer's financial
statements as shall be necessary, in the opinion of such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.5 Indemnification. (a) With respect to any
registration, qualification or compliance which has been effected pursuant to
this Article II, the Issuer shall indemnify each holder of Registrable
Securities whose securities are included therein, each such holder's directors
and officers, each underwriter (as defined in the Securities Act) of the
securities sold by such a holder, each other Person who participates in the
offering of such holder's securities, and each Person who controls (within the
meaning of the Securities Act) any such holder, underwriter, or participating
Person from and against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on:
(i) any untrue statement (or alleged untrue
statement) of a material fact contained in
15
<PAGE> 16
any prospectus, offering circular or other
document (including any related registration
statement, notification or the like) incident
to any such registration, qualification or
compliance effected pursuant to this Article
II,
(ii) any omission (or alleged omission) to state
therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading, or
(iii) any violation by the Issuer of the Securities
Act or any rule or regulation promulgated
thereunder applicable to the Issuer, or any
blue sky or state securities laws or any rule
or regulation promulgated thereunder
applicable to the Issuer,
in each case relating to action or inaction required of the Issuer in
connection with any such registration, qualification or compliance, and will
reimburse each such Person entitled to indemnity hereunder for any legal and
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided that, the
foregoing indemnity and reimbursement obligation shall not be applicable to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information
16
<PAGE> 17
furnished to the Issuer by or on behalf of such a holder or by or on behalf of
such an underwriter specifically for use in such prospectus, offering circular
or other document; and further provided that, with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this Section
2.5(a) shall not inure to the benefit of any underwriter to the extent that any
such losses, claims, damages or liabilities of such underwriter result from the
fact that there was not sent or given to any person who purchased Registrable
Securities in connection with such registration, at or prior to the written
confirmation of the sale of Registrable Securities to such person, a copy of
the prospectus relating to such registration, as then amended or supplemented
(exclusive of material incorporated by reference), if the Issuer had previously
furnished copies thereof to such underwriter.
(b) Each holder of Registrable Securities which are
included in such registration, qualification or compliance shall indemnify the
Issuer, its directors and officers, each underwriter (as defined in the
Securities Act) of the securities of a holder, each other person who
participates in the offering of such holder's securities and each Person who
controls (within the meaning of the Securities Act) the Issuer or any such
underwriter or participating Person from and against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on:
17
<PAGE> 18
(i) any untrue statement (or alleged untrue
statement) of a material fact contained in
any prospectus, offering circular or other
document (including any related registration
statement, notification or the like) incident
to any such registration, qualification or
compliance effected pursuant to this Article
II,
(ii) any omission (or alleged omission) to state
therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading, or
(iii) any violation by such holder of the
Securities Act or any rule or regulation
promulgated thereunder applicable to such
holder, or of any blue sky or other state
securities law or any rule or regulation
promulgated thereunder applicable to such
holder,
in each case, relating to action or inaction required of such holder in
connection with any registration, qualification or compliance, and will
reimburse each such Person entitled to indemnity hereunder for any legal and
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, expense, liability or action, but in
each case only to the extent that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such prospectus,
offering circular or other document in reliance
18
<PAGE> 19
upon and in conformity with written information furnished to the Issuer by or
on behalf of such holder specifically for use therein; and further provided
that, with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, the indemnity
agreement contained in this Section 2.5(b) shall not inure to the benefit of
any underwriter to the extent that any such losses, claims, damages or
liabilities of such underwriter result from the fact that there was not sent or
given to any person who purchased Registrable Securities in connection with
such registration, at or prior to the written confirmation of the sale of
Registrable Securities to such person, a copy of the prospectus relating to
such registration, as then amended or supplemented (exclusive of material
incorporated by reference), if the Issuer had previously furnished copies
thereof to such underwriter.
(c) Each party entitled to indemnification under this
Section 2.5 (an "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after the
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that
(i) counsel for the Indemnifying Party who shall
conduct the defense of any such claim or any
litigation shall be approved by the
Indemnified Party,
19
<PAGE> 20
(ii) the Indemnified Party may participate in such
defense at the Indemnified Party's expense
(provided that the Indemnified Party or
Indemnified Parties shall have the right to
employ one counsel to represent it or them
if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it
is advisable for it or them to be represented
by separate counsel by reason of having legal
defenses which are different from or in
addition to those available to the
Indemnifying Party, and in that event the
fees and expenses of such one counsel shall
be paid by the Indemnifying Party), and
(iii) failure of any Indemnified Party to give
notice as provided herein shall not relieve
the Indemnifying Party of its obligations
under this Section 2.5.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement (which judgment or settlement would be
adverse to and binding upon such Indemnified Party) of any claim for which such
Indemnified Party may seek indemnification hereunder; provided that, as to each
Indemnified Party withholding such consent, the maximum amount of the losses,
damages or liabilities in respect of which such Indemnified Party may seek
indemnification
20
<PAGE> 21
hereunder with respect to such claim shall be limited to the amount which the
Indemnifying Party would have paid to or on behalf of such Indemnified Party
had such Indemnified Party consented to such judgment or settlement.
(d) If the indemnification provided for in this Section
2.5 shall for any reason be unavailable to an Indemnified Party in respect to
any loss, claim, damage or liability, or any action in respect thereof,
referred to therein, then each Indemnifying Party shall in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party on the
one hand or the Indemnified Party on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission, but not by reference to any Indemnified
Party's stock ownership in the Issuer. In no event, however, shall a holder of
Registrable Securities be required to contribute in excess of the
21
<PAGE> 22
amount of the net proceeds received by such holder in connection with the sale
of Registrable Securities in the offering which is the subject of such loss,
claim, damage or liability. The amount paid or payable by an Indemnified Party
as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph shall be deemed to include, for
purposes of this paragraph, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act)) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
2.6 Information by Holders. If Registrable Securities
owned by a holder are included in any registration, such holder shall furnish
to the Issuer such information regarding itself and the distribution proposed
by such holder as the Issuer may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Article II.
2.7 Rule 144 Reporting. With a view to making available to
each holder of Registrable Securities the benefits of certain rules and
regulations of the Securities and Exchange Commission which may permit the sale
of the Registrable Securities to the public without registration, the Issuer
agrees that so long as a holder owns any Registrable Securities, the Issuer
shall, (a) make and keep available public information, as
22
<PAGE> 23
those terms are contemplated by Rule 144 under the Securities Act; (b) timely
file with the Commission all reports and other documents required to be filed
under the Securities Act and the Exchange Act; and (c) furnish to each holder
forthwith upon request a written statement by the Issuer as to its compliance
with the reporting requirements of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Issuer, and such
other information as such holder may reasonably request in order to avail
itself of any rule or regulation of the Commission allowing such holder to sell
any Registrable Securities without registration.
2.8 Future Registration Rights. (a) The Issuer shall
not hereafter agree with the holders of any securities issued or to be issued
by the Issuer to register such securities under the Securities Act unless such
agreement specifically provides that (a) such holder of securities may not
participate in any Piggyback Registration except as provided in Section 2.1,
(b) the holder of such securities may not participate in any Requested
Registration except as provided in Section 2.2, (c) unless in the opinion of
the managing underwriter or underwriters, if any, of any Piggyback Registration
or Requested Registration the public offering or sale of such other securities
would not interfere with the successful public offering and sale of Registrable
Securities requested to be included in such Piggyback Registration or Requested
Registration, such other securities will not be included in a registration
statement in which such shares of Registrable Securities are so included, and
(d) such
23
<PAGE> 24
securities may not be publicly offered or sold for a period of at least ninety
(90) days after the date upon which such registration statement becomes
effective. No provision of this Section 2.8 shall be deemed violated by the
future grants of registration rights provided such rights are subject to the
foregoing restrictions and are exercisable on a pro rata basis with all other
holders of such rights and the Issuer will not be required to obtain the
consent of any party hereto with respect to such future grants.
(b) From and after the date hereof, the Issuer shall not
enter into any agreement with any holder or prospective holder of any
securities of the Issuer providing for the granting to such holder of
registration rights (including demand registration rights which, by their
terms, do not permit the inclusion of shares of parties other than the holders
of such demand registration rights) that entitle such holder to priority over
the Investor with respect to registration of the securities of the Issuer.
ARTICLE 3
MISCELLANEOUS
3.1 Notices. Except as otherwise specifically provided
in this Agreement, all communications hereunder shall be sent in the manner and
to the addresses set forth in Section 11.1 of the Securities Purchase
Agreement.
3.2 Non-Waiver of Remedies and Actions By Holders. No
course of dealing between the Issuer and the holder of any
24
<PAGE> 25
Registrable Securities or any delay on the part of such holder in exercising
any rights available to such holder shall operate as a waiver of any right of
such holder, except to the extent expressly waived in writing by such holder.
3.3 Headings. The headings in this Agreement are for
purposes of reference only and shall not be considered in construing this
Agreement.
3.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall
constitute an original and all together shall constitute one Agreement.
3.5 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and Qualified Controlled
Affiliates of the Investor as permitted in Section 1.1(iv) and the Issuer's
successors and permitted assigns.
3.6 Consent of Holders; Waiver. Whenever, by the terms
hereof, the consent of the holders of Registrable Securities is required,
anything is required to be done to the satisfaction of the holders of
Registrable Securities, or the holders of Registrable Securities are to appoint
a representative, such consent, satisfaction, or appointment shall, unless
otherwise indicated, require the approval of the Investor. Any of the
provisions hereof may be waived or modified by consent of the Investor. All
the rights and remedies hereunder of the holders of Registrable Securities
shall be cumulative. All rights and remedies hereunder for the benefit of the
holders of
25
<PAGE> 26
Registrable Securities are intended to be for the benefit of each holder of
Registrable Securities and, unless otherwise specified to the contrary, may be
exercised by the holders of Registrable Securities together or by each holder
of Registrable Securities separately.
3.7 Enforceability. If any term or provision of this
Agreement, or the application thereof to any Person or circumstance, shall, to
any extent, be invalid or unenforceable, the remaining terms and provisions of
this Agreement or application to other Persons and circumstances shall not be
invalidated thereby, and each term and provision hereof shall be construed with
all other remaining terms and provisions hereof to effect the intent of the
parties hereto to the fullest extent permitted by law.
3.8 Law Governing. This Agreement shall be construed and
enforced in accordance with and shall be governed by the laws of the State of
Delaware applicable to contracts executed in and to be fully performed in that
state.
3.9 Effectiveness. The effectiveness of this Agreement
is conditioned upon, and the obligations and rights of the parties hereunder
will come into force and effect at, the Closing as contemplated in the
Securities Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
26
<PAGE> 27
year first above written.
NEXTEL COMMUNICATIONS, INC.
--------------------------------------
Name: Thomas J. Sidman
Title: Vice President
DIGITAL RADIO, L.L.C.
--------------------------------------
Name:
Title:
27
<PAGE> 1
EXHIBIT 10.39
CONFIDENTIAL
TERM SHEET FOR DEBT FINANCING
Lender: Motorola, Inc. or one or more designated wholly-owned
subsidiaries of Motorola, Inc. (collectively,
"Motorola")
Borrower: Nextel Communications, Inc., Nextel Finance Company,
and the other Restricted Companies party to the
Vendor Financing Agreement (but in each case, only to
the extent permitted under the terms of the Bank
Credit Agreement; such entities collectively, the
"Borrowing Entities").
Maximum Amount
Available U.S. $450 Million
Debt Type/
Instruments: A $50 Million increase of Tranche A Loans under the
current Vendor Financing Agreement (or the
establishment of a new Tranche if Nextel and Motorola
should agree); plus $200 Million of new, Second
Secured Loans, Tranche D, and $200 Million of Senior
Secured Loans, Tranche E, all under an Amended Vendor
Financing Agreement.
Commitment
Period: Closing Date to March 31, 1999
Interest Rate and
Payment: Tranche D Loans shall earn interest at a floating
rate equal to 75 Basis Points under the previous
months average yield of the Nextel Bonds maturing
9/03 as published in the Wall Street Journal, payable
quarterly in arrears. Tranche E Loans shall earn
interest at a rate equal to 2.75% over the Prime Rate
on a floating basis (based on a 365/366 day year and
actual days elapsed), payable quarterly in arrears.
If and when the Tranche D Loans become Senior Secured
Loans, the interest rate on the Tranche D Loans shall
be reduced to 2.00% over the Prime Rate on a floating
basis. Quarterly cash-only interest payments for both
Tranche D and Tranche E Loans shall commence April 1,
2001 (first cash-only interest payment date June 30,
2001) until Final Maturity Date.
Permitted Uses of
Funds: The Borrowing Entities may borrow the increased
amount of the Tranche A Loans for the same purposes
and permitted uses as are applicable to borrowings
made under the existing Vendor Financing Agreement.
The Borrowing Entities may borrow amounts of the new
Tranche D Loans and the new Tranche E Loans
exclusively for purchasing wireless communications
fixed network equipment, software or related goods
and/or services
1
<PAGE> 2
manufactured or supplied by or through Motorola, and
the transportation, sales and use taxes, installation,
testing and/or optimization costs related to such
equipment or software ("Purchase Borrowings"),
provided that all such Purchase Borrowings are
deployed within the US. If any of the Borrowing
Entities initially elects to pay cash for any Purchase
Borrowings, they may reborrow such payments at a later
date provided that they shall have purchased items of
the type that would have qualified for a Purchase
Borrowing, and were paid for during the period
beginning on the date hereof and ending on the date of
the relevant reborrowing request with funds not
borrowed under either the existing Vendor Financing
Agreement or the Amended Vendor Financing Agreement,
in an aggregate dollar amount at least equal to the
dollar amount of all Purchase Borrowings that would
then be outstanding (treating as outstanding the loans
covered by the relevant reborrowing request). Any
other uses of the Tranche D Loans or Tranche E Loans,
including the repayment of debt or other obligations
of Borrowing Entities, is prohibited.
Maturity Date: June 30, 2003
Amortization: Subject to Voluntary Prepayments and Mandatory
Prepayments as provided in the Vendor Credit
Agreement, all principal and accrued but unpaid
interest due will be due and payable in full on the
Maturity Day.
Voluntary
Prepayments: As provided for in the Vendor Financing Agreement.
Mandatory
Prepayments: As provided for in the Vendor Financing Agreement
with the addition that i) in the event Nextel, or
Motorola, is successful in finding an investor(s) that
is reasonable acceptable to Nextel to contribute
additional equity to Nextel, then any Tranche E Loans
outstanding will be repaid from such equity proceeds
on a dollar for dollar basis and any remaining Tranche
E. Commitments will be automatically terminated on a
dollar for dollar basis and Nextel agrees to use their
best efforts in a good faith manner to locate such
investor(s); ii) in the event any of the Borrowing
Entities are able to increase the amount of funds
available under the Credit Agreement above $1.905B,
then for each dollar of additional loans greater than
$1.905B, the Amended Vendor Agreement Tranche E Loan
Commitment shall be reduced by a dollar. Nextel
acknowledges that, so long as any amount of Tranche E
Loans are outstanding or any Tranche E Loan Commitment
remains in effect, any proceeds from i) and ii) will
not be used to repay Loans under the Credit Agreement.
Security: As provided for in the Vendor Financing Agreement
with the addition that i) all Tranche D Loans shall be
second secured to the Loans as contemplated in Section
5.02(c)(ii)(x) of the Intercreditor and Collateral
Agency Agreement; ii) that no new Debt beyond $2.3
Billion (excluding any Tranche E Loans
2
<PAGE> 3
under the Amended Vendor Financing Agreement) will be
created under the Credit Agreement and the Amended
Vendor Financing Agreement which is senior to Tranche
D Loans; and iii) in the event any of the Borrowing
Entities are successful in raising the Secured Debt
limit above $2.3 Billion (excluding any Tranche E
Loans made under the Amended Vendor Financing
Agreement), the first $200 Million of such increase
will be used to automatically convert the Tranche D
Loans to Senior Secured Loans or they will be repaid
in full. The next $200 Million shall be used to
retire the Tranche E Commitment.
Conditions
Precedent to
Initial Borrowing: For Tranche D Loans:
a) As provided for in the Vendor Financing
Agreement; plus
b) To access the first $100M in Tranche D Loans, the
Borrowing Entities must 1) have borrowed all the
funds available under the Credit Agreement (1.655B),
and all of the funds available under the current
Vendor Financing Agreement ($345M), 2) McCaw shall
have contributed equity to Nextel associated with the
exercise of options expiring in 1997 ($232.5
Million).
c) To access the second $100M in Tranche D Loans, in
addition to the conditions provided in b) above, the
Borrowing Entities must have borrowed in full the
Credit Agreement Tranche E Funds ($250M) by the time
of borrowing the remaining $100M in Tranche D Loans.
d) Nextel shall have borrowed all of the additional
Tranche A Loans under the Amended Vendor Financing
Agreement ($50M).
e) Motorola shall have received an updated business
plan reflecting the impact of the required and
contemplated borrowings.
For Tranche E Loans:
a) As provided for in the Vendor Financing
Agreement; plus
b) Borrowing Entities must have borrowed all of the
funds available under the Credit Agreement ($1.905B),
all of the funds available under the current Vendor
Financing Agreement $345M), all of the additional
Tranche A Loans under the Amended Vendor Financing
Agreement ($50M), and all of the Tranche D Loans
($200M) available under the Amended Vendor Financing
Agreement.
c) McCaw shall have contributed the $232.5M of
equity referred to in (e) above.
3
<PAGE> 4
d) Nextel shall have raised an additional $250M in
Unsubordinated Debt.
e) Nextel must be continuing to use their good faith,
best efforts to locate an investor(s) to contribute
additional equity to Nextel of at least $400 Million.
f) McCaw will lend Nextel $50M on a pro rata basis
with the Tranche E Loans and on the same terms and
conditions as the Tranche E. Loans.
Conditions
Precedent to
Subsequent
Borrowings: For Tranche D Loans:
a) As provided for in the Vendor Financing Agreement;
For Tranche E Loans:
a) As provided for in the Vendor Financing Agreement;
plus
b) Nextel must be continuing to use their good faith,
best efforts to locate an investor(s) to contribute
additional equity to Nextel of at least $400 Million.
Loan Documents: The Vendor Financing Agreement dated September 27,
1996, as amended.
Assignment: As provided for in the Vendor Financing Agreement;
plus the requirement that Motorola must hold at least
$50 Million of Loans for their own account shall be
satisfied either (a) by Motorola actually holding at
least $50 Million of Loans from either the original
Senior ($395 Million) Vendor Financing or from the
New Tranche D, as Motorola may elect, for their own
account or (b) by Motorola being subject to a valid
commitment to lend at least $50 Million pursuant to
the original Senior ($395 Million) Vendor Financing
Agreement.
Consents and
Waivers: As provided for in the Vendor Financing Agreement
Governing Law: As provided for in the Vendor Financing Agreement
Maximum
Outstandings: Motorola's commitment is to lend up to $755 Million
under the Amended Vendor Financing Agreement in the
US, but only $555 Million of the Loans can ever be
outstanding in the US that are held by Motorola for
its account at any point in time. Motorola's
worldwide outstanding limit is increased to $650
Million with a maximum non US outstanding of $400
Million at any point in time and with certain country
loan limits. Nextel agrees to use its best efforts in
assisting Motorola to sell to third parties on a
non-recourse basis sufficient loans so that the total
outstandings under the Amended Vendor Financing
Agreement, including the Tranche E Loans that are held
by
4
<PAGE> 5
Motorola for its account, is not greater than $555
Million. Each of the Borrowing Entities further
agrees that it will not draw down any Tranche E Loans
i) before March 31, 1998; ii) before Motorola has sold
at least $200 Million of Amended Vendor Finance
Agreement Outstandings to third parties on a non
recourse basis; and iii) unless such Tranche E Loans
are on a Senior Secured basis.
Expiration: This offer will automatically expire unless accepted
in writing within 30 days.
NEXTEL COMMUNICATIONS, INC. MOTOROLA, INC.
/s/Steven Shindler /s/Richard D. Severns
- ---------------------------- ----------------------------
Nextel Communications Motorola
Steven M. Shindler Richard D. Severns
Senior Vice President and Senior Vice President
Chief Financial Officer Director of Finance and
General Manager
Network Services and Strategy Group
Land Mobile Products Sector
Dated: as of March 26, 1997
5
<PAGE> 1
EXHIBIT 10.40
AMENDMENT NO. 1
TO AMENDED AND RESTATED INCENTIVE EQUITY PLAN
OF NEXTEL COMMUNICATIONS, INC.
This Amendment No. 1 ("Amendment No. 1") to the Amended and Restated
Incentive Equity Plan of Nextel Communications, Inc. (the "Plan"), is entered
into and effective as of the 28th day of March, 1997.
RECITALS
The Plan contemplates, and provides in Section 17 thereof, that the
Plan may be amended from time to time by the Committee, subject to certain
limitations and conditions not relevant to the matters treated herein. The
Committee desires to amend the Plan to provide that grants of benefits,
including without limitation, Options Rights, Deferred Shares or Restricted
Shares, may be made to Non-Affiliated Directors (as such term is defined
herein) thereunder, on terms and subject to conditions as are set forth herein.
NOW, THEREFORE, the Committee hereby adopts, at a meeting held
by conference telephone on March 28, 1997, at which a quorum was present and
acting, by unanimous vote, the following amendments, modifications and
additions to the Plan:
1. Section 1 of the Plan is hereby amended to read in
its entirety as follows: "1. Purpose. The purpose
of this Plan is to attract and retain officers and
other key employees of and consultants to Nextel
Communications, Inc. (the "Corporation") and its
subsidiaries, to attract and retain desirable
Non-Affiliated Directors, and to provide such persons
with incentives and rewards for superior
performance."
<PAGE> 2
2. Section 2 of the Plan is hereby amended:
(A) to insert the following defined term
immediately following the defined term "Market Value per Share" and immediately
prior to the defined term "Nonqualified Option": ""Non-Affiliate Director"
shall mean an individual who is serving (or who has been elected or appointed,
and has agreed to serve) as a member of the Board of the Corporation, provided
that such individual (1) is not an officer or employee of the Corporation or of
any subsidiary thereof, or a beneficial owner of ten percent (10%) or more of
the outstanding Common Shares and (ii) is serving as, or who was appointed or
elected as, a member of the Board of the Corporation other than pursuant to or
in connection with any contractual or other commitment of the Corporation to
take actions to cause or to advance such individual to be elected or appointed
as a member of the Board of the Corporation"; and
(B) to cause the defined term "Participant" to
read in its entirety as follows: ""Participant" means a person who is selected
by the Committee to receive benefits under this Plan and (i) is at that time an
officer, including without limitation, an officer who may also be a member of
the Board, or other key employee of or a consultant to the Corporation or any
subsidiary or (ii) has agreed to commence serving in any such capacity or (iii)
is at that time serving as, or is then being elected or appointed as, a
Non-Affiliated Director."
3. Section 14 of the Plan is hereby amended to read in
its entirety as follow: "14. Certain Terminations of Employment or Consulting
Services, Hardship and Approved Leaves of Absence. Notwithstanding any other
provision of this Plan to the contrary, in the event of termination of
employment or consulting services or service by a
2
<PAGE> 3
Non-Affiliated Director on the Board of the Corporation by reason of death,
disability, normal retirement, early retirement with the consent of the
Corporation, termination of employment or consulting services or service by a
Non-Affiliated Director on the Board of the Corporation to enter public service
with the consent of the Corporation or leave of absence approved by the
Corporation, or in the event of hardship or other special circumstances of a
Participant who holds an Option Right or Appreciation Right that is not
immediately and fully exercisable, any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Shares as to which the Deferral Period is not
complete, any Performance Shares or Performance Units that have not been fully
earned, or any Common Shares that are subject to any transfer restriction
pursuant to Section 9(b) of this Plan, the Committee may take any action that
it deems to be equitable under the circumstances or in the best interests of
the Corporation, including without limitation waiving or modifying any
limitation or requirement with respect to any award under this Plan."
4. The first sentence of Section 16 of the Plan is
hereby amended to read in its entirety as follows: "This Plan shall be
administered by the Compensation Committee of the Board which shall be composed
of not less than three members of the Board, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3; provided, that no
member of such Committee who is also a Non-Affiliated Director shall act with
respect to any grant made hereunder except in accordance with the guidelines
for grants to Non-Affiliated Directors hereunder adopted by the Board and in
effect at the relevant time."
3
<PAGE> 4
5. Terms used herein that are defined in the Plan are
used herein as so defined, unless expressly defined otherwise herein.
6. Except as expressly amended hereby, the Plan and all
of its terms as in effect prior to the adoption of this Amendment No. 1 shall
remain in full force and effect, and following the adoption hereof, the Plan
and this Amendment No. 1 shall be construed together as a single document, and
all references to the "Plan" appearing in the Plan shall be deemed to refer to
the Plan as amended by this Amendment No. 1.
4
<PAGE> 1
EXHIBIT 21
NEXTEL COMMUNICATIONS, INC.
SUBSIDIARIES OF THE COMPANY
AS OF JANUARY 1, 1997
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
- -------------------------------------------- -----------------------------
<S> <C>
Advanced MobileComm of North Carolina, Inc. Massachusetts
Air Link Communications, Inc. Maryland
American Mobile Systems Incorporated Delaware
C-Call Corp. (2) Delaware
Dial Call, Inc.(6) Georgia
Dial Call Indimich, Inc. Delaware
Dial Call Midwest, Inc. Delaware
Dial Distance, Inc. Delaware
FC New York, Inc. Delaware
FCI 900, Inc. Delaware
Fleet Call of Texas, Inc.(3) Texas
Fleet Call of Utah, Inc. Utah
McCaw International, Ltd.(4) Washington
McCaw Argentina, S.A., Ltd.(12) Cayman Islands
McCaw International (Argentina), Ltd.(11) Cayman Islands
McCaw International (Delaware), Ltd.(9) Delaware
McCaw International (Holdings), Ltd.(10) Cayman Islands
McCaw International (Philippines), Ltd.(11) Cayman Islands
McCaw International (Services), Ltd.(9) Delaware
Nextel Communications of the Mid-Atlantic, Inc. (2) Delaware
Nextel Finance Company Delaware
Nextel Investment Company Delaware
Nextel License Holdings 1, Inc.(5) Delaware
Nextel License Holdings 2, Inc. (1) Delaware
Nextel License Holdings 3, Inc. (8) Delaware
Nextel of Texas, Inc. (2)(3) Delaware
OneComm Corporation, N.A. (2) Delaware
PF License Holdings, Inc.(13) Delaware
PowerFone Holdings, Inc. Delaware
Safety Net, Inc. Delaware
Smart SMR, Inc. (2) Delaware
Smart SMR of California, Inc. (2) Delaware
Smart SMR of New York, Inc. (2) Delaware
Top Mega Enterprises, Ltd.(14) Hong Kong
Unrestricted Subsidiary Funding Company Delaware
</TABLE>
- -----------------------
(1) Subsidiary of Fleet Call of Utah, Inc.
(2) Subsidiary of Nextel Finance Company.
(3) Fleet Call of Texas, Inc. has a majority interest in Fort Worth Trunked
Radio Limited Partnership, a Texas limited partnership ("FWTR Ltd.").
The remainder of FWTR, Ltd. is owned by Nextel of Texas, Inc.
(4) Subsidiary of Unrestricted Subsidiary Funding Company.
(5) Subsidiary of American Mobile Systems Incorporated.
(6) Subsidiary of Advanced MobileComm of North Carolina, Inc.
(7) Subsidiary of Fleet Call of Utah, Inc.
(8) Subsidiary of Dial Call, Inc.
(9) Subsidiary of McCaw International Ltd.
(10) Subsidiary of McCaw International (Delaware), Ltd.
(11) Subsidiary of McCaw International (Holdings), Ltd.
(12) Subsidiary of McCaw International (Argentina), Ltd.
(13) Subsidiary of OneComm Corporation, N.A.
(14) Subsidiary of McCaw International (Philippines), Ltd.
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-01486, No. 333-01290, and No. 333-06521 of Nextel Communications, Inc. on
Form S-3, Form S-4 and Form S-8, respectively, and post-effective
amendments No. 1 on Forms S-8 to Registration Statements No. 33-91716 and No.
33-80021 of Nextel Communications, Inc., of our report dated March 20, 1997,
except for Note 13, as to which the date is March 27, 1997, appearing in this
Annual Report on From 10-K of Nextel Communicaations, Inc. for the year ended
December 31, 1996.
Deloitte & Touche LLP
McLean, Virginia
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 139,681
<SECURITIES> 5,012
<RECEIVABLES> 101,166
<ALLOWANCES> 10,774
<INVENTORY> 45,168
<CURRENT-ASSETS> 309,097
<PP&E> 1,803,739
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,472,439
<CURRENT-LIABILITIES> 375,744
<BONDS> 2,783,041
0
300,000
<COMMON> 229
<OTHER-SE> 2,507,909
<TOTAL-LIABILITY-AND-EQUITY> 6,472,439
<SALES> 0
<TOTAL-REVENUES> 332,938
<CGS> 0
<TOTAL-COSTS> 247,717
<OTHER-EXPENSES> 400,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227,495
<INCOME-PRETAX> (863,212)
<INCOME-TAX> (307,192)
<INCOME-CONTINUING> (556,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (556,020)
<EPS-PRIMARY> (2.50)
<EPS-DILUTED> (2.50)
</TABLE>
